Q2 2025 Brixmor Property Group Inc Earnings Call
Operator: 2nd Quarter 2025 Earnings Conference Call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation.
Greetings, and welcome to Bricks, more Property Group, second quarter 2025 earnings conference call.
Operator: If anyone should require operator assistance during the conference, please press star zero on your telephone. As a reminder, this conference is being recorded.
At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad,
Stacy Slater: I would now like to turn the conference over to your host, Stacy Slater. Thank you. You may begin.
As a reminder, this conference is being recorded.
I would now like to turn the conference over to your host, Stacey Slater. Thank you. You may begin.
Stacy Slater: Thank you, Operator, and thank you all for joining Brixmor's second quarter conference call. With me on the call today are Jim Taylor, Chief Executive Officer, Brian Finnegan, President and Chief Operating Officer, and Steve Gallagher, Executive Vice President and Chief Financial Officer. Mark Horgan, Executive Vice President and Chief Investment Officer, will also be available for Q&A.
Thank you, Opera.
Stacy Slater: Before we begin, let me remind everyone that some of our comments today may contain forward-looking statements that are based on certain assumptions and are subject to inherent risks and uncertainties, as described in our SEC filings, and actual future results may differ materially. We assume no obligation to update any forward-looking statements. Also, we will refer today to certain non-GAAP financial measures.
Joining brics Moore's, second quarter conference, call with me on the call today are Jim Taylor, chief executive officer, Brian Finnegan, president and Chief Operating Officer and Steve Gallagher, Executive Vice President and Chief Financial Officer, Mark Corgan, Executive, Vice President, and chief investment officer will also be available for Q&A.
Stacy Slater: Further information regarding a use of these measures and reconciliations of these measures to our GAAP results are available in the earnings release and supplemental disclosure on the Investor Relations portion of our website.
Stacy Slater: Given the number of participants on the call, we kindly ask that you limit your questions to one per person. If you have additional questions, please requeue.
Before we begin, let me remind everyone that some of our comments today may contain forward-looking statements that are based on certain assumptions and are subject to inherent risks and uncertainties as described in our SEC filings. Actual future results may differ materially. We assume no obligation to update any forward-looking statements. Also, we will refer today to certain non-GAAP financial measures. Further information regarding our use of these measures and reconciliations of these measures to our GAAP results are available in the earnings release and supplemental disclosure on the investor relations portion of our website.
Jim Taylor: At this time, it's my pleasure to introduce Jim Taylor. Thank you, Stacey, and good morning, everyone. I couldn't be more pleased with or proud of this Brixmor team's outstanding execution of our value-add plan, execution that drives our improved outlook for 2025 and provides excellent visibility on outperformance in 2026 and beyond.
Jim Taylor: Brian and Steve will review our results and outlook in more detail, but I'd like to highlight a few points that underscore, one, our unique visibility on growth, two, the fundamental and accelerating transformation of our portfolio, and three, the opportunities for future growth that we continue to unlock through disciplined capital recycling. As always, it begins with leasing where we once again drove robots, volumes and spreads, leveraging broad tenant demand to be in our centers and capitalizing on recent tenant disruption to bring in better, more relevant anchor tenants that in turn, as we all know, drive out performance and traffic and rate for the balance of the shopping.
Given the number of participants on the call. We kindly ask that. You limit your questions to 1 per person. If you have additional questions, please, reach you at this time. It's my pleasure to introduce Jim Taylor. Thank you, Stacy, and good morning everyone. I couldn't be more pleased with or proud of this bricks, more teams outstanding execution of our value ad plan execution that drives our improved outlook for 25 and provides excellent visibility on outperformance in 26 and Beyond.
Jim Taylor: In fact, this quarter, we not only drove our average in-place ABR to a new record, we achieved a record high per square foot rate for new and renewal lease. Our robust leasing activity drove our signed but not commenced pipeline to $67 million or 7% of total ABR, despite commencing $15 million again of new ABR in the quarter. This represents 8 quarters of average commencements of $15 million, while the forward pipeline has consistently exceeded $6 million. As Steve will detail in his remarks, this consistent delivery of new rents is part of what's driving expected NOI growth of over 4% this year, despite the drag from recent tenant disruption.
Score 1, our unique visibility on growth 2, the fundamental and accelerating transformation of our portfolio and 3, the opportunities for future growth that we continue to unlock through discipline Capital recycling. As always, it begins with leasing where. We once again, drove robots, volumes, and spreads leveraging broad tenant demand to be in our centers and capitalizing on recent tenant disruption to bring in better more relevant. Anchor, tenants that in turn as we all know Drive outperformance in traffic and rate for the balance of the shopping center,
In fact, this quarter, we not only drove our average in place, ABR, to a new record. We achieved a record high per square foot rate for new and renewal leases.
Jim Taylor: Speaking of value-add, our reinvestment pipeline continues to deliver, and we now expect to be at the upper end of our annual goal of $150 to $200 million of project deliveries at compelling return. These projects include the Davis Collection, a Trader Joe's and Nordstrom Rack anchored center on the doorstep of UC Davis, Farm Plaza, a Whole Foods anchored center just outside of Philadelphia, and Wynwood Village, a Target anchored center just south of downtown Dallas. Where we have delivered reinvestment projects, we also continue to benefit from the flywheel effect in growing occupancy and rate on the balance of the shopping centers impacted, which effect is reflected in the records we have set in small shop occupancy and rate.
Our robust leasing activity, drove our assigned, but not commenced pipeline to 67 million or 7% of total abbr despite commencing 15 million. Again of new abbr in the quarter. This represents 8 quarters of average commencements of 15 million. While the forward pipeline has consistently exceeded 60 million, as Steve will detail in his remarks. This consistent delivery of new rents as part of what's driving expected. Noi growth of over 4% this year, despite the drag from recent tenants to disruption.
Speaking of value, our reinvestment pipeline continues to deliver, and we now expect to be at the upper end of our annual goal of $150 to $200 million in project deliveries at compelling returns. These projects include the Davis Collection and a Trader Joe's and Nordstrom Rack-anchored center on the doorstep of UC Davis, Barn Plaza, a Whole Foods-anchored center just outside of Philadelphia, and Wynwood Village, a Target-anchored center just south of downtown Dallas.
Jim Taylor: Importantly, in addition to the $370 million of accretive projects we have underway, we have a future pipeline of identified projects of several hundred million with assets we own and control that provide visibility on growth for the next several years.
Where we have delivered reinvestment projects, we also continue to benefit from the flywheel effect in growing occupancy and rate on the balance of the shopping centers impacted, which effect is reflected in the records. We have set in the small shop, occupancy and rate.
Jim Taylor: Finally, we continue to opportunistically recycle capital, harvesting lower growth assets and redeploying the proceeds into assets where we see substantial upside through our leasing, operations, and reinvestment platforms. We are particularly pleased to announce the acquisition of La Centera, an iconic grocery-anchored lifestyle asset that we've long targeted in the Houston MSA, our third largest. With great tenants such as Trader Joe's, Athleta, Ikea, Love Sack, Lululemon, Sephora, Warby Parker, as well as a diverse mix of high-quality dining and service tenants, La Centera is a top-decile nationally and comparable lifestyle center. Priced well below replacement costs, Los Santeros offers us tremendous upside as we capitalize on below-market rents expiring over the near term.
Importantly in addition to the 370 million of accretive projects, we have underway, we have a future pipeline of identified projects of several hundred million with assets. We own and control that provide visibility on growth for the next several years.
Finally, we continue to opportunistically recycle Capital harvesting, lower growth assets and redeploying. The proceeds and assets where we see substantial upside through our leasing operations and reinvestment platform.
We are particularly pleased to announce the acquisition of Loss and Tara, an iconic grocery-anchored lifestyle asset that we've long targeted in the Houston MSA, our third largest. It features great tenants such as Trader Joe's, Athleta, Ikea, Love Sack, Lululemon, Sephora, and Warby Parker, as well as a diverse mix of high-quality dining and service tenants. Loss and Tara drives over 5 million visits annually, placing it in the top echelons of lifestyle centers nationally.
Jim Taylor: In sum, our value-add plan continues to fire on all cylinders, providing us with truly exciting and unparalleled visibility on future growth.
Brian Finnegan: With that, I'll turn the call over to Brian and Steve for a more detailed discussion of our results and outlook. Brian? Thanks, Jim, and good morning, everyone. Our team delivered another quarter of outstanding results, once again validating the demand to be part of the Brixmor portfolio and the momentum of our value-added plan. Leasing activities stood out, with recently recaptured space not only resolved at speed, but upgraded with stronger traffic-driving tenants at significantly higher rents. The message is clear. Top-tier retailers want to grow with us, and they are. This quarter, we executed 1.7 million square feet of new and renewal leases at a blended cash spread of 24 percent, including over 900,000 square feet of new leases at an impressive 44 percent spread.
Price well below. Replacement costs floss and Terra offers this tremendous upside as we capitalize on Blow Market rents expiring over the near term. In some our value ad plan continues to fire on all cylinders. Providing us with truly exciting and unparalleled visibility on future growth.
With that, I'll turn the call over to Brian and Steve for a more detailed discussion of our results and Outlook. Brian. Thanks Jim and good morning everyone. Our team delivered another quarter of outstanding results. Once again, validating the demand to be part of the bricks more portfolio and the momentum of our value added plan, leasing activities, stood out with recently recaptured space Not only resolved its speed. But upgraded with stronger traffic driving tenants at significantly higher rents
The message is clear: top-tier retailers want to grow with us, and they are.
Brian Finnegan: That new lease activity. generated the highest quarterly annual base rent in our company's history. Much of this record performance came from backfilling space recaptured through the Big Lots, Party City, and Joanne Bankersees, and we've already resolved 80% of those spaces with better tenants at rents more than 40% higher. And despite a 70 basis point drag from Bankersees, we still delivered 10 basis points of sequential occupancy growth to 94.2%. Small shop leasing continues to be a strength, reaching a new portfolio high of 91.2%, which as Jim highlighted, more upside as we deliver a creative reinvestment. We also saw improvement in our intrinsic lease terms, setting a record for new lease annual rent growth at 2.8%, while our disciplined approach in eliminating burdensome CAM provisions and deploying fixed CAM where appropriate has continued to improve our recovery rate.
