Brixmor Property Group - Earnings Call - Q2 2025

Executive Summary

• Q2 2025 delivered solid operational momentum with revenue of $339.5M, GAAP diluted EPS of $0.28, NAREIT FFO/share of $0.56, and same property NOI growth of 3.8% YoY; management raised 2025 FFO and same property NOI guidance on the back of record leasing metrics and visibility from a $67.1M SNO pipeline.
• Results beat S&P Global consensus on both revenue ($339.5M vs $332.5M*) and Primary EPS (0.2265 vs 0.2108*); beat drivers included robust base rent growth from commencements and ancillary revenue (notably a restructured parking agreement at Pointe Orlando), partially offset by higher taxes and a prior-year tax benefit comp in Cook County.
• Guidance raised: 2025 NAREIT FFO/share to $2.22–$2.25 (from $2.19–$2.24) and same property NOI to 3.90%–4.30% (from 3.50%–4.50%) as SNO commencements are now expected at $69M for 2025, providing a tailwind into 2026; bad debt remains within a 75–110 bps guide of total revenues.
• Strategic catalyst: the July acquisition of LaCenterra at Cinco Ranch ($223M) adds a high-traffic, grocery-anchored lifestyle asset in Houston with occupancy ~90%, LOIs in hand, and material rent mark-to-market (in-place ABR “low $30s” vs $60–$90 PSF for new deals), underwriting to low‑6% initial yields with high single-to-low double-digit IRR potential.

Note: Asterisked values (*) are from S&P Global consensus/actuals; Values retrieved from S&P Global.

What Went Well and What Went Wrong

• What Went Well

  • Leasing execution: 1.7M SF executed at a blended +24.2% spread, including 0.9M SF of new leases at +43.8% (company record for new lease ABR); small shop leased occupancy reached a record 91.2%.
  • Visibility and growth: SNO stands at $67.1M of ABR (3.2M SF), with leased‑to‑billed spread of 450 bps; commencements of $14.5M ABR in Q2 underpin raised 2025 growth outlook.
  • Management tone/confidence: “Our value‑add plan continues to fire on all cylinders… providing… unparalleled visibility on future growth,” with raised 2025 FFO and same‑property NOI outlooks, and reinvestment pipeline of $374.3M at ~10% yields.

• What Went Wrong

  • Tenant disruption drag: CFO cited a ~260 bps Q2 drag on same property NOI from bankruptcies/move-outs, though outweighed by base rent growth (+360 bps contribution) and ancillary revenue.
  • Tax comparables: Net expense reimbursements detracted ~110 bps from same property NOI growth due to a prior-year Cook County tax assessment benefit, pressuring NOI margin vs prior year.
  • Occupancy vs prior year: Total leased fell vs Q4 2024 (95.2% to 94.2%) even as it ticked up sequentially (+10 bps), reflecting the near-term impact of recaptured space pending backfill commencements.

Transcript

Operator (participant)

Greetings and welcome to Brixmor Property Group second quarter 2025 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 0 on your telephone keypad. 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.

Stacy Slater (Senior VP of Investor Relations and Capital Markets)

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 and 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, including 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 re-queue at this time. It's my pleasure to introduce Jim Taylor.

Jim Taylor (CEO and Director)

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 2025 and provides excellent visibility on outperformance in 2026 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 1 our unique visibility on growth, 2 the fundamental and accelerating transformation of our portfolio, and 3 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 eight 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, Barn Plaza, a Whole Foods anchored center just outside of Philadelphia, and 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 of 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 of 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.

Brian Finnegan (President and COO)

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. 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, has 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 and 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.

Steve Gallagher (EVP, CFO, and Treasurer)

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 SNOC commencements at higher rents continues to outpace the drag from the short term build occupancy decline. Other reimbursements and 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 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 billed occupancy. Our signed-but-not-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 30th 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 5.5 times, 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 signed-but-not-commenced 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 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. I'll turn the call over to the operator for Q&A.

Operator (participant)

Thank you. At this time we'll be conducting a question and answer session. If you'd like to ask a question, please press Star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press Star 2 if you'd like to remove your question from the queue. As a reminder, we ask that you please limit to one question and requeue if necessary. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please, while we poll for questions. Our first question comes from Todd Thomas with KeyBanc Capital Markets. Please proceed with your question.

