Good day, and welcome to the Brixmor Property Group First Quarter 2014 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Stacy Slater, Senior VP of Investor Relations. Please go ahead.

Thank you, operator, and thank you, all, for joining Brixmor's first quarter teleconference. With me on the call today are Michael Carroll, Chief Executive Officer; and Michael Pappagallo, President and Chief Financial Officer; as well as other key executives, who will be available for Q&A. Before we begin, I would like to remind everyone that our remarks and responses to your questions today may contain forward-looking statements that are based on current expectations of management and involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated, including those identified in the Risk Factors section of our annual report on Form 10-K, as such factors may be updated from time to time in our filings with the SEC, which are available on our website. We assume no obligation to update any forward-looking statements. In today's remarks, we will refer to certain non-GAAP financial measures, reconciliations of these non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings release and supplemental disclosure on the Investor Relations portion of our website. At this time, it's my pleasure to introduce Mike Carroll.

Thank you, Stacy, and good afternoon, everyone. During the IPO process and as a public company this past 6 months, we have emphasized a simple and clear-cut strategy, to focus on our operating capabilities and the embedded potential of our portfolio to deliver sustainable organic growth. At the same time, we're working on our balance sheet to extend our debt maturities and increase the size of our unencumbered pool in route to investment-grade rating. Mike will further discuss these efforts in his comments. Consistent with our guidance and expectations, we reported strong same property NOI growth of 3.8% during the quarter, driven predominantly by rent growth. The transparency and simplicity of our business is best exemplified by the fact that our same property NOI translates to cash EBITDA growth of over 4%. Our disclosure continues to set the standard for the industry and provide investors a clear tool to understand our performance. Our ABR per square foot also continued its positive trajectory increasing from -- to over $12 per square foot from $11.93 per square foot. This is the largest quarterly increase in ABR per square foot on record for the company. This growth has been achieved by the efforts of our leasing team and not through the sale of properties with low ABR's. Driving the increase is solid leasing spreads with this being the third consecutive quarter with blended spreads of 11% or higher. Strong demand from our retailers is continuing to push rent levels within our portfolio. Our new lease ABR per square foot of $15.18 is 26% above in-place rents and the highest rent level achieved in a quarter for the portfolio. When you compare these results to our expiry schedule between now and 2016 at $11.15 per square foot, it highlights this extremely compelling opportunity. This…

Thanks, Mike. We reported FFO per diluted share of $0.44, which reflects a strong 10% increase from the comparable first quarter of 2013. The respective period financial results are presented on a pro forma basis for the IPO transaction, which simply means that for 2013 we present results as if the IPO had occurred at beginning of that period with the attended impacts on portfolio composition, debt, interest expense and share count. The current 2014 numbers only have modest adjustments to present the IPO-pool only. Luckily for everyone, going forward, the 2014 quarters will be completely clean. As we mentioned in our press release, the first quarter results include charges related to the early extinguishment of debt that reduce the reported FFO per share by a little under $0.01. These charges represent a noncash adjustment to write off the original issuance cost when the debt was originated years ago, as well as the remaining accounting mark-to-market. Adjusting for this item, the increase in FFO per share versus last year was closer to $0.05. As the pro forma presentation makes for an apples-to-apples comparison, the uplift in FFO was really driven by NOI growth, which contributed $0.02 and additional $0.02 from interest savings and $0.01 from the reduction in overhead cost. Similar to the fourth quarter of 2013, our same property NOI growth was achieved primarily by rental growth and increased recovery of expenses due to higher occupancy levels over the past year. Rental growth accounts for 3/4 of the total NOI gains and, again, the product of a broad improvement across the portfolio, not redevelopment activity, which had a minimal 10-basis-point impact. Our NOI growth was noteworthy, given our comp was 4% in the first quarter of 2013. Like almost all REITs that have reported results to date, our operating…

[Operator Instructions] Our first question comes from Craig Schmidt of Bank of America.

I was wondering in terms of looking at the small shop occupancy for the remainder of the year, what type of tenants are you seeing most of the activity? And how would you categorize them from a national, regional and local kind of breakout?

