Brixmor Property Group, Inc. Aktie

And thanks for joining us today. We're looking forward to sharing our key takeaways from ICSC with you this morning, some quick housekeeping items. Please note that this presentation is being recorded and will be publicly available on our website for a period of time following the presentation. And some of our comments today may contain forward-looking statements. Please refer to our SEC filings for information about related risks. [Operator Instructions] With that, I'll turn the call over to Brian.

Thanks, Stacy, and good morning, everyone. Thanks for being here. This has been a tradition of ours for the last several years following the ICSC conference, you see the large X on the screen. We put a lot of time and effort into what is the largest commercial real estate conference in the world. And it's a great opportunity not just for you all to hear what we observed, but really to hear from our broader team. And we're thrilled to have on the screen today, in addition to Stacy, Steve and myself, Matt Ryan, our President of the South region and EVP of National Property Operations; David Gerstenhaber, our Head of Leasing; Laura Parke-Carson, VP of our North region in Leasing, who runs our Northeast portfolio based out of Philadelphia.

And Evie Gross, VP on our national accounts team. And they're going to give you some great insights from the conference. They're going to give you some of their feedback on the trends that they heard in what was another very successful conference for Brixmor. Before they do that, I thought I'd just give an overview on the environment and how we enter the show, Stacy, we can jump to the next slide. We entered the conference again with a lot of momentum in the business. As you can tell from our first quarter call, leasing demand remains incredibly strong.

We're signing rents at the highest level that we ever have. And I think from a dynamic standpoint, we're in an environment where there remains no new supply by any marginal level. And we don't see that coming for some time. New deliveries are going to be a fraction of what has historically been delivered. And what that's doing is retailers that have been successful that are investing in their physical stores and growing their physical store footprint are looking for space that is becoming less and less available, leading to more competition and driving rents higher and we remain incredibly well positioned to capitalize on this environment because of the work that we've done, it didn't happen overnight.

We've invested dramatically in the portfolio. We've been able to improve the tenant credit quality of our portfolio to the best it's ever been. The retailers both those that we have been growing with and many new ones that you'll hear from the team about today are coming to Brixmor because they see the execution that we've been able to deliver from a reinvestment standpoint and that's positioned us to accelerate things going forward. You look again at that leasing productivity, that's fueling the redevelopment pipeline. You see the embedded rent growth that we've been able to drive out of the portfolio. The rent increases, the intrinsic lease terms that we continue to improve significantly above in place. The occupancy runway that we have, growing small shop occupancy a 100 basis points year-over-year, but not close to where that peak can get to.

And then that clear visibility on growth from the stacking of rent in terms of signed but not commenced, which we grew 10% year-over-year despite the fact that we commenced $70 million of rent last year. So the portfolio is extremely well positioned in what we all recognize is a great environment for open-air retail. And I think what you'll hear from the team today is how that manifests itself into our retailer conversations, how they're thinking about expansion and how they're thinking about growing with us. So with that, why don't I hand it over to David Gerstenhaber to start off in terms of what he saw and what you'll hear from the rest of the team in terms of what they saw at ICSC last week.

Thanks, Brian. Appreciate it. Everybody. So it's no surprise to anybody on the screen that it's a very exciting time to be in our business. We had a super productive show last week. The team conducted over 700 meetings, which was up 10% versus last year. And it was across a really broad number of categories and tenants within those categories, which you're going to hear about from the team here. The overall tone for me at the show was super constructive, demand driven, our centers look better than they've ever looked before due to the continued robust pipeline of redevelopments. The retailers were focused on targeting grocery-anchored high-traffic centers, and they were in our booth in abundance.

They talked about securing sites early due to lack of supply. Many said they would sign leases on spaces that are several years out. They talked about increased flexibility around store size, formalizing existing conditions. And our core tenants continue to thrive. You see a lot of them on the screen here. The big 3 off-price guys, T.J., Burlington and Ross, they just continue to be positive comp machines, and they have over 400 open to buys next year. The grocery demand is broad-based with specialty driving a lot of the activity, but even the traditional segment, which has been less active over the last decade, has started to heat up with grocers like Kroger and Walmart Neighborhood Market announcing investments into store growth plans.

There are international concepts making a push into the U.S., specifically the Asian lifestyle category with Miniso, Teso and Ebisu and the footwear and sporting goods category was a particular bright spot for me at the show. Boot Barn and Cavender's have enormous white space and are performing really well. REI who has grown fairly slowly historically, they showed up at the booth with a list of 8 centers of ours that they want to be in over time as opportunities arise.

JD Sports and Hibbett is now fully integrated, and they're expanding all the banners in their umbrella, and there's renewed investment in Foot Locker and DICK'S Sporting Goods. New concepts were abundant at the show, categories like med spa, health and wellness, beauty and restaurants. We actually had 55 -- we met with 55 different names that are currently not represented in our portfolio. And AI came up in almost every meeting I was in, you'll hear it from the broader group here. Our leasing team is using it to canvas to market spaces, to prospect, to prepare for meetings and retailers talked about the different ways they're using AI to improve supply chain efficiency, marketing, site selection.

Ultimately, the retailers, they're using all the data that they have at their fingertips to get the consumers into the store and ensuring the stores have the goods and services the consumer wants. I'm going to give it back to Brian to hit on the active transaction market we're seeing.

Yes. Thanks, David. If Mark was on the call today, I think what you'd hear from him is that there are a lot of folks just lamenting the amount of competition that there is for space. All the things that I spoke about, all the things that David spoke about are bringing institutional capital into our space in the highest pace really in decades, driving more competition for assets really across the spectrum. We are still finding opportunities to put the platform to work. I think we mentioned on our first quarter call, what we had under control and expect us to be naming some of those opportunities shortly, but a positive you can see is how much competition is coming in, but how much institutional capital is coming in, but it certainly is leading to much more competition for particularly grocery-anchored retail, and that was a theme we heard throughout the show. With that, I think we're going to pass it to Laura to get some of her perspectives on the next slide.

Thank you, Brian. Good morning, everyone. Speaking of demand, there's really tremendous depth and breadth to the retail demand right now. It's a great time to be a landlord. It's coming from a whole host of categories, many of which David just touched on, but certainly off-price and grocery are leading the way. In the grocery sector, as David said, it's everyone from traditional to specialty, and it's really complemented by strong demand from restaurants, fitness, service, financial and as David touched on, the new Asian lifestyle brands.

And I think Evie will be sharing a little bit more about those in a few minutes as well. But I thought I would highlight where we're seeing some of the demand by way of a couple of examples of how this is playing out in real time in the Philly portfolio with highlights of a couple of projects that we're working on here in Philadelphia, the first of which is a redevelopment in Bucks County, PA, just north of Philadelphia in Bristol, Pennsylvania. we're in the early stages of a really dynamic redevelopment of this asset. And I think it's a great microcosm of what's happening in retail today.

We're in the process of adding grocery to the center. We're in the process of adding not one, but 2 off-price apparel retailers. And that was teed up just as we headed out to Vegas, which paved the way for a whole host of really productive meetings around synergies that we can build and follow-on leasing that we can achieve. Now that we have an anchor lineup in place. We had great meetings with credit unions, financial institutions, multiple QSRs, family entertainment, boutique fitness, and we've got 2 LOIs in the door already on the heels of coming back from Vegas with a whole host of others anticipated.

I think another great example of what we're seeing in this retail environment and what's really indicative of demand today, too, is staying in Bucks County, Pennsylvania and heading a little further north. We have a fully redeveloped asset in Newtown, Bucks County. It's a 100% leased. And yet, we continue to have outsized demand for this center. I can't tell you how many meetings I took where this project came up, and we talked about it. And what we're finding is that retailers were increasingly willing to make commitments to be a part of a project that they know we want to -- they want to be in earlier and earlier. Case in point, we signed a national apparel retailer 2.5 years out from an existing tenant's expiration because they're so committed to finding a home in this market. And that's becoming much more common.

And not only does that allow us to drive rate and optimize our merchandising but it gives us time to get the lease done, to get permits and approvals in hand so that the minute that original tenant vacates we can hit the ground running with our construction. I think we'll turn it to Matt.

We hit on redev a couple of times already. I think we're going to the next slide -- on this call, and it's because it's such a key part of the plan going forward. We've got more than $1 billion of redev projects that are advancing and the meetings last week really just add to that list. It really -- we're advancing projects we'd already worked on, and we're looking for new projects with the retailers in those meetings literally flipping through brochures, looking for voids where they don't exist today and trying to find more opportunities for them. Some of those bigger opportunities are listed on the map here. But if you check out the supplemental, you'll see more than 50 projects listed for that future pipeline. And Laura just mentioned it, but those tenants are asking for opportunities historically 2 years out.

We're now looking out 4 years, 5 years for -- we're looking at anchor expirations. We're looking at outparcel expirations for when we can really hit on kind of the next phase of projects. Some of those projects are -- we're working on half a dozen projects with Publix throughout the Southeast. There's an exciting project with H-E-B at an H-E-B anchored center in Dallas that we own that will be coming out shortly. In Atlanta, we've got a project that's coming to a head that will get us in the next year or so. So it's been really exciting. Laura hit on another piece.

A lot of the retailers were asking about the redev projects that have been delivered, the projects that are done, it's the follow-on leasing that continues to get mentioned. There's just -- there's a lack of space. They know what the projects look like and they're frankly begging for opportunities in those centers, looking for when tenants are going to expire within their size ranges. And just anxious to take advantage of that, whether it's next year, 2 years out, 3 years out, it's been really interesting.

David, I think I'm going back to you at this point. Is that right?

Yes, that's right. Thanks, Matt. I appreciate it. So I'm going to ask some questions I know are on everybody's minds. And again, as Stacy mentioned, if you have any of your own questions, feel free to either hit the hand emoji or type it in the chat. All right. So let's start with the first one. In the meetings I attended, I didn't really hear any notable change in discussions around store opening plans given increased macroeconomic and geopolitical uncertainty. In the majority of the meetings I was in, retailers were focused on how to find more opportunities in our portfolio, how we could be more efficient in getting deals done quicker and what do they do to win spaces and competitive scenarios. Let's hear from Evie and Laura on what the tone of their meetings were. Let's start with you, Evie.

Awesome. Thanks, David. I would just add that retailers today have more data than ever before, and they know exactly where their customer is coming from, what the right co-tenancy mix for their store to be successful. And so these meetings were methodical and intentional just an example, but Cavender's Western Wear was asking for a response to an LOI they sent over where we may control the space starting in 2028 and they're just looking further out than ever before because they want to be in the right real estate for the brand, and they know where that is. Barnes & Noble has a hole in Kansas City and our meeting was mostly focused on how it can get creative to deliver their prototype there now that we've signed Sierra as a brand-new anchor. So the retailers know where they want to be, and it's about getting creative to make that happen for them in our assets in the coming years.

How about you, Laura?

I would echo what Evie is saying, and I think part of what dovetails with that is because they know where they want to be, they're getting aggressive about the terms that they're willing to commit to. I had -- I would characterize the show as energized in a word. And people were asking me where do I need to be on rate to get into this center? What do I need to do? That was a common question. And it's because they recognize that they want to be in the market, they know it's a highly competitive landscape and there are other retailers vying for those same opportunities.

So it's really giving us a lot of ability to really make great decisions around the merchandising mix in our centers. And it's also giving us obviously driving rate, but it's also giving us the opportunity to leverage noneconomic points. We're making sure that we -- in return for getting good retailers, we're making sure that we have the flexibility to bring in more good retailers because I want to make sure that there aren't restrictions that burden us and we have the leverage to have those conversations and have those outcomes work for us in this environment, which is great.

Okay. I'm going to hit on a few more. I know we got a bunch of hands up here, but let's just get through a couple more of ours, and then we'll turn it over to the broader group. Next question. Are there any changes in store prototypes, including footprints or markets? Let's start with Matt on that.

Yes, I'd say, I mean, T.J. Maxx during the meeting announced their earnings, they announced the Sierra expansion, they announced the HomeSense expansion, which from our perspective, it couldn't have been timed any better. I had a meeting with them an hour or 2 later, a few of their real estate reps. So it was really exciting to have these discussions right after their earnings call. But I'd say flexibility in that size range from box tenants who let's say, historically, they had wanted 22,000 feet and maybe been willing to flex 1,000 feet here and there.

We're looking at spaces that are 17,000, 16,000 feet or 28,000, 30,000 square feet. In some cases, they just don't want to miss out on opportunities and they've been more flexible to take space. They're very focused on being efficient and making the most of those spaces, but it's -- it was noticeable to me that they were willing to take more space if necessary or less space than maybe they have been considering a year or 2 ago.

Yes. Ditto in many of my meetings, Matt, a lot of national retailers announcing new territory. You hit on T.J., taking both their new banners, Sierra and HomeSense National. Sprouts was in the booth telling us about 2 -- they're pushing into the Northeast and a bunch of new cities in the Midwest. Ross continues to push up into the Northeast. It was a common theme throughout the day. Let's jump to new concepts. Let's hear about some of the exciting new concepts or categories you met with Evie.

Awesome. Yes. I mean, you mentioned and teased the Asian lifestyle brands previously. But I'm really excited about this category and it's brand new. Miniso and Teso Life are the biggest players with aggressive expansion plans. Miniso says they will open 100 stores a year through 2030. And Teso Life is opening 40 to 50 a year for the foreseeable future, and they only have 20 open so far. So basically, the entire country is white space for them. And what I like about is stores in this category is it's experiential. So it really drives the customer into the store to discover and be inspired.

They don't know what they want before they walk in, but they're creating this experience where they have toys that they sell in a blind box and kids don't know what's inside until they open it up. They have special beauty products that can only be found here and are not sold at Ulta or Sephora so I love the newness that it creates. I'm also really excited as our merchandising mix only improves. We are attracting a higher caliber retailer to our shopping centers, including Warby Parker, who we've signed 2 new leases with so far, and that momentum will continue.

They're doing 45 to 50 new deals a year, and they love the better grocer category like Whole Foods and Trader Joe's, which puts us in a great place to find additional opportunities for them. And then Victoria's Secret is a brand that is relevant again and doing well in all facets of the business from athleisure, to swim, their fashion show is back and they haven't traditionally played in the open air space, but we did sign our first deal with them at Roosevelt Mall in Philadelphia an open-air shopping center with some traditional mall retailers and I believe that we have sourced our second deal to follow in Vegas. So really exciting.

Awesome. Great stuff. And then let's do one more before we go to the screen here. How did you integrate AI in preparation for and utilization at the show? And what did you learn about retailers increasing use of AI. Let's start with Matt on that one.

I mean so AI gets -- got mentioned -- of course they were mentioned every meeting. It came up in almost every single conversation we had. It's been really interesting to hear about how other people are using it and share some of the ways that we're using it. So one of our meetings are -- one of the leasing reps I was sitting with, we have a vacant space, she was meeting with the restaurant tenant, she asked AI to create a view or a rendering of what this space would look like if that tenant was in the space. So she has their signage on the facade. She has a sample buildout of what this space would look like when they're in there, which is just -- like to even think about that 12 months ago would have been complete science fiction, and it took her 10 minutes.

The Leasing team is using it for canvasing for coming up with voids in markets, they're going to AI and asking what use categories that are growing are represented in our center today and give me 10 to 15 of the most active retailers in those categories so that we can reach out to them. So it's a backup. It's really -- it's helping them be more efficient and thoughtful. Through the legal process, we're using it for lease comments, we can upload a redline copy of a lease and get recommended responses based off of the last 10 leases we've signed, and it gives them a better guide for how to respond to leases.

And then from operations, we sat down with the group, we've been working with drone companies for the last year or so. I was able to meet with 1 or 2 of them last week that they're flying our centers. They're flying our roofs and parking lots. They're able to tell us the conditions of the roofs, conditions of the parking lots. They're able to sense the temperature of the roofs. So you can see actually where there may be a leak, and you can detect it early so we can address it fast before it becomes an issue. The one retailer mentioned, this was wild.

They mentioned drones flying through their space at night, taking pictures of their inventory and then sending an e-mail out to the store manager with recommendations for where they need to go fold their shirts or where they need to update their -- the stands. So it's just -- it's been added in so many different facets of the business and it just continues to grow. It's been really interesting to track.

Wild stuff. How about you, Evie.

One of the biggest themes I heard from retailers in terms of how they're using AI is to make sure that they are in stock in stores when the customer goes there to eliminate friction. That is the most important thing. And then me, personally, I am definitely using it for follow-ups. And just to make that a more efficient process. We can be the first landlord in the retailers inbox after the show, there's a ton of value in that. So using AI to transcribe notes that were taken during meetings and help transfer those into client-facing follow-up e-mails to the retailers has been really helpful.

Yes, all about efficiency. If you think about the amount of time it took us to do the follow-up even a year ago, how much has changed in just a year. It's great stuff. All right. Let's go to the screen here. Why don't we start with you, Floris, I think your hand was up first.

Thanks, David. I don't know whether that's a good thing or not, whether my hand is first or not. I'm very intrigued, you're not the only landlord that's talking about getting to expirations early. And the question I have for you is how do you weigh if you're dealing with 27 or 28 expirations today when there's no new supply and rents are going to spike? How do you know that you're not giving away the space too cheaply? And how do you know -- and what do you think the impact of presumably getting a nice spread on the rent would mean for the rest of the tenants that are leasing space in that center. Is this a way for you to accelerate growth or are you -- how do you balance that from not -- in getting that maybe the high spread, maybe not signing that lease too cheaply because, frankly, there's not going to be any supply for the next 2 to 3 years. And that means that there's going to be significant pressure on rents going forward.

Yes. Thanks. It's a great question. What I'd say there is every situation and every scenario is completely different. As you know, our cheapest form of growth is renewals. We have existing tenants that are in those spaces with term for a couple of years out. We're looking at things like what's the future merchandising plan of this asset? What is replacing them? And possibly spending capital now to get a better tenant in there 2 years from now. How is that going to impact the trajectory of the rest of the asset?

What's going to be the follow-on leasing. What is the health or performance of the current tenant, can they afford to pay the market rents? To your point, what are the market rents 2 to 3 years from now? And we're seeing growth historically, which allows us to have a pretty good lens or visibility into what rates will be 2 to 3 years from now. But I'd say those competitive scenarios are driving outsized results, whether it's renewing the existing tenant or improving with the new tenant there. All right. Let's go to Todd.

All right. My question, Brian, you touched on the capital markets environment and the increased level of competition that you're seeing for acquisitions. Can you just talk about the committed pipeline today and expand on how that increased competition is impacting your ability to transact and you noted it's particularly competitive for grocery anchored centers. Does this push you a little bit more toward either secondary markets or a segment of the industry like power or lifestyle that might be a little less traffic at the margin?

Thanks, Todd. Our True North is going to be what's the IRR, right? What -- how can we drive growth? And then how does that compare to the growth profile of what we currently own and control today. So as we look at that, we remain encouraged that our team -- Mark's team is out there able to find opportunities. We do have to challenge ourselves in terms of the underwriting because we're still seeing what's that IRR cap rates blow out 50 basis points, but also the things that we're able to do under our platform, for instance, like we bought LaCenterra last year, Matt's overseeing that project.

We've been able to add $100,000 in specialty income out of the gate. Matt was able to recast the theater to add another $100,000. It wasn't in the underwriting through adjusting onerous CAM caps. So those are the things that we're looking at to ensure that we can out position ourselves to position ourselves to win in certain scenarios. Grocery-anchored is important to us, everything that we bought over the last 1.5 years has had a grocer. And as we look forward, we want that component or the ability to add a grocer if it's not there today. I think to your point of where it pushes us we're going to remain disciplined. We don't need acquisitions to grow.

We have seen that our team has been able to execute on what we've been able to add to the portfolio and what we're selling is growing far less than what we've been buying. So we've been able to recycle that capital and make it accretive to growth. But to the extent that the market in certain areas gets too expensive for us, we're going to remain disciplined. Having said that, we have a great team, and we believe we're going to continue to find opportunities. We look forward to sharing with you all what we're working on here over the next few weeks, but it was certainly competitive, particularly in that core grocery-anchored market from what we heard over the last few weeks at ICSC.

All right. Let's go to Andrew.

Thanks, David, and thanks, everyone, for the time this morning. I guess on the leasing side, small shop specifically, that occupancy is now over 92%. So first, I guess, just how much runway is left on the small shop side. And then maybe just how are leasing conversations with small shop and maybe your mom-and-pop tenants overall.

Yes. I think this is a good one for Laura to hit on, specifically with the activity she has in her portfolio on SHOP and her occupancy rates. Why don't you take that, Laura?

Yes. I mean, look, we have -- we continue to have opportunities in the portfolio to mark some of these in-place shop rents to market, particularly at these assets where we've reinvested and redeveloped. I think one of the nice things about the way that we've managed our portfolio and the reinvestment that we've made is that even our small shop tenants tend to be higher and better caliber than they were a number of years ago. We have a lot of small shop retailers who are multiunit operators who are savvy business folks who appreciate the value of being in a redeveloped center in joining a Whole Foods-anchored center in Bucks County or a fully redeveloped village at Newtown in Bucks County.

And we're actually able -- in cases where we do have some older leases with in-place long-time tenants, we've been able to do some dynamic repositioning that wouldn't necessarily be apparent if you're looking at a site plan, I can give you some examples at Barn Plaza in Doylestown, where we have Bucks County's first Whole Foods Market and our Barnes & Noble, we're gearing up now to break ground for the second phase of our redevelopment there, which involved taking down a former Regal Cinema, and we're building 3 new multi-tenant outparcels with several first-to-portfolio retailers in Brixmor's portfolio.

And on the other side of the site, on the Whole Foods side of the project, there are some long-standing older tenants that had been in the center for -- in some case a couple of decades, we were able to upgrade those with no downtime in rent with like-kind categories, but better operators at significant rent spreads with little to no TI so we have sort of these embedded opportunities to really capitalize on the investment and the groundwork that we've laid at these centers to continue to drive rate and improve the quality and the caliber of our small shop tenants.

And Laura hit it. I would just add to that. Our portfolio, in particular, had a much higher percentage of reinvestment over the last few years. So the small shop occupancy in Laura's section of portfolio is pushing close to 95%. And as we look at the balance of the portfolio and see that future reinvestment pipeline, the one that Matt mentioned with those 50 projects, it's 89% today. And we generally see a 300 to 400 basis point increase when we bring those redevelopments on. So oftentimes, we get asked what's left. That's what's left in terms of our ability to grow. That provides for, call it, 100, 150 basis points more of growth ahead of what is already record small shop occupancy for the portfolio.

So everything Laura said relative to being able to put better tenants in, to remerchandise much more efficiently, to drive rate through reinvestment. She's doing every day in our portfolio. That upside, though, is fairly broad-based in terms of where we do have a drag from future redevelopment.

All right. Eric, you're next on my Brady bunch box.

Great. Could you just maybe talk about a little about the negotiating leverage between you and the retailers and how that has shifted over the years past and your ability to kind of renegotiate maybe its parking easements to add pads and just some of the less quantifiable metrics that we may not see in the supplemental and just how that has evolved over time.

Yes, this is actually one -- I'm going to give this to Matt, but what I'd start off with there, Eric, is we negotiate a very long lease document with the tenant. One page of it is the rent and the delivery condition and the rest of it is just control. And you're hitting on these things that are very important to us. It's control over uses, it's control over development. And the environment that we're in today is giving us really good leverage into limiting the control that those retailers get over our assets so that we can really drive future value there. Matt, why don't you jump in on that?

Yes, it's been -- I mean, the focus has been term, we've been able to achieve longer terms, less options, better increases, all those metrics. But David hit it, it's historically where a retailer box anchor tenant may have had control the entire parking lot. We're freeing up outparcels. We're freeing up the ability to add 2,000 foot outparcels, 10,000-foot outparcels. It's the ability to have flexibility in the parking lot and expand other parts of the centers, to expand on to the existing property. That where they may have been more restrictive in the past.

And then as we're working with tenants, we have a relationship with across the country, it may not even be in that specific center. We're going to have conversations with them to free up some restrictions and in other markets, sometimes when we have projects moving forward. So that's been the leverage we've been able to take advantage of. So as we're signing a handful of leases with one anchor tenant on the East Coast, we may be able to free up some restrictions around the West Coast that allow us to advance some redev project to that part of the country.

And Eric, I would just add, retailers have been much more accommodating as it relates to densifying projects. I was in a meeting with David where we're literally looking at building a grocery store in the middle of the parking lot in front of a larger format retailer. And we were talking to them about the truck turn radius and visibility, but they're recognizing the demand and traffic that they would bring. You see the same things relative to restaurants and pad operators upfront.

The other thing is municipalities have been much more willing as well in terms of densifying large parking fields. We mentioned on the last call, we brought more outparcels into our active pipeline last quarter than we ever had. We've done 100 of those projects over the last 10 years outside of redevelopments and have much more ability to do so going forward because of that accommodation from both the retailers as well as municipalities. The other thing, giving credit to this team on the screen, we've got 300 consents over the past year. And many of them to do and execute on a lot of those reinvestments, many of them at no cost because of the partnership that our teams have.

So it's important for us to free those things up going forward. We have seen both retailers and municipalities be much more accommodating to allow us to do so. But when we do need consents, we have a team that's readily able -- to be able to secure those so we can execute on reinvestments.

All right. Let's go to Sydney next. Sydney.

So on the acquisition front, maybe jumping off Todd's question. You mentioned you can still find opportunities, but where have you seen the sources of these assets coming to market, given the competition from institutional capital and is it mostly marketed transactions or maybe more off-market deals that you can source with private families or relationships that you have?

Yes. So you hit on it, Sydney. Some of it is families. They're recognizing the same dynamic. There's tax advantages for us being a REIT in those conversations. Historically, those discussions have resulted in cash transactions. But I think more so, that's become part of the discussion. Some of them are marketed deals. All 3 deals we bought last year were marketed deals from pension funds. But we felt that we had the ability to come in to execute on a plan that would drive growth out of the gate and long term.

