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Press Release

Brixmor Property Group Reports Third Quarter 2018 Results

- Accelerating Value Creation -

Company Release - 10/29/2018 4:05 PM ET

NEW YORK, Oct. 29, 2018 /PRNewswire/ -- Brixmor Property Group Inc. (NYSE: BRX) ("Brixmor" or the "Company") announced today its operating results for the three and nine months ended September 30, 2018.  For the three months ended September 30, 2018 and 2017, net income attributable to common stockholders was $0.49 per diluted share and $0.27 per diluted share, respectively.

Key highlights for the three months ended September 30, 2018 include:

  • Executed 2.2 million square feet of new and renewal leases at comparable rent spreads of 13.4%, including 0.9 million square feet of new leases at comparable rent spreads of 39.7%
  • Executed 3.1 million square feet of total leasing volume, including options, at comparable rent spreads of 12.1%
  • Grew total leased occupancy 90 basis points year over year to 92.5%, including 110 basis points of growth in small shop leased occupancy to 85.5%
    • Maintained widest leased to billed occupancy spread since IPO of 310 basis points
  • Generated same property NOI growth of 1.2%, driven by a 270 basis points contribution from base rent
  • Grew total in process reinvestment pipeline to $340.4 million, while delivering $53.8 million of projects at an average incremental NOI yield of 9%
  • Closed on $530.2 million of dispositions, including six assets totaling $76.7 million closed subsequent to quarter end
  • Acquired one adjacency at an existing center for $1.5 million, repurchased $48.6 million of common stock and repaid $507.2 million of secured indebtedness
  • Issued $250.0 million of Floating Rate Notes due 2022 and repaid a portion of the Company's $600.0 million term loan
  • Increased quarterly dividend by 1.8% to $0.28 per common share, which represents an annualized yield of 7.3% 
  • Updated previously provided NAREIT FFO per diluted share expectations and affirmed same property NOI expectations for 2018

"I am very pleased with how our record leasing, growth in redevelopment, accelerated capital recycling and prudent balance sheet management not only position us for sustainable growth in 2019 and beyond, but also how this progress across all fronts of our self-funded plan, in an otherwise volatile marketplace, continues to significantly enhance the intrinsic value of our portfolio," commented James Taylor, Chief Executive Officer and President.

FINANCIAL HIGHLIGHTS

Net Income

  • For the three months ended September 30, 2018 and 2017, net income attributable to common stockholders was $147.3 million, or $0.49 per diluted share, and $83.4 million, or $0.27 per diluted share, respectively.
  • For the nine months ended September 30, 2018 and 2017, net income attributable to common stockholders was $288.7 million, or $0.95 per diluted share, and $230.4 million, or $0.75 per diluted share, respectively.

NAREIT FFO

  • For the three months ended September 30, 2018 and 2017, NAREIT FFO was $128.4 million, or $0.42 per diluted share, and $157.2 million, or $0.52 per diluted share, respectively. Results for the three months ended September 30, 2018 include a loss on extinguishment of debt related to the prepayment of secured indebtedness and other items that impact FFO comparability of ($20.3) million, or ($0.07) per diluted share. Results for the three months ended September 30, 2017 include litigation and other non-routine legal expenses, a gain on extinguishment of debt and other items that impact FFO comparability of ($0.3) million, or ($0.00) per diluted share.
  • For the nine months ended September 30, 2018 and 2017, NAREIT FFO was $437.5 million, or $1.44 per diluted share, and $480.7 million, or $1.58 per diluted share, respectively. Results for the nine months ended September 30, 2018 include a loss on extinguishment of debt related to the prepayment of secured indebtedness, litigation and other non-routine legal expenses and other items that impact FFO comparability of ($22.1) million, or ($0.07) per diluted share. Results for the nine months ended September 30, 2017 include litigation and other non-routine legal expenses and other items that impact FFO comparability of ($3.3) million, or ($0.01) per diluted share.

Same Property NOI Growth

  • Same property NOI for the three months ended September 30, 2018 increased 1.2% from the comparable 2017 period.
    • Same property base rent for the three months ended September 30, 2018 contributed 270 basis points to same property NOI growth.
  • Same property NOI for the nine months ended September 30, 2018 increased 1.3% from the comparable 2017 period. 
    • Same property base rent for the nine months ended September 30, 2018 contributed 190 basis points to same property NOI growth.   

