Brixmor's Q3 2025: Contradictions Emerge on Tenant Disruption, Small Shop Occupancy, and Credit Risk

Date of Call: October 28, 2025

Financials Results

• EPS: NAREIT FFO $0.56 per share in Q3, driven by same-property NOI growth of 4%; updated FFO guidance $2.23–$2.25

Guidance:

• Updated full-year FFO guidance to $2.23–$2.25 and affirmed same-property NOI growth range of 3.9%–4.3%.
• Expect ~80% of the signed-but-not-commenced ("snow") pipeline to commence by end-2026, with 2026 commencements slightly weighted to H1.
• Record lease commencements and higher lease settlement income will boost 4Q but are expected to be a headwind to 2026 FFO growth.
• Raised annual dividend 7% to $1.23; maintain liquidity and capital flexibility (prefunding, shelf/ATM review, extended buyback program).

Business Commentary:

• Strong Leasing and Rent Commencements:
• Brixmor Property Group executed 1.5 million square feet of new and renewal leases in Q3, with a record rate of $25.85 per square foot.
• New tenant openings included Sprouts Farmers Market and Trader Joe's.

• The company's strong demand and healthy tenant mix, particularly from grocery anchors, contributed to this growth.

• Reinvestment and Redevelopment Impact:

• Eight value-enhancing projects were stabilized during the quarter, with an average incremental yield of 11%.
• The company is expanding its reinvestment pipeline, with emphasis on grocery-anchored centers, now accounting for 82% of ABR.

• This strategy is driven by the increase in tenant traffic and higher rent opportunities.

• Financial Performance and Guidance:

• NAREIT FFO for Q3 was $0.56 per share, with same-property NOI growth of 4%.
• $22 million of new ABR was commenced, the highest in company history.

• Guidance for FFO was increased to $2.23 to $2.25, driven by lease settlement income and strong demand.

• Transaction Activity and Capital Recycling:

• Brixmor completed the $223 million acquisition of LaCenterra at Cinco Ranch, with positive initial underwriting results.
• $148 million in assets were disposed in the year-to-date, with $190 million in acquisitions under control.
• The company is recycling capital from low-growth assets into high-growth opportunities, focusing on traditional open-air retail centers.

Sentiment Analysis:

Overall Tone: Positive

• Management repeatedly emphasized strong execution: "continues to deliver outstanding results," record $22M of ABR commenced, signed rents at a record $25.85/sq ft, same-property NOI +4%, and management raised FFO guidance to $2.23–$2.25 and increased the dividend, signaling confidence.

Q&A:

• Question from Michael Goldsmith (UBS): On the implied acceleration of same-store NOI growth in 4Q, can you walk through the contributing factors (snow pipeline activation, what's due in 4Q) and the role of comparisons in that acceleration and its sustainability?
  Response: 4Q acceleration driven by partial/fully phased-in benefit of $22M ABR commenced in Q3 plus ~ $19M expected to commence between Q3 and Q4; prior-year tenant disruptions roll off, providing favorable comps and a sustainable tailwind from the snow pipeline.

• Question from Samir Khanal (BofA): You said shop occupancy hit a record and there's more room to run — can you expand on that as we think about occupancy into next year?
  Response: Management sees several hundred basis points of upside in shop occupancy driven by the reinvestment pipeline (redevelopments and grocer additions), giving clear visibility to further occupancy gains.

• Question from Craig Mailman (Citigroup): Could you describe the opportunity set for acquisitions, cap-rate trends, and whether new buys will be like LaCenterra (longer-term) or some that are nearer-term accretive to FFO?
  Response: Focus is on value-added, grocery-anchored open-air centers similar to LaCenterra that offer strong growth and high unlevered IRRs via occupancy gains and rent mark-to-market; some deals are longer-term value-add rather than immediately accretive.