Todd Thomas (Managing Director and Equity Research Analyst)

Hi, thanks. Good morning. 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 timeframe for that? With this year's 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 in the remainder of 2025 and sort of an early view into 2026.

Jim Taylor (CEO and Director)

Hey 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. Our hearts are with you and I wanted to say that at the outset. Thank you.

Brian Finnegan (President and COO)

Yeah, and thanks, Todd. We were really pleased with the activity during the quarter. 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. It was pretty broad based. Particularly to your point, a lot of that was on space that we recently recaptured.

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 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. We're 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 drugstores, 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's some good trends there, but also very small part of what we do as well.

We feel pretty confident on the other side of this and from a trajectory standpoint, 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?

Steve Gallagher (EVP, CFO, and Treasurer)

Yeah, 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. Then going forward, we will be getting back a couple of at home. I think more importantly, what Brian highlighted was getting the rent commenced on those backfills within the third quarter into the fourth quarter will start to accelerate that base rent growth as we move through the remainder of the year.

Jim Taylor (CEO and Director)

Yeah. 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 from the signed-but-not-commenced rent pipeline in the latter part of the year, as Steve highlighted.

Todd Thomas (Managing Director and Equity Research Analyst)

All right, thank you.

Operator (participant)

Our next question comes from Michael Goldsmith with UBS. Please proceed with your question.

Michael Goldsmith (Real Estate Investment Trust Analyst)

Good morning. Thanks a lot for taking my question. 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's some leases that are up for maturity for the first time where you can sprinkle some Brixmor magic and remerchandise. What are the benefits from this property, and if you could provide the cap rate, that would be helpful, thank you.

Steve Gallagher (EVP, CFO, and Treasurer)

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. You know, we've 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. For example, the in-place occupancy here is around 90%. It does have several high-profile vacancies where we already have LOIs in hand and actually a lease in the short term of ownership that we've had. Additionally, as you mentioned, the asset has very significant rent mark-to-market.

Certain spaces have rents that were set well over 20 years ago and are now expiring in the very near term without options. 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 in hand, the yields are in the low sixes today with very, very significant growth potential ahead of us. Importantly, from a total return perspective, as we think about the IRR, we think this will generate high single-digit, low double-digit IRRs using pretty conservative exit assumptions. Really excited about having this part of our portfolio.

Michael Goldsmith (Real Estate Investment Trust Analyst)

Thank you very much. Good luck in the back half.

Operator (participant)

Our next question comes from Samir Khanal with BofA Securities. Please proceed with your question.

Samir Khanal (Director of Real Estate Investment Trust and Equity Research)

Good morning, everybody. I guess my question is around the same property NOI growth in the second quarter, which was a very strong number. Can you elaborate the other revenue line there, which did pick up from a year ago. What's kind of driving that? Thanks.

Steve Gallagher (EVP, CFO, and Treasurer)

Yeah, 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. The great part about that renegotiation is we went from being a lease to now having more of a management agreement with the person provider, and it allows us to capture the upsides in driving additional traffic to that center with the recent redevelopment we did there. With that, we get to participate a lot more on the upside as a revenue as well, so that's probably about a half of that. As we've consistently done over the years, we look for opportunities in there being vacant space to capitalize on that vacancy. With our ancillary team being able to backfill some of that vacant space and traffic, drive additional revenue during this period.

Go ahead, Brian.

Brian Finnegan (President and COO)

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. Steve mentioned parking. We have a great fee generation business, whether it's EV charging or 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. 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. We were really pleased with what we saw there during the quarter.

Jim Taylor (CEO and Director)

Yeah, and let's not lose sight as well of the strong top line contribution of ABR 3.8%. What that really is showing you is the accelerating impact of that signed-but-not-commenced rent pipeline as we commence $15 million quarterly and continue to keep that signed-but-not-commenced rent pipeline over $60 million. It gives us a high degree of visibility, Samir, not only into growth this year, but even better growth in 2026 and 2027.

Samir Khanal (Director of Real Estate Investment Trust and Equity Research)

Got it.Thanks a lot, guys.

Operator (participant)

Our next question comes from Greg McGinniss with Scotiabank. Please proceed with your question.

Greg McGinniss (Director)

Hey, good morning. Just looking at the bad debt expense. 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?

