Press Release

Brixmor Property Group Reports Second Quarter 2019 Results

- Accelerating Leasing and Reinvestment Momentum -

Company Release - 7/29/2019 4:05 PM ET

NEW YORK, July 29, 2019 /PRNewswire/ -- Brixmor Property Group Inc. (NYSE: BRX) ("Brixmor" or the "Company") announced today its operating results for the three and six months ended June 30, 2019.  For the three months ended June 30, 2019 and 2018, net income was $0.23 per diluted share and $0.26 per diluted share, respectively.

Key highlights for the three months ended June 30, 2019 include:

  • Executed 2.2 million square feet of new and renewal leases, with rent spreads on comparable space of 13.9%, including 1.0 million square feet of new leases, with rent spreads on comparable space of 30.4%
  • Executed 3.3 million square feet of total leasing volume, including options, with rent spreads on comparable space of 11.7%
  • Grew total leased occupancy to 91.5% and anchor leased occupancy to 94.2%
    • Realized small shop leased occupancy of 85.3%, a 20 basis point increase from the comparable 2018 period, despite impact of the Payless ShoeSource liquidation, which primarily impacted occupancy in the three months ended June 30, 2019
    • Leased to billed occupancy spread further expanded to 400 basis points, representing $51.4 million of annualized base rent not yet commenced, providing visibility on future growth   
  • Generated same property NOI growth of 1.8%, driven by a 170 basis point contribution from base rent, reflecting the impact of strong rent spreads
  • Grew the total in process reinvestment pipeline to $414.6 million at an expected average incremental NOI yield of 10%, while delivering $16.0 million of projects at an average incremental NOI yield of 14%
  • Completed $52.1 million of dispositions comprised of 0.3 million square feet
  • Completed $78.5 million of acquisitions and repurchased $3.0 million of common stock, excluding commissions
  • Issued $400.0 million of Senior Notes due 2029 and repaid indebtedness under the Company's unsecured credit facility, including $200.0 million of the Company's $500.0 million term loan
  • Published inaugural Corporate Responsibility Report
  • Affirmed previously provided NAREIT FFO per diluted share and same property NOI growth expectations for 2019

"We continue to drive substantial, measurable progress on our plan to deliver value through record levels of leasing and reinvestment on a self-funded basis," commented James Taylor, Chief Executive Officer and President. "The work we have accomplished sets us up well for consistent, sustainable growth, while also driving significant intrinsic value at the real estate level."

FINANCIAL HIGHLIGHTS

Net Income

  • For the three months ended June 30, 2019 and 2018, net income was $69.0 million, or $0.23 per diluted share, and $80.4 million, or $0.26 per diluted share, respectively.
  • For the six months ended June 30, 2019 and 2018, net income was $131.9 million, or $0.44 per diluted share, and $141.4 million, or $0.47 per diluted share, respectively.

NAREIT FFO

  • For the three months ended June 30, 2019 and 2018, NAREIT FFO was $142.7 million, or $0.48 per diluted share, and $154.3 million, or $0.51 per diluted share, respectively.  Results for the three months ended June 30, 2019 and 2018 include items that impact FFO comparability of ($1.1) million, or ($0.00) per diluted share, and ($1.1) million, or ($0.00) per diluted share, respectively.
  • For the six months ended June 30, 2019 and 2018, NAREIT FFO was $285.5 million, or $0.96 per diluted share, and $309.1 million, or $1.02 per diluted share, respectively.   Results for the six months ended June 30, 2019 and 2018 include items that impact FFO comparability of ($1.8) million, or ($0.01) per diluted share, and ($1.8) million, or ($0.01) per diluted share, respectively.

Same Property NOI Growth

  • Same property NOI growth for the three months ended June 30, 2019 was 1.8% versus the comparable 2018 period. 
    • Same property base rent for the three months ended June 30, 2019 contributed 170 basis points to same property NOI growth.
    • Sears / Kmart had an impact of approximately (50) basis points on same property NOI growth in the three months ended June 30, 2019. 
  • Same property NOI growth for the six months ended June 30, 2019 was 1.9% versus the comparable 2018 period. 
    • Same property base rent for the six months ended June 30, 2019 contributed 170 basis points to same property NOI growth.
    • Sears / Kmart had an impact of approximately (50) basis points on same property NOI growth in the six months ended June 30, 2019.

