What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-02-13 compared with 2022-02-07 · 121 added, 138 removed, 240 unchanged (52% of the section changed)

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Brixmor Property Group Inc.

and subsidiaries (collectively, “BPG”) is an internally-managed real estate investment trust (“REIT”).

and subsidiaries (collectively, “BPG”) is an internally-managed corporation that has elected to be taxed as a real estate investment trust (“REIT”).

Brixmor Operating Partnership LP and subsidiaries (collectively, the “Operating Partnership”) is the entity through which BPG conducts substantially all of its operations and owns substantially all of its assets.

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As of December 31, 2022, our portfolio was comprised of 373 shopping centers (the “Portfolio”) totaling approximately 66 million square feet of GLA.

Our high-quality national Portfolio is primarily located within established trade areas in the top 50 Metropolitan Statistical Areas 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.

Our high-quality national Portfolio is primarily located within established trade areas in the top 50 Core-Based Statistical Areas 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 December 31, 2022, our three largest tenants by annualized base rent (“ABR”) were The TJX Companies, Inc.

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(“Burlington”).

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

BPG 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, 2022, 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 purpose 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 our purpose-driven Corporate Responsibility (“CR”) strategy and our commitment to environmental, social, and governance (“ESG”) issues.

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

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We provide our tenants with dedicated service through both our national accounts leasing team based in New York and our network of four regional offices in Atlanta, Chicago, Philadelphia and San Diego, as well as our 12 leasing and property management satellite offices throughout the country.

We believe that this structure enables us to obtain critical national market intelligence, while also benefitting from the regional and local expertise of our leasing and operations teams.

We believe that this structure enables us to obtain critical national market intelligence, while also benefiting from the regional and local expertise of our leasing and operations teams.

• Experienced Management – Senior members of our management team are seasoned real estate operators with extensive public company leadership experience.

Our management team has deep industry knowledge and well-established relationships with retailers, brokers, and vendors through many years of operational

and transactional experience, as well as significant capital markets capabilities and expertise in executing value-enhancing reinvestment opportunities.

Our management team has deep industry knowledge and well-established relationships with retailers, brokers, and vendors through many years of operational and transactional experience, as well as significant capital markets capabilities and expertise in executing value-enhancing reinvestment opportunities.

Factors That May Influence Our Future Results

We derive our rental income primarily from base rent and expense reimbursements paid by tenants to us under existing leases at each of our properties.

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.

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

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

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.

See “ Forward-Looking Statements ” included elsewhere in this Annual Report on Form 10-K for the factors that could affect our rental income and/or property operating expenses.

As discussed below, the COVID-19 pandemic has had, and is expected to continue to have, a significant impact on our business.

“Risk Factors” for a further discussion of other factors that could impact our future results.

Impacts on Business from COVID-19

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

The effects of COVID-19, including related government restrictions, border closings, quarantines, shelter-in-place orders, and social distancing guidelines, forced many of our tenants to temporarily close stores, reduce hours, or significantly limit service, and resulted in a dramatic increase in national unemployment and a significant economic contraction in 2020.

Since we cannot estimate when the COVID-19 pandemic and the responsive measures to combat it will end and to what extent certain restrictions will be maintained or later reinstated, we cannot estimate the ultimate operational and financial impact of COVID-19 on our business.

The degree to which COVID-19 impacts our operating results in the future will depend on the factors discussed in “ Forward-Looking Statements ” included elsewhere in this Annual Report on Form 10-K and in Item 1A.

“Risk Factors” .

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

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

As of February 1, 2022, we have collected 94% of base rent for the nine months ended December 31, 2020 and 97% of base rent for the year ended December 31, 2021.

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

Rent deferrals have increased our Receivables, net.

We are in ongoing discussions with our tenants regarding rent that has not yet been collected or addressed through executed deferral or abatement agreements.

See “ Forward-Looking Statements ” included elsewhere in this Annual Report on Form 10-K for additional information regarding risk factors that could affect our financial condition, operating results, and cash flows.

Leasing Highlights

As of December 31, 2021, billed and leased occupancy were 88.7% and 92.0%, respectively, as compared to 87.8% and 90.7%, respectively, as of December 31, 2020.

As of December 31, 2022, billed and leased occupancy were 90.2% and 93.8%, respectively, compared to 88.7% and 92.0%, respectively, as of December 31, 2021.

The following table summarizes our executed leasing activity for the years ended December 31, 2022 and 2021 (dollars in thousands, except for per square foot (“PSF”) amounts):

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Acquisition Activity

• During the year ended December 31, 2022, we acquired seven shopping centers, one outparcel, and one land parcel and paid less than $0.1 million related to previously acquired assets for an aggregate purchase price of $409.7 million, including transaction costs and closing credits.

• During the year ended December 31, 2021, we acquired six shopping centers, one outparcel, and two land parcels for an aggregate purchase price of $258.8 million, including transaction costs and closing credits.

• During the year ended December 31, 2020, we acquired two land parcels for an aggregate purchase price of $3.4 million, including transaction costs.

Disposition Activity

• During the year ended December 31, 2022, we disposed of 16 shopping centers and 10 partial shopping centers for aggregate net proceeds of $277.0 million resulting in aggregate gain of $109.2 million and aggregate impairment of $5.7 million.