This quarter, we executed 1.7 million square ft of new, and renewal leases at a blended cash, spread of 24% including over 900,000 square. Feet of new leases at an impressive 44% spread
That new lease activity.
Generated the highest quarterly annual base rent in our company's history.
Much of this record performance came from backfilling space, recaptured through the Big, Lots Party City and Joanne bankruptcies. And we've already resolved 80% of those spaces with better tenants at rents, more than 40% higher,
and despite a 70 basis point drag from bankruptcies, we still deliver 10 basis points of sequential occupancy, growth to 94.2%,
Reaching a new portfolio, high of 91.2%.
Which is Jim highlighted more upside as we deliver a creative reinvestments.
We also saw improvement in our intrinsic. Lease terms setting, a record for new lease, annual rent growth at 2.8%. While our disciplined approach in eliminating burdensome can provisions and deploying fixed. Camwear appropriate has continued to improve our recovery rate.
Brian Finnegan: We're also proud of the caliber of tenants joining our portfolio. Retailers that are expanding with purpose and conviction. This quarter, among the tenants we added were new locations with Sprouts Farmers Market, Nordstrom Rack, Ross Dress for Less, Burlington Stores, Barnes & Noble, Chick-fil-A, Dave's Hot Chicken and PNC Bank. As Jim mentioned, and as highlighted by our La Centera acquisition in Houston, we're also seeing a clear trend as best in class mall native and elevated brands are moving into high traffic grocery anchored centers. Thanks to our proactive portfolio transformation, we're capturing this momentum, adding first to portfolio deals with Sephora, Lovesac, and J.
We're also proud of the caliber of tenants joining our portfolio retailers that are expanding with purpose and conviction. This quarter among the tenants, we added were new locations with Sprouts, Farmers Market Nordstrom Rack, Ross Dress for Less Burlington stores Barnes & Noble Chick-fil-A, Dave's Hot Chicken and PNC Bank.
As Jim mentioned and as highlighted by our lentera acquisition in Houston, we're ALS seeing a clear Trend as best-in-class Mall native and elevated brands are moving into high-traffic grocery, anchored centers.
Brian Finnegan: Jill during the quarter, with several more exciting names in our forward pipeline. Looking ahead to the second half of 2025, we're confident in the trajectory of our business. Our traffic and collection trends are strong, the consumer remains resilient, and our forward leasing pipeline is larger than it was at this time last year, with creditworthy tenants focused on growing store count. We are exceptionally well positioned to capitalize on this environment and deliver compelling growth in 2025 and beyond. That's a direct result of the outstanding execution by the entire Brixmor team, and we're grateful for their continued effort.
Thanks to our proactive, portfolio transformation, or capturing. This momentum adding first, the portfolio deals with Sephora, Love Sack and Jill during the quarter with several more exciting names in our forward pipeline.
Looking ahead to the second half of 2025. We're confident in the trajectory of our business. Our traffic and collection Trends are strong the consumer remains resilient and our forward leasing pipeline is larger than it was at this time last year with creditworthy tenants focus on Growing store, count
We are exceptionally well, positioned to capitalize on this environment and deliver compelling growth in 2025 and Beyond.
Steve Gallagher: With that, I'll turn the call over to Steve for a deeper dive into our financial results. Steve. Thanks, Brian. As both Jim and Brian emphasized, we continue to deliver consistent outperformance as we execute our value-added business plan. Nayreed FFO was $0.56 per share in the second quarter, driven by same-property NOI growth of 3.8%, despite a 260 basis point drag from tenant disruption in the quarter. Base rent growth contributed 360 basis points to the same property on a wide road. As the momentum from the snow commencement at higher rents continues to outpace the drag from the short term build occupancy decline.
That's a direct result of the outstanding execution by the entire bricks more team and we're grateful for their continued efforts.
With that, I'll turn the call over to Steve for a deeper dive into our financial results. Steve, thanks Brian as both Jim and Brian emphasize. We continue to deliver consistent outperformance as we execute our value, ad business plan,
Nate ffo was 566 cents per share in the second quarter driven by the same property. Noi growth of 3.8%. Despite a 260 basis point drag from tenant disruption in the quarter.
Steve Gallagher: Handling other reimbursements, other revenues contributed 150 basis points to same property NOI growth, as we capitalized on tenant disruption to drive revenue on temporarily vacant spaces, and also negotiated a revised agreement for our parking garage at Point Orlando, that allows us to further capitalize on the growth and traffic at that center. As expected, net expense reimbursements detracted 110 basis points from same property NOI growth, due to the prior year benefit related to tax assessments in Cook County, Illinois. As Brian noted, we signed a record high 21 million of new ABR in the quarter, and ended the second quarter with a 450 basis point spread between lease and build occupancy.
Base rent growth contributed 360 basis points to the same property on a wide growth. As the momentum from the new commencements at higher rents continues to outpace the drag from the short-term build occupancy decline.
Anthony other reimbursements, other revenues contributed 150 basis points to the same property, noi growth as we capitalized on tenant, disruption to drive revenue, on temporarily vacant spaces. And also negotiated a revised agreement for our parking garage at pointer Lando that allows us to further capitalize on the growth and traffic at that Center as expected. Net expense reimbursements, detracted 110, basis points from same property. Noi growth due to the prior year, benefit related to tax Assessments in Cook County Illinois.
Steve Gallagher: Our signed but not yet commenced pool totals $67 million, which includes $59 million of net new rent. We expect to commence $41 million through the remainder of the year and now expect total commencements of $69 million in 2025, as compared to the $53 million we expected at the end of last year, which will provide a tailwind to growth in 2026. From a balance sheet perspective, at June 30th, we had $1.4 billion of available liquidity, no remaining debt maturities until June 2026, and our debt to EBITDA on a current quarter annualized basis was 5.5 times, providing us flexibility as we execute on our business plan.
As Brian noted, we signed a record high of $21 million of new ABR in a quarter. We ended the second quarter with a 450 basis point spread between lease and build occupancy.
our assigned but not yet commenced pool totaled 67 million which includes 59 million of net. New rent.
We expect to commence 41 million through the remainder of the year and now expect total commencements of 69 million in 2025 as compared to the 53 million. We expected at the end of last year which will provide a Tailwind to growth in 2026.
Steve Gallagher: In terms of our forward outlook, we have updated our same property NOI growth guidance to 3.9 to 4.3% and increased our FFO guidance to $2.22 to $2.25. We expect tenant disruption to drag same property NOI by 230 basis points, and we expect the trajectory of base rent growth to accelerate into the second half of the year as we commence rent from the snow pipeline. Our increased FFO expectations are driven by the increase in same property NOI, as well as increased lease settlement and other income as we continue to operate the portfolio for long-term value creation, capitalizing on opportunities in this strong leasing environment to proactively recapture and accredibly backfill space.
From a balance sheet perspective, at June 30th, we had $1.4 billion of available liquidity. There are no remaining debt maturities until June 2026, and our debt to EBITDA on a current quarter annualized basis was 5.5 times, providing us flexibility as we execute on our business plan.
In terms of our forward Outlook, we have updated our same property. Noi growth guidance to 3.9 to 4.3% and increased our ffo guidance to 2.22 to 2.25 we expect, tenants disruption, to drag some property, analy by 230 basis points, and we expect the trajectory of Base rent growth to accelerate into the second half of the year as we commence rent from the snow pipeline. Our increased ffo expectations are driven by the increase in same property, noi as well as increased lease settlement, and other income, as we continue to operate the portfolio for long-term value creation.
Steve Gallagher: We have consistently said rent basis matters, and you see that in growth we have been able to deliver at the top of the peer group, while also reducing exposure to our at-risk tenants and providing unparalleled visibility into growth in 2026 and beyond.
Operator: And with that, I'll turn the call over to the operator for Q&A. Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone. A confirmation tone will indicate your line is in the question. You may press star 2 if you'd like to remove your question from the queue. As a reminder, we ask that you please limit to one question and recue if necessary. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Capitalizing on opportunities in this, strong leasing environment to proactively recapture incredibly impactful space. We have consistently said, rent basis matters. And you see that in the growth we have been able to deliver at the top of the peer group, while also reducing exposure to our app risk, tenants and providing unparalleled visibility into growth in the 2026 and Beyond. And with that, I'll turn the call over to the operator for Q&A.
Session.
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And Confirmation until we indicate your line is in the question queue.
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Operator: One moment, please, while we poll for questions.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we pull for questions.
Todd Thomas: Our first question comes from Todd Thomas with KeyBank Capital Markets. Please proceed with your question. Hi, thanks. Good morning. I wanted to ask about leasing in the quarter. New lease volume in particular was really strong.
All right, first question comes from Todd Thomas with keybanc capital markets. Please proceed with your question.
Todd Thomas: And I'm wondering, you know, Brian, do you see a path to getting the portfolio's lease rate back to 95%? And what's the timeframe for that?
Todd Thomas: And then with this year's bankruptcies and known move outs largely behind you at this point, I was just wondering if you could comment on, you know, this year's tenant disruption and drag relative to the forward outlook for Tenerife and the remainder of 25 and sort of an early view into 20.
Jim Taylor: Hey, Todd, Jim, before we answer that question, I just really wanted to comment at the start of the question.
Hi, thanks, good morning. Um, I wanted to ask about leasing in the quarter. Uh, new lease volume in particular was really strong and I'm wondering, you know, Brian. Do you do you see a path to getting the portfolio's least straight back to 95%. Um, and what's the time frame for that? And then with this year's bankruptcies and and known move outs, largely behind you at this point. I was just wondering if you could comment on um, you know, this year's tenant disruption and drag relative to the forward outlook for um you know, ten of risk and and and vacate activity and the remainder of 25 and and sort of an early view into 26.
Jim Taylor: But our hearts and prayers go out to our friends at 345 Park, particularly those families and loved ones of the victims. Just, our hearts are with you, and I wanted to say that. Yeah, and thanks, Todd. We were really pleased with the activity during the quarter. I think we had talked about coming out of ICSE, just what we were hearing from our retailers in terms of continuing to be focused on growing their store footprint. What you heard on the first quarter calls from retailers was constructive and positive in terms of the trends that they're seeing in their business.
