Brixmor Property Group Inc.

Greetings and welcome to the Bricksmore Property Group fourth quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Stacey Slater. Thank you, Stacey. You may begin.

Thank you, Operator, and thank you all for joining Bricksmore's fourth quarter conference call. With me on the call today are Jim Taylor, Chief Executive Officer and President, and Angela Ahman, Executive Vice President and Chief Financial Officer, as well as Mark Horgan, Executive Vice President and Chief Investment Officer, and Brian Finnegan, Executive Vice President, Chief Revenue Officer, who will 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 or two per person. If you have additional questions regarding the quarter, please re-queue. At this time, it's my pleasure to introduce Jim Taylor.

Thank you, Stacey. Good morning, everyone, and thank you for joining our call. I trust that each of you, your families, and loved ones are well. As I'm sure you are, I'm beyond glad to put 2020 in the rear view. Yet, I'm also very grateful for what the year revealed in terms of the durability and resilience of our team, our portfolio, our business plan, and our purpose. With nearly 95% of our base rent for April through December now collected or addressed, leasing levels and spreads approaching pre-pandemic levels, and highly accretive redevelopments delivered at attractive incremental returns, our performance continued to accelerate through the fourth quarter, and it continued in January, where cash collections exceeded where we were at the same point in December. In short, we delivered one of the best performances in the sector in navigating through the crisis. That's true whether you measure it in terms of cash collections, where we are among the highest, impact on NOI where we are among the lowest, the adequacy of reserves for amounts not collected, or value delivered through reinvestment. And importantly, we are among the best positioned for the recovery, with strong visibility on how we will grow going forward. In a few moments, Angela will cover our performance in more detail, in addition to providing some color on the specific assumptions underlying the guidance we've provided for 2021. I'd like to focus my remarks on those elements of our team portfolio and plan that provide us both visibility and confidence in the continued outperformance in the months and years ahead. As always, it begins with leasing, where in the fourth quarter we signed another 1.4 million square feet of new and renewal leases with a vibrant mix of tenants in grocery, value, service, quick-serve restaurants, and home improvement categories. Importantly, we continue to gain share of new store openings for our core tenants, added new to the portfolio concepts like rent kitchens, and also built a significant pipeline of specialty grocery deals that will trigger some very accretive redevelopments in the future. Leveraging our attractive rent basis, we achieved cash spreads on new leases of 22% in the fourth quarter. Interestingly, where we have active or completed reinvestments, those spreads approach 30%, reflecting the longer tail benefits of our reinvestment strategy. And we continued our success in driving strong intrinsic lease terms, achieving annual embedded rent bumps of 2.1% in the quarter, while remaining disciplined with capital, where we achieved a near record net effective rent per foot of $15.23. Encouragingly, we also saw an acceleration in small shop activity despite the reclosure orders, with 268 new and renewal small shop deals in the quarter, representing over 700,000 square feet. We expect this activity to continue to accelerate as closure orders are lifted. During the quarter, we commenced another 13 million of new AVR, and as of the end of the quarter, we had 38 million of signed but not commenced AVR, which provides us with a tremendous tailwind as we deliver that rent over the next several quarters. As reflected in our guidance that Angela will cover in more detail, We believe that this production will allow us to deliver growth in 2021 at a level that should set us apart, despite what we believe will be continued disruption from the pandemic. In addition to those signed leases, we have a forward pipeline of leases and negotiation of 1.9 million square feet, representing an additional 35 million of AVR. Brian and the leasing team have truly hit their stride at a pace that leads the sector and clearly demonstrates the demand by growing relevant tenants to be in our well-located shopping centers. Importantly, this leasing productivity also unlocks tremendous value creation in our centers through our accretive reinvestment program. During the quarter, we delivered another $21 million of reinvestment and an incremental return of 12%, bringing our total reinvestment deliveries during the year to $113 million and an incremental return of 10%. Stop for a moment and consider that despite a pivot to conserve capital during the height of this crisis, this team still created over $75 million of incremental value through reinvestment during the pandemic. And as we look forward, our pipeline underway now stands at over $400 million of investment, of which we expected to deliver over $200 million this year at an incremental return of 9% to 10%. Of course, as always, we remain disciplined. ensuring that we don't commit significant capital ahead of signed lease commitments. That's what makes this reinvestment activity so much more attractive from both an absolute and a risk-adjusted return basis versus ground-up development, where you don't have the same levels of pre-leasing, and you therefore don't know if you're building a bridge or a pier until it's too late to stop. Further, we've phased our spend to ensure that we don't have too much exposure to any specific project. As we demonstrated last year, that discipline allowed us to be flexible in responding to the crisis while still creating significant value. And importantly, with each completed reinvestment, we drive our centers closer to our purpose of being the center of the communities we serve. As I mentioned earlier, we are pleased to see the follow-on benefit of this reinvestment strategy in terms of leasing and spreads at centers that we've impacted, which now represents over 30% of our portfolio. I'm also excited about the level of grocery activity in our forward pipeline, which again will be transformative for the center's impact. I strongly encourage you to visit our website to take a virtual tour of the projects we have completed or underway to get a sense of the scale of what is happening at Brooksmore. From an operations perspective, we began transitioning in the fourth quarter back to normalized OPEX spend levels as our portfolio reached 97% reopened. and there was less necessity for us to reduce can burdens for closed tenants. Again, I'm very proud of how our team pivoted during the crisis with a focus on our tenants, whether it was reducing can burdens, assisting with access to the PPP program, or providing additional service levels in terms of outdoor dining, curbside pickup, and additional signage. As we look forward, our focus from an operations perspective will be maintaining operating margins, tightening tenant delivery timetables, and continued progress towards our proudly-owned Vicar-X-More standard. And of course, we will continue to apply the lessons learned over the past year in accommodating the ever-evolving needs of our tenants. Speaking of those evolving needs, I would highlight in closing that the pandemic has also accelerated many of the longer-term trends that are important to consider as we execute our plan this year and beyond. Those trends include mall-native tenants such as Bath & Body, Foot Locker, K-Jewelers, Sleeve Number, and Vision Works increasingly relocating from malls to our open-air centers. The ever-growing universe of service providers seeking to capitalize on the convenience, flexibility, and proximity of our shopping centers to the consumer. The increased tenant demand for buy-online, pick-up-at-store, which can be easily accommodated in our format. of locations like ours near single-family rooftops, the focus by retailers on opening or relocating stores, on partnering with landlords such as Brixmore that have proven track records and access to capital, and the convergence of retail and logistics within the last mile of the customer. Each one of these trends is individually significant for our business, and collectively, we believe they will help us continue to drive our performance in the years ahead. Again, thank you for your interest in Bricksmoor. And with that, we'll turn the call over to Angela before opening the lineup for questions.