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Item 2. Management’s Discussion and Analysis

2023-05-01 compared with 2022-11-01 · 108 added, 200 removed, 209 unchanged (60% 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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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 September 30, 2022, our portfolio was comprised of 378 shopping centers (the “Portfolio”) totaling approximately 67 million square feet of GLA.

As of March 31, 2023, our portfolio was comprised of 367 shopping centers (the “Portfolio”) totaling approximately 65 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 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 September 30, 2022, our three largest tenants by annualized base rent (“ABR”) were The TJX Companies, Inc.

As of March 31, 2023, our three largest tenants by annualized base rent (“ABR”) were The TJX Companies, Inc.

(“TJX”), The Kroger Co.

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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 operating 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 strategy and our commitment to environmental, social, and governance issues.

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

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Leasing Highlights

As of September 30, 2022, billed and leased occupancy were 89.6% and 93.3%, respectively, as compared to 88.2% and 91.5%, respectively, as of September 30, 2021.

The following table summarizes our executed leasing activity for the three months ended September 30, 2022 and 2021 (dollars in thousands, except for per square foot (“PSF”) amounts):

For the Three Months Ended September 30, 2022

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

New, renewal and option leases 417 2,791,073 $ 17.09 $ 4.91 $ 1.62 10.9 %

New and renewal leases 360 1,748,497 19.26 7.83 2.59 14.2 %

New leases 146 661,587 21.20 17.80 6.72 32.2 %

Renewal leases 214 1,086,910 18.08 1.76 0.08 11.8 %

Option leases 57 1,042,576 13.45 — — 5.8 %

For the Three Months Ended September 30, 2021

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

New, renewal and option leases 386 2,770,003 $ 14.54 $ 3.23 $ 1.43 10.7 %

New and renewal leases 332 1,719,493 16.62 5.20 2.31 12.3 %

New leases 161 745,712 17.43 9.62 5.28 26.3 %

Renewal leases 171 973,781 15.99 1.82 0.04 7.6 %

Option leases 54 1,050,510 11.14 — — 7.6 %

(1) Based on comparable leases only, which consist of new leases signed on units that were occupied within the prior 12 months and renewal or option 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.

The following table summarizes our executed leasing activity for the nine months ended September 30, 2022 and 2021 (dollars in thousands, except for PSF amounts):

For the Nine Months Ended September 30, 2022

As of March 31, 2023, billed and leased occupancy were 90.0% and 94.0%, respectively, as compared to 88.6% and 92.1%, respectively, as of March 31, 2022.

The following table summarizes our executed leasing activity for the three months ended March 31, 2023 and 2021 (dollars in thousands, except for per square foot (“PSF”) amounts):

For the Three Months Ended March 31, 2023

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

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Option leases 61 1,015,566 13.17 — — 8.8 %

For the Nine Months Ended September 30, 2021

For the Three Months Ended March 31, 2022

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

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Acquisition Activity

• During the nine months ended September 30, 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 nine months ended September 30, 2021, we acquired two shopping centers, one outparcel, and two land parcels for an aggregate purchase price of $66.7 million, including transaction costs and closing credits.

• During the three months ended March 31, 2023, we did not acquire any assets.

• During the three months ended March 31, 2022, we acquired three shopping centers and one land parcel and paid less than $0.1 million related to previously acquired assets for an aggregate purchase price of $158.2 million, including transaction costs and closing credits.

In addition, during the three months ended March 31, 2022, we funded $6.1 million of deposits on assets that were under contract to be acquired.

Disposition Activity

• During the nine months ended September 30, 2022, we disposed of 11 shopping centers and seven partial shopping centers for aggregate net proceeds of $168.2 million, resulting in aggregate gain of $58.2 million and aggregate impairment of $4.6 million.

In addition, during the nine months ended September 30, 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 net gain of $2.4 million.

• During the nine months ended September 30, 2021, we disposed of nine shopping centers, 14 partial shopping centers, and one land parcel for aggregate net proceeds of $124.4 million resulting in aggregate gain of $49.5 million and aggregate impairment of $1.5 million.

In addition, during the nine months ended September 30, 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 three months ended March 31, 2023, we disposed of six shopping center and two partial shopping centers for aggregate net proceeds of $119.7 million, resulting in aggregate gain of $48.5 million.

