Brixmor Property Group Inc. (BRX) September 15, 2026 Conference Transcript

When we get started, so this is the first panel for me here. Welcome to the Bricksmore Roundtable. Happy to have Brian Finnegan with us this morning, who's the CEO of the company. Brian, why don't you, I mean, we have a big group here, maybe introduce the team and maybe provide some opening remarks.

Yeah, sure. Samir, thanks for having us. Good seeing all of you today. Joined with me here are Mark Morgan, our Chief Investment Officer, Steve Gallagher, our Chief Financial Officer, and Stacey Slater, our Head of Capital Markets, IR, and Strategy. Thanks again for being here today. Look, from our standpoint, I mean, the strategy continues to be a creative reinvestment in our portfolio. Really, my focus for the last 18 months in coming into the seat is not a shift in the strategy. We spent 10 years transforming the portfolio. It's really to accelerate everything that we've been doing. It's been a tremendous environment for open-air retail. Our retailers are performing. Traffic continues to go up at our shopping centers and across the sector, but in particular, the work that we've done to our portfolio has really allowed us to capitalize on that environment. We're signing rents at the highest level that we ever have. We're continuing to deliver growth at the top of the sector, and we're delivering that more efficiently with lower capex, with retailers taking on more of that work. And what we show all of you is the visibility on that growth that's really unparalleled in what we own and control today. We're not banking on external growth to grow. We have a signed-but-not-commenced pipeline of $70 million that's contractually obligated. It's been around that level for the past couple years because we continue to backfill it as we've been commencing $15 to $20 million a quarter. So as we look out, our plan is to continue to do what we can to accelerate that. We've invested $1.5 billion in the portfolio to date, but we're even more excited about the opportunity set that we have going forward. We've got a billion dollars in reinvestment just in our active and future pipelines that we show all of you, projects like the half a dozen that we have with Publix in Florida, things like in Metro New York, suburban Philadelphia, suburban Houston as well. So the pipeline continues to be strong. And then while external growth is really additive to what we do, we have found opportunities to put the platform to work. About half, close to half the acquisition activity that we've done as a public company has been in the last two years. And there's a common theme across all of those acquisitions in that they have a growth profile that aligns with the growth profile of the portfolio that we have today. And there are markets that we know very well. So we're very excited about what we see within the space in terms of how our tenants continue to perform, but even more excited about how we're positioned to capitalize on that going forward.

I mean, you mentioned after coming into the role and you talked about accelerating kind of everything you've done here. Maybe diving into that a little bit, maybe where do you find the biggest opportunity to improve the business?

I think it is that, Samir, if you look at where we've kind of taken rents in a couple different ways. So just in operations alone, we've taken rents from $12.50 to $19 across the portfolio. We're signing those at $25 today. We're at three years running of renewal growth that's in the mid-teens. So our retailers are able to pay higher rents because they're performing in our shopping centers. So we think there's continued room to run there from just a rent growth perspective in the existing portfolio. And it's really continuing to capitalize on that, whether that's the three and a half million square feet of space that's expiring anchor space in the next three years that we control at rents that are $11 and we're signing those at 18, or whether that's in our existing bumps in the Portfolio, which were a record at 2.8%. So that's an initial operation to continue to drive rate in the portfolio and do that more efficiently. I mentioned reinvestment. So getting those projects started, we've been delivering larger projects across the country recently. So you think about Davis, California, Block 59 in suburban Chicago, Port Orlando, the projects that we have in suburban Philadelphia, bringing those forward and getting those commenced. So you will see us start to bring a number of those public projects online next year and in the years to follow. You should expect a steady cadence of that future reinvestment pipeline coming on to the active pipeline as well. And then an area that I'm sure we'll touch on, we have been very forward thinking in terms of our deployment of technology. And for us, it's very result oriented. What's the time that we're saving? What's the value that we're creating? And I mentioned a few things in our first earnings fall earlier in the year, areas like legal leasing, things that Mark is doing in terms of tenant under or property underwriting as we're looking at acquisitions and then tenant health across the portfolio, which we're seeing even more improvement there as well.

So that's been a big focus as far as to this is more of the AI and sort of data.

