Brixmor Property : Reports Third Quarter 2019 Results

NEW YORK, Oct. 28, 2019 /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, 2019.  For the three months ended September 30, 2019 and 2018, net income was $0.27 per diluted share and $0.49 per diluted share, respectively.

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

• Executed 2.3 million square feet of new and renewal leases, with rent spreads on comparable space of 13.3%, including 0.9 million square feet of new leases, with rent spreads on comparable space of 30.5%
• Executed 3.6 million square feet of total leasing volume, including options, with rent spreads on comparable space of 11.1%
• Grew total leased occupancy to 91.9% and anchor leased occupancy to 94.7%
• Realized small shop leased occupancy of 85.6%, a 30 basis point increase sequentially
• Leased to billed occupancy spread of 330 basis points, representing $47.6 million of annualized base rent not yet commenced
• Generated same property NOI growth of 4.4%, driven by a 290 basis point contribution from base rent, reflecting the impact of strong rent spreads and significant lease commencements during the quarter
• Grew the total in process reinvestment pipeline to $413.9 million at an expected average incremental NOI yield of 9%, while stabilizing $68.2 million of projects during the quarter at an average incremental NOI yield of 11%
• Completed $151.1 million of dispositions comprised of 1.7 million square feet
• Issued $350.0 million of Senior Notes due 2029 and repaid indebtedness under the Company's unsecured credit facility; as a result, the Company now has no debt maturities until 2022 and no amounts outstanding under its Revolving Credit Facility
• Increased quarterly dividend by 1.8% to $0.285 per common share, which represents an annualized yield of ~5.4%
• Increased previously provided NAREIT FFO per diluted share and same property NOI growth expectations for 2019

"Our operating and financial results this quarter demonstrate how our balanced business plan delivers sustainable growth in cash flows and intrinsic value," commented James Taylor, Chief Executive Officer and President.  "Our leasing productivity, strong reinvestment returns and disciplined capital allocation continue to highlight the unique strengths of our team and portfolio."

FINANCIAL HIGHLIGHTS

Net Income

• For the three months ended September 30, 2019 and 2018, net income was $80.9 million, or $0.27 per diluted share, and $147.3 million, or $0.49 per diluted share, respectively.
• For the nine months ended September 30, 2019 and 2018, net income was $212.7 million, or $0.71 per diluted share, and $288.7 million, or $0.95 per diluted share, respectively.

NAREIT FFO

• For the three months ended September 30, 2019 and 2018, NAREIT FFO was $145.3 million, or $0.49 per diluted share, and $128.4 million, or $0.42 per diluted share, respectively. Results for the three months ended September 30, 2019 and 2018 include items that impact FFO comparability, including loss on debt extinguishment, of ($1.1) million, or ($0.00) per diluted share, and ($20.3) million, or ($0.07) per diluted share, respectively.
• For the nine months ended September 30, 2019 and 2018, NAREIT FFO was $430.8 million, or $1.44 per diluted share, and $437.5 million, or $1.44 per diluted share, respectively. Results for the nine months ended September 30, 2019 and 2018 include items that impact FFO comparability, including loss on debt extinguishment, of ($2.9) million, or ($0.01) per diluted share, and ($22.1) million, or ($0.07) per diluted share, respectively.

Same Property NOI Growth

• Same property NOI growth for the three months ended September 30, 2019 was 4.4% versus the comparable 2018 period.
• Same property base rent for the three months ended September 30, 2019 contributed 290 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 September 30, 2019.
• Same property NOI growth for the nine months ended September 30, 2019 was 2.8% versus the comparable 2018 period.
• Same property base rent for the nine months ended September 30, 2019 contributed 210 basis points to same property NOI growth.
• Sears / Kmart had an impact of approximately (50) basis points on same property NOI growth in the nine months ended September 30, 2019.

Dividend

• The Company's Board of Directors declared a quarterly cash dividend of $0.285 per common share (equivalent to $1.14 per annum) for the fourth quarter of 2019, which represents a 1.8% increase.
• The dividend is payable on January 15, 2020 to stockholders of record on January 6, 2020, representing an ex-dividend date of January 3, 2020.