In addition, during the year ended December 31, 2022, we resolved contingencies related to previously disposed assets and had land at one shopping center seized through eminent domain for aggregate net proceeds of $2.8 million, resulting in aggregate gain of $2.4 million.

• During the year ended December 31, 2021, we disposed of 17 shopping centers and 15 partial shopping centers for aggregate net proceeds of $237.4 million resulting in aggregate gain of $73.1 million and aggregate impairment of $1.9 million.

In addition, during the year ended December 31, 2021, we received aggregate net proceeds of less than $0.1 million from previously disposed assets resulting in aggregate gain of less than $0.1 million.

• During the year ended December 31, 2020, we disposed of 10 shopping centers, six partial shopping centers, and one land parcel for aggregate net proceeds of $121.4 million resulting in aggregate gain of $32.6 million and aggregate impairment of $8.0 million.

In addition, during the year ended December 31, 2020, we received aggregate net proceeds of $1.0 million and resolved contingencies of $0.5 million from previously disposed assets resulting in aggregate gain of $1.5 million.

Results of Operations

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Rental income

The increase in rental income for the year ended December 31, 2021 of $95.4 million, as compared to the corresponding period in 2020, was due to a $105.2 million increase for assets owned for the full period, partially offset by a $9.8 million decrease in rental income due to the timing of acquisition and disposition activity.

The increase for assets owned for the full period was due to (i) a $67.6 million decrease in revenues deemed uncollectible;

(ii) a $25.8 million increase in straight-line rental income, net;

(iii) a $7.1 million increase in expense reimbursements;

The increase in rental income for the year ended December 31, 2022 of $71.1 million, compared to the corresponding period in 2021, was due to a $55.9 million increase for assets owned for the full period and a $15.1 million increase in rental income due to net transaction activity.

The increase for assets owned for the full period was due to (i) a $33.6 million increase in base rent;

(ii) a $12.1 million increase in expense reimbursements;

(iii) a $7.9 million increase in straight-line rental income, net;

(iv) a $4.5 million increase in ancillary and other rental income;

(v) a $2.2 million increase in lease termination fees;

(vi) a $2.2 million increase in base rent;

and (vii) a $1.8 million increase in percentage rents;

partially offset by (viii) a $4.8 million decrease in accretion of below-market leases, net of amortization of above-market leases and tenant inducements.

The decrease in revenues deemed uncollectible was primarily attributable to the impact of COVID-19 reserves in 2020 and recoveries of previously reserved amounts in 2021.

The increase in straight-line rental income, net was primarily attributable to the impact of COVID-19 reserves in 2020.

The $7.1 million increase in expense reimbursements for assets owned for the full period was primarily due to proactive, temporary cost reductions taken in 2020 in response to COVID-19, which reduced reimbursable operating costs.

The $3.3 million increase in ancillary and other rental income for assets owned for the full period was primarily due to an increase in revenue from short-term and seasonal leases.

The $2.2 million increase in base rent for assets owned for the full period was primarily due to a decrease in COVID-19 rent deferrals accounted for as lease modifications and rent abatements, in addition to contractual rent increases and positive rent spreads for new and renewal leases and option exercises of 10.1% during the year ended December 31, 2021 and 7.2% during the year ended December 31, 2020, partially offset by a decrease in weighted average billed occupancy.

(v) a $3.1 million increase in percentage rents;

and (vi) a $2.6 million increase associated with revenues deemed uncollectible;

partially offset by (vii) a $5.5 million decrease in lease termination fees;

and (viii) a $2.4 million decrease in accretion of below-market leases, net of amortization of above-market leases and tenant improvements.

The $33.6 million increase in base rent for assets owned for the full period was primarily due to contractual rent increases, positive rent spreads for new and renewal leases and option exercises of 12.7% during the year ended December 31, 2022 and 10.1% during the year ended December 31, 2021, an increase in weighted average billed occupancy, and a decrease in rent deferrals accounted for as lease modifications and rent abatements related to COVID-19.

The $12.1 million increase in expense reimbursements was primarily attributable to increases in billed occupancy, reimbursable operating expenses, and real estate taxes.

Other revenues

The increase in other revenues for the year ended December 31, 2021 of $3.6 million, as compared to the corresponding period in 2020, was primarily due to an increase in tax increment financing income.

The decrease in other revenues for the year ended December 31, 2022 of $5.3 million, compared to the corresponding period in 2021, was primarily due to a decrease in tax increment financing income.

Operating Expenses (in thousands)

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Operating costs

The increase in operating costs for the year ended December 31, 2021 of $20.4 million, as compared to the corresponding period in 2020, was due to a $21.1 million increase for assets owned for the full period primarily due to proactive, temporary cost reductions taken in 2020 in response to COVID-19 and a decrease in favorable insurance captive adjustments, partially offset by a $0.7 million decrease in operating costs due to the timing of acquisition and disposition activity.

The increase in operating costs for the year ended December 31, 2022 of $9.4 million, compared to the corresponding period in 2021, was due to a $7.7 million increase for assets owned for the full period primarily due to increases in repairs and maintenance, utilities, and insurance costs, in addition to a $1.7 million increase in operating costs due to net transaction activity.

