What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-08-03 compared with 2020-05-07 · 220 added, 116 removed, 233 unchanged (59% of the section changed)

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We believe we own and operate one of the largest open-air retail portfolios by gross leasable area (“GLA”) in the United States (“U.S.”), comprised primarily of community and neighborhood shopping centers.

As of March 31, 2020, our portfolio was comprised of 400 shopping centers (the “Portfolio”) totaling approximately 70 million square feet of GLA.

As of June 30, 2020, our portfolio was comprised of 398 shopping centers (the “Portfolio”) totaling approximately 70 million square feet of GLA.

Our high-quality national Portfolio is primarily located within established trade areas in the top 50 Metropolitan Statistical Areas (“MSAs”) in the U.S., and our shopping centers are primarily anchored by non-discretionary and value-oriented retailers, as well as consumer-oriented service providers.

As of March 31, 2020, our three largest tenants by annualized base rent (“ABR”) were The TJX Companies, Inc.

As of June 30, 2020, our three largest tenants by annualized base rent (“ABR”) were The TJX Companies, Inc.

(“TJX”), The Kroger Co.

(“Kroger”), and Dollar Tree Stores, Inc.

The Parent Company has been organized and operated in conformity with the requirements for qualification and taxation as a REIT under the U.S.

The Parent Company has been organized and operated in conformity with the requirements for qualification and taxation as a REIT under U.S.

federal income tax laws, commencing with our taxable year ended December 31, 2011, has maintained such requirements through our taxable year ended December 31, 2019, and intends to satisfy such requirements for subsequent taxable years.

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Our key strategies to achieve this objective include proactively managing our Portfolio to drive internal growth, pursuing value-enhancing reinvestment opportunities and prudently executing on acquisition and disposition activity, while also maintaining a flexible capital structure positioned for growth.

In addition, as we execute on our key strategies, we do so guided by a commitment to operate in a socially responsible manner that allows us to realize our goal of owning and managing properties that are the centers of the communities we serve.

In addition, as we execute on our key strategies, we do so guided by a commitment to be socially responsible as we realize our goal of owning and managing properties that are the centers of the communities we serve.

We believe the following set of competitive advantages positions us to successfully execute on our key strategies:

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Expense reimbursements primarily consist of payments made by tenants to us for their proportionate share of property operating expenses, including common area expenses, utilities, insurance and real estate taxes, and certain capital expenditures related to the maintenance of our properties.

Our property operating expenses consist of the portion of property operating expenses that are not recovered through these expense reimbursements.

Our ability to maintain or increase rental income is primarily dependent on our ability to maintain or increase rental rates, renew expiring leases at equal or higher rents and/or lease available space.

Increases in our property operating expenses, including repairs and maintenance, landscaping, snow removal, utilities, security, ground rent related to properties for which we are the lessee, property insurance, real estate taxes and various other costs, to the extent they are not reimbursed by tenants or offset by increases in rental income, will adversely impact our overall performance.

Increases in our property operating expenses, including repairs and maintenance, landscaping, snow removal, security, ground rent related to properties for which we are the lessee, utilities, insurance, real estate taxes and various other costs, to the extent they are not reimbursed by tenants or offset by increases in rental income, will adversely impact our overall performance.

Factors that could affect our rental income and/or property operating expenses include:

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The global outbreak of a novel strain of coronavirus (“COVID-19”) and the public health measures that have been undertaken in response have had a significant adverse impact on the global economy, on our tenants, and on our business.

The effects of COVID-19, including related government restrictions, border closings, quarantines, “shelter-in-place” orders and “social distancing,” have forced many of our tenants to close stores, reduce hours or significantly limit service, and have resulted in a dramatic increase in national unemployment that will create headwinds for our tenants even after the current government restrictions are lifted.

The effects of COVID-19, including related government restrictions, border closings, quarantines, “shelter-in-place” orders and “social distancing” guidelines, have forced many of our tenants to close stores, reduce hours or significantly limit service, and have resulted in a dramatic increase in national unemployment and an economic recession.

Since we cannot estimate when the COVID-19 pandemic and the responsive measures to combat it will end, we cannot estimate the ultimate operational and financial impact of COVID-19 on our business.

Approximately 70% of our shopping centers are anchored by grocery stores.

these, along with our tenants deemed “essential” by state and local governments, represent approximately 35% of our ABR.

Grocery stores and other essential tenants have remained open throughout this time and in some cases experienced stable or increased sales, which we expect to partially mitigate the adverse impact of COVID-19 on our business.

However, the following operating trends, combined with macroeconomic trends such as an expected economic recession, reduced consumer spending and significantly increased unemployment, lead us to believe that our operating results for the second and third quarters of 2020 will be more adversely affected by COVID-19 than our results for the quarter ended March 31, 2020.

Grocery stores and other essential tenants have remained open throughout this time and many have experienced stable or increased sales, which we believe will help to partially mitigate the adverse impact of COVID-19 on our business.

COVID-19 has significantly impacted our operations during the second quarter of 2020, and the following operating trends, combined with macroeconomic trends such as the current economic recession, reduced consumer spending and significantly increased unemployment, lead us to believe that our operating results for at least the remainder of 2020 will continue to be adversely affected by COVID-19.

• Rent collection:

As of July 29, 2020, we had collected approximately 98%, 78% and 58% of second quarter 2020 billed base rent from essential retailers, hybrid retailers and other retailers or services, respectively.

As of July 29, 2020, approximately 33%, 24% and 43% of our portfolio by ABR consisted of essential retailers, hybrid retailers and other retailers or services, respectively.

• Store closures:

As of April 30, 2020, approximately 38% of our ABR is represented by leases for stores or service-uses that are closed.

Store closures in the first quarter of 2020 were minimal and limited to the last two weeks of the quarter.

Store closures, particularly if for an extended period, increase the risk of business failures and lease defaults.