Dividend

  • The Company's Board of Directors declared a quarterly cash dividend of $0.28 per common share (equivalent to $1.12 per annum) for the fourth quarter of 2018, which represents a 1.8% increase.
  • The dividend is payable on January 15, 2019 to stockholders of record on January 4, 2019, representing an ex-dividend date of January 3, 2019.

PORTFOLIO AND INVESTMENT ACTIVITY

Value Enhancing Reinvestment Opportunities

  • During the three months ended September 30, 2018, the Company completed eight value enhancing reinvestment projects and added nine new reinvestment opportunities to its in process pipeline. Projects added include five anchor space repositioning projects, three outparcel development projects and one redevelopment project, with a total aggregate net estimated cost of approximately $55.3 million at an expected average incremental NOI yield of 10%.
  • At September 30, 2018, the value enhancing reinvestment in process pipeline was comprised of 56 projects with an aggregate net estimated cost of approximately $340.4 million. The in process pipeline includes 31 anchor space repositioning projects with an aggregate net estimated cost of approximately $122.2 million at expected average incremental NOI yields of 9 to 14%; 12 outparcel development projects with an aggregate net estimated cost of approximately $19.1 million at an expected average incremental NOI yield of 12%; and 13 redevelopment projects with an aggregate net estimated cost of approximately $199.1 million at an expected average incremental NOI yield of 9%.

Dispositions

  • During the three months ended September 30, 2018, the Company generated approximately $453.5 million of gross proceeds on the disposition of 28 assets, including two partial properties, comprised of 3.5 million square feet.
  • During the nine months ended September 30, 2018, the Company generated approximately $699.3 million of gross proceeds on the disposition of 44 assets, including two partial properties, comprised of 6.4 million square feet.
  • Subsequent to September 30, 2018, the Company generated approximately $76.7 million of gross proceeds on the disposition of six assets, including one partial property, comprised of 0.7 million square feet.

Acquisitions

  • During the three months ended September 30, 2018, the Company acquired a building adjacent to an existing center for $1.5 million.
  • During the nine months ended September 30, 2018, the Company acquired a building and land adjacent to existing centers and terminated a ground lease and acquired the associated building at an existing center for a combined purchase price of $8.8 million.
  • During the three months ended September 30, 2018, the Company repurchased 2.7 million shares of common stock under its share repurchase program at an average price per share of $17.77 for a total of approximately $48.6 million, excluding commissions. Since inception of the share repurchase program in December 2017, the Company has repurchased 5.2 million shares of common stock at an average price per share of $16.78 for a total of approximately $87.7 million, excluding commissions.

CAPITAL STRUCTURE

  • As previously announced, during the three months ended September 30, 2018, the Company's Operating Partnership, Brixmor Operating Partnership LP, issued $250.0 million aggregate principal amount of Floating Rate Notes due 2022 with an interest rate equal to three-month U.S. dollar LIBOR plus 1.05% per annum, reset quarterly. The net proceeds from the offering were utilized to repay a portion of the Company's $600.0 million Term Loan maturing March 18, 2019.
  • Also as previously announced, during the three months ended September 30, 2018, the Company repaid $507.2 million of secured indebtedness, including amortization, scheduled to mature in 2020 at a weighted average stated interest rate of 6.2%. These repayments were funded with disposition proceeds and with proceeds from the Company's $1.25 billion revolving credit facility, which had $1.10 billion of availability as of September 30, 2018.
  • In connection with the early repayment of certain indebtedness, the Company recognized a loss on extinguishment of debt of $19.8 million, or $0.07 per diluted share during the three months ended September 30, 2018.

GUIDANCE

  • The Company has updated its previously provided NAREIT FFO per diluted share expectations for 2018 to $1.89 – 1.94 from $1.95 – 2.04.
    • The Company's previous NAREIT FFO guidance did not include the ($0.07) loss on extinguishment of debt recognized during the three months ended September 30, 2018.  The Company's updated guidance does not include any expectations of additional loss on extinguishment of debt related to potential capital transactions or any expectations of additional one-time items, including, but not limited to, litigation, investigative and other non-routine legal expenses.
  • The Company has affirmed its previously provided same property NOI growth expectations for 2018 of 1.00 – 1.50%.
  • The following table provides a reconciliation of the range of the Company's 2018 estimated net income attributable to common stockholders to NAREIT FFO:

