Brixmor Property (NYSE:BRX) Group reported robust performance in its third quarter 2023 earnings conference call, with a significant increase in leasing and a record rise in small shop occupancy. The company raised its FFO outlook and dividend, maintaining a strong balance sheet and projecting continued NOI outperformance.
Key takeaways from the call include:
- Over 780,000 square feet of new leases were signed at an average comparable spread of 52.7%, with retailers such as Trader Joe's, Lululemon (NASDAQ:LULU), and Ulta.
- Small shop occupancy grew to a record 89.8%, and same-store NOI growth reached 4.8%.
- The company raised its FFO outlook to $2.03 at the midpoint and increased its dividend by 4.8%.
- A strong pipeline of signed but not yet commenced leases is expected to continue contributing to NOI outperformance.
- Despite bankrupt tenants' minor negative impact on same property NOI growth, the company plans to recapture the space and minimize the impact in 2024.
- The company's balance sheet remains strong with a debt-to-EBITDA ratio of 6.1 times and total liquidity of $1.3 billion.
- Brixmor Property Group has a pool of uncommenced properties worth $62 million, 17% larger than the previous year, expected to provide a solid foundation for growth.
- The company anticipates ongoing tenant disruption in 2024 and potential pressure on interest expenses due to upcoming debt maturities and interest rate swaps.
- Brixmor Property Group plans to capitalize on timing and pricing adjustments in the market, with initial opportunities in the $100 million deal market.
During the call, Brixmor executives, including James Taylor and Juan Sanabria, discussed the company's strong performance and future plans. They highlighted the importance of robust yields on their investments and the potential for small shop occupancy to reach the low-90s. Mark Horgan, another executive, noted the market's adjustment to recent changes in the cost of capital and the possibility of opportunities arising in the $100 million deal market.
The company also expressed satisfaction with its ability to recapture bankrupt tenants and noted strong demand for their spaces. While acknowledging that bankruptcies in 2023 would have a continued impact in 2024, the company is confident in its ability to outperform based on its signed but not commenced pipeline, legal and LOI activity, and record-setting spreads and rates.
Brixmor Property Group discussed its decision to pause acquisitions 1.5 years ago in anticipation of better opportunities, particularly in coastal Carolinas, Florida, and the Southeast. The company expects cash flow from backfilled Bed Bath & Beyond (OTC:BBBYQ) spaces to primarily come in the latter half of next year and early 2025.
In terms of interest costs, the company has a $300 million bond maturity in June 2023 and a $300 million swap expiring in July 2024. It is evaluating the market for refinancing opportunities and has the flexibility and liquidity to navigate the refinancing process. The company concluded the call with a positive outlook for future growth, emphasizing its strong balance sheet, efficient capital usage, and cost considerations in leasing deals.
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