Executive Summary / Key Takeaways

• Brixmor Property Group is executing a value-added strategy focused on transforming its open-air retail portfolio by leveraging a low rent basis and strong operational platform to attract better tenants at higher rents.
• Recent performance, including Q1 2025 results showing revenue growth and positive same property NOI despite tenant disruption, demonstrates the effectiveness of this strategy in a tight supply environment.
• A significant Signed But Not Yet Commenced (SNO) pipeline of $60 million in ABR provides substantial visibility for accelerated base rent growth in the second half of 2025 and into 2026.
• Strategic capital recycling, including recent acquisitions and dispositions, aims to cluster investments in key markets and fund value-enhancing reinvestment projects, supported by a strong balance sheet and ample liquidity.
• While facing risks from economic uncertainty and tenant disruption, the company's focus on non-discretionary and value-oriented retailers, coupled with its operational capabilities, positions it to potentially outperform peers.

Unlocking Value in Open-Air Retail

Brixmor Property Group stands as one of the largest publicly traded owners and operators of open-air retail shopping centers in the United States. Focusing primarily on community and neighborhood centers located within established trade areas in the top 50 Core-Based Statistical Areas, the company's portfolio comprises 361 properties totaling approximately 64 million square feet of gross leasable area as of March 31, 2025. Anchored predominantly by non-discretionary and value-oriented retailers like TJX (TJX), Kroger (KR), and Burlington (BURL), alongside consumer-oriented service providers, Brixmor's core objective is to maximize total returns to stockholders through consistent, sustainable growth in cash flow.

The company's strategy is rooted in a balanced value-added plan that has evolved since its election as a REIT in 2011. This plan emphasizes proactive portfolio management, pursuing value-enhancing reinvestment opportunities, and executing prudent acquisition and disposition activity, all while maintaining a flexible capital structure. A critical component of this strategy is leveraging the portfolio's historically low rent basis to attract higher-quality tenants at significantly improved rental rates, thereby transforming the asset base and driving intrinsic value.

In a competitive landscape populated by diverse retail REITs such as Simon Property Group (SPG), Kimco Realty (KIM), Realty Income (O), and Federal Realty Investment Trust (FRT), Brixmor differentiates itself through its deep focus on community-centric open-air centers and its fully-integrated operating platform. While competitors like SPG may dominate in premium mall spaces or FRT in high-quality urban mixed-use, and KIM focuses heavily on grocery-anchored centers, Brixmor's strength lies in its expansive retailer relationships and operational efficiency across a broad national portfolio. This integrated platform, supported by experienced management, enables data-driven decisions in leasing, property management, and redevelopment, leading to quantifiable benefits such as higher leasing spreads and improved expense recovery rates compared to some peers. Unlike companies with proprietary technological products, Brixmor's competitive edge is derived from the strategic application of its operational capabilities and market intelligence to its real estate assets and tenant base.

The current market environment, characterized by a notable lack of new open-air retail supply and sustained tenant demand, provides a favorable backdrop for Brixmor's strategy. This supply-demand imbalance allows the company to push rents and upgrade its merchandising mix. While indirect competition from e-commerce giants like Amazon (AMZN) remains a factor, Brixmor's focus on necessity-based and value retailers, coupled with the community hub nature of its centers, offers a degree of resilience.

Performance Reflecting Strategic Execution

Brixmor's recent financial and operational performance underscores the effectiveness of its value-added approach. For the three months ended March 31, 2025, total revenues increased by approximately 5.4% to $337.5 million compared to $320.2 million in the prior-year period. This growth was driven by increases in base rent, expense reimbursements, and lease termination fees from assets owned for the full period, as well as contributions from net transaction activity. The increase in base rent specifically benefited from contractual escalations and positive rent spreads achieved on new and renewal leases.

Operational metrics highlight continued momentum. As of March 31, 2025, billed occupancy stood at 90.0% and leased occupancy at 94.1%. Executed leasing activity in Q1 2025 included 1.29 million square feet of new and renewal leases at a blended cash spread of 20.5%, with new leases achieving a spread of 47.5% and renewals 14.0%. These robust spreads, particularly on new leases, demonstrate the significant mark-to-market opportunity being captured from the portfolio's low in-place rent base.

Same property NOI growth in Q1 2025 was 2.8%. This growth was achieved despite a 160 basis point drag attributed to tenant disruption, highlighting the underlying strength from base rent growth, which contributed 410 basis points. The impact of revenues deemed uncollectible also detracted from same property NOI growth in the quarter, partly due to a difficult comparison with the prior year's timing of tax reconciliations.