As of July 29, 2020, approximately 6% of our ABR is represented by tenants that are currently closed, including approximately 1%, 5% and 11% of the ABR of essential retailers, hybrid retailers and other retailers or services, respectively.

Store closures, particularly if for an extended period, or if forced to occur multiple times, increase the risk of business failures and lease defaults.

• Timing of rental payments:

We have permitted, and may continue to permit, rent deferrals for certain tenants.

We expect these rent deferrals to significantly increase our receivables, net for the next several

quarters and decrease our cash flow from operations for the next quarter compared to our recent historical results.

Certain tenants experiencing economic difficulties during this pandemic have sought rent relief, which has been provided on a case-by-case basis primarily in the form of rent deferrals, and in limited cases in the form of rent abatements.

Rent deferrals have significantly increased our Receivables, net.

We are in ongoing discussions with our tenants regarding rent that has not yet been collected.

• Leasing activity:

While the size of our new and renewal leasing pipeline remains generally consistent with prior periods, the velocity of lease execution has notably slowed during April 2020.

We have taken various steps to mitigate the impact of COVID-19 on our liquidity, including deferrals of approximately $110.0 million of capital expenditures originally anticipated in 2020 and draws of $550.0 million on our revolving credit facility in excess of amounts originally anticipated during the quarter in order to bolster liquidity.

As of April 30, 2020, we have approximately $510.0 million in cash, approximately $600.0 million of remaining availability under our revolving credit facility, and no debt maturities until 2022.

In addition, we have encouraged our tenants whose businesses have been impacted by COVID-19 to explore their eligibility for benefits under recently announced government assistance programs intended to provide financial support to affected businesses;

While the size of our new and renewal leasing pipeline remains generally consistent with prior periods, the velocity of lease execution has notably slowed since March 2020.

We have taken various steps to mitigate the impact of COVID-19 on our liquidity, including deferrals of approximately $100.0 million of capital expenditures originally anticipated in 2020 and the temporary suspension of our quarterly cash dividend.

In June 2020, we issued $500.0 million aggregate principal amount of 4.050% Senior Notes due 2030, the net proceeds of which were used to repurchase of a portion of our 3.875%, Senior Notes due 2022 and repay outstanding indebtedness under our $1.25 billion revolving credit facility (the “Revolving Facility”), extending the duration of our debt.

As of July 29, 2020, we have approximately $350.0 million in cash, approximately $1.1 billion of remaining availability under the Revolving Facility, and no debt maturities until 2022.

In addition, we have encouraged our tenants whose businesses have been impacted by COVID-19 to explore their eligibility for benefits under government assistance programs intended to provide financial support to affected businesses;

the ultimate impact of such assistance on our tenants, however, is not yet clear.

The effects of COVID-19 are widely expected to trigger an economic recession, and if the recession continues well beyond the lifting of government restrictions related to COVD-19 and the reopening of our tenants’ stores that have temporarily closed, many of our tenants could face financial distress.

The effects of COVID-19 have triggered an economic recession, and we expect that the longer it continues, the number of our tenants facing financial distress will increase.

Historically, economic indicators such as GDP growth, consumer confidence and employment are correlated with demand for certain of our tenants’ products and services.

In addition, some of our tenants have been required to close their stores for the second time due to the re-instatement of government restrictions, and other tenants who are currently operating may also be required to do so in the future.

These conditions could increase the number of our tenants that are unable to meet their lease obligations to us and could limit the demand for space from new tenants.

We expect the significance of the COVID-19 crisis, including the extent of its effect on our financial and operational results and the economic slowdown, to be dictated by, among other things, the scope, severity and duration of the pandemic, the direct and indirect economic effects of the pandemic and containment measures, and potential changes in consumer behavior.

We expect the significance of the COVID-19 crisis and the resulting economic slowdown on our financial and operational results to be dictated by, among other things, the scope, severity and duration of the pandemic, the direct and indirect economic effects of the pandemic and containment measures, and potential changes in consumer behavior.

These uncertainties make it difficult to predict operating results for our Portfolio for the remainder of 2020.

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Leasing Highlights

As of March 31, 2020, billed and leased occupancy were 89.1% and 92.2%, respectively, as compared to 87.5% and 91.1%, respectively, as of March 31, 2019.

The following table summarizes our executed leasing activity for the three months ended March 31, 2020 and 2019 (dollars in thousands, except for per square foot (“PSF”) amounts):

For the Three Months Ended March 31, 2020

As of June 30, 2020, billed and leased occupancy were 88.9% and 92.1%, respectively, as compared to 87.5% and 91.5%, respectively, as of June 30, 2019.

The following table summarizes our executed leasing activity for the three months ended June 30, 2020 and 2019 (dollars in thousands, except for per square foot (“PSF”) amounts):

For the Three Months Ended June 30, 2020

Leases GLA New ABR PSF Tenant Improvements and Allowances PSF Third Party Leasing Commissions PSF Rent Spread (1)

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Option leases 42 565,664 11.75 — — 7.8 %

For the Three Months Ended March 31, 2019

For the Three Months Ended June 30, 2019

Leases GLA New ABR PSF Tenant Improvements and Allowances PSF Third Party Leasing Commissions PSF Rent Spread (1)

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ABR PSF includes the GLA of lessee-owned leasehold improvements.