So I would say it's been a mix. And those dynamics that I just talked about, right, relative to, hey, can we pull that anchor rent forward. Floris's question of, hey, you may replace a tenant 2 years out, but we're renewing tenants 2 years out and they're paying us market rent today to do that, and we're freeing up all kinds of things in the lease, having an understanding that you can do that with a specific tenant going in, having understanding that hey, wait a second, I know we can get a consent from this operator, and there may not have been a pad in the underwriting because to Matt's point, we may have done that in 2 or 3 other places around the country.

So it's executing on the business plan, but it's also spending time with those families having a target asset list that our teams, our acquisition teams who are partnering with the regional folks in the field are constantly monitoring, hey, when this could come to market? Is this a corner that we want to own. You've seen us cluster and buy centers or buy a pad at a shopping center that we've frankly been talking to people for years on and have been able to jump on, and ultimately, those are either going to come to market or before they come to market.

So those are some of the things that we do, but it's really for us the ability to execute and drive growth that gives us conviction about what we're buying.

The only thing I'd add there, Sydney, and Brian hit on this was the relationships we have with our retailers and their -- they know our ability to execute. We're talking to them constantly, and they're saying there are centers we want to be in, the landlord can't go through the entitlement process with the municipality. They can't get the needed consents from the other tenants. They can't get construction financing. We know Brixmor you can deliver, can you go in and try to buy this asset. And that's another really good source for us.

So just lastly, that 2 of the projects that we bought with Publix in Southwest Florida were exactly that. There are private landlords that have invested in the shopping centers, one of which we've already completed a development in Sarasota, the other one is one of the larger projects that Matt mentioned in South Tampa. So we're doing that, you can see us doing that, but that is also a key component in terms of understanding what the growth levers are when we enter into an acquisition discussion.

Okay. How about you, Michael. You're muted. Still muted. You went off for a second.

Just curious, did any of the tenants in the meetings talk about what would cause them to slow plans at all?

I didn't hear a peep of it. Not in one of my meetings, I see a lot of heads shaking no here. Again, there are some uncertainty out there in the economy. But in our meetings, there was no mention of a slowdown.

Yes. I would say though, Michael, to that point, there was an acknowledgment of what David started with, right, that there are some -- whether it's geopolitical macro headwinds, I do think that conversation and it was -- we had said to our team, hey, we're going to communicate how we're using, let's just call it, technology, right? AI is a component of that. Technology to make better decisions, to be smarter about who's shopping our centers. And what was really encouraging to me in meeting after meeting similar initiatives on the retailer side to do exactly what Evie hit on to figure out how that store can continue to be as productive as it ever has been.

People that are going on their phone to look at some things in stock, making sure that, that's in stock when they go into those stores, understanding in a trade area, what type of product is getting delivered, right? What type of product is getting picked up. And there was this and you definitely heard it from the off-price operators in terms of the better brands that they're putting into their stores as across the income spectrum, folks are searching for value. So I agree with David 100%, the meetings that we sat in on, there wasn't a discussion of, hey, here's a pullback? Or if this happens next quarter, we're in a pullback. What there was is, hey, here is how we're making decisions in an environment where there are some macroeconomic headwinds, and we're going to make those smarter than really we ever have going forward going into a 5- or 10-year lease commitment.

Let's go to Connor.

So you guys discussed that retailers going to know where they want to be. And you hit on this a little bit. You mentioned the Northeast, but just wondering if you saw any other trends in what sort of markets that tenants are kind of eyeing or looking for? Does it happen to be urban, suburban, regional like the Northeast, you mentioned? And then maybe what's driving this either from tenant conversations or what you guys are kind of seeing through some of your work on the back end?

Yes, I think the Northeast is a popular topic for this year just because it was kind of like the last frontier for Ross, who had covered the rest of the entire country. It was the last piece for them to push into, Sprouts who has generally come across the bottom half of the country through the Sunbelt into the Southeast. It's their next frontier. I think retailers generally are looking for good suburbs where their customers are located. Some other new markets, I heard of Rally House is a sporting goods and sporting wear retailer who's in 25 states today, he has been very active in our portfolio.

They announced 6 new states. It's not just the Northeast. They're pushing west into the Midwest and more into the Southwest. How about you, Evie? What new markets did you hear about?

A lot of demand for Florida and Texas, I would say. And really, it's where the retailer is not. So wherever they have white space, they're looking at not just demographics to compare markets and make decisions but psychographics as well. DSW just opened a few new stores in California where they didn't have as big of a presence. So yes, a lot of broad-based -- broad space demand across the country.

And they're using the data at their fingertips to identify where their customers are and where they're going to succeed.

I'm responsible for the Southeast. So Texas, Florida, Georgia, the Carolinas, it's incredible. The demand out there was just literally off the charts. So I mentioned the Publix redev projects. There's 6 or 7 of them, we are working on the pipeline now. The tenants are asking where they are. They want to be there. Good meetings with Kroger, talking about their growth, Harris Teeter growth in that part of the country. So I really think it was just broadly spread out the interest. I don't really think it was just focused on the north. And Brian mentioned a little bit of how the North redev projects that were delivered a couple of years ago were -- I want to say we, the South, the projects that are being delivered in the south are probably a year or 2 behind some of those.

So the shop activity in those projects is -- was happening in those meetings and should be getting signed in the next few quarters and showing up in our numbers. So it's -- it feels like it's there.

You bet. All right. Ravi is next. Ravi?

Can you discuss the Publix' refreshed strategy that you have up on the slides there? What specifically are some of the projects and objectives? And how should we think about you being a capital source to your tenant base as they look to upgrade and modernize their fleet?

Yes. I'll let you take that, Matt. Go ahead.

So we're one of the large landlords, they have a fleet of stores that once they get to be 30, 40 years old, they want to offer their most recent prototype to customers. Those stores from my perspective are low rents, in-place rents with a number of options that are still remaining. So they have control. So if we have an ability to deliver a new store to a shopping center, we'll reset their rent. We get a new 20-year term with Publix. At the same time, we typically will renovate or update some of the facades in the center to make it look like a new property.

We see traffic drive 30% increases at those properties. We see the sales increase for Publix typically about 30% and the tenants that are in our properties, their traffic is increasing, their sales are increasing. So it's really an opportunity for us to improve the tenant lineup that's in the property today or reset leases the same program that we've talked about a couple of times on this call. So it's really a refresh for the whole property, and it puts us in another -- it ramps us up.

And Ravi, just to your comment being a capital source for our tenants, and this is one of the most well-capitalized businesses in the world. These are also among the most attractive returns of our entire redevelopment pipeline, not even considering the cap rate compression that you're getting from brand-new Publix with 20 years of term. To Matt's point, we're getting a new store. We are freeing up years of restrictions and ultimately, the follow-on leasing there has been fantastic.

So they've been an amazing partner. Matt and team have done a great job, and they've done this now where they're now going outside of Florida. Matt's working on the first one, literally the first one in suburban Atlanta that they're doing. We're looking at some projects as those stores in Atlanta and the Carolinas, get to that, call it, 25, 30-year vintage, they're now starting those discussions, and they're doing them with landlords that can execute. So we love what we're doing with them. We've shown the ability to execute their fantastic returns, and we're excited with what we have going forward.

All right. Alex.

Question for you about the retailers themselves and obviously trying to get a little bit inside baseball, if you will. Rents are up. So obviously, we like that from the REIT side, but labor costs are up, the financing costs are up. So the retailers themselves are under more pressure. At the same time, customers have stomached huge price increases over the past 5 or so years. Are you seeing the retailers that you're talking to, especially the expansion ones or the ones that are really taking on more cost. Are you seeing them just solely relying on raising the prices that they're charging for their products as a way to compensate?

Or are you seeing your customers, your tenants, are you seeing them sort of rethink their business to make a more streamlined such that they can afford higher labor, afford higher rents. But at the same time, that's not necessarily translating to higher prices because, ultimately, the customer only has so much money that they can spend at the centers.

Yes. I think it's similar to Brian's point on the acknowledgment that there are labor headwinds, there are food cost headwinds in the restaurant industry. I think what we're seeing in our portfolio is we're getting much better tenants who are able to not only stomach the additional costs from labor costs, labor cost headwinds, but they know where their customers are. They're using the data that they have. They're opening stores where they know they're going to succeed. They're relocating stores to better centers and I think overall, the universe of retailers that we're seeing active in our portfolio are able to weather these items and be successful. Again, an acknowledgment of what's going on.

Yes. I think to add on that, Alex, just you think of who our tenants are, right? And the environment today and some level of hybrid work has stuck. I mean here in New York City, utilization rates are still 30% less than what they were in 2019. That's 1.5 days, right, that people are home more. What does that mean for their refrigerator, right? That helps our grocers? What does that mean for the daily habits that they have of going to get a cup of coffee, going to work out? There has been a fundamental shift in wellness. People are going to be much less apt to give their gym membership up, you've heard it from those fitness operators, what that does for our centers in terms of the service operators and the quality of QSR restaurants.

And then across the income spectrum, people are searching for value. And that's why you're seeing the comps and performance that's been happening with Ross and TJX and Burlington. So I do think it's the nature of who we've been able to bring in to our centers as well and some of those shifts in consumer habits and the consumer has been adapting to what's happening. So it's something that we remain laser-focused on, it's something that we're talking to our tenants about. But I also think everything David said, is the truth.

And then also, you just think about on top of that, the nature of who our tenants are and how our centers are shopped today, is a benefit to as well.

So we got a little under 10 minutes left. It looks like we have one more from Daniel. Let's go to you, Daniel, and then I'm going to go around the room for one last question for our group.

I know you mentioned some of the items that you've been working on adding into leases. I was wondering if there's anything that you've been trying to work into leasing discussions around e-commerce sales and the benefit of having a store in a market has on increasing e-commerce sales in that trade area.

It's a great question. And the answer is yes, absolutely. Many retailers are not only fulfilling online orders in the store, but delivering online orders from the store, the majority of our leases allow us to capture those sales. And there are some that don't. And we have a big initiative here to make sure that any sales that are coming out of that box, whether it's online, pick up in store delivery, we are getting the benefit of as it relates to percentage rent and our upside in those deals.

But yes, we are laser focused on it. And it's a great question.

All right. So let's go around the horn here on what surprises you heard at the show. Let's start with Laura.

Well, I'll tell you, I had a couple surprise visits from retailers, which -- that surprised me. It's not typical that an unscheduled -- a retailer makes an unscheduled appearance in the booth looking for me and hoping to get a few minutes of my time. So that was kind of a refreshing development this year. And then I had a broker come into the booth and grab me to tell me that she had an LOI for me and that she was going to be sending it over for a credit union for one of our assets in Maryland. So those were some positive surprises.

Our favorite kind. How about you Evie.

Yes. I mean I had 33 meetings over 2 days and first time ever, no, no shows, which is a little unheard of, and I think just speaks to the demand in the space and for our asset class. I had a 2:30 meeting on Wednesday, which is the very last spot and the show floor was practically empty by then. And they came a Canadian retailer who's entering the U.S. called La Vie en rose, which has a very similar merchandising mix to Victoria's Secret. They have 5 opened so far in the U.S., and they're looking to do a big expansion. They came to tell me that they reviewed the prep that I sent over before the meeting, and they're touring this week, one of our shopping centers, and they needed a lockbox code. So great way to end the show on a really high note and just excited for all the follow-ups here to come.

Good stuff. How about you, Matt?

I had a couple, a few tenants that hadn't historically been open to ground leases were looking for creative ways to get into some of our centers, which I'm excited to explore, the student activity at ICSC. So the ICSC Foundation has been really involved in it. There are 600 students that attended the show, which just shocking that we were able to drive that much traffic from colleges, I was able to meet with a handful of them, which was great. I mean our office, there's a handful of interns here. So it's been really nice to meet with them.

And then I mentioned that AI had came up at every meeting. Literally, it came up at almost every meeting. It's just been such a hot topic and some of those uses and cases that things that I had -- in ways that I hadn't considered using it, just hearing how other people were taking advantage of what was really great, it was helpful.

For me, this might sound a little cheesy, but the surprise for me at the show was actually the lack of surprises, right? I mean every year, we all have some level of bad news that gets delivered to us, whether it's a store that's not performing, a store that's relocating, a tenant that's mad at us for some reason, there was 0 of that for me this year. And if I look at the conversations we're having with our national retailers, we mentioned this several times across getting control and all the consents we get, there really aren't any retailers out there that we don't have a solid relationship with where we're able to navigate these things.

And historically, there's always been 2, 3 or a handful of them that have had constant challenging conversations. And this year, thankfully to the environment we're in. And thankfully to the relationships that everyone on the screen has built with our retail partners, there's really none. And it's been really great to see. I missed one question here with Omotayo. Let's finish with you unless anybody has anything else.

One of your peers had a similar presentation yesterday, I met a couple of your peers also at ICSC and I guess kind of thematically, everyone kind of sounds the same if I may use that word. So I am just kind of curious a little bit from Brixmor perspective, what can you tell the investment community in regards to one and maybe something you're doing a little bit differently versus everybody else, and how should we kind of think about it differently in a world where everything just sounds fantastic.

Yes. I can take that, David. It's a message I frankly said to the team, we get together every year, right? And we've done this for a long time too. By the way, I know some folks are a little bit new to it, but this is something that we love doing and spending time with all of you. And so this portfolio wasn't always in the same position it is today. And there were things that we had to do in terms of our approach, right, in terms of the relationships that we developed, in terms of the resilience that we had to have when we were more defensive.

And to be able to take that same mindset and then do that with a portfolio that has been transformed with relationships that have been strengthened, gives us the ability to drive growth. I think at the top of the peer group going forward and gives us the ability and visibility to do larger scale acquisition, and larger scale reinvestments based off of how we've executed with the team, be able to take on acquisitions like we did at LaCenterra and out of the gate are well ahead of our underwriting.

So it's the experience that you all have seen and how we've been able to demonstrate that execution through cycle after cycle that puts us in a position to outperform when it's a great environment or when it becomes more challenging environment. There is a reason that we had the highest collection rates during COVID, right? There is a reason that we saw some of the biggest lift in small shop occupancy coming out of that as well. And there's going to be a reason where we're going to continue to drive growth going forward. And it's really due to everybody on the team and the resilience that this group has had over many cycles.

All right. I don't see any other questions. I want to thank you all for coming. Appreciate the time today, and everybody have a great day. Thank you.

Thanks, everybody. We appreciate it.

Greetings, and welcome to the Brixmor Property Group First Quarter 2026 Earnings Call.

[Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Stacy Slater, Executive Vice President and Investor Relations. Thank you. You may begin.

Thank you, operator, and thank you all for joining Brixmor's first 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 requeue. At this time, it's my pleasure to introduce Brian Finnegan.

Thank you, Stacy, and good morning, everyone. I am pleased to report another quarter of outstanding results by the Brixmor team as we continue to execute across all facets of our business plan to start the year. We grew same-property NOI 6.4% over last year and delivered $0.58 per share in FFO, results that demonstrate the momentum that is accelerating across the platform, which is also reflected in our improved outlook for the year. These results continue to differentiate Brixmor in what remains a positive backdrop for open-air grocery-anchored retail.

Before providing additional detail on Brixmor's strong start to the year, I want to share a few thoughts on the broader environment and how Brixmor is positioned within it. We are operating in a period of heightened uncertainty. Geopolitical tensions and capital markets volatility are real, and we are monitoring them. That said, the fundamentals for our property type remain exceptionally strong. Consumer traffic at our centers continues to grow with over 220 million visits in the first quarter, up over 3.5% year-over-year.

New supply remains at historic lows and demand from high-quality retailers for well-located space is as strong as we have seen as physical stores remain the most cost-effective way to deliver goods to the consumer. These secular tailwinds are attracting institutional capital into our sector at the highest pace in decades. Within this environment, Brixmor stands apart. We have meaningful embedded upside across our portfolio, enabling us to continue to deliver on industry-leading mark-to-market opportunities.

Our reinvestment and signed but not commenced pipelines provide exceptional visibility into future growth -- future cash flow growth. The underlying credit quality of our tenant base is the strongest in our company's history, and we have the talent and experience to continue to deliver for our stakeholders.

Now let's turn to our results for the quarter, which highlight the operating strength in our business. Leasing demand from best-in-class tenants remains elevated. We executed 1.3 million square feet of new and renewal leases at a blended cash spread of 27%, with new lease spreads at 42% and record renewal growth of 21%. Our team is capitalizing on strong tenant demand as well as the investments we have made across the portfolio to elevate the quality of our tenant mix.

During the quarter, we added first-to-portfolio locations with Pottery Barn, Williams-Sonoma, L.L. Bean, Rowan, and Teso Life, while continuing to grow with leading operators across the off-price, health and wellness and quick service restaurant segments.

From an occupancy perspective, total lease occupancy ended the quarter at 95.1%, flat sequentially and up 100 basis points year-over-year, while small shop occupancy was 92.1%, up 130 basis points year-over-year, underscoring sustained demand for space. We are still well below peak occupancy expectations for the portfolio, which represents meaningful future upside. And while we do expect overall occupancy headwinds in the second quarter due to a handful of anticipated box recaptures, we expect to return to a growth trajectory in the second half of the year. Our leasing activity during the quarter also increased our signed but not commenced pipeline to $67 million, up 10% year-over-year.

Accretive reinvestment remains central to our strategy, and we were active in the first quarter. We stabilized $78 million of projects at a 9% average incremental return. This included 2 transformational projects, the opening of our first large-format Target at Wynnewood Village in South Dallas, Texas; and Phase 1 of Block 59 in suburban Chicago. Both have been exceptionally well received in their respective markets and demonstrate our team's ability to execute large-scale projects that generate meaningful value creation and growth with future phases still to come at both locations.

We also commenced Phase 3 of our Roosevelt Mall redevelopment in Philadelphia, further densifying the site with exceptional operators like Ulta, Shake Shack and Victoria's Secret. We continue to make meaningful progress on our outparcel development program, adding a record 6 new projects at an attractive 16% incremental return. This has been and will continue to be a compelling area of focus as demand is deep, returns are strong, and the program is highly complementary to our merchandising strategy.

In addition, the communities that we serve are increasingly supportive of these projects, as they share our desire to convert large underutilized parking fields into thriving retail and restaurant destinations. At quarter end, our active reinvestment pipeline stood at $302 million with a 10% average incremental return with another $700 million in our future pipeline, including opportunities and assets we acquired over the last 2 years.

The depth of this pipeline continues to differentiate Brixmor, providing many years of runway for accretive reinvestment. On the transaction front, the market has been competitive and dynamic. Increasing demand for open-air retail allowed Mark and team to dispose of $108 million of assets where value had been maximized. And while we did not acquire any assets during the quarter, we continue to identify compelling opportunities to put our platform to work with over $160 million of assets under control in high-growth markets where we have a strong presence and a deep pipeline of additional opportunities we are currently underwriting.

To support our capital recycling strategy, we raised $116 million through our forward ATM, which provides flexibility as we execute. We will remain disciplined in our approach to capital allocation, focused on acquiring assets where our platform can create value and that are accretive to our long-term growth profile. Before I turn it over to Steve, I want to take a moment to thank the entire Brixmor team. The results we delivered this quarter and the acceleration of our business plan are a direct reflection of your focus, discipline and commitment to this company. I'm incredibly proud of this team and grateful for the energy and thoughtfulness you bring every single day.

With that, I will turn the call over to Steve for a deeper review of our financial results and improved 2026 outlook. Steve?

Thanks, Brian. I'm pleased to report solid first quarter results and an improved forward outlook as we continue to capitalize on the strength of the current retail environment and the embedded opportunity within the Brixmor portfolio. First quarter same-property NOI increased 6.4%, supported by a 410 basis point contribution from base rent growth due to the stacking of rent commencements.

Ancillary and other income contributed an additional 120 basis points, driven in part by the Pointe Orlando garage restructure discussed last year. While these dollars are recurring, the year-over-year benefit to same-property NOI growth is limited to the first quarter as the garage contribution began in the second quarter of last year.

Revenues deemed uncollectible contributed 30 basis points to growth as we continue to benefit from the improving underlying credit quality of the portfolio. NAREIT FFO was $0.58 per share in the first quarter, benefiting from the strong same-property NOI performance. Our signed but not yet commenced pipeline ended the quarter at $67 million at a record $24 per square foot, 25% above in-place ABR per square foot and ended the period with a 370 basis point spread between leased and billed occupancy. We anticipate approximately $38 million of that signed-but-not-commenced ABR to commence ratably throughout 2026.

Turning to our forward outlook. We increased our same-property NOI growth guidance to 4.75% to 5.5% and our FFO guidance to $2.34 to $2.37 per share. We expect base rent contribution to growth will accelerate as the year progresses, and we continue to expect revenues deemed uncollectible of 75 to 100 basis points of total revenues, supported by ongoing positive trends in rent collections. The increase in our FFO guidance reflects the strength and visibility of our same-property NOI trajectory.

From a balance sheet perspective, we took advantage of our improved cost of capital and proactively raised $115 million of equity under our at-the-market equity program on a forward basis to partially fund our growing acquisition pipeline. As we look to our upcoming bond maturity in June, we proactively entered into a $200 million interest rate hedge at 3.99%, providing us protection against recent volatility in the treasury markets.

We ended the period with $1.8 billion of available liquidity, including $425 million in cash, $115 million of unsettled forward ATM proceeds and $1.25 billion in capacity under our revolving credit facility, leaving us well positioned with flexibility to execute under our business plan.

Debt-to-EBITDA is 5.3x as the continued growth in free cash flow of the underlying portfolio has allowed us to naturally deleverage while funding accretive redevelopment and acquisition pipelines.

Our first quarter results demonstrate strong fundamentals, sustained leasing momentum and solid visibility into future earnings with same-property NOI and FFO growth expected to be approximately 5% at the midpoint of our revised guidance. Supported by meaningful embedded growth and a flexible balance sheet, we are well positioned to execute and drive long-term value.

And with that, I'll turn the call over to the operator for Q&A.

[Operator Instructions] Our first question comes from Michael Griffin with Evercore ISI.

Brian, I appreciate your commentary there in the prepared remarks. Curious if you could quantify the expected headwind to occupancy in the second quarter that you detailed? And then maybe as it relates to the SNO commencement, Steve, I know you mentioned about $38 million coming on ratably throughout the balance of the year. If that delta between signed and occupied was 370 basis points in the first quarter, how do you expect that to progress throughout the balance of the year?

Yes. Mike, thanks for the question. Just on the first part related to occupancy, we're highlighting because it may impact the growth trajectory throughout the year. It's not always linear. Those boxes are within our improved guidance range outlook. There's opportunity there for mark-to-market. We knew we were getting them back. We do expect to get back on a path to growth.

Overall, we're very pleased with the occupancy trends in the portfolio. We're well below peak occupancy. So it's a handful of boxes. We expect it to be modest, but ultimately expect to be able to put better tenants in at much higher rents. Steve?

Yes. And on the commencement side of the SNO pipeline, I mean, I think we do expect it to commence ratably. But I think importantly, the entire team is really focused on backfilling that pipeline. So I think Brian would have mentioned on the last call of as we continue to backfill and commence rent out of that pipeline, you might see it wider for the remainder of the year as there's some really impactful leases within that SNO pipeline that are coming on in 2027. One of our largest pipelines we've had with Publix are in sort of that longer-term pipeline within the SNO pipeline.

Our next question comes from Michael Goldsmith with UBS.

Can you talk a little bit about the acquisition environment? What are the opportunities you're seeing, if you're seeing any competition and if that's influencing pricing? Clearly, you've disposed of some stuff during the quarter and you hit the ATM. So you've got the liquidity to participate, but just trying to get a sense of the opportunities that you can use this capital on.

Yes. Michael, I would just say, as I mentioned, it's been competitive, but we also like what we're seeing out there. Mark, why don't you give more detail on that?

Yes. I think as Brian highlighted in his remarks, we're certainly seeing new capital come into the space, which I think is a real reflection of the healthy fundamentals that everyone is seeing, and I think a good signal for future growth in the overall business in the open-air retail.

From a competitive market perspective, that new capital is certainly compressing cap rates really across all asset types, you're seeing the type of compression on smaller grocery-anchored deals, smaller unanchored deals. We're also seeing the return of some really low-priced capital chasing high-profile deals have pushed some deals into the high 4s in certain cases.

From a Brixmor perspective, we've been at this acquisition game for a long time. We've developed lots of relationships. So as we think about that sourcing of acquisitions, part of it is through broker like it's been for many years and the other half really has been direct deals. So that's how we compete. We really try to have a good and intentional way of thinking about assets that work for Brixmor.

You should expect us on the transaction front to always remain disciplined. If you look at last year, we didn't close any acquisitions in the first couple of quarters when we closed $420 million the second half of the year. So we really try to drive this business for long-term cash flow and value growth. We're excited about what we see in this $160 million we have under control.

And importantly, we see a really healthy pipeline of assets behind that. And we're going to continue to find those assets where we can really put our platform to work and drive strong rent mark-to-market redevelopment opportunities and drive those unlevered IRRs in that 9% to 10% range. So we're really, really bullish on what we're seeing in the acquisition market today, but expect us to remain disciplined as we put capital out.

Yes. And Michael, I would just add, we've been thrilled with how the team is executing on what we bought, right? We're ahead of our underwriting on the $400 million that we bought last year. So that gives us a lot of conviction as we are out there in the market in terms of being able to drive a growth profile that's accretive to the growth profile of the company that's in line with what we've been doing. So we're excited about that.

Our next question comes from Alexander Goldfarb with Piper Sandler.

A little bit of feedback on this line. So a question for you, big picture. We've had massive inflation since COVID in the past few years, which fortunately seems to be subsiding, but now we have spiking energy prices, yet you guys don't seem to talk about any slowdown in tenant leasing. You talked about consumer traffic being up, I think, 3% year-over-year. So is it just that the consumer and the retailers are just basically impenetrable from price shock? Or how do we sort of manifest this, especially as your portfolio is sort of middle market. It's not like you're super high end, your middle market. So just trying to get a better sense for how the consumer and the retailers seem to be stomaching when the headlines would suggest otherwise.

Yes. Alex, it's a great question. I'd say consumers are adapting versus collapsing. I think across the income spectrum, you're seeing consumers look for value that helps our grocers, that helps our off-price retailers. There's a higher percentage of share going to health and wellness that helps our fitness operators and helps our higher-quality restaurant options.