Craig, this is Tim. What we're seeing is that capital still not readily available for the local mom and pop and we focused our efforts on the national and regional retailers, as well as franchisers with a positive credit. Past performance as indication of future results, 66% of ABR from shop leasing in the trailing 12 months came from national, regional retailers. And we see -- we've done multiple deals with the likes of Dickey's Barbecue, Great Clips, Panera Bread, Pet Supplies Plus, Rue21, Sally Beauty, Kay Jewelers, Jersey Mike's, et cetera.

And would you say, relative to maybe 6 months ago, are you getting more activity on the small shop leasing, the same amount that you expected or less?

I would say it's increasing. Craig, I think, this is what we've talked about a lot is really getting the anchor piece in our shopping centers solidified and getting those anchors in and open has been a really strong catalyst to the business and we're seeing that follow-through where we've had anchors open, the momentum has been just tremendous where we picked up 500 basis points on our shop program in those centers. And so with that activity continues to occur with major openings and those quality anchors season -- they just continue to be a really solid draw for us to be able to drive that small shop program.

Our next question is from Christy McElroy with Citi.

I know you came public with a specific portfolio and you haven't really expressed much interest in making any of the big types of changes that we've seen from many of your peers, but it seems like we've seen some real strengthening in private market pricing and demand over the last 6 months. Mike, you mentioned in your opening remarks, possible disposition activity. Can you give us a sense for the volume of sales to expect over the next couple of years and has the strength in the market had any impact on your view around dispositions at all?

We acknowledge that the market is strong for assets today, but I think the piece that we see from an operating standpoint is we're seeing very strong results in our -- in just our operating metrics and properties that others would think are in markets they don't want to be. And lot of it is just driven by -- from our point of view, how you define quality, and for us it's a strong grocery anchor in a dominant location and in a good market. And when we look at our portfolio, we look at non-top 100 assets, or non-top 100 markets rather. We're seeing and have been seeing same property growth that has been in the high 4% range, and so over 4.5% now all through 2012, all through 2013, so far year-to-date in 2014. And so we're continuing to drive strong operating metrics there, strong spread and strong leasing momentum there. And it really is tied into those strong grocery anchors. So as long as we continue to see that growth, we really don't see a reason to be out selling those assets. And when I look -- you can paint this with the brush that the market paints it with, but I look at our markets that are outside of -- where others wouldn't want to be. Places like Naples, Florida, and Vallejo, California in the Bay Area, basically the entire State of Connecticut is non-top 50 market. Many of the college markets, Ann Arbor, Boulder, et cetera, doing very well in those markets and they have intrinsic barriers to entry that are very appealing to us and are helping us in our catalyst to the growth. So we don't see a real push to have to do anything there. And so that's why we hesitate to give you a disposition number because until we see growth to date, we're not going to be a seller.

And given the momentum that you've seen in leasing, would you expect that your blended spreads could continue to trend in the sort of 10% to 11% range through the remainder of the year? Or should we expect any change in terms of the mix space rolling?

Yes, we think still -- our guidance is 8% to 10%, I think we're still comfortable with that. I think we're all a little bit in uncharted territory because we've never been in a period -- a prolonged period of no new supply like we're in now. And so, I think there is an opportunity to continue to supry [ph] to the upside. But for now, we're still feel like that 8% to 10% is a good number.

And how do you -- TI's trends and TI's play into that? It seems like on a per-square-foot basis they've been trending higher over the last few quarters?

Christy, this is Mike P. Yes, that is true, and I think that it underscores also that the average higher rents that go along with it. So that on a net effect of rent basis actually, we're showing a positive momentum, we're showing increases. So TI's always have been, always will be part of the landscape over the longer period of time, as more and more of the portion of deals become small ticket or small space leasing and probably less allocable TI dollar. But that will be offset probably by increased opportunities of anchor space and expansions and redevelopments. So it will tend to equal out, from our perspective, as we look forward the next couple of year expect a similar level of TI spending that we've been recording and hopefully, what goes along with that is increase average base rents that we will be achieving.

Our next question comes from Todd Thomas of KeyBanc Capital Markets.

This is Grant Keeney on for Todd. Just touching on the leasing momentum, the spread between the percent leased and the percent build, it looks like its remained fairly constant over the last few quarters. This quarter over last year had about 10% increase in the ABR from leases signed, but not yet commenced to the $24 million. I'm just wondering if you could provide some color on the expected timing of that rent coming online and how we think about the split trending as you continue to lease-up the portfolio.