The following table summarizes our executed leasing activity for the six months ended June 30, 2020 and 2019 (dollars in thousands, except for per square foot (“PSF”) amounts):

For the Six Months Ended June 30, 2020

Leases GLA New ABR PSF Tenant Improvements and Allowances PSF Third Party Leasing Commissions PSF Rent Spread (1)

New, renewal and option leases 617 4,188,834 $ 13.66 $ 3.74 $ 1.14 8.1 %

New and renewal leases 518 2,686,485 14.88 5.80 1.77 8.2 %

New leases 178 1,012,215 14.96 14.19 4.59 22.2 %

Renewal leases 340 1,674,270 14.84 0.73 0.07 4.5 %

Option leases 99 1,502,349 11.46 0.07 — 7.8 %

For the Six Months Ended June 30, 2019

Leases GLA New ABR PSF Tenant Improvements and Allowances PSF Third Party Leasing Commissions PSF Rent Spread (1)

New, renewal and option leases 851 6,484,250 $ 13.74 $ 6.86 $ 1.47 10.9 %

New and renewal leases 717 3,935,862 15.53 11.25 2.42 13.2 %

New leases 323 1,720,798 16.85 23.63 5.38 31.4 %

Renewal leases 394 2,215,064 14.49 1.63 0.11 7.5 %

Option leases 134 2,548,388 10.98 0.08 — 7.4 %

(1) Based on comparable leases only, which consist of new leases signed on units that were occupied within the prior 12 months and renewal leases signed with the same tenant in all or a portion of the same location or that include the expansion into space that was occupied within the prior 12 months.

Excludes leases executed for terms of less than one year.

ABR PSF includes the GLA of lessee-owned leasehold improvements.

Acquisition Activity

• During the three months ended March 31, 2020, we acquired one land parcel for $2.0 million, including transaction costs.

• During the three months ended March 31, 2019, we did not acquire any real estate assets.

• During the six months ended June 30, 2020, we acquired one land parcel for $2.0 million, including transaction costs.

• During the six months ended June 30, 2019, we acquired two shopping centers, two leases at an existing shopping center and one land parcel for an aggregate purchase price of $79.6 million, including transaction costs.

Disposition Activity

• During the three months ended March 31, 2020, we disposed of three shopping centers and two partial shopping centers for aggregate net proceeds of $40.5 million resulting in aggregate gain of $7.5 million and aggregate impairment of less than $0.1 million.

In addition, during the three months ended March 31, 2020, we received aggregate net proceeds of $0.9 million and resolved a $0.5 million contingency from previously disposed assets resulting in aggregate gain of $1.4 million.

• During the three months ended March 31, 2019, we disposed of three shopping centers for aggregate net proceeds of $44.9 million resulting in aggregate gain of $7.3 million.

In addition, during the three months ended March 31, 2019, we received aggregate net proceeds of $0.3 million from previously disposed assets resulting in a gain of $0.3 million.

• During the six months ended June 30, 2020, we disposed of five shopping centers and two partial shopping centers for aggregate net proceeds of $45.7 million resulting in aggregate gain of $8.2 million and aggregate impairment of less than $0.1 million.

In addition, during the six months ended June 30, 2020, we received aggregate net proceeds of $0.9 million and resolved a $0.5 million contingency from previously disposed assets resulting in aggregate gain of $1.4 million.

• During the six months ended June 30, 2019, we disposed of six shopping centers and three partial shopping centers for aggregate net proceeds of $94.8 million resulting in aggregate gain of $20.5 million.

In addition, during the six months ended June 30, 2019, we received aggregate net proceeds of $0.3 million from previously disposed assets resulting in aggregate gain of $0.1 million.

Results of Operations

The results of operations discussion is combined for BPG and the Operating Partnership because there are no material differences in the results of operations between the two reporting entities.

Comparison of the Three Months Ended March 31, 2020 to the Three Months Ended March 31, 2019

Comparison of the Three Months Ended June 30, 2020 to the Three Months Ended June 30, 2019

Revenues (in thousands)

Three Months Ended March 31,

Three Months Ended June 30,

2020 2019 $ Change

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Other revenues

Total revenues $ 247,620 $ 291,005 $ (43,385)

Rental income

The decrease in rental income for the three months ended June 30, 2020 of $43.3 million, as compared to the corresponding period in 2019, was due to an $8.2 million decrease in rental income due to net disposition activity and a $35.1 million decrease for the remaining portfolio.

The decrease for the remaining portfolio was due to (i) a $25.3 million increase in revenues deemed uncollectible;

(ii) a $12.4 million decrease in straight-line rental income, net;

(iii) a $0.9 million decrease in percentage rents;

(iv) a $0.7 million decrease in expense reimbursements;

(v) a $0.6 million decrease in ancillary and other rental income;

and (vi) a $0.3 million decrease in accretion of above- and below-market leases and tenant inducements, net;

partially offset by (vii) a $4.8 million increase in base rent;

and (viii) a $0.3 million increase in lease termination fees.

The increase in revenues deemed uncollectible and decrease in straight-line rental income, net were primarily attributable to COVID-19.

The $4.8 million increase in base rent for the remaining portfolio was primarily due to contractual rent increases, an increase in billed occupancy, and positive rent spreads for new and renewal leases and option exercises of 8.1% during the six months ended June 30, 2020 and 10.9% during the year ended December 31, 2019.

Other revenues

Other revenues remained generally consistent for the three months ended June 30, 2020 as compared to the corresponding period in 2019.

Operating Expenses (in thousands)

Three Months Ended June 30,

2020 2019 $ Change

Operating expenses

Operating costs

$ 25,136 $ 29,307 $ (4,171)

Real estate taxes

41,808 43,189 (1,381)

Depreciation and amortization

80,829 81,593 (764)

Impairment of real estate assets

5,962 6,186 (224)

General and administrative

24,436 25,175 (739)

Total operating expenses $ 178,171 $ 185,450 $ (7,279)

Operating costs

The decrease in operating costs for the three months ended June 30, 2020 of $4.2 million, as compared to the corresponding period in 2019, was primarily due to a $0.9 million decrease in operating costs due to net disposition activity and a $3.3 million decrease for the remaining portfolio primarily due to proactive cost reductions taken in response to COVID-19.

Real estate taxes

The decrease in real estate taxes for the three months ended June 30, 2020 of $1.4 million, as compared to the corresponding period in 2019, was primarily due to a $0.9 million decrease in real estate taxes due to net disposition activity and a $0.5 million decrease for the remaining portfolio primarily due to favorable adjustments of prior year assessments.