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 third quarter of 2019.
  • The dividend is payable on October 15, 2019 to stockholders of record on October 4, 2019, representing an ex-dividend date of October 3, 2019.

PORTFOLIO AND INVESTMENT ACTIVITY

Value Enhancing Reinvestment Opportunities

  • During the three months ended June 30, 2019, the Company delivered nine value enhancing reinvestment projects and added nine new reinvestment opportunities to its in process pipeline.  Projects added include six anchor space repositioning projects, two outparcel development projects and one redevelopment project, with a total aggregate net estimated cost of approximately $21.9 million at an expected average incremental NOI yield of 14%.
  • At June 30, 2019, the value enhancing reinvestment in process pipeline was comprised of 61 projects with an aggregate net estimated cost of approximately $414.6 million.  The in process pipeline includes 28 anchor space repositioning projects with an aggregate net estimated cost of approximately $108.9 million at expected incremental NOI yields of 9 to 14%; 11 outparcel development projects with an aggregate net estimated cost of approximately $26.8 million at an expected average incremental NOI yield of 10%; and 22 redevelopment projects with an aggregate net estimated cost of approximately $278.9 million at an expected average incremental NOI yield of 9%.

Dispositions

  • During the three months ended June 30, 2019, the Company generated approximately $52.1 million of gross proceeds on the disposition of three shopping centers, as well as three partial properties, comprised of 0.3 million square feet.   
  • During the six months ended June 30, 2019, the Company generated approximately $98.2 million of gross proceeds on the disposition of six shopping centers, as well as three partial properties, comprised of 0.8 million square feet.   

Acquisitions and Share Repurchases

  • During the three months ended June 30, 2019, the Company acquired two shopping centers, one adjacency at an existing center and terminated a lease and acquired the associated subleases at an existing center for a combined purchase price of $78.5 million, including: 
    • Plymouth Square, a 236,000 square foot community shopping center (excluding square footage related to the anticipated relocation of Brixmor's regional office) located in Conshohocken, Pennsylvania (Philadelphia MSA), for $56.0 million. Plymouth Square is anchored by Weis Markets, Marshalls, REI and Sweat Fitness and has significant near-term value creation opportunity. The property is the Company's twenty-fourth asset in the Philadelphia market and is located directly across from its 100% leased Whitemarsh Shopping Center.  
    • Centennial Shopping Center, a 114,000 square foot neighborhood shopping center located in Englewood, Colorado (Denver MSA), for $17.9 million. Centennial Shopping Center is anchored by a highly productive King Soopers grocer (Kroger) and Pet Supplies Plus and is the Company's sixth asset in the market.
  • During the three months ended June 30, 2019, the Company repurchased 0.2 million shares of common stock under its share repurchase program at an average price per share of $17.05 for a total of approximately $3.0 million, excluding commissions.  Since inception of the share repurchase program in December 2017, the Company has repurchased 7.5 million shares of common stock at an average price per share of $16.72 for a total of approximately $125.0 million, excluding commissions. As of June 30, 2019, the share repurchase program had $275.0 million of available repurchase capacity.

CAPITAL STRUCTURE

  • As previously announced, during the three months ended June 30, 2019, the Company's Operating Partnership, Brixmor Operating Partnership LP, issued $400.0 million aggregate principal amount of 4.125% Senior Notes due 2029.  The net proceeds from the offering were utilized to repay indebtedness under the Company's unsecured credit facility, including $200.0 million of the Company's $500.0 million Term Loan maturing July 31, 2021.