PORTFOLIO AND INVESTMENT ACTIVITY

Value Enhancing Reinvestment Opportunities

• During the three months ended September 30, 2019, the Company stabilized 11 value enhancing reinvestment projects with a total aggregate net cost of approximately $68.2 million at an average incremental NOI yield of 11% and added 12 new reinvestment opportunities to its in process pipeline. Projects added include five anchor space repositioning projects, five outparcel development projects and two redevelopment projects, with a total aggregate net estimated cost of approximately $66.1 million at an expected average incremental NOI yield of 10%.
• At September 30, 2019, the value enhancing reinvestment in process pipeline was comprised of 62 projects with an aggregate net estimated cost of approximately $413.9 million. The in process pipeline includes 28 anchor space repositioning projects with an aggregate net estimated cost of approximately $123.7 million at expected incremental NOI yields of 9 to 14%; 14 outparcel development projects with an aggregate net estimated cost of approximately $33.4 million at an expected average incremental NOI yield of 10%; and 20 redevelopment projects with an aggregate net estimated cost of approximately $256.9 million at an expected average incremental NOI yield of 9%.

Dispositions

• During the three months ended September 30, 2019, the Company generated approximately $151.1 million of gross proceeds on the disposition of 12 shopping centers, as well as one partial property, comprised of 1.7 million square feet.
• During the nine months ended September 30, 2019, the Company generated approximately $249.4 million of gross proceeds on the disposition of 18 shopping centers, as well as four partial properties, comprised of 2.5 million square feet.

Acquisitions

• During the nine months ended September 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.

CAPITAL STRUCTURE

• As previously announced, during the three months ended September 30, 2019, the Company's Operating Partnership, Brixmor Operating Partnership LP, issued $350.0 million aggregate principal amount of 4.125% Senior Notes due 2029.  The Notes constitute a further issuance of, and form a single series with, the $400 million of previously issued 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 $300.0 million of the Company's Term Loan schedule to mature in 2021.  As a result, the Company now has no debt maturities until 2022 and no amounts outstanding under its Revolving Credit Facility.

GUIDANCE

• The Company has updated its previously provided NAREIT FFO per diluted share expectations for 2019 to $1.90 – 1.93 from $1.86 – 1.94 and its same property NOI growth expectations for 2019 to 3.00 – 3.25% from 2.75 – 3.25%.
• The Company's updated guidance does not include any expectations of additional one-time items, including, but not limited to, litigation and other non-routine legal expenses and does include prospective capital recycling.
• The following table provides a reconciliation of the range of the Company's 2019 estimated net income to NAREIT FFO:

(Unaudited, dollars in millions, except per share amounts)		2019E		2019E Per Diluted Share
Net income		$271 - $280		$0.90 - $0.93
Depreciation and amortization related to real estate		326		1.09
Impairment of real estate assets		17		0.06
Gain on sale of real estate assets		(46)		(0.15)
NAREIT FFO		$568 - $577		$1.90 - $1.93

CONNECT WITH BRIXMOR

• For additional information, please visit www.brixmor.com;
• Follow Brixmor on:
• Twitter at https://twitter.com/Brixmor
• Facebook at https://www.facebook.com/Brixmor
• Instagram at https://www.instagram.com/brixmorpopupshop
• YouTube at https://www.youtube.com/user/Brixmor; and
• Find Brixmor on LinkedIn at www.linkedin.com/company/brixmor.