I'd say I'd say AI and data across the portfolio. And you're you're you're seeing results. Absolutely. Absolutely. Absolutely. I mean, look, we cut our outside legal expenses in half. And if you think about the time it takes to review a lease, right, the time it takes to dig into a lease clause to figure out what you need to do to reinvest in that, we've shaved that time down dramatically. So one of the things we measure is time to open from when we have that first conversation to when we get those tenants open. We've cut our time in legal by 15% over the past two years. So that's something where we're seeing real tangible efforts. And so if you're able to take that time and have that individual now work on a few more leases, just think of how many days of rent you're able to pull forward.

What about on the underwriting front, as you think about acquisitions? From a technology perspective, it's two things.

It's speed. It's allowing you to get through the data much quicker. So if we get an inbound from a broker, we can get into our model and compare it to our existing portfolio. That used to take a day or two from an analyst. It's kind of done in 10 minutes, and you can kind of rank your rent sales performance against the entire portfolio. It's much, much faster. And the other piece, as Brian mentioned, it's a cost perspective as well. So we were cutting about 50K out of every acquisition just from a legal perspective. And so we're getting that work done cheaper and faster, which has been great.

Maybe it is shifting to the consumer. There's been a lot of conversation on the macro. Talk about, I know you briefly touched on kind of traffic and tenant sales, but kind of talk to us kind of the trends you're seeing. You saw through the summer. Any changes in tone from retailer conversations that you've seen over the last few weeks or several months here?

We've been very encouraged. I mean, if you look at our back-to-school traffic was up significantly over last year. We've been up in traffic every month this year. Interestingly, our back-to-college traffic, we have a great college town portfolio. So where we were seeing, call it three to four percent growth year over Every year, we saw 8% growth in Ann Arbor, Michigan. We saw high single digits growth in the centers of Texas A&M. So we have about 10% of the portfolio in college towns. We saw significant growth there. I'd say we're seeing the consumer be maybe more intentional with their spend. I think across the income spectrum, they're looking for value. You heard that on a number of the earnings calls with the off price tenants. I think they're still spending on health and wellness and health and beauty. So you heard that from Ulta, you heard it from a number of the fitness tenants as well. And then I think there has been, I mean, there's kind of a mixed bag, I think, on some of the grocery results across the board. But if you think about the traditional grocers that went several years without opening new stores like Kroger invested millions of dollars in that fleet and who we've been growing with on the specialty side, like Sprouts and Trader Joe's and Whole Foods. We're still seeing strong demand there. So I think from our standpoint, we do have, we serve two customers, right? We serve our retailers, and then we serve the customers that shop at our centers. But from a retailer perspective, when they're making 10-year decisions, and they're looking at various economic cycles during those 10 years, they're doing that today with more data than they've ever had on those consumers to make those stores as productive as possible. How much in an environment are they shipping from that store? How much is getting picked up? And being able to connect with the consumer wherever the consumer wants to meet them is important. So I do think the consumer is being intentional with their spend. You certainly heard that from a number of retailers, but they've been incredibly resilient.

Anything on the, you know, look, I mean, obviously, the watch list, right? As we think about the back half of this year and into next year, I mean, there's been, you've heard grocery earnings here, right? It's been, you know, whether it's Kroger or some of those reports. I mean, how do you think about the watch list going into kind of the next 12 to 18 months here?

I would say the underlying tendency of this portfolio, the healthiest is the healthiest it's ever been. And I'd ask anybody in the room to compare our top 20 from five years ago to where it sits today. And what you'd see in the top tendency is growth from Trader Joe's. You'd see growth from Sprouts, growth from Barnes & Noble, growth from Publix. And look at those operators that have left. So I think as you think about categories that could be closing stores, right, we expect drugstores to continue to marginalize their store base. It's 80 basis points of our rent. And even the nature of that exposure for us, they're generally older inline locations. Think of the former Eckert's or the former Long's in California, filling those spaces with Trader Joe's and Ulta. We've placed every one of our right aides that we got back over two years. Office supply will continue to close stores. We've cut that exposure in half. We've been signing the bulk of the off price deals that we've been doing have been in a number of those boxes that rent spreads from 40 to 50%. I do think you'll see them potentially slow down because they've almost closed too many stores. They're not certainly not going to open new ones. And then you look at the rest of the exposure. It has been a good summer for movie theaters, but it's 1% of our rent. I think we've invested in a new theater in seven years. But I think overall, the health of the portfolio, even on that small shop tenancy, the signatures that we were able to get on those leases over the past five years are dramatically improved from where they were pre-pandemic. And you see that coming through in the bad debt trends. You see that coming through in the move-out trends. You see that coming through in those retention rates as well. So we feel pretty good about the watch list going forward. I think there are always inevitably some categories that will close stores, but just leave you with the health of the tendency is as strong as it's ever been in the portfolio.

