Brixmor (BRX) Q3 2026 Earnings Call Transcript

Image source: The Motley Fool.

DATE

Oct. 27, 2026

CALL PARTICIPANTS

• Executive Vice President, Investor Relations - Stacy Slater
• Chief Executive Officer and President - Brian T. Finnegan
• Chief Financial Officer - Steven T. Gallagher
• Executive Vice President and Chief Investment Officer - Mark T. Horgan

TAKEAWAYS

• NAREIT FFO -- $0.60 per diluted share, representing a 7% increase.
• Same Property NOI -- 6.6% growth, driven by a 480 basis point contribution from base rent and increased occupancy.
• Total Leased Occupancy -- 95.6%, representing a record for the portfolio and an increase of 150 basis points from the prior year.
• Small Shop Occupancy -- 92.8%, a record level reflecting strong demand from quick-serve restaurants and medical service providers.
• New Lease Rent Spreads -- 42.6% on comparable spaces, driven by high demand for grocery-anchored retail locations.
• Renewal Lease Rent Spreads -- 19.4% on comparable spaces, with tenant retention rates reaching 88%.
• Signed But Not Yet Commenced (SNO) Pipeline -- $68.9 million in annualized base rent, providing a clear bridge to future NOI growth.
• Quarterly Dividend -- $0.33 per share, representing a 7.3% increase from the previous quarter.
• In-Process Reinvestment Pipeline -- $331.8 million across 46 projects, with an expected average incremental NOI yield of 10%.
• Acquisitions -- $49.5 million for the Village West Shopping Center in Southern California, anchored by a high-performing Stater Bros. grocery store.
• Dispositions -- $42.8 million in gross proceeds from the sale of two shopping centers during the quarter.
• Full-Year 2026 FFO Guidance -- $2.36 to $2.38 per diluted share, raised to reflect the strength of year-to-date results.
• Full-Year 2026 Same Property NOI Guidance -- 5.5% to 5.8%, increased due to favorable operating environments and strong tenant execution.
• Net Debt to Adjusted EBITDA -- 5.2 times on a current quarter annualized basis.
• Liquidity -- $1.5 billion, consisting of $183 million in cash and $1.25 billion of availability under the revolving credit facility.
• Revenues Deemed Uncollectible -- 60 to 85 basis points of total expected revenues for 2026.
• Term Loan Financing -- $400 million delayed draw term loan expected to close in the fourth quarter to support transaction activity.
• Anchor Leased Occupancy -- 97.0%, which remains 70 basis points below the prior peak.
• Base Rent Contribution -- 480 basis points of the total 6.6% same property NOI growth reported during the quarter.
• Comparable Rent Spread -- 25.3% for total executed new and renewal leases spanning 1.6 million square feet.

Need a quote from a Motley Fool analyst? Email pr@fool.com

RISKS

• Gallagher warned that fourth quarter growth is expected to moderate as the company laps elevated ancillary income from the previous year, noting that the timing of a large incentive payment in the prior period creates a comparison headwind.

SUMMARY

Brixmor Property Group Inc. (NYSE:BRX) reported record occupancy levels and increased its full-year financial outlook following a period of high leasing demand. Management reported that the company is preparing to close the acquisition of Slate Grocery REIT in the first quarter of 2027, a transaction valued at approximately $2.34 billion. The company stated that its internal reinvestment pipeline and the embedded mark-to-market rent opportunities are primary drivers of expected net operating income growth into 2027.

• CEO Finnegan stated, "We completed our eight largest anchor leases during the quarter in less than 60 days."
• Finnegan noted that the company has reduced the time for legal lease processing by 25% over the last two years through technology deployment and the use of short-form leases.
• Gallagher noted that anchor leases expiring in 2027 without options average approximately $11.00 per square foot, providing a mark-to-market opportunity against current rates in the mid to upper teens.
• Horgan indicated that the company is currently marketing assets and has "about $130 million that we have under contract or in negotiations today" to support the funding of the Slate transaction.
• Management reported the addition of a 97,000-square-foot IKEA in Suburban Chicago, marking the first large-format location for the retailer within the Brixmor portfolio.
• The company reported that small shop move-outs have remained at record lows for the portfolio for two consecutive years.

INDUSTRY GLOSSARY

• ABR: Annualized Base Rent, a measure of the total yearly rent due from a tenant.
• CAM: Common Area Maintenance, charges paid by tenants for the upkeep of shared spaces in a property.
• FFO: Funds From Operations, a standard earnings measure used by REITs to reflect cash flow from operations.
• NOI: Net Operating Income, the total income from a property after operating expenses but before taxes and interest.
• Outparcel: A small lot at the front of a shopping center, typically used for a single-tenant building like a restaurant or bank.
• REIT: Real Estate Investment Trust, a company that owns, operates, or finances income-producing real estate.
• SNO: Signed but not yet commenced, referring to leases that have been executed but where rent payments have not yet begun.

Full Conference Call Transcript

Operator: Greetings, and welcome to the Brixmor Property Group third Quarter 2026 Earnings Conference Call. At this time, participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to your host, Stacy Slater. Please go ahead.