Hey Todd, it's Jim. Before we answer that question, I just really wanted to comment at the start of the questions that our hearts and prayers go out to our friends at 3:45 Park, particularly those families and loved ones of the victims.
Just our hearts are with you, and I wanted to say that at the outset. Thank you.
Brian Finnegan: And we really saw it come through in the activity during the quarter, from a wide range of uses, whether that's in specialty grocery, off price apparel, books, home furnishing, QSR restaurants, which we're seeing, we're continuing to see better operators there. So it was pretty broad based. And particularly to your point, a lot of that was on space that we recently recaptured. And we're really proud of how the team has gotten after that quickly and have been able to backfill that with much better tenants. I think to your second part of your question, as Steve touched on it in his remarks, this has given us the opportunity to improve what has already been the best underlying credit profile that this portfolio has ever had.
Ya. And thanks Todd. Um, we we were really pleased with the activity during the quarter. I think we had talked about coming out of ICS. He just what we were hearing from our retailers in terms of continuing to be focused on growing. Their store footprint, what you heard on the first quarter calls from retailers was constructive and positive in terms of the trends that they're seeing in their business. And we really saw it come through in the activity during the quarter uh from a wide range of uses whether that's in specialty grocery off price apparel books, Home Furnishing qsr restaurants which we're seeing we're continuing to see better operators there so it was pretty broad-based and particularly to your point. A lot of that was on space that we recently recaptured and we're really proud of how the team has gotten after that quickly and have been able to backfill that with much better tenants. I think to your second part of your question, is Steve touched on it in his remarks? This has given us the opportunity to improve. What is already been the best under
Brian Finnegan: So really, on the other side of this, that watch list is a lot smaller than it was historically. There's always categories that we're watching. You think of drugstores, they're certainly closing some locations. It's a very small part of what we do, less than 1% of our AVR. You think of theaters, there's some good trends there, but also very small part of what we do as well. So we feel pretty confident on the other side of this. And from a trajectory standpoint, remain really encouraged by what we're seeing in the leasing pipeline.
Online credit profile that this portfolio has ever had. So really on the other side of this that watch list is a lot smaller than it was historically. Uh, there's always categories that we're watching, you think of drugstores, um, they're certainly closing some locations. It's a very small part of what we do less than 1% of our AVR. Um, you think of theaters, there's some good Trends there, but also very small part of what we do as well. So, we feel pretty confident on the other side of this. And from a trajectory standpoint remain, really encouraged by what we're seeing in the leasing pipeline.
Steve Gallagher: Steve, was there an amount of rent collected in the quarter that's worth considering as we think about 3Q that will create a little bit of drag or do you anticipate an inflection in economic occupancy and ABR? Moving into the back half. Yeah, I mean, if you just think about the rent, you're talking on the on the bankrupt spaces, obviously, you would have had a sub period for some of the Joanne locations. And then, you know, going forward, we will be getting back a couple of at home. But I think more importantly, and what Brian highlighted was getting the rent commenced on those backfills within the third quarter and into the fourth quarter will start to accelerate that base rent growth as we move through the remainder of the year.
Steve was there an amount of rent collected in the quarter? Um, that's worth considering as we think about 3Q, that will create a little bit of drag, or to anticipate and inflection in economic occupancy and ABR growth, moving into the back half of the year.
Jim Taylor: Yeah, and Todd, I would just remark, we're particularly pleased to be at a place where we're growing better than 4%, despite over 230 basis points of headwind, which, you know, obviously does imply the rent commenced. Snow Pipeline, and the latter part of the year is the pie like.
Yeah. I mean if you just think about the rent you're talking on the on the bankruptcy spaces obviously you would have had to still period for some of the Joanne locations. And then you know, going forward we will be getting back a couple of at home, but I think more importantly. And what Brian highlighted was getting the rent commence. On those back, fills within the third quarter, and into the fourth quarter, we'll start to accelerate That Base rent growth as we move through the, the remainder of the year.
Yeah, and Todd. I would just remark, we're particularly pleased to be at a place where we're growing better than 4% despite over 230 basis points of headwind which, you know, obviously does imply the rank commencements. And from the snow pipeline in the latter, part of the year is the highlighted.
Todd Thomas: All right, thank you.
All right. Thank you.
Michael Goldsmith: Our next question comes from Michael Goldsmith with UBS. Please proceed with your question. Good morning. Thanks a lot for taking my question. On La Centera, can you talk about the opportunity here? Seemingly, you can benefit from scale in the Houston market. It brings you closer to some of the growth tenants that you're working with across the portfolio. Presumably, there's some leases that are up for maturity for the first time where you can sprinkle some Brixmor magic and remerchandise. So what are the benefits from this property? And if you can provide the cap rate, that would be helpful.
Our next question comes from Michael Goldsmith with UBS, please proceed with your question.
Jim Taylor: Thank you. Sure. Well, I think you've got the sales point down pretty well.
Good morning. Thanks a lot for taking my question. Uh unlawful Tara do you talk about the opportunity here seemingly you can benefit from scale in the Houston Market and to bring you closer to some of the growth tenants that you're working with across the portfolio. Presumably there's some leases that are up for maturity for the first time where you can sprinkle some bricks for magic and re merchandise. So what are the benefits from this property? And if you can provide the cap rate, that would be helpful. Thank you.
Jim Taylor: We're really excited about adding La Centera to the portfolio, as we do think this is a pretty classic example of value-added investing, as we do believe we bought the asset at a pretty opportunistic time in the assets lifecycle. We've recently reviewed plenty of lifestyle deals in the market. I think this one has some pretty unique attributes, which you kind of outlined, which is why we focused on La Centera. So for example, the in-place occupancy here is around 90%. It does have several high profile vacancies. We already have LOIs in hand and actually a lease in the short term of ownership that we've had.
Jim Taylor: Additionally, as you mentioned, the asset has very significant rent mark-to-market. At certain spaces, have rents that were set well over 20 years ago and are now expiring in the very near term without option. and Adam. The asset clearly is going to be the landing zone for the high-profile and high-rent paying tenants, Brian kind of laid out in his remarks. From a cap rate perspective, with our expenses and management fees and LOIs in hand, the yield's in the low sixes today, with very, very significant growth potential ahead of us. So, importantly, from a total return perspective, as we think about the IRR, we think this will generate high single-digit, low double-digit IRRs using pretty conservative exit assumptions.
Um, we're really excited about adding loss and tear out of the portfolio. As we do think this is a pretty classic example of value added investing. As we do believe, we bought the asset and it's pretty opportunistic time in the assets life cycle. Um, you know, we recently reviewed plenty of Lifestyle deals in the market. And I think this 1 has some pretty unique attributes, which you kind of outlined, which is why we focused on on loss and Tara. So, for example, the in place occupancy here is around 90%. It does have several high-profile vacancies, where we already have Louis in hand. And actually, a lease in the short term of ownership that we've had. Additionally, you mentioned the asset has very significant rent. Mark to Market at certain spaces have rents that were set well over 20 years ago and are now expiring in the very near term without options. And and as importantly,
The asset clearly is going to be the landing zone for the high-profile and high rent. Paying tenants, Brian kind of light out in his remarks this morning.
Um, from a cap rate perspective with our expenses, the management fees,
And hand.
And low sixes today with very very significant growth potential ahead of us. So importantly from a total return perspective, as we think about the irr, we think this will generate High single digit low, double digits.
Jim Taylor: So, we're really excited about having this as part of our portfolio. Thank you very much.
And pretty conservative exit, exit assumptions. So we're really excited about having this as part of our portfolio.
Jim Taylor: Good luck with the back half.
Thank you very much. Good luck in the back half.
Samir Khanal: Our next question comes from Samir Khanal with Bank of America. Please proceed with your question. Good morning, everybody. I guess my question is around the same strain of high growth in the second quarter, which was a very strong number. But can you elaborate the other revenue line there, which did pick up from a year ago? So what's kind of driving that? Thanks. Yeah, as I mentioned in my prepared remarks, we did have an opportunity to renegotiate our parking agreement at Point Orlando, right next to the Orange County Convention Center. And the great part about that renegotiation is we went from being a lease to now having more of a management agreement with a provider.
Our next question comes from, Samir canal with Bank of America. Please proceed with your question.
Good morning everybody. Um, I guess my my question is around the the same story. I know why growth in in the second quarter which was a very strong number, uh, but can you elaborate the, the other Revenue line there, which did pick up from a year ago. So so what's kind of driving that thanks?
Steve Gallagher: And that allows us to capture the upsides and driving additional traffic to that center with the recent redevelopment we did there. And with that, we get to participate a lot more on the upside as a revenue as well. So that's probably about a half of that. And then as we've consistently done over the years, you know, we look for opportunities in there being vacant space to capitalize on that vacancy. And with our ancillary team been able to backfill some of that vacant space and drive additional revenue during this period. Yeah, go ahead.
Yeah, as I mentioned, in my prepared remarks, we did have an opportunity to renegotiate our parking agreement at a point Orlando. Um, right back next to the Orange County, Convention Center. And, and the great part about that we negotiation is, we went from being at least to now having more of a management agreement with the provider and it allows us to capture the upsides and driving additional traffic to that center. With the recent Redevelopment, we did there and with that we get a participate, a lot more on the upside as a revenue as well. So that that's probably about a half of that and then as we've consistently done over the years, you know, we look for opportunities in their being vacant, space to to capitalize on that, that vacancy and and with our ancillary team, being able to backfill some of that vacant space and drive additional Revenue, well, during this period. Yeah, go ahead Brian. Oh, sorry. I I would just add. I think this is just a great example from an operations perspective of how our team just takes advantage of driving Revenue throughout the asset and and Steve mentioned parking. Uh we have a great fee Jenner.
Steve Gallagher: that is going to be recurring for us. So we're really pleased with what we saw there during the quarter. Yeah, and let's not lose sight as well of the strong top line contribution of ABR of 3.8%. So what that really is showing you is the accelerating impact of that snow pipeline as we commence 15 million quarterly. We continue to keep that snow pipeline over 60 million, so it gives us a high degree of visibility, Samir, not only in the growth this year, but even better growth. Got it. Thanks a lot, guys.
