Brixmor Property Group Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022; comparisons are with the corresponding 2021 periods unless noted. Brixmor is a REIT operating 378 open-air shopping centers totaling approximately 67 million square feet of gross leasable area. The filing combines the parent company and operating partnership; their assets and liabilities are materially the same.
Financial performance
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Total revenue | $304.7 million | $290.2 million | $909.5 million | $857.0 million |
| Net income | $79.7 million | $46.1 million | $247.0 million | $188.9 million |
| Diluted earnings per share | $0.26 | $0.15 | $0.82 | $0.63 |
| Nareit FFO | $147.7 million | $115.8 million | $442.0 million | $385.0 million |
| Nareit FFO per diluted share | $0.49 | $0.39 | $1.47 | $1.29 |
| Same-property NOI | $204.5 million | $197.3 million | $604.2 million | $568.5 million |
| Operating cash flow | Not presented for quarter | Not presented for quarter | $441.2 million | $424.9 million |
Q3 revenue increased 5.0% and net income rose 72.8%; nine-month revenue grew 6.1% and net income rose 30.7%. Nine-month same-property NOI increased 6.3%. Occupancy improved: at September 30, billed occupancy was 89.6% versus 88.2% a year earlier, and leased occupancy was 93.3% versus 91.5%. Nine-month comparable leasing rent spreads were 12.0% across new, renewal, and option leases, up from 9.1%.
Results include material gains on real estate sales: $15.8 million in Q3 and $60.7 million for nine months in 2022. The prior-year comparisons included debt-extinguishment losses of $27.1 million in Q3 and $28.3 million for nine months; 2022 recorded $0.2 million for nine months. These items affect GAAP net income comparisons. Operating expenses rose 6.6% in Q3 and 6.2% year to date; nine-month operating costs increased $9.7 million, primarily from repairs, maintenance, utilities, and insurance.
Balance sheet, cash flow and capital
- At September 30, 2022, total assets were $8.49 billion, net real estate was $7.93 billion, and debt obligations, net, were $5.11 billion, down from $5.16 billion at year-end 2021.
- Cash, cash equivalents, and restricted cash were $31.3 million, down from $297.7 million at year-end. Nine-month operating cash flow was $441.2 million; investing cash outflow was $474.5 million, including $409.7 million for acquisitions and $233.1 million for real estate improvements and investments. Financing cash outflow was $233.2 million.
- Management reported $1.28 billion of available liquidity, including the $1.25 billion unsecured credit facility and $31.3 million in cash and restricted cash. Verify facility availability against the $200 million revolver balance shown at quarter-end.
- The April 2022 credit agreement amendment extended the $1.25 billion revolving facility maturity to June 2026 and the $300 million term loan maturity to July 2027, and added a $200 million delayed-draw term loan. The company repaid all $250 million of its 2022 notes and had $200 million of net revolver borrowings during the nine months. The company stated it had no scheduled maturities in the 12 months after the financial statements were issued and was in covenant compliance.
- Unsecured notes had a weighted average stated rate of 3.69%; $300 million of term-loan borrowings were hedged at a combined fixed rate of 2.59% plus a 119-basis-point spread through July 2024. Debt maturities are concentrated thereafter, including $500 million in 2024, $700 million in 2025, and $807.5 million in 2026.
- Dividends were $0.24 per share for Q3 2022, compared with $0.215 a year earlier. In October, the board declared a Q4 dividend of $0.26 per share, payable January 17, 2023.
Outlook, management commentary and risks
Management expects cash from operations and other capital sources to fund anticipated uses, including debt service, capital spending, acquisitions, and REIT distributions, over the next 12 months and beyond. The filing provides no specific earnings or FFO guidance. The company had 53 active anchor-space repositioning, redevelopment, and outparcel projects with anticipated total cost of $400.3 million; $214.1 million had been spent by September 30. It also identified a potential future redevelopment pipeline of approximately $900 million over several years.
Management cited inflation and higher property operating expenses as risks, partly mitigated by contractual rent increases and tenant expense reimbursements. Risks also include rising interest rates, tenant financial health, retail-sector disruption and e-commerce, leasing demand, local market conditions, and natural disasters. The company recorded $4.6 million of real estate impairment for the nine months, related to two properties and disposition activity. Routine litigation and environmental matters were not expected by management to materially affect results; no material subsequent events were reported through issuance of the financial statements.
After quarter-end, the company established a new $400 million share repurchase program, replacing the prior program, and a new $400 million at-the-market equity program on November 1, 2022. The ATM may issue shares or use forward sale arrangements, creating potential dilution; proceeds are intended for general corporate purposes. The filing states that disclosure controls were effective and that there were no material changes to internal control over financial reporting.
Important facts for investors to verify
- Whether rental growth, improving occupancy, and rent spreads persist, and how much growth is offset by rising operating costs and inflation.
- The quality and repeatability of reported earnings and FFO, considering gains on asset sales, impairment charges, and prior-year debt-extinguishment losses.
- Actual undrawn revolver capacity and liquidity, debt covenant headroom, interest-rate exposure, and refinancing needs as maturities approach.
- Returns and funding needs for the $400.3 million active redevelopment program and the approximately $900 million future project pipeline.
- The effects of the new ATM and repurchase programs on capital allocation, leverage, and per-share results.