Stacy Slater: Thank you, operator, and thank you all for joining Brixmor's Third Quarter Conference Call. With me on the call today are Brian T. Finnegan, CEO and President and Steven T. Gallagher, Chief Financial Officer and Mark T. Horgan, Executive Vice President and Chief Investment Officer. 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 our 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. 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 re queue. We would also note that today's call is intended to focus on our third quarter operating and financial results, and we would appreciate it if questions focused on those topics. At this time, it is my pleasure to introduce Brian T. Finnegan.

Brian T. Finnegan: Thank you, Stacy, and good morning, everyone. We delivered an exceptional quarter, reflecting continued operating momentum and strong execution across the business. Retailer demand for space in high quality grocery anchored centers remains robust. Traffic to our centers continues to grow, and new supply remains limited. While there continues to be volatility in the broader environment, particularly around interest rates, inflation, and the capital markets, the underlying fundamentals of our business remain very healthy. Against that backdrop, we remain focused on what we can control. Executing our strategy with discipline and continuing to create value across the Brixmor portfolio. That execution was clearly reflected in our third quarter results.

We increased NAREIT FFO per share by 7% over the prior year and grew same property NOI by 6.6%. We returned to our record level of total leased occupancy, generated exceptional leasing economics, and continued to advance our reinvestment pipeline at attractive returns. Given the strength of our performance during the quarter, we again raised our full year outlook for both same property NOI and NAREIT FFO per share. Our board also increased the quarterly dividend by more than 7% reflecting the strong visibility we have into continued earnings and cash flow growth. The strength of the quarter further reinforces our confidence in the Slate transaction announced last month.

The opportunity is a natural extension of the strategy we have successfully executed across Brixmor. Creating value through redevelopment, occupancy upside, and meaningful rent mark to market. Our focus between now and closing is straightforward. Making sure we are positioned to begin executing on day 1. And our third quarter results provide a clear demonstration of what our platform can deliver. Starting with leasing, we executed 1.6 million square feet of new and renewal leases during the quarter at a blended comparable rent spread of 25%. New lease spreads were 43%. Including anchor spreads above 70%. While renewal spreads exceeded 19%. These results show how effectively our team is capturing the significant market to market embedded in our portfolio.

And the gap between our in place rents and the rents reflected in our forward leasing pipeline gives us a meaningful runway to capture additional mark to market over time. Just as importantly, we are using this environment to improve the quality and relevance of our centers. During the quarter, we continued to grow our relationships with leading retailers across a range of categories including multiple leases with Ross and TJX as well as another new lease with Trader Joe's. Our team also continues to operate with greater speed and efficiency. We completed our 8 largest anchor leases during the quarter in less than 60 days. Including 1 with a leading off price retailer in under 30 days.

Our national retailer relationships, together with the investment investments we have made in technology and AI, are helping us streamline the leasing process. Reduce downtime, and accelerate rent commencement. Ultimately that allows us to more effectively capitalize on the strong retailer demand we are seeing across the portfolio. That activity drove total leased occupancy to 95.6%. Up 80 basis points sequentially and 150 basis points year over year. Small shop occupancy reached a new record of 92.8%. While anchor occupancy increased to 97%. And with anchor occupancy still 70 basis points below its prior peak, we see additional upside ahead. Those occupancy gains also benefited from an 88% retention rate.

Up 300 basis points year over year as tenants continue to succeed at our centers and renew with us at near record rates. And importantly, we continue to have excellent visibility into what comes next. We ended the quarter with $69 million in our signed but not yet commenced pipeline, after commencing $42 million of rent year to date. That pipeline provides a clear bridge between the leasing activity we are generating today and future NOI and earnings growth. Turning to reinvestment. It remains 1 of the most compelling uses of capital in our business, and a key driver of long term value creation. Allowing us to deploy capital into assets we already own at attractive double digit incremental returns.

During the quarter, we stabilized 4 projects $55 million of investment at a 10% average incremental return. We also added 6 new projects to the active pipeline, representing $37 million at an 11% return. At quarter end, our active pipeline totaled approximately $322 million at an expected return of 10%. Beyond the active pipeline, we continue to see a substantial runway of high return reinvestment opportunities across the portfolio. The projects we added during the quarter illustrate both the depth and breadth of that opportunity. In Port Steven. Lucie, Florida, we are redeveloping Eastport Plaza to accommodate a new 50 thousand square foot Publix prototype.

This is our sixth reinvestment project with Publix, with several more already identified in our future pipeline. At Westridge Court and Block 59 in Suburban Chicago, we are building on the successful first phase of the transformation with the addition of a 97 thousand-square-foot IKEA the retailer's first large format location in our portfolio. We also continue to build momentum in our outparcel program. Adding 3 projects during the quarter and bringing our year to date total to 13. We see a deep pool of opportunities to further densify our centers, and generate attractive returns. Turning to transactions. We acquired Village West Shopping Center in Southern California for $50 million during the quarter.

The center is anchored by a high performing Stater Brothers grocery store and is exactly the type of acquisition we target. High quality, grocery anchored real estate, where our platform can create additional value through leasing, remerchandising, and reinvestment. We also completed $43 million of dispositions bringing year to date proceeds to approximately $166 million. Importantly, these sales are consistent with the capital recycling strategy we have been executing independent of Slate. We are selectively monetizing assets where we believe we have substantially completed our value creation plan and can redeploy those proceeds into opportunities offering more attractive long term growth and returns. Despite higher rates, demand for grocery anchored open air retail remains deep.