CONFERENCE CALL AND SUPPLEMENTAL INFORMATION

The Company will host a teleconference on Tuesday, October 29, 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 November 12, 2019 by dialing 844.512.2921 (domestic) or 412.317.6671 (international) (Passcode: 13693367) or via the web through October 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 [e-mail] 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 409 retail centers comprise approximately 72 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
					9/30/19		12/31/18
	Assets
		Real estate
			Land		$                1,779,161		$              1,804,504
			Buildings and tenant improvements		7,556,642		7,535,985
			Construction in progress		155,487		90,378
			Lease intangibles		630,065		667,910
					10,121,355		10,098,777
			Accumulated depreciation and amortization		(2,452,678)		(2,349,127)
		Real estate, net			7,668,677		7,749,650
		Cash and cash equivalents			29,072		41,745
		Restricted cash			2,409		9,020
		Marketable securities			19,109		30,243
		Receivables, net			223,323		228,297
		Deferred charges and prepaid expenses, net			151,125		145,662
		Real estate assets held for sale			6,186		2,901
		Other assets (1)			60,260		34,903
	Total assets				$                8,160,161		$              8,242,421
	Liabilities
		Debt obligations, net			$               4,852,510		$              4,885,863
		Accounts payable, accrued expenses and other liabilities (1)			548,288		520,459
	Total liabilities				5,400,798		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			3,226,531		3,233,329
		Accumulated other comprehensive income (loss)			(13,207)		15,973
		Distributions in excess of net income			(456,939)		(416,188)
	Total equity				2,759,363		2,836,099
	Total liabilities and equity				$                8,160,161		$              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				Nine Months Ended
					9/30/19		9/30/18		9/30/19		9/30/18
	Revenues
		Rental income (1)			$         292,732		$          306,172		$         873,424		$         935,689
		Other revenues			233		308		1,685		996
	Total revenues				292,965		306,480		875,109		936,685
	Operating expenses
		Operating costs			29,573		31,969		90,138		101,340
		Real estate taxes			43,688		44,711		130,203		135,383
		Depreciation and amortization			82,837		85,183		249,825		266,900
		Provision for doubtful accounts			-		3,094		-		6,458
		Impairment of real estate assets			8,170		16,372		17,468		44,201
		General and administrative (2)			24,550		21,209		75,168		64,955
	Total operating expenses				188,818		202,538		562,802		619,237
	Other income (expense)
		Dividends and interest			128		156		575		356
		Interest expense			(47,698)		(55,364)		(142,839)		(165,735)
		Gain on sale of real estate assets			25,621		119,333		46,266		159,043
		Loss on extinguishment of debt, net			(943)		(19,759)		(1,620)		(20,182)
		Other			(401)		(962)		(1,975)		(2,200)
	Total other income (expense)				(23,293)		43,404		(99,593)		(28,718)
	Net income				$             80,854		$           147,346		$            212,714		$          288,730
	Per common share:
		Net income:
			Basic		$                 0.27		$                 0.49		$                  0.71		$                 0.95
			Diluted		$                 0.27		$                 0.49		$                  0.71		$                 0.95
		Weighted average shares:
			Basic		298,031		302,170		298,257		303,031
			Diluted		298,879		302,382		298,927		303,213
(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 nine months ended September 30, 2019, Rental income is presented net of Revenues deemed uncollectible.
(2) The Company capitalized $3.2 million and $8.7 million of leasing payroll and legal costs during the three and nine months ended September 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				Nine Months Ended
					9/30/19		9/30/18		9/30/19		9/30/18
	Net income (1)				$             80,854		$           147,346		$            212,714		$          288,730
		Depreciation and amortization related to real estate			81,869		84,028		246,887		263,616
		Gain on sale of real estate assets			(25,621)		(119,333)		(46,266)		(159,043)
		Impairment of real estate assets			8,170		16,372		17,468		44,201
	NAREIT FFO				$           145,272		$            128,413		$           430,803		$           437,504
	NAREIT FFO per diluted share (1)				$                  0.49		$                  0.42		$                 1.44		$                 1.44