And I think look to the retailers, their reports have been very strong, right? So even where you may have some stock price performance, that is different than ultimately the sales that they're generating from the actual locations and how they're growing their store fleet. So I think sometimes, you know, don't always focus on what an individual stock is doing. Really look at what they're doing out of those stores.

And I know you guys recaptured some space in the second quarter. Maybe give us an update kind of where you are with that space.

Yeah, I think one of the reasons we wanted to signal that we potentially see some occupancy noise in the second quarter was that things have been really good. And I think folks are pointing at any potential negatives. And part of our strategy is going to continue to be capturing the value in under market space. Just the nature of the role this quarter, we expected to take some space back specifically on reinvestment assets in North Jersey and Orlando. We knew it was going to come through. It came through and we had a handful of the painted tree boxes that we took back and still only had a 30 basis point dip. Also raised guidance during the quarter as well. So you didn't see it impact us in terms of our growth rate for the year. The boxes that we did take back are effectively all leased at this point, both with REN and with Painted Tree, again, with off-price operators, with health and wellness operators. So that positions us for even a better look at looking forward in terms of the improved rent and the improved traffic on those, getting those backfilled pretty quickly. We don't give occupancy guidance because there are going to be times, and you saw our term fees pick up last year, and they're a little bit elevated this year, where we're going to take space back in an environment like this, sometimes get paid to do it. But we do expect occupancy to get back on a growth trajectory in the back half of the year.

Right, right. So it sounds like, I think, during the second quarter earnings, you said that there was six of the eight, right, boxes you had taken back where it had been.

Yeah, effectively and more effectively, either signed or at least on all of them.

And the rents were up like 40% or something.

And I think that's like just a good window in terms of the supply environment. Like back to what we're hearing from retailers, we're hearing that there's not enough good boxes and great shopping centers. And that's why you're seeing when there are some level of vacancies in boxes like that, that's why they're getting absorbed very quickly. And they're getting absorbed quickly with tenants that are driving traffic and continuing to produce in their stores. You hit a record of like, I think it was 70 million of ABR as you look at S&O pipeline, right?

Help us understand kind of the rent commencement of that. And when does that sort of hit the financials as we think about them to the next 12 months?

Yeah, we expect about 30 million to hit the remainder of the year. And then as you look into next year, the vast majority of that should hit into 27. And just like we've talked about consistently over the last couple of years, that stacking of rent commencement really gives us visibility into growth, like you're seeing in 26, with the midpoint of our same property NOI being at 5.25%. But also, as you go into 27, and then additionally into 28, you'll see that continued stacking of rent commencements out of the snow pipeline. I think importantly, the rents in place on them are about 25% higher than our in-place rents that we see across the portfolio.

I think the other thing that's helpful, just seeing that visibility and the size of that pipeline, I point to two things. It has remained in kind of that $60 to $70 million range for some time. That's because as we've been commencing, call it $15 to $20 million a quarter, we've been backfilling that with new leasing. I think the other thing that maybe historically was a knock on the portfolio is, well, what's coming out the back door, right? Well, we have small shop moveouts that are record lowest for the portfolio, retention rate that's nearing all-time highs. So from just a moveout trend perspective, you're seeing much more of that growth being additive going forward with, again, the tendency being as healthy as it's ever been and continuing those strong retention rate trends.

On the leasing side, I mean, you've hit, it seems like every quarter is a record for small shop leasing and occupancy, right? Like, what's the kind of the, where can you take shop occupancy, you think, at this point?

So we continue to take it higher. If you were to look at that future reinvestment pipeline, the 60 or some odd projects that are on there today, they trail portfolio average by about 400 basis points. So if you were to ask where some of the non-structural vacancy is, right, it's there. So call it, is that 100, is that 150 basis points? We also have the spread. So back to that snow perspective, there's a 400 basis point spread in terms of that small shop occupancy coming online that's obligated and baked, right? So that's visibility on growth. And then overall, is it probably a similar volume? We're 80 basis points below prior peak occupancy. That's by no means a cap on the portfolio. So if you figure another 50 to 100 basis points on top of that.