Real estate taxes

The decrease in real estate taxes for the year ended December 31, 2021 of $3.2 million, as compared to the corresponding period in 2020, was due to a $2.6 million decrease due to the timing of acquisition and disposition activity and a $0.6 million decrease for assets owned for the full period.

The increase in real estate taxes for the year ended December 31, 2022 of $4.6 million, compared to the corresponding period in 2021, was primarily due to a $2.7 million increase due to net transaction activity and a $1.9 million increase for assets owned for the full period, primarily due to an increase in current year assessments.

Depreciation and amortization

The decrease in depreciation and amortization for the year ended December 31, 2021 of $8.4 million, as compared to the corresponding period in 2020, was due to a $6.0 million decrease for assets owned for the full period and a $2.4 million decrease due to the timing of acquisition and disposition activity.

The increase in depreciation and amortization for the year ended December 31, 2022 of $17.6 million, compared to the corresponding period in 2021, was primarily due to a $14.9 million increase attributable to net transaction activity, and a $2.7 million increase for assets owned for the full period, primarily due to capital expenditures, partially offset by accelerated depreciation and amortization related to tenant move-outs.

Impairment of real estate assets

During the year ended December 31, 2022, aggregate impairment of $5.7 million was recognized on two shopping centers and one partial shopping center as a result of disposition activity.

During the year ended December 31, 2021, aggregate impairment of $1.9 million was recognized on two shopping centers as a result of disposition activity.

During the year ended December 31, 2020, aggregate impairment of $19.6 million was recognized on three shopping centers and one partial shopping center as a result of disposition activity and three operating properties.

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

General and administrative

The increase in general and administrative costs for the year ended December 31, 2021 of $7.2 million, as compared to the corresponding period in 2020, was primarily due to an increase in net compensation costs resulting from outperformance under our variable incentive programs, partially offset by a decrease in litigation and other non-routine legal expenses.

The increase in general and administrative costs for the year ended December 31, 2022 of $11.8 million, compared to the corresponding period in 2021, was primarily due to an increase in net compensation costs, marketing expenses, and travel and entertainment costs, partially offset by decreases in litigation and other non-routine legal, professional, office, and other expenses.

During the years ended December 31, 2022 and 2021, construction compensation costs of $17.5 million and $16.6 million, respectively, were capitalized to building and improvements and leasing legal costs of $4.1 million and $2.5 million, respectively, and leasing commission costs of $7.9 million and $6.8 million, respectively, were capitalized to deferred charges and prepaid expenses, net.

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Dividends and interest

Dividends and interest remained generally consistent for the year ended December 31, 2021 as compared to the corresponding period in 2020.

Dividends and interest remained generally consistent for the year ended December 31, 2022 compared to the corresponding period in 2021.

Interest expense

The decrease in interest expense for the year ended December 31, 2021 of $5.2 million, as compared to the corresponding period in 2020, was primarily due to lower overall debt obligations.

The decrease in interest expense for the year ended December 31, 2022 of $2.3 million, compared to the corresponding period in 2021, was primarily due to lower overall debt obligations, partially offset by a higher weighted average interest rate.

Gain on sale of real estate assets

During the year ended December 31, 2022, we disposed of 14 shopping centers and nine partial shopping centers that resulted in aggregate gain of $109.2 million.

In addition, during the year ended December 31, 2022, we resolved contingencies related to previously disposed assets and had land at one shopping center seized through eminent domain resulting in aggregate net proceeds of $2.8 million, resulting in aggregate gain of $2.4 million.

During the year ended December 31, 2021, we disposed of 16 shopping centers and 15 partial shopping centers that resulted in aggregate gain of $73.1 million.

During the year ended December 31, 2020, we disposed of seven shopping centers, five partial shopping centers and one land parcel that resulted in aggregate gain of $32.6 million.

In addition, during the year ended December 31, 2020, we received aggregate net proceeds of $1.0 million and resolved contingencies of $0.5

million from previously disposed assets resulting in aggregate gain of $1.5 million, and we received final insurance proceeds related to two shopping centers that were damaged by Hurricane Michael resulting in aggregate gain of $0.4 million.

Loss on extinguishment of debt, net

During the year ended December 31, 2021, we redeemed all $500.0 million of our 3.250% Senior Notes due 2023 and repaid $350.0 million of an unsecured term loan under our senior unsecured credit facility agreement, as amended April 29, 2020 (the “Unsecured Credit Facility”), resulting in a $28.3 million loss on extinguishment of debt.

During the year ended December 31, 2022, we amended and restated our unsecured credit facility effective April 28, 2022 (the "Unsecured Credit Facility"), which is comprised of a $1.25 billion revolving credit facility (the "Revolving Facility") and a $300.0 million term loan, in addition to a new $200.0 million delayed draw term loan (together, the "Term Loan Facility"), resulting in a $0.2 million loss on extinguishment of debt due to the acceleration of unamortized debt issuance costs.

During the year ended December 31, 2021, we redeemed all $500.0 million of our 3.250% Senior Notes due 2023 and repaid $350.0 million of an unsecured term loan under our Unsecured Credit Facility, resulting in a $28.3 million loss on extinguishment of debt.

Loss on extinguishment of debt includes $25.5 million of prepayment fees and $2.8 million of accelerated unamortized debt issuance costs and debt discounts.

