Item 1. Business
Item 1. Business
Brixmor Property Group Inc. 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. BPG owns 100% of the limited liability company interests of BPG Subsidiary LLC (“BPG Sub”), which, in turn, is the sole member of Brixmor OP GP LLC (the “General Partner”), the sole general partner of the Operating Partnership. Unless stated otherwise or the context otherwise requires, “we,” “our,” and “us” mean BPG and the Operating Partnership, collectively. We own and operate one of the largest publicly-traded 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 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 Core-Based Statistical Areas (“CBSAs”) 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., The Kroger Co., and Burlington Stores, Inc. In the opinion of our management, no material part of our business is dependent upon a single tenant, the loss of which would have a material adverse effect on us, and no single tenant or shopping center accounted for 5% or more of our consolidated revenues during 2022.
As of December 31, 2022, BPG beneficially owned, through its direct and indirect interest in BPG Sub and the General Partner, 100% of the outstanding partnership common units (the “OP Units”) in the Operating Partnership. The number of OP Units in the Operating Partnership beneficially owned by BPG is equivalent to the number of outstanding shares of BPG’s common stock, and the entitlement of all OP Units to quarterly distributions and payments in liquidation is substantially the same as those of BPG’s common stockholders. BPG’s common stock is publicly traded on the New York Stock Exchange (“NYSE”) under the ticker symbol “BRX.”
Management operates BPG and the Operating Partnership as one business. Because the Operating Partnership is managed by BPG, and BPG conducts substantially all of its operations through the Operating Partnership, BPG’s executive officers are the Operating Partnership’s executive officers, and although, as a partnership, the Operating Partnership does not have a board of directors, we refer to BPG’s board of directors as the Operating Partnership’s board of directors.
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Our Shopping Centers
The following table provides summary information regarding our Portfolio as of December 31, 2022:
Number of Shopping Centers 373
GLA (square feet) 66.0 million
Percent Billed 90%
Percent Leased 94%
Annualized Base Rent ("ABR") Per Square Foot (“PSF”) (1)
$16.19
New, Renewal and Option Volume (square feet) (2)
10.6 million
New Lease Volume (square feet) (2)
3.3 million
New, Renewal and Option Rent Spread (2)(3)
12.7%
New Rent Spread (2)(3)
37.0%
Percent Grocery-anchored Shopping Centers (4)
72%
Percent of ABR in Top 50 U.S. CBSAs 71%
(1) ABR represents contractual monthly base rent as of a specified date under leases that have been signed or commenced as of the specified date, multiplied by 12. For purposes of calculating ABR, all signed or commenced leases with an initial term of one year or greater are included. ABR PSF is calculated as ABR divided by leased GLA, excluding the GLA of lessee-owned leasehold improvements.
(2) During the year ended December 31, 2022.
(3) Represents the percentage change in contractual ABR PSF in the first year of the new lease relative to contractual ABR PSF in the last year of the old lease. For purposes of calculating rent spreads, ABR PSF includes the GLA of lessee-owned leasehold improvements. Based on comparable leases only, which consist of new leases signed on units that were occupied within the prior 12 months, 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, and contractual renewal options exercised by tenants in the same location to extend the term of an expiring lease. New leases signed on units that have been vacant for longer than 12 months, new leases signed on first generation space, and new leases that are ancillary in nature regardless of term are deemed non-comparable and excluded from New Rent Spreads. Renewals that include the expansion of an existing tenant into space that has been vacant for longer than 12 months and renewals that are ancillary in nature regardless of term are deemed non-comparable and excluded from Renewal Rent Spreads.
(4) Based on number of shopping centers.
Business Objectives and Strategies
Our primary objective is to maximize total returns to our stockholders through consistent, sustainable growth in cash flow. 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 our purpose-driven Corporate Responsibility (“CR”) strategy and our commitment to environmental, social, and governance (“ESG”) issues.