Generation business, uh, whether it's EV charging solar, um, that's been a growth Initiative for us. We've got a great specialty leasing team that works with our regions to drive ancillary Revenue. So it has been an area of focus, um, and as Steve mentioned as it relates to that point, garage deal that is going to be recurring for us. So uh, we're really pleased with what we saw there during the quarter. Yeah. And let's not lose sight as well of the strong Topline contribution of ABR of 3.8%. So what that really is showing you is the accelerating impact of that snow pipeline as we commence 15 million quarterly and continue to keep that snow pipeline over 60 million. So gives us a high degree of visibility. So we are not only into growth, uh, this year but even better growth in 26 and 27.
Got it. Thanks a lot, guys.
Greg Mcginniss: Our next question comes from Greg McGinniss with Scotiabank. Please proceed with your question. Hey, good morning. Just looking at the bad debt expense, looks like you're tracking at the low end of your guidance range. Is there anything that, you know, is standing out as potential headwinds for the back half, or is this just some conservatism on your part for maintaining that range? Yeah, I mean, I think Brian hit on his comments. You know, we continue to be really pleased with the underlying credit quality of the portfolio. Obviously, in the first half of the year, there was a little bit more tenant disruption and some of that pre-petition debt is or bad debt is sitting within that amount.
Our next question comes from Greg McGuinness with Scotiabank. Please proceed with your question.
Hey, good morning.
It's a bad debt expense. Looks like you're tracking at the low end of your guidance range. Is there anything that, you know, is standing out as potential headwinds for the back half? Or is this? Just some conservatism on your part for maintaining that range?
Steve Gallagher: And then there is always sort of the normal core seasonality to when we receive some of the real estate tax payments. But, you know, I think as you look to the back half of the year, we continue to be really impressed with the underlying tenant quality and, you know, no real concerns there in the bad deadline.
Steve Gallagher: I Okay, thank you.
Yeah, I mean, I think Brian hit on his comments. You know, we continue to be really pleased with the underlying credit quality of the portfolio. Um, obviously in the first half of the Year, there was a little bit more tenant disruption. In some of that pre-petition debt is or, or bad debt is sitting within that amount. And then there is always sort of the normal core seasonality to when we receive some of the real estate tax payments. But, you know, I think as you look to the back half of the year, we continue to be really impressed with the underlying tenant quality, and um, you know, no real concerns there and and the bad deadline item.
Brian Finnegan: And then on the leasing demand, I'm just curious how that's trended through the year, whether you've seen any sort of changes? The April tariff announcement through today and the types of tenants that you're finding to backfill some of these anchor spaces and what you expect to be filling. Yeah, Gary, on our last call, we actually... We still have more in the pipeline today than we did a year ago. So we remain really encouraged. Our team is focused on leasing up the remainder of the vacancy that we've taken back here over the last few months. And then I touched on a number of the categories earlier, but I would add kind of to Mark's point, we are seeing this trend accelerate of more elevated brands going to grocery-anchored shopping centers.
Okay, thank you. And then on the leasing demand, I'm just curious how that's trended through the year. Whether you've seen a sort of changes from, you know...
The April tariff announcement through today, uh, and the types of tenants that you're finding to backfill, um, some of these anchor spaces, and what you expect to be filling with. Um, yeah, our last call, we had actually touched.
Brian Finnegan: And it's not just at a La Centera, right? We've seen it in suburban Philadelphia, in Marco Island, in Florida, in Plano, Texas, most recently in Davis, California. And whether that's maybe lifestyle tenants that have been performing at grocery-anchored centers or higher-quality food and beverage that we continue to add to the portfolio, opening our first locations with Tate Bakery and Mendocino Farms and Urban Plates. So it's been fairly broad-based, and with all the work that our team's done across the portfolio, we're just attracting a better caliber of tenant today, and it's something You got it.
Real time because we thought it was prudent after the Tariff announcement and then we came out of icsc, very encouraged, in terms of the tenor of those conversations and what's been interesting over the last 2 months is just played out those conversations have now turned into Louis and leases. And you can see that come through in the quarter, more GLA than we've least in the last 2 and a half years into Steve touched on the highest ABR that we've ever had as a company. And despite all of that volume, we still have more in the pipeline today than we did a year ago. So we remain really encouraged. Um, our team is focused on leasing up the remainder of the vacancy that we're taking that we've taken back here over the last few months and then I touched on a number of other categories earlier, but I would add kind of to Mark's point. We are seeing this trend accelerate of more elevated Brands going to grocery anchored shopping centers and it's it's not just at a loss in Terra, right? We've seen it in Suburban, Philadelphia and Marco Island in Florida in Plano, Texas. Most recently.
In Davis, California, and whether that's maybe lifestyle centers, tenants that have been performing at grocery-anchored centers, or higher quality food and beverage that we continue to add to the portfolio. We're opening our first locations with Tate Bakery, Mendocino Farms, and Urban Plates. So it's been fairly broad-based, and with all the work that our teams done across the portfolio, we're just attracting a better caliber of tenant today, and it's something that we're really excited about.
All right. Thanks Brian.
Operator: Thanks. As a reminder, we ask that you please limit to one question and recue if necessary.
You got it, thanks.
Craig Mailman: Our next question comes from Craig Mailman with Citi. Please proceed with your question. Good morning. Just want to focus a little bit here on the cadence of earnings. I think you guys are run rating to at least hit the midpoint of guidance for the back half of the year.
As a reminder, we ask that you please limit to 1 question and req if necessary.
Our next question comes from Craig Melman with City. Please proceed with your question.
Steve Gallagher: Could you just talk about some of the puts and takes as we think about kind of the first half run rate into the second half, but then just maybe give some additional color on the contribution of La Centera and maybe how you guys think about financing that kind of more permanently with dispositions or other financing sources? Yeah, Craig. If you just look at the first half of the year, we were really pleased on how we performed. Obviously, lease settlement income was a little higher than our historical run rate there. And, you know, I think that should probably decelerate into the back half of the year, all things being equal.
Hey, good morning. Um, just want to focus a little bit here on the the Cadence of earnings. I think you guys are, um, run rating to at least. Hit the midpoint of guidance for the back half of the Year. Could you just talk about some of the puts and takes as we think about, kind of the first half run rate into the second half? And then just maybe give some, uh, additional color on the contribution of the loss and Tara, and maybe how you guys think about financing that, um, kind of more permanently with this positions or, or other financing sources.
Steve Gallagher: And then obviously, there is some seasonality to just how we collect certain amounts of revenue, whether it be the percent rent line and that. But I think importantly, what you should expect is the acceleration of same property NOI growth into the back half of the year as we continue to commence rent from the snow pipeline. On Los Anteros, you know, as we've typically done, we really finance that with a combination of capital recycling and free cash flow on a leverage neutral basis. What should we think about on the kind of the net spread on that investment from a gap perspective?
Yeah, Craig. Um, if if you just look at the first half of the year, we we were really pleased on on how we performed, obviously, at least settlement income was a little higher than our historical run rate there. And, you know, I think that should probably decelerate into the, the best back half of the Year, all things being equal. Um, and and then obviously there is some seasonality to just how we collect certain amounts of Revenue, whether it be the percent rent, light ends up. But I think importantly, what you should expect is the acceleration of same property. Know why growth into the back half of the year as we continue to convince rent from the snow Pipeline on on loss and therapy.
All right, you know, as we typically done we really financed that with, with a combination of capital Recycling and uh free cash flow and a leverage neutral basis.
Jim Taylor: I would, I would consider it basically neutral at the start and with a position to be able to create that pretty quickly as we capitalize on the blow market round. You know the thing I would add, Craig, is when we think about our cap recycling, we always try to take advantage of the opportunities in our portfolio to lower our marginal cost of capital like we did in the past quarter where we sold the ground lease at a low cap rate, and then a land parcel at about 2 cap, which really drove the cap rate for that cap recycling in Q2 down to the 5, so we're always going to be focused on trying to find portfolio, we can exit low hold and low yield, low.
What should we think about on the kind of the net spread on that investment from a gap perspective?
I would, I would consider it basically neutral at the start and
With it position to be able to create that pretty quickly as we capitalize on the blow Market rents.
You know, the other thing I would add, we think about our cap recycling. We we always try to take advantage of the opportunities in our portfolio, to lower our marginal cost of capital. Like we did in the past quarter, where we sold the ground, lease at a low cap rate. And then a land parcel at about 2 cap, which really drove the cap rate for that Capital recycling in Q2 down into the 5. So we're always going to be focusing on trying to find those those pieces of the portfolio where we can exit, um, low hold and and low yield, uh, low yield capital.
Great. Thank you.
Michael Griffin: Our next question comes from Michael Griffin with Evercore. Please proceed with your question. Great, thanks. Appreciate the commentary so far.
Our next question comes from Michael Griffin with evercore, please, proceed with your question.
Jim Taylor: Just wondering if you could give us a sense, you know, in your conversation with retailers, you know, obviously, we've seen some trade deals come to fruition recently, but there been kind of this understanding of, hey, we're still burning off the inventory that we brought in sort of pre-tariff announcements? Have they thought, oh, you know, we're going to absorb some of this tariff cost versus pass it on to the consumer? I just want to get a sense as we look to the back half of the year, you know, could we see some pressure on retailer margins as it seems like this tariff scenario of 15%, whatever you want to call it, starts to really materialize?
Great thanks. Uh, appreciate the commentary so far. Uh, just wondering if you could give us a sense, you know, when your conversation with retailers, you know, obviously we've seen some trade deals, uh, come to fruition recently. But has there been kind of this understanding of? Hey, we're still burning off the inventory that we brought in sort of pre- tariff announcements. Have they thought? Oh, you know, we're
Going to absorb some of this tariff cost versus pass it on to the consumer. I, I just want to get a sense as we look to the back half of the year, you know, could we see some pressure on retail or margins as it seems like this tariff scenario of, you know, 15% whatever you want to call, it starts to really materialize.