Steve Gallagher (EVP, CFO, and Treasurer)

Yeah, I mean, I think Brian hit 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 potential debt or bad debt is sitting within that amount. There is always sort of the normal course seasonality to when we receive some of the real estate tax payments. I think as you look to the back half of the year, we continue to be really impressed with the underlying tenant quality and, you know, no real concerns there in the bad debt line item.

Okay, thank you.

Greg McGinniss (Director)

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.

Steve Gallagher (EVP, CFO, and Treasurer)

Yeah, Greg, our last call, we actually touched on what we were seeing kind of real time because we thought it was prudent after the tariff announcement. We came out of ICSC very encouraged in terms of the tenor of those conversations. What's been interesting over the last two months as it's played out, those conversations have now turned into LOIs and leases. You can see that come through in the quarter. More GLA than we've leased in the last two and a half years. As Steve touched on, the highest ABR that we've ever had as a company. Despite all of that volume, we still have more in the pipeline today than we did a year ago. 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. I touched on a number of the categories earlier. 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. It's not just at LaCenterra. Right. We've seen it in suburban Philadelphia, Marco Island in Florida, and Plano, Texas, most recently in Davis, California. 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 Tate Bakery, Mendocino Farms, and Urban Plates, it's been fairly broad based. With all the work that our team's done across the portfolio, we're just attracting. A better caliber of tenant today. It is something that we're really excited about.

Greg McGinniss (Director)

All right, thanks, Brian.

Brian Finnegan (President and COO)

You got it. Thanks.

Operator (participant)

As a reminder, we ask that you please limit to one question and requeue if necessary. Our next question comes from Craig Mailman with Citi. Please proceed with your question.

Craig Mailman (Director and Equity Research Analyst)

Good morning. 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?

Steve Gallagher (EVP, CFO, and Treasurer)

Yeah, 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. There is some seasonality to just how we collect certain amounts of revenue, whether it be the percent rent line items. 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 signed-but-not-commenced rent pipeline on LaCenterra, as we typically have done, we really finance that with a combination of capital recycling and free cash flow on a leverage neutral basis.

Craig Mailman (Director and Equity Research Analyst)

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

Jim Taylor (CEO and Director)

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

Steve Gallagher (EVP, CFO, and Treasurer)

The other thing I would add, Craig, is when we think about our cap recycling, we always try to take advantage of the opportunities in our portfolio to lower our marginal cost of capital, like we did in this past quarter where we sold the ground lease at a low cap rate and then a land parcel at about 2% cap, which really drove the cap rate for that cap recycling in Q2 down into the 5%. We are always going to be focused on trying to find those pieces. The portfolio where we can exit low. Hold and low-yield, low-yield capital.

Craig Mailman (Director and Equity Research Analyst)

Great, thank you.

Operator (participant)

Our next question comes from Michael Griffin with Evercore. Please proceed with your question.

Michael Griffin (Director)

Great, thanks. 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, you know, 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, you know, 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?

Jim Taylor (CEO and Director)

Yeah, 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. It's 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. Their commitment to the store has been phenomenal, as you can see in our results. The tariff noise really has done little to abate that demand. 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.

Steve Gallagher (EVP, CFO, and Treasurer)

Yeah. I would just add, the commentary that you heard from national retailers after the first quarter calls was really constructive in terms of how they're navigating tariffs, whether that's through negotiation with suppliers or alternative methods of sourcing. Also, the commentary around how the consumer has remained resilient, still have a strong job market. We're still seeing positive traffic trends across the portfolio. To Jim's point, that really ties with what we're hearing from the real estate departments as well in terms of their focus on growth. The tenants that we're growing with are performing. 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. It kind of gives you a window. Into that demand environment, into how tight the supply environment is as well. 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. From what we're seeing to date, we're very encouraged.

Michael Griffin (Director)

Great. Thanks so much.

Brian Finnegan (President and COO)

Got it. Thanks.

Operator (participant)

Our next question comes from Cooper Clark with Wells Farg. Please proceed with your question.

Cooper Clark (VP of Equity Research)

Hi. Thank you for taking the question. 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?