Giving us confidence in our ability to continue executing our capital recycling strategy while remaining disciplined on pricing and certainty of execution. So stepping back, the core business has tremendous momentum. Occupancy is at record levels with additional upside ahead. We have meaningful embedded rent mark to market. And our reinvestment pipeline continues to generate attractive opportunities across the portfolio. Slate provides another meaningful avenue to put our and capabilities to work and extend that growth over time. Most importantly, our team continues to execute at a very high level, I want to thank everyone at Brixmor for another outstanding quarter.

With that, I will turn the call over to Steven for a deeper review of our financial results and updated 2026 outlook. Steven?

Steven T. Gallagher: Thanks, Brian. Our third quarter results reflect another period of strong execution across the portfolio. With growth in same property NOI and FFO supported by continued strength in the underlying business. Same property NOI increased 6.6%, driven by a 480 basis point contribution from base rent. With healthy occupancy growth, strong expense recoveries, and contributions from ancillary and other income, also benefiting results. 7% to $0.60 per share. That core performance is reflected in our updated outlook for the year. We increased our expectations for same property NOI growth of 5.5 to 5.75% and FFO per share of $2.36 to $2.38. Reflecting the strength of our year to date results, including same property NOI growth of 6.2% year to date.

The increase reflects broad based strength across all components of NOIs supported by our team's execution and the favorable operating environment. Of note, we expect fourth quarter growth to moderate as we lap elevated ancillary and other income, reflecting prior year and timing rather than weaker portfolio fundamentals. As we look beyond the fourth quarter, we continue to have strong visibility into growth in 2027 and beyond. Supported by the stacking of rent commencements, and higher average build occupancy. Approximately 55 million of rent is expected to commence in 2026. With another $48 million from our signed but not yet commenced pipeline expected to commence in 2027. Before the benefit of additional leasing activity.

And the opportunity extends beyond rent commencements. Below market rents continue to provide significant embedded upside. While the transformation of the portfolio has reset our rent growth opportunity meaningfully higher, Anchor leases expiring in 2027 without options average approximately $11 per square foot compared with new and renewal leases in the mid to upper teens. Beyond the mark to market opportunity, contractual rent bumps add to that embedded growth. The health of our tenant base is reflected in high retention, solid collections, and low bad debt. And our redevelopment pipeline continues to create meaningful value across the portfolio.

Taken together, these factors provide strong visibility into growth as we move into 2027, delivered efficiently with capital expenditures at historic lows for this portfolio. Importantly, that visibility is before considering the additional growth opportunity from Slate. The transaction adds an additional source of long term growth through below market rents, occupancy upside, redevelopment, the benefits of applying our operating platform across the portfolio. The precise 2027 FFO impact will depend on closing timing, purchase accounting, and the ultimate mix and pricing of transaction funding. We will provide details on our 2027 outlook with our year end earnings as usual.

From a balance sheet perspective, we ended the quarter with $1.5 billion of liquidity including $183 million of cash, $1.25 billion of availability, under our revolving credit facility, and approximately $115 million of anticipated proceeds under unsettled forward equity contracts. Net debt to adjusted EBITDA was 5.2 times on a current quarter annualized basis, and we expect leverage to temporarily improve further through year end as we execute on our capital recycling activity ahead of the Slate transaction closing. Subsequent to quarter end, we are currently working on a delayed draw term loan with our broader bank group for $400 million with closing expected in the fourth quarter and drawing in conjunction with closing.

We also have $400 million of forward starting swaps on our existing $500 million term loan, providing additional certainty around our borrowing cost. With our strong liquidity, access to multiple sources of debt capital, and an active transaction market, we have significant flexibility as we complete the funding for the Slate acquisition. Overall, we are well positioned heading into 2027 with strong embedded growth and visibility in the existing portfolio. Additional opportunities from the Slate transaction, and the balance sheet flexibility execute on both. And with that, I will turn the call over to the operator for Q&A.

Operator: Thank you. We will now be conducting a question and answer session. Please limit yourself to 1 question. And our first question will come from Michael Goldsmith with UBS.

Michael Goldsmith: Good morning. Thanks a lot for taking my question. Question is just on the leasing, and in particular the anchor occupancy pickup. I know it dipped last quarter and that was well known at the time. I was just wondering there was any sort of noise in the number this quarter or is that just kind of clean leasing? And then as you think about the SNO pipeline, it compressed a little bit. So are we kind of approaching the period where kind of, like, the buildup in leasing is starting to get released, and so we should see the benefit from that over the next couple of quarters. Thanks.

Brian T. Finnegan: Michael, thanks for the question. I think clean leasing is a good way to describe it. We had discussed on the last call the expected bounce back in occupancy in the back half of the year, and it did so in a big way. You look at the quality of tenants that we continue to add to the portfolio, whether that is grocers like Trader Joe's, Ross, TJX, and getting that done a lot faster. So as we think about the occupancy trajectory, there is certainly more room to run. As I mentioned to my remarks, we are still below prior peak. And then you think about that signed but not yet commenced pipeline.