Brian Finnegan: Yeah, let me start the answer here. You know, one of the things that we've been really encouraged by with the retailers is their commitment to the store as the most profitable channel to reach the customer. They're really making a long term decision by entering into a 10 or 15 year lease. And their commitment to the store has been, you know, phenomenal. and our results. So the tariff noise really has done little to abate that demand, and we're encouraged, as Brian was talking about, not only by the breadth of demand. by the types of quality tenants we're bringing into the portfolio, the vibrancy, and frankly the traffic they bring, which is very clear in our Yeah, I would just add, I mean, the commentary that you heard from national retailers after the first quarter calls was really constructive in terms of how they're navigating tariffs, whether that's through negotiation with suppliers or alternative methods of sourcing, and also the commentary around how the consumer has remained resilient, still have a strong job market.
Brian Finnegan: We're still seeing positive traffic trends across the portfolio. And to Jim's point, that really ties with what we're hearing from the real estate departments as well, in terms of their focus on growth, and the tenants that we're growing with are performing. And then the last thing I'd mention, you saw it again last week, another very active auction where retailers are bidding for space, where there's no downtime, all their own cost, it kind of gives you a window into that demand environment, into how tight the supply environment is as well. So, so far, it's been really constructive.
To reach the customers and they're really making a long-term decision by entering into a 10 or 15 year lease and their commitment to the store has been, you know, phenomenal as you can see in our results. So the Tariff noise really has done little to obey that demand and we're encouraged as Brian was talking about not only by the breadth of demand we're seeing but by the types of quality tenants, we're bringing into the portfolio, the vibrancy and frankly the traffic they bring which is very clear in our results. Yeah. I would just add, I mean the commentary that you heard from National retailers after the first quarter calls was was really constructive in terms of how they're navigating tariffs, whether that's through negotiation with suppliers or alternative methods of sourcing and also, the commentary around how the consumer has remained resilient. You still have a strong job market. We're still seeing positive traffic. Trends across the portfolio.
And to Jim's point that really ties with what we're hearing from the real estate departments as well in terms of their focus on growth and the tenants that we're growing with are performing. And then the last thing I'd mentioned, you saw it again last week and other very active auction where retailers are bidding for space where there's no downtime all their own costs. That kind of gives you a window into that demand environment into how tight the supply environment is as well. So so far it's been really
Jim Taylor: We're keeping a very close eye on it.
Jim Taylor: Could there be some impacts down the line? Sure. But from what we're seeing to date, we're very encouraged. Great.
Constructive. We're keeping a very close eye on it. Could there be some impacts down the line, sure, but from what we're seeing to date, we're very encouraged
Jim Taylor: Thanks so much. Yeah, thanks.
Great. Thanks so much. Got it. Thanks.
Cooper Clark: Our next question comes from Cooper Clark with Wells Fargo. Please proceed with your question. Hi, thank you for taking the question. Following the acquisition in Q3, could you talk about how the current acquisition pipeline looks moving forward? Wondering if there's an appetite for more transaction activity in the back half of the year? And also what type of buyers you're competing with on deals you're currently underwriting?
Our next question comes from Cooper, Clarke with Wells Fargo, please proceed with your question.
Hi. Thank you for taking the question. Following the acquisition in Q3, could you talk about how the current acquisition pipeline looks moving forward? Wondering if there's an appetite for more transaction activity in the back half of the year. And also, what type of buyers you're competing with on deals you're currently underwriting?
Jim Taylor: Yeah, I'd say start with your last point. Broadly in open air, competition is clearly heating up. There's clearly more private capital, which includes high net worth and pension coming in and seeking exposure to the asset class. And that's clearly compressing cap rate for gross record deals and really following through in some other asset types.
Jim Taylor: So when we think about the market, we're going to continue to focus on opportunities in our footprint where we see high growth opportunities. And we really think that our team on the ground helps us identify those quickly to focus on them like a loss of terror and pass on other ones where you don't see that growth. So we'll work, you should expect us, as you've kind of mentioned, to be balanced in capital recycling, but also discipline where we're not buying to buy, we're buying, we're buying assets where we think we can really drive value.
Yeah, I'd say start with your last point in probably an open, air competition is clearly heating up. There's clearly more private Capital which includes High net worth and pension coming in and is seeking exposure to the asset class and that's clearly compressing cap rate for grocery anchor deals and and really following through in some other asset asset types. So when, when we think about the market, we're going to continue to focus on on opportunities in our footprint, where we see high growth opportunities and we really think that our team on the ground helps us identify those quickly to focus on them like a lost and Tara and pass on other ones where we don't see that growth. So we'll work you should expect us as as Steve kind of mentioned to be balanced in capital recycling but also discipline where we're not buying Dubai. We're buying, we're buying assets, where we think we can really Drive value.
Thank you.
Alexander Goldfarb: Our next question comes from Alexander Goldfarb with Piper Sandler. Please proceed with your question. Hey, good morning, morning down there.
All right. Next question. Comes from Alexander Goldfarb with Piper Sandler. Please proceed with your question.
Jim Taylor: So my one question is, on the S&O, the aggregate of the S&O that's coming online, with the 200 basis points of drag that you entered the year, meaning the known move outs that you started the year with and the known bankruptcies, and your pace of leasing and getting this 40 million of S&O open this year, Stacy, I'm not asking for 26 guidance, but still, when you hear your commentary and all these good things happening, why should we not think the back half of next year is going to show a really strong ramp? I'm trying to understand what are the offsets, you know, that we should think about, that would, you know, sort of limit the upside benefit of all this stuff that you're talking about, and presumably, interest rates will come down, not up.
Hey, uh, uh, good morning, morning down there. Uh, so my 1 question is uh, on the Sno, the aggregate of the Sno, uh, that's coming online, with the 200 basis points of drag that you enter the year. Meaning the known move outs that you started the year with and the known bankruptcies and your pace of Leasing and getting this 40 million of Sno, open this year,
Jim Taylor: So I'm just trying to understand what contains next year from showing sharp acceleration in the back half.
Jim Taylor: Well, we're not prepared to give guidance at this point. But what we are really encouraged by, Alex, is how we've positioned ourselves to outperform from a growth perspective, given the stacking of that rent pipeline. And it's not only what we have in the signed but not commenced, but also what we have in legal. It gives us a lot of confidence that the strategy continues to work. It's an all weather strategy that provides visibility on growth. And of course, the deducts from that growth as we look out will be any additional tenant disruption. But we like how the portfolio is positioned from a credit standpoint.
Stacy I'm not asking for 26 guidance but still when you hear your commentary and all these good things happening, why should we not think the back? Half of next year is going to show a really strong ramp. I'm trying to understand what are the offsets, you know, that we should think about uh, that would, you know, sort of limit the upside benefit of all this stuff that you're talking about. I'm presumably, the interest rates will come down, not up. So I'm just trying to understand what contains next year from showing sharp acceleration in the back half.
Well, we're not prepared to give guidance at this point, but what we are really encouraged by Alex is how we've positioned ourselves to outperform from a growth perspective, given the stacking of that rent Pipeline. And and it's not only what we have in the sign but not commenced but also what we have in legal, it gives us a lot of confidence that the
Jim Taylor: like how we're continuing to generate great demand to be in our assets.
Jim Taylor: Howling Red Our next question comes from Juan Sanabria with BMO Capital Markets. Please proceed with Good morning. Thanks for the time. You talked a little bit in the prepared remarks about opportunities on the CAM side to get more favorable setups in the leases. Just curious on how we should think about that impacting margins on a go-forward basis, kind of all else equal. Yeah, again, it's been something that we've been focused on really throughout the lease, and whether it is incremental rent growth that we're getting, whether it is flexibility in terms of development, or to your point, removing cam caps, removing carve outs and strategically deploying fixed cam, I think you can see it come through today in the recovery rate that's ahead of where build occupancy sits.
Strategy continues to work. It's an all-weather strategy that provides visibility on growth. And of course, the deducts from that growth as we look at will be any additional tenant disruption, but we like how the portfolio's positioned from a credit standpoint. We like how we're continuing to generate great demand to be in our assets and compelling. Rents,
Proceed with your question.
Good morning, thanks for the time. Um, you talked a little bit in the prepared remarks about...
Um, opportunities on the campsite to get more favorable, um, setups in the leases.
Just curious on on how we should think about that impacting.
Uh, margins on a go forward basis. Kind of all else, equal.
Jim Taylor: And so we expect to see some further improvement there in margin as we continue to focus on these areas. But it's not really a new phenomenon. It's something that our team has been doing and has been successful with for some time. And you can really see that coming through in the results. So we're pleased with the tenor of the lease conversation. It's something we're going to continue to be focused on.
Jim Taylor: Yeah, I would just add, it shows our disciplined approach to operations.
Haendel Sainte Juste: And we continue to find opportunities to harvest growth in this great Our next question comes from Haendel Sainte Juste with Mizuho Securities.
Yeah, well again, it's been something that we've been focused on really throughout the lease and whether it is incremental rent growth that we're getting, whether it is flexibility in terms of development or to your point. Removing cam caps, removing carve outs and and strategically deploying fixed cam. I think you can see it, come through today in the recovery rate. That's ahead of where build occupancy sits. And so we we expect to see some further Improvement there in margin as we continue to focus on these errors but it's it's not really a new phenomenon. It's something that our team has been doing and has been successful with for for some time and you can really see that coming through in the results. So we're pleased with the tenor of the lease conversation. It's something we're going to be continue to be focused on. Yeah and I would just add it shows. Our discipline approach to operations and we continue to find Opportunities to harvest growth in this great portfolio.
Haendel Sainte Juste: Please proceed with your question. Hey there, good morning. So I guess my question somewhat dovetails on the last comment you made, Jim, about finding these great opportunities in the portfolio. You guys have done lots of great things lately, strong stats, some all-time highs in ABR, small shop spreads, and it looks as though you have some pretty sustainable tailwinds into next year with a lower occupancy and lower rents, but your multiple still sits well below the peer set.
Our next question comes from Handel St. Just with MUO Securities. Please proceed with your question.
Hey there. Uh, good morning.
So, uh, I guess my question somewhat dubta on the last comment, you made Jim about finding these great opportunities in the portfolio. Um, you guys have done lots of great things, uh, lately, strong stats, some all-time highs and ABR, small shop spreads,
Jim Taylor: So I guess I'm curious, you know, why you think that is and what you guys are focused on to drive down that gap versus your peers in trade closer to the peer set or maybe even the premium at some point? Thanks. Well, we would agree very much that our multiple doesn't reflect appropriately the upside and growth that we're going to continue to deliver. And our plan on this side is to continue to deliver that growth and outperform and chip away at that relative multiple. I think it presents, frankly, the investor a compelling opportunity from a total return standpoint.
