Brixmor Property Group Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Brixmor is a REIT operating 365 open-air shopping centers totaling approximately 65 million square feet of gross leasable area. The filing combines Brixmor Property Group Inc. and its operating partnership; their operating results are materially the same.
Financial performance
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $309.8m | $306.1m | $621.2m | $604.8m |
| Net income | $56.4m | $87.8m | $168.7m | $167.3m |
| Diluted EPS | $0.19 | $0.29 | $0.56 | $0.56 |
| Nareit FFO | $157.1m | $148.9m | $308.7m | $294.3m |
| Same-property NOI | $213.9m | $208.3m | $422.4m | $406.5m |
Q2 revenue increased 1.2%, while net income declined 35.7%; diluted EPS fell from $0.29 to $0.19. FFO rose 5.5%. For the first half, revenue increased 2.7%, net income was broadly unchanged, and FFO rose 4.9%. Same-property NOI increased 2.7% in Q2 and 3.9% for the first half. The filing does not present a conventional operating margin measure.
Portfolio billed and leased occupancy at June 30 was 90.4% and 94.1%, respectively, versus 89.0% and 92.5% a year earlier. Q2 comparable new and renewal leases achieved a 15.4% rent spread; the comparable spread for all new, renewal, and option leases was 12.9%.
Cash flow, balance sheet and capital
- First-half operating cash flow was $294.9m, up from $274.1m. Investing activities used $11.9m, compared with $416.6m in 2022, when acquisitions were substantially higher. Financing activities used $289.4m. Cash, cash equivalents and restricted cash totaled $14.9m at period-end.
- Debt obligations, net, were $4.91bn at June 30, down from $5.04bn at year-end 2022. Cash and restricted cash plus available revolver capacity provided reported liquidity of $1.26bn; the $1.25bn revolving facility was undrawn.
- The company repurchased $199.6m of 3.65% senior notes due 2024, leaving $300.4m outstanding, funded with a $200m delayed-draw term loan. The filing reports $300.4m of debt maturities in the 12 months following issuance of the statements. Debt covenants were in compliance.
- First-half real estate improvements and investments were $156.1m. The company had 50 redevelopment, anchor repositioning, and outparcel projects underway, with $435.5m anticipated total cost and $240.9m incurred; it also identified approximately $950m of potential future redevelopment investment.
- The quarterly dividend was $0.26 per share, up from $0.24 a year earlier. Management reported $400m of capacity under both the ATM equity program and share repurchase program; neither was used for issuance or repurchases in the first half.
Material changes, outlook and risks
Revenue growth reflected higher base rents, expense reimbursements, and occupancy, partly offset by lower revenue deemed collectible and net dispositions. Q2 results included $16.7m of real estate impairment charges, compared with less than $0.1m a year earlier. First-half impairment was $17.8m versus $4.6m. Q2 gain on property sales was $3.9m versus $23.0m in Q2 2022; first-half gain was $52.3m versus $44.9m. These items help explain why GAAP net income diverged from FFO. The first half also included a $4.35m debt-extinguishment gain.
Management said operating cash flow and access to capital are expected to fund anticipated needs, including debt payments, capital improvements, and distributions, for the next 12 months and beyond. No specific earnings or FFO guidance is provided in the supplied filing text. Management noted that inflation may increase property and corporate costs; lease escalators, tenant expense reimbursements, rent growth, and interest-rate hedges may mitigate but do not eliminate this exposure. Other cited risks include economic and retail-sector conditions, tenant credit, interest rates, property expenses, competition, and natural disasters or other uninsured losses. Management reported no material change to previously disclosed risk factors, no material litigation outside the ordinary course, and no material subsequent events.
Investor verification priorities
- Assess the sustainability of same-property NOI and leasing spreads alongside billed occupancy and the amount of rental income deemed uncollectible.
- Review the impairment assumptions and disposition gains, which materially affected reported GAAP earnings and comparisons.
- Check refinancing plans and interest-rate exposure for the $300.4m 2024 maturity and subsequent debt maturities.
- Monitor funding and returns for the $435.5m active project commitments and the larger redevelopment pipeline.
- Confirm that operating cash flow, revolver availability, and REIT distribution requirements support the dividend and planned capital spending.