Depreciation and amortization

The decrease in depreciation and amortization for the three months ended June 30, 2020 of $0.8 million, as compared to the corresponding period in 2019, was primarily due to a $2.2 million decrease in depreciation and amortization due to net disposition activity, partially offset by a $1.4 million increase for the remaining portfolio primarily related to tenant write-offs and value-enhancing reinvestment capital expenditures, partially offset by a decrease in depreciation and amortization related to acquired in-place lease intangibles.

Impairment of real estate assets

During the three months ended June 30, 2020, aggregate impairment of $6.0 million was recognized on two operating properties.

During the three months ended June 30, 2019, aggregate impairment of $6.2 million was recognized on one operating property.

Impairments recognized were due to changes in anticipated hold periods in connection with our capital recycling program.

General and administrative

The decrease in general and administrative costs for the three months ended June 30, 2020 of $0.7 million, as compared to the corresponding period in 2019, was primarily due to a decrease in marketing and travel costs due to COVID-19 and a decrease in net compensation costs, partially offset by an increase in non-recurring costs.

During the three months ended June 30, 2020 and 2019, construction compensation costs of $3.6 million and $3.6 million, respectively, were capitalized to building and improvements and leasing legal costs of $0.1 million and $0.0 million, respectively and leasing commission costs of $1.2 million and $1.8 million, respectively, were capitalized to deferred charges and prepaid expenses, net.

Other Income and Expenses (in thousands)

Three Months Ended June 30,

2020 2019 $ Change

Other income (expense)

Dividends and interest

$ 102 $ 300 $ (198)

Interest expense

(49,852) (48,475) (1,377)

Gain on sale of real estate assets 692 13,043 (12,351)

Loss on extinguishment of debt, net

(10,386) (707) (9,679)

(961) (756) (205)

Total other expense $ (60,405) $ (36,595) $ (23,810)

Dividends and interest

The decrease in dividends and interest for the three months ended June 30, 2020 of $0.2 million, as compared to the corresponding period in 2019, was primarily due to a $0.2 million decrease in investment income from marketable securities.

Interest expense

The increase in interest expense for the three months ended June 30, 2020 of $1.4 million, as compared to the corresponding period in 2019, was primarily due to higher overall debt obligations.

Gain on sale of real estate assets

During the three months ended June 30, 2020, two shopping centers were disposed resulting in aggregate gain of $0.7 million.

During the three months ended June 30, 2019, three shopping centers and three partial shopping centers were disposed resulting in aggregate gain of $13.2 million.

Loss on extinguishment of debt, net

During the three months ended June 30, 2020, we repurchased $182.5 million of our 3.875% Senior Notes due 2022 through a tender offer, resulting in a $10.4 million loss on extinguishment of debt, net.

Loss on extinguishment of debt, net includes $9.5 million of prepayment fees and $0.9 million of accelerated unamortized debt issuance costs and debt discounts.

During the three months ended June 30, 2019, we repaid $200.0 million of an unsecured term loan under the Operating Partnership’s senior unsecured credit facility agreement, as amended April 29, 2020 (the “Unsecured Credit Facility”), resulting in a $0.7 million loss on extinguishment of debt due to the acceleration of unamortized debt issuance costs.

Other expense remained generally consistent for the three months ended June 30, 2020 as compared to the corresponding period in 2019.

Comparison of the Six Months Ended June 30, 2020 to the Six Months Ended June 30, 2019

Revenues (in thousands)

Six Months Ended June 30,

2020 2019 $ Change

Rental income

$ 527,836 $ 580,692 $ (52,856)

Other revenues

2,085 1,452 633

Total revenues $ 529,921 $ 582,144 $ (52,223)

Rental income

The decrease in rental income for the three months ended March 31, 2020 of $9.6 million, as compared to the corresponding period in 2019, was due to a $7.7 million decrease in rental income due to net disposition activity and a $1.9 million decrease for the remaining portfolio.

The decrease for the remaining portfolio was due to (i) a $7.2 million decrease in straight-line rental income, net;

(ii) a $3.3 million increase in revenues deemed uncollectible;

The decrease in rental income for the six months ended June 30, 2020 of $52.9 million, as compared to the corresponding period in 2019, was due to a $16.0 million decrease in rental income due to net disposition activity and a $36.9 million decrease for the remaining portfolio.

The decrease for the remaining portfolio was due to (i) a $28.6 million increase in revenues deemed uncollectible;

(ii) a $19.6 million decrease in straight-line rental income, net;

(iii) a $1.9 million decrease in percentage rents;

and (iv) a $0.7 million decrease in accretion of above- and below-market leases and tenant inducements, net;

partially offset by (v) a $7.4 million increase in base rent;

(vi) a $1.8 million increase in expense reimbursements;

(viii) a $0.8 million increase in lease termination fees;

and (viii) a $0.3 million increase in ancillary and other rental income.

The increase in revenues deemed uncollectible and decrease in straight-line rental income, net included $2.6 million of revenues deemed uncollectible and a $3.8 million reduction in straight-line rental income, net related to COVID-19.

The $7.4 million increase in base rent for the remaining portfolio was primarily due to contractual rent increases, an increase in billed occupancy, and positive rent spreads for new and renewal leases and option exercises of 9.3% during the three months ended March 31, 2020 and 10.9% during the year ended December 31, 2019.

(iv) a $1.0 million decrease in accretion of above- and below-market leases and tenant inducements, net;

and (v) a $0.3 million decrease in ancillary and other rental income;

partially offset by (vi) a $12.3 million increase in base rent;

(vii) a $1.2 million increase in expense reimbursements;

and (viii) a $1.0 million increase in lease termination fees.

The increase in revenues deemed uncollectible and decrease in straight-line rental income, net were primarily attributable to COVID-19.