During the year ended December 31, 2020, we repurchased all $500.0 million of our 3.875% Senior Notes due 2022 and repaid a $7.0 million secured loan, resulting in a $28.1 million loss on extinguishment of debt, net.

Loss on extinguishment of debt, net includes $26.2 million of prepayment fees and $1.9 million of accelerated unamortized debt issuance costs and debt discounts, net of premiums.

The decrease in other expense for the year ended December 31, 2021 of $4.9 million, as compared to the corresponding period in 2020, was primarily due to favorable tax adjustments and legal settlements in the current year and unfavorable tax adjustments in the prior year.

The increase in other expense for the year ended December 31, 2022 of $3.6 million, compared to the corresponding period in 2021, was primarily due to favorable tax adjustments and legal settlements in the prior year and an increase in transaction costs in the current year.

Comparison of the Year Ended December 31, 2021 to the Year Ended December 31, 2020

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Liquidity and Capital Resources

We anticipate that our cash flows from the sources listed below will provide adequate capital for the next 12 months and beyond for all anticipated uses, including all scheduled payments on our outstanding debt, current and anticipated tenant and other capital improvements, stockholder distributions to maintain our qualification as a REIT, and other obligations associated with conducting our business.

We anticipate that our cash flows from the sources listed below will provide adequate capital for the next 12 months and beyond for all anticipated uses, including all scheduled payments on our outstanding debt, current and anticipated tenant and other capital improvements, stockholder distributions, including those required to maintain our qualification as a REIT, and other obligations associated with conducting our business.

Our primary expected sources and uses of capital are as follows:

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• available borrowings under the Unsecured Credit Facility;

• dispositions;

• issuance of long-term debt;

• dispositions;

• issuance of equity securities.

• debt repayments

• maintenance capital expenditures;

• leasing capital expenditures;

• debt repayments;

• dividend/distribution payments;

• value-enhancing reinvestment capital expenditures;

• dividend/distribution payments;

• acquisitions;

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We believe our capital structure provides us with the financial flexibility and capacity to fund our current capital needs as well as future growth opportunities.

We have access to multiple forms of capital, including secured property level debt, unsecured corporate level debt, preferred equity, and common equity, which will allow us to efficiently execute on our strategic and operational objectives.

We generate significant operating cash flow and have access to multiple forms of external capital, including secured property level debt, unsecured corporate level debt, preferred equity, and common equity, which will allow us to efficiently execute on our strategic and operational objectives.

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

As of December 31, 2021, we had $1.2 billion of available liquidity under our $1.25 billion revolving credit facility (the “Revolving Facility”) and $297.7 million of cash and cash equivalents and restricted cash.

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

As of December 31, 2022, we had $1.35 billion of available liquidity, including $1.32 billion under our Unsecured Credit Facility and $21.3 million of cash and cash equivalents and restricted cash.

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

Material Cash Requirements

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Contractually Obligated Expenditures

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 December 31, 2021 (dollars in millions):

The following table summarizes our debt maturities (excluding extension options), interest payment obligations, and obligations under non-cancelable operating leases (excluding renewal options), as of December 31, 2022 (dollars in millions):

Contractually Obligated Expenditures Twelve

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(2) Scheduled interest payments included in these amounts for variable rate loans are presented using rates (including the impact of interest rate swaps), as of December 31, 2022.

Amounts presented exclude debt premiums and discounts and deferred financing costs.

“Quantitative and Qualitative Disclosures about Market Risk” for a further discussion of these and other factors that could impact interest payments.

See Item 7 A.

“Quantita tive and Qua litative Dis closures abo ut Market Ri sk” for a further discussion of these and other factors that could impact interest payments

Other Essential Expenditures

We incur certain other essential expenditures in the ordinary course of business, such as common area expenses, utilities, insurance, real estate taxes, certain capital expenditures related to the maintenance of our properties, leasing capital expenditures, and corporate level expenses.

The amount of common area expenses, utilities, and certain capital expenditures related to the maintenance of our properties that we incur depends on changes in the scope of services that we provide, changes in prevailing market rates, and changes in the size and composition of our Portfolio.

Additionally, we carry comprehensive insurance to protect our Portfolio against various losses.

The amount of insurance expense that we incur depends on the assessed value of our Portfolio, prevailing market rates, changes in risk, and the size and composition of our Portfolio.

Furthermore, we incur real estate taxes in the various jurisdictions in which we operate.

The amount of real estate taxes that we incur depends on changes in the assessed value of our properties, changes in tax rates assessed by certain jurisdictions, and changes in the size and composition of our Portfolio.

Leasing capital expenditures represent tenant specific costs incurred to lease space, including tenant improvements, tenant allowances, and external leasing commissions.

We incur certain essential expenditures in the ordinary course of business, such as common area expenses, utilities, insurance, real estate taxes, capital expenditures related to the maintenance of our properties, leasing capital expenditures, and corporate level expenses.

The amount of common area expenses, utilities, and capital expenditures related to the maintenance of our properties that we incur depends on the scope of services that we provide, prevailing market rates, and the size and composition of our Portfolio.

We carry comprehensive insurance to protect our Portfolio against various losses.