CONNECT WITH BRIXMOR

CONFERENCE CALL AND SUPPLEMENTAL INFORMATION

The Company will host a teleconference on Tuesday, July 30, 2019 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 August 13, 2019 by dialing 844.512.2921 (domestic) or 412.317.6671 (international) (Passcode: 13690707) or via the web through July 30, 2020 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 PERFORMANCE MEASURES

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 (calculated 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 (calculated 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 calculated in accordance with GAAP.  The Company's computation of these non-GAAP performance 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 performance measures are relevant to understanding and addressing financial performance.  A reconciliation of these non-GAAP performance 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 and financial performance of real estate companies. The National Association of Real Estate Investment Trusts ("NAREIT") defines FFO as net income (loss), calculated in accordance with GAAP, excluding (i) depreciation and amortization related to real estate, (ii) gains and losses from the sale of certain real estate assets, (iii) gains and losses from change in control, (iv) impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity and (v) after adjustments for unconsolidated joint ventures calculated to reflect FFO on the same basis. Considering the nature of its business as a real estate owner and operator, the Company believes that NAREIT FFO is useful to investors in measuring its operating and financial performance because the definition excludes items included in net income that do not relate to or are not indicative of the Company's operating and financial performance, such as depreciation and amortization related to real estate, and items which can make periodic and peer analyses of operating and financial performance more difficult, such as gains and losses from the sale of certain real estate assets.

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 and excluding properties under development and completed new development properties which have been stabilized for less than one year), as total property revenues (base rent, expense reimbursements, adjustments for revenues deemed uncollectible, ancillary and other rental income, percentage rents and other revenues) less direct property operating expenses (operating costs, real estate taxes and provision for doubtful accounts). Same property NOI excludes (i) corporate level expenses (including general and administrative), (ii) lease termination fees, (iii) straight-line rental income, net, (iv) accretion of above- and below-market leases and tenant inducements, net, (v) straight-line ground rent expense, and (vi) income / expense associated with the Company's captive insurance company.  Considering the nature of its business as a real estate owner and operator, the Company believes that same property NOI is useful to investors in measuring the operating performance of its property portfolio because the definition excludes various items included in net income that do not relate to, or are not indicative of, the operating performance of the Company's properties, such as depreciation and amortization and corporate level expenses (including general and administrative), and because it eliminates disparities in NOI due to the acquisition or disposition of properties or the stabilization of completed new development properties during the period presented and therefore provides a more consistent metric for comparing the operating performance of the 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 421 retail centers comprise approximately 73 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 approximately 5,000 retailers including The TJX Companies, The Kroger Co., Publix Super Markets, Wal-Mart, Ross Stores and L.A. Fitness.

Brixmor announces material information to its investors in SEC filings and press releases and on public conference calls, webcasts and the "Investors" page of its website at www.brixmor.com. The Company also uses social media to communicate with its investors and the public, and the information Brixmor posts on social media may be deemed material information. Therefore, Brixmor encourages investors and others interested in the Company to review the information that it posts on its website and on its social media channels.

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 sections entitled "Forward-Looking Statements" and "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2018, 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


6/30/19


12/31/18

     Assets




          Real estate




               Land

$               1,805,993


$               1,804,504

               Buildings and tenant improvements

7,569,557


7,535,985

               Construction in progress

132,296


90,378

               Lease intangibles

646,102


667,910


10,153,948


10,098,777

               Accumulated depreciation and amortization

(2,424,153)


(2,349,127)

          Real estate, net

7,729,795


7,749,650

          Cash and cash equivalents

10,809


41,745

          Restricted cash

2,447


9,020

          Marketable securities

15,813


30,243

          Receivables, net

221,683


228,297

          Deferred charges and prepaid expenses, net

144,178


145,662

          Real estate assets held for sale

32,085


2,901

          Other assets (1)

63,713


34,903

     Total assets

$              8,220,523


$               8,242,421





     Liabilities




          Debt obligations, net

$              4,925,537


$              4,885,863

          Accounts payable, accrued expenses and other liabilities (1)

530,805


520,459

     Total liabilities

5,456,342


5,406,322





     Equity




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




               305,323,128 and 305,130,472 shares issued and 297,846,251 and 298,488,516




               shares outstanding

2,978


2,985

          Additional paid-in capital

3,223,058


3,233,329

          Accumulated other comprehensive income (loss)

(7,887)


15,973

          Distributions in excess of net income

(453,968)


(416,188)

     Total equity

2,764,181


2,836,099

     Total liabilities and equity

$              8,220,523


$               8,242,421





(1) In connection with the Company's adoption of ASC 842 on January 1, 2019, a right-of-use asset and lease liability were recorded and are included in Other assets and Accounts payable, accrued expenses and other liabilities, respectively.