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


2018E


2018E Per Diluted
Share

Net income attributable to common stockholders


$343 - $359


$1.14 - $1.19

Depreciation and amortization


343


1.13

Impairment of operating properties


44


0.15

Gain on disposition of operating properties


(159)


(0.53)

NAREIT FFO


$571 - $587


$1.89 - $1.94

CONNECT WITH BRIXMOR

CONFERENCE CALL AND SUPPLEMENTAL INFORMATION
The Company will host a teleconference on Tuesday, October 30, 2018 at 10:00 AM ET.  To participate, please dial 877.705.6003 (domestic) or 201.493.6725 (international) within 15 minutes of the scheduled start of the call.  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 November 13, 2018 by dialing 844.512.2921 (domestic) or 412.317.6671 (international) (Passcode: 13683065) or via the web through October 30, 2019 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
The Company presents the non-GAAP performance measures set forth below.  These measures should not be considered as alternatives to, or more meaningful than, net income (presented in accordance with GAAP) or other GAAP financial measures, as an indicator of financial performance and are not alternatives to, or more meaningful than, cash flow from operating activities (presented 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.  The Company's computation of these non-GAAP measures 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 these non-GAAP measures are relevant to understanding and addressing financial performance.  A reconciliation of these non-GAAP measures to net income is presented in the attached table.

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) presented 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 unconsolidated joint ventures calculated to reflect FFO on the same basis.

The Company believes NAREIT FFO assists investors in analyzing Brixmor's comparative operating and financial performance because, by excluding (i) gains and losses related to dispositions of previously depreciated operating properties, (ii) real estate-related depreciation and amortization of continuing operations, (iii)  impairment of operating properties and real estate equity investments, (iv) extraordinary items, and (v) after adjustments for joint ventures calculated to reflect FFO on the same basis, investors can compare the operating and financial performance of a company's real estate between periods. 

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 ((i) base rent, ancillary and other, (ii) expense reimbursements, and (iii) percentage rents) less direct property operating expenses ((i) operating costs, (ii) real estate taxes, and (iii) provision for doubtful accounts).  Same property NOI excludes (i) corporate level income (including management, transaction, and other fees), (ii) lease termination fees, (iii) straight-line rental income, (iv) amortization of above- and below-market rent and tenant inducements, (v) straight-line ground rent expense, and (vi) income / expense associated with the Company's captive insurance entity.

The Company believes same property NOI assists investors in analyzing Brixmor's comparative operating and financial performance because it 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 the operating performance of a company's real estate between periods.

ABOUT BRIXMOR PROPERTY GROUP
Brixmor (NYSE: BRX) is a real estate investment trust (REIT) that owns and operates a high-quality, national portfolio of open-air shopping centers. Its 445 retail centers comprise approximately 77 million square feet of prime retail space in established trade areas.  The Company strives to own and operate shopping centers that reflect Brixmor's vision "to be the center of the communities we serve" and are home to a diverse mix of thriving national, regional and local retailers.  Brixmor is a proud real estate partner to more than 5,000 retailers including The TJX Companies, The Kroger Co., Publix Super Markets, Wal-Mart, Ross Stores and L.A. Fitness.

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, 2017, 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


9/30/18


12/31/17

Assets




Real estate




Land

$                 1,845,114


$               1,984,309

Buildings and tenant improvements

7,614,385


8,063,871

Construction in progress

98,354


81,214

Lease intangibles

697,118


792,097


10,254,971


10,921,491

Accumulated depreciation and amortization

(2,358,782)


(2,361,070)

Real estate, net

7,896,189


8,560,421

Cash and cash equivalents

19,607


56,938

Restricted cash

45,412


53,839

Marketable securities

30,725


28,006

Receivables, net of allowance for doubtful accounts of $18,947 and $17,205

230,782


232,111

Deferred charges and prepaid expenses, net

150,232


147,508

Other assets 

124,491


75,103

Total assets

$              8,497,438


$               9,153,926





Liabilities




Debt obligations, net

$               5,106,708


$              5,676,238

Accounts payable, accrued expenses and other liabilities

516,468


569,340

Total liabilities

5,623,176


6,245,578






Equity




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




305,118,890 and 304,947,144 shares issued and 299,891,880 and 304,620,186




shares outstanding

2,999


3,046

Additional paid-in capital

3,254,722


3,330,466

Accumulated other comprehensive income

27,121


24,211

Distributions in excess of net income

(410,580)