Driving Internal Growth. Our primary drivers of internal growth include (i) embedded contractual rent escalations, (ii) below-market rents that may be reset to market as leases expire, (iii) occupancy growth, and (iv) prudent expense management, including proactively navigating inflationary pressure on operating costs and wages. Ongoing strong new leasing productivity, with a key focus on merchandising and our enhanced underwriting processes, have also enabled us to consistently improve the credit of our tenancy and the vibrancy and relevancy of our Portfolio to retailers and consumers. During 2022, we executed 613 new leases representing approximately 3.3 million square feet and 1,614 total leases, including new leases, renewals, and options, representing approximately 10.6 million square feet.
We believe that rents across our Portfolio are well below market, which provides us with a key competitive advantage in attracting and retaining tenants. During 2022, we achieved rent spreads on new leases of 37.0% and blended rent spreads on new and renewal leases of 16.0% excluding options or 12.7% including options. Looking forward, the weighted average expiring ABR PSF of anchor lease expirations through 2025, assuming no remaining renewal options are exercised, is $10.23 compared to a weighted average ABR PSF of $13.56 for new anchor leases signed during 2022.
Our high-quality, nationally diversified portfolio of community and neighborhood shopping centers continues to benefit from the desire of many thriving retail platforms to locate in physical formats that provide greater access and proximity to their customers, which has led to robust leasing demand and below-average tenant move-out activity, driving record leased occupancy in 2022. We believe there is opportunity for further occupancy gains in our Portfolio, particularly for spaces less than 10,000 square feet, as such spaces will continue to benefit from our value-enhancing reinvestment initiatives. As of December 31, 2022, leased occupancy was a record 89.2% for spaces less
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than 10,000 square feet, while our total leased occupancy was a record 93.8%. The spread between our total leased occupancy and our total billed occupancy was 360 basis points and our total signed but not yet commenced lease population, which includes an additional 70 basis points of GLA related to space that will soon be vacated by existing tenants, represented 2.9 million square feet and $54.7 million of ABR, providing strong visibility on our future growth.
Pursuing value-enhancing reinvestment opportunities. We believe that we have significant opportunities to realize attractive risk-adjusted returns by investing capital in the repositioning and/or redevelopment of certain assets in our Portfolio. Such initiatives are tenant driven and focus on upgrading our centers with strong, best-in-class retailers. During 2022, we stabilized 30 anchor space repositioning, outparcel development, and redevelopment projects, with a weighted average incremental net operating income (“NOI”) yield of 10% and an aggregate cost of $179.3 million. As of December 31, 2022, we had 48 projects in process with an expected weighted average incremental NOI yield of 9% and an aggregate anticipated cost of $342.9 million. 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 at NOI yields that are generally consistent with those that we have recently realized.
Prudently executing on acquisition and disposition activity. We actively pursue acquisition and disposition opportunities in order to further concentrate our Portfolio in attractive retail submarkets and optimize the quality and long-term growth rate of our asset base. In general, 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, while our disposition strategy focuses on selling assets 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. Our acquisition activity may include acquisitions of open-air shopping centers and non-owned anchor spaces or outparcels at, or adjacent to, our shopping centers and the timing of acquisition and disposition activity is often dependent on the transactions and capital markets environments.
During 2022, we acquired $409.7 million of assets, including transaction costs and closing credits, and generated aggregate net proceeds of $277.0 million from property dispositions. Acquisitions were funded through a combination of net proceeds from property dispositions and available cash.
Maintaining a Flexible Capital Structure Positioned for Growth. 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 have investment grade credit ratings from all three major credit rating agencies and during 2022, we received a credit rating upgrade from Fitch Ratings and a positive credit rating outlook from S&P Global Ratings.
During 2022, we amended and restated our unsecured credit facility (the “Unsecured Credit Facility”), which is comprised of a $1.25 billion revolving credit facility (the “Revolving Facility”) and a $300 million term loan facility, in addition to a new $200 million delayed draw term loan (together, the “Term Loan Facility"). The Unsecured Credit Facility amendment extended the maturities of the Revolving Facility and Term Loan Facility to June 2026 and July 2027, respectively, while also improving pricing and adding a sustainability-linked pricing component related to our continued reductions of greenhouse gas emissions. During 2022, we also renewed our $400 million share repurchase program and our $400 million at-the-market equity offering program (“ATM”), which together provide us with maximum flexibility to capitalize on a wide range of potential capital markets environments and support the long-term execution of our balanced business plan.
