Brixmor Property Group Inc. (BRX) Q2 2026 Earnings Call Transcript

Greetings and welcome to Bricksmore Property Group 2nd Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Stacey Slater, EVP of IR. Thank you. You may begin.

Thank you, Operator, and thank you all for joining Bricksmore's second quarter conference call. With me on the call today are Brian Finnegan, CEO and President, and Steve Gallagher, Chief Financial Officer. Mark Horgan, Executive Vice President and Chief Investment Officer, will also be available for Q&A. Before we begin, let me remind everyone that some of our comments today may contain forward-looking statements that are based on certain assumptions and are subject to inherent risks and uncertainties as described in our SEC filings, and actual future results may differ materially. We assume no obligation to update any forward-looking statements. Also, we will refer today to certain non-GAAP financial measures. Further information regarding our use of these measures and reconciliations of these measures to our GAAP results are available in the earnings release and supplemental disclosure on the Investor Relations portion of our website. Given the number of participants on the call, we kindly ask that you limit your questions to one per person. If you have additional questions, please re-queue. At this time, it's my pleasure to introduce Brian Finnegan.

Thank you, Stacey, and good morning, everyone. Before turning to our results, I would acknowledge the past, the people who make it special, everything he did, and those values remain deeply embedded in our company. For me personally, the foundation he helped build here across the industry over property and wide growth. Anchored Retail, we continue to prioritize engagement, which continues to benefit from a blended cash spread of 19%. Three years, the mid-teens continue to reflect the lack of available space and the value retailers place in staying in our centers. Hence, we continue to attract as the rent growth itself. During the quarter, we continue to upgrade our merchandising with retailers such as Sierra. Occupancy to a new painted tree boxes at spreads of over 40%. The efficiency level we achieve this quarter is a clear reflection of the improved quality of the portfolio and the follow-on demand created by our reinvestment activity. The time-but-not-yet-commence pipeline reached a record $71 million of annualized base rent. That pipeline remains one of the clearest bridges from the leasing activity we are generating today to future NOI growth and gives us strong visibility into the next phase of earnings growth as leases commence over time. A portion of that pipeline commences in 2027 and beyond, providing visibility well beyond the current uses of capital in our business across the open air sector with nearly $350 million of active reinvestments at an expected 10% incremental yield. Beyond that, our future pipeline exceeds $700 million across the portfolio. This pipeline continues to differentiate Berksmoor, giving us a long runway of high return internal growth in assets we already own and control. Morris Hills in northern New Jersey. Each project reflects the same approach half of the year, 15% average incremental return. We see significant runway for future densification outside of redevelopments moving. Strategic acquisitions during the quarter for $164 million. South City, Florida. These are high-quality units as acquisition currency for a portion of the purchase price. Reflects the importance of relationships and sources of transactions as we pursue disciplined external. Aaron Jones Crossing, we're also immediately added to our future redevelopment pipeline, demonstrating Mark and his team's ability to find assets that fit our reinvestment strategy. To continue expanding relationship-driven reinvestment pipe, which Steve will discuss in more detail. The durability of our operating we're creating across the, our reinvestment pipeline continues to generate high return internal growth. In the portfolio, in markets where we can create value, our balance sheet remains positioned to support disciplined capital allocation. Our team continues to demonstrate what Jim established with our first cultural tenant, that great real estate matters, but great people matter even more. And I want to thank the Bricksmore team for their dedication and resilience for a deeper review of our financial results and updated 2026 outlook.

Operating environment. Same property NOI increased 40 basis points. In addition to base rent, performance was strong across virtually every component of NOI. Reflecting favorable collections taken together, this quarter's results demonstrates that growth is not driven by a single or by healthy underlying portfolio performance and the cumulative benefit of improved escalations or run rate for the returning to guidance. Property NOI growth of 5 to 5.7. guidance of $2.35 to $2.30 reflects the continued strength of operations. The increase primarily reflects the improved expectations from revenues deemed uncollectible, which we now expect to be 60 to 85 basis points of total revenues, reflecting the strength of our tenant base. Leasing activity remains strong, rent spreads remain healthy, and our snow pipeline provides visibility into future earnings growth while delivering same property NOI over 5%, reflecting the improvements to the balance sheet and portfolio, resulting from our value-add business plan. During the quarter, we repaid our June $600 million maturity and issued $400 million of $5.375 and settled a forward effective yield on the new notes. We ended the quarter performance, a record-signed-but-not-commenced pipeline, and a redevelopment pipeline that provides another source of... Combined with our balance sheet strength and liquidity, we remain well-positioned heading into the second half of the year, and as we begin to look towards 2027. And with that, I'll turn the call over to the operator for Q&A.

Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. As a reminder, we ask that you please limit to one question and re-queue if necessary. One moment, please, while we poll for questions. Our first question comes from Michael Goldsmith with UBS. Your line is now live.

Good morning. Thanks a lot for taking my questions. Occupancy was down sequentially in the second quarter, and you had messaged that last quarter as a result of anticipated box recapture. So, was the occupancy decline that actually happened in line with those expectations, or were there any incremental headwinds? And as you look ahead, can you discuss the cadence of the occupancy recovery and maybe provide some color on the redevelopment, releasing, or other projects that are enabled by recapturing those boxes?

Good morning, Michael. Thanks for the question. It was definitely in line with what we expected. We did have some large one that we took back in Orlando. So, interestingly, as occupancy is not always linear, as we talked about, we do expect to get back on a trajectory of growth in the back half of the year.

Thank you very much. Good luck in the back half.

Our next question comes from Handel St. Just with Mizuho. Your line is now live.

Hey, guys. I guess first condolences on Jim. He was a great man and will be missed. My question, I guess it's somewhat similar to Michael's question just now. Now, I wanted to get maybe a bigger sense of why the strong same-story and wide growth that you're seeing here isn't translating into better FFO growth in the updated guide. I think you mentioned straight lining in your remarks. Could the timing of dispositions or maybe some conservatism be playing a role? And maybe some added color on if there's anything else in the back after you went out appreciating and some color on the cadence for same-story and FFO would be helpful too.

I'll let Steve Chapman here, but first, Handel, thanks for the missing a lot. as we can give you some of the boxes we took back in a quarter.

But I think, importantly, we're equally as focused on making sure that top line growth and all of the tailwinds we have.

Thank you.

Our next question comes from Michael Griffin with Evercore. Your line is now live.

Great, thanks. I was wondering if you could give some color on the acquisitions in the quarter, either cap rates, IRRs that you're underwriting to, or redevelopment opportunity at these properties. And then, you know, maybe, Mark, if you could just talk more broadly about what the acquisition opportunity set looks like right now, you know, given there is such a strong private bid for open-air retail these days. But I think Brian highlighted a lot of what we like about the assets in his opening remarks and what we like. And we believe we can put our platform to work densification and redevelopment. The cap rate in the quarter blended to a low, effectively, that land that's sitting there rating for on development in the near term. In terms of, you know, pipeline on the market, we do have an additional asset. We're under hard contract on Southern California for about 15 years. It will be higher than what I just said here. And if you think about the deal we did and working on for eight years, the deal on College Station, we've been chasing that since 2018. So a lot of the deals that we're looking at acquiring are assets that we've actively been looking at acquiring for long term and building that relationship. So to the extent you can get them off market or in the cone market, you're a preferred buyer. So that's how we kind of think about our ability to transact. I would also say that a lot of capital that's coming into this space is more focused on core-like or more. So that really, I think, will help us continue to be in that required to the extent we choose to be. So I would also highlight, again, as we have in the past, our first dollar of investment is going to be the redevelopment pipeline. We're really not required or leaning on acquisitions to drive value given our base business plan.

Great. Thanks so much.

Our next question comes from Todd Thomas with KeyBank Capital Markets. Your line is now live.

Yeah, hi, thanks. Good morning. I wanted to ask about the reinvestment pipeline that increased a bit this quarter to $350 million, roughly. Brian, you talked about some new projects, some activations, and I think some of the recaptures are driving that. How should we think about new starts and the size of the pipeline heading into 27? And then with rents climbing and the lack of supply in the space, are you seeing potential for returns to increase overall from the current blended 10% stabilized yield forecast on the pipelines?

It's a great question, Todd. What you can expect from us is that consistent movement from that future pipeline, which we show all of you, into the active pipeline. So, as I mentioned, we were thrilled with what we brought online in Dayton and Market Plaza. We've been bringing on larger assets in that high single-digit, low double-digit return. Looking into next year, just the future pipeline and the active pipeline of what we're showing you gives us several years of $150 million to $200 million of reinvestment. We'll probably be towards the low end of that this year, just due to the nature of the pool, but really thrilled with what we're seeing and thrilled with what we're seeing in terms of the cadence of that coming on in the active pipeline. And last thing that I would mention, and Mark touched on it in his commentary on acquisitions, we're finding opportunities to refuel that externally. We have a lot with what we have in the pipeline today, just in what we own, but bringing on that asset in College Station, an opportunity to add densification in Long Island, which can be very challenging to do. We were thrilled with that as well. So we're pleased with the cadence. I think it gives everybody on the phone good visibility in terms of the future pipeline and expect to continue to see us deliver a strong cadence of bringing those online.