Steve Gallagher (EVP, CFO, and Treasurer)

Yeah, I'd say start with your last point. Broadly, in open-air, 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 gross deals and really following through in some other asset types. When we think about the market, we're going to continue to focus on opportunities in our footprint where we see high growth opportunities. We really think that our team on the ground helps us identify those quickly to focus on them, like LaCenterra, and pass on other ones where we don't see that growth. You should expect us, as Steve kind of mentioned, to be balanced in capital recycling, but also disciplined where we're not buying to buy. We're buying assets where we think we can really drive v

alue. Thank you.

Operator (participant)

Our next question comes from Alexander Goldfarb with Piper Sandler. Please proceed with your question.

Alexander Goldfarb (Managing Director and Senior Research Analyst)

Hey, good morning. Morning down there. My one question is on the SNO. 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 open this year. Stacy, I'm not asking for 2026 guidance, but still, when you hear your commentary and 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 limit the upside benefit of all this stuff that you're talking about. Presumably interest rates will come down, not up. I'm just trying to understand what contains next year from showing sharp acceleration in the back half.

Jim Taylor (CEO and Director)

We're not prepared to give guidance at this point. 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. 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 deduction from that growth as we look out will be any additional tenant disruption. 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.

Operator (participant)

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

Juan Sanabria (Managing Director of Equity Rsearch)

Good morning. Thanks for the time. 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.

Steve Gallagher (EVP, CFO, and Treasurer)

Yeah.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 in the recovery rate. That's ahead of where billed occupancy sits, and we expect to see some further improvement there in margin as we continue to focus on these areas. 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. We're pleased with the tenor of the lease conversation and something we're going to continue to be focused on.

Jim Taylor (CEO and Director)

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

Operator (participant)

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

Haendel Juste (Managing Director and Senior Real Estate Investment Trust Analyst)

Hey there. Good morning. 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. It looks as though you have some pretty sustainable tailwinds into next year with a lower occupancy and lower rents. Your multiple still sits well below the peer set. I guess I'm curious, you know, 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 set or maybe even the premium at some point.Thanks.

Jim Taylor (CEO and Director)

We would agree very much that our multiple doesn't reflect appropriately the upside and growth that we're going to continue to deliver. 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, that'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. 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. We are confident in our ability to continue to deliver and I think as we do, we'll continue to eclipse that multiple differential.

Operator (participant)

Our next question comes from Caitlin Burrows with Goldman Sachs. Please proceed with your question.

Caitlin Burrows (VP)

Hi, good morning everyone. It sounds like leasing and pricing remain really encouraging. I was wondering if you could go through how the year so far has turned 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? What's making the previous high end of same property NOI growth no longer attainable?

Steve Gallagher (EVP, CFO, and Treasurer)

Yeah, 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. 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. 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 two, 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 2026 and 2027.

Caitlin Burrows (VP)

Thanks.

Operator (participant)

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

Jim Taylor (CEO and Director)

Good morning, Floris.

Floris Van Dijkum (Managing Director of Equity Research)

Hey Jim, how are you? My question for you guys is regarding shop occupancy. Your most valuable space presumably in all your centers. It's, I think, at an all-time high right now of 91.2%. My question is, you know, and I think this was alluded to in one of the previous questions, where can it go to? Maybe if you can talk about what your shop occupancy is on all the assets that you've actually redeveloped, presumably that's higher. The second question or the related question is what percentage of your S&O pipeline represents shop space?

Jim Taylor (CEO and Director)

Let me take the top of that question. I'll let Steve add additional color. 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 and more than a couple 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. 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.

Steve Gallagher (EVP, CFO, and Treasurer)

Yeah. On the Snow, it's about $35 million worth of ABR, and I think importantly at about a mid-30s ABR per square foot. As you mentioned, impressive numbers in.

Jim Taylor (CEO and Director)

There is 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. In my mind, it just provides us tremendous visibility on how we'll continue to grow it.

Floris Van Dijkum (Managing Director of Equity Research)

If I were to, you know, 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?

Steve Gallagher (EVP, CFO, and Treasurer)

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

Floris Van Dijkum (Managing Director of Equity Research)

Great, thanks.

Operator (participant)

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

Ki Bin Kim (Managing Director of Real Estate Investment Trust Equity Research)

Thank you. Good morning. Can you guys provide a progress update on the releasing efforts on the Big Lots and Joann activity?