The $12.3 million increase in base rent for the remaining portfolio was primarily due to contractual rent increases, an increase in billed occupancy, and positive rent spreads for new and renewal leases and option exercises of 8.1% during the six months ended June 30, 2020 and 10.9% during the year ended December 31, 2019.

Other revenues

The increase in other revenues for the three months ended March 31, 2020 of $0.7 million, as compared to the corresponding period in 2019, was primarily due to an increase in tax increment financing income.

The increase in other revenues for the six months ended June 30, 2020 of $0.6 million, as compared to the corresponding period in 2019, was primarily due to an increase in tax increment financing income.

Operating Expenses (in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

2020 2019 $ Change

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Operating costs

The decrease in operating costs for the three months ended March 31, 2020 of $0.9 million, as compared to the corresponding period in 2019, was primarily due to a $1.0 million decrease in operating costs due to net disposition activity, partially offset by and a $0.1 million increase for the remaining portfolio.

The decrease in operating costs for the six months ended June 30, 2020 of $5.1 million, as compared to the corresponding period in 2019, was primarily due to a $2.0 million decrease in operating costs due to net disposition activity and a $3.1 million decrease for the remaining portfolio primarily due to proactive cost reductions taken in response to COVID-19.

Real estate taxes

The decrease in real estate taxes for the three months ended March 31, 2020 of $0.5 million, as compared to the corresponding period in 2019, was primarily due to a $1.3 million decrease in real estate taxes due to net disposition activity, partially offset by a $0.8 million increase for the remaining portfolio primarily due to increases in tax rates and assessments from several jurisdictions.

The decrease in real estate taxes for the six months ended June 30, 2020 of $1.8 million, as compared to the corresponding period in 2019, was primarily due to a $2.2 million decrease in real estate taxes due to net disposition activity, partially offset by a $0.4 million increase for the remaining portfolio primarily due to increases in tax rates and assessments from several jurisdictions.

Depreciation and amortization

The decrease in depreciation and amortization for the three months ended March 31, 2020 of $2.4 million, as compared to the corresponding period in 2019, was primarily due to a $1.9 million decrease in depreciation and amortization due to net disposition activity and a $0.5 million decrease for the remaining portfolio primarily related to tenant write-offs in 2019, partially offset by an increase in depreciation and amortization related to value-enhancing reinvestment capital expenditures.

The decrease in depreciation and amortization for the six months ended June 30, 2020 of $3.1 million, as compared to the corresponding period in 2019, was primarily due to a $4.1 million decrease in depreciation and amortization due to net disposition activity, partially offset by a $1.0 million increase for the remaining portfolio primarily related to tenant write-offs, partially offset by a decrease in depreciation and amortization related to acquired in-place lease intangibles.

Impairment of real estate assets

During the three months ended March 31, 2020, aggregate impairment of $4.6 million was recognized on one partial shopping center as a result of disposition activity and one operating property.

During the three months ended March 31, 2019, aggregate impairment of $3.1 million was recognized on one operating property.

Impairments recognized were due to changes in estimated hold periods primarily in connection with our capital recycling program.

During the six months ended June 30, 2020, aggregate impairment of $10.6 million was recognized on one partial shopping center as a result of disposition activity and three operating properties.

During the six months ended June 30, 2019, aggregate impairment of $9.3 million was recognized on two operating properties.

Impairments recognized were due to changes in anticipated hold periods primarily in connection with our capital recycling program.

General and administrative

The decrease in general and administrative costs for the three months ended March 31, 2020 of $2.8 million, as compared to the corresponding period in 2019, was primarily due to a decrease in net compensation costs.

During the three months ended March 31, 2020 and 2019, construction compensation costs of $3.5 million and $3.3 million, respectively, were capitalized to building and improvements and leasing legal costs of less than $0.1 million and $0.0 million, respectively and leasing commission costs of $1.4 million and $1.2 million, respectively, were capitalized to deferred charges and prepaid expenses, net.

The decrease in general and administrative costs for the six months ended June 30, 2020 of $3.6 million, as compared to the corresponding period in 2019, was primarily due to a decrease in marketing, professional and travel costs due to COVID-19 and a decrease in net compensation costs, partially offset by an increase in non-recurring costs.

During the six months ended June 30, 2020 and 2019, construction compensation costs of $7.1 million and $6.9 million, respectively, were capitalized to building and improvements and leasing legal costs of $0.1 million and $0.0

million, respectively and leasing commission costs of $2.6 million and $3.0 million, respectively, were capitalized to deferred charges and prepaid expenses, net.

Other Income and Expenses (in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

2020 2019 $ Change

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Gain on sale of real estate assets 9,597 20,645 (11,048)

Gain (loss) on extinguishment of debt, net

Loss on extinguishment of debt, net

(10,391) (677) (9,714)

(1,719) (1,574) (145)

Total other expense $ (99,493) $ (76,300) $ (23,193)

Dividends and interest

Dividends and interest remained generally consistent for the three months ended March 31, 2020 as compared to the corresponding period in 2019.

The decrease in dividends and interest for the six months ended June 30, 2020 of $0.2 million, as compared to the corresponding period in 2019, was primarily due to a $0.2 million decrease in investment income from marketable securities.

Interest expense

The increase in interest expense for the three months ended March 31, 2020 of $0.7 million, as compared to the corresponding period in 2019, was primarily due to higher overall debt obligations.

The increase in interest expense for the six months ended June 30, 2020 of $2.1 million, as compared to the corresponding period in 2019, was primarily due to higher overall debt obligations.

Gain on sale of real estate assets

During the three months ended March 31, 2020, three shopping centers and one partial shopping center were disposed resulting in aggregate gain of $7.5 million.

During the three months ended March 31, 2019, three shopping centers were disposed resulting in aggregate gain of $7.3 million.

In addition, during the three months ended March 31, 2019, we received aggregate net proceeds of $0.3 million from previously disposed assets resulting in aggregate gain of $0.3 million.