Jim Taylor: that we have a business plan that's not predicated upon external growth, it's not predicated upon the pricing of our current much more predicated on the continued ability to fund accretive growth through internally generated cash. That's why I often say it's an all weather business plan. And I'm proud of the fact that we're delivering growth where we are, despite the tenant disruption that we have. I'm also excited about what continues to happen to the composition of this portfolio as we actually our value added strategy and really drive and create value. So we're confident in our ability to continue to deliver and I think as we do we'll continue to Clips.
Uh, and it looks as though you have some pretty sustainable tailwinds, uh, into next year with lower occupancy and lower rents. Um, but your multiples still, it's well below the peer set. So, I guess I'm curious, you know, why you think that is and what you guys are focused on to drive down that gap versus your peers and trade, uh, closer to the peers that are, or maybe even at a premium to that at some point. Thanks. Well, we would agree very much that our multiples don't reflect appropriately the upside and growth that we're going to continue to deliver. And our plan on this side is to continue to deliver that growth and outperform, and chip away at that relative multiple. Um, I think it presents, frankly, the investor a compelling opportunity from a total return standpoint that we have a business plan that's not predicated upon external growth. It's not predicated upon the pricing of our currency, but much more predicated on the continued ability to fund accretive growth through internally generated cash flow. That's why I often say, it's a...
Weather business plan and I'm proud of the fact that we're delivering growth where we are despite the tenant disruption that we have. I'm also excited about what continues to happen to the composition of this portfolio as we execute our value added strategy and really driving create value. So we're confident in our ability to continue to deliver and I think as we do, we'll continue to Eclipse that multiple differential.
Caitlin Burrows: Our next question comes from Caitlin Burrows with Goldman Sachs. Please proceed with your question. Hi, good morning, everyone. So it sounds like leasing and pricing remain really encouraging.
Our next question comes from Caitlin Burrows with Goldman Sachs, please proceed with your question.
Steve Gallagher: I was wondering if you could go through how the year so far is turning out versus your expectations, any additional color you can give on how you set guidance? Like, is it do you think of it as being conservative versus realistic? And what's making the previous high end of same store and why growth no longer attainable?
Steve Gallagher: Yeah, thanks, Caitlin. You know, I think we continue to be really impressed by the underlying portfolio. I think you hit on a lot of the leasing items that Brian went through earlier. As you remember, just when we started the year, the midpoint of our expectation for tenant disruption was 200 basis points of drag, right? As I mentioned in my comments, you know, with some of the more recent activity with At Home and Rite Aid, that has moved up a little bit. But I think importantly, our ability to drive additional growth from the portfolio and move our midpoint up from our initial midpoint of 4% just shows you that the growth in the portfolio and our ability to continue to drive through disruption.
Hi, good morning everyone. Um, so it sounds like Leasing and pricing remain, really encouraging. I was wondering if you could go through, how the year so far is turning out versus your expectations. Any additional color, you can give on how you set guidance. Like, is it, do you think of it as being conservative versus realistic and what's making the previous high-end? The same store and why growth no longer attainable?
Yeah, thanks Caitlyn.
Um you know I I think we continue to be really impressed by the underlying portfolio. I think you hit on a lot of the leasing items that Brian went through earlier. As you remember, just when we started the year, the midpoint of our expectation for attendance disruption was 200 basis points of drag, right? As I mentioned in my comments, you know, with some of the more recent activity with at home and writing that has moved up a little bit, but I think importantly our ability to drive additional growth from the portfolio and move our midpoint up from our
Steve Gallagher: I think we've consistently said over the last year or two, to the extent we get additional spaces back as a result of tenant disruption, while that may impact short term growth, ultimately, it's just going to provide us additional space to grow into 26 and 27.
Floris van Dijkum: Thanks Our next question comes from Floris Van Dijkum with Lattenberg-Solomon. Please proceed with your question. Good morning, Flora. Hey, Jim. How are you? So my question for you guys is regarding shop occupancy. Again, your most valuable space, presumably, in all your centers. It's, I think, at an all-time high right now of 91.2. But my question is, you know, and I think this is sort of what was alluded to in one of the previous questions, where can it go to?
Our initial midpoint of 4% just shows you that the growth in the portfolio and our ability to continue to, to drive through this option. I think we've consistently said over the last year or 2 to the extent, we get additional spaces back as a result of tenant disruption. While that may impact short-term growth ultimately is just going to provide us additional space to grow into 26 and 27.
Flores.
Jim Taylor: And maybe if you can talk about what your shop occupancy is on all the assets that you've actually redeveloped, because presumably it's higher. And then the second question, or the related question is, what percentage of your S&L pipeline represents shop space?
Jim Taylor: Let me let me take the top of that question. I'll let Steve add additional color. But one of the things we're particularly encouraged about is not only that we've reached a record in terms of small shop occupancy, but we've got great visibility and more than a couple hundred basis points of growth in that number, particularly as we deliver our in process redevelopments, which can drag that as we bring in the new anchors and then obviously lease off the success of the anchors and the traffic that's being brought So it's an important lever for our growth as we look ahead, and we're very excited, as Brian was talking about, in terms of the types of best-in-class tenants that are traffic drivers themselves that we're bringing in the small shop category.
Hey Jim. How are you? Um, so my my question for you guys, uh, is regarding shop occupancy. Uh, again, your most valuable, uh, space, presumably in all your centers. Um, it's I think at an all-time high right now 91.2. Um, but my question is, you know, and I think this is sort of was alluded to, in 1 of the previous question. Uh, where can I go to? And maybe if you can, uh, talk about what your shop occupancy is on, all the assets that you've actually redeveloped, could presumably attire. And then the second question, or the related question is, what percentage of your Sno pipeline represents shop space?
Let me uh, let me take the top of that question. I'll let Steve add additional color, but 1 of the things or particularly encouraged about is not only that, we've reached a record in terms of small shop occupancy, but we've got great visibility, and more than a couple hundred basis points of growth. And that number particularly, as we deliver our in process redevelopments, which can drag that as we bring in the new anchors, and then obviously lease off the success of the anchors and the traffic that's being brought in. So, it's an important lever for our growth as we, uh, as we look ahead. And we're very excited as Brian was talking about in terms of the types of deaths in class tenants that our traffic drivers themselves, that we're bringing in the small shop
Steve Gallagher: Yeah. On the snow, it's about $35 million worth of ABR, and I think importantly, at about a mid-30s ABR per square foot, so, you know, as you mentioned, impressive numbers. and tremendous opportunity and visibility on being able to continue to create that occupancy As we often say, we don't manage the portfolio for occupancy, but rather for growth, which is part of why our in-process redevelopment pipeline drags that number a bit, but in my mind, it just provides us tremendous visibility on how we'll continue to grow.
Top category. Yeah, on the snow. It's about 35 million dollars worth of ABR. And I think importantly, at at about a mid 30s, um, ABR per square foot. So, you know, as as you mentioned, impressive numbers in there.
And tremendous opportunity and visibility on being able to continue to create that occupancy percentage. As we often say, we don't manage the portfolio for occupancy but rather for growth, which is part of why our in-process redevelopment pipeline drags that number a bit. But in my mind, it just provides us tremendous visibility on how we'll continue to grow it.
Steve Gallagher: And if I were to, you know, the first part of my question, which is the the occupancy in shop space on the on the assets that are, you know, redeveloped and stabilized, how much higher is that than your your average today in your portfolio? We Yeah, sorry, Jim, we have about 100 basis points of drag today, that in that in that future reinvestment pipeline that are dry, that's dragging that down for us. And we typically add several 100 basis points, and we deliver those reinvestment. Great, thanks.
And if if I were to, you know, the the first part of my question which is the the occupancy in shop space on the on the assets that are, you know, redeveloped and stabilized. How much higher is that than your Your Average today in your portfolio? Well, yeah.
Yeah. Sorry Jim. We have about a 100 basis points of drag today that in that in that um, future reinvestment pipeline that are drive. That's dragging that down for us. And we typically add several hundred basis points and we deliver those reinvestments.
Great, thanks.
Ki-Bin Kim: Our next question comes from Ki-Bin Kim with Truist Securities. Please proceed with your question. Thank you. Good morning.
Our next question comes from Kebin Kim with Truist Securities. Please proceed with your question.
Brian Finnegan: Can you guys provide a progress update on the releasing efforts on the Big Loss and Joanne's activity? Yeah, sure. Like I said earlier, we've been very pleased with what we're seeing. We're about 80% resolved for us that's leased at least, or we're finishing up an LOI to go to lease. And particularly on those Joanne and Party Cities, which we've really just taken back recently, we've been very pleased with the progress. So whether that's with specialty grocers like Trader Joe's, operators like Ulta, Crunch Fitness, Barnes & Noble, the team has been very active in terms of addressing this space.
Thank you. Good morning. Can you provide a progress update on the leasing at First on the Big Loss and Joann's activity?
Brian Finnegan: And we weren't waiting for it, right? We had a sense that this was coming, like when we talked about at the time, we had reduced our exposure to Big Lots by 30% at the time of the filing. We had two of the spaces already leased of our Joannes and had been managing down some of that Party City exposure over time as well. So we remain very encouraged with how our team is backfilling it. We're not resting on our laurels. We're focused on getting the rest of that space leased.
Brian Finnegan: And you should really start, we're starting some of that starting to come online here in the back half of this year, but you start to see it come online in bulk as we get into 2026.
Yeah, sure. Keep in like I like I said earlier, we've been very pleased with what we're seeing. We're about 80% resolved for us. That's least at least or we're finishing up. An ally to go to lease and particularly on those Joanne and Party Cities, which we've really just taken back recently. We've been very pleased with the progress. So whether that's with specialty, groceries, like Trader, Joe's operators like Ulta Crunch, Fitness Barnes & Noble. Um, the team has been very active in terms of addressing the space and we were waiting for it, right? We had a sense that this was coming. Like when we talked about at the time, we had reduced our exposure to Big Lots by 30% at the time of the filing. We had 2 of the spaces already leased of our Jo-Ann's and had been managing down some of that Party City exposure over time as well. So we remained very encouraged um with how our team is backfilling. It we're not resting our Laurels, we're focused on getting the rest of that space least.