(449,375)

Total equity

2,874,262


2,908,348

Total liabilities and equity

$              8,497,438


$               9,153,926

 

 

CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited, dollars in thousands, except per share amounts



Three Months Ended


Nine Months Ended


9/30/18


9/30/17


9/30/18


9/30/17









Revenues








Rental income

$           239,217


$          246,578


$          726,549


$          749,976

Expense reimbursements

66,348


66,489


204,589


206,718

Other revenues

915


1,429


5,547


6,426

Total revenues

306,480


314,496


936,685


963,120









Operating expenses








Operating costs

31,969


30,505


101,340


100,955

Real estate taxes

44,711


45,076


135,383


135,607

Depreciation and amortization

85,183


94,239


266,900


285,040

Provision for doubtful accounts

3,094


1,216


6,458


4,023

Impairment of real estate assets

16,372


11,065


44,201


27,383

General and administrative

21,209


22,838


64,955


67,043

Total operating expenses

202,538


204,939


619,237


620,051









Other income (expense)








Dividends and interest

156


76


356


234

Interest expense

(55,364)


(57,410)


(165,735)


(170,584)

Gain on sale of real estate assets

119,333


25,942


159,043


54,920

Gain (loss) on extinguishment of debt, net

(19,759)


1,828


(20,182)


488

Other

(962)


(1,200)


(2,200)


(2,591)

Total other income (expense)

43,404


(30,764)


(28,718)


(117,533)









Income before equity in income of unconsolidated joint venture

147,346


78,793


288,730


225,536

Equity in income of unconsolidated joint venture

-


31


-


381

Gain on disposition of unconsolidated joint venture interest

-


4,556


-


4,556

Net income 

147,346


83,380


288,730


230,473

Net income attributable to non-controlling interests

-


-


-


(76)

Net income attributable to Brixmor Property Group Inc.

147,346


83,380


288,730


230,397

Preferred stock dividends 

-


-


-


(39)

Net income attributable to common stockholders

$           147,346


$             83,380


$          288,730


$          230,358









Per common share:








Net income attributable to common stockholders:








Basic 

$                  0.49


$                  0.27


$                  0.95


$                  0.76

Diluted 

$                  0.49


$                  0.27


$                  0.95


$                  0.75

Weighted average shares:








Basic 

302,170


304,936


303,031


304,810

Diluted 

302,382


305,176


303,213


305,175

 

 

FUNDS FROM OPERATIONS (FFO)

Unaudited, dollars in thousands, except per share amounts










Three Months Ended


Nine Months Ended


9/30/18


9/30/17


9/30/18


9/30/17









Net income

$           147,346


$             83,380


$          288,730


$          230,473

Gain on disposition of operating properties

(119,333)


(25,942)


(159,043)


(54,920)

Gain on disposition of unconsolidated joint venture interest

-


(4,556)


-


(4,556)

Depreciation and amortization- real estate related- continuing operations

84,028


93,299


263,616


282,240

Depreciation and amortization- real estate related- unconsolidated joint venture

-


-


-


56

Impairment of operating properties

16,372


11,065


44,201


27,383

NAREIT FFO

$            128,413


$            157,246


$            437,504


$             480,676









NAREIT FFO per share/OP Unit - diluted

$                  0.42


$                  0.52


$                   1.44


$                   1.58

Weighted average shares/OP Units outstanding - basic and diluted

302,382


305,176


303,213


305,175









Items that impact FFO comparability








Gain (loss) on extinguishment of debt, net

$            (19,759)


$                1,828


$             (20,182)


$                    488

Litigation and other non-routine legal expenses

(467)


(1,959)


(1,655)


(3,629)

Transaction expenses

(95)


(204)


(294)


(204)

Total items that impact FFO comparability

$            (20,321)


$                 (335)


$             (22,131)


$               (3,345)

Items that impact FFO comparability, net per share

$                (0.07)


$                (0.00)


$                 (0.07)


$                 (0.01)









Additional Disclosures








Straight-line rental income, net (1)

$                5,015


$               2,397


$               11,896


$               14,484

Amortization of above- and below-market leases and tenant inducements, net (2)

5,112


6,966


18,250


21,449

Straight-line ground rent expense (3)

(40)


(31)


(100)


(104)









Dividends declared per share/OP Unit

$               0.275


$               0.260


$                0.825


$                0.780

Share/OP Unit dividends declared

$             82,470


$             79,283


$            248,970


$            237,839

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

64.2%


50.4%


56.9%


49.5%


























(1) Includes unconsolidated joint venture Montecito Marketplace straight-line rental expense, net of $4 and $2 at pro rata share for the three and nine months ended September 30, 2017,

respectively. Montecito Marketplace was sold on August 8, 2017.