Gain (loss) on extinguishment of debt, net

Gain (loss) on extinguishment of debt, net remained generally consistent for the three months ended March 31, 2020 as compared to the corresponding period in 2019.

Other expense remained generally consistent for the three months ended March 31, 2020 as compared to the corresponding period in 2019.

During the six months ended June 30, 2020, five shopping centers and one partial shopping center were disposed resulting in aggregate gain of $8.2 million.

During the six months ended June 30, 2019, six shopping centers and three partial shopping centers were disposed resulting in aggregate gain of $20.5 million.

In addition, during the six months ended June 30, 2019, we received aggregate net proceeds of $0.3 million from previously disposed assets resulting in aggregate gain of $0.1 million.

Loss on extinguishment of debt, net

During the six months ended June 30, 2020, we repurchased $182.5 million of our 3.875% Senior Notes due 2022 through a tender offer and repaid our $7.0 million secured loan, resulting in a $10.4 million loss on extinguishment of debt, net.

Loss on extinguishment of debt, net includes $9.7 million of prepayment fees and $0.7 million of accelerated unamortized debt issuance costs and debt discounts, net of premiums.

During the six months ended June 30, 2019, we repaid $200.0 million of an unsecured term loan under the Unsecured Credit Facility, resulting in a $0.7 million loss on extinguishment of debt due to the acceleration of unamortized debt issuance costs.

Other expense remained generally consistent for the six months ended June 30, 2020 as compared to the corresponding period in 2019.

Liquidity and Capital Resources

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• operating cash flow;

• available borrowings under our existing senior unsecured credit facility agreement, as amended December 12, 2018 (the “Unsecured Credit Facility”);

• available borrowings under the Unsecured Credit Facility;

• dispositions;

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We currently have investment grade credit ratings from all three major credit rating agencies.

As of March 31, 2020, we had $598.8 million of available liquidity under our $1.25 billion revolving credit facility (the “Revolving Facility”) and $584.8 million in cash and cash equivalents.

As of June 30, 2020, we had $1.1 billion of available liquidity under our $1.25 billion revolving credit facility (the “Revolving Facility”) and $318.5 million in cash and cash equivalents.

We intend to continue to enhance our financial and operational flexibility through the additional extension of the duration of our debt.

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Future decreases in cash flow from operations resulting from tenant defaults, rent deferrals, or decreases in our rents or occupancy, would decrease the cash available for the capital uses described above, including payment of dividends.

The recent decline in our stock price has significantly decreased the prospects that we will use our at-the-market equity offering program in the near future, and volatility in debt capital markets and liquidity challenges of in the banking sector resulting from COVID-19 have increased risks related to the pricing and availability of debt financing.

In addition, a significant decline in our operating performance in the future could result in us not satisfying the financial covenants applicable to our debt and/or defaulting on our debt, which could result in us not being able to incur additional debt, including the remaining capacity on our Revolving Facility.

As discussed below, our Board of Directors has also temporarily suspended the quarterly cash dividend.

The decline in our stock price since the onset of the pandemic has significantly decreased the likelihood of utilizing our at-the-market equity offering program in the near future.

In June 2020, we issued $500.0 million aggregate principal amount of 4.050% Senior Notes due 2030, the net proceeds of which were used to repurchase a portion of our 3.875%, Senior Notes due 2022 and repay outstanding indebtedness under the Revolving Facility, extending the duration of our debt.

However, the impacts of COVID-19 may increase risks related to the pricing and availability of future debt financing.

In addition, a significant decline in our operating performance in the future could result in us not satisfying the financial covenants applicable to our debt and/or defaulting on our debt, which could impact our ability to incur additional debt, including the remaining capacity on our Revolving Facility.

In addition, we have no debt maturities until 2022.

However, since we do not know the ultimate severity and length of the COVID-19 pandemic, and thus cannot predict the impact it will have on our tenants and on the debt and equity capital markets, we cannot estimate the ultimate impact it will have on our liquidity and capital resources.

However, since we do not know the ultimate severity and length of the COVID-19 pandemic, and thus cannot predict the impact it will ultimately have on our tenants and on the debt and equity capital markets, we cannot estimate the impact it will have on our liquidity and capital resources.

In order to continue to qualify as a REIT for federal income tax purposes, we must distribute to our stockholders at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gains.

We intend to continue to satisfy this requirement and maintain our REIT status.

Cash dividends paid to common stockholders for the three months ended March 31, 2020 and 2019 were $85.6 million and $84.1 million, respectively.

Our Board of Directors declared a quarterly cash dividend of $0.285 per common share in February 2020 for the first quarter of 2020.

The dividend was paid on April 15, 2020 to shareholders of record on April 6, 2020.

In response to uncertainties created by the COVID-19 pandemic, our Board of Directors has temporarily suspended the quarterly cash dividend.

Cash dividends paid to common stockholders for the six months ended June 30, 2020 and 2019 were $170.3 million and $167.8 million, respectively.

In response to uncertainties stemming from the COVID-19 pandemic, our Board of Directors has temporarily suspended the quarterly cash dividend.

Our Board of Directors will reevaluate the dividend on a quarterly basis, taking into account a variety of relevant factors including REIT taxable income.

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Brixmor Property Group Inc .

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows provided by operating activities $ 179,564 $ 251,007

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Brixmor Operating Partnership LP

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows provided by operating activities $ 179,564 $ 251,007

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Cash flows provided by (used in) financing activities 224,927 (149,127)

Cash and cash equivalents and restricted cash for BPG were $587.1 million and $3.4 million as of March 31, 2020 and 2019, respectively.

Cash and cash equivalents and restricted cash for the Operating Partnership were $587.1 million and $3.2 million as of March 31, 2020 and 2019, respectively.

Cash and cash equivalents and restricted cash for BPG were $320.0 million and $13.3 million as of June 30, 2020 and 2019, respectively.