Jim Taylor: And just broadly speaking, when you think about the potential basket of other retailers that might be a little bit challenged, whether that be like a Michael's, Kohl's, or some pet stores, when you look at that collective basket of troubled retailers versus what you've already gone through this past year, does it feel better, worse, or the same going forward? It actually feels much better. And that's a point Steve was really trying to underscore in his remarks, is the fact that we've worked our way through some of the more significant weaker credits in an environment that's been strong from a leasing perspective, and importantly, with the business plan that's been able to deliver growth as we have been dealing with that tenant disruption.
And you should really start. We're starting to see some of that come online here in the back half of this year, but you just start to see it come online in bulk as we get into 2026.
Jim Taylor: forward will there be additional tenant disruption, of course, but we like how the portfolio is positioned to outperform. Thank you.
We're proud of the fact again that we're growing better than 4%, despite over 230 basis points of drag. So as we look forward, will there be additional tenant disruption? Of course, but we like how the portfolio is positioned to outperform.
Thank you, that.
Michael Mueller: Our next question comes from Mike Mueller with J.P. Morgan. Please proceed with your question. Yeah, hi. Noah LaCenterra is a grocery anchored center with the Trader Joe's. But if Trader Joe's wasn't there, would you have had the same interest in the property? And do you think pricing would have been materially different? If so?
Our next question comes from Mike Mueller. With JP Morgan, please proceed with your question.
Yeah. Hi, um, no loss in terror is a grocery-anchored center with Trader Joe's. But if Trader Joe's wasn't there, would you have had the same interest in the property? And do you think pricing would have been materially different? If so?
Jim Taylor: Look, it's a great question. We do like to buy assets that have grosser exposure to highlight some of the trends Brian is focusing on. So when it comes down to NAFTA, I think the question would have been more of, could we put a grocer in here and do it accretively? Could that grocer then change the overall aspect of the tenancy here? Luckily, Los Anteros, we have an easier path where it's leasing and marked market. But when we really look at acquisitions, it's really trying to find those opportunities where we can truly drive value, not necessarily just about having a grocer's ability to drive value from the data.
Um, look, it's a great question. We, we do like to buy assets, um, that that have growth exposure to, to, highlight some of the trends. Brian is, is focusing on. So, when it comes down to NASA, I think it would be, the question would have been more of. Could we put a a grocery order here and do an accredited week? Could that grosser then change the overall, um, aspect of the tendency here? Luckily loaner we have an easier path where it's Leasing and, and Mark to Market, but we when we really look at Acquisitions, it's really trying to find those opportunities where we can truly Drive value. Um, not necessarily just about having a Grower's ability, to, to drive value from from the data acquisition.
Jim Taylor: Got it. Okay, thanks.
Got it, okay. Thanks.
Linda Tsai: Our next question comes from Linda Tsai with Jeffrey's Group. Please proceed with your question. Hi, good morning.
Our next question comes from Linda Tsai with Jefferies Group. Please proceed with your question.
Jim Taylor: On the Luscentara acquisition, a two-parter on your strategy. With 5 million visits a year, how much higher is the annual traffic statistics in the HHI demos versus the rest of the Brixmor portfolio?
Jim Taylor: And then just in terms of buying in a master plan community, are there any nuances to think about why disasters would be more attractive relative to a center that is not in the master plan community? Well, I can start with the second piece, you know, this asset is considered the heart of Cinco Ranch, so we really, there's a real lack of competition here and it's really been designed to drive interest across the entire community, so we like the position of this asset in that there isn't true competition within the trade area. from a demos perspective, you know, what I would say is our primary investment philosophy is really finding value added assets where we can drive value.
Hi. Good morning. Um on the lesson Tara acquisition a 2-part on your strategy with 5 million visits a year. How much higher is the annual traffic statistics and the hhi demos versus the rest of the bricks more portfolio. And then just in terms of buying in a master plan Community, are there any nuances to think about about why these assets would be more attractive relative to a center? That is not in the master plan community?
Um well I can start with the with the with the second patient of this asset is considered the heart of single Ranch. So we really there's a real lack of competition here and it's really been designed to to to drive interest across the entire Community. Um, so we we we like the the position of this asset and that there isn't true competition within the trade area.
Jim Taylor: While this one does have very attractive demos, I think the average household About 151,000 I think our current today is.
Um, from a demo perspective, you know what I would say is our primary investment philosophy is really finding value-added assets. We can drive value. While this one does have very attractive demos, I think that the average household income is about $151,000. I think our current today is...
Brian Finnegan: And we had tremendous visibility, as Brian can give some color on, in terms of great tenants who we knew wanted... Yeah, I mean, somebody mentioned earlier, sprinkling the Brixmor magic. Our team has already been doing that and is very excited. We've got a great team in Houston. As we've talked about throughout this call, we've got a great portfolio in Houston. We've already had leases that are brought into committee that are ahead of where we expect it to be some great uses. And we had some of the folks that were there on the asset join the team as well that, to Mark's point, are very tied in with the community there and are helping us from an operating perspective.
120. So it's, it's a secretive to those demographics, but we didn't buy it for the demographics. We bought it for the ability to drive value here and we had tremendous visibility as Brian can give some color on in terms of great tenants who we knew wanted to be there. Yeah, I mean if somebody mentioned earlier sprinkling the the bricks more magic our team has already been doing that and is very excited. We've got a great team in Houston as we've talked about throughout this call we've got a great portfolio in Houston.
Brian Finnegan: So it does fit into what we do from a growth perspective. These are tenants that we have been attracting to the portfolio, like I mentioned, Sephora and others, some great food and beverage operators there. And just overall, we're really excited about it and really proud of how our team's gotten after it out of the gate. With great existing traffic, as you highlight, but we think the pro forma traffic as we bring in. Better Tenants to Replace Some of the First Generation Lifestyle Tenants Here. Rents that can be as much as double as what's in place will continue to drive that traffic and continue to drive the performance.
We've already had leases that have brought into committee that are ahead of where we expected to be some great uses. And we had some of the folks that were there on the asset, join the team as well. That's Mark's Point are very tied in with the community there and are helping us from an operating perspective. So um it does fit in to what we do from a growth perspective. Um these are tenants that we have been attracting to the portfolio. Like I mentioned Sephora and others, um, some great food and beverage operators there and just overall, we're really excited about it and really proud of how our team's gotten after it out of the gate with great. Existing traffic, is you highlight but we think the pro-forma traffic is, we bring in these better tenants to replace some of the first generation lifestyle, tenants here at rents that can be as much as double as what's in place. We'll continue to drive that traffic and continue to drive the performance here.
Paulina Rojas: Great, thanks for the call.
Great, thanks for the caller.
Paulina Rojas: Our next question comes from Paulina Rojas with Green Street Advisors. Please proceed with your question.
Our next question comes from Paulina roas with Green Street, advisors please proceed with your question.
Jim Taylor: Good morning. A follow-up to a prior question. You mentioned that cap rates for grocery anchored centers are compressing. Can you clarify the timing around that comment? Specifically, have you seen pricing continue to become more competitive at the margin over the last two or three months? Where are you really referring to a broader trend over a longer period? Sure. It's a great question. So certainly year over year, we're seeing cap rate compression. If we really look at over the last quarter, if you think about the deals that were really launched here in the spring, we're seeing very high demand for grocery anchored centers from pension or other private capital.
No. Um, follow-up to a prior question. You mentioned that cap rates for grocery-anchored centers are compressing. Can you clarify the timing around that comment? Specifically, have you seen pricing continue to become more competitive at the margin over the last 2 or 3 months?
Or were you really referring to a broader trend over, yeah, a longer period?
Jim Taylor: So we're seeing it in real time in the last three to four months. That's how I would answer your question. And yeah, yeah, it does.
Sure. It's a great question. So certainly year over year we're seeing cap rate compression and if you if if we really look at over the last quarter so you think about the deals were really launched here in the spring. We're seeing very high demand for grocery anchored centers from pension and other private Capital. So we're seeing in real time in the last 3 to 4 months is how I would answer your question.
Um, yeah, yeah, it does.
Cooper Clark: Our next question comes from Cooper Clark with Wells Fargo. Please proceed with your question. Great, thank you for taking the follow up. The incremental NOI yield from the redebt pipeline and process has remained strong at 10%.
Our next question comes from Cooper Clarke with Wells Fargo. Please proceed with your question.
Jim Taylor: As you talk about the future redevelopment projects you spoke to earlier on the call, could you walk through some of the puts and takes as we think about a strong leasing environment coupled with some continued uncertainty from tariffs? Wondering if we could see yields move north of 10% moving forward if the current leasing environment remains steady? I think you highlighted a couple of the drivers. Obviously, you've got demand, and that's robust, and we continue to surprise even ourselves in terms of the rents that we're able to achieve. On the other side of that, you could have costs and inflationary pressures impacting those returns.
Great. Thank you for taking the follow-up. The incremental noi yield from the redep pipeline and process has remained strong at 10%. As you talk about the future Redevelopment projects, you spoke to earlier on the call. Could you walk through some of the puts and takes as we think about a strong leasing environment coupled with some continued uncertainty, from tariffs wondering if we could see yields move north of 10%, moving forward, if the currently in environment remains steady,
Operator: So as we look out, in particular, look at the opportunities that we've identified in the shadow pipeline, we're reasonably confident about our ability to continue to deliver that incremental return in the high single, low double digits, basically in line with what you've seen over the last Great, thank you. As a reminder, if you'd like to ask a question, please press star 1 on your television. One moment, please, while we poll.
I think you highlighted a couple of the drivers. Obviously, you've got demand, and that's robust. We continue to, um, surprise even ourselves in terms of the rents that we're able to achieve. On the other side of that, you could have costs and inflationary pressures impacting those returns. So, as we look out, in particular, at the opportunities that we've identified in the shadow pipeline, we're reasonably confident about our ability to continue to deliver that incremental return in the high single, low double digits, basically in line with what you've seen over the last couple of years.