The amount of insurance expense that we incur depends on the assessed values of our properties, prevailing market rates, changes in risk generally, and the size and composition of our Portfolio.

We incur real estate taxes in the various jurisdictions in which we operate.

The amount of real estate taxes that we incur depends on the assessed values of our properties, the tax rates assessed by various jurisdictions, and the size and composition of our Portfolio.

Leasing capital expenditures represent tenant specific costs incurred to lease or renew space, including tenant improvements, tenant allowances, and external leasing commissions.

The amount of leasing capital expenditures that we incur depends on the volume and nature of leasing activity.

Leases typically provide for the reimbursement of property operating expenses such as common area expenses, utilities, insurance, and real estate taxes, and certain capital expenditures related to the maintenance of our properties.

However, these costs generally do not decrease if a property is not fully occupied, and certain costs are non-reimbursable.

However, costs that we incur generally do not decrease if revenue or occupancy decreases, and certain costs that we incur are not typically reimbursed.

In order to continue to qualify as a REIT for federal income tax purposes, we must meet several organizational and operational requirements, including a requirement that we annually 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.

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

We intend to continue to satisfy these requirements and maintain our REIT status.

Our board of directors evaluates our dividend on a quarterly basis, taking into account a variety of relevant factors, including REIT taxable income.

The following table summarizes our dividend activity for the fourth quarter of 2022 and the first quarter of 2023:

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Opportunistic Expenditures

We also intend to utilize a significant amount of cash for opportunistic expenditures such as value-enhancing reinvestment and acquisition activity.

• The amount of reinvestment capital expenditures that we may incur in future periods is contingent on a variety of factors that may change from period to period, such as the number, total expected cost, and nature of value-enhancing reinvestment projects that we execute.

See “Improvements to and investments in real estate assets” below for further information regarding our in-process reinvestment projects and pipeline of future reinvestment projects.

• The amount of future acquisition and disposition activity depends on the availability of opportunities that further concentrate our Portfolio in attractive retail submarkets and optimize the quality and long-term growth rate of our asset base.

We also utilize cash for opportunistic expenditures such as value-enhancing reinvestment and acquisition activity.

The amount of value-enhancing reinvestment capital expenditures that we may incur in future periods is contingent on a variety of factors that may change from period to period, such as the number, total expected cost, and nature of value-enhancing reinvestment projects that are underway.

See “Improvements to and investments in real estate assets” below for further information regarding our in-process reinvestment projects and our pipeline of future redevelopment projects.

The amount of future acquisition activity depends on the availability of opportunities that further concentrate our Portfolio in attractive retail submarkets and optimize the quality and long-term growth rate of our asset base.

Our acquisition strategy focuses on buying assets with strong growth potential that are located in our existing markets and will allow us to leverage our operational platform and expertise to create value.

Our acquisition activity may include acquisitions of open-air shopping centers, non-owned anchor spaces, and retail buildings and/or outparcels at, or adjacent to, our shopping centers.

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.

As previously discussed under the header “Impacts on Business from COVID-19”, the COVID-19 pandemic has had, and may continue to have, an adverse impact on our liquidity and capital resources.

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

Since we do not know the ultimate scope, severity, and duration of the pandemic and the response thereto, and thus cannot predict the impact it will 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.

Our cash flow activities are summarized as follows (dollars in thousands):

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Year Ended December 31,

2022 2021 $ Change

Net cash provided by operating activities $ 566,382 $ 552,239 $ 14,143

Net cash used in investing activities (462,453) (331,005) (131,448)

Net cash provided by (used in) financing activities (293,578) 72,712

Net cash used in financing activities (380,413) (293,578) (86,835)

Net change in cash, cash equivalents and restricted cash (276,484) (72,344) (204,140)

Cash, cash equivalents and restricted cash at beginning of period 297,743 370,087 (72,344)

Cash, cash equivalents and restricted cash at end of period $ 21,259 $ 297,743 $ (276,484)

Brixmor Operating Partnership LP

Year Ended December 31,

2022 2021 $ Change

Net cash provided by operating activities $ 566,382 $ 552,239 $ 14,143

Net cash used in investing activities (462,453) (331,005) (131,448)

Net cash provided by (used in) financing activities (298,722) 62,714

Cash and cash equivalents and restricted cash for BPG and the Operating Partnership were $297.7 million and $282.6 million, respectively, as of December 31, 2021.

Cash and cash equivalents and restricted cash for BPG and the Operating Partnership were $370.1 million and $360.1 million, respectively, as of December 31, 2020.

Net cash used in financing activities (366,182) (298,722) (67,460)

Net change in cash, cash equivalents and restricted cash (262,253) (77,488) (184,765)

Cash, cash equivalents and restricted cash at beginning of period 282,585 360,073 (77,488)

Cash, cash equivalents and restricted cash at end of period $ 20,332 $ 282,585 $ (262,253)

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 year ended December 31, 2021, our net cash provided by operating activities increased $109.1 million as compared to the corresponding period in 2020.

During the year ended December 31, 2022, our net cash provided by operating activities increased $14.1 million compared to the corresponding period in 2021.

