Brixmor Property Group Inc. (BRX) is one of the largest publicly-traded open-air retail portfolios in the United States, owning and operating 359 shopping centers totaling approximately 64 million square feet of gross leasable area (GLA) as of March 31, 2023. The company's high-quality national portfolio is primarily located within established trade areas in the top 50 Core-Based Statistical Areas in the U.S., with shopping centers that are primarily anchored by non-discretionary and value-oriented retailers, as well as consumer-oriented service providers.

Financials

Brixmor has demonstrated impressive financial performance, reporting annual net income of $305,087,000, annual revenue of $1,245,036,000, annual operating cash flow of $588,794,000, and annual free cash flow of $243,637,000 in its most recent fiscal year. The company's strong results have continued into the first quarter of 2023, with net income of $88,905,000 and total revenues of $320,241,000 for the three-month period ended March 31, 2023.

Leasing Activity

The company's robust leasing activity has been a key driver of its financial success. During the first quarter of 2023, Brixmor executed 294 new and renewal leases totaling 1.3 million square feet, including 700,000 square feet of new leases with tenants across a wide range of categories. The company achieved several noteworthy records, including for overall anchor and small shop occupancy of 95.1%, 97.3%, and 90.5%, respectively, with a sequential small shop gain for the 13th consecutive quarter. Brixmor also hit a high watermark in new small shop rents at over $30 per square foot, as the improvements made at its centers, along with a high-demand, low-supply retail leasing environment, have allowed the team to drive rates across the portfolio.

Brixmor's ability to drive rate and capture the upside embedded in its below-market rents was also apparent in its new and renewal spreads of 20% and new leasing spreads of 40%. The company's move-out trends were the lowest first quarter result this portfolio has had, leading to record retention at over 89% of GLA. Additionally, tenant disruption has remained muted so far this year, which is a significant factor in Brixmor's improved outlook for the year.

Same-Property NOI Outlook

The cumulative effect of robust leasing, record portfolio retention, low move-out activity, and a stable tenant base is reflected in Brixmor's improved same-property net operating income (NOI) outlook for 2023, which the company has increased to a range of 3.5% to 4.25%. This growth is driven by a 425 to 475 basis point contribution from base rent, which includes approximately 40 basis points of top-line drag at the midpoint from national tenant disruption.

Reinvestment Initiatives

Brixmor's value-enhancing reinvestment initiatives have also been a key component of its success. The company stabilized $11.6 million of projects at an incremental 12% return during the first quarter and now has an active pipeline of over $400 million of projects with an incremental 9% return, of which it expects to stabilize approximately $200 million this year. These high-profile projects include Roosevelt Mall and Plymouth Square in the Philadelphia market, as well as the first phase of Pointe Orlando across from one of the busiest convention centers in the country.

External Growth

On the external growth front, Brixmor is beginning to see transaction activity increase and more opportunities to put its platform to work, particularly following the $69 million of attractive capital the company raised in the first quarter through dispositions. The company recently acquired a grocery-anchored asset adjacent to a center it already owns in Long Island, New York, consistent with its successful clustering strategy deployed in other markets.

Liquidity

Brixmor's balance sheet remains strong, with total liquidity of $1.7 billion as of March 31, 2023, and a debt-to-EBITDA ratio on a trailing 12-month basis of 5.9x. The company's credit rating has also been placed on a positive outlook by Moody's, recognizing the improvements made to the balance sheet over the past several years.

Outlook

Looking ahead, Brixmor has increased its 2023 NAREIT FFO guidance to a range of $2.08 to $2.11 per share, driven by the continued strength in the leasing environment and the momentum generated by the company's portfolio transformation initiatives. The company's signed but not yet commenced pool totaled a record $68 million as of March 31, 2023, including $60 million of net new rent, with a blended annualized base rent per square foot of $21.11, approximately 23% above the portfolio average.

Conclusion

Brixmor's geographic diversification and focus on high-quality, open-air retail assets have positioned the company well to capitalize on the strength of the current market. The company's proactive management of its portfolio, value-enhancing reinvestment opportunities, and disciplined approach to external growth have all contributed to its strong financial and operational performance. As Brixmor continues to execute on its strategic initiatives, the company is well-positioned to deliver sustainable growth and value for its stakeholders.