I think you are seeing some positive trends still in the economy. If you look at -- there's still decent wage growth, still a strong job market. Traffic, we've been pleased with those traffic trends. Interestingly, from a leasing perspective, 2/3 of our leasing during the quarter happened after the conflict started. So I think the retailers today have been nimble and have been catering to what the consumers want.

I think the other point is if you look at retailers saying, you heard it a lot on the recent earnings calls from retailers, is that they've got more data today than they ever have on their consumer in terms of understanding what's selling within the stores, understanding what's getting delivered from the stores and how that fits within an omnichannel strategy.

So I think they're much better positioned in terms of being able to adapt to different consumer trends. And we've been encouraged. Look, it's something that we're watching very closely. We don't see any delinquencies picking up in our small shop tenancies. You can see that coming through in the bad debt numbers for the quarter. So something we continue to watch, but have been encouraged by the trends so far.

Our next question comes from Todd Thomas with KeyBanc Capital Markets.

I just wanted to ask on the equity issuance in the quarter, that decision there. Just curious if you can speak about that and your interest level to issue additional equity at current prices, just how you're thinking about funding obligations in general and whether you might look to over-equitize acquisitions here a bit, perhaps drive down leverage more meaningfully than you had previously?

Well, Todd, I'll take the first part and maybe Steve can chime in if he has anything to add. So we saw a window during the first quarter with the acquisition pipeline growing to utilize the ATM on a forward basis. It's very similar to what we did at the end of 2024 to help fund acquisitions. We're going to continue to be -- remain very disciplined with our equity. We recognize that it's precious, but we saw an opportunity. So we took it during the first quarter, and we're pleased with what we're seeing in the acquisition market.

Yes. And I mean these are long-term assets, and we think about our balance sheet on the long term. So while the match funding might not always occur in a quarter, we're really thinking about the long-term funding in our business. And I think importantly, what you've seen in our leverage level is that we've been able to naturally delever just through the growth that's coming through in the portfolio without having to issue equity. And that's something at 5.3x levered, we feel really comfortable where we are today.

Our next question comes from Haendel St. Juste with Mizuho Securities.

So my question is on the leasing CapEx. A bit of a jump in the quarter. I think it was up 30% year-over-year. Assuming that's tied to the recent backfillings and why the anchor new lease spreads are up 90%, so maybe some color on what's driving this? And should we expect the leasing CapEx to stay elevated near term given the size of the sales pipeline?

Yes, Haendel, we remain pleased with just the overall CapEx trends in the portfolio. I think it was the nature of the pool this quarter. If you looked at overall CapEx, it was down versus the fourth quarter of last year. We expect CapEx as a percentage of NOI to be in line with where we were a year ago, which were decade lows for this portfolio. All the things that we've been talking about relative to demand for space, tenants taking on more existing conditions has allowed us to be more efficient in that leasing capital spend.

We did lease a lot of space last year. So there are some costs associated with that. But we're filling those boxes much more efficiently. Our payback trends remain at decade lows for the portfolio as well. And just thinking of CapEx overall, maintenance CapEx will continue to be at a level we were at a year ago, which were, again, lowest for the portfolio. So we feel like we're very well positioned in terms of what we're seeing from those CapEx trends and what you saw during the quarter was just the nature of how some of the deals came through.

Our next question comes from Greg McGinniss with Scotiabank.

I appreciate the color so far on the acquisition market, but I'm curious kind of what type of buyer you're running into on the competition side and also who tends to be acquiring your assets and at what cap rates? And then was the comment on high 4 cap rates related to the types of assets that you'd be interested in acquiring? Or is that just a high watermark that you've seen in the market?

Sure. On that, that's really just the high watermark you're seeing from some of the lower priced capital high-profile deals. Our strategy is going to remain finding assets where we can drive long-term IRR growth in that 9% to 10% range, but it was really to kind of highlight where cap rates have gone for certain assets.

With respect to buyers, you've seen a full range of buyers we've talked about over the past. You've seen private equity funds come in. You've seen the rise of high net worth buying assets. You've seen smaller private equity funds come to the forefront. But the real broad trend you're seeing is that a lot of private capital is saying to itself that the cash flow generation out of open-air retail is very attractive relative to other asset types today. And that's where they're coming into the space. They're seeing very strong fundamentals that Steve and Brian have been talking about, and they like access to this cash flow level.

What we're competing with is really that full set of folks, both when we're trying to buy assets, we're selling assets to that same group of folks. And really, where it comes back to for Brixmor is our operating platform. This is a group of great operators, and we try to find those assets where we can put a platform to work to drive value.

Our next question comes from Caitlin Burrows with Goldman Sachs.

Maybe just on the same-store NOI growth side. I know you guys gave some comments about a unique factor that drove especially strong results in the first quarter. You mentioned potential like expected occupancy dip in the second quarter. Could you go through what it would take to kind of get you to the low versus high end of the same-store NOI guidance range now?

Yes. I think importantly, when you look at the trajectory of same-property NOI growth, like focusing on that top line base rent, that has been accelerating, right? The contribution from that to same-property NOI has really been accelerating since the middle of last year, and we expect that to continue throughout the remainder of this year.

When you think about the highs and lows and the puts and takes, it's pretty similar to most quarters. I know it kind of sounds boring at times, but it's working every day, which the team is doing to get rent commencing sooner, right, pulling those rent commencement dates forward, continuing to lease additional space, getting them open in the year.

And then ultimately, what will happen on the bad debt side. We've seen some positive trends in there. We still think 75 to 100 basis points is appropriate where we sit at this point in the year. But that's really the puts and takes to the high and the low within that range.

Yes. And Caitlin, just because you mentioned occupancy again, just to reiterate, we expect that impact to be fairly modest. We do get the question on trajectory a lot. We're expecting to be back on a path to growth towards the end of the year. What we leased in the first quarter was ahead of where we were last year. Our deal flow into committee is ahead of where we were both in rent and square footage. So we remain very excited by what we're seeing in the leasing environment. It's just not always linear in terms of the growth trajectory as it relates to occupancy.

Our next question comes from Cooper Clark with Wells Fargo.

And I appreciate the earlier comments on the acquisition pipeline. I just wanted to touch on the transaction market. And I was curious if you could provide any incremental in terms of liquidity today as it seems like higher demand for the sector is being met with ample amount of product coming to the market. Also, any color on some of the products where you might be seeing better opportunity, whether on the large-format side or value add?

Yes. Let me start, and then I'll give it to Mark because he's going to have more detailed color. I think what you're seeing from institutions and the demand for the space is because of all the great things that are happening. We're in a very low supply environment. Traffic continues to grow at our shopping centers. The consumers remain resilient. Our retailers are performing, and there continues to be upside in the asset class. So I think that's why you're seeing so much demand just from a wide range of capital sources.

Mark, I don't know if you want to provide any more detail on it?

No, I would just reiterate what you said is that we -- it's been a big change over the last several years of the amount of capital flowing in. There's plenty of liquidity for assets today. As far as where we're seeing opportunities, it's the same type of opportunity that we've been trying to take advantage of for a long time. We really try to find opportunities where an asset has been under-rented, where there's large rent mark-to-market and redevelopment opportunities. That really won't change as to put capital. We really want to find ways to put our platform to work and drive long-term value and cash flow.

Our next question comes from Craig Mailman with Citi.

Just a follow-up on the acquisition side of things. As we think about the equity being put to work, how should we view kind of the going-in yields versus that longer-term 9% to 10% IRR? And then also just maybe on the other side of Todd's earlier question about overequitizing. How do you guys think about just competing with the private guys that are using more debt given the stability of the asset class and you and your public peers kind of driving down leverage at the same time, it kind of puts you at a competitive disadvantage on the margin. Just how do you think about the use of equity here versus even expanding leverage a bit on the margin?

Yes. Craig, let me just start because we are spending a bunch of time on acquisitions, and we are pleased with what we're seeing in the market, but let's not forget our core business strategy is to accretively reinvest in the portfolio. We had a fantastic quarter on the redevelopment front. The pipeline continues to be very large. Our team is demonstrating the ability to deliver larger projects at scale. You're seeing those come through.

So we have been pleased with what we're seeing on the acquisition market. We're going to continue to be opportunistic there, but it's kind of secondary to what we do. We can remain disciplined there. We don't have to buy to drive growth. So I just want to frame that up, and then maybe I can kind of give it to Mark a little bit for the rest of your question in terms of some of the puts and calls.

I can let Steve talk about the balance sheet, but I was going to hit on the same exact point, Brian, how we're competing with the private capital is that they're seeking simple, more stabilized deals, and we're trying to find assets where we can put our platform to work for future redevelopment like our Britton platform a couple of years ago. And the private folks aren't really seeking that type of opportunity today.

Yes. And on the balance sheet side, the issuance of the equity, I mean, we look at all sources of capital available to us. We were a net acquirer last year. We didn't issue any equity, right? So it's looking at the long-term financing of the business and providing us with the flexibility to be able to execute under the business plan. I mean the redevelopment pipeline is still funded with free cash flow on a leverage-neutral basis. So where we're issuing equity is generally going to be additive to what we can do in the transaction market.

Our next question comes from Samir Khanal with Bank of America.

I guess, Brian, maybe talk about bad debt and what's that tracking year-to-date and how that compares to your guidance of, I think you said 75 to 100 basis points. It sounds like you're tracking better from your comments, but you've left the guide unchanged from that perspective. Any categories driving that conservatism?

Yes. Steve can touch a bit on the guide but this is the best underlying credit profile this portfolio has ever seen. Move-outs, which were historic lows for the portfolio last year are down 10% from a GLA perspective thus far year-to-date. If you were to include the bankruptcies, that's just normal course move-outs. If you include the bankruptcies last year, they're cut in half. And so from a payment trend perspective, all the things that we've been doing to the portfolio to attract higher quality tenants, the stringent underwriting standards that Steve's team has in place working with our leasing team has positioned us very well.

I think as you look out at the balance of the year, we feel like we're adequately provisioned, but we feel very confident in terms of the quality of the cash flows that we have in the portfolio today. From a category perspective, drugstores are going to continue to close stores. It's a very low percentage of what we do. It's about 80 basis points. We cut our office supply exposure in half. They're going to close stores. We leased a number of those boxes to off-price uses over the last few quarters at significant spreads.

So even within those categories that may be considered on a "watch list" we have very low exposure to. And as you think of a category like restaurants, 2/3 of our restaurant exposure is from national and regional tenants. Our top restaurants are Starbucks, Chipotle and Darden. So we feel really good about the nature of that tenancy as well. So you take that on a whole, it's in the best position we've ever been from a credit quality perspective.

Yes. I mean we were at 54 basis points of total revenues within the quarter. If you just look back to the last several years, there is a little bit of seasonality on when we report that based on the collections, mainly of real estate tax bills for large cash basis tenants. So when you're looking at the quarter, right, it's not always a straight trajectory that you would think. I think we've commented on that in previous years. But saying all that, I agree with everything Brian said, right, we're still seeing a lot of positive trends in collection, but that's where the 54 will sort of balance out at some point, all things considered.

Our next question comes from Eric Borden with BMO Capital Markets.

I appreciate the comments around the positive foot traffic seen to start the year, but I was just curious if you could update us on tenant OCRs. And are there any parts of the tenant base where OCRs are improving or deteriorating?

Yes. Just from an occupancy cost perspective, tenant sales remain very healthy. You saw that come through in the percentage rent line item this quarter. We've actually seen some wins on the audit front as well. So a lot of our tenants that pay percentage rent, whether that's grocers, whether that's restaurants, we continue to see those numbers stick and they are elevated a bit this year.

Across the board, as we look at occupancy costs, and we're assessing those from a renewal perspective, we have renewals at record rates for the portfolio at 21%. Retailers aren't paying that. Operators aren't paying that unless their stores are profitable. So we're seeing positivity there really across the board. And as we talked about in our remarks, this still is the most profitable way to deliver goods to the consumer.

And retailers are getting smarter about how they are stocking their stores and the inventory levels within those stores that will ultimately make those more productive. So from an occupancy cost perspective and from just an overall sales trend perspective, we're encouraged by what we see.

Our next question comes from Floris Van Dijkum with Ladenburg Thalmann.

You had really strong ABR growth again this quarter, I think. Could you maybe talk a little bit about the differential in ABR between renovated portfolios and non-renovated portfolios and where the future upside potentially could come from in terms of ABR growth?

Yes. Floris, it's fairly broad-based in terms of what we've been seeing both in assets where we've reinvested. Obviously, in projects where we've been able to bring grocers in, where we've been able to significantly change out what was there previously, you're going to see a higher upside. In terms of the specific percentage, I mean, we can get back to you on that. But I would just say kind of broad-based, we're now 3 years running of renewal growth in the mid-teens.

We just hit a high for the portfolio. We've taken rents from $12.50 to over $19. We're signing those leases today in the mid-20s. Our anchor rents over the last year were a record at over $17. And we've got leases expiring that we control over the next year at $10. And we've been doing that more efficiently with less capital. So I think it's tough to say because we can point to box opportunities where they've been straight backfills where we've doubled, tripled the rent. And we can also point to things where we've made reinvestments where we're continuing to see the benefit of that.

You look at a reinvestment project like Newtown in suburban Philadelphia, which we stabilized several years ago, we're still achieving the highest rents that we ever have in that center, and that wasn't part of our initial underwriting. So I do think it's tough to kind of differentiate between the 2, and we can get back to you if we have some specific numbers on it. But I would say it's been fairly broad-based in terms of the upside that we've had for the portfolio.

Yes. And Brian hit on the key point with Newtown, but it's also the amount of properties we've touched at this point, right? There's just a wider range that you've touched getting that growth, right? So you're getting that flywheel effect across a larger percentage of the portfolio. It's about 25% higher in in-place rents based on the assets that we redeveloped versus the in-place portfolio.

[Operator Instructions] Our next question comes from Hong Zhang with JPMorgan.

I guess as it relates to the expected box move-outs this quarter, could you provide any color on just -- do you have tenants lined up, what the expected downtime is? Anything on just the expected rent spread on re-leasing?

Yes. And again, this is why I said it could be modest in terms of what we're seeing. We do have leases out on several of those spaces, a few of them. We are putting grocers in at significantly higher spreads. I'd just point to the fact that overall, our in-place anchor rents are in the low double digits. We've been signing them at records for the portfolio. This is the tightest box supply environment across the country. It's among the tightest box environments that we've ever had with additional occupancy upside.

So it's just the nature of when we get those leases signed, but we're very pleased with the activity on them, the tenants that we're negotiating with and the rents we're going to be able to achieve as well.

We have reached the end of our question-and-answer session, which there are no further questions at this time. I would now like to turn the floor back over to Stacy Slater for closing comments.

Thanks, everyone. We'll catch up with you guys soon.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Welcome to Citi's 2026 Global Property CEO Conference. I'm Craig Mailman with Citi Research. And we are pleased to have with us today Brixmor and CEO, Brian Finnegan. This session is for Citi clients only and disclosures have been made available at the corporate access desk. [Operator Instructions] So Brian, I'm going to turn it over to you to introduce your company and team, provide any opening remarks. Tell the audience the top reasons and investors should buy your stock today, and then we can jump into Q&A.

Thank you all for being here today. With me, I have Steve Gallagher, our Chief Financial Officer; Mark Horgan, our Chief Investment Officer; and Stacy Slater, our Head of Investor Relations and Corporate Strategy and capital markets. We are one of the largest owners of open-air shopping centers across the U.S. We have 348 assets in the major markets across the country. We're among the largest landlords to TJX and Kroger, Publix, Ross and Burlington, Whole Foods as well. Our strategy is a bit differentiated in the sense that we have a very low rent basis in well-located shopping centers.

And over the course of the last 10 years have gone on a strategy of continuously reinvesting in those being able to recapture below-market rents and put better tenants in that are driving a lot more traffic at higher rents. And you can see that coming through in almost every observable metric in the portfolio and why you should own our stock today is the best is yet to come because all the things you like about the portfolio in the past relative to the low rent basis, the redevelopment opportunity, the platform in place to drive outsized growth is still there from the best foundation that we've ever had relative to our underlying cash flows, relative to the CapEx that we have to deploy both because of the environment and what we've already touched across the portfolio.

And the redevelopment pipeline going forward is as exciting as it's ever been. If you think about the pipeline that we have with Publix, the centers that we have in places like Plano, Texas and Atlanta and Metro, New York that we're starting reinvestments in. So we're in a fantastic position to continue to drive growth and really excited about what we have going on in the business.

And given that this is the first time you're in the hot seat having taken over more recently, as you kind of take the position. I know Brixmor has been a little bit of a machine with the redevelopment over this cycle. What as the incoming CEO are you looking at to tweak or change on the margin as you take the seat?

It's a great question. So I'd say the first part in terms of the aggressive operation of our assets, the focus on reinvestment that's not going to change. If anything, we're putting resources in place to be able to drive that faster. I oversaw the realignment of the team 18 months ago when we went from 4 to 3 regions, when we invested in more execution resources that we could move around more seamlessly across the portfolio depending on capital needs, and we've seen tremendous benefits from that. So we're operators at heart, and that is not going to change.

And as I mentioned earlier, I'm even more excited about what we have in front of us and what we've already completed. Mark is up here and acquisitions is not a core part of our business strategy. It's not something that we need to do to grow, but we have been net acquirers for over the last 5 years. 40% of the acquisitions that we've done as a company have been in the last 5 quarters, and we've found fantastic opportunities to replenish that redevelopment pipeline but also where we can put the platform to work in places like Houston and Denver and South Florida. So we expect to be opportunistic there, and we expect to continue to find opportunities, but we're going to remain disciplined.

I think the third thing is we've always leveraged technology very well here. What can we do to lean into that. We've seen some early initiatives in AI and automation really pay off, particularly on the legal front, allowing us to negotiate leases a lot faster from a leasing perspective, more information in terms of how our tenants will perform shopping centers, allowing us to make merchandising decisions and understanding our tenant health a bit. We have 8,000 leases. We have 900 million visits through our portfolio over the last year, that's a lot of data and how can we utilize that to make better decisions. So I expect us to lean into technology a bit more there.

Since you opened the door with technology, I'll jump to my AI portion of the show right off the bat here. I mean you had mentioned legal is one place that you guys are finding efficiencies. Can you describe kind of how deep the initiative is that at Brix on this kind of AI implementation outside of maybe legal, where you're seeing the opportunity? And how you guys evaluate the ROI on this or how you evaluate maybe the go, no go on putting time and effort and money into some of these new technologies versus waiting maybe and being the follower on some of these things versus more of a first mover.

I think if you could take the crawl, walk, run approach sometimes people can sprint past you. So we have been measured in terms of how we're approaching things. But you asked coming in, we challenged every leader in every function to look at their process and say not particularly just with AI. But what are some things that with technology, we can do faster, whether it's automating, whether it's some level of AI tools, our teams are using it every day to be more efficient to get faster information. And I think what we've seen across the portfolio, Craig, that's been really interesting is we've seen people step up and find things that make themselves more invaluable.

For instance, we talked about legal. Some of the things we do in terms of how we're abstracting leases and finding certain things out and different ways we're doing that across the portfolio was a bit inefficient. We were able to save thousands of dollars with one individual just utilizing some tools to figure out, okay, what consents do we need to put solar on our roofs rather than things that were taking us a couple of weeks, we're taking us 10 to 15 minutes. That individual is now business liaison is helping other people deploy as a tool. Some of the things in tenant health, right? You may ask about that today.

We may have a sense, everybody in the room of who's on a watch list or what tenants you're paying particular attention to. But for us, can we go a bit deeper to say, all right, well, who was paying on the second of the month that's now paying on the fifth or sixth" where we might not get a flag on that because they're still not technically paying late here within their grace period. But we can start to get some early signals that, hey, maybe we need to send a leasing rep in there. Maybe we need to send a property manager in there. We've cut back to the legal front. We've cut 3 to 5 hours out of drafting leases through automating those out of the gate and just think of okay, well that's time to be able to work on another lease to be able to do that faster. Our time and legal was down 10% last year.

So we're continuing to find ways. To your point about where we're investing, we are looking at the tools that we have and what some of the embedded options are within that, like with Salesforce and other things and ultimately, where we spend time with what we're doing on our own. But we've been very encouraged by what we've seen to date and are going to continue to leverage it to make better data-driven decisions.

And do you guys have a preference for platform, Google, OpenAI, anthropic? Is there any...

We're in the Microsoft suite today. So Copilot has been a tool that we've used, and we like it so far, and it ties into everything else that we're doing from a share point perspective across the portfolio. So from that standpoint, that's a tool that we've used, but also leveraging what's embedded in some of the other tools as well.

And do you anticipate you guys would be more of a off-the-shelf user products coming from these providers? Or with your IT team, is there an initiative to try to build out Brix specific tools internally and spend the time and money there?

I think it's a balance, and I wouldn't have an exact percentage of it today. We try to think about these things as like what are the gaps we're trying to solve for? Or what are the initiatives that we want to focus on and then think about what are the tools. And always looking, okay, what do we have in place today? Or what are we doing today that we can leverage, Steve oversees the data analytics team. And we've been going through a process across the portfolio. One of the things that we did when we did the realignment was enable us to figure out how we were measuring certain tasks differently in regions and get that with some standardization across the entire portfolio, primarily through Power BI initiative.

So from that standpoint, it will still be a mix but we do think there's tools that we have in place today that we can certainly leverage. And we're talking a lot about how we utilize AI. But I think it's important to recognize, even if we -- you may want to shift the discussion, but we'll get there relative to our tenants. Our tenants have more data today on their customers than they ever have. They understand what happens when they open a store in a given market, how that store will impact other locations, how that will impact their online sales. So as you see the tenants that are performing well, right, and continue to make investments in expanding their fleet, they're utilizing data and AI more so than they ever have to give visibility in terms of how that store is going to perform.

And we'll jump into the tenant side and the second because this question somewhat dovetails into tenant health is as you guys are looking at it, is it -- as you guys look at headcount future today versus future and the benefits of AI, is it more of a headcount reducer or just a slower of headcount growth because you improve productivity?

Yes. I'd probably answer it this way. We have maintained the headcount reduction that we did from 2 years ago and are still operating incredibly efficiently across the portfolio. I mean we are challenging ourselves when we do have open positions to say, "Hey, is this something that we can ultimately absorb," but I go back to -- there are going to be individuals that spend the time that are curious that are going to improve their skill set, and we've seen it in our company that are going to make themselves more invaluable. And that's the encouraging thing. I think with this and any other forward-leaning technology is those that are early adopters are going to be able to increase their value, we've seen it, and we expect to continue to see it going forward.

And I guess pivoting to the tenant side, you echoed some of the comments I've heard from some of your peers, just in maybe better margins by your tenants, better inventory management. But then on the other side, there's the talk of Agentic commerce and what does that do to brick-and-mortar versus that just create bigger winners in the e-commerce space. So I'm just kind of curious, your views on that and then juxtapose that with sort of your tenant composition. And how maybe you guys feel you're positioned if there is that push towards some of the bigger players versus maybe the role of the off-price retailer and the grocer, right? And some of the roles that these different tenants can fit into.

The best tenants today meet the consumer wherever the consumer wants to meet them. And whether that's in the store, whether it's online, whether it's pickup, whether it's on their phone, and you see that with operators like Ulta, you see that with great grocery operators. Off-price is a bit differentiated but those operators are succeeding today because the brands that they're carrying in their store are the best that they have ever been. And you have seen a shift in terms of consumers from an apparel standpoint, looking for value at a discount, and that's why they continue to succeed.

So I think as it relates to merchandise mix, it's something that we're always thinking about. It's a center-specific discussion, but we love grocery. We love what's happening in the grocery space from the specialty operators that are differentiating themselves through our traditional operators, both the regional players and nationals continue to invest in their stores. We talked about off-price. Wellness is becoming more essential. People care more today than they ever have about how they look and feel. So we're seeing folks less apt to give their gym membership up. You're seeing health and beauty operators like Ulta and Sephora continue to perform and then the quality of service operations around that.

And then you're also seeing that tie into quick-serve restaurants. The quality of operators that we're bringing to our centers like the Cavas of the world, Shake Shack. They're providing value, but they're also providing more of a healthy option than you saw previously from fast food. So from that perspective, I think we have been nimble and that merchandising mix has changed from a consumer standpoint over time and something that we'll continue to focus on. I do think still though, if you talk to retailers that have an omnichannel platform, they're going to say they're trying to make the store the center of what they do. And the store is still the most profitable way to deliver goods to the consumer.

And on the continued kind of tenant health here, leasing has been strong, continues to be strong. You guys are pushing kind of shop occupancy higher. The SHOP pipeline has grown. As you guys assess sort of the portfolio today and then look at sort of the redevelopment tail you have. How should we expect near term and long term frictional vacancy, I guess, in that SHOP portfolio? Like where do you think today's portfolio can handle it versus once you're even further through the redevelopment, what long-term potential for your portfolio could be assuming similar type supply-demand dynamics of today?

So we have always said that we expected this portfolio to be at a low 90s shop occupancy. So it's 92.2%. What is encouraging about what we still have in terms of the growth opportunity there is if you were to look at the future redevelopment pipeline.

[Audio Gap]

And then maybe turning to acquisitions. Mark looks bored down there. So we'll put him into the mix. You guys have been fairly active, but you're match funding things, right? And so the -- it feels like the game plan has been more IRR arbitrage on upgrading the portfolio, harvesting some value. Could you just talk about -- is that the trend that we should continue where sort of market cap rates going? And how much could you do that's more immediately accretive versus longer-term accretive.

Well, I'd say a couple of things on, I would note, as Brian said earlier, we've been a net acquirer of assets now for the last 5 years. So we have been growing externally. I think 100% right. Our focus as an investor is long-term IRR. And when we think about our marginal dollar, we're certainly directing that dollar towards redevelopment today, given the yields -- incremental yields that the team has been delivering. So when we're looking at acquisitions, we're comparing that dollar and making sure that we're buying assets where we can put our platform to work and really drive IRRs into that high single digit, low double digit on an unlevered basis. So that's how we're going to continue, I think, to think about it.