The increase was primarily due to (i) an increase in same property net operating income;

(ii) an increase from net working capital;

and (iii) an increase in lease termination fees;

partially offset by (iv) an increase in cash outflows for interest expense;

(v) a decrease in net operating income due to the timing of acquisition and disposition activity;

and (vi) an increase in cash outflows for general and administrative expense.

(ii) an increase in net operating income due to net transaction activity;

and (iii) a decrease in cash outflows for interest expense;

partially offset by (iv) a decrease from net working capital;

(v) a decrease in other non-same property net operating income;

(vi) an increase in cash outflows for general and administrative expense;

and (vii) a decrease in lease termination fees.

Investing Activities

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 program.

During the year ended December 31, 2021, our net cash used in investing activities increased $163.8 million as compared to the corresponding period in 2020.

Net cash used in investing activities primarily 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 activity.

During the year ended December 31, 2022, our net cash used in investing activities increased $131.4 million compared to the corresponding period in 2021.

The increase was primarily due to (i) an increase of $150.9 million in acquisitions of real estate assets;

and (ii) an increase of $23.8 million in improvements to and investments in real estate assets;

partially offset by (iii) an increase of $115.0 million in net proceeds from sales of real estate assets;

and (iv) a $0.4 million decrease in purchases of marketable securities, net of proceeds from sales.

(ii) an increase of $21.7 million in improvements to and investments in real estate assets;

and (iii) an increase of $1.2 million in purchases of marketable securities, net of proceeds from sales;

partially offset by (iv) an increase of $42.4 million in net proceeds from sales of real estate assets.

Improvements to and investments in real estate assets

During the years ended December 31, 2022 and 2021, we expended $330.4 million and $308.6 million, respectively, on improvements to and investments in real estate assets.

In addition, during the years ended December 31, 2021 and 2020, insurance proceeds of $3.3 million and $7.5 million, respectively, were received and included in improvements to and investments in real estate assets.

These amounts are net of insurance proceeds of $7.7 million and $3.3 million, respectively, which were received during the year ended December 31, 2022 and 2021.

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 December 31, 2021, we had 50 in-process anchor space repositioning, redevelopment and outparcel development projects with an aggregate anticipated cost of $374.3 million, of which $215.7 million has been incurred as of December 31, 2021.

In addition, we have identified a pipeline of future reinvestment projects aggregating approximately $1.0 billion of potential capital investment, which we expect to execute over the next several years.

We expect to fund these projects with cash and cash equivalents, net cash provided by operating activities, proceeds from sales of real estate assets, and/or available liquidity under the Revolving Facility.

As of December 31, 2022, we had 48 in-process anchor space repositioning, redevelopment and outparcel development projects with an aggregate anticipated cost of $342.9 million, of which $182.4 million had been incurred as of December 31, 2022.

In addition, we have identified a pipeline of future redevelopment projects aggregating approximately $1.0 billion of potential capital investment, which we expect to execute over the coming years.

We expect to fund these projects with cash and cash equivalents, net cash provided by operating activities, proceeds from sales of real estate assets, and/or proceeds from capital markets transactions.

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.

We continue to evaluate the market for acquisition opportunities and we may acquire shopping centers when we believe strategic opportunities exist.

During the year ended December 31, 2022, we acquired seven shopping centers, one outparcel, and one land parcel for an aggregate purchase price of $409.7 million, including transaction costs and closing credits.

During the year ended December 31, 2021, we acquired six shopping centers, one outparcel and two land parcels for an aggregate purchase price of $258.8 million, including transaction costs and closing credits.

During the year ended December 31, 2020, we acquired two land parcels for an aggregate purchase price of $3.4 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.

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

During the year ended December 31, 2022, we disposed of 16 shopping centers and 10 partial shopping centers for aggregate net proceeds of $277.0 million.

During the year ended December 31, 2021, we disposed of 17 shopping centers and 15 partial shopping centers for aggregate net proceeds of $237.4 million.

In addition, during the year ended December 31, 2021, we received aggregate net proceeds of less than $0.1 million from previously disposed assets.

During the year ended December 31, 2020, we disposed of 10 shopping centers, six partial shopping centers and one land parcel for aggregate net proceeds of $121.4 million.

addition, during the year ended December 31, 2020, we received aggregate net proceeds of $1.0 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 year ended December 31, 2021, our net cash provided by (used in) financing activities decreased $366.3 million as compared to the corresponding period in 2020.

The decrease was primarily due to (i) a $308.7 million decrease in debt borrowings, net of repayments;

and (ii) an $86.8 million increase in distributions to our common stockholders;

partially offset by (iii) a $23.1 million decrease in repurchases of common stock;

(iv) a $5.1 million increase in issuances of common stock;

Net cash used in financing activities is primarily impacted by the nature, timing, and magnitude of issuances and repurchases of debt and equity securities, as well as borrowings or principal payments associated with our outstanding indebtedness, including our Unsecured Credit Facility, and distributions made to our common stockholders.

During the year ended December 31, 2022, our net cash used in financing activities increased $86.8 million compared to the corresponding period in 2021.

The increase was primarily due to (i) a $122.7 million increase in debt repayments, net of borrowings;

(ii) a $32.4 million increase in distributions to our common stockholders;

and (iii) a $5.0 million increase in repurchases of common stock;

partially offset by (iv) a $48.0 million increase in issuances of common stock;

and (v) a $25.3 million decrease in deferred financing and debt extinguishment costs.