Great. Thank you. That
As a reminder, if you'd like to ask a question. Please press star 1 on your telephone keypad 1 moment, please while we Poll for questions,
Michael Griffith: Our next question comes from Michael Griffith with Evercore ISI. Please proceed with your question. Great, thanks for taking the follow up. Just a clarification question on the La Centera property. I believe it's in a mixed use development with an office and resi component. Did you just buy the retail portion? Or did you also buy the the office and resi as Yeah, it is in a mixed use environment. We do not own the multifamily. There is some smaller office component at the asset. It's been well leased. Forever is really the only class-based space in the market.
Our next question comes from Michael Griffith with evercore, isi, please proceed with your question.
Great. Thanks for taking the follow-up. Just a clarification question on the loss and Tara property. I believe it's in a mixed-use development with an office and residential component. Did you justify the retail portion, or did you also buy the office and residential as well?
Jim Taylor: We do actually believe, just like the retail, there is red mark to market. There really isn't any occupancy upside today at that, but we do think there's good red mark to market in the office, given it's really the only class-based space in that trade area. And great creditworthy tenants that are in there today as well, which to Mark's point, we think there's some upside.
Jim Taylor: Great, thank you.
Yeah it is it is in a mixed use environment. We we do not own the the multi family. There is some um smaller office component at the asset. It's been well least. Um basically forever. It's really the only class A Space in the market. We we do actually believe just like the retail. Um there is rent Mark to Market. There really isn't any occupancy upside today at that, but we do think there's good rent work to Market in the office, given it. It's really the only class based space in in that trade area and great creditworthy tenants that are in there today as well which to Mark's point, we think there's some upside too.
Great. Thank you.
Caitlin Burrows: Our next question comes from Caitlin Burrows with Goldman Sachs. Please proceed with your question. Hi, I feel like this has been talked about a few times, so sorry, but just on the watch list, it sounds like it's, you've said a few times that it's smaller than it was historically. I was wondering if there was any way you could quantify like today, it's X amount of ABR and last year over the X amount of years, historically, it was some other level. Caitlin, I think it's important. We use the watch list as a tool, right? We look at it not just with near-term credit risk, but also with tenants that may be putting stores at risk, that have weaker performance, that are closing locations.
Our next question comes from Caitlyn Burroughs with Goldman Sachs. Please proceed with your question.
Hi. Um, I feel like this has been talked about a few times, so sorry. But just on the watch list, it sounds like it's, uh, you've said a few times that it's smaller than it was historically. I was wondering if there was any way you could quantify. Like today, it's x amount of ABR and last year, over the X amount of years. Historically, it was some other level.
Jim Taylor: So we don't necessarily have a number that we've reported on it. But I would just say, if you look at the names that have filed recently, it's significantly lower than where it was. But I'd also point to look at the names we've grown with in the top 40, right? You think of how Whole Foods has come up in our portfolio. You think about Sprouts, Aldi, Chipotle, Bath & Body Works. There are some strong operators that we continue to grow with. Trader Joe's is another one. So I think that underlying credit portfolio, you can see it getting stronger from that perspective as well.
Jim Taylor: And to Jim's point, look, there's always some tenants and categories that we're keeping a close eye on. But if you have a low-rent basis, like we do, and we can backfill accretively to the extent you get a box or two back, you're going to do okay. So we feel really good about the position that we're in today. And as we talked about throughout the call on the other side of this, we're really improving that position that we're in today from a credit profile standpoint.
Kaitlin, I think it's important. We used to watch this as a tool, right? We look at it, not just with near-term, credit risk, but also with tenants that may be putting stores at risk that have weaker performance that are closing locations. So we don't necessarily have a, a, a number that we've reported on it. But I would just say, if you look at the names that have filed recently, um, it's significantly lower than where it was, but I'd also point to look at the names we've grown with in the top 40, right? You think of how Whole Foods just come up in our portfolio. You think of how Sprouts um all the Chipotle Bath and Body Works. There are some strong operators that we continue to grow with Trader. Joe's is another 1. So I think that underlying credit portfolio, you can see it getting stronger from that perspective as well. And to Jim's Point, look, there's always some tenants and categories that we're keeping a close eye on. But if you have a low rent basis, like we do, then we can backfill it creatively to the, to the extent, you get a box or 2 back. Um, you're going to do, okay? So we feel really good about the position that we're
In today, and as we talked about throughout the call, on the other side of this, um, we're really in, we're really improving that position that we're in today from a credit profile standpoint.
Paulina Rojas: You got it. Thank you.
Thanks.
You got it. Thank you.
Jim Taylor: Our next question comes from Paulina Rojas with Green Street Advisors. Please proceed with your question. Hi, again, a very specific follow up. Could you please provide some numbers around it? Where are current in-place rents and what do you think the market rents are? As a percentage, it's easier. So we do think that loss and terror is going to drive some pretty significant NOI growth. Our base case underwriting has NOI growth that kind of averages the 5% range over a 10-year hold. A lot of that's driven by the lease-up of the spaces that are currently vacant.
Our next question comes from Paul, in a roas with Green Street, advisors please proceed with your question.
Hi again, a very, um, specific follow-up.
website could you please um provide some numbers around it where is where our current in place runs and what you think the the market rents are
as a percentage.
So, um,
Jim Taylor: Those leases are coming in kind of in the $60 to $90 per square foot range versus the in-place NOI, the in-place ABR. Obviously, the vacancies are zero. The in-place ABR of the asset today is in a low. And is the type of space comparable there in that mix that you are referencing? Yeah, for sure. So a lot of that's the inline space in phase one, where you see the big red marked market. Yeah. And I think, Paulina, interestingly, the tenants that are performing that we want there, they're driving a ton of traffic, are doing well.
Per square foot range versus the inflated NOI or the inflated ABR. Obviously, the vacancies are zero. The in-place ABR of the apps that today is in the low 30s.
Right. And these are the type of space comparable there in in that mix that you're referencing.
Jim Taylor: We're getting some percentage rent out of those stores. The other thing is some tenants where we may ultimately want to upgrade, those are the spaces that are significantly under market to Mark's point in that part of the asset. And we've been pleased with what we've been seeing just a few weeks out of the gate in terms of the activity there.
Jim Taylor: So we do feel that there's a tremendous amount of upside and excited about our teams getting after it out of the gate.
Where you see the big red marked Market. Yeah. And I think, Paul in interestingly, the, the tenants that are performing are that we want there, they're driving a ton of traffic are, are doing well. Um, those are the the we're getting some percentage run out of those stores. The other thing is some tenants where we may ultimately want to upgrade. Those are the spaces that are significantly under Market to Mark's point in that part of the asset. And we've been pleased with what we've been seeing just a few weeks out of the gate in terms of the activity there. So uh, we do feel that there's a tremendous amount of upside and excited about our teams getting after it out of the gate.
Jim Taylor: Thank you.
Thank you. Thank you.
Alexander Goldfarb: Our next question comes from Alexander Goldfarb with Piper Sandler. Please proceed with Hey, thank you for the follow up. Just going back to my question, you know, as we look on page 30 of this up, and you know, you have 41 million of of S&O, that's going to commence this year, 21 million next year, and presumably, you know, that will those numbers in the outer years will grow as you guys do more leasing. So far, you haven't described anything that would say these aren't fully additive. And I guess that's what I'm trying to get at is, in shopping centers, we often get excited, and then have to revise down numbers.
All right. Next question. Comes from Alexander Goldfarb with Piper Sandler. Please proceed with your question.
Hey, thank you for the follow-up. Uh, just going back to my question, you know, as we look on page 30 of this up and, you know, you have 41 million of of Sno that's going to commence this year, 21 million, next year. And presumably, you know that will those numbers in the outer years will grow as you guys do more leasing it so far. You haven't described
Jim Taylor: And I'm just trying to understand if there are any negatives to us adding fully, like the 41 million this year, the 21 million next year, in addition to your normal course, you know, NOI growth. Yeah, I mean, I think there are a couple of things that you always consider. One is ongoing tenant disruption. The other is normal course move out. But the important thing is that from a growth perspective, we're providing visibility as those rents stack, not just for this year, but as you point out in the next year, and it's pretty compelling.
Anything that would say these aren't fully additive. And I guess that's what I'm trying to get at is, uh, in shopping centers. We often get excited and then have to revise down numbers. And I'm just trying to understand if there are any negatives to us adding fully like the 41 million this year, the 21 million next year in addition to your normal course, you know, noi growth
yeah, I mean, I think
Jim Taylor: So what is normal course move outs, Jim, that we should be thinking about? Is it 10 million, 20 million? I'm just trying to get a sense. Yeah, Alex, I mean, that shifts in a given year relative to what the expiration profile looks like, you know, just pointing to a number of the positives, normal course move outs have been down, but I should touch on we're not giving guidance today, we do feel really confident in the trajectory of growth for this year and beyond. But there are some factors like the from a either a tenant disruption standpoint or some move outs that can impact that into next year.
There are a couple of things that you always consider: one is ongoing tenant disruption, and the other is normal course move-outs. But the important thing is that from a growth perspective, we're providing visibility as those around Stack, not just for this year, but as you point out, into next year. And it's pretty compelling.
So, what is the normal course of move-outs for gyms that we should be thinking about? Is it 10,000, 20,000? I'm just trying to get a sense.
Operator: Okay, thank you. You got it. Thank you. We have reached the end of the question and answer session.
Yeah, Alice, I mean, that that shifts in a given year relative to what the expiration profile, uh, looks like, you know, just pointing to a number of the positives. Normal course move outs have been down, but it's in touch on we're not giving guidance today. We do feel really confident in the trajectory of growth for this year and Beyond, but there are some factors like we from a either, a tenant disruption standpoint or some move outs that can impact that into next year.
Okay. Thank you. You got it. Thank you.
Stacy Slater: I'd now like to turn the call back over to Stacy Slater. Thanks, everyone. Enjoy the rest of your summer.
We have reached the end of the question and answer session. I'd now, like to turn the call back over to Stacey Slater for closing comments.
Thanks, everyone. Enjoy the rest of your summer.
Operator: This concludes today's conference. You may disconnect your lines at this time, and we thank you.
Include today's conference, you may disconnect your lines at this time and we thank you for your participation.