• During the three months ended March 31, 2022, we disposed of five shopping centers and one partial shopping center for aggregate net proceeds of $58.9 million resulting in aggregate gain of $21.8 million and aggregate impairment of $1.1 million.

In addition, during the three months ended March 31, 2022, we resolved contingencies related to previously disposed assets, resulting in net 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 September 30, 2022 to the Three Months Ended September 30, 2021

Comparison of the Three Months Ended March 31, 2023 to the Three Months Ended March 31, 2022

Revenues (in thousands)

Three Months Ended September 30,

Three Months Ended March 31,

2023 2022 $ Change

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Rental income

The increase in rental income for the three months ended September 30, 2022 of $14.6 million, as compared to the corresponding period in 2021, was due to a $9.1 million increase for assets owned for the full period and a $5.5 million increase due to net acquisition and disposition activity.

The increase for assets owned for the full period was due to (i) a $9.2 million increase in base rent;

The increase in rental income for the three months ended March 31, 2023 of $12.8 million, as compared to the corresponding period in 2022, was due to an $11.8 million increase for assets owned for the full period and a $1.0 million increase due to net transaction activity.

The increase for assets owned for the full period was due to (i) an $8.9 million increase in base rent;

(ii) a $4.7 million increase in expense reimbursements;

(iii) a $1.2 million increase in ancillary and other rental income;

(iv) a $1.1 million increase in straight-line rental income, net;

(v) a $0.3 million increase in percentage rents;

(iii) a $1.2 million increase in lease termination fees;

(iv) a $0.4 million increase in percentage rents;

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

partially offset by (vi) a $2.9 million decrease associated with revenues deemed uncollectible;

(vii) a $1.4 million decrease in lease termination fees;

(viii) a $0.6 million decrease in accretion of below-market leases, net of amortization of above-market leases and tenant inducements.

The $9.2 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 12.0% during the nine months ended September 30, 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 the current pandemic of the novel coronavirus (“COVID-19”).

The $4.3 million increase in expense reimbursements was primarily attributable to increases in billed occupancy, reimbursable costs, and real estate taxes.

(vii) a $0.7 million decrease in straight-line rental income, net;

and (viii) a $0.1 million decrease in ancillary and other rental income.

The $8.9 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 14.9% during the three months ended March 31, 2023 and 12.7% during the year ended December 31, 2022, and an increase in weighted average billed occupancy.

The $4.7 million increase in expense reimbursements was primarily attributable to increases in weighted average billed occupancy, reimbursable operating costs, and real estate taxes.

The $2.9 million decrease associated with revenues deemed uncollectible was primarily attributable to reduced cash collections associated with amounts previously reserved.

Other revenues

Other revenues remained generally consistent for the three months ended September 30, 2022 as compared to the corresponding period in 2021.

Operating Expenses (in thousands)

Three Months Ended September 30,

2022 2021 $ Change

Operating expenses

Operating costs $ 33,299 $ 32,774 $ 525

Real estate taxes 44,179 39,763 4,416

Depreciation and amortization 84,773 81,724 3,049

General and administrative 29,094 25,309 3,785

Total operating expenses $ 191,345 $ 179,570 $ 11,775

Operating costs

The increase in operating costs for the three months ended September 30, 2022 of $0.5 million, as compared to the corresponding period in 2021, was due to a $0.6 million increase in operating costs due to net acquisition and disposition activity, partially offset by a $0.1 million decrease for assets owned for the full period.

Real estate taxes

The increase in real estate taxes for the three months ended September 30, 2022 of $4.4 million, as compared to the corresponding period in 2021, was due to a $3.2 million increase in real estate taxes for assets owned for the full period, primarily due to a decrease in favorable adjustments related to prior year assessments and an increase in

current year assessments, in addition to a $1.2 million increase in real estate taxes due to net acquisition and disposition activity.

Depreciation and amortization

The increase in depreciation and amortization for the three months ended September 30, 2022 of $3.0 million, as compared to the corresponding period in 2021, was primarily due to a $5.5 million increase attributable to net acquisition and disposition activity and capital expenditures for assets owned for the full period, partially offset by a $2.5 million decrease in accelerated depreciation and amortization related to tenant move-outs.