The decrease in debt borrowings is primarily related to amounts drawn on the Revolving Facility in 2020 in order to bolster liquidity in response to COVID-19.

Non-GAAP Performance Measures

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These measures should not be considered as alternatives to, or more meaningful than, net income (calculated in accordance with GAAP) or other GAAP financial measures, as an indicator of financial performance and are not alternatives to, or more meaningful than, cash flow from operating activities (calculated in accordance with GAAP) as a measure of liquidity.

Non-GAAP performance measures have limitations as they do not include all items of income and expense that affect operations, and accordingly, should always be considered as supplemental financial results to those calculated in accordance with GAAP.

Our computation of these non-GAAP performance measures may differ in certain respects from the methodology utilized by other REITs and, therefore, may not be comparable to similarly titled measures presented by such other REITs.

Non-GAAP performance measures have limitations as they do not include all items of income and expense that affect operations, and accordingly, should always be considered supplemental financial measures to those calculated in accordance with GAAP.

by such other REITs.

Investors are cautioned that items excluded from these non-GAAP performance measures are relevant to understanding and addressing financial performance.

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Same property NOI is calculated (using properties owned for the entirety of both periods and excluding properties under development and completed new development properties that 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 and real estate taxes).

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 below-market leases, net of amortization of above-market leases and tenant inducements, (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, corporate level expenses (including general and administrative), lease termination fees, straight-line rental income, net, accretion of below-market leases, net of amortization of above-market leases and tenant inducements, and straight-line ground rent expense.

Same property NOI excludes (i) lease termination fees, (ii) straight-line rental income, net, (iii) accretion of below-market leases, net of amortization of above-market leases and tenant inducements, (iv) straight-line ground rent expense, net, (v) income or expense associated with our captive insurance company, (vi) depreciation and amortization, (vii) impairment of real estate assets, (viii) general and administrative expense, and (ix) other income and expense (including interest expense and gain on sale of real estate assets).

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 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 lease termination fees, straight-line rental income, net, accretion of below-market leases, net of amortization of above-market leases and tenant inducements, straight-line ground rent expense, net, income or expense associated with our captive insurance company, depreciation and amortization, impairment of real estate assets, general and administrative expense, and other income and expense (including interest expense and gain on sale of real estate assets).

We believe that same property NOI is also useful to investors because it further eliminates disparities in NOI due to the acquisition or disposition of properties or the stabilization of completed new development properties during the periods presented and therefore provides a more consistent metric for comparing the operating performance of our real estate between periods.

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We commence recognizing rental revenue based on the date we make the underlying asset available for use by the tenant.

Leases also typically provide for the reimbursement 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 by the lessee and are recognized in the period the applicable expenditures are incurred and/or contractually required to be reimbursed.

Leases also typically provide for the reimbursement 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, by the lessee and are recognized in the period the applicable expenditures are incurred and/or contractually required to be reimbursed.

We periodically evaluate the collectability of our receivables related to rental revenue, straight-line rent, expense reimbursements, and those attributable to other revenue generating activities.

We analyze individual tenant receivables and consider tenant credit-worthiness, the length of time a receivable has been outstanding, and current economic trends when evaluating collectability.

In 2020 and 2021, our evaluation included consideration of the estimated impact of COVID-19 on the collectability of our receivables.

In 2022 and 2021, our evaluation included consideration of the impact of COVID-19 on the collectability of our receivables.

This assessment involved significant judgment regarding the severity and duration of the disruption caused by COVID-19, as well as judgment regarding which industries and tenants would be most significantly impacted.

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Real estate assets are recognized on our Consolidated Balance Sheets at historical cost, less accumulated depreciation and amortization.

Upon acquisition of real estate operating properties, management estimates the fair value of acquired tangible assets (consisting of land, buildings, and tenant improvements) and identifiable intangible assets and liabilities (consisting of above- and below-market leases and in-place leases) based on an evaluation of available information.

Based on these estimates, the fair value is allocated to the acquired assets and assumed

Upon acquisition of real estate operating properties, we estimate the fair value of acquired tangible assets (consisting of land, buildings, and tenant improvements) and identifiable intangible assets and liabilities (consisting of above- and below-market leases and in-place leases) based on an evaluation of available information.

Transaction costs incurred during the acquisition process are capitalized as a component of the asset’s value.

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In allocating fair value to identifiable intangible assets and liabilities, the value of above-market and below-market leases is estimated based on the present value (using a discount rate reflecting the risks associated with the leases acquired) of the difference between:

(i) the contractual amounts to be paid pursuant to the leases negotiated and in-place at the time of acquisition and (ii) management’s estimate of fair market lease rates for the property or an equivalent property, measured over a period equal to the lesser of 30 years or the remaining non-cancelable term of the lease, which includes renewal periods with fixed rental terms that are considered to be below-market.

The capitalized above-market or below-market intangible is amortized as a reduction of, or increase to, rental income over the remaining non-cancelable term of each lease.

(i) the contractual amounts to be paid pursuant to the leases negotiated and in-place at the time of acquisition and (ii) management’s estimate of fair market lease rates for the property or an equivalent property, measured over a period equal to the lesser of 30 years or the remaining non-cancelable term of the leases, which includes renewal periods with fixed rental terms that are considered to be below-market.