A key indicator of future growth is the Signed But Not Yet Commenced (SNO) pipeline, which remained strong at $60 million in ABR as of March 31, 2025, representing 6% of total in-place ABR. This pool includes $52 million of net new rent, with approximately $48 million (79%) expected to commence ratably through the remainder of 2025. This substantial pipeline provides excellent visibility on future base rent acceleration, particularly in the second half of the year and into 2026.

Value-enhancing reinvestment remains a core focus. As of March 31, 2025, the company had 37 in-process projects with an aggregate anticipated cost of $390.9 million, targeting an average incremental return of 10%. These projects, often involving bringing in high-productivity grocers like Publix (PUB) and Sprouts (SFM), are expected to drive significant value creation. The company also stabilized $28 million of reinvestment projects in Q1 2025.

Capital recycling activity continues to support the strategy. In Q1 2025, Brixmor acquired one land parcel for $3.1 million and disposed of two shopping centers and two partial shopping centers for $21.6 million in net proceeds. This follows a year of significant capital recycling in 2024, including $212 million of dispositions and $290 million of value-add acquisitions, aimed at clustering investments in attractive submarkets and funding reinvestment opportunities.

Financially, Brixmor maintains a solid balance sheet. As of March 31, 2025, the company had $1.36 billion of available liquidity, including $1.25 billion under its Revolving Facility. The company actively manages its debt profile, having repaid $632.3 million of 2025 notes in Q1 2025 and issuing $400 million of new 5.20% Senior Notes due 2032. Subsequent to the quarter, the Unsecured Credit Facility was amended, extending maturities and lowering interest rate margins. With no scheduled debt maturities until June 2026 (as of the Q1 2025 filing date) and investment-grade credit ratings, Brixmor is well-positioned to fund its business plan.

The company's Debt/Equity ratio of 1.73x (TTM) is higher than some peers like KIM (0.81x) or O (0.69x), but its operational efficiency is reflected in a TTM Operating Profit Margin of 35.92%, comparable to or exceeding some rivals like KIM (31%) or FRT (39%).

Outlook and Risks

Looking ahead, Brixmor has affirmed its full-year 2025 guidance, projecting same property NOI growth of 3.5% to 4.5% and NAREIT FFO per share in the range of $2.19 to $2.24. Management anticipates base rent growth will accelerate in the second half of the year as the substantial SNO pipeline commences. The guidance incorporates an expectation for revenues deemed uncollectible to be within the historical run-rate of 75 to 110 basis points of total revenues, acknowledging potential tenant-specific issues.

The company's outlook is underpinned by the continued momentum from leasing, the stacking effect of rent commencements from the SNO pipeline, embedded contractual rent escalations, and the delivery of accretive reinvestment projects. The vast majority of the ABR contributing to the 2025 forecast is already executed, providing a high degree of visibility.

Despite the positive outlook, several risks warrant investor attention. Changes in national, regional, and local economic conditions, including potential impacts from inflation and tariffs, could affect consumer spending and tenant performance. While leases offer some protection through escalations and expense reimbursements, certain non-reimbursable costs could increase. Tariffs, specifically, could impact construction costs and tenants relying on international supply chains. Local real estate market conditions, competition from other properties and e-commerce, and the financial stability of tenants, including potential bankruptcies beyond those recently experienced (JOANN (JOAN), Big Lots (BIG), Party City (PRTY), Conn's (CONN)), remain ongoing considerations. However, Brixmor views tenant disruption as an opportunity to upgrade its portfolio, citing success in backfilling recent vacancies at attractive spreads.

Conclusion

Brixmor Property Group is executing a focused value-added strategy that is yielding tangible results in the current open-air retail environment. By capitalizing on its portfolio's low rent basis, leveraging its operational platform and retailer relationships, and strategically recycling capital into value-enhancing reinvestments and accretive acquisitions, the company is driving visible growth. The substantial Signed But Not Yet Commenced pipeline provides a clear runway for accelerating base rent growth in the near term, supporting management's positive outlook for 2025 FFO and same property NOI growth. While macroeconomic uncertainties and tenant-specific risks persist, Brixmor's concentration in necessity-based and value-oriented retail, combined with its proactive management of the portfolio and strong financial position, positions it to potentially outperform peers and continue its transformation journey, offering a compelling investment thesis for discerning investors.