From a market perspective, the open-air retail market today is quite robust. It's one of the sectors, I think, relative to a lot of other ones that is -- has a lot of new capital coming in on the margin cap rates compressing particularly for assets that are smaller. So from our perspective on that IRR recycling question you had, we're able -- we've been able to sell some assets in our portfolio at pricing where we think we're selling them at a low high 6, low 7 IRR and reinvesting at that 9% to 10% IRR range. So we like that about the market today. If you look at what we've invested over the last couple of years, the deals have been bigger. So our average deal size was somewhere in that, I think, 150 last year. And what's interesting about those bigger deals is that they are a little bit higher yielding generally, there's less competition for those assets. And more importantly, they usually have more moving pieces that we can put our platform to work in today's environment.

So we're excited about that piece of the environment. For us, acquisitions, as Brian said, it's not necessary for us to grow. We're excited about the opportunity that acquisitions incrementally can add to our company. But the other thing I'd leave you with is that it's always going to be opportunistic for us. So it's not a quarter-by-quarter plan. It's let's find the right deals to put our platform to work on.

And as you guys think about that time frame to capture that 300 basis point -- 200, 300 basis points of IRR lift. Like what's the -- is there a time hurdle internally. What is it?

Well, what we -- we've done a lot of back testing on our acquisitions. They've generally been good deals. And what we're finding is it's a 3- to 5-year business plan generally when we buy. And it's driven by a variety of factors. We're focused on assets that have rent mark-to-market. Last year, we bought some assets with occupancy gain. The year before we bought Britain Plaza in Tampa, which is really backfilling the redevelopment pipeline but that plays out over 3 to 5 years.

And what is -- what's kind of the opportunity pipeline look today as you kind of evaluate the redevelopment IRRs and incremental returns versus acquisitions that you kind of need to do for the long-term backfilling growth? I mean what's the deal pipeline look like for you? And how do you kind of ultimately decide here's the bucket of capital. We need this. Maybe you could just sell more to fund it, but kind of how do you guys divvy that up internally?

I'll take the first part, and Mark can talk about the pipeline, maybe Steve can chime in here. So our focus is going to continue to be on accretive reinvestment. We're funding that with free cash flow. And as I mentioned earlier, I'm even more excited about what we have in that future pipeline than what we've already done to date because the projects are larger in scale, but still derisked in the sense that they are pre-leased, and we have good visibility on cost, and we have them in great markets. And so that's going to continue to be the first focus of our capital dollars. And Mark, I don't know if you want to touch any more on the market.

Yes. From a pipeline perspective, the market was quite active in Q4. Q1 has been a little slower. When we think about the pipeline we've been building, it's -- we've been talking to some of these families that we're trying to acquire from for 5, 7 years at this point. And what's interesting is that we are seeing more activity from some of the private families who are saying to themselves, "Hey, I kind of see where the market stabilize, I need to make a transition with my business, and we're seeing some more activity on the private side." It's always going to be, as I said, opportunistic for us. We don't need to do it every quarter. We're trying to fund the right deal to put money to work.

And to your question, we are comparing that marginal dollar to anything we can spend on their development pipeline. If the returns on the acquisitions don't match those, we're really past -- we really are trying to find the right deals to drive long-term value for shareholders here.

And I think implicit in your question, Craig, is the impact on growth in the short term, right? And we've been net acquirers now for the past 5 years. We have continued to grow FFO at the top of the peer group so this has been additive. We are excited with what we're seeing in the market, and we want to grow because we have a platform that we feel can drive outsized and incremental results than ultimately what can be achieved by whoever is owning the property today. So we're excited about it. And generally, we're growing in markets that we know very, very well. And then we have a good understanding of what the leasing demand is and how far we can push things to drive outsized returns and value.

And we just had a question come in. You mentioned the deals that you're tracking are with private families. How much do marketed opportunities play in your consideration?

The way we think about that question is how many deals have we bought off-market versus on market. It's about 60% on market, 40% off market. That's kind of the way it generally trends. It's a pretty -- it's a widely brokered market.

And generally, I would just say, Mark, chime in here if I'm off on this. But even some of the off-market deals will have some level, sometimes of broker assistance, and we're generally not getting them I would say, at a steep discount, we are just getting ahead of them before they're broadly marketed and there's more competition for them.

100%. The beauty of the off-market deal, the ones that you've been tracking for many years is that you kind of know the business plan day 1. You're not getting a broker package saying, "Hey, this is kind of interesting." You're saying, I wanted to buy the center for 10 years. And so that's the beauty, I think of off market. You can control that price and really get to your business spend much faster.

And I brought this up with one of your peers earlier. I'm just kind of curious on your answer. As you guys underwrite different markets, clearly, some states and cities are more tax-friendly and others are less tax friendly and some are moving even more unfriendly, right, speaking of New York City and some other places. But just how do you underwrite that political risk and which ultimately translates into operating expenses and limits the ability to push rents, right? And maybe impacts demographics in an area where you thought was X and maybe it changes to Y. I know it doesn't change quickly. But just how much time do you guys think about that versus those are maybe 10-year changes and it's past the point? Or are you guys thinking internally now about that? And maybe is that leading you towards not only the buy, no buy decision, but also hold-sell decision on assets that you currently have in the portfolio?

That's where we start. It's more of the existing -- not as much on -- it's certainly a consideration, Craig, on external growth, but understanding that the decision to hold an asset it's an investment decision as well. And so as we look out and say, okay, what's happening over the next 10 years, what's happening in that market from a tax and legislation standpoint, what's happening in that market in terms of the competition there.

One of the benefits of clustering and having a lot of assets and being the largest landlord in places like Philadelphia, Atlanta, among the largest landlords in Houston is that you have a good understanding of ultimately what's happening in a given market.

We've done some very accretive reinvestments in some high-tax states and others that have been much more accommodating from an overall tax perspective. So I think where we sit today in terms of the markets that we're in, and we have a large presence in we like, but it's certainly a consideration not just from what we're buying, but more importantly, for what we already are in control.

I think importantly, too, just the size of the portfolio gives us that diversification, right? So not any one market is that impacted by any one decision by a local jurisdiction.

And I would remit Brian, so when we think about new deals that we're buying, the reason why we buy in our footprint is because we know the markets well. We think we understand where taxes are going. We think we -- not we think we know where operating expenses are going and so that's an advantage for us to take -- to use to find good deals in the market. If you see where we bought, we bought a lot in Texas recently, we bought a lot of assets in Florida. We bought some deals in Chicago that have been big home runs for us because we understood the opportunity some of those assets presented. We're a big landlord in Southern California, and that has a lot of headline risk in that market. Our portfolio in California performs extremely well. We just put money to work in that market at a high 6, low 7 going in yield with growth that we think is 4% to 5%. So you have to buy the right assets in these markets, and we do think our platform gives us that advantage to do so.

We have another question come in. Can you paint a scenario that would lead to FFO growth in 2026 that trends above the high end of guidance.

Yes. I think Steve can chime in on this, too. It's pretty simple for us. It's ultimately on the execution front. What can we still get done now that we can open this year? What might we be able to pull in from next year, can we continue to see the compelling move-out trends that we've had across the portfolio were normal course move-outs or now 4 years running of historic lows. So it's kind of simple, but it's more on our ability to continue to execute throughout the year, and we're pretty encouraged out of the gate.

Yes. I think it always comes down to the same property NOI, that's the largest component of our growth, and it's what Brian said, it's getting leases open sooner. I think we didn't spend a lot of time talking about tenant disruption, but obviously, our watch list compares favorably to a lot of the other companies out there. And to the extent that is muted as well, I think you could see us drive to the higher end of our same-property NOI guidance. I mean for the rest of it, I think on the interest rate side, we only have a little exposure left, right? So I think like we saw in '25 to the extent there are opportunities for us proactively to get paid to take back space and then ultimately backfill that with more relevant tenants, you may see an opportunity for lease settlement to be higher, but we feel very comfortable where we are set today with our range.

And from a funding perspective, where you guys kind of sit? What were you anticipating? I don't know how much debt raising was in guidance, if any. But just from a spread perspective, some of your peers have put out -- have issued debt at record type spreads there. I mean how does that factor into what you have kind of baked in?

Yes. I mean we have an upcoming $600 million maturity. We prefunded some of that back in September. So we were sitting on about $350 million of cash so the remainder exposure for the year is pretty limited. Obviously, we saw those trends, they were a great spread in our fixed income. I know there's some of them in here today. Our fixed income support has been very, very strong with investors. Obviously, there's a lot more volatility in the 10-year today and where spreads are going. But I think still think we would probably do a 10-year sort of in the 5, 10-ish range, plus or minus. So it's still very strong cost of capital of what you've seen over the last couple of years. And then we'll continue to look for a window to be opportunistic in the market as we get closer to that maturity.

And then just to remind us, I know you talked about a bit on the call, but how much of the bankruptcies from 1.5 years ago are still need to be addressed in the portfolio versus where have been leased. And then the commencement timing, again, I know that we talked about the still pipeline today, but the tail of that from a commencement standpoint.

Let's say -- answer it this way. Our occupancy was down 10 basis points year-over-year despite the fact that we took back 1.6 million square feet last year and grew at over 4% while we were doing that. So I think it gives you visibility in terms of what we've addressed. Now the bulk of the leases, it generally takes about a year, if you think about it, maybe a little bit more depending on the work that you're doing in the space. So thinking about the bulk of the anchors that we signed in the fourth quarter, starting to come online in the fourth quarter of 2026. And what we're signing today, Craig, will -- generally, there's still some anchors that you can get in for the year, but primarily, that's going to be for 2027 and beyond. And then even thinking about -- I mean, we signed close to 1 million square feet of new leases in the fourth quarter. That's only a small fraction of what's coming on in 2026. The bulk of that, the full year impact is coming on in 2027.

And Steve, as you mentioned, the tenant credit watch list type exposure and guidance, it's eased a bit, right? Like remind us again what you have been there for known versus maybe a cushion for potential.

Yes. I mean the way we approach budgeting has been consistent going back ever since I've been here as we go space by space, property by property, right? So to the extent there is an individual bankruptcy at a property, we would remove that out of the underlying amount. But where in the previous years, we've given that range of possible outcomes because there were more material larger bankruptcies out there. I mean we're not seeing that today. When you look at -- you'll still see drug stores, cloth stores, container store. We had one Saks had a great property we had in Naples, but there's just not a lot of exposure out there.

And then on the traditional revenue deemed uncollectible, where our historical run rate was 75 to 110 basis points based on all the work we've done on their portfolio and the improvement of that underlying tenant credit profile, we've tightened that into 75 to 100 just to reflect that improved underlying tenant.

And I would just add, I know we're coming up on time here to leave everybody with what I said at the beginning was this is the strongest underlying tenant credit profile that this company has ever had. And if you were to screen a perceived watch list versus us and any of the peers, the category Steve mentioned, individual names, we would screen very favorably.

4 years running of normal course move outs being historic lows for the portfolio, retention rates close to all-time high. So the position that we're in today is very strong from an overall tenant credit perspective.

Before we run out of time, same-store for the retail group next year.

3.5.

And more, fewer, the same amount of companies.

Less.

Thank you, guys. Enjoy the conference.

Thanks. We appreciate it.

Greetings, and welcome to the Brixmor Property Group Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Stacy Slater. Thank you. You may begin.

Thank you, operator, and thank you all for joining Brixmor's fourth 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 our 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 1 per person. If you have additional questions, please requeue. At this time, it's my pleasure to introduce Brian Finnegan.

Thank you, Stacy, and good morning, everyone. I am thrilled to join you today for my first call as permanent CEO of Brixmor, a company that has been my professional home for more than 21 years. Before touching on our results for the quarter and the year, I will share a few comments on our leadership succession and strategy going forward.

First, a sincere thank you to Jim Taylor for his extraordinary leadership and mentorship. His impact to Brixmor in our industry is immense, and I was proud to be by his side for the last 9.5 years, as we dramatically transformed this portfolio. We wish him the very best in his retirement. I also want to thank the Board for their confidence and the Brixmor team for their support. I'm grateful to step into this role at a moment of real strength for the company. Our portfolio transformation and disciplined execution position us exceptionally well to accelerate our growth going forward. The fundamentals for open-air, grocery-anchored retail remain favorable. Consumers have been resilient. Thriving tenants are expanding their physical store presence and new retail supply remains at historic lows.

Against this backdrop, the Brixmor operating platform stands out as our low rent basis continues to provide industry-leading mark-to-market opportunity, while our future reinvestment and sign but not commenced pipelines provide unmatched visibility on future growth and cash flows. We do not anticipate any changes to our operating model in the near term outside of a few of our talented leaders taking on more responsibilities, specifically, congratulations to Stacy Slater on her promotion to Executive Vice President, Capital Markets, Corporate Strategy and Investor Relations; and Matt Ryan, who will expand his role as South Region President to include national property operations. Both will join our executive committee.

More broadly, the operational realignment we implemented 18 months ago, consolidating from 4 to 3 regions, continues to pay dividends through greater efficiency, stronger leasing execution and disciplined capital allocation. We are also leaning in further to technology and analytics. Early initiatives in AI and automation are already yielding positive results in areas such as lease abstraction and summarization, tenant health analyses and leasing prospecting tools.

Externally, we are going to remain disciplined but opportunistic. Under Mark's leadership, we were net acquirers in 4 of the last 5 years with 2025 being our most active year as a public company at approximately $420 million of asset value acquired in Houston, Southern California and Denver. We expect to continue allocating capital towards opportunities where our platform can create outsized value without having to rely on acquisitions for growth, and we are mindful of our balance sheet in every capital allocation decision we make.

Now let's turn to our results for the quarter and the year, which were exceptional. As Steve will touch on further, same property NOI grew by 4.2% for the year even as we recaptured 1.5 million square feet of anchor space. FFO for the year was at the high end of our guidance range at $2.25 per share and up 5.6% year-over-year. We delivered a record leasing year with $70 million of new rent executed, [indiscernible] occupancy increasing to a new high of 92.2% and end the year with the largest sequential overall occupancy gain in the company's history, up 100 basis points to 95.1%.

Demand from high-quality tenants remains robust. As within the over 3 million square feet of new leases executed last year, we signed 8 new grocer leases with strong operators such as Publix, Sprouts and Big Y and multiple leases with each of the leading retailers in the off-price segment. From a small shop standpoint, we continue to be impressed by the depth and credit quality of the operators in the health and wellness quick service restaurant and service segments as we continue to attract a higher caliber tenant to this portfolio. The strength of our small shop tenancy is also evidenced by the fact that 70% of our small shop rent is derived from multiunit operators.

Our team also continued to capture the mark-to-market upside in the portfolio. with new lease rent growth for the year at 39% and renewal rent growth for the year at 15%, resulting in our third consecutive year of mid-teens renewal growth. We also saw improvement in our retention rate. which at year-end was 87%, a 180 basis point improvement from last year. Switching to operations. We continue to deploy capital efficiently and leverage competition for space to reduce our deal costs with overall CapEx spending down 14% year-over-year and the lowest since 2021, while maintenance CapEx spending was at our lowest level since 2016 outside of the pandemic year.

In addition, disciplined operating expense spending resulted in a record expense recovery ratio at year-end of 92.3%. On the reinvestment front, we stabilized $183 million of projects in 2025 at an attractive 10% incremental yield. This included some of the most impactful projects in the company's history such as the Dave's collection, where we toured down an obsolescent anchor adjacent to a high-performing Trader Joe's grocer and delivered a new Nordstrom Rack, Ulta, J. Crew Factory, Mendocino Farms, Urban Plates and several other exciting tenants across the street from UC Davis. At year-end, we had $336 million in the active pipeline, including Rockland Plaza, which we added to the active pipeline this quarter as we kick off the redevelopment of this well-located center in the New York Metro area with Nordstrom Rack, Ross Dress for Less, Burlington, and new outparcel buildings and several exciting shop tenants. Behind the active pipeline, our deep shadow pipeline of projects, including several more with public provides us years of runway for value-creating redevelopment in what we already own and control.

Moving to our transaction activity. we acquired 2 high-quality grocery-anchored centers in Denver and Southern California in the fourth quarter. Both have immediate leasing and mark-to-market upside are accretive to our long-term growth profile and are in markets that our West region team has created significant value in. We also completed $170 million of dispositions during the quarter, where we saw limited ROI going forward, including our last asset in Alabama.

In closing, thanks to the Brixmor team's record performance, we entered 2026 with tremendous momentum in the business. properties hosted over 9 million visits last year, and our tenant lineup reflects the strongest underlying credit profile in our company's history. The portfolio looks the best it ever has. Our balance sheet is in the strongest position it has ever been, and our platform is positioned to drive consistent durable growth. I am so energized for what lies ahead and grateful to lead this team as we accelerate our business plan.

With that, I'll hand the call over to Steve for a deeper review of our financial results and 2026 outlook. Steve?

Thanks, Brian. The strength and resiliency of our business model were clearly evident in 2025. We executed consistently throughout the year despite the significant amount of space we recaptured, delivered 5.6% FFO growth, achieved 4.2% same-property NOI growth and meaningfully improved our underlying tenant profile. As a result, our portfolio is the strongest position it's ever been and we are exceptionally well positioned to capture the continued demand for well-located open-air retail centers.

Fourth quarter same-property NOI increased 6%, supported by a 360 basis point contribution from base rent growth due to stacking rent commencements from late 2024 and all of 2025. Ancillary and other income contributed an additional 200 basis points, reflecting our team's proactive asset management initiatives to drive revenue across the portfolio. NAREIT FFO was $0.58 per share in the fourth quarter benefiting from strong same-property NOI performance and elevated lease termination income.

As we noted last quarter, we anticipate higher lease termination activity as we proactively recaptured space to unlock value creation opportunities across the portfolio, with the largest of these transactions in the Bay Area. Same-property NOI increased 4.2% for the year, despite over 200 basis points of tenant disruption headwinds. Base rent contributed 360 basis points and ancillary and other income added 110 basis points driven equally by the updated recurring parking agreement at Point Orlando discussed on our prior calls, and asset management initiatives.

NAREIT FFO per share was $2.25, up 5.6% from last year, supported by broad-based operational strength across the portfolio. We commenced the record $70 million of ABR in 2025. We fully replenished that volume by executing another $70 million of net new rent, a clear indication of the depth and durability of demand. Our signed but not yet commenced pipeline at year-end totaled $62 million at an average of $23 per square foot and includes $50 million of net new rent. The spread between lease and build occupancy ended the period at 350 basis points, and we anticipate approximately $43 million of that sign but not yet commenced pipeline to commence ratably throughout 2026.

The tailwinds created by the stacking of 2025 rent commencements, contributions from redevelopment, embedded rent bumps and combined with the sign but not yet commenced pipeline provides strong visibility into our 2026 outlook. We're guiding to 4.5% to 5.5% same property NOI growth, driven by more than 450 basis points of expected base rent contribution. We also expect net expense reimbursements will contribute to growth as we expect average build occupancy to increase over last year.

Our continued transformation across the portfolio has meaningfully enhanced the credit quality of our tenant base. which is now the strongest we've seen. As a result, we expect revenues deemed uncollectible at 75 to 100 basis points of total revenues. In terms of cadence, we expect base rent growth to accelerate throughout the year as we commenced the significant rent embedded in this new pipeline.

Our FFO guidance reflects the strength of our same-property NOI trajectory. For 2026, we are introducing NAREIT FFO guidance of $2.33 to $2.37 per share, representing 4.4% growth at the midpoint even while absorbing at the recent headwind from lower lease termination income as we return to historical levels and a $0.03 headwind from higher interest expense.

Capital deployment across the portfolio remains highly efficient, with leasing maintenance capital expenditures down approximately $26 million year-over-year. Strong competition for space continues to push net effective rents to a record $23.66, and our payback period now averages 2 years, the most attractive levels we've seen in nearly a decade.

We have steadily reduced maintenance capital expenditures over several years, while enhancing the overall quality and appearance of our centers. We ended the period at a $1.6 billion of available liquidity, including $360 million in cash raised in our September 2025, 4.85% issuance, which prefunded our June 2026 $600 million, 4.125% maturity.

Debt to EBITDA is 5.4x, keeping our balance sheet well positioned to support our business plan. Our performance continues to highlight the durability of our fundamentals and the attractiveness of our strategy. supported by FFO growth of 4% plus since 2022, a 4.4% dividend yield and a dividend growing at a 6% CAGR over that same period. I want to thank our team for their ongoing dedication and execution, which remains a key driver of our performance. And with that, I'll turn the call over to the operator for Q&A.

[Operator Instructions] Our first question comes from the line of Michael Goldsmith with UBS.

You're guiding for bad debt this year, 75 to 100 basis points, I guess, as you entered last year, you guided to 75% to 110 basis points. I think you called out an upgraded portfolio quality or upgraded tenants. But I guess just trying to -- can you provide a little bit more detail there? And how much does the -- does this new guidance range like reflect just line of sight into tenant bankruptcies.

Michael, thanks for the question, and I'll start and let Steve take it. As both of us touched on, we're really encouraged by the tenant health trends in the portfolio. And when we sat here a year ago, we said that on the other side of these recaptures you would see improvement in what was already the strongest underlying tenancy that we had. So if you think about our low drug store exposure, if you look at our low theater exposure, the quality and strength of our small shop tenants. As I mentioned, 70% of our small shops are for multi-tenant operators. All the work that we've done to the portfolio has just allowed us to attract a much stronger tenancy. So that's reflected in terms of the guidance going forward and how we're thinking about our expectations for bad debt. Steve, do you want to touch on more?

Yes. I mean I think Brian hit on the macro trends, just when you look at that guide rate, our previous historical run rate is 75% to 110%. So it's really bringing in that top and down 10% or 10 basis points. And I think importantly, as we went through the budgeting process space by space, as we always have done, there's not a lot of disruption in the future that we're seeing. So we feel really comfortable where we are within our guidance range.

Our next question comes from the line of Todd Thomas with KeyBanc.

I wanted to ask about the acquisition environment. and thoughts on investments and capital recycling activity going forward. Brian, you touched on this in your prepared remarks, and maybe Mark can weigh in as well. But just wanted to get your thoughts on the pipeline heading into '26 in terms of volume and pricing. And then second part, Steve, in the guidance reconciliation, it looks like there is $0.01 of growth related to transactions. Can you just speak to that, whether that's based on 2025 activity or if there's something implied from the forecast as a result of that?

Thanks for the question, Todd. I'll touch briefly at the start. We just have been very encouraged by what we've been seeing on the transaction front. What's interesting is 40% of the volume that Mark has done since he's been here, has happened in the last 5 quarters because in a very competitive environment, we found opportunities to put the platform to work. And that's really what we saw last year and what we expect to see going forward. But Mark, why don't you touch on more of the overall environment.

Yes, I think you're right. As far as the pipeline goes, it continues to grow. And one of the things that's really paying dividends for us in some of the direct marketing we're doing to some of the private ownership groups. So expect us as we think about that pipeline, we remain opportunity to think as Brian highlighted in his opening remarks, as we do think that external growth today is a great lever for us to drive additional value beyond the growth in our base portfolio. However, I would highlight that the first dollar free cash flow is going to go to redevelopment given the great turns and yields we see in that part of our business. From an overall market perspective, we're certainly seeing cap rate compression across basically all asset types and open our retail today. And that's been driven by an increased increasing amount of private capital, pension and capital being directed towards our space given the great returns that Brixmor in the [indiscernible] been delivering in the space. A lot of that capital that's coming in is directed towards smaller grocery anchor deals and [indiscernible] and that's driving capital rates in that piece of the business down into the 5s from certain high-demand markets like the Southeast in California, we continue to see smaller bid list for larger deals, like a China that we bought last year that have some operating. They really have an operating nature of the business, which fits well for the Brixmor platform.

Yes. And on the guidance front, I mean, that walk down is really sort of a gross-up approach just to help people understand the components, not necessarily from a capital allocation. I think when you're just -- and Mark has touched on this in previous calls, I think you expect it to be sort of neutral in the initial year. And then I think importantly, the growth profile of those assets we're acquiring are going to grow more than the assets that we're selling.

Our next question comes from the line of Haendel St. Juste just with Mizuho.

I wanted to go back to the guide for a bit. I was hoping you could expound on some of the assumptions, particularly as it relates to the upper end of the same-store NOI guide. It seems a little conservative relative to what you put last year. You mentioned 450 basis points of base rent growth, I think, there's a lower tenant credit backdrop. You have lower occupancy. So just curious if you could maybe give some more color on the pathway or what's embedded at the upper end.

Yes. I mean, to get to the upper end, really, I think, especially within the same property NOI, it's kind of the same as every year, right? If the team continue and you solve it in 2025, the team continue to execute on getting that snow pipeline executed or sorry, commence as early as possible and then continue to backfill that pipeline as we move throughout the year. I mean I think as far as the guide, you just look at -- we talk a lot about the compounding of those rent commencements and you're seeing that come through. But there is a small portion of income associated with some of the names that we talked about that we did recognize income of '25 that you have to hurdle you head into '26.

Yes. And I think Steve hit it, but you can really see the drivers in that walk down and it's pretty much exactly those components in same-property NOI. So it's hitting our dates. What can we pull in potentially from '27, how much are we continuing to drive rent growth. So we feel really comfortable with the range and really pleased with how the team has been executing and feel like we're in a good spot as we head into the year.

Our next question comes from the line of Michael Griffin with Evercore.

Brian, I know it's been a little over a month since you've been kind of in the permanent CEO role. And I realize that Brixmor has a solid history of blocking and tackling, executing on operations, kind of making the main thing, the main thing. But as you kind of get into the top job, are there any things, whether it's initiatives, how you're looking at the portfolio or platform maybe differently that you want to kind of be able to put your mark on the companies you kind of take over in the top row.