General and administrative

The increase in general and administrative costs for the three months ended September 30, 2022 of $3.8 million, as compared to the corresponding period in 2021, was primarily due to an increase in net compensation costs.

During the three months ended September 30, 2022 and 2021, construction compensation costs of $4.4 million and $4.2 million, respectively, were capitalized to building and improvements and leasing legal costs of $0.7 million and $0.7 million, respectively and leasing commission costs of $2.1 million and $2.0 million, respectively, were capitalized to deferred charges and prepaid expenses, net.

Other Income and Expenses (in thousands)

Three Months Ended September 30,

2022 2021 $ Change

Other income (expense)

Dividends and interest $ 88 $ 51 $ 37

Interest expense (48,726) (48,918) 192

Gain on sale of real estate assets 15,768 11,122 4,646

Loss on extinguishment of debt, net — (27,116) 27,116

Other (789) 390 (1,179)

Total other expense $ (33,659) $ (64,471) $ 30,812

Dividends and interest

Dividends and interest remained generally consistent for the three months ended September 30, 2022 as compared to the corresponding period in 2021.

Interest expense

The decrease in interest expense for the three months ended September 30, 2022 of $0.2 million, as 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 three months ended September 30, 2022, one shopping center and three partial shopping centers were disposed of resulting in aggregate gain of $13.5 million.

In addition, during the three months ended September 30, 2022, we had land at one shopping center seized through eminent domain resulting in an aggregate gain of $2.3 million.

During the three months ended September 30, 2021, three shopping centers, five partial shopping centers, and one land parcel were disposed of resulting in aggregate gain of $11.1 million.

Loss on extinguishment of debt, net

During the three months ended September 30, 2021, we redeemed all $500.0 million of our 3.250% Senior Notes due 2023, resulting in a $27.1 million loss on extinguishment of debt.

Loss on extinguishment of debt includes $25.5 million of prepayment fees and $1.6 million of accelerated unamortized debt issuance costs and debt discounts.

The increase in other expense for the three months ended September 30, 2022 of $1.2 million, as compared to the corresponding period in 2021, was primarily due to favorable tax adjustments in the prior year.

Comparison of the Nine Months Ended September 30, 2022 to the Nine Months Ended September 30, 2021

Revenues (in thousands)

Nine Months Ended September 30,

2022 2021 $ Change

Rental income 908,903 853,407 $ 55,496

Other revenues 602 3,549 (2,947)

Total revenues $ 909,505 $ 856,956 $ 52,549

Rental income

The increase in rental income for the nine months ended September 30, 2022 of $55.5 million, as compared to the corresponding period in 2021, was due to a $44.7 million increase for assets owned for the full period and a $10.8 million increase due to net acquisition and disposition activity.

The increase for assets owned for the full period was due to (i) a $24.9 million increase in base rent;

(ii) a $9.2 million increase in expense reimbursements;

(iii) a $6.3 million increase in straight-line rental income, net;

(iv) a $4.6 million increase associated with revenues deemed uncollectible;

(v) a $3.6 million increase in ancillary and other rental income;

and (vi) a $2.6 million increase in percentage rents;

partially offset by (vii) a $4.6 million decrease in lease termination fees;

and (viii) a $1.9 million decrease in accretion of below-market leases, net of amortization of above-market leases and tenant inducements.

The $24.9 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 12.0% during the nine months ended September 30, 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 $9.2 million increase in expense reimbursements was primarily attributable to increases in billed occupancy, reimbursable operating expenses, and real estate taxes.

The increase due to net transaction activity was primarily attributable to an increase in real estate tax reimbursements.

Other revenues

The decrease in other revenues for the nine months ended September 30, 2022 of $2.9 million, as compared to the corresponding period in 2021, was primarily due to a decrease in tax increment financing income.

Other revenues remained generally consistent for the three months ended March 31, 2023 as compared to the corresponding period in 2022.