Cash and cash equivalents and restricted cash for the Operating Partnership were $310.0 million and $13.2 million as of June 30, 2020 and 2019, respectively.

Operating Activities

Net cash provided by operating activities primarily consists of cash inflows from tenant rental payments and expense reimbursements and cash outflows for property operating expenses, general and administrative expenses and interest expense.

During the three months ended March 31, 2020, our net cash provided by operating activities decreased $1.8 million as compared to the corresponding period in 2019.

The decrease is primarily due to (i) a decrease in net operating income due to net disposition activity;

(ii) a decrease from net working capital;

and (iii) an increase in cash outflows for interest expense;

partially offset by (iv) an increase in same property net operating income;

(v) a decrease in cash outflows for general and administrative expense;

During the six months ended June 30, 2020, our net cash provided by operating activities decreased $71.4 million as compared to the corresponding period in 2019.

The decrease is primarily due to (i) a decrease from net working capital;

(ii) a decrease in net operating income due to net disposition activity;

(iii) a decrease in same property net operating income primarily due to COVID-19;

and (iv) an increase in cash outflows for interest expense;

partially offset by (v) a decrease in cash outflows for general and administrative expense;

and (vi) an increase in lease termination fees.

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Net cash used in investing activities is impacted by the nature, timing and magnitude of acquisition and disposition activity and improvements to and investments in our shopping centers, including capital expenditures associated with our value-enhancing reinvestment efforts.

During the three months ended March 31, 2020, our net cash used in investing activities increased $14.8 million as compared to the corresponding period in 2019.

The increase was primarily due to (i) an increase of $9.0 million in improvements to and investments in real estate assets;

(ii) a decrease of $3.7 million in net proceeds from sales of real estate assets;

and (iii) an increase of $2.0 million in acquisitions of real estate assets.

During the six months ended June 30, 2020, our net cash used in investing activities decreased $23.3 million as compared to the corresponding period in 2019.

The decrease was primarily due to (i) a decrease of $77.6 million in acquisitions of real estate assets;

and (ii) a decrease of $11.4 million in improvements to and investments in real estate assets;

partially offset by (iii) a decrease of $48.5 million in net proceeds from sales of real estate assets;

and (iv) a $17.3 million decrease in net proceeds from sales of marketable securities, net of purchases.

Improvements to and investments in real estate assets

During the three months ended March 31, 2020 and 2019, we expended $86.7 million and $77.7 million, respectively, on improvements to and investments in real estate assets.

In addition, during the three months ended March 31, 2020 and 2019, insurance proceeds of $3.6 million and $0.5 million, respectively, were received and included in improvements to and investments in real estate assets.

During the six months ended June 30, 2020 and 2019, we expended $158.1 million and $169.5 million, respectively, on improvements to and investments in real estate assets.

In addition, during the six months ended June 30, 2020 and 2019, insurance proceeds of $3.6 million and $1.4 million, respectively, were received and included in improvements to and investments in real estate assets.

Maintenance capital expenditures represent costs to fund major replacements and betterments to our properties.

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Such initiatives are tenant driven and focus on upgrading our centers with strong, best-in-class retailers and enhancing the overall merchandise mix and tenant quality of our Portfolio.

As of March 31, 2020, we had 50 in-process anchor space repositioning, redevelopment and outparcel development projects with an aggregate anticipated cost of $360.0 million, of which $193.3 million had been incurred as of March 31, 2020.

June 30, 2020, we had 52 in-process anchor space repositioning, redevelopment and outparcel development projects with an aggregate anticipated cost of $392.9 million, of which $215.6 million had been incurred as of June 30, 2020.

Acquisitions of and proceeds from sales of real estate assets

We continue to evaluate the market for acquisition opportunities and we may acquire shopping centers when we believe strategic opportunities exist, particularly where we can further concentrate our Portfolio in attractive retail submarkets and optimize the quality and long-term growth rate of our asset base.

During the three months ended March 31, 2020, we acquired one land parcel for $2.0 million, including transaction costs.

During the three months ended March 31, 2019, we did not acquire any real estate assets.

During the six months ended June 30, 2020, we acquired one land parcel for $2.0 million, including transaction costs.

During the six months ended June 30, 2019, we acquired two shopping centers, two leases at an existing shopping center and one land parcel for an aggregate purchase price of $79.6 million, including transaction costs.

We may also dispose of properties when we believe value has been maximized, where there is downside risk, or where we have limited ability or desire to build critical mass in a particular submarket.

During the three months ended March 31, 2020, we disposed of three shopping centers and two partial shopping centers for aggregate net proceeds of $40.5 million.

In addition, during the three months ended March 31, 2020, we received aggregate net proceeds of $0.9 million from previously disposed assets.

During the three months ended March 31, 2019, we disposed of three shopping centers for aggregate net proceeds of $44.9 million.

In addition, during the three months ended March 31, 2019, we received aggregate net proceeds of $0.3 million from previously disposed assets.

During the six months ended June 30, 2020, we disposed of five shopping centers and two partial shopping centers for aggregate net proceeds of $45.7 million.

In addition, during the six months ended June 30, 2020, we received aggregate net proceeds of $0.9 million from previously disposed assets.

During the six months ended June 30, 2019, we disposed of six shopping centers and three partial shopping centers for aggregate net proceeds of $94.8 million.

In addition, during the six months ended June 30, 2019, we received aggregate net proceeds of $0.3 million from previously disposed assets.

Financing Activities

Net cash provided by (used in) financing activities is impacted by the nature, timing and magnitude of issuances and repurchases of debt and equity securities, as well as principal payments associated with our outstanding indebtedness and distributions made to our common stockholders.

During the three months ended March 31, 2020, our net cash provided by financing activities increased $629.5 million as compared to the corresponding period in 2019.

During the six months ended June 30, 2020, our net cash provided by financing activities increased $384.2 million as compared to the corresponding period in 2019.