Michael, it's a great question. So I'd answer it in a few ways. First, our strategy of reinvesting and aggressively operating our assets is not going to change. have anything it's accelerating from here for all the work that we've done, meaning that we still have occupancy upside, we still have the ability to drive rents. And with the quality tenants that we've attracted, we're going to continue to improve our assets going forward. That's going to continue to be the focus. We touched on transactions a bit earlier. I'm very encouraged by what we're seeing there. We're going to remain very disciplined. We don't need acquisitions to grow. -- but it has been an awesome opportunity for us with Mark partnering with our regional teams in markets that we know really well where we have an idea of how we can drive [indiscernible] value in a very competitive environment. And I think the third thing is, and I touched on it, we've always been big on technology here and focus on how we can make more data-driven decisions and really focused on that across the organization and we challenged leaders across the organization to really look at business, look at ways to improve that through technology. And I mentioned a few of the early wins that we're seeing in lease action, and leasing, legal in terms of efficiency with our legal spend. We've been doing some work around tenant health analyses and the leasing team, particularly a lot of our junior members in terms of how they're deploying AI and automation, really more AI in terms of their leasing prospecting tool. So continue to lean in there. But overall, I mean, we're in a really good position as a team. I feel really grateful for how the company has grown during the time that I and a number of us in this room have been here. And it's really kind of taking that and all the work that we've done to the portfolio and really turbocharging the business plan going forward.

Our next question comes from the line of Craig Mailman with Citi.

I kind of want to hit on the SNO pipeline and try to frame this in a way that's not too confusing. But just as you guys have talked about being a little bit more aggressive maybe taking back space, which is driving some lease term fees, which would imply some opportunistic moves there that maybe are more accretive than bad debt coming down. The SNO pipeline has continued to increase as the lease rate has increased. I'm just kind of curious, the growth profile of the composition of the snow pipeline. Like with the ability to intentionally kind of replace tenants, remerchandise, have lower tenant credit. Is the next batch of kind of additions to the snow pipeline just more accretive to FFO and the AFFO as you guys kind of throttle CapEx? Or is it -- am I reading too much into this? Look, I'm just trying to get a sense of the potential to kind of inflect higher here even on the growth, particularly as FFO drops to the AFFO line.

Craig, it's a great question. I think I understand what you're asking. So basically, -- at this point, if you think about the nature of that snow pipeline, what I say is a few things. So the highest rents that we've ever had, right? They are some of the strongest tenants that we've ever had. And as Steve touched on, we're doing it more efficiently with less CapEx because of the environment and the competition for space because of the fact that a lot of these retailers have taken on more construction work themselves and have been much more accommodating in terms of accepting existing conditions. So yes, those factors would lead us to, again, attracting stronger tenants at higher rents and doing it more efficiently going forward. What I would say is we've already been doing that and you can expect us to continue to do that because of the position that we put the portfolio in and the environment that you're seeing our tenants are thriving in this environment. Our centers are driving a significant amount of traffic. So we feel really good about the nature of that pipeline going forward.

Our next question comes from the line of Juan Sanabria with BMO Capital Markets.

Just hoping to talk a little bit about the turnkeys in the fourth quarter, and it looks like there's kind of a change in the pace of noncash rents that were kind of noted in guidance or line item guidance. I was hoping you can give a little bit more color on the driver of the term fees and the expectations into 2026 and what impact, if at all, that had on the noncash revenues as we think about sharpening our model for '26.

Yes. Juan, I'll let Steve hit on the noncash, but let me just touch on term fees. And if you take a step back, without term fees, the core business would have grown in line with where we grew same-property NOI at over 4% despite the fact that we took back 1.5 million square feet of anchor space during the year, and it would grow even more in 2026. We had a very unique opportunity in the fourth quarter in a center that we own in the East Bay area where we controlled the whole site taking back the Kohl's and the party city and we have tremendous optionality. We could do a retail plan today as we have LOIs for all that space or alternatively, there may be an opportunity for us to get the land rezoned for residential because of that timing, it was very opportunistic for us to take what is an outsized term fee the amount of that probably wouldn't have been there if we had waited until we got the property rezone. So the team did a fantastic job in terms of the timing of execution. In a normal course year, this portfolio has been generating, call it, $4 million to $6 million of term fees. It's a mix from tenants that have left where we've done settlements and others in an environment where there is a significant amount of demand that we can accretively backfill space. So expect us to continue to be opportunistic there. What you're seeing in that walk down is specific to that large term fee that we took in the fourth quarter, and it was a very, very unique situation. So Steve, why don't you hit on the noncash.

Yes, the noncash, and we talked about it on previous calls, is really acceleration of 141 associated with some of the bankruptcies that we encountered throughout the year. So that was more focused on those tenants and not something that we expect to recur going forward.

Our next question comes from the line of Greg McGinniss with Scotiabank.

This is Peter [indiscernible] Greg McGinniss. In terms of external growth, so the Q4 acquisitions seem to feed the traditional grosser anchored mold. And are you seeing like better risk-adjusted returns in these core gross assets right now compared to the value-add lifestyle opportunities you discussed earlier in 2025?

I'll let Mark take that.

I think when you if you look at what we've been buying over the years, we're -- our focus is actually pretty simple. We're trying to find assets within our footprint where we can really drive outsized ROIC opportunity. So if you think back to 2024, we bought an asset in Tampa called Britton Plaza, which was a classic opportunistic deal where we purchased the land very attractively. We have a big development opportunity there that we're working on getting into the pipeline as quickly as we can. As we move into 2025, if you look at the range of assets we bought by a lifestyle center in Houston, we bought a traditional grocer maker deal in Denver, and we bought Chino at the end of the year. which is on the West Coast in L.A. all those assets have great opportunities for the Brixmor platform to apply our platform to drive higher yields going in, drive longer-term growth. And that's where we're really focused on not necessarily the the asset type. We're looking for growth in our footprint and where we can apply our platform that may be in a lifestyle center with great growth opportunities like LaCenterra or it could be a great [indiscernible] opportunity like Britton.

Our next question comes from the line of Caitlin Burrows with Goldman Sachs.

Maybe another question on the SNO pipeline. So it's off -- it's high as economic occupancy has gone up, which is great. But I guess, looking forward, when you consider leasing demand and the amount of vacancy that you do have, what is your view on the SNO pipeline replenishing itself kind of as we go forward?

Yes, Caitlin, we remain very encouraged with the demand environment. That snow pipeline has been fairly sticky at around $60 million, even though we've been commencing anywhere from $15 million, $22 million a quarter because we've been replenishing it. So the conversations we're having with retailers, retailers that are thriving and continuing to drive traffic to their stores. they're looking to open store count in an environment where there's not a lot of space. So we feel pretty confident in terms of our ability to continue to replenish that. I mentioned occupancy upside. We're still 50 basis points below the buyer peak from a lease occupancy perspective. And that was [indiscernible] no means a cap on the portfolio because the portfolio is in a much better position today. So really feel very encouraged about what we're seeing from an overall demand environment as we move into the year to replenish the pipeline.

Our next question comes from the line of Samir Khanal with Bank of America.

I guess, Steve, just curious on this -- the other revenue ancillary income component. I guess, what's assumed as part of guidance this year? I know last quarter, you talked about the park agreements that benefited some of this quarter. Like how should we think about that sort of line item of other

revenue as we think about '26?

Yes. I think the things we were trying to highlight in the script is really the focus of the entire organization and maximizing revenue across our properties. We have a very, very strong ancillary team in-house that this is our main focus is driving that type of income. So one example of that was the point Orlando Garage, which is a recurring item. I try to break that out a little separately, so you all could see that contribution from that. But in that other bucket, you still see -- even though some of those -- some of that revenue was more focused on on the boxes we got back in the year. There are always those opportunities across the portfolio. So it's not a line item we necessarily give guidance on, but I don't think it will meaningfully move the range one way or the other as we continue to just find additional opportunities across the portfolio to maximize income.

And Samir, I would just add, Steve hit on it, but this is a team operators. And so as we look to create value in our assets and mine income opportunities to drive revenue we're seeing higher rents in terms of car charging phases. We're seeing higher rents in terms of our solar. We're seeing very interesting uses in terms of that temp in-line space. So from that perspective, the specialty team has done a great job. And as part of the realignment a few years ago, we partnered that more with the operating platform. So there's a lot of collaboration with our property management teams, with our leasing teams in the region, they're working side by side. And so you really saw that come through. Steve did point out some large onetime items, not really onetime, but larger items that contributed. But the nature of that is going to be recurring. So we feel really good about the trends in the specialty business going forward, but more importantly, how our team is working together to drive value.

Our next question comes from the line of Cooper Clark with Wells Fargo

I know we touched on the acquisition side earlier. So curious if you could comment on the disposition pipeline as it stands today in terms of volumes and how we should think about the disposition cadence throughout the year, given some of the strength in market pricing and opportunity to reinvest accretively with your redevelopment pipeline? Also curious on the depth of bidder pools and what buyers you're seeing most aggressively pursue deals?

Yes, sure. For the dispose, what's really interesting about the [indiscernible] market is really the demand that we're seeing in the market today. And so last year, the disposal we sold were blending to a low 7% cap rate, and the market is really allowing us to exit assets at better-than-expected cap rates for assets where we see lower growth and would really be the bottom of our portfolio in terms of value creation from our perspective. And what's important from our perspective that we remain very confident in our ability to sell these lower growth assets and recycle that capital into higher growth opportunities like [indiscernible], like a [indiscernible], where we're really seeing dispose underwriting, and we think the buyers are underwriting IRRs in that mid-7 to 8% range and we're really buying assets from our perspective, with IRRs are generally blending in that high 9% to 10% range. So we remain really [indiscernible] in that part of the trade we're making. As far as bid list, it's really dependent on size. So 1 of the things you've seen is a lot of money raised to try to buy open-air grocer centers. I think a lot of that capital was focused on one quality of assets. They've seen cap rates compressed. And they've had to go after a slightly lower demographic and slightly lower grocery performance, and that's really allowing us to drive cap rate on what we're selling at the bottom part of our portfolio. In terms of who those are, it's pension funds, -- it's high net worth, you're seeing low group from back out of the wood work. So it's a really healthy market today. And as I mentioned earlier, the big difference is really size. So when you're selling a $5 million asset, [indiscernible] pool is very large. When you get [indiscernible] which was $140 million or $138 million, that is less was quite small and really allowed us to find a great opportunity to drive higher IRRs even the demand. So we remain really convicted about our ability to sell, again, lower IRR and [indiscernible] really excited about that opportunity.

Our next question comes from the line of Connor Mitchell with Piper Sandler.

Just going back to the bad debt outlook for this year, just kind of thinking about watch list. You mentioned that you've had limited exposure to pharmacies [indiscernible], but just wondering if you could kind of put some context around the general watch list and what you're seeing within your portfolio, whether that's maybe a majority of the watch list are higher up on the watch list are kind of one-off situations where there's upcoming debt maturities and it's more of a balance sheet issue, and that's the worry? Or if more of those tenants retailers are kind of more within like a theme or a service type kind of group together?

Yes. Conor, it's a good question, and it's something that we are always watching. This team historically has been very proactive in terms of addressing things ahead of potential credit events. Many of you on the call today have screen watch list across our peer set. And if you look at where ours is today, we screen very favorably in terms of those categories that I mentioned. The other thing that we feel very confident about is, a few years ago, we put very stringent underwriting standards in place, most stringent the companies had with our finance team and our leasing teams in terms of underwriting small shop tenancy. And what we saw there was who was taking space was multiunit operators established that had much stronger credit profile than we had seen historically. It's why we have so many multiunit operators in that space. So we still have a tenant health call with our team. Steve and I review it on a monthly basis. Our teams are reviewing it daily and the trends we see are very positive. We're not seeing an uptick in delinquencies. We're not seeing an uptick in move-outs. Normal course move-outs for the portfolio last year, if you take away the bankruptcies, were, again, historic lows for the portfolio retention rates up, renewal growth in the mid-teens. So I think all those trends give you visibility into the health of the portfolio. there's always a handful of names that we're watching. It just tends to be very low for us at this point.

Our next question comes from the line of Mike Mueller with JPMorgan.

Can you talk a little bit more about, I guess, using tech and AI to evaluate tenant health? And has it changed your watch list in any material way as a result of the approach?

Yes. One of the things we're looking at, Mike, it's a great question, is not -- you all on the phone have the names you may be watching or the categories that I mentioned, but it's really those -- where can we start to get some early signals, right? That's not just, hey, well, the tenant got a default this month or the tenant wasn't a little bit late. Can we start to see where that payment date goes from the third date to the fifth date. It's things like that relative that we started to roll out. We're seeing some pretty interesting [indiscernible] we can at least start to have a conversation with people at a time. I think that's just one example of how we're using all the data that we have across the entire platform to just make more data informed data-driven decisions. So it's something that was a big focus of ours as part of the realignment to get consistency in the types of dashboards that we're using to measure our tasks and to measure our improvement in certain operating metrics as we go throughout the year. So that's just one aspect of it. And I think as we continue to deploy things throughout the year, we'll continue to share some of the benefits. But I'm really pleased at how the team has adopted this mindset and how we're pushing things forward really across the platform.

[Operator Instructions] Our next question comes from the line of Linda Tsai with Jefferies.

The improved retention rate of 87%, I guess, that helps support the record low CapEx down 14% year-over-year. How sustainable do you view lower CapEx spend if you had to look out a few years?

We certainly see it at this run rate, Linda. It's a great question in terms of where we are. So I kind of break it down in a few ways. We still plan, and we think it's a great use of capital for accretive reinvestment. I think where we have seen the declines is on the leasing side. wher competition for space and improvement in the portfolio has allowed us to reduce CapEx in those deals while still growing rent significantly. I also think, again, retailers, and you're seeing it, you saw it last year in the auctions, have been much more willing to take on existing space and much more flexible in terms of those build-outs. So that's driving it as well. the deferred maintenance overhang of this portfolio is behind us from a maintenance CapEx perspective. This is now 3 years running of maintenance CapEx lows for the portfolio, the lowest since 2016 outside of the pandemic year. And we have been very intentional. You're thinking now it's more roofs and parking lots. But even within that, the fact that we're doing portfolio-wide roofing bids, the fact that our property managers are working with our redevelopment teams in terms of some of the things that we may need to improve in those reinvestments to avoid future CapEx going forward. And then you just look about it -- and then you look at it on the expense side as well from a recovery rate. All the work that we've done and keep cleaning up our CAM cause has allowed us to get paid back for the operating expense investment that making in our assets. So you put that all together, in addition to the environment, it's leading to lower CapEx, and we feel like we're in a good position right now as we go forward.

Our next question comes from the line of Paulina Rojas with Green Street.

My question is about dispositions. I find interesting that some of the assets that you have sold had low occupancy [indiscernible], Springdale and a few others sold earlier in the year, not too many, but some, which would suggest that perhaps those assets had remaining upside? So my question is, did these sectors have anything common that made it more compelling to pursue a sale rather than driving additional occupancy internally, particularly given the good leasing momentum.

Yes. It's a great question. And I think you've seen a mix there historically, Paulina, several centers to that we had during the year that were close to 100% occupied. I think we are focused on ROI. And so yes, there was some vacancy. But we just got -- we just answered a question about CapEx, are we going to put those dollars to work accretively. And you've seen us do that across the portfolio, but in areas where we don't see the ability to do that accretively. We say to ourselves hey, how does the whole decision compare to the sale decision? Are we better off recycling the capital somewhere else. And as Mark spent some time going through, we're seeing some great bids for assets. So we can take that capital and deploy it elsewhere where we can get a more accretive return. So that's really it. I mean, if you look at it, occupancy impact from dispositions was a very, very small percentage during the year. that wasn't the motivating factor there was, a, they were in markets where we don't have a huge presence in those 2 assets, in particular, but more importantly, we just didn't see the ROI and the investment that we would have to make to drive the occupancy forward at those centers.

Our next question comes from the line of Tayo Okusanya with Deutsche Bank.

Again, congrats, Brian. Stacy, no one is more deserving congrats to you as well. Just a question around, again, fundamentals in the strip side just kind of seem very strong across the board. And I'm just curious, as you kind of think about the industry as a whole and yourself and all your peers, I mean, are we setting up for a year where it's kind of rising tide lifts all boats? Or fundamentally, do you think we're still going to see differences across all the platforms. And in this kind of environment, what really are the key things in your mind that would lead to greater success versus another operator in this space?

Yes, it's a great question, and there's no doubt the environment is strong. I think we're as well positioned as anybody in terms of all the things that we've been talking about on this call relative to the low rent basis, the occupancy upside the visibility on the strength of the redevelopment pipeline. We haven't spent [indiscernible] time on this today. But in what we already own and control, if you think about the projects that we've got with Publix. The one that we just launched this quarter in Metro New York, the 1 that Mark bought last year in South Tampa, Plano, Texas. We're going to be opening up our first large format target in Dallas in a couple of weeks. We're very excited about the nature of that pipeline going forward. And I think if you look at the ability to grow and the ability to do that incrementally and accretively, I think we stand apart. So yes, the environment is strong. Our retailers are performing. But I think the position that we put the portfolio in really allows us to capitalize on that going forward.

Our next question is a follow-up from Caitlin Burrows with Goldman Sachs.

You guys mentioned earlier how the balance sheet is at net debt to EBITDA of 5.4x. I guess, how are you thinking of that? And where you want to be is lower or better? Or are you in the right range? Or would you be okay going higher?

Yes. And I think Brian mentioned in his remarks, I mean, we continue to be very disciplined with the balance sheet. I think where we are in the midsize based on the amount of growth that we see coming. We feel very well positioned here. But obviously, we'll keep an eye on it as we move through the year. But I think we're pretty comfortable here in the [indiscernible].

Our next question is a follow-up from Paulina Rojas with Green Street.

I wanted to follow up on your comments about the improved tenant quality. I think you mentioned that roughly 75%, I think, instead of the small tenants or multi-unit operators. Can you share put some historical context on that metric so we can better compare and contrast the improvement over time.

Yes. I think it's certainly up from where it was. We can get to the exact number. I think 1 of the things that we've seen there Paulina because we've seen a reduction just in kind of that true local tenancy. It's down to 17% of our ABR. One of the reasons that we wanted to highlight is because as we were digging through -- and this came up as, again, part of some of the data work that we've been doing across the portfolio was we were really that's surprised by it because we're seeing it come through in our leasing committee, but it really kind of reassured the thoughts that we had about the trajectory of the portfolio and the fact that we did have more established small shop tenants in particular that were successful, right? And it's tied to everything else we've been talking about relative to the strong payment trends relative to record small shop rents that we've been able to achieve. And then if you just think of the overall quality of tenants that we're adding to the portfolio, you look at those higher-quality QSRs, right? There is a focus on health and wellness and whether it's the strong regional operators like [indiscernible] and Honey [indiscernible] or the [indiscernible] bakeries that we're attracting to the portfolio when you look at some higher-end tenants like [indiscernible] Parker that we just added our first locations to. We opened a capital [indiscernible] last year [indiscernible] shopping center in suburban Philadelphia. So these are names that maybe 7, 8 years ago, we would not have been attracting to the portfolio. And I think it's just all the work that the team has done on the reinvestment front, the fact that consumers in the markets in which we own shopping centers are just demanding more from those markets in terms of the quality of restaurants and the quality of services. And so it gives us the opportunity to provide that. So overall, I think you can see it come through in the types of tenants that the names of the tenants who were signing and then just the strength of that tenancy coming through in the rest of the operating metrics.

We have no further questions at this time. Ms. Slater, I'd like to turn the call back over to you for closing comments.

Great. Thank you all for joining us today. We look forward to seeing many of you over the next few weeks.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.

Greetings. Welcome to Brixmor Property Group Inc. Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Stacy Slater, Senior Vice President, Investor Relations and Capital Markets. Thank you. You may begin.

Thank you, operator, and thank you all for joining Brixmor's third quarter conference call. With me on the call today are Brian Finnegan, Interim CEO; and the company's President and Chief Operating Officer; and Steven 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.

Before turning the call to Brian, please note that out of respect for Jim's privacy, we will not be addressing any questions regarding his medical leave, and we refer you to the company's October 16 press release. We do ask that you join our Brixmor family in wishing Jim good health.

[Operator Instructions] At this time, it's my pleasure to introduce Brian Finnegan.

Thanks, Stacey, and good morning, everyone. I first want to say on behalf of the entire Brixmor team that our thoughts go out to Jim and his family. We care about them deeply and are grateful for the well wishes and support for him that we have received from across the industry. In the meantime, the team he built remains focused on executing our business plan. which is demonstrated in the third quarter, continues to deliver outstanding results. As usual, those results begin with leasing. As this quarter, we executed 1.5 million square feet of new and renewal leases at a blended cash spread of 18%. New leases during the quarter were signed at a record rate of $25.85 per square foot as our team continues to capitalize on healthy demand to be in our well-located shopping centers.

We're seeing strong activity in both anchors and small shops, with small shop occupancy hitting another record at 91.4%, with room to run as we deliver our reinvestment program. And on the anchor front, the team is making progress on backfilling the spaces recaptured over the past year with new leases executed during the quarter on those spaces with the likes of Marshalls, Total Wine and More, Bob's Discount Furniture and Cavender's Boot City.

Thanks to the continued strength in leasing, the signed, but not yet commenced pipeline remains above $60 million despite commencing a record $22 million of ABR during the quarter, which Steve will comment on further. New tenant openings are among the most exciting aspects of our business, and the third quarter included Sprouts Farmers Market in Knoxville, Tennessee, Trader Joe's in suburban Denver, and several openings at 2 of our most impactful redevelopments the Davis Collection in Davis, California, and Block 59 in Suburban Chicago.

Staying with reinvestment. During the quarter, we stabilized 8 value-enhancing projects with a total cost of approximately $46 million at an average incremental yield of 11%. This included College Plaza in Long Island, New York, where we added a new Chick-fil-A out parcel and reconfigured existing in-line space for Burlington, Five Below and Ulta to complement a strong performing ShopRite supermarket.

We also stabilized the first phase of Barn Plaza in suburban Philadelphia, where earlier this year, we opened Bucks County's first new Whole Foods Market. Thanks to the successful execution of the initial phase of that project by our North region team, we're adding a second phase into our active pipeline this quarter, which includes, first, the portfolio of new leases with Pottery Barn, Williams Sonoma, Sephora and Lovesac. This is 1 of the many examples across the portfolio where our reinvestment program is enabling us to attract a much higher caliber of tenant than we have historically.

Finally, on reinvestment, our partnership with Publix continues to grow as we announced our second new project of the year in Hilton Head, South Carolina, with several more to follow in the future pipeline. Our percentage of ABR from grocery-anchored centers now sits at 82%. And as we've seen a 35% increase in year-over-year traffic when we add a grocer, we're thrilled with the opportunities to add more grocers to the portfolio as we execute our reinvestment program.

Switching to transactions. As we discussed at length on our second quarter call, we closed on the $223 million acquisition of La Senter at Cinco Ranch in suburban Houston and are pleased with our team's progress out of the gate, with 7 new leases either signed or in process, all well ahead of our initial underwriting. Mark and team continue to raise attractive capital as we exited 8 assets where we had maximized value since our last earnings call, bringing our total disposition volume year-to-date to $148 million.

We continue to evaluate opportunities to put our platform to work and still expect to be net acquirers at year-end. To that end, we have approximately $190 million of value-added acquisitions under control and look forward to sharing more about these exciting acquisitions soon.

To summarize, our team continues to execute on all fronts, attracting great tenants in a supply-constrained environment at the highest rents we've ever achieved. Our redevelopment platform continues to deliver low-risk compelling returns with several years of runway for future growth. And on the transaction front, we're well positioned to continue to recycle capital out of low-growth assets into those where we see the opportunity to create value through our operating platform.

Thank you to the Brixmor team for your continued focus and effort as we continue to create value for our stakeholders. With that, I'll hand the call over to Steve for a more detailed review of our financial results. Steve?

Thanks, Brian. I'm pleased to report on another strong quarter of execution by the Brixmor team as we continue to stack rent commencements from the snow pipeline that will accelerate growth over the next several quarters. NAREIT FFO was $0.56 per share in the third quarter, driven by same-property NOI growth of 4%. As expected, base rent growth decreased to a 270-basis-point contribution due to a 150-basis-point drop in build occupancy compared to the third quarter of last year. We expect base rent growth to accelerate into 2026 as build occupancy rebounds, and we continue to commence rent from the snow pipeline at higher rents.

Additionally, revenues seemed on collectible contributed 80 basis points to growth in the quarter as we trend to the lower end of our historical run rate of 75 to 110 basis points of total revenue given the improvement in our underlying tenant credit. As Brian noted, we commenced a record high $22 million of new ABR in the quarter. And capitalizing on the strong leasing environment, we executed $16 million of new leases at a record high $25.85 per square foot and ended the third quarter with a 390-basis-point spread between leased and build occupancy.

Our assigned, but not yet commenced pipeline totaled $60 million, which includes $53 million of net new rents. In addition, the blended annualized rent per square foot on the signed, but not yet commenced pool is $22.30 per square foot, approximately 21% above our portfolio average, reflecting the below-market rent basis in our centers. We expect 80% of the snow pipeline to commence by the end of 2026, with 2026 commencements slightly weighted to the first half of that period.

From a balance sheet perspective, at September 30, we had $1.6 billion of available liquidity, including approximately $400 million from our September 2025 4.85% issuance, which prefunded our June 2026 maturity of $600 million at $4.125%. One note on the capital markets front, our SEC shelf registration statement is due to expire next month. So we'll be filing a replacement shelf registration statement this week. As part of that process, we'll also be reviewing our existing ATM program and DRIP. We will also be extending our buyback program for another 3 years, which together will continue to provide Brixmor with maximum flexibility to capitalize on a wide range of potential capital market environments and support the long-term execution of our business plan.

We are pleased to announce a 7% increase in our annual dividend to a rate of $1.23. The revised dividend, which approximates taxable income, allows the company to retain as much free cash flow as possible while meeting our REIT dividend requirements.

In terms of our forward outlook, we have updated our FFO guidance to $2.23 to $2.25, and affirmed our same-property NOI range of 3.9% to 4.3%. Our increased FFO expectations is driven by higher-than-expected lease settlement income in the fourth quarter as we continue to capitalize on opportunities to proactively recapture and accretively backfill space. As such, we expect lease settlement income to be a headwind to 2026 FFO growth. We are excited about how we are positioned heading into next year with significant tailwinds from 2025 rent commencements a strong snow pipeline and reduced exposure to at-risk tenancy, coupled with the strong demand from tenants to locate in our centers. And with that, I'll turn the call over to the operator for Q&A.