Our next question comes from Alexander Goldfarb with Piper Sandler.

Your line is now live.

Thank you. And morning down there and echoing the condolences on Jim. Um, Brian, uh, conversation on, you know, earnings acceleration, uh, you know, as you guys think about whether it's underwriting new leases and the terms or how you manage tenant rollover or when they take space, uh, I know I've asked you this in the past, but just as you guys have more opportunity to manage the portfolio, are there little things that you've been able to figure out or to do that causes the FFO, uh, recognition to accelerate without obviously changing, you know, the underlying economics?

I think your point, we are getting tenants to take possession sooner. You've seen a shift our costs. You've also seen tenants that have been much more flexible in terms of how they work with existing space. So that gets them in the space. I think just from an, and then the add on that, we're signing rents at the highest level that we ever have. So I'll let Steve touch on it a little bit further, but everything is of the mind here of how do we get tenants open sooner because generally the team's effort and please, which is in terms of further monetizing our leases.

And I think importantly, what that does is while it does and then our commencement dates and deals that way, that ultimately could result in us accelerating.

Thank you.

Our next question comes from Greg McGinnis with Scotiabank. Your line is now live.

Hey, good morning. Brian, I appreciate the comments on the assets you've been looking at for a long time in terms of what you're acquiring and other smaller landlords you've been working with, assets you've been looking at. But what does that look like in terms of kind of near-term acquisition opportunity? You know, is this pace of acquisitions that you've achieved in the first half of the year, $164 million, does that feel like a reasonable pace as you're going forward? or is there an opportunity to kind of increase how much money you're putting to work from an external growth perspective?

Well, I'll let Mark chime in on this as well. And again, our first dollar is going to continue to go through a lot of things, but what each of them has, we're going to be consistent around not giving transaction guidance actions, nor do we have to be more pleased with what we've done.

Thank you, both.

Our next question comes from Jamie Feldman with Wells Fargo.

Your line is now live. great uh thanks for taking the question so i was hoping you could provide a little bit more color on the op unit transaction sounds like you've been working on this for years you know what was it that finally got the seller to move forward and then just how big is your pipeline of similar deals now that you've got this first one done and then finally just anything unique in how you structured it in terms of you know the price is it was it price that where the stock is trading or the price to something different as we think through you doing more of these in the future. Thank you.

We do think we got a really strong value.

I would just add, Jamie, it just gives us another tool looking to market. And again, it's relationship building. It's understanding the markets and centers that the portfolio long-term so that when they do ultimately decide to sell, we're in a great position to have the conversation first. So it was really a great job by Mark and the team of getting ahead of this one, and we think it's a tool that we may be able to utilize going forward.

Okay, thank you. Do you know if they were talking to other REITs? Okay, thank you.

Our next question comes from Samir Kanell with Bank of America. Your line is now live.

Good morning, everybody. I guess, Brian or Steve, sorry if I missed this, but did you provide a view on occupancy in the second half? I know you talked a little bit about, I think, growth trajectory in the second half last quarter. And then maybe to tie in the guidance, you know, it implies that decel in the second half. And I know you're probably being conservative, but just walk us through kind of how to think about occupancy and NOI growth in the second half. Thanks.

And Steve can touch on the CATE at 27 to continue the stack rent that we've been doing over the last couple of years.

Our next question comes from Caitlin Burroughs with Goldman Sachs.

Your line is now live.

Good morning, everyone. Brian, you mentioned in the prepared remarks that Bricks more benefits from a few factors, one of which is a low rent basis, which is obviously not new news. But I'm wondering if you can talk about the outlook for rent spreads. I guess it would maybe seem that by now the low rent basis has been marked to market. So how is that not the case? And specifically with 2Q, the new and renewal spreads were lower than recent quarters. So just wondering if you would consider that part of normal variability or some new trend.

