Brixmor Property Group Reports Third Quarter 2018 Results

NEW YORK, Oct. 29, 2018 /PRNewswire/ -- Brixmor Property Group Inc. (NYSE: BRX) ("Brixmor" or the "Company") announced today its operating results for the three and nine months ended September 30, 2018.  For the three months ended September 30, 2018 and 2017, net income attributable to common stockholders was $0.49 per diluted share and $0.27 per diluted share, respectively.

Key highlights for the three months ended September 30, 2018 include:

• Executed 2.2 million square feet of new and renewal leases at comparable rent spreads of 13.4%, including 0.9 million square feet of new leases at comparable rent spreads of 39.7%
• Executed 3.1 million square feet of total leasing volume, including options, at comparable rent spreads of 12.1%
• Grew total leased occupancy 90 basis points year over year to 92.5%, including 110 basis points of growth in small shop leased occupancy to 85.5%
• Maintained widest leased to billed occupancy spread since IPO of 310 basis points
• Generated same property NOI growth of 1.2%, driven by a 270 basis points contribution from base rent
• Grew total in process reinvestment pipeline to $340.4 million, while delivering $53.8 million of projects at an average incremental NOI yield of 9%
• Closed on $530.2 million of dispositions, including six assets totaling $76.7 million closed subsequent to quarter end
• Acquired one adjacency at an existing center for $1.5 million, repurchased $48.6 million of common stock and repaid $507.2 million of secured indebtedness
• Issued $250.0 million of Floating Rate Notes due 2022 and repaid a portion of the Company's $600.0 million term loan
• Increased quarterly dividend by 1.8% to $0.28 per common share, which represents an annualized yield of 7.3% 
• Updated previously provided NAREIT FFO per diluted share expectations and affirmed same property NOI expectations for 2018

"I am very pleased with how our record leasing, growth in redevelopment, accelerated capital recycling and prudent balance sheet management not only position us for sustainable growth in 2019 and beyond, but also how this progress across all fronts of our self-funded plan, in an otherwise volatile marketplace, continues to significantly enhance the intrinsic value of our portfolio," commented James Taylor, Chief Executive Officer and President.

FINANCIAL HIGHLIGHTS

Net Income

• For the three months ended September 30, 2018 and 2017, net income attributable to common stockholders was $147.3 million, or $0.49 per diluted share, and $83.4 million, or $0.27 per diluted share, respectively.
• For the nine months ended September 30, 2018 and 2017, net income attributable to common stockholders was $288.7 million, or $0.95 per diluted share, and $230.4 million, or $0.75 per diluted share, respectively.

NAREIT FFO

• For the three months ended September 30, 2018 and 2017, NAREIT FFO was $128.4 million, or $0.42 per diluted share, and $157.2 million, or $0.52 per diluted share, respectively. Results for the three months ended September 30, 2018 include a loss on extinguishment of debt related to the prepayment of secured indebtedness and other items that impact FFO comparability of ($20.3) million, or ($0.07) per diluted share. Results for the three months ended September 30, 2017 include litigation and other non-routine legal expenses, a gain on extinguishment of debt and other items that impact FFO comparability of ($0.3) million, or ($0.00) per diluted share.
• For the nine months ended September 30, 2018 and 2017, NAREIT FFO was $437.5 million, or $1.44 per diluted share, and $480.7 million, or $1.58 per diluted share, respectively. Results for the nine months ended September 30, 2018 include a loss on extinguishment of debt related to the prepayment of secured indebtedness, litigation and other non-routine legal expenses and other items that impact FFO comparability of ($22.1) million, or ($0.07) per diluted share. Results for the nine months ended September 30, 2017 include litigation and other non-routine legal expenses and other items that impact FFO comparability of ($3.3) million, or ($0.01) per diluted share.

Same Property NOI Growth

• Same property NOI for the three months ended September 30, 2018 increased 1.2% from the comparable 2017 period.
• Same property base rent for the three months ended September 30, 2018 contributed 270 basis points to same property NOI growth.
• Same property NOI for the nine months ended September 30, 2018 increased 1.3% from the comparable 2017 period. 
• Same property base rent for the nine months ended September 30, 2018 contributed 190 basis points to same property NOI growth.   

Dividend

• The Company's Board of Directors declared a quarterly cash dividend of $0.28 per common share (equivalent to $1.12 per annum) for the fourth quarter of 2018, which represents a 1.8% increase.
• The dividend is payable on January 15, 2019 to stockholders of record on January 4, 2019, representing an ex-dividend date of January 3, 2019.

