Brixmor Property Group (NYSE: BRX) is a retail real estate investment trust (REIT) that has one of the largest portfolios of open-air shopping centers in the United States, with 393 properties located in major markets across the country. By shopping centers, I don’t mean the malls that everyone is racing to find ways to repurpose. Brixmor primarily invests in grocery-anchored shopping centers with retailers that serve the daily needs of the people in their communities.
Brixmor’s properties are anchored by tenants like Kroger (NYSE: KR), Albertsons (NYSE: ACI), TJX Companies (NYSE: TJX), Dollar Tree (NASDAQ: DLTR), and other major non-discretionary retailers.
How the pandemic affected Brixmor Property Group
Brixmor’s revenue took a painful hit in the second quarter of 2020 as it began deferring rent for some of its hardest hit tenants. However, the company also continued to sign new leases and continuously improved rent collections as the year went on.
Since the start of the pandemic, the company signed 1.7 million square feet worth of new leases in 2020 and a total of 2.3 million square feet for the full year. While this isn’t as much as the 3.5 million square feet leased in 2019, I would still say it’s impressive considering the state of the market during the majority of 2020. I think it’s a strong testament to the strength of Brixmor's portfolio.
The company finished the year collecting 92.7% of its base rent for the fourth quarter, leaving its same property NOI down only about 5.4% in 2020 compared to 2019.
Brixmor’s financial position
Brixmor significantly improved its cash position in 2020, bringing its total available liquidity to $1.6 billion. The company also has some additional breathing room with no debt maturities in 2021 and only $250 million maturing in 2022.
This financial position is going to provide the company with a lot of flexibility over the next couple of years, which will allow it to focus on strengthening its portfolio and take advantage of acquisition opportunities. It also leaves it prepared for any further disruptions from the COVID-19 pandemic.
The company is also looking at $30 million of new annual base rent expected to commence by the end of the year, which should help strengthen its position further.
The future of retail
There’s no question that the retail real estate landscape is changing, and the COVID-19 pandemic has accelerated the rate at which it’s happening. More people have been turning to online shopping, and the variety of things people are buying online has increased. However, this doesn’t eliminate the need for brick-and-mortar stores.
For one, people will continue to need a physical location to purchase things as they’re needed. Fortunately for Brixmor, grocery stores are one of these types of locations.
Second, online shopping doesn’t only include buying items that are delivered to a customer’s door from a warehouse. Many major retailers have implemented curbside pickup options, where customers can purchase something online and pick it up the same day. Brixmor’s shopping centers are designed in a way that makes this easy for their tenants to execute. While free two-day shipping is great, it still doesn’t compare to same-day.
Besides shopping, there will continue to be a need for restaurants. While the world has seen an unprecedented number of restaurant closures in the past year, Brixmor is still collecting over 80% of rent from its restaurant tenants.
While nobody could have anticipated the amount of change we've seen over the past year in regard to how retail business is conducted, these changes are something Brixmor has been anticipating and planning for over the course of the past several years. The company has been proactively decreasing its exposure to higher-risk tenants while repositioning its portfolio to better suit the needs of its tenants’ customers.
The Millionacres bottom line
While Brixmor Property Group took a significant hit in 2020 along with retail landlords across the globe, the company's planning over the past several years has left it in a strong position to make a fast recovery and continue growing. I expect to see this REIT hit new highs in three years in terms of the size of its portfolio, revenue, and dividends.