Yeah, it's a good question, Caitlin. The interesting thing is, as our ABR has risen from $12 to over $19, the rents that we're signing have also risen dramatically as well. So just said simply, and we're signing leases in the mid-20s off a $19 base rent. We've now been three years running of new lease growth at 80%. Once we get those trends in the portfolio, as we continue to improve, our assets will continue to be able to drive with anchor leases and last year. So the trends continue to improve. It can be lumpy in a given quarter, but overall, we're really pleased with the rent growth trajectory across the portfolio.

Our next question comes from Craig Mailman with Citigroup.

Your line is now live.

Hey, good morning. I know it's a bit early here to be thinking about 27, but your business is a little bit more stable with visibility. I'm just kind of curious. The execution has been steady and solid here. As we start to think about 27, is there anything that you could think about that could significantly boost the run rate growth for BRICS in the near term? Or should we continue to think about BRICS as a 5% FFO grower, plus or minus, in 27 and maybe 28?

I'd say Craig and Steve can jump in here, too. specialty income or outlook when we have 29 million of rent that we're expecting to commence

in the back half of the year we'll get a partial benefit of that into this year as a full benefit into the next year and then we have almost 37 a million of rent coming online in next year and that's what six months of leasing left to do so i think you have a lot of visibility into that year what what the offset to that is always is what is happening with this space we're taking back and like you saw in this quarter there are going to be time our next question comes from florist van Dijkom with Leidenberg Thalman.

Your line is now live.

Hey, guys. Thanks. And, you know, obviously, Jim will be missed, but it looks like the company's in good hands. So, Brian, good luck with everything. My question is regarding your CAM initiative and auxiliary revenues. Touch upon maybe if you could on the percentage of the portfolio that has six cam now, what kind of impact that has on same store, as well as what you think the ancillary revenue opportunity could be relative to where it is today.

Well, first, of course, again, appreciate the time. We're doubled that business. We still see future growth because we've moved away some of those across the portfolio. But really, we continue to deploy fixed cam strategically. We're about 40% of our ABR now has fixed cam. We're growing those rates at 4.2% across both small shop. And that would be because a lock in at 4% growth, and there's going to be more negotiation on those rates up front. But where we've done that, we've done it very efficiently. The other thing is for those tenants and that we're getting paid back for the investments that we're making you can really see that coming through right so you pointed out to where we continue to make improvement that we continue to drive growth in addition to driving base rent growth near the top of the shopping center so pretty pleased with how the team has as a reminder if you'd like to ask a question please press star one on your telephone keypad one moment while we

poll for questions our next question comes from paulina ross with green street capital your line is now live.

Good morning. Your guidance for uncollectible income of 60 to 85 basis points of revenue assumes some deterioration from the 50 basis points you have recognized year-to-date. So what are you seeing that keeps you these 50 basis points year-to-date outside of your And more broadly, can you share how you thought about the high and low end of the uncollectible income guidance?

Thanks for the question in collections due to the cash basis accounting and when we reached the benefit of that in the first half of the year, and then you have the headwind into the last half of the year. So if you look back at the last couple of years, you'll notice that the first half has significant outperform noise in the underlying, the strength of the actual collection that you're seeing on the recurring monthly rent continues to be very strong across the portfolio as our our tenants continue to perform and it just goes to the competition that we're seeing for spaces and allows us to have even higher standards that we're putting in on underwriting making sure you know I would just add you follow this portfolio for a long time this is the strongest underlying tenant base that the company has ever had I mean screen the top 40 worth versus where small shop move out you said we continue to have strong

collection trends. So you put all that together.

Our next question comes from Juan Sanabria with BMO Capital Markets. Your line is now live.

Good morning and thanks for the time and the condolences to the team for the loss of Jim and Michael B. Mitts, obviously.

Thanks, Juan.

Just a question on the acquisitions and the yields and kind of the competition backdrop in terms of rates, et cetera. For what you closed in the second quarter, I think you said All the assets are entering the redevelopment pool shortly, so should we think I guess about the contribution of those couple of assets and what that means to the initial returns?

I think if you think about the complexion of those assets, right, we have a highly productive HEB in College Station, another place College found really well. I mean, there, Juan, you've got five out parcels. We've got a lot of inbounds, and we're already in discussions on a number of leases since a month ago. And similarly, the densification that we have out in Long Island, both in the front of the center, and we have a large parking field to the side as well. That's why Mark's pointing to a three-, four-year growth perspective, because it does take some time. And we've just got a great team to be able to get those projects entitled to move those forward. We've got great tenant partnerships with the grocers out there as well to enable us to do what we want to do. That was part of the due diligence that we had in those properties. But I think it fits with the strategy of assets that we're adding in markets that we know that ultimately complement the business plan of the company moving forward.