Also, during 2022 we repaid $250.0 million of our senior unsecured notes due 2022 with available cash. As of December 31, 2022, we had $1.35 billion of available liquidity, including $1.12 billion under our Revolving Facility, $200.0 million under our delayed draw term loan, and $21.3 million of cash and cash equivalents and restricted cash. We have no debt maturities in 2023 and have $500.0 million of debt maturities in June 2024.
Operating in a Socially Responsible Manner. We believe that prioritizing corporate responsibility is critical to delivering consistent, sustainable growth. Our CR strategy is integrated throughout our organization and is focused on creating partnerships that improve the social, economic, and environmental well-being of all our stakeholders
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including our communities, employees, tenants, suppliers and vendors, and investors. Our strong commitment to ESG issues directly aligns with our core values and our vision to be the center of the communities we serve.
Our ESG Steering Committee, which is comprised of executive and senior leadership from a variety of functional areas, meets quarterly to set, implement, monitor, and communicate our CR strategy and related initiatives. Our board of directors, through our Nominating and Corporate Governance Committee (“NCGC”) oversees our CR initiatives to ensure that our actions consistently demonstrate our strong commitment to operating in an environmentally and socially responsible manner. To facilitate their oversight, the NCGC and our board of directors are provided with quarterly updates on our initiatives by our senior leadership team. CR objectives are included as part of our executive officers' goals and the achievement of such goals impacts the individual performance portion of their compensation.
We provide best-in-class, comprehensive CR disclosures, prepared in accordance with the Global Reporting Initiative (“GRI”) Standards and in alignment with Sustainability Accounting Standards Board (“SASB”) and Task Force on Climate-related Financial Disclosures (“TCFD”) reporting frameworks. We are a GRESB participant and a signatory to the Science Based Targets initiative (“SBTI”).
• Environmental Responsibility: In 2021, our ESG Steering Committee formalized the Company’s Climate Change Policy, which articulates our strategy for the assessment of and response to the risks posed by climate change and natural hazards to our properties, our tenants, and the communities we serve. As part of this policy, we set a goal to achieve net zero carbon emissions by 2045 for areas under our operational control. As a signatory of the SBTI, aligned with the 1.5 degree Celsius pathway, we are committed to an interim reduction of greenhouse gas emissions by 50% by 2030 for areas under our operational control. As of December 31, 2021, we have achieved a 38% reduction against this interim SBTI goal.
• Human Capital: As of December 31, 2022, we had 502 employees, including 500 full-time employees. Our talented and committed employees are the foundation of our success. Together, we strive to promote a culture that is supportive, collaborative, and inclusive, and that provides opportunities for both personal and professional growth. We empower our employees to think and act like owners in order to create value for all stakeholders. This approach enables us to attract and retain diverse and talented professionals while fostering collaborative, skilled, and motivated teams. The pillars of our human capital strategy are:
• Engagement : We believe that employees that are personally engaged in our vision to be the center of the communities we serve and are connected with similarly engaged colleagues will be more effective in their roles. We measure employee engagement through biennial employee surveys and utilize the results from such surveys to continually improve our organization, enhancing benefits and various other forms of support based on employee feedback. Our engagement and connectivity initiatives have contributed to our 99% employee satisfaction score and 100% participation in annual performance reviews and talent development discussions.
• Growth and Development : We encourage our employees to grow and develop their interests, skills, and passions by providing learning opportunities along with professional and personal training. Our annual talent development process is intended to provide a well-rounded perspective on individual performance by recognizing employee strengths, identifying opportunities for growth, and developing actionable plans for professional development. We foster employee growth by providing: comprehensive training programs geared towards specific job functions; innovative development programs, such as two-year intensive apprenticeship programs for entry level employees in leasing, property management, and construction; Predictive Index Behavioral Assessments to enhance self-awareness and effective collaboration; education assistance through reimbursements for tuition and professional licensure; and “Personal Development Accounts,” which provide time off and expense reimbursement for a personal or professional development activity chosen by the employee.