The capitalized above-market or below-market intangibles are amortized as a reduction of, or increase to, rental income over the remaining non-cancelable term of the leases.

The value of in-place leases is estimated based on management’s evaluation of the specific characteristics of each tenant lease, including:

(i) fair market rent and the reimbursement of property operating expenses, including common area expenses, utilities, insurance, and real estate taxes that would be forgone during a hypothetical expected lease-up period and (ii) costs that would be incurred, including leasing commissions, legal and marketing costs, and tenant improvements and allowances, to execute similar leases.

(i) fair market rent and the reimbursement of property operating expenses, including common area expenses, utilities, insurance, real estate taxes, and certain capital expenditures related to the maintenance of our properties, that would be forgone during a hypothetical expected lease-up period and (ii) costs that would be incurred, including leasing commissions, legal and marketing costs, and tenant improvements and allowances, to execute similar leases.

The value assigned to in-place leases is amortized to depreciation and amortization expense over the remaining term of each lease.

Real Estate - Estimates Related to Impairments

Management periodically assesses whether there are any indicators, including property operating performance, changes in anticipated hold period, and general market conditions, including the impact of COVID-19, that the carrying value of our real estate assets (including any related intangible assets or liabilities) may be impaired.

If an indicator is identified, a real estate asset is considered impaired only if management’s estimate of aggregate future undiscounted and unleveraged property operating cash flows, taking into account the anticipated probability-weighted hold period, are less than the carrying value of the property.

Various factors are considered in the estimation process which are subject to significant management judgment, including the anticipated hold period, current and/or future reinvestment projects, and the effects of demand and competition on future operating income and/or property values.

We periodically assess whether there are any indicators, including property operating performance, changes in anticipated hold period, and general market conditions, that the carrying value of our real estate assets (including any related intangible assets or liabilities) may be impaired.

If an indicator is identified, a real estate asset is considered impaired only if our estimate of aggregate future undiscounted and unleveraged property operating cash flows, taking into account the anticipated probability-weighted hold period, is less than the carrying value of the property.

Various factors are considered in the estimation process that are subject to significant management judgment, including the anticipated hold period, current and/or future reinvestment projects, and the effects of demand and competition on future operating income and/or property values.

Changes in any estimates and/or assumptions, particularly the anticipated hold period, could have a material impact on the projected operating cash flows.

If management determines that the carrying value of a real estate asset is impaired, an impairment charge is recognized to reflect the estimated fair value.

When a real estate asset is identified by management as held for sale, we discontinue depreciating the asset and estimate its sales price, net of estimated selling costs.

If the estimated net sales price of an asset is less than its net carrying value, an impairment charge is recognized to reflect the estimated fair value.

Prior to 2021, inflation had been low and had a minimal impact on the operating performance of our shopping centers;

however, inflation has significantly increased in 2021 and may continue to be elevated or increase further.

Most of our long-term leases contain provisions designed to mitigate the adverse impact of inflation, including contractual rent escalations and requirements for tenants to pay 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, thereby reducing our exposure to increases in property operating expenses resulting from inflation;

however, we have exposure to increases in non-reimbursable property operating expenses, including expenses incurred on vacant units.

In addition, we believe that many of our existing rental rates are below current market rates for comparable space and that upon renewal or re-leasing, such rates may be increased to be consistent with, or closer to, current market rates, which may also offset certain inflationary expense pressures.

With respect to our outstanding indebtedness, we periodically evaluate our exposure to interest rate fluctuations, and may continue to enter into interest rate protection agreements that mitigate, but do not eliminate, the impact of changes in interest rates on our variable rate loans.

If management determines that the carrying value of a real estate asset is impaired, an impairment charge is recognized to reflect the estimated fair value of the asset.

When we identify a real estate asset as held for sale, we discontinue depreciating the asset and estimate its sales price, net of estimated selling costs.

If the estimated net sales price of an asset is less than its net carrying value, an impairment charge is recognized to reflect the estimated fair value of the asset.

Prior to 2021, inflation was low and had a minimal impact on our operating and financial performance;

however, inflation significantly increased over the last two years and may continue to be elevated or increase further.

With respect to our shopping centers, our long-term leases generally contain provisions designed to mitigate the adverse impact of inflation, including contractual rent escalations and requirements for tenants to pay a portion 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, thereby reducing our exposure to increases in property operating expenses resulting from inflation;

however, we have exposure to increases in certain non-reimbursable property operating expenses, including expenses incurred on vacant units.

We believe that many of our existing rental rates are below current market rates for comparable space and that upon renewal or re-leasing, such rates may be increased to be consistent with, or closer to, current market rates, which may also offset certain inflationary expense pressures.

With respect to our outstanding indebtedness, we periodically evaluate our exposure to interest rate fluctuations, and have and may continue to enter into interest rate protection agreements that mitigate, but do not eliminate, the impact of changes in interest rates on our variable rate loans.

With respect to general and administrative costs, we continually seek opportunities to offset inflationary cost pressures through routine evaluations of our spending levels and through ongoing efforts to utilize technology to enhance our operational efficiency.

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What changed 10-K

Item 7. Management’s Discussion and Analysis