[Operator Instructions] Our first question is from Michael Goldsmith with UBS.

Steve, a question for you. On the implied acceleration of the same-store NOI growth in the fourth quarter, can you walk through kind of the contributing factors there? Is that a function of the snow pipeline being activated, what you've already done, what you -- what is due in the fourth quarter? And then also, can you just talk about the role of the comparisons in the acceleration to just the sustainability of that?

Sure. Yes. I mean, as we talked about, we commenced $22 million of rent in the quarter, right? And we've talked a lot over the last several quarters about just the stacking of rent and how that provides growth heading into future quarters. So you obviously get a partial benefit of that rent that commenced in the quarter. And then you get another partial benefit in Q4 as it's fully in for the entire quarter. And then you also have approximately $19 million of rent that we expect to commence between the end of the third quarter and fourth quarter, that will provide growth into that quarter as well. I think the only other thing I would just remind you is, when you look to the prior year quarter ending 9/30, the entirety of the tenant disruption that we've experienced over the last year was in and billing as of that period. So that rent starts to fall off the fourth quarter and then through 2025, just as you're thinking about the year-over-year comparisons. But what we're really looking forward to is that tailwind that the commencement of this new pipeline is providing.

Yes, Michael, I would just add what we're really excited about there on the commencement front, too, is some of these larger redevelopments starting to come online, like Block 59 in Chicago, which I mentioned. We're also seeing the first of the boxes that we backfilled last year that we took back at the end of the year starting to come online as well to Ross boxes that we opened last week. So everything that Steve said, again, gives us good visibility to the end of the year, but some anecdotes there in terms of the nature of that as well.

Our next question is from Samir Khanal with Bank of America.

I guess, Brian, in your opening remarks, you talked about shop occupancy hitting another record and you also stated there's more room to run. Maybe expand on those comments as we think about occupancy into next year.

Yes. We've been pleased with the progress on the shop front, as I mentioned. But if you look at that future reinvestment pipeline, we're several hundred basis points below where occupancy sits today. And Samir, when we've seen historically, as we bring those projects on, you're seeing a lift in shop occupancy. So we do feel like we have several hundred basis points more to run. And when you think about the nature of those projects in that future reinvestment pipeline, a great future pipeline that we have with public think about Plano, Texas, other projects that we have in Florida, suburban Atlanta, Metro New York, which gives us real good visibility in our ability to drive that forward. So that's really that piece in terms of what's left and our ability to get it even higher than it is today, which, again, we're pretty pleased about.

Our next question is from Craig Melman with Citigroup.

Brian, you had mentioned some additional acquisitions that are in the pipeline. Could you just go through what the opportunity set looks like and where cap rates are trending? And kind of are these going to be more like lost on terra that are longer-term opportunities that maybe aren't initially accretive? Or are there some stabilizing there that can kind of boost FFO in the near term as well?

Craig, I'll hand this to Mark, but I would just say we're really pleased with what we're seeing on the transaction front, but also pleased with not just what we're doing out of the gate in Lasontera, but what we're doing out of the gate with the $300 million of acquisitions that we closed last year. So maybe I'll hand it to Mark to give an overview on what he's seeing in the market.

Sure. the market remains really competitive. As we've discussed on past calls, we're seeing new entrants and capital, actually on the sidelines really seeking exposure to open-air retail. A lot of that capital is actually seeking smaller, simple grocery anchor deals. And so what's interesting is that's really allowing us the opportunity to be efficient when we capital recycle. And we're selling some assets where we see low hold IRRs from our perspective, well below IRRs we'd like to generate. We've got the ability to recycle that capital into assets like Watson Terra, where we see really strong growth and the ability to drive strong IRRs and really drive our return on invested capital from here.

With respect to the deals that we're buying, we really try to focus on, from an acquisition perspective, value-added opportunities. So the ones that were in the pipeline today, which we think will continue to grow over time, that pipeline will continue to grow. They look pretty similar to Losinterra and that they have very strong growth opportunities, and we're going to leverage our platform to drive strong cash flows through occupancy gains through rent mark-to-market and some redevelopment. I would say the ones that we're looking at today are not lifestyle centers. They're more traditional open air retail centers that fit right into our platform. A good example on 1 of those assets were using a platform to drive an immediate increase and an anchor rent that's giving us better growth through the term of the anchor rent and increasingly going in cap rate by about 50 basis points, which we feel is very compelling from an acquisitions perspective. And really, I think, speaks to the strength of the platform as we think about future acquisitions from here.

Our next question is from Michael Griffin with Evercore ISI.

Great. And first of all, my thought to Jim and his family, wishing him a speedy recovery. Brian, maybe you could talk a little bit about how the leasing pipeline looks as we head into next year? I mean, our retailers still looking to expand and grow their business. You guys have done some pretty strong new leasing year-to-date, but just give us a sense of what those conversations are like kind of caveating that while it seems like we've gotten some trade deals done, there is still this macro uncertainty as it relates to tariffs and the potential impact to retailers.

We appreciate the kind words about Jim, Michael. And we remain very optimistic and encouraged by what we're seeing in the leasing environment. The pipeline today is higher than it was a year ago despite the fact that we've signed 10% more in GLA this year. The retailers who were growing with are not only looking to add store count in both infill locations and where they have additional white space with specialty grocers, off-price apparel, health and wellness operators, the tenants are performing. If you listen to those second quarter calls, you saw -- you heard some very strong results from a lot of the retailers that we continue to grow with. From a tariff perspective, they've been able to navigate this with suppliers. And so as we think about our core tenant mix as well as the new operators who are expanding with us in the portfolio, they continue to have strong open-to-buys as they head into 2026. And interestingly, we have a full slate for New York ICSC coming up in a few weeks. Those discussions will be primarily around '27, right? There are still deals that we're signing towards the end of the year that we're going to get open in late '26, part of that focus to is 2027 pipeline.

So we remain very encouraged. We continue to keep a close eye to see if there are any cracks in that, but to date, we're really not seeing it.

Our next question is from Todd Thomas with KeyBanc Capital Markets.

I wanted to go back to the same-store growth and ask a bit about the building blocks for '26, if I could. You talked about the headwinds from bankruptcies and tenant disruptions for the year. I think you noted it was about 230 basis points last quarter. Any early thoughts about how we should think about that drag today as we look into '26? Whether you expect that to alleviate, or do you see a similar level of drag?

Yes. I mean, as we sit here today, right, I think the 1 thing we've talked about a lot over the last couple of quarters is just to reduce exposure we have to average tenancy, right? When you look at our watch list today versus -- even versus our peer, but especially compared to 5, 10 years ago, right, you just see a lot less exposure to some of those names that you all were worried about as were we, Big Lot, Party City, JOANN. And you're seeing more exposure to things like Whole Foods, Sprouts, Public, right? So I think as you look into '26, I mean, obviously, 1 of the headwinds is going to be we did recognize rent for that bank of space in '25 that's not going to recur in [ '26 ], right? But I think sitting here today, there doesn't look to be a lot of significant tenant disruption out there moving forward. Obviously, we'll see how the next couple of quarters play out, but we really feel comfortable sitting here today with the tailwind from that snow pipeline commencing in '25 and then also into '26. But obviously, just reminding that there is some headwinds for the rent be recognized in '25.

Our next question is from Greg McGinniss with Scotiabank.

Brian, I just want to touch back on the tenant health commentary. Looking at the bad debt expense, guidance was maintained and despite previously trending towards the low end, Q3 was up versus Q2. Could you just provide some insight on that increase? And then generally -- more generally, how you're feeling about the range in the year?

Well, I'll let Steve hit the guidance piece. But just to expand on what he just said, right? Our office supply exposure has been cut in half. We have a very low drug store exposure. If you look, we have 17% of our ABR comes from local tenants. And the underlying credit quality of the tenants who backfilled the space we took back over the last year, is very strong. So we feel very confident in terms of where that watch list exposure sits today. There's always categories that we're keeping a close eye on. But as Steve noted, that has dropped meaningfully from where this portfolio was historically. And Steve, maybe you could touch on the guidance piece.

Yes. I mean, obviously, we are trending to the lower end of the range. I'm still within the range. I'd just remind you about things we've talked about over the last couple of years, right, is the first half of the year, due to some of the out-of-period cash collections on real estate taxes, generally has a lower -- when you're just looking at as a percentage of total revenue. And then the back end is all a little bit higher. So I think we feel comfortable where we're headed within the range, but I'd just remind you that third and fourth quarter, when you're looking as a percentage, is a little bit higher. But I think when you're comparing to the prior year, obviously, it's a favorable trend.

Our next question is from Alexander Goldfarb with Piper Sandler.

And just echoing the speedy recovery thoughts for Jim. Mark, the cap rates in the acquisition world have definitely come in even Power Center. I know you guys really aren't looking at that, but even that's getting a strengthening bid. As you look at your opportunity set, do you sort of have a minimum threshold where you're like we can't buy below x yield because the deals need to be accretive from Day 1? Just trying to understand with more focus on REITs delivering earnings growth -- true earnings cash flow growth, do you find that you have a floor that you won't go below? Or how do you balance that given the increased competition for assets?

Look, I think everyone in the room understands that our job is to grow earnings at [indiscernible] and that's what we're going to be focused on over time. Our acquisitions program historically and today remains focused on driving high unlevered IRRs. When we look at the deals, we've been delivering, that tends to be in that 9.5% to 10.5% range. So when we find compelling opportunities, we're going to go after them to acquire. Last year, we acquired Plaza [indiscernible], [indiscernible] Plaza harming down in Tampa, which was a lower going-in yield, where we see very, very significant value-add opportunities in that asset. So we're not going to pass up the ability to buy something like Plaza Britain in the future. With that said, the assets we're working on today, we think have attractive going in yields and growth. So we're really focused on both parts of that plan from an acquisitions perspective.

And Alex, since we're funding that through capital recycling, we're funding that with assets that we don't see that long-term growth potential into assets, to Mark's point, where we do. So with everything Mark said, we feel that there are a lot of compelling opportunities out there for us today despite the fact that it is.

The other thing I would add, and we talked about this in the past, we continue to mine out things like land parcels in this portfolio, which are not yielding any casual today are really native cash flow given the carry cost. We did that earlier this year. We have some in our pipeline today that again, will provide us some really well-priced capital to put the work in the acquisitions market.

Our next question is from Cooper Clark with Wells Fargo.

It looks like G&A came down in the quarter around $2 million to $3 million. Curious what drove this? And if $26 million is a good run rate moving forward, or if it was driven by a more one-timing item?

Yes. I mean, we're obviously not going to provide guidance on G&A right now. But if you just look at the comparison to the prior quarter, we did do a restructuring in the prior year, which did have a charge in that quarter and importantly, gave us a better run rate going forward of a reduced G&A, which you're seeing in that line year-to-date. So it's really about the comparison and what happened in the prior quarter. We feel pretty comfortable where G&A is today.

Our next question is from Juan Sanabria with BMO Capital Markets.

Thoughts with Jim and his family. I just wanted to ask about the publics relationship you kind of noted at the top in your prepared remarks and what we could see going forward? Any opportunities for some greenfield developments?

Yes. First, touching on the publics relationship one, our South region team has a long-standing relationship with them. We've done into the double-digit projects in terms of in-place redevelopments. We've got 2 new projects that we've done this quarter in Southeast Florida and Hilton Head, South Carolina, which we recently announced. We just announced yesterday another redevelopment in St. Pete with them. And we've got a long pipeline with them and a great partnership in terms of they've been reinvesting, like a lot of our grocer partners in their stores in both Florida and some other Southeast markets. So team in the South region has done a fantastic job with them, and we look forward to continuing to see that grow. And you could see many of those projects in the future pipeline.

As it relates to new development, our focus is on redevelopment. We've got several years of runway of future growth in that future reinvestment pipeline. As Mark touched on, he's adding additional opportunities to that as well. Never say never because we do have great relationships with the likes of Publix, Kroger, HEB, I could go down the list that we have a lot of -- we've had a lot of good report -- not just report with, but we've been able to execute with historically. So we'll continue to look at things, but generally, that focus is going to be on redevelopment.

Our next question is from Handel St. Juste with Mizuho Securities.

I wanted to build on the last question, it looks like the average yields for redevelopment projects ticked down a bit sequentially to 9% versus 10% last quarter. Is that a mix issue? Are you starting to see the impact of tariffs or higher cost or maybe this is a new level we should expect near term? And then some thoughts broadly, I guess, on minimum yield or hurdles in light of the lower debt costs. I'm curious if you're changing that at all in light of lower debt cost.

Juan, -- I'm sorry, Haendel, we -- if you look at where we said historically and where we've been delivering, it's been high single digit, low double-digit returns. So it's just effectively the mix that we had of what was stabilizing during the quarter. As we look out in that future reinvestment pipeline, we still see, as I said, several years of runway similar returns. There have been instances where there have been some cost increases, but we're getting it back in terms of our rents. And we continue to be able to invest accretively. These are incremental returns. We're also not including in those returns the follow-on leasing that we continue to see in these projects several years after. So we remain very encouraged by what we're seeing in terms of the projects going forward and the nature of what those returns look like.

We're not changing our threshold. If anything, as we've done some of these larger projects we want a higher pre-lease threshold from where we've been historically to limit our risk. These projects are still fully bought out, and we have a great line of sight on where costs are going to go. But generally, we're very pleased with what we've been seeing both in the existing and future pipeline as it relates to those returns.

Our next question is from Caitlin Burrows with Goldman Sachs.

A big part of the Brixmor story is your ability to quarter after quarter achieved large leasing spreads as you bring rents up to market rates. So I guess with Jim having become CEO almost 10 years ago, it would seem like a lot of this opportunity has been realized by now, but maybe that's not true. So could you give some detail on how you think about what portion of that upside, the outsized leasing spreads has been realized? How much is left? And how long leasing spreads can continue in the like mid-teens rate?

Yes. Well, Caitlin, I would just say we're very pleased with the rent growth trends in the portfolio, both with what we've been able to execute as well as what we see coming down the pipe. So if you think about the quarter, we signed the highest rents we ever have in overall small shop and anchors. Over the last year, we've signed the highest rents that we ever have in all those categories as well. If you look at that future leasing pipeline, it sits at about 40% higher than our in-place rents today. And as we continue to reinvest in the portfolio, we expect to continue to drive rent hire. And we still have a low rent basis in terms of the spaces that we are taking back, and we're backfilling these boxes accretively.

So we still see a long runway for future rent growth. You could see some fluctuation in a given quarter, but really pleased with what we're seeing from the team.

[Operator Instructions] Our next question is from Floris Van Dijkum with Ladenburg Thalmann.

Wanted to ask about the recycling of capital. One of the unique elements that you guys had is selling stabilized low-growth assets at attractive cap rates and reinvesting into your significant redevelopment activity. As I noticed, you haven't sold that much year-to-date. I think it's $190 million-ish or thereabouts, less than what you've acquired. Could you talk about the pipeline of dispositions and what the impact of that is going to be? Because you do have a significant redevelopment pipeline as well that is in the works and you're adding on to it.

Well, Floris, I'll start and then maybe I'll hand it to Mark. There's always going to be, and Jim has said this historically, a portion of the portfolio where we've maximized value. And then we're going to take that capital and recycle it in to places where we see more compelling growth opportunities that align with the growth profile of the company. So with that, maybe I'll hand it to Mark in terms of some more detail on the pipeline.

Yes, sure. The one other comment I'd make with respect to our funding of the business, but don't forget, we do generate significant free cash flows here post dividend, post our normal leasing spend. And that's really what's funding our -- the vast majority of our redevelopment program. So yes, there's probably some limited amount of dispos that go into keeping us leverage and neutral there. But ultimately, I wouldn't forget that as you think about how we're funding the business.

On the pipeline for dispositions, as I mentioned, what's most interesting to us in the market today is this new capital coming in, again, is seeking exposure to the space. We think we've got the ability here to be opportunistic and sell assets that Brian highlighted that have less growth in our overall portfolio and put it back to work in assets where we are compelled to see higher growth rates and really drive that ROIC for us over time.

And just to make sure, the cap rates on the dispos are broadly in line with what your acquiring except maybe the lifestyle center, but that it should be on a sort of a cap rate neutral basis? Or is there a little bit of dilution involved there?

Yes. Our year-to-date cap rate, like it's been for many years, it's in and around 7%. The acquisitions are going to be slightly lower than that when you blend them all together this year. Last year, we think it was about neutral. So it depends on the mix of what we're selling. But importantly, we're really focused on that long-term hold IRR. And we think that growth of what we're buying is significantly better than what we're selling, and we're seeing that through looking back at the assets we bought. So we remained convicted in the Action program to add value to the company over time.

. SP1 Our next question is from Linda Tsai with Jefferies.

Can you comment on the yield for Lasenterra? And then in terms of traditional open-air centers being in your acquisition pipeline, just wondering why you highlighted that they are not lifestyle centers?

Well, I'll take the second part first, Linda, sorry about that. And we did touch on [indiscernible] last quarter, but Mark can spend a little bit more time on that. I think what Mark was saying is we are looking for assets that have compelling growth profiles. And if you look at that in terms of what we bought historically, it's been a mix. And so when Mark was comparing it to [indiscernible], it's very -- these assets are very similar in that they're grocery anchored, and we feel like we can put our platform to work to have compelling growth out of those properties. So maybe, Mark, I don't know if there's a little bit more to add on for [indiscernible]?

Yes. I would really point to the comments we made last quarter, we went through it in detail. And what I would highlight is that since last quarter, we've outperformed what our expectations were in the initial ownership periods. So we remain convicted in the growth that we're generating. We remain convicted that the yields were going to roll will be a little bit higher in year 1 and moreover, the growth that we see coming from that asset. We think it's a really compelling opportunity for Brixmor. And just to highlight what I was trying to highlight was the assets that we're buying, we have high conviction in growth, just like we did with Lassantera. The ones in the pipeline today that we have under control are just -- they look more like traditional shopping centers. We're always going to focus on growth.

[Operator Instructions] Our next question is from Hong Zhang with JPMorgan.

I guess your lease to occupied spread has gone down throughout this year, but still remains above historic levels. given the strong rent commencements you expect in 4Q in 2026, do you expect to be back to more historic levels by the end of 2026 going to 2027?

I'll take that. I would expect that to still remain wide. I mean, obviously, you'd expect it to tighten since we commenced a record amount of ABR during the quarter, but we're also leasing a lot of space. And we've got a large legal pipeline that where we continue to fill deals in the leasing committee in terms of the flow in the leasing committee on a weekly basis remains strong. So the pipeline remains elevated. We like what we're seeing from a demand perspective. You should expect that to remain somewhat elevated, but it is exciting in terms of the commencements that we've had here that we had in the third quarter and that we look forward to seeing in the fourth.

There are no further questions at this time. I would like to turn the floor back over to Steve for closing remarks.

Thank you, guys, for all joining today.

Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.

Welcome to the Brixmor Roundtable. Jim, I'll turn it over to you, maybe introduce the team up here and provide some opening remarks.

Be happy to. First of all, thank you for your interest in Brixmor. I have with me Mark Horgan, our Chief Investment Officer. Brian Finnegan, our President and Chief Operating Officer; Steve Gallagher, our CFO; and Stacy Slater, our Head of Capital Markets and IR.

Brixmor prides itself on being a value-added investor within the shopping center space. We're one of the largest open-air platforms in the country with tenants that include Kroger, Whole Foods, Sprouts, TJ, T.J. Maxx, Trader Joe's. And our strategy as a company has been to take the opportunity to capitalize on below-market rents, bring in better tenants at better rents, accretively reinvest in the property and provide growth that's at the top of the peer group. And we're really proud of our track record of doing just that.

We just reported the quarter where we exceeded expectations. But importantly, we also highlighted for folks the fact that we expect to grow at 4% this year despite -- and that's on the NOI line, despite over 200 basis points of occupancy headwind. And we also provided guidance in terms of our signed but not commenced pipeline, which represents about 7% of our total ABR, which we expect to commence ratably over the next several quarters, putting us in a position to have visibility on being able to outperform not just in '25, but also '26 and beyond.

I thought it might be helpful for Brian, you to give kind of an update in terms of what we're seeing real time in terms of tenant demand, particularly encouraged by what we're seeing in the grocery segment, but it's really broad-based, and it's putting us in a position to stock the pipeline of future accretive reinvestment projects and continue to drive the transformation of this portfolio. Brian?

Yes. We remain really encouraged by what we're seeing in the demand environment. We had a great start to the year. Second quarter was one of the best quarters that we've had in years from a productivity standpoint.

We just had Orlando ICSE, which is one of the largest regional shows outside of Vegas and New York. And what you saw there was retailers who we have been growing a lot with over the last few years, continue to be focused on growing their open-air store footprint, whether that's in off-price apparel, whether that's in specialty grocery, health and wellness, QSR restaurant operators.

And they're looking at deals, not just for '26 at this point, particularly from an anchor perspective, those leases have to get done effectively now or by the end of the year to get stores open for 2026, really in 2027 as well. And I think from a retailer perspective, this is intentional demand.

They know more about their customers today than they ever have. They know how opening a store in a given market will complement the existing store footprint, what it will do from an online sales perspective. So we remain very encouraged by what we're seeing from a demand standpoint as well as what we saw from retailers in terms of the Q2 earnings releases, which were generally positive and ties to what we've been hearing from the real estate folks.

Jim mentioned grocery. We have been growing significantly with specialty grocery, whether that's with Trader Joe's. We've done more in the last 18 months with them than we had done in the prior 10 years. Whole Foods is now in our top 10. We continue to grow with Sprouts, which is in our top 20. We did one of their first locations here in the New York metro area.

But interestingly, on the traditional side, we're seeing some growth opportunities there as well. We'll sign our second new Publix lease here shortly. We've got half a dozen opportunities with them across the portfolio in the pipeline right now from a redevelopment standpoint.

So really excited by what we're seeing there. What we're also seeing from the likes of HEB, Walmart, who's expanding their neighborhood grocery concept as well. And so you can really see this come through in really every observable metric across the portfolio, whether that's the spreads we've been able to achieve, the rents that we've been able to sign and really the traffic that we're generating, which, again, is at the top of the peer group.

And with that, we've transformed not just the portfolio, but the tenancy. A lot of you in this room have been familiar with this company for a long time, but I would ask anyone to take our top tenancy from 2019 and compare it to where we are today. And what you wouldn't have seen 5 years ago, you wouldn't have seen Whole Foods where they are. You wouldn't have seen Sprouts, Trader Joe's, wouldn't have seen Chipotle, Bath & Body Works, operators like Barnes & Noble, who have really reinvented their business who are growing with as well.

And we're also doing that on the redevelopment front. We're pretty excited with what we're seeing from a reinvestment standpoint. We're opening our project in Davis, California tomorrow, grand opening across the street from UC Davis in the Trader Joe's anchored center where we're bringing in Nordstrom Rack and Ulta, places like Block 59 in Naperville, where we're adding a brand-new Yard House, Cheesecake Factory, Stan's Donuts, Shake Shack and a number of other great operators in what had been some underutilized space upfront. You can see that in places like Southwest Florida and Plano, Texas as well. And we have a lot of runway to that going forward. So overall, we remain really encouraged by what we're seeing in the business.

Steve?

Yes. I think what Jim and Brian both really highlighted is the culmination of our business plan over the last 10 years has really put us in a position to be able to grow through that tenant disruption. And I think importantly, on the other side of it, you do see a much reduced exposure to some of that at-risk tenancy. And that, combined with the SNO pipeline, and we still have $40 million of ABR to bring on in the second half of the year, that stacking of rents, which we've consistently talked about, delivering on average about $15 million of ABR a quarter really positions us to grow into '26, '27 and beyond.

And we've talked about a lot with this group about any disruption to the extent it is accelerated, which we saw in the first half of the year, while that will impede short-term growth, it really does help accelerate growth over the next couple of years, and we look forward to delivering that.

You talked about the disruption earlier this year and maybe even towards the end of last year. I mean, are you tracking ahead of-- given how much interest there is in the space and leasing you talked about, are you tracking ahead of sort of your original assumptions for backfill timing or NOI lift at this point?

I mean I can take that first, Samir. We went into this, Samir, with the lowest box supply that we've ever had in the portfolio, right? It was about 1/3 of where we were 10 years ago. So there had been a significant amount of demand in the box space. And it's not like we were just sitting waiting for some of this stuff to happen, right?

We had reduced our exposure to Big Lots by 30% prior to the filing. Recall that we had terminated 5 Bed Bath leases before that filing as well because we knew they were at risk of getting lost at auction. We've decreased our office supply exposure by 50% and done that with specialty grocers and off-price apparel operators.

So we were very confident in the demand. It's why we expect it to grow at where we're growing year-to-date. And we've been pleased so far with how quickly our team has been able to address that with the rents that are already starting to come online this year for the big lot spaces that we took back last year and what we continue to see in terms of demand for the space.

Yes. And we're really -- Samir, I think one thing to appreciate is we're really not seeing in this year the benefit of a lot of that backfill. That won't be coming on until next year and to still provide 4% growth with 200 basis points of headwind really implies the important underlying point that the execution of this strategy would have delivered 6% unlevered growth but for the bankruptcies. So as we look forward, we're excited about the trajectory of the business and importantly, the value we've created as we've executed upon it.

And of the spaces you got back, how much of them has sort of been addressed at this point? I mean, how much commitment?

We're 80% addressed and the balance we expect to address over the next couple of quarters as many of those spaces were spaces that we got back later. But I'm really pleased with how the team has stepped up and really brought in tenants that are relevant to the communities they serve.

When you replace the Big Lots with the Sprouts, you not only get an accretive return as we have given our rent spreads on the box itself, but you get a follow-on benefit in terms of occupancy and rate on the balance of the center, which gives us visibility several years forward in terms of this upgrade and tenancy that we've executed.

The upgrade and the rent, how much of a rent uplift are you getting from these boxes you're getting back?

