BRIXMOR PROPERTY GROUP INC. M&A announcement

Thank you, operator, and thank you all for joining Brixmor's Transaction Overview Conference Call. With me on the call today are Brian Finnegan, CEO and President, Steven Gallagher, Chief Financial Officer, and Mark Horgan, Executive Vice President and Chief Investment Officer. Before we begin, let me remind everyone that some of our comments today, including our comments regarding the expected benefits of the transaction, 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 in our transaction press release. An actual future result 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. 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 re-queue. Please note that a presentation with additional details related to this transaction has also been posted to the investor relations pages of our website. At this time, it's my pleasure to introduce Brian Finnegan.

Thank you, Stacy. Good morning, everyone, and thank you for joining us on short notice. We're excited to announce a transaction that directly aligns with our strategy and creates a compelling opportunity to generate long-term shareholder value through the same leasing, redevelopment, and operating playbook that has driven Brixmor's outperformance over the last decade. Before I walk through the strategic rationale, let me start with the transaction structure. Brixmor and Everview Partners have entered into definitive agreements to acquire Slate Grocery REIT, a Canadian-listed owner of U.S. grocery-anchored shopping centers, in a transaction valued at $2.34 billion. Brixmor will acquire 23 grocery-anchored shopping centers totaling approximately 3 million square feet, or $636 million. A newly formed joint venture between Brixmor and affiliates of Everview Partners will acquire the remaining 92 assets, totaling approximately 12 million square feet for $1.71 billion.

Brixmor will own 20% of the joint venture, and Everview will own 80%. Brixmor will serve as asset manager, property manager, and leasing representative for the venture, leveraging our platform to generate recurring income. We will also make $174 million preferred equity investment in the joint venture that will generate a 9% dividend. Everview is the right partner for this transaction. They share our conviction in grocery-anchored, open-air retail, bring substantial real asset investment experience, and recognize the value of Brixmor's operating platform. The structure allows us to pursue a strategic and accretive opportunity while remaining disciplined in our capital deployment. It also creates a potential pipeline of future acquisition opportunities for Brixmor.

The overall transaction reflects a low 7% cap rate, which we believe represents an attractive entry point given the quality of the real estate, current market pricing for grocery-anchored, open-air retail, and the embedded growth opportunities across the portfolio. The transaction has been approved by Brixmor's board of directors and Slate's board of trustees and is expected to close in the first quarter of 2027, subject to Slate unit holder approval and other customary closing conditions. With the mechanics covered, let me turn to why this transaction is compelling for Brixmor and our shareholders. Over the last decade, we have built a highly capable operating platform, deep retailer relationships, and proven redevelopment capabilities. This transaction allows us to put those strengths to work at scale.

It expands our investment in grocery-anchored, open-air retail as highly complementary assets in markets where we already have a significant presence and operating expertise, enhances our visible multiyear growth profile, and does so through a capital-efficient structure that is immediately accretive while preserving our balance sheet strength and financial flexibility. The opportunity also aligns directly with the acquisition framework we have communicated to investors. We evaluate every acquisition through the same lens, strategic fit, market fit, long-term NOI growth potential, and our ability to create value through leasing, redevelopment, remerchandising, and operational execution. This transaction checks every box. Let's turn to the real estate. The Brixmor acquired portfolio consists of 23 grocery-anchored shopping centers that are 96% leased and located entirely within our existing footprint.

The assets are concentrated in Florida, Georgia, and the Carolinas, markets where we have scale, deep operating knowledge, strong retailer relationships, and conviction in the long-term growth outlook. The portfolio is 100% grocery anchored and includes leading operators such as Publix, Harris Teeter, and Kroger. We know these operators exceptionally well and have partnered with them for many years to create value at our centers. Simply put, these assets are exactly the type of properties we have been adding to the portfolio. The joint venture portfolio adds another 92 centers and approximately 12 million square feet of real estate that is 94% grocery anchored. Approximately 70% of the portfolio overlaps with markets where we currently operate. We expect to leverage our national leasing platform, strong retailer relationships, and operating expertise to drive attractive long-term NOI growth across both portfolios, in line with Brixmor's long-term 4% growth expectation.