I mean, we commenced $17 million of rent during the quarter. We still have that sitting there around $69 million. So we are continuing to replenish that pipeline. And it gives us great visibility on growth into next year. So I would kinda say as expected, but really the team did a tremendous job of not just getting those anchor leasings done, getting them done as fast as we ever have.

Michael Goldsmith: Thank you very much.

Brian T. Finnegan: Thanks, Mike.

Operator: We will go next to Haendel St. Juste with Mizuho Securities.

Analyst: Hey, guys. So thanks for taking my question. Not a question specifically on Slate, but I guess I am curious about the deal funding, capital recycling, and balance sheet implications. Can we expect to see leverage tick up a little bit Is the plan for that to kind of organically kind of delever over time for free cash flow? And then how much will dispositions perhaps play a role in the funding of that? So curious about that, and then maybe some color on the transaction market, what you are seeing, and how that is impacting maybe your near term deployment plans there. Thanks. Brian T.

Finnegan I would just start by saying our expectations are really the same as they were around a month ago, except we have additional clarity on the term loan. But maybe Steven and Mark can provide some color on the rest of the question.

Steven T. Gallagher: Yeah. And provided it in my commentary just to help people understand. As Mark executes under the capital recycling, as we sell assets heading into the end of the year and preparing for that closing, you will see us naturally delever as that cash goes on our balance sheet. Our expectation is that leverage ultimately remains sort of where we are. But ultimately, where that leverage sits will depend on a couple of factors, including the timing of the transaction and the funding requirements. And Mark can hit on sort of what we are seeing in the transaction market.

Mark T. Horgan: Yeah. The market. Look. it is been a very interesting market over the last several months. I would highlight we closed 2 deals in September that really priced over the summer. They closed at expected values. So we have seen rates go up a bit. We have seen rates come now back down a little bit. And through all that, pricing really has only moved slightly at best. And the reason for that is demand. We are just seeing very strong demand from capital seeking exposure to open air retail and the really strong operating fundamentals that Brian and Steven kind of hit on in the call. And that depth of demand is really what is supporting values.

Frankly, we have been really popular since the Slate announcement. Well capitalized buyers are reaching out. Seeking assets because they are finding the market to be quite competitive. With respect specifically about funding the Slate transaction as we talked about a month ago, We are in the market with assets today. We see very clear demand for assets. We have got about $130 million that we have under contract or in negotiations today. In preliminary discussions on a range of other assets, some of which we go to market with. Some of which you might just go direct to all this capital looking for assets.

So the other thing I would highlight in that $130 million includes some land parcels that relates to their lower, no-yielding. So we are really, really confident in our ability to fund the transaction accretively here.

Brian T. Finnegan: Thank you.

Analyst

Operator: Our next question will come from Todd Thomas with KeyBanc Capital Markets.

Todd Thomas: Hi, good morning. I wanted to ask about the same store NOI growth forecast, which implies a modest deceleration in the fourth quarter, Steven, you mentioned some ancillary income headwinds. Can you provide a little bit more detail there? And thinking about your comments around non option expirations, looking ahead and taking into account this year's leasing and earn in, heading into 2027, curious about the base rent contribution specifically, how we should think about the 4.8% growth in the quarter and whether that can be sustained heading into 2027?

Analyst: Yeah.

Brian T. Finnegan: Todd, let me take the second part in terms of the rent growth upside. So we are almost 4 years running now of renewal growth in the mid teens. We have higher retention. Traffic was up at our portfolio every month this year. Our tenants continue to perform. You have seen that percentage rent line out outperform as well. We are getting percentage rent from operators we had not historically. The health of that portfolio is very strong. And so we see continued growth as it relates to mark to market and renewals And Steve can touch on trajectory that goes in the year end from there.

Steven T. Gallagher: Yes. When you think about the ancillary headwind, in the fourth quarter of last year, we really had 1 large incentive payment from a redevelopment that we did That is coming through the entirety of the year. So it is not a year-over-year comparison issue. it is just all of that hit in the fourth quarter versus being spread throughout the year. So that is why we highlighted it last year, we highlighted on the last earnings call just to help people understand where that headwind was going to come. But ultimately, it is going to be part of our earnings trajectory going forward.

Brian T. Finnegan: Yeah. And I think I would just add, look, we are pleased with the trajectory and NOI growth for the year. We raised our outlook again We have had record low small shop move outs. So from a health of the portfolio, perspective, Todd, and the core fundamentals we are very confident in that trajectory. And like Steven said, where things maybe will not be in a given quarter, but this was as expected.

Operator: Moving on to Michael Griffin with Evercore ISI.

Michael Griffin: Thanks. Wanted to touch on the small shop leasing for a bit. Saw leased occupancy reached, 92.8% in the quarter. Seems like there is more potential upside here, particularly within the SNO pipeline. So can you give us a sense in the near to medium term how much further this leased occupancy can move on the small shop side? And are you getting any pushback from tenants or occupancy cost ratios ticking up? As it relates to resistance that they might have from signing higher rents or higher renewals?

Brian T. Finnegan: Michael, thanks for the question. We continue to have significant visibility on upside in our small shops. And it is really consistent with what is driven small shops to date. It is deployment of our reinvestment pipeline. You look at that future reinvestment pipeline and small shop occupancy trails the portfolio by several hundred basis points. And you see that level of uptick as we bring those projects online. So we are pleased with the growth that we have had to date, but we definitely see a lot more room to run as it relates to small shops. And I think in terms of your second question on small shop health and ability to pay increasing rents.

Our tenants are performing. Right? Retention rates up 300 basis points year over year. Again, small shop move outs this year are record lows for the portfolio for the consecutive year. And what is really encouraging to us is the quality of those operators that we have been attracting. Consumers are demanding more of the suburbs. That leads to higher quality quick serve restaurants. It leads to higher quality service operators, higher quality medical users. And you can see that coming through in our portfolio They are driving traffic. They are renewing with us.

So from that perspective, tenants are not paying increased rents at this level unless they are healthy and their sales correlate to the ability to pay those. So that is what which gives us a lot of encouragement of not just driving small shop occupancy going forward, but doing it with great operators at continued higher rents.

Michael Griffin: Thank you.

Brian T. Finnegan: Thanks, Michael.

Operator: Our next question comes from Craig Mailman with Citi.

Craig Mailman: Hey, good morning, everyone. I do not know Brian or Mark who wants to tackle this 1, but just going back to the commentary about pricing being pretty sticky here. Despite the move in rates just given the flood of capital kind of coming into the group. Just kind of curious on the I guess, the makeup of that capital and the depth of it. Mark, how much of that is just capital that needs to be put out the door because it was raised in the fund that has their deployment periods coming to an end. And so for them, pricing is less of an issue because they want to get fees on that.

And once that kinda dries up, is there a potential that pricing starts to move because expectations have to change on that incremental capital that is raised and the return requirements that they are telling their kind of investors that they are gonna be able to hit going forward?

Mark T. Horgan: Well, appreciate the question. I. You know, from a scale perspective, from what we can tell, there is a range of capital coming into the space. So it is what you have seen return to our space is the very traditional pension fund capital that you are seeing sovereign wealth LP capital come in. High net worth is seeking the capital. And we are also seeing 31 Capital come into the space for particularly on some folks, in the data center space. We sold some effort data center. We are seeking exposure to, to retail given the fundamental of the business. As far as the scale of it, it seems very large.

I mean, what we are tracking from what we have just had inbound calls on is billions of dollars of capital today. And, you know, as far as pricing being sticky to look at cap rates of retail over time, it has generally been stickier than some other asset types. That, you know, we really have not seen things drop super low across the entire industry. They generally do not spike up that high when you see rates movement because of the overall fundamentals of the sector. So as far as we can see today, we feel very confident about liquidity and we do not expect to see large pricing change.

Or I think you will see pricing changes, frankly, assets that require a lot of debt. So that is new construction pricing, assets without growth, that is probably where you are seeing the biggest impact on pricing. But as far as assets with good growth opportunities that we chase, and I think a lot of folks are looking for, you are seeing very tight pricing. We have seen assets real time, you know, post rates move in, well into the fives across multiple markets. That might be on the margin, but we are expecting to see a healthy demand for assets, at attractive cap rates today.

Operator: And our next question will come from Samir Khanal with Bank of America.

Samir Khanal: America. Good morning, everybody. I guess, Brian, when I look at your in process reinvestment pipeline, roughly $330 million now. I think it is around a 10% yield. And you talk about occupancy reaching record levels. I mean, should we think about the opportunity there is that in that pipeline and sort of the size of that pipeline over the next couple of years? Thanks.

Brian T. Finnegan: The redevelopment pipeline, Samir? So on the redevelopment pipeline, I think what encourages me about it is not just the size of it, but the nature of it. Right? As you have seen us, the last couple years, the. Our projects have gotten larger with a similar risk profile. Look at what we have done in college towns like Davis, California, great suburbs like Suburban Chicago. We are adding a 100 thousand square foot IKEA. And I mentioned the pipeline that we have with Publix. That pipeline is also part of what attracted us to the Slate portfolio as well.

But independent of that, you still have a billion dollars just in what is in our active pipeline today and in the future pipeline we show you every quarter. 3 of the assets that we bought this year immediately went into that future pipeline. So Mark and team are finding those opportunities as well. But thinking about the rest of the Publix developments that we have, the outparcel opportunity that we have, and we have already done about 110 outparcels across the portfolio, we see a similar level in what we have today and the ability to densify our sites. So it is going to continue to be a core strategy for the company.

We have improved our expertise over time. And what really excites me about it is just the size of that pipeline and the types of projects that we have been able to deliver, and we will continue to deliver over the next several quarters.

Operator: We will go next to Greg McGinniss with Scotiabank.

Greg McGinniss: Hey. Good morning. Brian, you mentioned the improving ability to reduce downtime and accelerate rent commencements. Can you quantify that change in terms of how many days you have cut from lease signing to rent paying, whether for shop or big box tenants? And what is assumed with regards to the SNO pipeline disclosure for 2027 starts?

Brian T. Finnegan: Yeah. Can you repeat the last part? Greg, I missed the last part. Just trying to understand if the acceleration in rents rent commencements is applied to what is been disclosed for expected 2027. It starts on the SNS. Got it. So I think we have constantly thought about here what is the value of a day in rent. Right? On average across the portfolio through all of our functions. And I mean, where you can see it in the data across the board is in legal. So we are down about 25% in our time legal over the last 2 years.

We have reduced the size of our short form lease Our legal teams, our leasing teams in terms of the relationships that they have developed on the. With their tenant counterparts has really helped that as well as deploying technology. it is taking us a lot less time today to generate a lease. it is taking us a lot less time to reconcile a lease when the lease is done and also understanding what some of those clauses are that tenants will live with. It can be hard to quantify just the days and the time from lease execution to opening because scopes are different.

What I would say, though, and you can see this coming through in the reduced capital that we are having to spend, is tenants are taking on more existing conditions. Particularly national tenants have beefed up their construction departments so that they can take fixed cost TAs and be able to control both sides of the schedule. So that is allowed us to deliver space and do it much more efficiently and get those tenants started a lot sooner.

The other thing I would point to is the relationships that our redevelopment folks have with local municipalities to work through the permitting process. it is another reason, back to Samir's question, why we have been able to get some of these projects done, particularly outparcel in what were historically very challenging jurisdictions. So if you put all that together, it really speaks to the outperformance of us pulling dates forward in the third quarter and something that we continue to be focused on improving this as we get into 2027.

Operator: Caitlin Burrows with Goldman Sachs has our next question.

Caitlin Burrows: Hi, good morning everyone. I was just wondering if you could comment on bad debt in the quarter and then the watch list going forward. I know it is been relatively small recently, but wondering if there is been any shifts. Thanks.

Brian T. Finnegan: Yeah, I mean Steven can touch on the quarterly trajectory, but I would just say, Caitlin, the health of the tenancy is the strongest it is ever been. And 1 of the ways you can see that is in bad debt. We lowered our outlook at the start of the year. We improved that outlook. Throughout the year, and we maintained it with. Because third quarter went as expected. If you think about the tenancy and who we have grown with, HEB entered our top 40 last quarter. We have grown with Trader Joe's. We have grown with Sprouts. We have grown with Aldi. We have grown with Aldi off price users. We continue to grow with Publix.

Thinking about the signatures that we have, we got a question on small shop. Tenancy earlier. We have done more with national and regional tenants. And even those local operators, which we want unique, you know, local operators at our shopping centers They would still only represent 17% of our rent. And even the signatures we are getting there are the strongest they have ever been. So as we think about collection trends, retention rate, and overall small shop occupancy growth, and frankly, the growth that we are getting in renewals out of small shops, the health of the portfolio remains very strong. The watch list is lower than it was today.

We continue to watch certain categories that may close stores like drug stores. We have reduced our exposure to office supply. Significantly. But as we sit here today, we are operating from a great position of strength as it relates to the underlying tenancy of the portfolio.

Operator: We will go next to Alexander Goldfarb with Piper Sandler.

Alexander Goldfarb: Hey, morning, down there. Brian, question on Slate and the Brixmor platform. Previous to the deal, you had spoken about the breadth of the Brixmor leasing relationships and how you were top you know, a top landlord to many of, many of the, you know, national tenants. Obviously, Slate, you know, makes you bigger.

Just curious if in thinking about this deal and thinking about the company going forward, if you see like, the need to be even bigger to create even better, relationships and standing with the retailers or if as you look over the national playing field, you see markets where some of your strong tenant relations do not really have a presence, and therefore, you guys acquiring there is a way to sort of expand those tenant relationships into new markets. Just trying to understand sort of you know, how you look at it and if it is more a negotiating leverage standpoint or it is a chance to really bring, you know, tenant reach to new markets.

Brian T. Finnegan: Yeah. it is a great question, and I think it is really 1 of the things that is made us even more convicted about the opportunity here, Alexander, over the past month as we have been talking to our national retail partners and their desire for us to not just show them what is available in the slate portfolio, but to talk to them about our plans and our reinvestment plans particularly on some of those Publix and other grocer reinvestments. We have been growing the company ahead of sleep, half of the acquisition activity that we did as a public company was in the last 2 years.

But it is been very intentional. it is been in markets that we know really well. it is been in places where we can put our platform to work to drive outsized value. that is exactly the way that we look at Slate transaction. It was a unique opportunity for us, and we are thrilled to be moving forward to. Towards closing in the first quarter. As we think about the scale of the portfolio, we had 900 million visits over the last year. We have 8 thousand leases. We are we are among the top landlord to every major retailer in the country. So we have the access and the partnership that we need to ultimately help them grow.

And we are gonna look at our acquisition strategy going forward kind of the same way as is there ability in our markets to find new opportunities to put our platform to do it accretively, to add assets that will complement the long term growth profile. I expect us to be able to do that but that is how we think about adverse growth for growth's sake.

Alexander Goldfarb: Thank you.

Brian T. Finnegan: Thanks, Alexander.

Operator: We will go next to James Feldman with Wells Fargo.

James Feldman: Great. Thanks for taking the question. So you had new lease spreads at 42.6%, renewals at 19.4%, and total spreads at 25%. Beyond these headline rents, where are you having the most success improving lease economics? Is it contractual escalators, term options, guarantees, TI, or landlord work? And then, you know, going back to your answer to a prior question just in terms of the improving quality, of the tenants you are bringing into the portfolio, what does that mean for your negotiating leverage And can your 1.7% in place contractual rent growth realistically move towards the 2.6% achieved on recent new and renewal leases?

Brian T. Finnegan: Yeah. Well, James, the answer to your question, I would say kind of the above, and I will just point to some specific data points in that. You look at a portfolio today that is recovering a few hundred basis points ahead of build occupancy, that was the direct opposite in 2019. So our teams focus on improving CAM clauses, strategically deploying fixed CAM, which is now 41% of our ABR and growing at 4.2%. You mentioned our average growth. it is 2.6%. We have been continuing to drive that higher. it is not something that we just started working on the last few quarters. I mean, we have taken that from 90 basis points in 2016 to 1.7% today.

So we are. We definitely see the ability to grow that further. We do not get the touch all of the portfolio in a given year, but our team is being very opportunistic. As it relates to removing or reducing options, we are doing that as well. We have almost completely removed those from local tenant leases. If you look at the options that we are giving to some regional tenants, we have introduced fair market value concepts. So we are growing them well in excess of their growth rate. With national tenants, we are reducing what was historically a number of options that were just kind of commonplace in those leases. We are negotiating those much harder.

I would say just as it relates to leverage the reason that we are driving these rents is because our tenants are succeeding at our centers. We have transformed so much of the portfolio. We have invested a lot. We have brought a lot of great tenants in that are continuing to drive traffic. When you do that, it ultimately helps the entire shopping center. it is a business where it matters who your neighbor is. And we continue to see that, and that is why we are so excited about what we have going forward, the tenants that we are opening, the redevelopments that we are bringing online, including the ones that we brought in during the quarter.

But expect to see that not just in the headline rent growth, expect to see it in the continuing improvement in those other aspects of the lease.

Operator: We will go to Floris van Dijkum with Ladenburg Thalmann.

Floris van Dijkum: Hey, thanks guys. Following up on cruising speed question, you are cruising speed, as you rightly point out, Brian, increased quite nicely at 1.7% in place today. I think 2.6 on the new deals over the last 12 months. Question is, how does Slate compare to that? Does that add to the cruising speed or detract? And then number 2, I guess, is you know, how many years of 2.6% growth in new leases do you need to achieve before you hit 2% average cruising in your portfolio. Presumably, you can model these things out because you know your pipeline pretty well. How long of a trajectory to get to that?

And does the Slate portfolio add or detract from that growth?

Brian T. Finnegan: Well, I think we are entering with a pretty good starting point as it relates to Slate. I mean, that team has been delivering renewal growth in the mid teens over the last year. They have been doing new lease growth in the 40% range. And so for us, that gets us very excited about ultimately what we think our platform can deliver as we start to take on these assets, particularly as we think about the redevelopment upside in those in a subset of that portfolio. And what we have learned over the last month has only made us more convicted in that opportunity.

I think it can be challenging to model that level of growth out for several years. What I can say is we continue to improve it. And the growth rates at 2.6% are, again, off the highest rents we have ever signed as a company. So we continue to see a long runway, speed on in his opening remarks about what is expiring and where we are signing those leases. Retention rates going up, renewal growth continues to be in that mid to high teens level. So look, on top of that, we expect to continue to improve our in place bumps. And going forward, we will continue to improve what the underlying growth is of the portfolio.

It is tough to quantify today how many years that will take, but we are. We are seeing steady improvement.

Operator: Our next question will come from Linda Tsai with Truist.

Linda Tsai: Hi, thanks for taking my question. I think the 88% retention ratio is near Brixmor's historical high. Do you view the high 80s as a new steady state? Or does that change temporarily with incorporating the Slate acquisition in terms of potential remerchandising?

Brian T. Finnegan: Look, I think, Linda, this is more of a result than kind of an aim for us to get to a higher retention rate. So if you think about the portfolio historically, it was in the low eighties. I mean, that has gone higher into the mid to high eighties. I think you can expect us around this level probably towards the high end. Part of our business plan will always be to recapture space that is either under market or underutilized when we have the ability to do that upon a lease expiration.

And we are not going to let a retention rate stat drive that decision at an asset level when ultimately we think that is the best thing for the property, and we can create a lot of value going forward. But what I would say, though, is I think what you are seeing in those retention trends are really the health of the portfolio. Everything that we have done coming through in terms of improving our tenancy, improving our.

The ability of our tenants to succeed at our centers, and that is just 1 stat that of many that shows you the health of the portfolio in addition to loan move out in addition to the renewal rates that we have been able to achieve. So we are proud of it. I think you can expect kind of that mid to high 80s range, but it is not something that, say, we are definitely striving to achieve. it is more a result of the work we have done.

Operator: Moving on to John Peterson with Jefferies.

Analyst: Oh, great. Thank you. Another question on the Slate acquisition. I think if you run some of the demographics on it, household income and population density is below the portfolio. But if you look over the last few years, the growth of income and population is much higher than your existing I am just curious as you think about deploying capital, how you think about that trade off between kind of infill high income locations versus more higher growth areas?

Brian T. Finnegan: Yeah. We have never managed the portfolio specifically for demographics. As we think about the markets that we are going into though, that growth rate, John, is something that we paid a lot of attention to as well as our conversations with the tenants and, frankly, the demand that we are seeing from tenants, to want to explore opportunities in the portfolio. You think about the strength of the grocers there, whether it is Publix, Harris Teeter, or Kroger, how they have reinvested in those stores. They certainly see the growth that is happening in those markets and something that we do as well. So it is a data point it is something that we consider.