The other thing I would add, ex-set redevelopment coming online, we think the assets should grow at least in line with the portfolio given the near-term rent mark-to-market in the existing assets. So we're excited about the opportunities we have in front of us both here and in the pipeline we're looking at.

And any comments on competition or spread compression or cap rate compression from here?

We haven't seen over the last quarter, I'd say cap rates seem to be generally stable, despite some of the volatility you've seen in the rate movement. We continue to see, and I continue to experience, significant new capital coming in.

Great. Thank you very much.

Our next question comes from Mike Moeller with J.P. Morgan. Your line is now live.

Yeah, hi. First, those are nice comments about Jim. We'll definitely miss him as well. I did jump on a little bit late here. Later on, I was just wondering, as it relates to the development or the reinvestment pipeline, the development pipeline, as you look out over the next couple of years, are there going to be any projects that stand out in terms of significance, either size or from a return investment that are going to be a little bit different than what the normal is in the pipeline, or do you expect it to be kind of more of the traditional bread and butter?

Well, thanks, Mike. I think you'll see a mix of both of our marquee larger, probably be more bread and butter. I think you can expect to see a mix of both. You'll continue to see a steady cadence of those Publix redevelopments coming online. We expect to announce a few of them here in the back half of the year, and you're going going to see a few of those stores open next year as well. So probably say consistent cadence, more larger projects. And then I touched on out parcels remarks. We actually touched on our team's development. You're seeing just a ton of demand in the space from great operators. So it helps us as well as we accelerate that business. So we're really pleased with all aspects of it, but importantly on those larger projects, how we've been able to execute.

Got it. And for a quick follow-up, the 440 basis point least occupied spread, if you're looking at the spaces above and below 10,000 square feet, was there a lot of variability attributing to that average?

I think on the 10,000 square foot space, just the nature of them would be some.

Okay, thank you.

Our next question comes from Amateo Okasana with Deutsche Bank. Your line is now live.

Yes. Good morning, everyone. Also, I wanted to say Jim definitely would be missed. Condolences to the company and to his family. In terms of questions, I just wanted to kind of stick onto the line of questioning that was just previously asked. Again, the snow pipeline getting larger, the build versus occupied spread getting larger. I think, again, all signs of future earnings growth for share, but I think sometimes there's also this question of, you know, if you continue to kind of have additional vacancy and fallout and, you know, yes, you're leasing it up and it's growing, but near-term earnings are probably negatively impacted. Like, how do we just kind of think about, again, that balance and when we kind of think about the next 12 months, if we really do kind of start to see some of those numbers shrinking, which is, again, the clear indicator that earnings growth should accelerate at that point.

Yeah, well, I think, Theo, we expected build-to-lease to be wide this year just due to the nature of we've expanded the stability on the strength of leasing demand and the fact that this growth is effectively baked as we look out into 2030.

That gives us the growth over the next couple of years.

Thank you.

Our next question comes from Caitlin Burroughs with Goldman Sachs. Your line is now live.

Hi again, everyone. We've talked a lot about acquisitions, but I don't think we've talked on the funding side. So you guys haven't settled any or much of the forward equity. What will drive the timing of settling that equity? And then going forward, if you continue to buy assets, how are you planning on funding that? What, I guess, is it a target leverage and then manage equity and dispositions based on the share price? But, yeah, if you could just talk about that a bit.

I think you just said it pretty perfectly. But, yeah, I mean, we look at the balance sheet over a long period of time. So if you look at where we sit at the end of the quarter, we had over $100 million of cash on the balance sheet. And our debt-to-leverage versus the acquisition pipeline and what are those opportunities?

Capital recycling. And that is, Caitlin, where we've maximized NOI, and you saw that with the assets that we sold a year ago and what we sold earlier this year. There's no longer a non-core overhang for this portfolio. It's simply in markets where we think that we've maximized NOI to be able to recycle that capital into other markets where we see a higher growth potential.

Thanks.

You got it.

We have reached the end of the question and answer session. I'd now like to turn the call back over to Stacey Slater for closing comments.

Thanks, everyone, for joining today.

Hope you all enjoy the rest of your summer.

This concludes today's conference.

You may disconnect your lines at this time. And we thank you for your participation.