The value creation opportunities are visible today. We see meaningful occupancy upside, particularly in the small shop space, together with opportunities to improve merchandising and tenant mix by leveraging the full breadth of our retailer relationships. We also see substantial mark-to-market potential and a long runway for future rent growth, with in-place rents across both portfolios averaging over 30% below Brixmor's current portfolio and several legacy anchor leases with rents below $9 per square foot. The Slate portfolio also generated mid-teens renewal growth over the last year, demonstrating the embedded opportunity we intend to capture. We have identified approximately $100 million of redevelopment and outparcel development opportunities within the Brixmor acquired portfolio at yields consistent with our existing reinvestment pipeline, including multiple Publix redevelopment projects in high-growth Southeast markets. Redevelopment is a core Brixmor capability.

We know how to work with our grocer partners, execute at scale, and deliver attractive risk-adjusted returns. This transaction adds another meaningful leg to our reinvestment pipeline. Beyond leasing and redevelopment, we see additional upside through contractual rent growth, improved expense recoveries, specialty income, and disciplined property operations. Individually, these initiatives are straightforward. Across a portfolio this size, we expect them to be meaningful contributors to property-level cash flow. Simply put, these are good assets today in growing markets, and we believe our platform can make them better. Turning to capital allocation, our ability to pursue an opportunity of this scale reflects the financial discipline, liquidity, and balance sheet strength we have built over time. Those efforts have created the flexibility to act when a compelling opportunity emerges, which is exactly what we are doing here.

We have deliberately sized our investment at approximately $1 billion to limit capital markets dependency and execution risk. With $1 billion of interim financing commitments in place and $1.5 billion of liquidity at the end of the second quarter, we have multiple funding levers and the flexibility to deploy capital in a disciplined and opportunistic manner. Our funding plan starts with approximately $300 million of cash on hand, including $115 million of unsettled forward ATM proceeds. We expect to fund approximately $500 million through debt, including the assumption of approximately $95 million of existing mortgages, with flexibility to access either the unsecured bond market or a bank term loan. Normal capital recycling activity is expected to fund the balance. The ultimate funding mix will depend on relative pricing and market conditions, and importantly, is not reliant on issuing equity at current trading levels.

This is not a change to our capital recycling strategy. We will continue to selectively monetize assets where we believe we have maximized value. Demand for retail real estate remains strong. For example, over the past two weeks, we have closed approximately $40 million of asset sales at attractive cap rates and have an additional $100 million under LOI or contract. The transaction is immediately accretive to Nareit FFO per share and consistent with our commitment to financial discipline. We are also committed to maintaining a strong investment-grade balance sheet with leverage in 2027 expected to be consistent with recent levels while preserving meaningful capacity for future investment opportunities. In closing, this transaction enhances our growth profile through a capital-efficient structure while remaining consistent with our disciplined capital allocation.

It adds strategically aligned assets at scale in markets where we have conviction, creates visible multi-year growth opportunities, and generates incremental recurring income, all while preserving balance sheet strength and financial flexibility. The opportunity is significant, the value creation levers are clear, and they are the same levers our team has successfully executed on for more than a decade. I would also like to recognize the Everview team. Billy Rahm and I have known each other for years, and I have tremendous respect for him and the organization he has built. We are excited to partner with Everview and look forward to applying our respective strengths to create meaningful value over time. I would also like to thank the special committee of the board of trustees of Slate Grocery REIT and its advisors for their professionalism, engagement, and partnership throughout this process.

We appreciate their constructive approach in reaching this agreement. Finally, I want to thank our advisors and, of course, the entire Brixmor team. This transaction reflects the strength of the platform you have built and the discipline, collaboration, and hard work you bring to the business every day. I am grateful for the tremendous effort that brought us to this point, and I know this team is ready to execute on the opportunity ahead. Thank you again for joining us today. We are excited about the transaction, confident in our ability to execute, and focused on delivering value for shareholders both immediately and over time. With that, operator, please open the line for questions.