 

 

CONSOLIDATED STATEMENTS OF OPERATIONS

Unaudited, dollars in thousands, except per share amounts


















Three Months Ended


Six Months Ended






6/30/19


6/30/18


6/30/19


6/30/18














Revenues










Rental income (1)

$          290,737


$           312,720


$          580,692


$           629,517



Other revenues

268


310


1,452


688


Total revenues

291,005


313,030


582,144


630,205














Operating expenses










Operating costs

29,307


33,881


60,565


69,371



Real estate taxes

43,189


44,947


86,515


90,672



Depreciation and amortization

81,593


91,334


166,988


181,717



Provision for doubtful accounts

-


949


-


3,364



Impairment of real estate assets

6,186


11,927


9,298


27,829



General and administrative (2)

25,175


21,320


50,618


43,746


Total operating expenses

185,450


204,358


373,984


416,699














Other income (expense)










Dividends and interest

300


104


447


200



Interest expense

(48,475)


(55,200)


(95,141)


(110,371)



Gain on sale of real estate assets

13,043


28,262


20,645


39,710



Loss on extinguishment of debt, net

(707)


(291)


(677)


(423)



Other

(756)


(1,185)


(1,574)


(1,238)


Total other expense

(36,595)


(28,310)


(76,300)


(72,122)














Net income

$             68,960


$             80,362


$            131,860


$            141,384














Per common share:










Net income:










     Basic 

$                  0.23


$                  0.27


$                  0.44


$                  0.47



     Diluted 

$                  0.23


$                  0.26


$                  0.44


$                  0.47



Weighted average shares:










     Basic 

298,140


302,776


298,372


303,468



     Diluted 

298,893


302,934


298,895


303,614













(1) In connection with the Company's adoption of ASC 842 on January 1, 2019, Rental income includes Expense reimbursements and Percentage rents for all periods presented. Additionally, for the three and six months ended June 30, 2019, Rental income is presented net of Revenues deemed uncollectible.

(2) The Company capitalized $2.6 million and $5.5 million of leasing payroll and legal costs during the three and six months ended June 30, 2018. In connection with the Company's adoption of ASC 842 on January 1, 2019, the Company is no longer capitalizing such costs.


 

 

FUNDS FROM OPERATIONS (FFO)

Unaudited, dollars in thousands, except per share amounts


















Three Months Ended


Six Months Ended






6/30/19


6/30/18


6/30/19


6/30/18














Net income (1)

$             68,960


$             80,362


$            131,860


$            141,384



Depreciation and amortization related to real estate

80,621


90,236


165,018


179,588



Gain on sale of real estate assets

(13,043)


(28,262)


(20,645)


(39,710)



Impairment of real estate assets

6,186


11,927


9,298


27,829


NAREIT FFO

$           142,724


$           154,263


$           285,531


$           309,091














NAREIT FFO per diluted share (1)

$                  0.48


$                   0.51


$                  0.96


$                   1.02


Weighted average diluted shares outstanding

298,893


302,934


298,895


303,614














Items that impact FFO comparability










Loss on extinguishment of debt, net

$                 (707)


$                  (291)


$                 (677)


$                 (423)



Litigation and other non-routine legal expenses

(373)


(604)


(1,070)


(1,188)



Transaction expenses

(59)


(166)


(69)


(199)


Total items that impact FFO comparability

$               (1,139)


$               (1,061)


$               (1,816)


$               (1,810)


Items that impact FFO comparability, net per share

$                (0.00)


$                (0.00)


$                 (0.01)


