Brixmor Property Group Inc. — Q1 2022 Form 10-Q
Business and period. Brixmor owns and operates U.S. open-air retail shopping centers, primarily neighborhood and community centers. At March 31, 2022, its portfolio comprised 380 centers and approximately 67 million square feet. This summary covers the unaudited quarter ended March 31, 2022, compared with Q1 2021.
Financial performance and position
- Revenue: $298.6 million, up 6.7% from $279.7 million. Rental income rose $21.9 million; lower uncollectible-rent amounts, higher base rents and occupancy contributed. Other revenue fell $3.0 million, mainly from lower tax increment financing income.
- Profit: Net income was $79.5 million versus $52.4 million; diluted EPS was $0.26 versus $0.18. The increase included $21.9 million of gains on real estate sales, compared with $5.8 million a year earlier. Operating expenses increased to $193.2 million from $183.8 million.
- Operating measures: Same-property NOI, a non-GAAP measure, increased 8.4% to $202.4 million from $186.7 million. Its margin on same-property revenue was approximately 73.7%, versus 72.6% (calculated from reported amounts). Nareit FFO was $145.4 million, or $0.49 per diluted share, compared with $130.5 million, or $0.44.
- Cash flow: Operating cash flow was $112.3 million, compared with $110.5 million. Investing used $174.9 million, including $164.3 million of real estate acquisitions and $70.1 million of property improvements and investments, partly offset by $58.9 million of sale proceeds. Financing used $194.7 million, including $250.0 million of debt repayments, partly offset by $210.0 million of revolving-facility borrowings and $43.9 million of equity proceeds.
- Debt and liquidity: Debt obligations, net, were $5.011 billion at March 31, down from $5.165 billion at December 31, 2021. Cash, cash equivalents and restricted cash were $40.4 million. Management reported $1.2 billion of available liquidity under the $1.25 billion revolving facility and stated that available sources were expected to cover anticipated needs. The company was compliant with debt covenants.
- Distributions and equity: The quarterly dividend was $0.24 per share, up from $0.215 in Q1 2021. Brixmor issued 1.7 million shares through its ATM program for $44.4 million gross proceeds; $350.4 million remained available under the program.
Changes, outlook and risks
- Billed and leased occupancy at quarter-end improved to 88.6% and 92.1%, respectively, from 87.8% and 90.8% a year earlier. Comparable new, renewal and option lease rent spreads were 13.1%, versus 6.7% in Q1 2021.
- Acquisition spending increased substantially: the company acquired three shopping centers and a land parcel for an aggregate $158.2 million, compared with $3.8 million of purchases in Q1 2021. It sold five centers and one partial center for $58.9 million of net proceeds.
- Impairment charges were $4.6 million, versus $1.5 million. Management attributed them to changed expected holding periods and the capital-recycling program. Operating costs and general and administrative expenses rose, including from higher repair, utility, insurance and compensation costs.
- On April 28, 2022, after quarter-end, the company amended its credit facilities: the $1.25 billion revolver maturity was extended to June 2026, and the $300 million term loan maturity to July 2027. A new $200 million delayed-draw term loan, also maturing in July 2027, was added; it had not been drawn when the financial statements were issued. Total unsecured credit-facility capacity increased from $1.55 billion to $1.75 billion, and the floating reference rate changed from LIBOR to SOFR.
- Management said it expected cash flows and capital sources to fund scheduled obligations and business needs over the next 12 months and beyond. It reported 54 active redevelopment, anchor-space repositioning and outparcel projects with anticipated aggregate costs of $418.9 million, of which $217.0 million had been incurred; a further approximately $900 million project pipeline was identified for execution over several years. No formal earnings guidance was provided in the supplied filing text.
- Management noted elevated inflation and potential pressure from non-reimbursable property costs, including costs on vacant space. Other disclosed risks include economic and interest-rate changes, tenant financial health, retail-sector disruption and e-commerce, real estate demand, and natural disasters or other uninsured losses. The filing reported no material changes to previously disclosed risk factors and no material litigation or environmental matters expected to affect results.
Investor verification points
- Assess how much of the net-income increase came from property operations versus real estate sale gains, and review the non-GAAP FFO and NOI reconciliations.
- Track occupancy, rent spreads, rent collection and operating-cost trends, particularly as inflation affects unreimbursed expenses.
- Verify acquisition and disposition execution, redevelopment spending and expected returns against the stated project pipeline.
- Review debt maturities, revolving-facility availability, floating-rate exposure and the terms of the post-quarter-end credit amendments.
- Monitor cash after acquisitions, capital spending, debt service and dividends, along with potential dilution from further ATM issuance.