PORTFOLIO AND INVESTMENT ACTIVITY

Value Enhancing Reinvestment Opportunities

• During the three months ended September 30, 2018, the Company completed eight value enhancing reinvestment projects and added nine new reinvestment opportunities to its in process pipeline. Projects added include five anchor space repositioning projects, three outparcel development projects and one redevelopment project, with a total aggregate net estimated cost of approximately $55.3 million at an expected average incremental NOI yield of 10%.
• At September 30, 2018, the value enhancing reinvestment in process pipeline was comprised of 56 projects with an aggregate net estimated cost of approximately $340.4 million. The in process pipeline includes 31 anchor space repositioning projects with an aggregate net estimated cost of approximately $122.2 million at expected average incremental NOI yields of 9 to 14%; 12 outparcel development projects with an aggregate net estimated cost of approximately $19.1 million at an expected average incremental NOI yield of 12%; and 13 redevelopment projects with an aggregate net estimated cost of approximately $199.1 million at an expected average incremental NOI yield of 9%.

Dispositions

• During the three months ended September 30, 2018, the Company generated approximately $453.5 million of gross proceeds on the disposition of 28 assets, including two partial properties, comprised of 3.5 million square feet.
• During the nine months ended September 30, 2018, the Company generated approximately $699.3 million of gross proceeds on the disposition of 44 assets, including two partial properties, comprised of 6.4 million square feet.
• Subsequent to September 30, 2018, the Company generated approximately $76.7 million of gross proceeds on the disposition of six assets, including one partial property, comprised of 0.7 million square feet.

Acquisitions

• During the three months ended September 30, 2018, the Company acquired a building adjacent to an existing center for $1.5 million.
• During the nine months ended September 30, 2018, the Company acquired a building and land adjacent to existing centers and terminated a ground lease and acquired the associated building at an existing center for a combined purchase price of $8.8 million.
• During the three months ended September 30, 2018, the Company repurchased 2.7 million shares of common stock under its share repurchase program at an average price per share of $17.77 for a total of approximately $48.6 million, excluding commissions. Since inception of the share repurchase program in December 2017, the Company has repurchased 5.2 million shares of common stock at an average price per share of $16.78 for a total of approximately $87.7 million, excluding commissions.

CAPITAL STRUCTURE

• As previously announced, during the three months ended September 30, 2018, the Company's Operating Partnership, Brixmor Operating Partnership LP, issued $250.0 million aggregate principal amount of Floating Rate Notes due 2022 with an interest rate equal to three-month U.S. dollar LIBOR plus 1.05% per annum, reset quarterly. The net proceeds from the offering were utilized to repay a portion of the Company's $600.0 million Term Loan maturing March 18, 2019.
• Also as previously announced, during the three months ended September 30, 2018, the Company repaid $507.2 million of secured indebtedness, including amortization, scheduled to mature in 2020 at a weighted average stated interest rate of 6.2%. These repayments were funded with disposition proceeds and with proceeds from the Company's $1.25 billion revolving credit facility, which had $1.10 billion of availability as of September 30, 2018.
• In connection with the early repayment of certain indebtedness, the Company recognized a loss on extinguishment of debt of $19.8 million, or $0.07 per diluted share during the three months ended September 30, 2018.

GUIDANCE

• The Company has updated its previously provided NAREIT FFO per diluted share expectations for 2018 to $1.89 – 1.94 from $1.95 – 2.04.
• The Company's previous NAREIT FFO guidance did not include the ($0.07) loss on extinguishment of debt recognized during the three months ended September 30, 2018.  The Company's updated guidance does not include any expectations of additional loss on extinguishment of debt related to potential capital transactions or any expectations of additional one-time items, including, but not limited to, litigation, investigative and other non-routine legal expenses.
• The Company has affirmed its previously provided same property NOI growth expectations for 2018 of 1.00 – 1.50%.
• The following table provides a reconciliation of the range of the Company's 2018 estimated net income attributable to common stockholders to NAREIT FFO:

CONNECT WITH BRIXMOR

• For additional information, please visit www.brixmor.com;
• Follow Brixmor on Twitter at www.twitter.com/Brixmor;
• Find Brixmor on LinkedIn at www.linkedin.com/company/brixmor.

CONFERENCE CALL AND SUPPLEMENTAL INFORMATION The Company will host a teleconference on Tuesday, October 30, 2018 at 10:00 AM ET.  To participate, please dial 877.705.6003 (domestic) or 201.493.6725 (international) within 15 minutes of the scheduled start of the call.  The teleconference can also be accessed via a live webcast at www.brixmor.com in the Investors section. A replay of the teleconference will be available through midnight ET on November 13, 2018 by dialing 844.512.2921 (domestic) or 412.317.6671 (international) (Passcode: 13683065) or via the web through October 30, 2019 at www.brixmor.com in the Investors section.