$                 (0.01)














Additional Disclosures










Straight-line rental income, net

$                6,184


$               3,784


$               11,220


$                6,881



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

3,653


7,083


7,769


13,138



Straight-line ground rent expense (2)

(32)


(30)


(63)


(60)














Dividends declared per share

$               0.280


$               0.275


$               0.560


$               0.550


Dividends declared

$             83,397


$             83,223


$           166,833


$           166,500


Dividend payout ratio (as % of NAREIT FFO) 

58.4%


53.9%


58.4%


53.9%













(1) The Company capitalized $2.6 million and $5.5 million, or $0.01 and $0.02 per diluted share, of leasing payroll and legal costs during the three and six months ended June 30, 2018. In connection with the Company's adoption of ASC 842 on January 1, 2019, the Company is no longer capitalizing such costs.

(2) 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




Six Months Ended









6/30/19


6/30/18


Change


6/30/19


6/30/18


Change


Same Property NOI Analysis














Number of properties


415


415


-


415


415


-


Percent billed


87.8%


89.2%


(1.4%)


87.8%


89.2%


(1.4%)


Percent leased


91.8%


92.5%


(0.7%)


91.8%


92.5%


(0.7%)
















Revenues (1)














     Base rent


$         209,951


$        206,392




$         418,366


$           411,361




     Expense reimbursements


61,939


61,343




125,964


125,338




     Revenues deemed uncollectible


(1,956)


-




(4,767)


-




     Ancillary and other rental income / Other revenues


4,626


4,276




9,464


7,809




     Percentage rents


2,046


1,609




4,915


4,502






276,606


273,620


1.1%


553,942


549,010


0.9%


Operating expenses 














     Operating costs


(29,003)


(30,553)




(59,598)


(62,179)




     Real estate taxes


(42,428)


(41,079)




(85,195)


(82,747)




     Provision for doubtful accounts 


-


(514)




-


(2,621)






(71,431)


(72,146)


(1.0%)


(144,793)


(147,547)


(1.9%)


Same property NOI 


$          205,175


$         201,474


1.8%


$         409,149


$         401,463


1.9%
















NOI margin (1)(2)





74.2%


73.8%




73.9%


73.5%




Expense recovery ratio





86.7%


85.6%




87.0%


86.5%





















Percent contribution to same property NOI growth:
















Change


Percent
Contribution




Change


Percent
Contribution




     Base rent


$              3,559


1.7%




$              7,005


1.7%




     Revenues deemed uncollectible / Provision for doubtful accounts


(1,442)


(0.7%)




(2,146)


(0.5%)




     Net recoveries


797


0.4%




759


0.2%




     Ancillary and other rental income / Other revenues


350


0.2%




1,655


0.4%




     Percentage rents


437


0.2%




413


0.1%








1.8%






1.9%


















Reconciliation of Net Income to Same Property NOI














Same property NOI


$          205,175


$         201,474




$         409,149


$         401,463




Adjustments:














     Non-same property NOI


2,015


20,577




4,706


43,480




     Lease termination fees


1,514


365




2,283


1,896




     Straight-line rental income, net


6,184


3,784




11,220


6,881




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


3,653


7,083




7,769


13,138




     Straight-line ground rent expense


(32)


(30)




(63)


(60)




     Depreciation and amortization 


(81,593)


(91,334)




(166,988)


(181,717)




     Impairment of real estate assets


(6,186)


(11,927)




(9,298)


(27,829)




     General and administrative 


(25,175)


(21,320)




(50,618)


(43,746)




     Total other expense


(36,595)


(28,310)




(76,300)


(72,122)





















Net income


$          68,960


$          80,362




$          131,860


$          141,384




















(1) In connection with the Company's adoption of ASC 842 on January 1, 2019, Revenues is presented net of Revenues deemed uncollectible for the three and six months ended June 30, 2019.

(2) NOI margin includes the impact of Revenues deemed uncollectible / Provision for doubtful accounts within Revenues for all periods presented.

 

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

 

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SOURCE Brixmor Property Group Inc.