• Health and Well-being : Our commitment to the health and well-being of our employees is a crucial component of our culture. We provide a wide-range of employee benefits including comprehensive medical, prescription, dental and vision insurance coverage (the majority of which is paid for by the Company); paid maternity, paternity, and adoption leave; matching 401(k) contributions; life insurance, disability benefits, and spousal death benefits; and a variety of time off benefits. We also encourage healthy lifestyles through initiatives such as: an annual wellness spending account; free
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access to online applications such as Noom (for developing healthy eating and lifestyle habits) and Headspace (for mindfulness and meditation); weekly live meditation breaks; health-oriented employee competitions; and "Wellness Wednesdays," which include live demonstrations related to a variety of healthy lifestyle topics. We also provide free access to licensed counselors to support mental health and offer hybrid work schedules to maximize engagement, collaboration, and efficiency, while supporting a healthy work-life balance.
• Diversity, Equity, and Inclusion (“DEI”): We believe our performance is enhanced by an inclusive environment that reflects the diversity of the communities we serve. We advocate for DEI in every part of our organization and strive to create equal opportunities for all current and future employees. We believe a culture based on DEI is critical to our ability to attract and retain talented employees and to deliver on our strategic goals and objectives. Every year, each employee participates in culture and ethics training and signs a pledge to commit to helping create and maintain an inclusive culture free from harassment based on race, sexual orientation, gender, and other protected classes. Our DEI Leadership Council, comprised of diverse senior leaders from a variety of functional areas, reports directly to our CEO and assists in maintaining best practices and behaviors to enhance inclusion and promote equity and diversity. In addition, our employee-led Employee Resource Group helps further the DEI Leadership Council's key initiatives by bringing employees together to connect and learn. We also regularly feature DEI themes in employee trainings and community events, such as our Big Brain Days.
We strive to ensure diversity of job candidates through partnerships with DEI focused organizations such as ICSC Launch Academy and Sponsors For Educational Opportunity (SEO), which seek to provide summer internship opportunities for racially diverse undergraduate students. We also assess pay equity periodically as it relates to gender, race, and ethnicity based on a role/similar-role basis. On average, there is no pay gap with respect to gender or race/ethnicity across the Company. Additionally, in 2021, our CEO signed the CEO Action for Diversity & Inclusion TM pledge, which is the largest CEO-driven business commitment to advance DEI in the workplace. In 2022, we became a founding donor to Nareit's Dividends Through Diversity, Equity, & Inclusion Giving Campaign, which supports charitable and educational organizations and initiatives that will help create a more diverse, equitable, and inclusive REIT and publicly traded real estate industry.
For more information on our CR strategy, goals, performance, and achievements, please visit our CR page at https://www.brixmor.com/why-brixmor/corporate-responsibility. Information on our website is not incorporated by reference herin and is not a part of this Annual Report on Form 10-K
Tenants
Our national portfolio is thoughtfully merchandised with non-discretionary and value-oriented retailers, as well as consumer-oriented service providers, and is home to a broad mix of national and regional tenants and local entrepreneurs. As of December 31, 2022, we had over 5,000 diverse tenants in our portfolio, including many vibrant new retailers added over the past several years, and approximately 72% of our properties were anchored by a grocer.
See “ Item 2. Properties ” for further information on our 20 largest tenants.
Compliance with Government Regulations
We are subject to federal, state, and local regulations, including environmental regulations that apply generally to the ownership of, and the operations conducted on, real property. As of December 31, 2022, we are not aware of any environmental conditions or material costs of complying with environmental or other government regulations that would have a material adverse effect on our overall business, financial condition, or results of operations. However, it is possible that we are not aware of, or may become subject to, potential environmental liabilities or material costs of complying with government regulations that could be material. See “Environmental conditions that exist at some of the properties in our Portfolio could result in significant unexpected costs” and “Compliance with the Americans with Disabilities Act, environmental laws, and fire, safety and other regulations may require us to make expenditures that would adversely affect our financial condition, operating results, and cash flows” in Item 1A. “Risk Factors” for further information regarding our risks related to government regulations.