Brian Finnegan (President and COO)

Yeah, sure. Kim, 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 lease, and particularly on those Joann and Party City spaces, which we've really just taken back recently, we've been very pleased with the progress. Whether that's with specialty grocers like Trader Joe’s, operators like Ulta, Crunch Fitness, Barnes and Noble, the team has been very active in terms of addressing this space and we weren't waiting for it. 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 two of the spaces already leased of our Joann and had been managing down some of that Party City exposure over time as well.

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. You should really start to see some of that starting to come online here in. The back half of this year. You start to see it come online in bulk as we get into 2026.

Ki Bin Kim (Managing Director of Real Estate Investment Trust Equity Research)

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 pet 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?

Jim Taylor (CEO and Director)

It actually feels much better. That is a point Steve Gallagher was really trying to underscore in his remarks, the fact that we worked 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. As we look forward, will there be additional tenant disruption? Of course. We like how the portfolio is positioned to outperform.

Ki Bin Kim (Managing Director of Real Estate Investment Trust Equity Research)

Thank you.

Operator (participant)

Our next question comes from Michael Mueller with JPMorgan Chase. Please proceed with your question.

Michael Muller (Managing Director and Senior Analyst)

Yeah, hi, New LaCenterra is a grocery-anchored center with the Trader Joe’s. 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.

Jim Taylor (CEO and Director)

Look, it's a great question. We do like to buy assets that have grocer exposure to highlight some of the trends Brian is focusing on. When it comes down to an asset, I think the question 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 where it's leasing and mark-to-market. When we really look at acquisitions, it's really trying to find those opportunities where it can truly drive value, not necessarily just about having a grocer's stability to drive value from the date of acquisition.

Operator (participant)

Got it. Okay, thanks

. Our next question comes from Linda Tsai with Jefferies Group. Please proceed with your question.

Linda Tsai (Senior VP and Senior Analyst of Real Estate Investment Trust)

Hi, good morning. On the LaCenterra acquisition, a two-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? In terms of buying in a master plan community, are there any nuances to think about about why these assets would be more attractive relative to a center that is not in the master plan community?

Steve Gallagher (EVP, CFO, and Treasurer)

I can start with the second piece. This asset is considered the heart of Cinco Ranch. We really. There's a real lack of competition here, and it's really been designed to drive interest across the entire community. We like the position of this asset in that there isn't true competition within the trade area. From a demos perspective, what I would say is our primary investment philosophy is really finding value-added assets where we can drive value. While this one 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. We didn't buy it for the demographics. We bought it for the ability to drive value here.

Jim Taylor (CEO and Director)

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

Steve Gallagher (EVP, CFO, and Treasurer)

Yeah, I mean 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've talked about throughout this call, we've got a great portfolio in Houston. We've already had leases that are brought into committee that are ahead of where we expected to be, some great uses. We had some of the folks that were there on the asset join the team as well. That's Mark's point. They are very tied in with the community there and are helping us from an operating perspective. 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 just overall we're really excited about it and really proud of how our team's gotten after it out of the Gate with great existing traffic as you highlight. 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 what's in place will continue to drive that traffic and continue to drive the performance here.

Linda Tsai (Senior VP and Senior Analyst of Real Estate Investment Trust)

Great. Thanks for the call.

Operator (participant)

Beth. Our next question comes from Paulina Rojas-Schmidt with Green Street Advisors. Please proceed with your question. Good morning.

Paulina Rojas Schmidt (Senior Analyst and Head of Strip Center Research)

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 two or three months? Or were you really referring to a broader trend over a longer period?

Steve Gallagher (EVP, CFO, and Treasurer)

Sure, it's a great question. Certainly, year over year we're seeing cap rate compression, and if we really look at over the last quarter, you think about the deals that really launched here in the spring, we're seeing very high demand for grocery-anchored centers from pension or other private capital. We're seeing it in real time in the last three to four months. Does that answer your question?

Stacy Slater (Senior VP of Investor Relations and Capital Markets)

Yeah. Yeah, it does.

Steve Gallagher (EVP, CFO, and Treasurer)

Great.

Operator (participant)

Our next question comes from Cooper Clark with Wells Fargo Securities. Please proceed with your question.

Cooper Clark (VP of Equity Research)

Great. Thank you for taking the follow up. The incremental NOI yield from the redevelopment 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?

Jim Taylor (CEO and Director)

I think you highlighted a couple of the drivers. Obviously you've got demand and that's robust, and we continue to surprise even 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. 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.

