Brixmor Property Group Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023, compared with the three months ended March 31, 2022. Brixmor is a REIT that owns and operates open-air shopping centers; its portfolio comprised 367 centers and approximately 65 million square feet of gross leasable area at quarter-end.
Key financial results
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Total revenue | $311.4 million | $298.6 million | +4.3% |
| Net income | $112.2 million | $79.5 million | +41.2% |
| Diluted EPS | $0.37 | $0.26 | Up $0.11 |
| Nareit FFO | $151.6 million | $145.4 million | +4.3% |
| Nareit FFO per diluted share | $0.50 | $0.49 | Up $0.01 |
| Same-property NOI | $212.0 million | $202.1 million | +4.9% |
| Operating cash flow | $135.1 million | $112.3 million | +$22.8 million |
Revenue growth reflected higher base rent, expense reimbursements, lease termination fees, and percentage rent. Same-property occupancy and rent spreads also improved. Net income growth was substantially affected by the $48.5 million gain on real estate sales, compared with $21.9 million in the prior-year quarter; FFO, which excludes qualifying property-sale gains, offers a less transaction-sensitive comparison.
Operating expenses were $198.6 million, up $5.3 million year over year. Interest expense rose $1.4 million to $48.7 million, primarily due to a higher weighted-average interest rate, partly offset by lower debt. The filing does not present a headline operating margin.
Operating performance and portfolio activity
- Portfolio billed occupancy was 90.0% and leased occupancy 94.0%, compared with 88.6% and 92.1%, respectively, at March 31, 2022.
- Comparable new, renewal, and option leases achieved a 14.9% rent spread, versus 13.1% in Q1 2022. New and renewal leases alone had a 19.2% spread, versus 18.1%.
- Same-property NOI increased $9.8 million. Same-property billed and leased occupancy were 90.2% and 94.1%, respectively.
- No acquisitions were completed in Q1 2023. Six shopping centers and two partial centers were sold for $119.7 million in net proceeds, generating a $48.5 million gain. No properties were held for sale at quarter-end.
Cash flow, debt, and liquidity
- Cash provided by operations was $135.1 million. Investing activities provided $48.5 million, including sale proceeds, while financing activities used $169.4 million. Cash, cash equivalents, and restricted cash totaled $35.4 million at quarter-end; $32.0 million was restricted cash.
- Net debt obligations were $5.0 billion, down from $5.04 billion at December 31, 2022. The debt included $4.62 billion of unsecured notes and $338.1 million of credit-facility and term-loan borrowings. The weighted-average stated rate on unsecured notes was 3.69%.
- Management reported $1.44 billion of available liquidity, including $1.20 billion available under the revolving facility, $200 million available under the delayed-draw term loan, and cash and restricted cash. The revolving facility had $47 million drawn against its $1.25 billion capacity.
- Scheduled debt maturities were $500 million in 2024, $700 million in 2025, $654.5 million in 2026, and $700 million in 2027. The filing stated there were no scheduled maturities in the 12 months after issuance of the financial statements. The company was in compliance with its debt covenants.
- The quarterly dividend was $0.26 per share, up from $0.24 a year earlier. The board declared a second-quarter 2023 dividend of $0.26 per share.
Outlook, commentary, and risks
Management said operating cash flow and available capital sources are expected to fund anticipated needs for the next 12 months and beyond, including debt payments, capital improvements, and REIT distributions. This is a liquidity assessment, not quantified earnings guidance; the filing provides no specific full-year 2023 revenue, earnings, FFO, or NOI forecast.
The company had 47 in-process anchor repositioning, redevelopment, and outparcel projects with anticipated total costs of $360 million; $203.3 million had been incurred by March 31. It also identified approximately $1.0 billion of potential future redevelopment investment over several years, subject to project and funding decisions.
Management highlighted inflation and potential increases in operating costs, including expenses on vacant space that may not be reimbursed by tenants. Other disclosed risks include changes in economic conditions and interest rates, tenant financial health and retail-sector disruption, competition and e-commerce, property operating costs, and natural disasters or other events that could cause uninsured losses. The company reported no material changes to the risk factors in its 2022 Form 10-K. Routine litigation and known environmental matters were not expected to have a material impact.
Subsequent event: On April 25, 2023, the Operating Partnership repurchased $199.6 million of its 3.65% senior notes due 2024 using proceeds from a $200 million delayed-draw term loan funded April 24. The company expected to recognize an approximately $4.3 million debt-extinguishment gain in Q2 2023. The loan was swapped to a fixed combined rate of 3.59%, plus stated spreads and adjustment, through July 2027.
Important facts for investors to verify
- How much of the net-income and EPS increase reflects property-sale gains rather than recurring operations; compare with FFO and same-property NOI.
- Post-tender-offer 2024 note balance, remaining debt maturities, and the all-in cost of the delayed-draw loan and interest-rate hedges.
- Whether leasing spreads and occupancy gains translate into sustained rental income and same-property NOI growth.
- Timing, remaining cost, and expected returns of the $360 million active project portfolio and the potential $1.0 billion redevelopment pipeline.
- Cash available for operations after distinguishing restricted cash, required distributions, capital spending, and debt obligations.