Shopping Center Business

MAY 2015

Shopping Center Business is the leading monthly business magazine for the retail real estate industry.

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276 • SHOPPING CENTER BUSINESS • MAY 2015 trying to drive better productivity from our existing assets. We have the unique opportunity to be able to do that today because of the structural differentiation of the portfolio — the assets are in older, established, infill markets. We also feel that being a great operator is how value is created." Portfolio focus Brixmor's portfolio is massive. The company owns 520 shopping centers to- taling 87 million square feet predominant- ly in the top 50 U.S. markets. Because the majority of its predecessors were public entities, Brixmor's portfolio — built over several decades — is extremely well locat- ed with strong tenants. The average cen- ter in the company's portfolio is 166,700 square feet. A few years ago, Brixmor stood at over 700 shopping centers; the company sold off a number of assets in non-major markets and weaker quality as- sets as it prepared to go public. Today, 58 percent of the portfolio is what was New Plan Excel; 20 percent is from Heritage and 20 percent is Kramont. "If you think about the history of those companies, some of them go back many, many years. We have retained what were many of the flagship properties from the portfolios. Roosevelt Mall in Philadel- phia, New Plan's original property, and Preston Ridge in Frisco, Texas, one of Center America's top properties, still re- main in the portfolio," says Carroll. "We have a long history with some of these properties. We know them really well and we know the markets really well." Brixmor also has strong relationships with its tenants. The company's portfo- lio is heavily weighted with top grocers and national big box anchors; the com- pany is the largest landlord to The TJX Companies and The Kroger Company. The company's centers have 69 percent national retailers, 18 percent regional re- tailers and 13 percent local tenants. The company has the largest wholly owned, grocery-anchored shopping center port- folio in the U.S., with 71 percent of its centers anchored by a grocery store, and 80 percent of its grocer tenants are ranked Number 1 or Number 2 in their respec- tive markets. According to the company, 72 percent of its grocers are traditional operators like H-E-B, Publix, Giant and Shop Rite, while 28 percent are specialty and warehouse grocers like Whole Foods Market, H Mart, Trader Joe's and Costco. "We love the consistency that a grocer brings to the traffic flow of a center," says Carroll. "Grocers are non-seasonal and non-cyclical." Because the company signed many short-term leases during the recession that are now up for renewal, leasing activity will provide a great deal of opportunity to the company in the next three years. "We have had a relatively static portfo- lio for a few years; it hasn't been supple- mented with new construction assets that have longer lease structures," says Carroll. "We have tried to be very thoughtful about who our anchors are, and upgrade those wherever possible with the idea of driving more overall sales productivity out of our spaces." With 40 percent of 87 million square feet expiring over the next three years, one need not do the math to realize that a huge percentage of Brixmor's portfolio must be leased or renewed. With its cur- rent volume, Brixmor is negotiating ap- proximately 2,100 lease transactions per year. In 2014, the company negotiated leases for 800 new retailers and approxi- mately 1,300 renewals totaling 13.1 mil- lion square feet. In 2015, approximately 11 percent of the company's GLA is ex- piring; in 2016 that will increase to 14.6 percent of GLA and fall to 13.2 percent of GLA in 2017. While for many that may pose a challenge, it is one that the Brixmor organization has embraced as an opportunity. "I say we are fortunate enough to have 40 percent of our leases expiring over the next three years," Carroll says. "Those leases are expiring between 2015 and 2017 with rents at $11.40 per square foot. That's happening in an environment when we are signing leases at $13 to $14 per square foot; there's a built-in oppor- At Naples Plaza in Naples, Florida, Brixmor razed a 50-year-old Publix store (left) and replaced it with a new prototype store (right). That property saw an estimated $24 million in incremental sales and drove interest in the property from other tenants. Preston Ridge in Frisco, Texas, is a 780,000-square-foot shopping center that Brixmor owns. It was owned by CenterAmerica Property Trust, which was acquired by Brixmor's predecessor.

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