Brian, you mentioned in your remarks, doing what you can to accelerate the snow. Can you just talk about what levers you're able to pull to maybe bring forward some of that commencement and how timelines have been trending?

Sure, sure. I mentioned first on the legal side. So it's cutting down the time that we're at least. So you'll hear coming up, I mean, we had a number of anchor tenant We got signed in under a month, right? We're setting kind of back to setting new records in our time with our off price operators who are doing a lot with getting that commitment, getting that timeframe down. We used to take call it four to six months is now taking one to three. So that's number one. Number two, retailers have been much more willing to take on the work and take on existing conditions themselves. So basically, what that allows us to do is give possession sooner, right? And it allows us to, it's obviously cheaper for us to do it and allows them to get open a lot quicker. There are also times, and we just did this in Westchester County, where we're doing tiered delivery schedules. And what I mean by that is we'll get a certain amount of work done so that the retailer can get in and start and then come back and maybe do the parking lot or maybe do the loading dock after that where we are doing some work. And then also where we do have these partnerships, we're willing to go at risk in terms of the entitlement spend because a tenant's got a committee approved deal and we know they're going to move forward. So it's the relationships that we have with municipalities in certain jurisdictions that we're able to get that work started faster. And all of that added is combined is allowing us to start to pull some of these dates up. And then the constant look at the portfolio with somebody like Publix, if you'll notice, we added two new public centers to the active pipeline last quarter. It's not like we bought those shopping centers, but we're constantly in front of these retailers, understanding if they've had shifts in a market. We're doing one of their first new prototypical redemises in suburban Atlanta. It's an area where typically they're tearing down stores in Florida. And as they start to get stores on a vintage of 25, 30, 35 years in the Carolinas, and it's just not as advantageous for us to tear those locations down because those sales may go to a competitor versus going to some of their other stores in Florida. So they're testing out the first one with us. So there could be another pipeline there as well. So it's also constantly in front of tenants and understanding where they may now be willing to pursue a reinvestment in the portfolio.

I'll just pause for a second. I don't know if there's any questions from the audience.

Okay.

Just wanted to switch to external growth here. You've been active in acquisition the second quarter. Maybe give us an update of kind of what you're seeing on the transaction market side, right? A lot of capital entering the space. Talk about pricing and talk about your ability to find acquisitions that sort of meet your return thresholds here. I want to take that more. Sure.

So you're absolutely right. We're seeing, as we've been talking about for a couple of years, we're seeing the return of pension fund capital, core capital back into retail. And when we talk to that capital, like, why are you coming into our space? You told us for years it wasn't an investment business for you. They're kind of saying back to us, as they compare open-air retail to the other major food groups, kind of putting aside the technology-type sectors, they're saying this is the most investable sector for them today. It underwrites the best. Based on everything that Brian has been describing, the tendency with the lack of supply, they think the returns are there. What is happening is that they are driving cap rate across basically every asset type, grocery, power center, unanchored, net lease. So that's been interesting on one hand, so we can take advantage of that when we're selling some assets to prices that we're very surprised about. From a cap rate perspective, what that means is you're seeing folks price even power centers below a six in certain cases, which was somewhat surprising in our opinion. And you're seeing poor grocery price in that mid fives, and you're just seeing really big, big bid lists. So how can we compete in that market? I'd step back and say we're not depending upon external growth to grow earnings here. We really have the steps we lay out in our investor deck that we don't require earnings, external growth to drive earnings. It should be out of everything we're doing. And so our ability to find those deals are really going through our existing footprint or portfolio and developing the relationships with the families that we want to buy assets from. So that the deal we bought in College Station, Texas last quarter, that's the deal we've been chasing since 2018. We wanted to buy it. We knew exactly what we were going to do with it. It came with very significant value-added opportunity with our parcel development that they've kind of put in all the infrastructure for. But we're going to be able to put the tenants in really, really cost efficiently. So that's how we're going to find opportunities. But again, since we're not really reliant upon exponential growth to drive earnings, it's something that's always going to be very opportunistic for us, despite really being a very strong capital market today for retail.