(2) Includes unconsolidated joint venture Montecito Marketplace amortization of above- and below-market leases and tenant inducements, net of $2 and $15 at pro rata share for the three

and nine months ended September 30, 2017, respectively. Montecito Marketplace was sold on August 8, 2017.

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

 

 

SAME PROPERTY NOI ANALYSIS 

Unaudited, dollars in thousands




Three Months Ended




Nine Months Ended





9/30/18


9/30/17


Change


9/30/18


9/30/17


Change

Same Property NOI Analysis













Number of properties


439


439


-


437


437


-

Percent billed


89.4%


89.6%


(0.2%)


89.4%


89.6%


(0.2%)

Percent leased


92.5%


91.6%


0.9%


92.5%


91.6%


0.9%














Revenues













Base rent


$         215,330


$        209,900




$        636,580


$         624,375



Ancillary and other


4,295


3,914




12,279


10,705



Expense reimbursements


63,916


61,580




190,400


187,651



Percentage rents


838


1,161




5,340


5,837





284,379


276,555


2.8%


844,599


828,568


1.9%

Operating expenses 













Operating costs


(30,972)


(28,673)




(94,539)


(90,878)



Real estate taxes


(43,023)


(41,777)




(125,997)


(123,619)



Provision for doubtful accounts 


(2,850)


(1,041)




(5,539)


(3,623)





(76,845)


(71,491)


7.5%


(226,075)


(218,120)


3.6%

Same property NOI 


$         207,534


$        205,064


1.2%


$         618,524


$         610,448


1.3%














Same property NOI excluding redevelopments (1)


$          189,179


$         188,049


0.6%


$          564,172


$           559,121


0.9%














NOI margin


73.0%


74.1%




73.2%


73.7%



Expense recovery ratio


86.4%


87.4%




86.3%


87.5%
















Percent contribution to same property NOI growth:















Change


Percent
Contribution




Change


Percent
Contribution



Base rent


$             5,430


2.7%




$            12,205


1.9%



Ancillary and other


381


0.2%




1,574


0.3%



Net recoveries


(1,209)


(0.6%)




(3,290)


(0.5%)



Percentage rents


(323)


(0.2%)




(497)


(0.1%)



Provision for doubtful accounts 


(1,809)


(0.9%)




(1,916)


(0.3%)







1.2%






1.3%
















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












Same property NOI


$         207,534


$        205,064




$         618,524


$         610,448



Adjustments:













Non-same property NOI


8,618


20,883




42,571


70,475



Lease termination fees


467


2,235




2,363


5,476



Straight-line rental income, net


5,015


2,401




11,896


14,486



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


5,112


6,964




18,250


21,434



Fee income


-


183




-


320



Straight-line ground rent expense


(40)


(31)




(100)


(104)



Depreciation and amortization 


(85,183)


(94,239)




(266,900)


(285,040)



Impairment of real estate assets


(16,372)


(11,065)




(44,201)


(27,383)



General and administrative 


(21,209)


(22,838)




(64,955)


(67,043)



Total other income (expense)


43,404


(30,764)




(28,718)


(117,533)



Equity in income of unconsolidated joint venture 


-


31




-


381



Gain on disposition of unconsolidated joint venture interest


-


4,556




-


4,556



Net income attributable to non-controlling interests 


-


-




-


(76)



Preferred stock dividends


-


-




-


(39)
















Net income attributable to common stockholders


$         147,346


$          83,380




$        288,730


$        230,358





(1) Redevelopments include only completed and in process projects. See Supplemental Disclosure for reconciliation.

 

 

Brixmor Property Group Logo. (PRNewsFoto/Brixmor Property Group)

 

 

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SOURCE Brixmor Property Group Inc.