• Question from Michael Griffin (Evercore ISI): How does the leasing pipeline look heading into next year given retailer expansion appetite and macro uncertainty (tariffs) — what are conversations like?
  Response: Pipeline is stronger than a year ago despite higher GLA signed; retailers are expanding, navigating tariffs, and management is optimistic about continued leasing into 2026–2027.

• Question from Todd Thomas (KeyBanc): On the building blocks for 2026 and the drag from bankruptcies/tenant disruptions, any early thoughts on how to model that drag into '26?
  Response: Exposure to at-risk tenants has been materially reduced; while rent recognized in 2025 from recaptured space won't recur in 2026, management expects limited further disruption and net benefit from the snow pipeline commencements.

• Question from Greg McGinniss (Scotiabank): Q3 bad-debt rose versus Q2 even as guidance was maintained — please explain the Q3 increase and how you feel about the range for the year.
  Response: Q3 uptick reflects seasonality/timing (out-of-period tax cash collections effect); overall trend is toward the lower end of the historical range and management remains comfortable with the guidance range.

• Question from Alexander Goldfarb (Piper Sandler): Given cap-rate tightening, do you have a minimum yield threshold for acquisitions to ensure Day‑1 accretion, or how do you balance returns vs competition?
  Response: Targeting high unlevered IRRs (historically ~9.5%–10.5%); management will pursue compelling value-add opportunities even if going-in yield is lower when long-term IRR and growth justify the purchase.

• Question from Cooper Clark (Wells Fargo): G&A was down ~$2M–$3M in the quarter — what drove this and is ~$26M a sustainable run rate or was there a one-time?
  Response: Prior-year restructuring charge reduced G&A run rate; current lower G&A reflects that comparison and management is comfortable with the current run rate but provided no formal forward guidance.

• Question from Juan Sanabria (BMO): Can you expand on the Publix relationship and any potential for greenfield developments going forward?
  Response: Long-standing Publix partnership focused on redevelopments (multiple projects underway including Hilton Head and St. Pete); primary focus remains redevelopment, not greenfield, though they won't rule out opportunities.

• Question from Haendel St. Juste (Mizuho): Redevelopment yields ticked to ~9% from 10% — is that a mix issue, cost/tariff impact, or a new level; any change to minimum yield/hurdles given lower debt costs?
  Response: Yield change is mix-driven; historical returns remain high-single to low-double digits, thresholds unchanged though management now requires higher pre-lease thresholds on larger projects to limit risk.

• Question from Caitlin Burrows (Goldman Sachs): How much of the outsized leasing-spread upside has been realized and how long can mid-teens spreads continue?
  Response: Significant runway remains: future leasing pipeline rents are ~40% above in-place rents today, supporting continued material leasing spreads despite past gains.

• Question from Floris Gerbrand Van Dijkum (Ladenburg Thalmann): On capital recycling — disposition pipeline size and impact given you sold less YTD than acquired; are dispos cap rates broadly in line with acquisitions or is there dilution?
  Response: Management will remain opportunistic selling low-growth assets into strong buyer demand; year-to-date disposition cap rates are around 7% and acquisition yields vary by mix, but focus is on improving long-term hold IRR rather than near-term cap-rate neutrality.

• Question from Linda Yu Tsai (Jefferies): Can you comment on LaCenterra yields and why current pipeline assets are described as traditional open-air rather than lifestyle centers?
  Response: LaCenterra has outperformed initial expectations with stronger early yields and growth; pipeline assets are grocery-anchored, traditional open-air centers (similar growth profile) where management has conviction they can apply the platform — not lifestyle centers.

• Question from Hong Zhang (JPMorgan): Lease-to-occupied spread has narrowed this year but remains above historic levels — do you expect it to return to historic levels by end-2026/2027 given expected rent commencements?
  Response: Spread should tighten as record ABR commences but is expected to remain elevated because leasing activity and a large signed-but-not-commenced pipeline remain strong.