And what's been interesting, Tamir, just to add on what Mark said, despite the uptick in rates, you're still seeing significant demand. And we haven't seen really cap rates widen. If anything, we've seen them tighten in markets that you may be a bit surprised in college Markets in the southeast, for example.

And what is that spread? I mean, I know you said power centers below six, but that's only selective power centers, right?

I mean, not necessarily. I mean, that centers in Greensboro, North Carolina, right? That centers in Columbia, South Carolina. And so I think what you're seeing is you still get, it's an asset class where you can get positive leverage.

Go ahead. Positive leverage, but it's not every power center. I agree, but you're seeing capric compression across that entire quality spectrum in that space. And why are investors, I think, driving to that space? Because they're seeing the same thing we see. Those rents were set 25 years ago. There is real true rent spread here. There's really great tenant demand for these centers. Certain investors have said, great, I want to lean into that because I'm seeing what the public eyes have been doing. That's an exposure I want to get to. So I think they really are coming around to where we are, that we're going to see good rent growth from older leases. These rent basis really matters. And I think that's where you're seeing some folks lean into that.

And I think opportunistically, too, we no longer have the non-core overhang of the portfolio. There's not a, hey, what do you need to sell? As any prudent capital allocator, you'd expect us to take advantage of opportunistic sales where we've maximized NOI. And so selling grocery-anchored locations in Houston, Texas, where grocery may not be reinvesting heavily in those stores that we're getting mid-six caps on, right? Smaller grocers in Kansas City on a site where we didn't see a significant amount of growth getting a low six cap on and being able to recycle that into capital in places like suburban Denver and Southern California and, like Mark mentioned, in College Station, Where we see compelling growth profiles, we're doing that pretty credibly.

Yeah, and you're actually a really good point, Brian. We're seeing that. Historically, you've seen folks just invest in certain core markets, given the pricing we've seen in like the Southeast and Southern California, Texas. We've seen some major investors move out into the Midwest searching for yield and compressing pricing even in Midwestern assets. It's been a very healthy market currently.

And I know one of the deals you did also used OP units for acquisition. I mean, I guess just stepping back, how meaningful of a tool is this going forward? And does this sort of open up sellers you couldn't potentially reach before?

I think there are a couple of more takeaways. One, you know, I think if you'd asked us, or if you'd asked an investor seven years ago, if they'd take OPN and some bricks more, it's not something they would have gone to. So I think it's a real endorsement of the platform that you had private investors saying, I want the exposure to your platform going forward for my family. There is going to be a change of ownership as long-term owners of these assets seek to figure out what their tax planning strategies will be over the next 10 years. So we think it's an interesting opportunity to set. But those deals take a very long time. So we're in discussions with families pretty much constantly on those opportunities. They do contend to be a very emotional discussion because it's kind of a life event discussion they're having. So while we're having those discussions real time, they can play out over years.

Anything as it relates to the disposition pipeline? Because given, you've talked about the cap rates being pretty low here in certain cases, would you accelerate your sort of dispositions and maybe try to? Right.

Again, for us, it's more of strategically, Samir, where have we maximized value? And is it time to recycle the capital versus saying, hey, there's a portfolio here that we want to exit? I mean, we have curated the portfolio over time. We're in the markets that we want to be in. We're clustered in those markets. And so for us, it's where we do have some pockets. And you can look at a map where you'd say, wait a second, there's only one or two assets there. We're okay. Are we in a position where we've maximized value there so we can recycle the capital? So expect us to do that, and we're encouraged by what we see in the environment to get some attractive pricing on those.

What about in terms of acquisition? I mean, there's some bigger portfolios out there right now. I mean, what's sort of the interest level at this point?

I'll let Mark take it. We think of it the same way we've looked at any acquisition. It's ultimately is what we're adding complementary to the growth profile and the business strategy of the company. And we've looked at, and I would think investors would expect us to look at other opportunities that have been out there. We'll continue to look at them. To date, we haven't found them to make sense. But I think that's how we would approach them from both a growth perspective and does it align with the strategy of the company today.