The Company's Supplemental Disclosure will be posted at www.brixmor.com in the Investors section.  These materials are also available to all interested parties upon request to the Company at [email protected] or 800.468.7526.

NON-GAAP DISCLOSURES The Company presents the non-GAAP performance measures set forth below.  These measures should not be considered as alternatives to, or more meaningful than, net income (presented in accordance with GAAP) or other GAAP financial measures, as an indicator of financial performance and are not alternatives to, or more meaningful than, cash flow from operating activities (presented in accordance with GAAP) as a measure of liquidity. Non-GAAP performance measures have limitations as they do not include all items of income and expense that affect operations, and accordingly, should always be considered as supplemental financial results to those presented in accordance with GAAP.  The Company's computation of these non-GAAP measures may differ in certain respects from the methodology utilized by other REITs and, therefore, may not be comparable to similarly titled measures presented by such other REITs. Investors are cautioned that items excluded from these non-GAAP measures are relevant to understanding and addressing financial performance.  A reconciliation of these non-GAAP measures to net income is presented in the attached table.

NAREIT FFO NAREIT FFO is a supplemental non-GAAP performance measure utilized to evaluate the operating performance of real estate companies. The National Association of Real Estate Investment Trusts ("NAREIT") defines FFO as net income (loss) presented in accordance with GAAP excluding (i) gain (loss) on disposition of operating properties, and (ii) extraordinary items, plus (iii) depreciation and amortization of operating properties, (iv) impairment of operating properties and real estate equity investments, and (v) after adjustments for unconsolidated joint ventures calculated to reflect FFO on the same basis.

The Company believes NAREIT FFO assists investors in analyzing Brixmor's comparative operating and financial performance because, by excluding (i) gains and losses related to dispositions of previously depreciated operating properties, (ii) real estate-related depreciation and amortization of continuing operations, (iii)  impairment of operating properties and real estate equity investments, (iv) extraordinary items, and (v) after adjustments for joint ventures calculated to reflect FFO on the same basis, investors can compare the operating and financial performance of a company's real estate between periods. 

Same Property NOI Same property NOI is a supplemental, non-GAAP performance measure utilized to evaluate the operating performance of real estate companies.  Same property NOI is calculated (using properties owned for the entirety of both periods excluding properties under development), as total property revenues ((i) base rent, ancillary and other, (ii) expense reimbursements, and (iii) percentage rents) less direct property operating expenses ((i) operating costs, (ii) real estate taxes, and (iii) provision for doubtful accounts).  Same property NOI excludes (i) corporate level income (including management, transaction, and other fees), (ii) lease termination fees, (iii) straight-line rental income, (iv) amortization of above- and below-market rent and tenant inducements, (v) straight-line ground rent expense, and (vi) income / expense associated with the Company's captive insurance entity.

The Company believes same property NOI assists investors in analyzing Brixmor's comparative operating and financial performance because it eliminates disparities in NOI due to the acquisition, disposition or stabilization of development properties during the period presented and therefore provides a more consistent metric for comparing the operating performance of a company's real estate between periods.

ABOUT BRIXMOR PROPERTY GROUP Brixmor (NYSE: BRX) is a real estate investment trust (REIT) that owns and operates a high-quality, national portfolio of open-air shopping centers. Its 445 retail centers comprise approximately 77 million square feet of prime retail space in established trade areas.  The Company strives to own and operate shopping centers that reflect Brixmor's vision "to be the center of the communities we serve" and are home to a diverse mix of thriving national, regional and local retailers.  Brixmor is a proud real estate partner to more than 5,000 retailers including The TJX Companies, The Kroger Co., Publix Super Markets, Wal-Mart, Ross Stores and L.A. Fitness.

SAFE HARBOR LANGUAGE This press release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  These statements include, but are not limited to, statements related to the Company's expectations regarding the performance of its business, its financial results, its liquidity and capital resources and other non-historical statements.  You can identify these forward-looking statements by the use of words such as "outlook," "believes," "expects," "potential," "continues," "may," "will," "should," "seeks," "approximately," "projects," "predicts," "intends," "plans," "estimates," "anticipates" or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties, including those described under the section entitled "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2017, as such factors may be updated from time to time in our periodic filings with the SEC, which are accessible on the SEC's website at www.sec.gov.  Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release and in the Company's filings with the SEC. The Company undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

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SOURCE Brixmor Property Group Inc.