Look, we think are going to continue to be in this range where we are on a lease versus build spread. We still feel like we have occupancy pickup to do here, and we also continue to have some of this, we're fine-tuning our anchor space throughout the portfolio. So I think, we're going to be at that level. I'm going to say through this year and well in the next year and then I'm not good enough to see beyond next year, but that would be my view there. And then, as we look at that space that's coming on, I think, just as a normal cycle, you would see the majority of that space come on the later half of the year.

Okay, that's helpful. And then, just want to touch on your open remarks you mentioned expediting the legal process to accelerate the timing and you mentioned the example of I think you said Pet Supplies, I was just curious if this initiative something unique to accompany your size of a national platform, and I guess, maybe how much more benefit do you see coming from this process?

I think so, I think our national accounts team and -- is unique to the business. And I think it's part of what differentiate how we operate with both a regional team and then a corporate team focused on those larger national accounts. And what it really allows us to do is have high-level relationships with those firms where because of the size and the scale of our platform, they know they're going to do multiple deals with us. And so it behooves us to work together with them to figure out how to stream line their process. And so Pet Supplies Plus is a great example, we have similar examples with Walmart and Kroger and others, where we have identified counterparts for -- on both sides of the legal equation. So that there's no learning curve, they know each other, they have a basis of form and a starting point, and it really allows things to get done faster. And so the biggest thing we need to do in our business and -- is eliminate downtime, we can never collect yesterday's rent, that is what we're trying to do wherever we can is eliminate downtime. And that is -- if I step back in a more macro basis where we see store closings and the opportunities to recapture space, we are fighting against downtime and trying to eliminate downtime, because we are marking to market substantially higher but the lumpiness comes from downtime that gets -- that's from when you take the space back from one tenant, put the next tenant in. So we're very focused on trying to do what we can do to eliminate downtime as the enemy.

And then that also to that point, it's also probably the #1 item that drags to, in the short-term, the same-store NOI metric. So to Mike's point, to the extent that we can reduce downtime, reduce cycle time and getting leases signed and tenants open, that will certainly the help short-term same-store NOI metrics.

Our next question is from Jeff Donnelly of Wells Fargo.

I guess, Mike Carroll, just building on the on a question that was earlier, many of your peers are selling into the market strengths, I think Christy had mentioned pairing down their portfolios to squeeze into sort of the same list of core markets, whereas Brixmor is one of the few that's kind of remained, I guess, with a more broad market focus. I guess, my first question is are you seeing any interesting acquisition opportunities coming your way from that slimming down process? And second, if we fast forward a few years, how do you think about your strategy and competitive positioning versus peers? Do you think your focus will ultimately shift towards that same slimming down market process or do you think you'll maintain more of a broad market focus?

Well, I think, Jeff, as I kind of started in my earlier comments where others are selling into that strengths, we're growing into that strength, if you will, because we've really seen good momentum in those markets. I would say, from an acquisition point of view, as we think about constructing this company in the portfolio that came public, some of that was done from that where we acquire things that some peers have sold. I think now that were public, it's much harder for us to buy from peers to be quite honest with you. And I wouldn't expect to see that happen going forward, but as far as what we see in the market, I mean I'll turn to Dean [ph] here, we're still not seeing a tremendous amount of activity for what we're looking for. And so we are looking for high-quality grocery anchored centers across the board landscape, but we also wanted to see growth. I think a lot of what we see is very maxed out, if you will, or things that may be were build at the peak in the last cycle and we still -- we see downside in the rents, but.

Well, Mike, I think that's right. And I would certainly and that we are tracking a lot of transactions, we are bidding selectively on properties and we're seeing a great deal of cap rate compression with the type of assets that we want that are already in our portfolio with great grocery sales and grocer anchored in. And we're also seeing even cap rates coming in on the secondary markets as well. So we are following that and we're looking for very, very selective opportunities.