Operating Expenses (in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

2023 2022 $ Change

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Operating costs

The increase in operating costs for the nine months ended September 30, 2022 of $9.7 million, as compared to the corresponding period in 2021, was due to an $8.6 million increase for assets owned for the full period primarily due to an increases in repair and maintenance, utility, and insurance costs, in addition to a $1.1 million increase in operating costs due to net acquisition and disposition activity.

The increase in operating costs for the three months ended March 31, 2023 of $1.1 million, as compared to the corresponding period in 2022, was due to a $1.4 million increase in operating costs for assets owned for the full period, primarily due to increases in repairs and maintenance and utilities, partially offset by a $0.3 million decrease due to net transaction activity.

Real estate taxes

The increase in real estate taxes for the nine months ended September 30, 2022 of $3.2 million, as compared to the corresponding period in 2021, was primarily due to a $2.3 million increase in real estate taxes due to net acquisition and disposition activity and a $0.9 million increase for assets owned for the full period, primarily due to an increase in current year assessments.

The increase in real estate taxes for the three months ended March 31, 2023 of $3.0 million, as compared to the corresponding period in 2022, was due to a $1.9 million increase in real estate taxes due to net transaction activity, in addition to a $1.1 million increase in real estate taxes for assets owned for the full period, primarily due to an increase in current year assessments, a decrease in real estate tax refunds, and a decrease in favorable adjustments related to prior year assessments.

Depreciation and amortization

The increase in depreciation and amortization for the nine months ended September 30, 2022 of $7.8 million, as compared to the corresponding period in 2021, was primarily due to a $14.7 million increase attributable to net

acquisition and disposition activity and capital expenditures for assets owned for the full period, partially offset by a $6.9 million decrease in accelerated depreciation and amortization related to tenant move-outs.

The increase in depreciation and amortization for the three months ended March 31, 2023 of $3.5 million, as compared to the corresponding period in 2022, was primarily due to a $1.9 million increase for assets owned for the full period, primarily due to capital expenditures, partially offset by a decrease in accelerated depreciation and amortization related to tenant move-outs, and a $1.6 million increase attributable to net transaction activity.

Impairment of real estate assets

During the nine months ended September 30, 2022, aggregate impairment of $4.6 million was recognized on two shopping centers, as a result of disposition activity.

During the nine months ended September 30, 2021, aggregate impairment of $1.9 million was recognized on one shopping center, as a result of disposition activity and one operating property, which has subsequently been sold.

During the three months ended March 31, 2023, aggregate impairment of $1.1 million was recognized on one operating property.

During the three months ended March 31, 2022, aggregate impairment of $4.6 million was recognized on one shopping center, as a result of disposition activity, and one operating property.

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 nine months ended September 30, 2022 of $10.4 million, as compared to the corresponding period in 2021, was primarily due to increases in net compensation costs, marketing, and travel and entertainment costs, partially offset by a decrease in litigation and other non-routine legal and professional expenses.

During the nine months ended September 30, 2022 and 2021, construction compensation costs of $12.9 million and $12.1 million, respectively, were capitalized to building and improvements and leasing legal costs of $3.1 million and $1.5 million, respectively and leasing commission costs of $6.0 million and $4.8 million, respectively, were capitalized to deferred charges and prepaid expenses, net.

The increase in general and administrative costs for the three months ended March 31, 2023 of $1.2 million, as compared to the corresponding period in 2022, was primarily due to an increase in net compensation costs, professional expenses, and travel and entertainment costs, partially offset by a decrease in office expenses.

During the three months ended March 31, 2023 and 2022, construction compensation costs of $4.6 million and $4.2 million, respectively, were capitalized to building and improvements and leasing legal costs of $1.4 million and $1.5 million, respectively, and leasing commission costs of $2.2 million and $1.9 million, respectively, were capitalized to deferred charges and prepaid expenses, net.

Other Income and Expenses (in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

2023 2022 $ Change

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Gain on sale of real estate assets 48,468 21,911 26,557

Loss on extinguishment of debt, net (221) (28,345) 28,124

Other (405) (539) 134

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Dividends and interest

Dividends and interest remained generally consistent for the nine months ended September 30, 2022 as compared to the corresponding period in 2021.

Dividends and interest remained generally consistent for the three months ended March 31, 2023 as compared to the corresponding period in 2022.