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Financial Information about Industry Segments
Our principal business is the ownership and operation of open-air retail shopping centers. We do not distinguish our principal business or group our operations on a geographical basis for purposes of measuring performance. Accordingly, we have a single reportable segment for disclosure purposes in accordance with U.S. generally accepted accounting principles (“GAAP”).
REIT Qualification
We have 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, have maintained such requirements through our taxable year ended December 31, 2022, and intend to satisfy such requirements for subsequent taxable years. As a REIT, we generally will not be subject to U.S. federal income tax on net taxable income that we distribute annually to our stockholders. In order to qualify as a REIT for U.S. federal income tax purposes, we must continually satisfy tests concerning, among other things, the real estate qualification of sources of our income, the composition and value of our assets, the amounts we distribute to our stockholders, and the diversity of ownership of our stock. In order to comply with REIT requirements, we may need to forgo otherwise attractive opportunities or limit the manner in which we conduct our operations. See “Risks Related to our REIT Status and Certain Other Tax Items” in Item 1A. “Risk Factors” for further information.
Executive Officers
As of December 31, 2022, each of our executive officers has been employed by us for more than five years and included the following:
Name Position Year Joined (1)
Age
James Taylor President, Chief Executive Officer 2016 56
Angela Aman Executive Vice President, Chief Financial Officer and Treasurer 2016 43
Brian T. Finnegan Executive Vice President, Chief Revenue Officer 2004 42
Mark T. Horgan Executive Vice President, Chief Investment Officer 2016 47
Steven F. Siegel Executive Vice President, General Counsel and Secretary 1991 62
Carolyn Carter Singh (2)
Executive Vice President, Chief Talent Officer 2001 60
(1) Includes predecessors of Brixmor Property Group Inc.
(2) Effective January 4, 2023, Shea Taylor, age 50, replaced Carolyn Carter Singh, upon her retirement, as Executive Vice President, Chief Talent Officer
Corporate Headquarters
Brixmor Property Group Inc., a Maryland corporation, was incorporated in 2011. The Operating Partnership, a Delaware limited partnership, was formed in 2011. Our principal executive offices are located at 450 Lexington Avenue, New York, New York 10017, and our telephone number is (212) 869-3000.
Our website address is https://www.brixmor.com. Information on our website is not incorporated by reference herein and is not a part of this Annual Report on Form 10-K. We make available free of charge on our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable after those reports are electronically filed with or furnished to the SEC. We also make available through our website other reports filed with or furnished to the SEC under the Exchange Act, including our proxy statements and reports filed by officers and directors under Section 16(a) of the Exchange Act. You may access these filings by visiting “SEC Filings” under the “Financial Info” section of the “Investors” portion of our website. In addition, the SEC maintains a website that contains reports, proxy and information statements, and other information for issuers, such as us, that file electronically with the SEC at https://www.sec.gov.
Financial and other material information regarding our company is routinely posted on and accessible at the “Investors” portion of our website at https://www.brixmor.com. Investors and others should note that we use our website as a channel of distribution of material information to our investors. Therefore, we encourage investors and others interested in our company to review the information we post on the “Investors” portion of our website. In
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addition, you may enroll to automatically receive e-mail alerts and other information about our company by visiting “Email Alerts” under the “Additional Info” section of the “Investors” portion of our website.
Dividend Reinvestment & Direct Stock Purchase Plan
Our registrar and stock transfer agent is Computershare Trust Company, N.A. We offer a Dividend Reinvestment and Direct Stock Purchase Plan, providing shareholders and new investors with a simple and convenient method of investing in additional shares of common stock without payment of transaction or processing fees, service charges, or other expenses. Plan inquiries may be directed to (877) 373-6374, or (781) 575-2879 if located outside the U.S. and Canada.
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