Cooper Clark (VP of Equity Research)

Great, thank you.

Operator (participant)

As a reminder, if you'd like to ask a question, please press Star one on your telephone keypad. One moment, please. While we poll for questions, our next question comes from Michael Griffin with Evercore ISI. Please proceed with your question.

Michael Griffin (Director)

Great. Thanks for taking the follow up. 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 just buy the retail portion or did you also buy the office in Resi as well?

Steve Gallagher (EVP, CFO, and Treasurer)

Yeah, 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, basically forever, leased. It's really the only class A space in the market. We do actually believe, just like the retail, there is rent mark to market. There really isn't any occupancy upside today at that. 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.

Operator (participant)

Great, thank you. Our next question comes from Caitlin Burrows with Goldman Sachs. Please proceed with your question.

Caitlin Burrows (VP)

Hi,I feel like this has been talked about a few times, so sorry, but just on the watch list, it sounds like 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.

Brian Finnegan (President and COO)

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. We don't necessarily have a number that we've reported on it. I would just say if you look at the names that have filed recently, it's significantly lower than where it was. 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 of how Sprouts, Aldi, Chipotle, Bath and Body Works. There are some strong operators that we continue to grow with. Trader Joe’s is another one. I think that underlying credit portfolio, you can see it getting stronger from that perspective as well. To Jim’s point, look, there are always some tenants and categories that we’re keeping a close eye on. If you have a low rent basis like we do, we can backfill accretively. To the extent you get a box or two back, you’re going to do okay. We feel really good about the position that we’re in today. As we talked about throughout the call, on the other side of this, we’re really improving that position that we’re in. In today from a credit profile standpoint.

Operator (participant)

Thanks.

Brian Finnegan (President and COO)

You got it. Thank you.

Operator (participant)

Our next question comes from Paulina Rojas-Schmidt with Green Street Advisors. Please proceed with your question.

Paulina Rojas Schmidt (Senior Analyst and Head of Strip Center Research)

Hi again, a very specific follow-up site of LaCenterra. Could you please provide some numbers around it? Where are current in-place rents and what do you think the market rents are? Are. As a percentage if easier?

Steve Gallagher (EVP, CFO, and Treasurer)

Sure. 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 zero. The in place ABR of the asset today is in the low 30s.

Paulina Rojas Schmidt (Senior Analyst and Head of Strip Center Research)

Is the type of space comparable there in that mix that you are referencing?

Steve Gallagher (EVP, CFO, and Treasurer)

Yeah, for sure. A lot of that's the inline space in phase one where you see the big rent mark-to-market. Yeah.

Brian Finnegan (President and COO)

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 the. We're getting some percentage rent 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. We do feel that there's a tremendous amount of upside and excited how our team's getting after it out of the gate.

Paulina Rojas Schmidt (Senior Analyst and Head of Strip Center Research)

Thank you.

Brian Finnegan (President and COO)

Thank you.

Operator (participant)

Our next question comes from Alexander Goldfarb with Piper Sandler. Please proceed with your question.

Alexander Goldfarb (Managing Director and Senior Research Analyst)

Hey, thank you for the follow up. Just going back to my question. As we look on page 30 of the SUP and you have $41 million of S&O that's going to commence this year, $21 million next year, and presumably 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. 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.

Jim Taylor (CEO and Director)

Yeah, 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. The important thing is that from a growth perspective, we're providing visibility as those rents stack, not just for this year, but as you point out, into next year. It's pretty compelling.

Alexander Goldfarb (Managing Director and Senior Research Analyst)

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.

Steve Gallagher (EVP, CFO, and Treasurer)

Yeah, Alex. I mean, that shifts in a given year relative to what the expiration profile looks like, just pointing to a number of the positives. Normal course move outs have been down, 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. There are some factors, like from either a tenant disruption standpoint or some move outs, that could impact that into next year.

Alexander Goldfarb (Managing Director and Senior Research Analyst)

Okay, thank you.

Brian Finnegan (President and COO)

You got it. Thank you.

Operator (participant)

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.

Stacy Slater (Senior VP of Investor Relations and Capital Markets)

Thanks, everyone. Enjoy the rest of your summer.

Operator (participant)

This concludes today's conference. You may disconnect your lines at this time. We thank you for your participation.