Interest expense

The decrease in interest expense for the nine months ended September 30, 2022 of $3.7 million, as compared to the corresponding period in 2021, was primarily due to lower overall debt obligations.

The increase in interest expense for the three months ended March 31, 2023 of $1.4 million, as compared to the corresponding period in 2022, was primarily due to a higher weighted average interest rate, partially offset by lower overall debt obligations.

Gain on sale of real estate assets

During the nine months ended September 30, 2022, nine shopping centers and seven partial shopping centers were disposed of resulting in aggregate gain of $58.2 million.

During the nine months ended September 30, 2021, eight shopping centers, 14 partial shopping centers, and one land parcel were disposed of resulting in aggregate gain of $49.5 million.

In addition, during the nine months ended September 30, 2021, we resolved contingencies related to previously disposed assets resulting in aggregate gain of less than $0.1 million.

Loss on extinguishment of debt, net

During the nine months ended September 30, 2022, we amended and restated our Unsecured Credit Facility, resulting in a $0.2 million loss on extinguishment of debt due to the acceleration of unamortized debt issuance costs.

During the nine months ended September 30, 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 due to $25.5 million of prepayment fees and $2.8 million of accelerated unamortized debt issuance costs and debt discounts.

The increase in other expense for the nine months ended September 30, 2022 of $3.6 million, as 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.

During the three months ended March 31, 2023, six shopping center and two partial shopping centers were disposed of resulting in aggregate gain of $48.5 million.

During the three months ended March 31, 2022, four shopping centers and one partial shopping center were disposed of resulting in aggregate gain of $21.8 million.

In addition, during the three months ended March 31, 2022, we resolved contingencies related to previously disposed assets resulting in net gain of $0.1 million.

Other expense remained generally consistent for the three months ended March 31, 2023 as compared to the corresponding period in 2022.

Liquidity and Capital Resources

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• operating cash flow;

• available borrowings under the Unsecured Credit Facility;

• available borrowings under the Unsecured Credit Facility (defined herein);

• issuance of long-term debt;

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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 generate significant operating cash flow and 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 September 30, 2022, we had $1.28 billion of available liquidity, including $1.25 billion under our Unsecured Credit Facility and $31.3 million of cash and cash equivalents and restricted cash.

We have an unsecured credit facility as amended and restated April 28, 2022 (the "Unsecured Credit Facility"), which is comprised of a $1.25 billion revolving loan facility (the "Revolving Facility") and a $300.0 million term loan facility, in addition to a $200.0 million delayed draw term loan (together the "Term Loan Facility").

As of March 31, 2023, we had $1.44 billion of available liquidity, including $1.20 billion available under our Revolving Facility, $200.0 million available under our Term Loan Facility, and $35.4 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

Our expected material cash requirements for the twelve months ended September 30, 2023 and thereafter are comprised of (i) contractually obligated expenditures;

Our expected material cash requirements for the twelve months ended March 31, 2024 and thereafter are comprised of (i) contractually obligated expenditures;

(ii) other essential expenditures;

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Contractually Obligated Expenditures

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 September 30, 2022 (dollars in millions):

Contractually Obligated Expenditures Twelve

September 30, 2023 Thereafter

March 31, 2024 Thereafter

Debt maturities (1)

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(1) Amounts presented do not assume the issuance of new debt upon maturity of existing debt.

(2) Scheduled interest payments for variable rate loans are presented using rates (including the impact of interest rate swaps), as of September 30, 2022.

(2) Scheduled interest payments for variable rate loans are presented using rates (including the impact of interest rate swaps), as of March 31, 2023.

“Quantitative and Qualitative Disclosures about Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2022 for a further discussion of these and other factors that could impact interest payments.

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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 changes in the scope of services that we provide, changes in prevailing market rates, and changes in the size and composition of our Portfolio.

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 value of our Portfolio, prevailing market rates, changes in risk, and the size and composition of our Portfolio.

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

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.

1 unchanged sentence

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 revenue or occupancy decrease, and certain costs we incur are generally not 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.

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

We intend to continue to satisfy these requirements 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.

