Brixmor Property Group Inc. — Q3 2021 Form 10-Q
Business context and period. Unaudited results cover the quarter and nine months ended September 30, 2021, compared with the same 2020 periods. Brixmor is a REIT focused on owning, leasing, managing, acquiring, selling and redeveloping U.S. open-air shopping centers. Its portfolio comprised 386 centers and approximately 68 million square feet of gross leasable area. The Operating Partnership holds substantially all assets and conducts substantially all operations.
Key financial metrics
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Total revenue | $290.2 million | $253.9 million | $857.0 million | $783.9 million |
| Net income | $46.1 million | $27.9 million | $188.9 million | $96.8 million |
| Diluted EPS | $0.15 | $0.09 | $0.63 | $0.32 |
| NAREIT FFO | $115.8 million | $106.6 million | $385.0 million | $338.1 million |
| NAREIT FFO per diluted share | $0.39 | $0.36 | $1.29 | $1.14 |
| Same-property NOI | $202.8 million | $177.0 million | $592.2 million | $545.5 million |
Revenue increased 14.3% in Q3 and 9.3% year to date; net income increased 65.1% and 95.3%, respectively. Same-property NOI rose 14.5% in Q3 and 8.6% year to date. Approximate same-property NOI margin was 74.2% in Q3 2021 versus 73.0% in Q3 2020, and 73.9% versus 73.5% for the nine-month periods. FFO, a non-GAAP measure, grew 8.7% in Q3 and 13.8% year to date.
Cash flow and liquidity: Nine-month operating cash flow was $424.9 million, up from $323.6 million. Investing used $156.1 million; financing used $234.5 million. At September 30, cash and restricted cash were $404.4 million for Brixmor Property Group Inc. (including $397.2 million cash and equivalents); the Operating Partnership reported $394.4 million. The company also reported $1.2 billion of available revolving-facility liquidity.
Debt: Net debt obligations were $5.16 billion, little changed from $5.17 billion at year-end 2020. Weighted-average debt maturity was 5.7 years; the weighted-average stated rate on unsecured notes was 3.56%. Debt covenants were met. The filing identifies $250 million of maturities over the next 12 months and says available cash is sufficient to meet them.
Changes versus prior comparable periods
- Rental income rose $36.2 million in Q3 and $71.8 million year to date. Management attributed much of the increase to lower uncollectible revenue and improved straight-line rental income compared with COVID-affected 2020, as well as rent recoveries and leasing activity. Year-to-date base rent nevertheless declined $3.4 million, partly due to lower billed occupancy.
- Operating costs rose $8.0 million in Q3 and $12.6 million year to date, chiefly due to repairs and maintenance, insurance and utility costs. Real estate impairment charges declined to zero in Q3 and $1.9 million year to date, from $5.7 million and $16.3 million, respectively, in 2020.
- Net income included a $27.1 million Q3 loss on debt extinguishment; the nine-month loss was $28.3 million. Gains on real estate sales were $11.1 million in Q3 and $49.5 million year to date, compared with $13.6 million and $23.2 million in 2020.
- During the nine months, Brixmor issued $350 million of 2.25% notes due 2028 and $500 million of 2.50% notes due 2031, using proceeds to repay a $350 million term loan and redeem $500 million of 3.25% notes due 2023.
Outlook, management commentary and risks
- Management stated that cash, operating cash flow, revolver availability and other capital sources are expected to cover anticipated needs, including debt service, capital improvements and distributions. No earnings or FFO guidance was provided in the supplied filing text.
- Management reported billed and leased occupancy of 88.2% and 91.5% at September 30, 2021, versus 88.0% and 91.2% a year earlier. By October 26, rent collections were 97% for Q3 2021, 97% for Q2 and 96% for Q1; collections for the nine months ended December 31, 2020 were 94%.
- Comparable leasing rent spreads were 9.1% for the first nine months of 2021, versus 7.2% for full-year 2020. The company had 49 repositioning, redevelopment and outparcel projects underway, with anticipated aggregate costs of $396.3 million, of which $245.0 million had been incurred. It identified a further pipeline of approximately $900 million of potential investment over several years.
- The board declared a fourth-quarter 2021 dividend of $0.24 per share, up from the $0.215 quarterly rate in Q3; the dividend remains subject to quarterly review. The company reported no share repurchases in the first nine months of 2021.
- COVID-19 remains a material uncertainty affecting tenants, rent collections, occupancy, cash flow and capital markets. Deferred rent receivables that were not lease modifications declined to $2.6 million at September 30, 2021. Other cited risks include tenant financial stress, retail-sector disruption and e-commerce competition, rising inflation and operating costs, interest rates, local market conditions, and natural disasters. Management noted that many leases provide rent escalations and expense reimbursements, but these do not eliminate exposure to unreimbursed costs.
- No material ordinary-course litigation impact, material environmental fines, or material subsequent events were reported. The company said its SEC matter had been settled in 2019; related proceedings against former employees were further resolved in July 2021. Disclosure controls were assessed as effective.
Investor facts to verify
- Separate recurring operating improvement from COVID-related bad-debt reserve reversals, straight-line rent effects, asset-sale gains and debt-extinguishment costs; compare FFO and same-property NOI alongside GAAP net income.
- Track rent collections, deferred and uncollected rent, occupancy, tenant credit quality and the progression of new and renewal leasing spreads.
- Review debt maturities, refinancing costs, interest-rate exposure, revolver availability and covenant headroom; confirm the $250 million 2022 maturity plan.
- Monitor project spending and returns on the $396.3 million active program and the approximately $900 million potential reinvestment pipeline, as well as acquisition and disposition activity.
- Assess whether the increased $0.24 quarterly dividend is supported by recurring cash generation and REIT distribution requirements, particularly if pandemic or inflation-related pressures worsen.