	Weighted average diluted shares outstanding				298,879		302,382		298,927		303,213
	Items that impact FFO comparability
		Loss on extinguishment of debt, net			$                 (943)		$            (19,759)		$              (1,620)		$            (20,182)
		Litigation and other non-routine legal expenses			(87)		(467)		(1,157)		(1,655)
		Transaction expenses			(58)		(95)		(127)		(294)
	Total items that impact FFO comparability				$              (1,088)		$            (20,321)		$             (2,904)		$            (22,131)
	Items that impact FFO comparability, net per share				$                (0.00)		$                (0.07)		$               (0.01)		$                (0.07)
	Additional Disclosures
		Straight-line rental income, net			$                6,831		$                5,015		$             18,051		$             11,896
		Accretion of above- and below-market leases and tenant inducements, net			3,622		5,112		11,391		18,250
		Straight-line ground rent expense (2)			(31)		(40)		(94)		(100)
	Dividends declared per share				$               0.280		$               0.275		$              0.840		$              0.825
	Dividends declared				$             83,397		$             82,470		$          250,230		$          248,970
	Dividend payout ratio (as % of NAREIT FFO)				57.4%		64.2%		58.1%		56.9%
(1) The Company capitalized $3.2 million and $8.7 million, or $0.01 and $0.03 per diluted share, of leasing payroll and legal costs during the three and nine months ended September 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						Nine Months Ended
						9/30/19		9/30/18		Change		9/30/19		9/30/18		Change
	Same Property NOI Analysis
	Number of properties					403		403		-		402		402		-
	Percent billed					88.9%		89.4%		(0.5%)		88.9%		89.4%		(0.5%)
	Percent leased					92.3%		92.6%		(0.3%)		92.2%		92.6%		(0.4%)
	Revenues (1)
		Base rent				$        208,744		$        203,097				$          617,027		$          604,411
		Expense reimbursements				62,788		60,629				186,105		183,086
		Revenues deemed uncollectible				(2,173)		-				(6,852)		-
		Ancillary and other rental income / Other revenues				4,714		4,092				14,016		11,748
		Percentage rents				1,082		683				5,997		5,173
						275,155		268,501		2.5%		816,293		804,418		1.5%
	Operating expenses
		Operating costs				(28,258)		(29,027)				(86,704)		(89,981)
		Real estate taxes				(42,576)		(41,071)				(125,496)		(121,593)
		Provision for doubtful accounts				-		(2,665)				-		(5,300)
						(70,834)		(72,763)		(2.7%)		(212,200)		(216,874)		(2.2%)
	Same property NOI					$         204,321		$          195,738		4.4%		$        604,093		$         587,544		2.8%
	NOI margin (1)(2)					74.3%		73.6%				74.0%		73.5%
	Expense recovery ratio					88.6%		86.5%				87.7%		86.5%
	Percent contribution to same property NOI growth:
						Change		Percent Contribution				Change		Percent Contribution
		Base rent				$              5,647		2.9%				$            12,616		2.1%
		Revenues deemed uncollectible / Provision for doubtful accounts				492		0.3%				(1,552)		(0.2%)
		Net recoveries				1,423		0.7%				2,393		0.4%
		Ancillary and other rental income / Other revenues				622		0.3%				2,268		0.4%
		Percentage rents				399		0.2%				824		0.1%
								4.4%						2.8%
	Reconciliation of Net Income to Same Property NOI
	Same property NOI					$         204,321		$          195,738				$        604,093		$         587,544
	Adjustments:
		Non-same property NOI				4,538		20,414				18,621		73,551
		Lease termination fees				423		467				2,706		2,363
		Straight-line rental income, net				6,831		5,015				18,051		11,896
		Accretion of above- and below-market leases and tenant inducements, net				3,622		5,112				11,391		18,250
		Straight-line ground rent expense				(31)		(40)				(94)		(100)
		Depreciation and amortization				(82,837)		(85,183)				(249,825)		(266,900)
		Impairment of real estate assets				(8,170)		(16,372)				(17,468)		(44,201)
		General and administrative				(24,550)		(21,209)				(75,168)		(64,955)
		Total other income (expense)				(23,293)		43,404				(99,593)		(28,718)
	Net income					$           80,854		$         147,346				$          212,714		$        288,730
(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 nine months ended September 30, 2019.
(2) NOI margin includes the impact of Revenues deemed uncollectible / Provision for doubtful accounts within Revenues for all periods presented.

 

 

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SOURCE Brixmor Property Group Inc.