The following table summarizes our dividend activity for the third and fourth quarters of 2022:

Quarter 2022 Fourth

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 first and second quarter of 2023:

Quarter 2023 Second

Dividend declared per common share $ 0.26 $ 0.26

Dividend declaration date July 27, 2022 October 25, 2022

Dividend record date October 4, 2022 January 4, 2023

Dividend payable date October 17, 2022 January 17, 2023

Dividend declaration date February 1, 2023 April 26, 2023

Dividend record date April 4, 2023 July 5, 2023

Dividend payable date April 17, 2023 July 17, 2023

Opportunistic Expenditures

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 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 redevelopment

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.

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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.

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

Brixmor Property Group Inc .

Nine Months Ended September 30,

Three Months Ended March 31,

2023 2022 $ Change

Net cash provided by operating activities $ 135,054 $ 112,260 $ 22,794

Net cash used in investing activities (474,479) (156,113) (318,366)

Net cash provided by (used in) investing activities 48,485 (174,937) 223,422

Net cash used in financing activities (169,369) (194,682) 25,313

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Brixmor Operating Partnership LP

Nine Months Ended September 30,

Three Months Ended March 31,

2023 2022 $ Change

Net cash provided by operating activities $ 135,054 $ 112,260 $ 22,794

Net cash used in investing activities (474,479) (156,113) (318,366)

Net cash provided by (used in) investing activities 48,485 (174,937) 223,422

Net cash used in financing activities (168,442) (186,052) 17,610

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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 nine months ended September 30, 2022, our net cash provided by operating activities increased $16.3 million as compared to the corresponding period in 2021.

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

(ii) a decrease in cash outflows for interest expense;

and (iii) an increase in net operating income due to acquisition and disposition activity;

During the three months ended March 31, 2023, our net cash provided by operating activities increased $22.8 million as compared to the corresponding period in 2022.

The increase was primarily due to (i) an increase from net working capital;

(ii) an increase in same property net operating income;

and (iii) an increase in lease termination fees;

partially offset by (iv) an increase in cash outflows for general and administrative expense;

(v) a decrease in lease termination fees;

and (vi) a decrease from net working capital.

(v) a decrease in net operating income due to net transaction activity and other non-same property net operating income;

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

Investing Activities

Net cash used in investing activities is primarily 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 nine months ended September 30, 2022, our net cash used in investing activities increased $318.4 million as compared to the corresponding period in 2021.

The increase was primarily due to (i) an increase of $343.0 million in acquisitions of real estate assets;

(ii) an increase of $20.8 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 $46.6 million in net proceeds from sales of real estate assets.

Net cash provided by (used in) investing activities is primarily 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 three months ended March 31, 2023, our net cash provided by investing activities increased $223.4 million as compared to the corresponding period in 2022.

The increase was primarily due to (i) a decrease of $164.3 million in acquisitions of real estate assets;

(ii) an increase of $60.8 million in net proceeds from sales of real estate assets;

and (iii) an increase of $0.6 million in proceeds from sales of marketable securities, net of purchases;

partially offset by (iv) an increase of $2.3 million in improvements to and investments in real estate assets.

Improvements to and investments in real estate assets

During the nine months ended September 30, 2022 and 2021, we expended $233.1 million and $212.4 million, respectively, on improvements to and investments in real estate assets.

Included in these amounts are insurance proceeds of $3.3 million and $2.9 million, respectively, which were received during the nine months ended September 30, 2022 and 2021.

During the three months ended March 31, 2023 and 2022, we expended $72.4 million and $70.1 million, respectively, on improvements to and investments in real estate assets.

Included in these amounts are insurance proceeds of less than $0.1 million and $2.0 million, respectively, which were received during the three months ended March 31, 2023 and 2022.

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

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

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

In addition, we evaluate our Portfolio on an ongoing basis to identify value-enhancing reinvestment opportunities.

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 September 30, 2022, we had 53 in-process anchor space repositioning, redevelopment, and outparcel development projects with an aggregate anticipated cost of $400.3 million, of which $214.1 million had been incurred as of September 30, 2022.

In addition, we have identified a pipeline of future redevelopment projects aggregating approximately $900.0 million of potential capital investment, which we expect to execute over the next several years.

As of March 31, 2023, we had 47 in-process anchor space repositioning, redevelopment, and outparcel development projects with an aggregate anticipated cost of $360.0 million, of which $203.3 million had been incurred as of March 31, 2023.