We talked about on the call, Samir, we were about between 40% and 50% for what we've addressed. I think Big Lots are on the high end of that and in line with the JOANN and Party City making up the balance.

I'd like to keep this conversation interactive as well. So if there's anything -- any questions you have, just raise your hand. That's fine.

Have you had to split any of those boxes?

Some, but it's a small percentage. I think as it relates to Big Lots today, it was actually -- frankly, it's just one. I think we split two of the Bed Bath spaces where we haven't split any of the Party City's. Some of the JOANN, actually lend themselves to being split just the nature of the configuration. We can do that. We have two of them, we can do that for small shop spaces, but the vast majority have been single-tenant backfills. And in those cases where we have split, we're getting paid back for the capital that we're putting to work.

I guess one news that did come out was Amazon's rollout of same-day delivery, right? I mean what was your reaction to that? And what I mean how -- is there any change at all in the sector? How do you think about that?

Yes. I think if this come out 10 years ago, it would be a bit more concerning, but the great grocers today have been very focused on their omnichannel footprint, frankly, meeting the consumer wherever the consumer wants to meet them. You look at what Kroger has done in both in-store with ClickList pickup as well as Ocado. You look at the partnerships with Instacart.

If people want their groceries delivered today in most parts of the country, they can get them delivered. So it wasn't surprising to us. We've had a great partnership with Amazon and with Whole Foods. But in terms of impact on other grocers, I think the great grocers today, you can walk in the store.

When you look at Kroger 10 years ago and they were first starting to deliver, you saw inventory issues, you saw consumers kind of fighting with pickers to get what they wanted off the shelves. You're not seeing that much today. And the data that they have and understanding inventory levels is much stronger. So I think grocers are well prepared to be able to handle any additional online competition.

Yes.

Help us think about occupancy, right, both anchor and anchor is pretty much -- I mean -- it's record levels. You've got shop occupancy that continues to go up. Help us think through, I mean, how much more room there is to push kind of...

Well, we continue to reset the bar as we execute this strategy, and it's a great question because the historical occupancy levels of this portfolio really aren't a guide to what the potential is going forward.

When you look at our reinvestment pipeline, you look at the small shops that are in the reinvestment projects, they drag the overall average by a couple of hundred basis points. But as you deliver those anchors, you can lease up several hundred basis points of shop occupancy benefiting from that reinvestment.

So we still think there's room to run from an occupancy standpoint in this portfolio as we've executed this strategy. But one thing that we've never done is run the portfolio for occupancy. We've always managed it for growth, which makes you focus on making sure that you're bringing in the right tenant at the right return on invested capital that's going to drive traffic to the balance of the center. One of the unique things about our asset class is folks ask us all the time about market rent. Well, you can have two centers across the street from each other whose market rent is 30% different, right? That market rent for that center is driven by the anchor is driven by the co-tenancy.

So we're really mindful of that, and it's showing up in our portfolio. It's showing up in our top tenancy. Frankly, it's also showing up, and this doesn't get enough focus in our renewal spreads, which have been at the top of the pack in the mid-teens, all really reflecting the demand to be in our centers and how we're leveraging that demand to drive rate, which is ultimately our core focus.

On the redevelopments you've talked about, you've talked annual goals of $150 million to $200 million annually, you're delivering at very high returns. Talk about how big is that pipeline of future opportunities?

Yes. What we've identified in the supplement represents a little over $800 million of future reinvestment potential. We're often asked, why don't you do that immediately? And you've got these pesky things called leases that prevent you from getting to the underlying real estate.

So just with what we have in the current shadow pipeline, we've got several years of $150 million to $200 million of annual very accretive spend looking ahead. The second part of our strategy has been around capital recycling. And as we've sold assets that -- and harvested assets that had limited growth and upside, we've redeployed that into assets where we see future reinvestment and future growth potential as we recently did with our acquisition of Britton Plaza in South Tampa. So we're kind of backfilling that pipeline as we execute our plan and have view on several years of accretive reinvestment.

Jim, you made comments about market rents being driven by tenancies and anchors. Earlier in the year, you put out kind of a case study on Middletown Plaza where there's some repositioning there, Trader Joe's moved in and foot traffic doubled, I think. How does that -- how do rents and spreads -- like can you quantify the uplift to rents after something like that?

Well, I believe in the case of Middletown, the shop rents nearly doubled. And not only do you see the rates increase, but you see the occupancy increase as well. And that's part of what we talk about when we say the flywheel effect of this type of activity is that you not only get an accretive return on the box that you're touching, but you get follow-on growth in the shops that were impacted by bringing in that Trader Joe's to that center. It opened up a whole new avenue of potential tenants and drove both occupancy and rate, and that's happened time and time again across the portfolio.

I think the other piece to quantify it would be we had a former Rite Aid location in there that was doing $3 million at its height and Trader Joe's will do $35 million, right? And just think of the traffic that that's ultimately going to bring in and the impact it's going to have in the rest of the shopping center.

And it's showing up across the portfolio. I mean we're really proud of the fact that we've led in terms of year-over-year traffic growth over the last 5 years, over the last year, over the last month against the peers because of this accretive reinvestment strategy.

Is there anything on -- what's the biggest pressure on the development process today? Is it cost primarily? Or how much have costs gone up?

Costs have actually moderated. I mean we've seen a moderation with material costs. We did a portfolio-wide roofing bid this year that came in 15% under our expectations. You're seeing some continued labor challenges in some pockets, but not really.

I think overall, costs have settled with some real moderation from a materials price standpoint. For us, the entitlement process, depending on the municipality, we've got redevelopment teams in our regional offices that they're charged with not only executing the developments, but developing great relationships with those municipalities. And ultimately, they're particular about what they want in a given shopping center.

Interestingly, they've been much more accommodating in terms of adding density because they don't want these large parking fields, which has given us additional opportunities to add outparcels across the portfolio and densify our assets.

I'd say probably that getting ahead of that entitlement piece. And the other thing that we'll do, Samir, when we have visibility on getting leases executed and working with our key tenant partners, we'll start that process very early, right?

We'll start that process ahead of having a lease executed when we have trust that ultimately, they've got a committee-approved deal to move those forward. So we're mitigating that. We mitigate it as well with conforming leases with our key tenant partners, and we're really focused on bringing that time line in. But I'd say the one piece that can be challenging in a given market is that entitlement piece.

And importantly, we're not taking significant risk here. This is an existing asset where we're not moving forward with capital until we've got the job priced out from a cost perspective, and we've got the leases signed. So that makes it even more attractive from a risk-adjusted standpoint.

Anything on the transaction side? I mean, kind of what you're seeing in the market out there? How competitive is it? And maybe talk about pricing.

Sure. The biggest change in the transactions market the last several years is that the private market has been listening to what Jim and Steve been saying about the overall business, and you're seeing more private capital be interested in the space.

Obviously, they had generally avoided the space during the so-called retail apocalypse, and you're seeing that flow into the market today, particularly for grocery-anchored assets. And so that's certainly making the market more competitive than it was over the last several years. That I would say that when you think about the market, though, it is about asset sizing. So the smaller the asset, if it's core grocer with not a lot of growth, that gets a lot of bids from pension type investors.

As you get out in bigger asset sizes or smaller asset pools, you can certainly see some wider cap rates. From a cap rate spread differential across the market, you continue to see what we've seen historically in that small core grocery prices the most aggressively from a cap rate perspective.

And then as you get to the bigger community centers are a little bit wider given the size and you get out dollar value on power centers can certainly move out cap rates. To the extent we transact, we really try to buy assets where we have very high conviction on growth in our footprint like we did with LaCenterra this past quarter in Houston.

Houston is our third largest market. We've known that asset for a long time. Our team knows it well. We know the rents. When we saw that asset, it had significant vacancies that we thought was leasable day 1. We saw a huge rent mark-to-market, particularly on Phase 1 of that asset.

So when we go into the market, we try to find those assets where we think we can really deliver very strong growth. We think that asset could deliver 5% to 7% annually over the next 10 years. So we think it's a very high growth opportunity for the company. And our whole strategy with respect to cap recycling is actually pretty simple.

As Jim said, we really exit assets after we maximize value and see limited growth and try to reinvest in assets where we see much higher hold IRRs. For example, in LaCenterra, we think that can generate high single-digit, low double-digit hold IRRs, assuming cap rates blow out.

We always try to underwrite pretty conservatively on the exit basis because we think it's quite important in retail to make sure you're delivering enough growth to generate that hold IRR. But it's been a competitive market, but a healthy market based on, I think, all the things Jim and Brian and Steve have been saying about the overall industry.

And for LaCenterra, I mean what's the -- I mean, you talked about the vacancy. Maybe really talk about the upside there in that asset.

Yes. So the asset, I've known it for a long time, and it was developed over 20 years ago. So the Phase 1 of that asset like the front of it had assets that we like to call Lifestyle 1.0 that were paying well below market rents. So that was really attractive. We see big rent spreads on that. And then there were 3 or 4 large vacancies that while we were buying it, we had LOIs in hand. We've been talking to tenants. Maybe, Brian, you can discuss kind of how it's come in the last the first couple of months of hold.

Yes. Samir, it's interesting. We're getting as, hey, this is a different asset for you all. It's actually very similar, right? It's grocery-anchored. It's in a market that we know very well. It's our third largest MSA.

To Mark's point, there's opportunities there to upgrade tenancy in parts of the shopping center. We've got Sephora that's one of their best producing stores across the country. It's got over 5 million visits a year and it's a growth profile that fits with the growth profile of the company. And we've been really pleased out of the gate with the leases that we've been able to get done that are ahead of underwriting, operators that our team knows in the market, frankly, a couple of deals that we're able to get done in Dallas with a restaurant operator that we're able to bring there, like a local institution.

I'll give you a quick example, it's small in scale, but they were going to do a smaller kind of smoothie national franchise where we found this like viral great operator in Austin, that paid a much higher rent that's going to drive much higher traffic and going to drive better sales. So our team knows the asset, they know the market, and we've been excited with what we're seeing out of the gate and feel some pretty compelling growth opportunities going forward.

And what we saw were in-place rents in the $30 range and the ability to drive those above $60, which we've been encouraged by the LOI and lease activity that we've been generating over the last month that's in excess of what we underwrote.

Yes. When you think about the assets we're buying, we're buying from assets that were held by like pension funds that have a third-party operator and an asset manager. They don't have the platform that we have is living and breathing the asset day-to-day.

They have third-party brokers and they're accepting the market where our team is going and trying to drive those rents, find those great operators to drive the traffic and better rents. I think it's underappreciated that we're a very good operator from an expense perspective.

So that asset, in particular, we saw some pretty significant expense savings, we believe, in year 1 relative to what how the pension funds run the asset. We have much cheaper insurance, for example, given the scale of our portfolio. So there are a lot of levers we try to pull when we acquire assets to drive both short- and long-term growth.

I feel like there's more lifestyle type assets being acquired these days. I don't know if it's a function of there's more available? Or is it -- remember back in the 2000s.

Yes. I mean I think part of that is the recognition that you're seeing a convergence of tenant demand to be in open-air retail centers. You're seeing tenants that were historically in lifestyle-only type centers, understanding the power of co-locating with a very productive grocer. And we're seeing it across our portfolio in multiple markets, whether it's Philly, Florida, Southern California, where we're attracting lifestyle native, mall native, Internet-type tenants into traditional grocery-anchored shopping centers.

So I think there's a general recognition of the overlap of tenancy and where the tenancy is growing. So it makes sense. One of the things about a lot of the product that's been on the market is that the rents were really full. So we didn't see an opportunity in some of those other assets that have traded recently to create value or to drive ROIC.

This asset, we've known for a long time, as Brian highlighted, over 5 million visits a year with rents in place that were half market. So we expect to get to a lot of that first-generation space over the first 3 to 5 years of ownership and drive that unlevered IRR into the high single, low double digits.

Yes. That's the most frustrating thing when you're an acquisitions person, it's not every cap rate is created the same when you're a hold investor. That's why we looked at those and said this one just has the right growth. You just have to be very disciplined in this business to make sure you're finding those opportunities with growth and being disciplined even they like an asset where if it's pricing wrong, you just can't buy it. So it's -- we really believe that we're going to find the right assets for us to continue to grow with given our platform. So we're excited about what we're seeing in the pipeline.

Any questions from the audience?

[indiscernible] also sold the original properties. How many properties of that are untouched? And at what point do you go back to second time, [indiscernible] the economics there [indiscernible]?

It's a great question. So we've touched about 42% of the portfolio in either single or multiple phases. One of the things that we will do is look at projects in phases because you reduce risk, but you also generate better returns on the balance or on the second phase.

For example, in Cudahy, California, we backfilled accretively a Kmart box with a Burlington and a Chuze Fitness. We later went back in a second phase and recaptured a Big Lots box early and brought in a Sprouts Farmers Market.

The rent that we got on the Sprouts Farmers Market reflected the uplift of our having done a first phase. So many of the projects that we do will be multiple phases that get us to better risk-adjusted returns. In terms of when will we be through, we've got several years of runway, we think, to accretively reinvest. And importantly, where we don't see the opportunity in the near to intermediate term to drive good growth, we'll harvest that asset and recycle it into one that presents that type of opportunity.

And Jimmy, you've talked about solid visibility into growth the next few years. Maybe frame that out a little bit more. I mean again, I'm not asking for guidance for '26, but help us think about major swing factors here. I know that the SNO pipeline is there. Just kind of...

Well, we have provided long-term guidance on an occupancy-neutral basis, the expectation and goal that we'll continue to produce 4% unlevered growth, focusing on the embedded rent bumps, the contribution from the reinvestments and the mark-to-market on the leases.

As we look forward, having the size of SNO pipeline that we have gives us confidence in not only hitting that range, but potentially doing better than that. Now we're not going to give guidance as it relates to the out years. But if you've been following our business, you see the building blocks being put into place today that will put us in a position that we think external activity aside to be able to grow at the top of the peer group.

I guess, Steven, is there anything that you've seen sometimes maybe benefits or onetime this year that won't repeat next year as we kind of think through that maybe Street models aren't incorporating correctly or...

Yes. I mean I think the first half of the year outside of just the seasonality and some of the line items like bad debt, right? You obviously have the impact of the bankruptcy, not only in bad debt, but also in the drag on the top line. Obviously, some of the spaces that we've gotten back midway through the year, you'll have some of a headwind related to JOANN's had a couple of months on, Party City, et cetera.

And then the team has been doing a great job on the ancillary front of driving incremental revenue on some of those boxes as we're re-leasing them as well. So I think it's pretty much a clean first half of the year.

We always look proactively for opportunities to take back space and relet it to better tenants at better rents. And to the extent some of those opportunities present themselves, we'll be willing to do that as well.

Anything on the balance sheet side?

No. I mean we did a bond offering last week, I think really successful, a lot of support from those in the room as well. So I think we're well positioned. You see the impact of a lot of the work we've done over the last 10 years to get our leverage into the mid-5s. And I think we feel very comfortable here where we are. So I think we're well positioned as we go forward over the next year.

We had a couple of rapid fire questions, but I'm not sure if there's any more left here. Okay. So number one, on the rapid fire. When the Fed starts to cut rates short end, what's your view on the 10-year borrowing rates, decline, stay flat, or potentially rise next year?

Potentially rise.

Okay. Number two, AI initiatives, majority of companies last year stated they are ramping up spending. How would you characterize your plans over the next year, higher, flat or lower?

Higher.

Number three, same-store NOI growth for the sector will be higher, lower or same next year.

I think it's going to be in line.

Okay, thank you.

Thank you.

Thank you.

Greetings, and welcome to Brixmor Property Group's Second Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Stacy Slater. Thank you. You may begin.

Thank you, operator, and thank you all for joining Brixmor's second quarter conference call. With me on the call today are Jim Taylor, Chief Executive Officer; Brian Finnegan, President and Chief Operating Officer; and Steve Gallagher, Executive Vice President and 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 a 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 1 per person. If you have additional questions, please requeue. At this time, it's my pleasure to introduce Jim Taylor.

Thank you, Stacy, and good morning, everyone. I couldn't be more pleased with or proud of this Brixmor team's outstanding execution of our value-add plan, execution that drives our improved outlook for '25 and provides excellent visibility on outperformance in '26 and beyond. Brian and Steve will review our results and outlook in more detail, but I'd like to highlight a few points that underscore: one, our unique visibility on growth; two, the fundamental and accelerating transformation of our portfolio; and three, the opportunities for future growth that we continue to unlock through disciplined capital recycling.

As always, it begins with leasing, where we once again drove robust volumes and spreads, leveraging broad tenant demand to be in our centers and capitalizing on recent tenant disruption to bring in better, more relevant anchor tenants that, in turn, as we all know, drive outperformance in traffic and rate for the balance of the shopping center. In fact, this quarter, we not only drove our average in-place ABR to a new record, we achieved a record-high per square foot rate for new and renewal leases.

Our robust leasing activity drove our signed but not commenced pipeline to $67 million or 7% of total ABR despite commencing $15 million again of new ABR in the quarter. This represents 8 quarters of average commencements of $15 million while the forward pipeline has consistently exceeded $60 million. As Steve will detail in his remarks, this consistent delivery of new rents is part of what's driving expected NOI growth of over 4% this year despite the drag from recent tenant disruption.

Speaking of value-add, our reinvestment pipeline continues to deliver, and we now expect to be at the upper end of our annual goal of $150 million to $200 million of project deliveries at compelling returns. These projects include The Davis Collection, a Trader Joe's and Nordstrom Rack anchored center on the doorstep of UC Davis, BarnPlazo, Whole Foods anchored center just outside of Philadelphia. In Wynwood Village, a Target-anchored center just south of downtown Dallas.

Where we have delivered reinvestment projects, we also continue to benefit from the flywheel effect in growing occupancy and rate on the balance of the shopping centers impacted, which effect is reflected in the records we have set in small shop occupancy and rate. Importantly, in addition to the $370 million of accretive projects we have underway, we have a future pipeline of identified projects with several hundred million with assets we own and control that provide visibility on growth for the next several years.

Finally, we continue to opportunistically recycle capital, harvesting lower-growth assets and redeploying the proceeds into assets where we see substantial upside through our leasing, operations and reinvestment platform. We are particularly pleased to announce the acquisition of LaCenterra, an iconic grocery-anchored lifestyle asset that we've long targeted in the Houston MSA, our third largest. With great tenants such as Trader Joe's, Athleta, IKEA, Lovesac, lululemon, Sephora, Warby Parker, as well as a diverse mix of high-quality dining and service tenants. LaCenterra drives over 5 million visits annually, putting it in the top decile nationally at comparable lifestyle centers. Priced well below replacement costs, LaCenterra offers us tremendous upside as we capitalize on below-market rents expiring over the near term.

In sum, our value-add plan continues to fire on all cylinders, providing us with truly exciting and unparalleled visibility on future growth. With that, I'll turn the call over to Brian and Steve for a more detailed discussion of our results and outlook. Brian?

Thanks, Jim, and good morning, everyone. Our team delivered another quarter of outstanding results, once again validating the demand to be part of the Brixmor portfolio and the momentum of our value-added plan. Leasing activity stood out with recently recaptured space not only resolved at speed but upgraded with stronger, traffic-driving tenants at significantly higher rents. The message is clear, top-tier retailers want to grow with us and they are.

This quarter, we executed 1.7 million square feet of new and renewal leases at a blended cash spread of 24%, including over 900,000 square feet of new leases at an impressive 44% spread. That new lease activity generated the highest quarterly annual base rent in our company's history. Much of this record performance came from backfilling space recaptured through the Big Lots, Party City, and JOANN bankruptcies. And we've already resolved 80% of those spaces with better tenants at rents more than 40% higher. And despite a 70 basis point drag from bankruptcies, we still delivered 10 basis points of sequential occupancy growth to 94.2%.

Small shop leasing continues to be a strength, reaching a new portfolio high of 91.2%, which, as Jim highlighted, more upside as we deliver accretive reinvestments. We also saw improvement in our intrinsic lease terms, setting a record for new lease annual rent growth at 2.8%, while our disciplined approach in eliminating burdensome CAM provisions and deploying fixed CAM where appropriate has continued to improve our recovery rate.

We're also proud of the caliber of tenants joining our portfolio, retailers that are expanding with purpose and conviction. This quarter, among the tenants we added were new locations with Sprouts Farmers Market, Nordstrom Rack, Ross Dress for Less, Burlington Stores, Barnes & Noble, Chick-fil-A, Dave's Hot Chicken, and PNC Bank. As Jim mentioned, and as highlighted by our LaCenterra acquisition in Houston, we're also seeing a clear trend as best-in-class, mall-native and elevated brands are moving into high-traffic grocery-anchored centers.

Thanks to our proactive portfolio transformation, we're capturing this momentum, adding first-to-portfolio deals with Sephora, Lovesac and J.Jill during the quarter with several more exciting names in our forward pipeline.

Looking ahead to the second half of 2025, we're confident in the trajectory of our business. Our traffic and collection trends are strong. The consumer remains resilient, and our forward leasing pipeline is larger than it was at this time last year with creditworthy tenants focused on growing store count. We are exceptionally well positioned to capitalize on this environment and deliver compelling growth in 2025 and beyond. That's a direct result of the outstanding execution by the entire Brixmor team and we're grateful for their continued efforts. With that, I'll turn the call over to Steve for a deeper dive into our financial results. Steve?

Thanks, Brian. As both Jim and Brian emphasized, we continue to deliver consistent outperformance as we execute our value-add business plan. NAREIT FFO was $0.56 per share in the second quarter, driven by same-property NOI growth of 3.8% despite a 260 basis point drag from tenant disruption in the quarter. Base rent growth contributed 360 basis points to same-property NOI growth as the momentum from the SNO commencement at higher rents continues to outpace the drag from the short-term build occupancy decline. Ancillary other reimbursements, other revenues contributed 150 basis points to same-property NOI growth as we capitalized on tenant disruption to drive revenue on temporarily vacant spaces and also negotiated a revised agreement for our parking garage at Point Orlando that allows us to further capitalize on the growth and traffic at that center. As expected, net expense reimbursements detracted 110 basis points from same-property NOI growth due to the prior year benefit related to tax assessments in Cook County, Illinois.

As Brian noted, we signed a record high $21 million of new ABR in the quarter and ended the second quarter with a 450 basis point spread between leased and build occupancy. Our signed but not yet commenced pool totaled $67 million, which includes $59 million of net new rent. We expect to commence $41 million through the remainder of the year and now expect total commencements of $69 million in 2025 as compared to the $53 million we expected at the end of last year, which will provide a tailwind to growth in 2026.

From a balance sheet perspective, at June 30, we had $1.4 billion of available liquidity, no remaining debt maturities until June 2026, and our debt-to-EBITDA on a current quarter annualized basis was 5.5x, providing us flexibility as we execute on our business plan. In terms of our forward outlook, we have updated our same-property NOI growth guidance to 3.9% to 4.3% and increased our FFO guidance to $2.22 to $2.25. We expect tenant disruption to drag same-property NOI by 230 basis points, and we expect the trajectory of base rent growth to accelerate into the second half of the year as we commence rent from the SNO pipeline.

Our increased FFO expectations are driven by the increase in same-property NOI as well as increased lease settlement and other income as we continue to operate the portfolio for long-term value creation, capitalizing on opportunities in this strong leasing environment to proactively recapture and accretively backfill space. We have consistently said that rent basis matters, and you see that in the growth we have been able to deliver at the top of the peer group while also reducing exposure to our at-risk tenants and providing unparalleled visibility into growth in 2026 and beyond. And with that, I'll turn the call over to the operator for Q&A.

[Operator Instructions] Our first question comes from Todd Thomas with KeyBanc Capital Markets.

I wanted to ask about leasing in the quarter. New lease volume, in particular, was really strong. And I'm wondering, Brian, do you see a path to getting the portfolio's leased rate back to 95% and what's the time frame for that? And then with this years, bankruptcies and known move-outs largely behind you at this point, I was just wondering if you could comment on this year's tenant disruption and drag relative to the forward outlook for tenant risk and vacate activity and the remainder of '25 and sort of an early view into '26.

Todd, it's Jim. Before we answer that question, I just really wanted to comment at the start of the question, that our hearts and prayers go out to our friends at 345 Park, particularly those families and loved ones of the victims. Just our hearts are with you and I wanted to say that at the outset. Thank you.

Yes, and thanks, Todd. We were really pleased with the activity during the quarter. I think we had talked about coming out of ICSC. Just what we were hearing from our retailers in terms of continuing to be focused on growing their store footprint. What you heard on the first quarter calls from retailers was constructive and positive in terms of the trends that they're seeing in their business. And we really saw it come through in the activity during the quarter from a wide range of uses, whether that's in specialty grocery, off-price apparel, books, home furnishing, QSR restaurants, which we're seeing -- we're continuing to see better operators there.

So it was pretty broad-based. And particularly to your point, a lot of that was on space that we recently recaptured, and we're really proud of how the team has gotten after that quickly and have been able to backfill that with much better tenants.

I think to your second part of your question, as Steve touched on it in his remarks, this has given us the opportunity to improve what has already been the best underlying credit profile that this portfolio has ever had. So really, on the other side of this, that watch list is a lot smaller than it was historically. There's always categories that we're watching. You think of drug stores, they're certainly closing some locations. It's a very small part of what we do, less than 1% of our ABR. You think of theaters, there are some good trends there but also a very small part of what we do as well. So we feel pretty confident on the other side of this. And from a trajectory standpoint, we remain really encouraged by what we're seeing in the leasing pipeline.

Steve, was there an amount of rent collected in the quarter that's worth considering as we think about 3Q that will create a little bit of drag? Or do you anticipate an inflection in economic occupancy and ABR growth moving into the back half of the year?

Yes. I mean, if you just think about the rent, you're talking on the bankrupt spaces, obviously, you would have had a stub period for some of the JOANN locations. And then going forward, we will be getting back a couple of at home. But I think more importantly and what Brian highlighted was getting the rent commenced on those backfills within the third quarter and into the fourth quarter will start to accelerate that base rent growth as we move through the remainder of the year.