The increase was primarily due to (i) a $409.7 million increase in debt borrowings, net of repayments, partially offset by (ii) an increase of $12.3 million in repurchases of common stock;

The increase in debt borrowings is primarily related to amounts drawn on our Revolving Facility in order to bolster liquidity in response to COVID-19.

(iii) an increase of $10.6 million in deferred financing and debt extinguishment costs;

and (iv) an increase of $2.6 million in distributions to common stockholders.

The increase in debt borrowings is primarily related to amounts drawn on our Revolving Facility in order to bolster liquidity in response to COVID-19 and net proceeds from the issuance of our 4.050%, Senior Notes due 2030, net of amounts repaid under the Revolving Facility and the repurchase of a portion of our 3.875%, Senior Notes due 2022.

Contractual Obligations

Our contractual obligations relate to our debt, including unsecured notes payable and unsecured credit facilities, with maturities ranging from two years to nine years, in addition to non-cancelable operating leases pertaining to our ground leases and administrative office leases.

The following table summarizes our debt maturities (excluding extension options), interest payment obligations (excluding debt premiums and discounts and deferred financing costs) and obligations under non-cancelable operating leases (excluding renewal options) as of March 31, 2020:

Our contractual obligations relate to our debt, including unsecured notes payable and unsecured credit facilities, with maturities ranging from two years to 10 years, in addition to non-cancelable operating leases pertaining to our ground leases and administrative office leases.

Contractual Obligations

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(1) Debt includes scheduled maturities for unsecured notes payable and unsecured credit facilities.

(2) As of March 31, 2020, we incur variable rate interest on (i) $645.5 million outstanding under our Revolving Facility;

(2) As of June 30, 2020, we incur variable rate interest on (i) $145.5 million outstanding under our Revolving Facility;

(ii) a $350.0 million term loan;

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“Quantitative and Qualitative Disclosures” in our annual report on Form 10-K for the year ended December 31, 2019 for a further discussion of these and other factors that could impact interest payments.

Interest payments for these variable rate loans are presented using rates (including the impact of interest rate swaps) as of March 31, 2020.

Interest payments for these variable rate loans are presented using rates (including the impact of interest rate swaps) as of June 30, 2020.

Non-GAAP Performance Measures

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The National Association of Real Estate Investment Trusts (“NAREIT”) defines funds from operations (“FFO”) as net income (loss), calculated in accordance with GAAP, excluding (i) depreciation and amortization related to real estate, (ii) gains and losses from the sale of certain real estate assets, (iii) gains and losses from change in control, (iv) impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity and (v) after adjustments for unconsolidated joint ventures calculated to reflect FFO on the same basis.

and amortization related to real estate, and items which can make periodic and peer analyses of operating and financial performance more difficult, such as gains and losses from the sale of certain real estate assets.

Our reconciliation of net income to NAREIT FFO for the three months ended March 31, 2020 and 2019 is as follows (in thousands, except per share amounts):

Three Months Ended March 31,

Considering the nature of our business as a real estate owner and operator, we believe that NAREIT FFO is useful to investors in measuring our operating and financial performance because the definition excludes items included in net income that do not relate to or are not indicative of our operating and financial performance, such as depreciation and amortization related to real estate, and items which can make periodic and peer analyses of operating and financial performance more difficult, such as gains and losses from the sale of certain real estate assets and impairment write-downs.

Our reconciliation of net income to NAREIT FFO for the three and six months ended June 30, 2020 and 2019 is as follows (in thousands, except per share amounts):

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

Net income $ 9,044 $ 68,960 $ 68,825 $ 131,860

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Same property net operating income (“NOI”) is a supplemental, non-GAAP performance measure utilized to evaluate the operating performance of real estate companies.

Same property NOI is calculated (using properties owned for the entirety of both periods and excluding properties under development and completed new development properties which have been stabilized for less than one year) as total property revenues (base rent, expense reimbursements, adjustments for revenues deemed uncollectible, ancillary and other rental income, percentage rents and other revenues) less direct property operating expenses (operating costs, real estate taxes and provision for doubtful accounts).

Same property NOI excludes (i) corporate level expenses (including general and administrative), (ii) lease termination fees, (iii) straight-line rental income, net, (iv) accretion of above- and below-market leases and tenant inducements, net, (v) straight-line ground rent expense, and (vi) income (expense) associated with our captive insurance company.

Considering the nature of our business as a real estate owner and operator, we believe that same property NOI is useful to investors in measuring the operating performance of our property portfolio because the definition excludes various items included in net income that do not relate to, or are not indicative of, the operating performance of our properties, such as depreciation and amortization and corporate level expenses (including general and administrative), and because it eliminates disparities in NOI due to the acquisition or disposition of properties or the stabilization of completed new development properties during the period presented and therefore provides a more consistent metric for comparing the operating performance of our real estate between periods.

Comparison of the Three Months Ended March 31, 2020 to the Three Months Ended March 31, 2019

Three Months Ended March 31,

2020 2019 Change

properties, such as depreciation and amortization and corporate level expenses (including general and administrative), and because it eliminates disparities in NOI due to the acquisition or disposition of properties or the stabilization of completed new development properties during the period presented and therefore provides a more consistent metric for comparing the operating performance of our real estate between periods.

Comparison of the Three and Six Months Ended June 30, 2020 to the Three and Six Months Ended June 30, 2019

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 Change 2020 2019 Change

Number of properties 392 392 — 392 392 —

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The following table provides a reconciliation of net income to same property NOI for the periods presented (in thousands):

Three Months Ended March 31,

Ended June 30, Six Months

Ended June 30,

2020 2019 2020 2019

Net income $ 9,044 $ 68,960 $ 68,825 $ 131,860

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Off-Balance Sheet Arrangements

We had no material off-balance sheet arrangements as of March 31, 2020.

We had no material off-balance sheet arrangements as of June 30, 2020.

Quantitative and Qualitative Disclosures about Market Risk

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis