Brixmor Says Billions In Buyer Capital, Some From Data-Center Land Sales, Is Holding Up Shopping-Center Prices
The REIT's investment chief said about $130 million of sales are under contract or in negotiation as it lines up funding for the Slate deal.
Brixmor Property Group, which owns grocery-anchored open-air shopping centers, says buyers are still paying up for them. Chief Investment Officer Mark Horgan told analysts on the company's third-quarter earnings call that inbound interest runs to "billions of dollars of capital."
Prices barely moved as rates swung
Mark Horgan, Brixmor's Executive Vice President and Chief Investment Officer, said two deals that priced over the summer closed in September "at expected values." Rates rose and then eased, and pricing moved only slightly at best, he said, because of demand.
Assets with good growth have sold "well into the fives" on cap rates, a measure of property yield, even after the rate moves, Horgan said. Pressure shows up in assets that need heavy debt, such as new construction, and in those without growth.
He said well-capitalized buyers have reached out since the Slate announcement.
Who is writing the checks
Asked by a Citi analyst whether funds with expiring deployment periods were inflating prices, Horgan named pension funds, sovereign wealth capital, high-net-worth buyers and 1031 exchange money. The last group includes some in the data center space who sold land for data centers and want retail exposure, he said.
Retail cap rates have historically been stickier than other asset types, he added.
Funding the Slate deal
Horgan said Brixmor has about $130 million of assets under contract or in negotiation, including land parcels that are "low or no yielding." He said the company is confident it can fund the Slate transaction accretively, meaning without hurting earnings per share.
CEO Brian Finnegan said year-to-date dispositions total about $166 million, including about $43 million in the quarter. He called them capital recycling independent of Slate. Brixmor announced Slate last month and Finnegan said it targets a first-quarter close.
CFO Steve Gallagher said the company is working on a $400 million delayed-draw term loan, expected to close in the fourth quarter and be drawn at the Slate closing. He expects leverage to stay about where it is, depending on timing and funding. Brixmor ended the quarter with about $1.5 billion of liquidity, including $183 million of cash and $1.25 billion on its revolver.
The operating quarter
Finnegan said normalized FFO per share, a standard real estate earnings measure, rose 7% from a year earlier, while same-property net operating income grew 6.6%. Total leased occupancy reached 95.6%. The company raised its full-year outlook again and lifted the quarterly dividend by more than 7%.
Finnegan said the Slate deal is targeted to close in the first quarter, and Gallagher said full 2027 guidance will come in February.
Sources
- Brixmor Property (BRX) Q3 FFO and Revenues Top Estimates — Yahoo Finance
- Brixmor (BRX) Q3 Earnings: Taking a Look at Key Metrics Versus Estimates — Yahoo Finance
- Brixmor: Q3 Earnings Snapshot — Associated Press
- Brixmor Property FFO of $0.60 beats by $0.01, revenue of $359.6M beats by $3.85M (NYSE:BRX) | Seeking Alpha — seekingalpha.com
- Brixmor: Q3 Earnings Snapshot | 9news.com — Associated Press