Yeah, I think, Brian, you said it well. We have internal growth opportunities with our redevelopment program. We're going to fund that with our free cash flow. That's going to be our first dollar out the door. As we look at bigger portfolios out there, we're going to compare them just like we compare any one-off deal. Does it add value to the company? Is there a way that we can apply our platform to that portfolio to drive outsized growth? We'll look at that. Here before, they've been hard to find. And we're going to be disciplined because we don't feel like we need to grow to grow. We need to grow to drive earnings, drive value.

I think importantly, we worked really hard to get our balance sheet to where it is today in the low five times debt to EBITDA. So it's not something that we're going to give up to for any of these sort of transactions.

Maybe on the balance sheet, talk about kind of, you know, in terms of explorations coming up. I know you have about $400 million that's coming up in the market next year. Sort of current thoughts on timing and structure, refi there. Any color would be helpful.

Yeah, I mean, we have our next maturity is $400 million in March. I think as we've done, I mean, we have all the options available to us in the capital markets, and that's really due to all the hard work we've done on the balance sheet side. So obviously, we still have six months to get out in front of that. Our line is fully undrawn. So, you know, Stacey and I and the team will work to address that as we get a little bit closer and when there's a window that makes sense for us. Yes.

In terms of maybe, I mean, given that it's September and people are starting to look forward kind of into the next year, talk about kind of as we think about the path forward here and we think about FFO growth in the next year, talk about kind of the swing factors as we think about what gets you kind of that, you know, 5% or plus 5% FFO growth.

Well, we put the long-term target out there for a reason because we wanted folks to see the embedded growth within the portfolio coming from reinvestment, from rent market, from those embedded bumps. And we're still highly confident in that. And we remain very encouraged with the leasing environment. As I mentioned earlier, the tendency is in the strongest position it's ever been. So we're excited about the growth prospects for the portfolio going forward without getting into specific guidance ranges for 2027. We continue to drive things like our specialty income as well. We continue to improve our recovery rates. So I think as we move forward, whether it's 27, 28, 29, we feel like the portfolio is well positioned to continue to drive growth.

What's the biggest driver there? Is it the reinvestment pipeline?

It will continue to be. It's going to continue to be our, you know, collapsing, right? If you look at that, that 70 million, right, and that spread between leased and built, we expect it to remain wide for a little bit as we get into next year and start to collapse as we get into the end of 2027. But the discussions that we're having with tenants today, Samir, not just for 27, I mean, there are 28 openings at this point. I mean, a lot of our anchors, they're still signing up deals for next year, but they're now starting to look at 28 going forward. So, you know, for us, it's back to that question that we had earlier we talked about is what we can do to accelerate and pull a lot of those things forward. Okay.

Any questions? Do you think any differently maybe about that longer-term leverage target, just given where you're talking about some of these assets are trading at cap rates that seem to be really low? I mean, let's see if that holds or not, but like, does that change the calculus at all? If you look at maybe funding something with an asset sale at a really good price versus refinancing at potentially similar type of cost.

Yeah, I think when we look at our leverage, you just think about a lot of the things we've talked about and the stability of cash flow that we have, low rent basis, right? So our ability in multiple market scenarios to still incredibly reinvest into the portfolio, long-term leases with high credit quality tendency. Just to do, when you look at that, that go forward stream of cash flows versus five years ago, it's a lot more stable today than it would have been. And that's why we think sort of being in this low five miles as the growth comes on, we're still going to see that additional, just like we've naturally de-levered, you'll have that ability to natural de-lever as, as you can. I think what you see maybe as a peer group is you did see some peers go more into the fours and ultimately what they're doing is now levering back up in order as they look for opportunity for growth. So I think it's a balance of how to really be in that sort of middle area, and you've seen even S&P put us on a positive outlook as they really reflect all of the hard work we've done to get to where we are today.

I know we've got a minute or so here, and we've got a couple of rapid-fire questions. So the first one, if long-term rates stay higher for longer, what has the biggest impact on sector, I guess sector earnings? Higher refinancing costs, lower transaction activity, or less new supply? Less new supply. Second one, over the next three years, will third-party capital become a more important source of growth for public REITs than balance sheet capital? Yes or no? Choose one. Yes. And the third is for your sector, will 2027, same-story NOI growth, be higher, the same, or lower than 2026? Hi. Okay. All right. Thanks a lot. Great.

Thanks, everybody. We appreciate the time.