Yes. And Todd, I would just remark, we're particularly pleased to be at a place where we're growing better than 4% despite over 230 basis points of headwind, which obviously does imply the rent commencements and from the SNO pipeline in the latter part of the year, as Steve highlighted.

Our next question comes from Michael Goldsmith with UBS.

On LaCenterra, can you talk about the opportunity here? Seemingly, you can benefit from scale in the Houston market. It brings you closer to some of the growth tenants that you're working with across the portfolio. Presumably, there are some leases that are up for maturity for the first time where you can sprinkle some Brixmor magic and re-merchandise. So what are the benefits from this property? And if you could provide the cap rate, that would be helpful.

Sure. I think you've got the sales point down pretty well. We're really excited about adding LaCenterra to the portfolio. We do think this is a pretty classic example of value-added investing as we do believe we bought the asset at a pretty opportunistic time in the asset's life cycle. We recently reviewed plenty of lifestyle deals in the market. I think this one has some pretty unique attributes, which you kind of outlined, which is why we focused on LaCenterra.

So for example, the in-place occupancy here is around 90%. It does have several high-profile vacancies. We already have LOIs in hand and actually a lease in the short-term ownership that we've had. Additionally, as you mentioned, the asset has very significant rent mark-to-market, at certain spaces have rents that were set well over 20 years ago and are now expiring in the very near term without options.

And as importantly, the asset clearly is going to be the landing zone for the high-profile and high rent paying tenants Brian kind of laid out in his remarks this morning. From a cap rate perspective, with our expenses, the management fees and the LOIs at hand, the yields in the low 6s today with very, very significant growth potential ahead of us. So importantly, from a total return perspective, as you think about the IRR, we think this will generate high single-digit, low double-digit IRRs using pretty conservative assumptions. So we're really excited about having it as part of our portfolio.

Good luck in the back half.

Our next question comes from Samir Khanal with Bank of America.

I guess my question is around the same-store NOI growth in the second quarter, which was a very strong number. But can you elaborate the other revenue line there, which did pick up from a year ago? So what's kind of driving that?

Yes. As I mentioned in my prepared remarks, we did have an opportunity to renegotiate our parking agreement at Point Orlando right next to the Orange County Convention Center. And the great part about that renegotiation is we went from being at leased to now having more of a management agreement with a provider, and it allows us to capture the upside in driving additional traffic to that center with the recent redevelopment we did there.

And with that, we get to participate a lot more on the upside as a revenue as well. So that's probably about half of that. And then as we've consistently done over the years, we look for opportunities in there being vacant space to capitalize on that vacancy. And with our ancillary team being able to backfill some of that vacant space and drive additional revenue during the period.

Yes. Go ahead, Brian.

Sorry, I would just add. I think this is just a great example from an operations perspective of how our team just takes advantage of driving revenue throughout the asset. And Steve mentioned parking. We have a great fee generation business, whether it's EV charging, solar. That's been a growth initiative for us. We've got a great specialty leasing team that works with our regions to drive ancillary revenue. So it has been an area of focus. And as Steve mentioned as it relates to that Point garage deal that is going to be recurring for us. So we were really pleased with what we saw there during the quarter.

Yes. And let's not lose sight as well of the strong top line contribution of ABR of 3.8%. So what that really is showing you is the accelerating impact of that SNO pipeline as we commence $15 million quarterly and continue to keep that SNO pipeline over $60 million. So it gives us a high degree of visibility to me are not only into growth this year but even better growth in '26 and '27.

Our next question comes from Greg McGinniss with Scotiabank.

Just looking at the bad debt expense, it looks like you're tracking at the low end of your guidance range. Is there anything that is standing out as potential headwinds for the back half? Or is this just some conservatism on your part for maintaining that range?

Yes. I mean, I think Brian hit it on his comments, we continue to be really pleased with the underlying credit quality of the portfolio. Obviously, in the first half of the year, there was a little bit more tenant disruption and some of that pre-petition debt is -- or bad debt is sitting within that amount. And then there is always sort of the normal core seasonality to when we receive some of the real estate tax payments.

But I think as you look to the back half of the year, we continue to be really impressed with the underlying tenant quality and no real concerns there in the bad debt line item.

Okay. And then on the leasing demand, just curious how that's trended through the year, whether you've seen any sort of changes from the April tariff announcement through today, and the types of tenants that you're finding to backfill some of these anchor spaces and what you expect to be filling with [indiscernible].

Yes. Last call we actually touched on what we were seeing kind of real time because we thought it was prudent after the tariff announcement. And then we came out of ICSC very encouraged in terms of the tenor of those conversations. And what's been interesting over the last 2 months as it's played out, those conversations have now turned into LOIs and leases and you can see that come through in the quarter. More GLA than we've leased in the last 2.5 years, and Steve touched on the highest ABR that we've ever had as a company.

And despite all of that volume, we still have more in the pipeline today than we did a year ago. So we remain really encouraged. Our team is focused on leasing up the remainder of the vacancy that we've taken back here over the last few months.

And then I touched on a number of the categories earlier. But I would add kind of to Mark's point, we are seeing this trend accelerate of more elevated brands going to grocery-anchored shopping centers. And it's not just at LaCenterra, right? We've seen it in suburban Philadelphia and Island in Florida and Plano, Texas, most recently in Davis, California.

And whether that's maybe lifestyle tenants that have been performing at grocery-anchored centers or higher-quality food and beverage that we continue to add to the portfolio, opening our first locations with Tatte Bakery and Mendocino Farms are in place. So it's been fairly broad-based. And with all the work that our team has done across the portfolio, we're just attracting a better caliber of tenant today and it's something that we're really excited about.

[Operator Instructions] Our next question comes from Craig Mailman with Citi.

Just want to focus a little bit here on the cadence of earnings. I think you guys are run rating to at least hit the midpoint of guidance for the back half of the year. Could you just talk about some of the puts and takes as we think about kind of the first half run rate into the second half? And then just maybe give some additional color on the contribution of LaCenterra and maybe how you guys think about financing that kind of more permanently with dispositions or other financing sources.

Yes, Craig. If you just look at the first half of the year, we were really pleased on how we performed. Obviously, lease settlement income was a little higher than our historical run rate there. And I think that should probably decelerate into the back half of the year, all things being equal. And then obviously, there is some seasonality to just how we collect certain amounts of revenue, whether it be the percent rent line on that.

But I think importantly, what you should expect is the acceleration of same-property NOI growth into the back half of the year as we continue to commence rent from the SNO pipeline. On LaCenterra, as we've typically done, we've really financed that with a combination of capital recycling and free cash flow on a leverage-neutral basis.

What should we think about on the kind of the net spread on that investment from a GAAP perspective?

I would consider it basically neutral at the start and with the position to be able to accrete that pretty quickly as we capitalize on the low market rents.

The only thing I would add, Craig, as we think about our capital recycling, we always try to take advantage of the opportunities in our portfolio to lower our marginal cost of capital like we did in the past quarter where we sold the ground lease at a low cap rate, parcel at about [ 2% ] cap, which really drove the cap rate for that cap recycling in Q2 down to the 5s. So we're always going to be focused on trying to find a piece of the portfolio we can exit low hold and low yield capital.

Our next question comes from Michael Griffin with Evercore.

I appreciate the commentary so far. Just wondering if you could give us a sense, in your conversation with retailers, obviously, we've seen some trade deals come to fruition recently. But has there been kind of this understanding of, "Hey, we're still burning off the inventory that we brought in sort of pre-tariff announcements?" Have they thought, "Oh, we're going to absorb some of this tariff cost versus pass it on to the consumer." I just want to get a sense as we look to the back half of the year. Could we see some pressure on retailer margins as it seems like this tariff scenario of 15%, whatever you want to call it, starts to really materialize?

Yes, let me start the answer here. One of the things that we've been really encouraged by with the retailers is their commitment to the store as the most profitable channel to reach the customers. And they're really making a long-term decision by entering into a 10- or 15-year lease. And their commitment to the store has been phenomenal, as you can see in our results. So the tariff noise really has done little to abate that demand, and we're encouraged, as Brian was talking about, not only by the breadth of demand we're seeing but by the types of quality tenants we're bringing into the portfolio, the vibrancy and frankly, the traffic they bring, which is very clear in our results.

Yes. I would just add, I mean, the commentary that you heard from national retailers after the first quarter call was really constructive in terms of how they're navigating tariffs, whether that's through negotiation with suppliers or alternative methods, sourcing and also the commentary around how the consumer has remained resilient. We still have a strong job market. We're still seeing positive traffic trends across the portfolio.

And to this point, that really ties with what we're hearing from the real estate departments as well in terms of their focus on growth, and the tenants that we're growing with are performing. And then the last thing I'd mention, you saw it again last week, another very active auction where retailers are bidding for space, where there's no downtime, all their own costs, that kind of gives you a window into that demand environment into how tight the supply environment is as well. So, so far, it's been really constructive. We're keeping a very close eye on it. Could there be some impacts down the line? Sure. But from what we're seeing to date, we're very encouraged.

Our next question comes from Cooper Clark with Wells Fargo.

Following the acquisition in Q3, could you talk about how the current acquisition pipeline looks moving forward? Wondering if there's an appetite for more transaction activity in the back half of the year. And also, what type of buyers you're competing with on deals you're currently underwriting?

Yes, I'd say start with your last point, broadly air, our competition is clearly heating up. There's clearly more private capital, which includes high net worth and pension coming in and seeking exposure to the asset class. That's clearly compressing cap rate for grocery-anchored deals and really following through in some other asset types. So when we think about the market, we're going to continue to focus on opportunities in our footprint where we see high-growth opportunities.

And we really think that our team on the ground helps us identify those quickly to focus on them like a LaCenterra and pass on other ones where you don't see that growth. So you should expect us, as Steve kind of mentioned, be balanced in capital recycling but also disciplined. We're not buying to buy. We're buying assets where we think we can really drive value.

Our next question comes from Alexander Goldfarb with Piper Sandler.

So my 1 question is on the aggregate of the SNO that's coming online with the 200 basis points of drag that you entered the year, meaning the known move-outs that you started the year with and the known bankruptcies, and your pace of leasing and getting this $40 million of SNO opened this year.

Stacy, I'm not asking for '26 guidance, but still when you hear your commentary on all these good things happening, why should we not think the back half of next year is going to show a really strong ramp? I'm trying to understand what are the offsets that we should think about that would sort of limit the upside benefit of all this stuff that you're talking about. I mean presumably, interest rates will come down, not up. So I'm just trying to understand what contains next year from showing sharp acceleration in the back half.

Well, we're not prepared to give guidance at this point, but what we are really encouraged by, Alex, is how we've positioned ourselves to outperform from a growth perspective, given the stacking of that rent pipeline. And it's not only what we have in the signed but not commenced but also what we have in legal. It gives us a lot of confidence that the strategy continues to work. It's an all-weather strategy that provides visibility on growth.

And of course, the deducts from that growth as we look out will be any additional tenant disruption. But we like how the portfolio is positioned from a credit standpoint. We like how we're continuing to generate great demand to be in our assets at compelling rents.

Our next question comes from Juan Sanabria with BMO Capital Markets.

You talked a little bit in the prepared remarks about opportunities on the CAM side to get more favorable setups in the leases. Just curious on how we should think about that impacting margins on a go-forward basis, kind of all else equal.

Yes. Again, it's been something that we've been focused on really throughout the lease. And whether it is incremental rent growth that we're getting, whether it is flexibility in terms of development or, to your point, removing CAM caps, removing carve-outs and strategically deploying fixed CAM, I think you can see it come through today and the recovery rate that's ahead of where build occupancy sits.

And so we expect to see some further improvement there in margin as we continue to focus on these areas but it's not really a new phenomenon. It's something that our team has been doing and has been successful with for some time. And you can really see that coming through in the results. So we're pleased with the tenor of the lease conversation. It's something we're going to continue to be focused on.

Yes. And I would just add, it shows our disciplined approach to operations, and we continue to find opportunities to harvest growth in this great portfolio.

Our next question comes from Haendel St. Juste with Mizuho Securities.

So I guess my question somewhat dovetails on the last comment you made, Jim, about finding these great opportunities in the portfolio. You guys have done lots of great things lately, strong stats, some all-time highs in ABR, small shop spreads. And it looks as though you have some pretty sustainable tailwinds into next year with a lower occupancy and lower rents. But your multiple still sits well below the peer set. So I guess I'm curious why you think that is and what you guys are focused on to drive down that gap versus your peers and trade closer to the peer sector or maybe even a premium at some point.

Well, we would agree very much that our multiple doesn't reflect appropriately the upside in growth that we're going to continue to deliver. And our plan on this side is to continue to deliver that growth and outperform and chip away at that relative multiple. I think it presents, frankly, the investor a compelling opportunity from a total return standpoint that we have a business plan that's not predicated upon external growth. It's not predicated upon the pricing of our currency but much more predicated on the continued ability to fund accretive growth through internally generated cash flow.

That's why I often say it's an all-weather business plan. And I'm proud of the fact that we're delivering growth where we are despite the tenant disruption that we have. I'm also excited about what continues to happen to the composition of this portfolio as we execute our value-added strategy and really drive and create value. So we're confident in our ability to continue to deliver, and I think as we do, we'll continue to eclipse that multiple differential.

Our next question comes from Caitlin Burrows with Goldman Sachs.

So it sounds like leasing and pricing remain really encouraging. I was wondering if you could go through how the year so far is turning out versus your expectations. Any additional color you can give on how you set guidance? Like is it -- do you think of it as being conservative versus realistic? And what's making the previous high end of same-store NOI growth no longer attainable?

Yes. Thanks, Caitlin. I think we continue to be really impressed by the underlying portfolio. I think you hit on a lot of the leasing items that Brian went through earlier. As you remember, just when we started the year, the midpoint of our expectation for tenant disruption was 200 basis points of drag, right? As I mentioned in my comments, with some of the more recent activity with At Home and Rite Aid, that has moved up a little bit.

But I think importantly, our ability to drive additional growth from the portfolio and move our midpoint up from our initial midpoint of 4% just shows you the growth in the portfolio and our ability to continue to drive through disruption. I think we've consistently said over the last year or 2, to the extent we get additional spaces back as a result of tenant disruption, while that may impact short-term growth, ultimately, it's just going to provide us additional space to grow into '26 and '27.

Our next question comes from. Floris Van Dijkum with Ladenburg Thalmann.

My question for you guys is regarding shop occupancy, again, your most valuable space presumably in all your centers. I think at an all-time high right now, 91.2%. But my question is, and I think this is sort of was alluded to in one of the previous questions, where can it go to? And maybe if you can talk about what your shop occupancy is on all the assets that you've actually redeveloped could presumably have higher. And then the second question or the related question is, what percentage of your SNO pipeline represents shop space?

Let me take the top of that question and I'll let Steve add additional color. But one of the things we're particularly encouraged about is not only that we've reached a record in terms of small shop occupancy, but we've got great visibility in more than a couple of hundred basis points of growth in that number, particularly as we deliver our in-process redevelopments which can drag that as we bring in the new anchors and then obviously lease off the success of the anchors and the traffic that's being brought in. So it's an important lever for our growth as we look ahead. And we're very excited, as Brian was talking about, in terms of the types of best-in-class tenants that are traffic drivers themselves that we're bringing in the small shop category.

Yes. On the SNO, it's about $35 million worth of ABR and I think importantly, at about a mid-30s ABR per square foot. So as you mentioned, impressive numbers in there.

And tremendous opportunity and visibility on being able to continue to accrete that occupancy percentage. As we often say, we don't manage the portfolio for occupancy but rather for growth, which is part of why our in-process redevelopment pipeline drags that number a bit. But in my mind, it just provides us tremendous visibility on how we'll continue to grow it.

And if I were to -- the first part of my question, which is the occupancy in shop space on the assets that are redeveloped and stabilized, how much higher is that than your average today in your portfolio?

Yes. Sorry, Jim, we have about 100 basis points of drag today in that future reinvestment pipeline that's dragging down, Floris, and we typically add several hundred basis points when we deliver those reinvestments.

Our next question comes from Ki Bin Kim with Truist Securities.

Can you guys provide a progress update on the re-leasing efforts on the Big Lots and JOANN's activity?

Yes. Sure, Ki Bin. Like I said earlier, we've been very pleased with what we're seeing. We're about 80% resolved for us that's leased, at lease or we're finishing up an LOI to go to lease. And particularly on those JOANN and Party Citys, which we've really just taken back recently, we've been very pleased with the progress. So whether that's with specialty grocers like Trader Joe's, operators like Ulta, Crunch Fitness, Barnes & Noble, the team has been very active in terms of addressing the space.

And we weren't waiting for it, right? We had a sense that this was coming like when we talked about at the time, we had reduced our exposure to Big Lots by 30% at the time of the filing. We had 2 of the spaces already leased JOANNs and have been managing down some of that Party City exposure over time as well. So we remain very encouraged with how our team is backfilling it. We're not resting on our laurels. We're focused on getting the rest of that space leased. And you should really start -- we're starting -- some of that is starting to come online here in the back half of this year, but you start to see it come online in bulk as we get into 2026.

And just broadly speaking, when you think about the potential basket of other retailers that might be a little bit challenged, whether that be like a Michaels, Kohl's or some test stores, when you look at that collective basket of troubled retailers versus what you've already gone through this past year, does it feel better, worse, or the same going forward?

It actually feels much better, and that's a point Steve was really trying to underscore in his remarks is the fact that we work our way through some of the more significant weaker credits in an environment that's been strong from a leasing perspective, and importantly, with the business plan that's been able to deliver growth as we have been dealing with that tenant disruption. We continue to prove that it's an opportunity. And we're proud of the fact, again, that we're growing better than 4% despite over 230 basis points of drag. So as we look forward, will there be additional tenant disruption? Of course, but we like how the portfolio is positioned to outperform.

Our next question comes from Mike Mueller with JPMorgan.

I know LaCenterra is a grocery-anchored center with the Trader Joe's. But if Trader Joe's wasn't there, would you have had the same interest in the property? And do you think pricing would have been materially different if so?

Look, it's a great question. We do like to buy assets that have grocery exposure to highlight some of the trends Brian is focusing on. So when it comes down to I think it would be a question it would have been more of, could we put a grocery here and do it accretively? Could that grocer then change the overall aspect of the tenancy here? Luckily, LaCenterra, we have an easier path leasing and mark-to-market.

But when we really look at acquisitions, it's really trying to find those opportunities where we can truly drive value, not necessarily just about having a grocer ability to drive value from the date of acquisition.

Our next question comes from Linda Tsai with Jefferies Group.

On the LaCenterra acquisition, a 2-parter on your strategy. With 5 million visits a year, how much higher is the annual traffic statistics in the HHI demos versus the rest of the Brixmor portfolio? And then just in terms of buying in a master planned community, are there any nuances to think about why these assets would be more attractive relative to a center that is not in a master planned community?

Well, I can start with the second piece of this asset. It's considered the heart of Ranch. So we really -- there's a real lack of competition here, and it's really been designed to drive interest across the entire community. So we like the position of this asset in that there isn't true competition within the trade area.

From a demo perspective, what I would say is our primary investment philosophy is really finding value-added assets where we can drive value. While this 1 does have very attractive demos, I think the average household income is about $151,000, I think our current today is $120,000. So it's accretive to those demographics. So we didn't buy it for the demographics. We bought it for the ability to drive value here.

And we had tremendous visibility, as Brian can give some color on, in terms of great tenants who we knew wanted to be there.

Yes. I mean, as somebody mentioned earlier, sprinkling the Brixmor magic, our team has already been doing that and is very excited. We've got a great team in Houston, as we talked about throughout this call. We've got a great portfolio in Houston. We've already had leases that have brought into committee that are ahead of where we expected to be some great uses.

And we had some of the folks that were there on the asset join the team as well that, to Mark's point, are very tied in with community there and are helping us from an operating perspective. So it does fit into what we do from a growth perspective. These are tenants that we have been attracting to the portfolio, like I mentioned, Sephora and others, some great food and beverage operators there. And just overall, we're really excited about it and really proud of how our team has gotten after it out of the gate.

With great existing traffic as you highlight, but we think the pro forma traffic as we bring in these better tenants to replace some of the first-generation lifestyle tenants here at rents that can be as much as double as what's in place, we'll continue to drive that traffic and continue to drive the performance here.

Our next question comes from Paulina Rojas with Green Street Advisors.

And a follow-up to a prior question. You mentioned that cap rates for grocery-anchored centers are compressing. Can you clarify the timing around that comment? Specifically, have you seen pricing continue to become more competitive at the margin over the last 2 or 3 months? Or where are you really referring to a broader trend over a longer period?

Sure, it's a great question. So certainly, year-over-year, we're seeing cap rate compression. And if we really look out over the last quarter, if you think about the deals we've really launched here in the spring, we're seeing very high demand for grocery-anchored centers from pension and other private capital. So we're seeing it real time in the last 3 to 4 months is how I'd answer your question.

Yes, yes, it does.

Our next question comes from Cooper Clark with Wells Fargo.

The incremental NOI yield from the redev pipeline in process has remained strong at 10%. As you talk about the future redevelopment projects you spoke to earlier on the call, could you walk through some of the puts and takes as we think about a strong leasing environment, coupled with some continued uncertainty from tariffs? Wondering if we could see yields move north of 10% moving forward if the current leasing environment remains steady.

I think you highlighted a couple of the drivers. Obviously, you've got demand and that's robust, and we continue to surprise ourselves in terms of the rents that we're able to achieve. On the other side of that, you could have cost and inflationary pressures impacting those returns. So as we look out, in particular, look at the opportunities that we've identified in the shadow pipeline, we're reasonably confident about our ability to continue to deliver that incremental return in the high single, low double digits, basically in line with what you've seen over the last couple of years.

[Operator Instructions] Our next question comes from Michael Griffin with Evercore ISI.

Just a clarification question on the LaCenterra property. I believe it's in a mixed-use development with an office and resi component. Did you justify the retail portion or did you also buy the office and resi as well?

Yes. It is in a mixed-use environment. We do not own the multifamily. There is some smaller office component at the asset. It's been well leased basically for. It's really the only Class A space in the market. We do actually believe just like the retail, there is red mark-to-market. There really isn't any occupancy upside today at that, but we do think there's good rent mark-to-market in the office, given it's really the only Class A space in that trade area.

And great creditworthy tenants that are in there today as well, which, to Mark's point, we think there's some upside, too.

Our next question comes from Caitlin Burrows with Goldman Sachs.

I feel like this has been touched about a few times, so sorry. But just on the watch list, it sounds like it's -- you've said a few times that it's smaller than it was historically. I was wondering if there was any way you could quantify like today, it's X amount of ABR and last year over the X amount of years historically, it was some other level?

Caitlin, I think it's important. We use the watch list as a tool, right? We look at it not just with near-term credit risk but also with tenants that may be putting stores at risk, that have weaker performance, that are closing locations. So we don't necessarily have a number that we've reported on it. But I would just say, if you look at the names that have filed recently, it's significantly lower than where it was.

But I'd also point to look at the names we've grown with in the top 40, right? You think of how Whole Foods has come up in our portfolio, you think about Sprouts, all the Chipotle, Bath & Body Works, those are some strong operators that we continue to grow with. Trader Joe's is another one. So I think that underlying credit portfolio, you can see it getting stronger from that perspective as well. And to Jim's point, look, there's always some tenants and categories that we're keeping a close eye on.

But if you have a low rent basis like we do and we can backfill accretively to the extent you get a box or 2 back, you're going to do okay. So we feel really good about the position that we're in today. And as we talked about throughout the call and the other side of this, we're really improving that position that we're in today from a credit profile standpoint.

Our next question comes from Paulina Rojas with Green Street Advisors.

Again, a very specific follow-ups upside of LaCenterra. Could you please provide some numbers around it? Where is -- where are current in-place rents? And what do you think the market rents are as a percentage if it's easier?

Sure. So we do think that LaCenterra is going to drive some pretty significant NOI growth. Our base case underwriting has NOI growth that kind of averages the 5% range over a 10-year hold. A lot of that's driven by the lease-up of the spaces that are currently vacant. Those leases are coming in kind of in the $60 to $90 per square foot range versus the in-place NOI -- the in-place ABR. Obviously, the vacancies are 0. The in-place ABR of the asset today is in the low 30s.

And is the type of space comparable there in that mix that you're referencing?

Yes, for sure. So a lot of that's the in-line base in Phase 1, where you see the big rent mark-to-market.

Yes. And I think, Paulina, interestingly, the tenants that are performing that we want there, they're driving a ton of traffic are doing well. Those are -- we're getting some percentage right out of those stores. The other thing is some tenants where we may ultimately want to upgrade, those are the spaces that are significantly under market, to Mark's point, in that part of the asset. And we've been pleased with what we've been seeing just a few weeks out of the gate in terms of the activity there. So we do feel that there's a tremendous amount of upside and excited of how our team is getting after it out of the gate.

Our next question comes from Alexander Goldfarb with Piper Sandler.

Just going back to my question, as we look on Page 30 of the south and you have $41 million of SNO that's going to commence this year, $21 million next year and presumably, that will -- those numbers in the outer years will grow as you guys do more leasing. So far, you haven't described anything that would say these aren't fully additive. And I guess that's what I'm trying to get at is in shopping centers, we often get excited and then have to revise down numbers. I'm just trying to understand if there are any negatives to us adding fully like the $41 million this year, the $21 million next year in addition to your normal course NOI growth?

Yes. I mean, I think there are a couple of things that you always consider. One is ongoing tenant disruption. The other is normal course move-outs. But the important thing is that from a growth perspective, we're providing visibility as a rent stack, not just for this year but as you point out, into next year, and it's pretty compelling.

So what is normal course move-outs, Jim, that we should be thinking about? Is it $10 million, $20 million? I'm just trying to get a sense.

Yes. Alex, I mean, that shifts in a given year relative to what the exploration profile looks like. Just pointing to a number of the positives, normal course move-outs have been down. But as Jim touched on, we're not giving guidance today. We do feel really confident in the trajectory of growth for this year and beyond. But there are some factors like from either a tenant disruption standpoint or some move-outs that can impact that into next year.

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

Thanks, everyone. 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.