Brixmor Property Group Inc.

Welcome to the Bricksmoor Property Group's second quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. A 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. I would now like to turn the call over to Stacey Slater, SVP of Investor Relations and Capital Markets. Thank you. You may begin.

Thank you, Operator, and thank you all for joining Bricksmore'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 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.

Thanks, Stacey, and good morning everyone. Before speaking to our results and continued execution, I'd like to begin by congratulating Brian, Stephen, Kevin, and Helene on their well-deserved promotions. Simply put, well done. As a company, our foundational cultural tenet is that great real estate matters, but great people matter even more. At Bricksmore, we are blessed with the best team in the industry, a team that continues to deliver outperformance quarter in and quarter out as we execute our balanced value-added plans. Speaking of records, we achieved record occupancy and record new and renewal spreads in the quarter, once again highlighting the flywheel effect of our portfolio transformation and our ability to capitalize on the embedded mark-to-market opportunity. In fact, we averaged rents of $23.82 a foot versus our average in place of $17.25. Importantly, we also commenced an additional $17 million of ABR in the quarter, ahead of expectations, while our signed but not commenced AVR replenished to $65 million. Again, providing excellent visibility on continued top-line growth as those leases commenced paying rent over the next several quarters. Overall, that top-line revenue growth drove most of our same-store performance of 5.5 in the quarter, as growth in operating margins driven largely by increased occupancy and penetration of fixed CAM, delivered the balance of that growth. That same store growth, in turn, drove bottom line FFO growth of nearly 6% in the quarter when you exclude the prior year gain on debt extinguishment. Even with expectations of higher levels of bad debt and lower prior year recoveries, as Steve will detail further in a moment, This outperformance led us to raise our FFO guidance to a range of $211 to $214, an increase of $0.03 at the midpoint. On the reinvestment front, we continue to make excellent progress, delivering $37 million at an incremental return of 9%, putting us on track to deliver over $200 million for the full year. We also commenced $100 million of pre-leased reinvestment projects, including a second phase of Point Orlando and an exciting restaurant out parcel district called Block 59 in Naperville that Brian will discuss further. These and other projects underway provide us with excellent visibility that we will continue to deliver $150 to $200 million for our plan in 25 and 26 and beyond. On the capital recycling front, we were closed during the quarter on a $17 million acquisition in Long Island that is immediately adjacent to one of our existing centers. And just barely a month into ownership, we've identified several grocers to backfill an empty box at highly accretive rents. With these and other grocery opportunities that Brian will highlight in a moment, we continue to organically grow our overall grocery-anchored percentage to over 80% of AVR. Importantly, in a manner that unlocks huge value through yield and compression and cap rate. Following quarter end, we also closed on the acquisition of fresh market shops in Hilton Head, a value-added acquisition that builds on our critical mass in the fast-growing coastal Carolinas market. Further, our forward acquisition pipeline continues to build to over $200 million with opportunities in our core markets to further cluster and leverage our best-in-class platform. Finally, I'm pleased to report that we continue to demonstrate the strength of our balance sheet and the impact of our balance strategy as we brought debt to EBITDA down to 5.6 times and have over $1.7 billion of liquidity to fund our business for the next several years. In sum, our balanced value-added business plan not only continues to deliver on all fronts, but also positions us importantly for continued outperformance. With that, I'll turn the call over to Brian for a more detailed discussion of our operating results. Brian? Thanks, Jim, and good morning, everyone. I'm pleased to report another quarter of outstanding operating results delivered by the Bricksmore team, as demand to be in our centers from a wide range of high-quality operators shows no signs of slowing down. The well-capitalized tenants we are attracting and the rents we are achieving demonstrate not only the continued transformation of our portfolio, but the unmatched strength of the Bricksmore platform. Our leasing activity during the quarter allowed us to achieve records once again in overall anchor and small shop occupancy, with small shops growing sequentially for the 14th consecutive quarter to 90.8%. Record occupancy levels are also enabling our team to push rental rates higher in both new and renewal leases, which was also evident in our results. As we achieved record renewal growth of 19%, across 195 renewal leases executed in the quarter to pair with the over 50% growth in our comparable new leases, which Jim highlighted. As encouraging as these results are, what's even more encouraging are the tenants we delivered them with. Tenants like Ulta, HomeGoods, Rally House, Skechers and Boot Barn, along with the company's first new lease with Wayfair in Greensboro, North Carolina, yet another online retailer that is recognizing the importance of having a physical store footprint. We also continue to grow our grocery anchor percentage during the quarter, adding another Sprouts Farmer's Market to proactively backfill a cons location in Knoxville, Tennessee, at close to triple the in-place rent, demonstrating once again the opportunity that we have in our below-market leases and the speed at which our team can capitalize on them. The cons boxes are among the few that are expected to come back to us at a time when box vacancy is at historic lows for the portfolio, and our team is well on their way to backfilling these spaces in markets like Raleigh and Houston with better tenants at higher rents. Briefly on reinvestment, to expand on what Jim highlighted, we are very excited to bring on $100 million of accretive, pre-leased, transformative redevelopment projects during the quarter led by the second phase at Point Orlando and Block 59 in suburban Chicago. Phase 2 at Point Orlando is coming online at the perfect time, as we prepare to open live at the Point in partnership with the Cordish Companies later this fall, and Block 59 includes a great mix of well-capitalized restaurant tenants, complementing the grocery anchor component of the shopping center in one of the most desirable suburbs in the Chicago market. Looking forward, we remain encouraged by the depth of retailer demand, and the forward and legal pipeline, which continues to grow despite the records we continue to set in occupancy. Our team continues to be laser-focused on quickly converting this demand into open, rent-paying tenants, which as Steve will highlight further, gives us great visibility on future growth. Before handing the call over to Steve, I would like to congratulate him, Helaine, and Kevin on their well-deserved promotions, and thank Jim and the board for the opportunity to serve as president. as well as the broader Bricksmore team for their continued support. There has never been a better time to be at Bricksmore, and I'm grateful to work with the best team in the business. Steve? Thanks, Brian.