Contradiction Point 1

Tenant Disruption and Leasing Activity

It involves the company's sentiment regarding the impact of tenant disruption and leasing activity, which are crucial for assessing the company's growth trajectory and financial health.

What factors contributed to the acceleration of same-store NOI growth in Q4, and is this acceleration sustainable? - Michael Goldsmith (UBS Investment Bank)

2025Q3: The commencement of $22 million of rent in the quarter, providing growth into future quarters. Partial benefits in Q4 as it's fully in. Expect around $19 million of rent to commence between Q3 and Q4. The entire tenant disruption from last year is receding, acting as a headwind in Q4. The commencement of the new pipeline is a tailwind. - Steven Gallagher(CFO) and Brian Finnegan(COO)

Can you discuss leasing activity during the quarter and the strategy to return to a 95% leased rate? How do tenant disruptions compare to the forward outlook? - Todd Michael Thomas (KeyBanc Capital Markets)

2025Q2: We're growing better than 4% despite over 230 basis points of headwind from tenant disruption. Our leasing activity is strong, leveraging broad tenant demand. - James M. Taylor(CEO) and Brian T. Finnegan(COO)

Contradiction Point 2

Small Shop Occupancy and Growth Opportunities

It involves the company's expectations and progress regarding small shop occupancy and growth opportunities, which are important for assessing the company's future revenue and operational performance.

Can you clarify your comments on small shop occupancy reaching a record and the growth potential? - Samir Khanal (BofA Securities)

2025Q3: Pleased with occupancy progress, future reinvestment pipeline below current occupancy level. Expects several hundred basis points more room for growth. Projects like Publix and suburban Atlanta drive occupancy forward. - Brian Finnegan(COO)

What are shop occupancy trends, and how do redeveloped assets differ from the rest of the portfolio? - Florians Van Dijkum (Ladenburg Thalmann & Co. Inc.)

2025Q2: James M. Taylor: We're at a record small shop occupancy with visibility for growth. Future reinvestments will boost occupancy further. Brian T. Finnegan: 100 basis points of drag in the future pipeline, with potential to add several hundred basis points when projects stabilize. - James M. Taylor(CEO) and Brian T. Finnegan(COO)

Contradiction Point 3

Lease-to-Occupied Spread

It indicates a shift in expectations regarding the company's ability to maintain a lease-to-occupied spread, which is an important metric for financial forecasting and investor expectations.

When will the lease-to-occupied spread return to historical levels? - Hong Zhang (JPMorgan Chase & Co, Research Division)

2025Q3: Spread will remain elevated due to strong demand and leasing activity. Expectation of continued strong demand supports elevated pipeline. - Brian Finnegan(Interim CEO, President & COO)

Do you expect lease term income to return to normal after April 2nd? - Hong Zhang (JPMorgan Chase & Co, Research Division)

2025Q1: We expect the lease-to-occupied spread to begin to return to historical levels, which would come as we backfill the space that we're losing. We should be complete on the backfills by the second quarter of next year. - Steven Gallagher(Executive VP, CFO & Treasurer)

Contradiction Point 4

Bad Debt Expense and Credit Risk

It reflects differing views on the company's exposure to credit risk and the potential impact on financial results, particularly bad debt expense.

Can you explain the increase in bad debt expense? - Greg McGinniss (Scotiabank Global Banking and Markets, Research Division)

2025Q3: Office supply exposure cut in half, low drug store exposure, strong credit quality of new tenants. Confident in reduced exposure to traditional risk areas. - Brian Finnegan(Interim CEO, President & COO)

Why wasn’t the bad debt assumption adjusted for tariff uncertainty? - Michael Griffin (Evercore ISI Institutional Equities, Research Division)

2025Q1: But as we focus on our credit quality, we focus on the next tenants that we are taking in the building and the strength of their balance sheets and their financial wherewithal to pay their rent. - Steven Gallagher(Executive VP, CFO & Treasurer)