But as we looked at this and said to ourselves, we are growing in Atlanta. We are growing in the Carolinas. We are growing in Orlando. We are growing in Jacksonville. These are all places that have very high growth rates, You are seeing positive trends throughout their economies. You are seeing investment And from that perspective, we like the trajectory, but more importantly, we like what we are hearing out of the gate from the tenants in those centers.

Analyst: Thank you.

Operator: We will hear next from Paulina Rojas with Green Street.

Paulina Rojas: Good morning. The Slate transaction brings a JV partner preferred equity investment and also fee income. A different mix, from Brixmor's traditional growth. My question is what is your appetite for repeating this template in the future? How often are you foreseeing management fees playing a bigger role going forward? To more transactions like this.

Brian T. Finnegan: Yeah. I. Paulina, I think the answer is the same as it was before the Slate transaction. It is we will consider it. And for us, it is always been is there alignment from a business plan perspective? Does the opportunity in front of us justify some of the additional complexity that does come along with JV partnerships. This is not our first rodeo with joint ventures. We have had them with large institutions in the past. it is something that we have not done in a few years, but we have certainly had them in the past. So I think it is something that we will consider.

We do like the aspect of having the bulk of the portfolio with no property level debt Steven, Stacy, and team have worked very hard on our balance sheet. But where the opportunity presents itself, particularly with a great partner like EverView, and another institution that is investing alongside them with Adia, that and with the opportunity that we had in front of us made a lot of sense. Will we look at it again? The answer is it depends. I think for us, we will continue to look at these on a 1 off basis, but I am really proud of the team in terms of how we move forward with the transaction.

We are starting and integrating a joint venture partnership and came back. came through with 1 of the best operational quarters that we have had in the company's history. So I think from that perspective, it continues to be it is an option for us. But it is really going to be opportunity dependent.

Operator: We will hear next from Mike Mueller with JPMorgan.

Mike Mueller: Yeah. Hi. Your reinvestment pipeline has about a 10% return expectation. Does the underwriting here and the returns you need flex up and down with larger interest rate moves like it does with acquisitions. Or is it just kind of a different animal because of the implications for the whole property and your kind of starting off higher yield to begin with?

Brian T. Finnegan: Yeah. I think we have always approached investments, Mike. Through the lens of interest rates going up. And whether that is acquisitions or our reinvestment underwriting. I think from a reinvestment standpoint, if anything, as we have done larger projects, over the past few years, the change that you have seen in our underwriting is much more confidence in those pre leasing levels. We are not bringing anything into that active pipeline that is spec we have actually increased those pre leasing levels fairly significantly. And then ultimately, too, having great visibility on costs. Despite some of the uptick in rates and inflation, we actually had seen material costs kind of moderate this year.

We have had some pockets of labor pressure, but it has not been material. And so from that perspective, having great visibility on that and conviction on that when we move into these projects is something that we are really focused on. So I think if anything, that is been the additional focus versus the rates on the reinvestment investments. But I would say across the board, we are always approaching these through the lens of rates going up.

Operator: Greg McGinniss with Scotiabank has our next question.

Greg McGinniss: Hi, yes, Steven, I just want to follow-up on the guidance We appreciate that the increase in same store gave contribution to the increased FFO per share expectations, but term fees are also coming in higher year to date than prior commentary indicated. what is the balance between those 2 items? In terms of the FFO increase to the midpoint? And what are term fee expectations for Q4?

Steven T. Gallagher: Yeah. If you go back to where we really started the year, right, we knew term fees were going to be a headwind. As we look to our 2026 guidance. So the $0.03 high in our initial guide. Now term fees, as you know, can be lumpy. If you actually look at the term fee that we recorded in the quarter, majority of it was actually for rent. And I think it talks about it goes to a lot of what Brian was talking about the quality of the name on these leases of an entity going bankrupt in The US and how a UK guarantor allowed us to collect over $2 million from that tenant.

So when we talk about the health of the leasing dynamic, that is a lot of what we are referring to. So that is what really led to it in the quarter. But when you look at the move in same property, obviously, that implies about a penny, penny and a half. The rest is more or less within our expectations for the year.

Greg McGinniss: Thanks.

Operator: Stacy. And we will go next to Omotayo Okusanya with Deutsche Bank.

Omotayo Okusanya: Yes. Good morning. Just a quick question around 2027 as you are kind of starting to sharpen up our models. Just curious if there is anything in 2027 that the team would like to kind of point out from a modeling perspective that maybe we should be aware of or whether you kind of expect 2027 to be fairly clean and business as usual.

Steven T. Gallagher: I mean, it is definitely not going to be business as usual with Slate coming on. So I will point that out. And obviously, we will give guidance on that in February. I think the 1 item, and I had mentioned it in my script, is we do have swaps burning off in the middle of the year in July, and we did put in 400 million of new hedges for when those drop off. But outside of that, I think everything else is pretty well disclosed as far as where we stand heading into 2027.

Operator: And this now concludes our question and answer session. I would like to turn the floor back over to Stacy Slater for closing comments.

Stacy Slater: Thanks, everyone. We will see a lot of you at NAREIT in a few weeks.

Operator: Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a good day.

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.