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 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 proceeds from capital markets transactions.

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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 nine months ended September 30, 2022, we acquired seven shopping centers, one outparcel, and one land parcel and paid less than $0.1 million related to previously disposed assets for an aggregate purchase price of $409.7 million, including transaction costs and closing credits.

During the nine months ended September 30, 2021, we acquired two shopping centers, one outparcel and two land parcels for an aggregate purchase price of $66.7 million, including transaction costs and closing credits.

During the three months ended March 31, 2023, we did not acquire any assets.

During the three months ended March 31, 2022, we acquired three shopping centers and one land parcel and paid less than $0.1 million related to previously acquired assets for an aggregate purchase price of $158.2 million, including transaction costs and closing credits.

In addition, during the three months ended March 31, 2022, we funded $6.1 million of deposits on assets that were under contract to be acquired.

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 nine months ended September 30, 2022, the Company disposed of 11 shopping centers and seven partial shopping centers for aggregate net proceeds of $168.2 million.

In addition, during the nine months ended September 30, 2022, we had land at one shopping center seized through eminent domain for aggregate net proceeds of $2.8 million.

During the nine months ended September 30, 2021, we disposed of nine shopping centers and 14 partial shopping centers for aggregate net proceeds of $124.4 million.

In addition, during the nine months ended September 30, 2021, we received aggregate net proceeds of less than $0.1 million from previously disposed assets.

During the three months ended March 31, 2023, we disposed of six shopping centers and two partial shopping centers for aggregate net proceeds of $119.7 million.

During the three months ended March 31, 2022, we disposed of five shopping centers and one partial shopping center for aggregate net proceeds of $58.9 million.

Financing Activities

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 nine months ended September 30, 2022, our net cash used in financing activities decreased $1.3 million as compared to the corresponding period in 2021.

The decrease was primarily due to (i) a $53.1 million increase in issuances of common stock;

(ii) a $25.2 million decrease in deferred financing and debt extinguishment costs;

partially offset by (iii) a $47.8 million increase in debt repayments, net of borrowings;

(iv) a $24.2 million increase in distributions to our common stockholders;

and (v) a $5.0 million increase in repurchases of common shares in conjunction with the equity award plans.

During the three months ended March 31, 2023, our net cash used in financing activities decreased $25.3 million as compared to the corresponding period in 2022.

The decrease was primarily due to (i) a $77.0 million decrease in debt repayments, net of borrowings;

partially offset by (ii) a $43.8 million decrease in issuances of common stock;

(iii) a $7.0 million increase in distributions to our common stockholders;

(iv) a $0.8 million increase in repurchases of common stock;

and (v) a $0.1 million increase in deferred financing and debt extinguishment costs.

Non-GAAP Performance Measures

We present the non-GAAP performance measures set forth below.

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.

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 supplemental financial measures 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.

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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 of certain real estate assets.

Our reconciliation of net income to Nareit FFO for the three and nine months ended September 30, 2022 and 2021 is as follows (in thousands, except per share amounts):

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Our reconciliation of net income to Nareit FFO for the three months ended March 31, 2023 and 2022 is as follows (in thousands, except per share amounts):

Three Months Ended March 31,

Net income $ 112,246 $ 79,506

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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, net, and (vi) income or 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 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, net.

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.

Comparison of the Three and Nine Months Ended September 30, 2022 to the Three and Nine Months Ended September 30, 2021

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 Change 2022 2021 Change

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 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, 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 by only including NOI of properties owned for the entirety of both periods presented and excluding properties under development and completed new development properties that have been stabilized for less than one year, or income or expense associated with our captive insurance company 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, 2023 to the Three Months Ended March 31, 2022

Three Months Ended March 31,

2023 2022 Change

Number of properties 350 350 —

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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 September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Three Months Ended March 31,

Net income $ 112,246 $ 79,506

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

however, inflation has significantly increased in 2021 and 2022 and may continue to be elevated or increase further.

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;

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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.

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.

Quantitative and Qualitative Disclosures about Market Risk

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What changed 10-Q

Item 2. Management’s Discussion and Analysis