Brixmor Property Group Inc. Q2 FY2026 earnings call

• Leasing Performance

• Executed 1.4 million square feet of new and renewal leases with a 19% blended cash rent spread, including 31% on new leases and 16% on renewals. New lease spreads have remained above 30% for three consecutive years.
• Achieved a record 2.8% embedded rent growth across all new and renewal leases, improving the long-term organic growth profile of the portfolio.
• The signed but not yet commenced (SNC) rent pipeline reached a record $71 million of annualized base rent, with a significant portion commencing in 2027 and beyond, providing clear visibility into future NOI growth.
• 6 of the 8 recaptured boxes from exited tenants have already been re-leased at spreads of over 40%.

• Reinvestment and Development

• Ended the quarter with nearly $350 million of active reinvestment projects expected to deliver a 10% incremental yield, with a future pipeline exceeding $700 million, providing a multi-year runway of high-return internal growth.
• Added 8 new active projects and 4 new out parcel developments during the quarter, bringing total first half 2026 out parcel developments to a record 10 projects with a 16% average incremental return.
• All projects follow a strategy of optimizing tenancy and long-term value creation rather than just filling vacant space. Municipalities are increasingly accommodating densification, expanding this growth opportunity.

• Acquisitions

• Completed 4 strategic acquisitions totaling $164 million, all high-quality grocery-anchored assets in existing high-presence markets where Bricksmore can add value via re-merchandising, reinvestment, and operational improvements.
• The Mayfair Shopping Center acquisition marked the first use of OP units as partial acquisition currency, a new tool for transacting with private sellers that creates a win-win structure for both parties.
• Acquired assets have embedded redevelopment and densification opportunities aligned with the company's existing strategy.

• Balance Sheet

• S&P revised the company's credit outlook to positive, reflecting improvements from the value-add business plan.
• Repaid a $600 million maturity, issued $400 million of 5.375% senior notes, and settled a forward hedge resulting in an effective yield of ~5.22%, extending duration and addressing all near-term maturities (no material maturities until March 2027).
• Ended the quarter with 5.3x leverage and $1.5 billion in total liquidity, including $115 million of unsettled forward ATM issuance, providing ample flexibility for future capital allocation.

Bricksmore is a single-segment open-air grocery-anchored retail real estate company, so no separate product segment breakdown is provided. Key overall financial results for the quarter include: 5.8% same property net operating income (NOI) growth, with 440 basis points of that growth coming from base rent. Quarterly NAREIT Funds From Operations (FFO) was $0.58 per share, partially offset by a $3 million non-cash straight-line rent charge from bankrupt tenant box recaptures. Total leased occupancy ended the quarter at 94.8%, down 30 basis points sequentially as expected due to proactive recaptures for redevelopment. Small shop occupancy reached a new record high. Same property NOI growth was driven by strong collections, favorable expense recoveries, and broad-based improvement across all NOI components.

• Management upwardly revised full year 2026 guidance, reflecting better than expected first half execution, strong tenant demand, and embedded portfolio growth.

• Updated same property NOI growth guidance is 5% to 5.75%, up from prior expectations.
• Updated full year 2026 FFO guidance is $2.35 to $2.37 per share.
• The implied second half 2026 deceleration in same property NOI growth is primarily due to tough comparisons against a very strong fourth quarter 2025 for ancillary income, not underlying operating weakness.
• Uncollectible revenue is now expected to be 60 to 85 basis points of total annual revenue, reflecting the overall strength of the current tenant base. The first half 2026 year-to-date 50 basis point level is consistent with expected seasonality, which favors stronger collection results in the first half of the year.

• Forward-looking statements are subject to inherent uncertainties, and actual future results may differ materially from current expectations, as detailed in the company's SEC filings.

• Proactive vacancy from recapturing space for redevelopment creates near-term downward pressure on occupancy, even though it generates higher long-term growth.
• Increased competition from private capital entering the open-air retail sector can limit acquisition opportunities and put pressure on cap rates, though management notes it primarily targets off-market, relationship-driven deals that require an active operating platform, reducing direct competition.
• The timing of future OP unit acquisitions with private sellers is unpredictable, as these transactions can take years to complete and depend on seller timing.

Q: The sequential occupancy decline was driven by expected box recaptures for redevelopment. was the decline in line with expectations, and what is the cadence of recovery going forward? / A: Management confirmed the occupancy decline was exactly in line with prior expectations, stemming from planned recaptures for large reinvestment projects in New Jersey and Orlando. Already 6 of 8 recaptured boxes have been re-leased at rent spreads over 40%, with new rent commencing mostly in 2027. Management expects occupancy to return to a growth trajectory in the second half of 2026, noting that occupancy is not always linear during active reinvestment.

Q: Why hasn't strong same property NOI growth translated to a larger increase in FFO guidance? Are there timing factors or conservatism at play? / A: The gap between stronger same property NOI growth and the FFO guidance increase is entirely explained by a one-time $3 million non-cash straight-line rent charge from the boxes recaptured in the quarter. Management emphasized that the underlying operating momentum across all segments of the business remains strong, and they remain focused on delivering consistent FFO growth consistent with past performance.

Q: What can we expect for the size and cadence of the active reinvestment pipeline moving into 2027, and are expected returns rising given market rent growth? / A: Management expects to consistently move projects from the $700+ million future pipeline into the active pipeline year over year, providing a multi-year runway of $150 to $200 million of annual reinvestment activity. They reaffirmed the current expectation of high single-digit to low double-digit incremental returns for the pipeline, and note that acquisition of new assets with embedded redevelopment opportunities continues to refuel the pipeline externally.

Q: New lease spreads were slightly lower than recent quarters. Is this a new trend, or just normal quarterly variability, and how does the company's low historic rent basis still drive upside after years of mark-to-market? / A: Management noted that the slight quarterly dip is just normal variability, and new lease spreads have now been above 30% for three straight years, with renewal spreads holding in the mid-teens. There remains substantial embedded upside: the company's average in-place ABR is $19 per square foot, but new leases are being signed in the mid-$20s, and anchors expiring over the next three years have an average in-place rent of just $11 per square foot, providing significant future mark-to-market upside. Embedded average rent growth for the portfolio also increased to a record 2.8% in the quarter, further boosting long-term growth.