But Jeff I think this is -- the final part of your question, we are thinking and following our original story. We are a broad national player. We believe in the grocery anchored space. We think the market doesn't get it on how to define grocer quality. I look at our grocer sales against peers who have narrowed focus to smaller markets, and our sales are basically on par with those. And so if I look at that, sales are what really drive quality in the grocer business and to the extent that we can acquire good quality grocers. And I think the nice part about the markets outside of the top 20 is the grocery business is consolidated very nicely where it's really Kroger or Publix who are main player and Walmart in most markets. And so you really drive dominant sales through these grocers where the markets have consolidated. That's why the #1 and #2 market positioning is so important in our portfolio.

That's helpful. As a follow-up, sticking with you, I guess, Office Depot and Staples are among your top 20 tenants, we can see the absolute exposure you guys have. Can you maybe give a little bit color around maybe the risk that you see of store closures or re-tenanting options there to the extent you do face closures?

I'll let Tim take that.

Yes. Let’s take Office Depot first, listen, they haven't been extremely forthcoming with information. That said, we're really not concerned. I mean, we've got 44 leases, average ABR of about $10 a foot. We see this is an opportunity to mark these spaces to market as we've been doing thus far on a selective basis by going forward. We see probably 8 of the locations that are overlaps potentially. But again, we view this as an opportunity to improve the merchandise mix in re-lease space at accretive basis. Same general tone with Staples whereby they had a downsizing program in place. They hinted about some store closures, but to date, we haven't seen anything in our portfolio. There was a list that came out, none of those stores that were on that list are in our portfolio, and we've continued to monitor that business on day-to-day basis through national accounts.

And just one last question, I can't leave Mike Pappagallo out. On Page 11 of your supplement, there's about $1.3 million of other expense in the quarter, and maybe I missed it in your remarks, what flowed through that line and why is it the most -- such a big move up?

As a general matter, what's in that caption primarily state and local franchise taxes. This quarter, there was a one-time item related to some legal costs, related to a property sale quite a few years ago, so don't expect the repeat of that.

Our next question is from Jason White of Green Street Advisors.

Just a quick question on your new versus renewal decision-making process. One point that your TI downtime is that overcome by the additional rent? I'm looking at your renewal spreads for the first quarter were about 10% and new leases were about 21%, so where do you need that spread to be to make the decision to go with the new lease and incur that downtime and additional TI cost?

Yes, I see the economics are not always the only decision, a lot of times this is a merchandising play as well. But I think that mid-20s is where you really start to think long and hard about keeping -- certainly with not the right tenant and you can be -- at 20%, we're going do that all day long. And then it really to the capital commitment with that. But I think that mid-20s number is probably the appropriate place where we look.

Okay. And do you see the renewals, are you thinking I mean they've obviously trended up over the last 4 quarters, you see those continuing to trend north with the strengths in the market?

Again, I'd say, yes, and kind of preference by some we're still in pretty tough retail sales environment. But I do think the transformation of our portfolio with so many anchor openings that have happened over the last couple of years, good productive sales coming from that, any extra foot traffic and productivity at the centers is allowing us a little bit of a tailwind to be able to drive strong renewal rates. So I think we're going to continue to trend, but my caution on that is we still have soft retail sales across the board.

Okay, and then final question on just maybe your disclosure here, I see that you say comparable only on the spread and we don't breakout what's comparable and what's noncomparable, how -- is there a way to tell that here for disclosure?

Not sure. I'm not sure of your question.

On your supplemental, your new leasing. Most of your peers would breakout on a comparable and noncomparable space basis and you guys just have one bucket that lists all of your new leases, is there way to tell which of those are factored into your...

There's a comparable column there.

Yes, I mean in terms of your number of leases that went into that comparable space versus that may have been excluded.

Yes, as an example for the new leases signed for the quarter ended March, of the 202 leases, 69 of those were comparable, okay. The total rents, ABR on those new leases was a little over $15 -- $15.18, the comparable component that had a 21% increase on the new rent level there was a little over $16. You don't see that item on the disclosure, but we do disclose both the number as well as the percentage increase.

The next question is from Mike Mueller of JPMorgan.

Just want to go back to asset sales, because at the beginning of your comments you mentioned we should expect some normal asset sales next year, and then, in response to Christy's question, you basically defended why you don't have to sell anything. So I mean, what should we expect next year?

I think you should expect us to be a portfolio manager, Mike. And as we see growth flattening out, you would expect us to sell assets that we see lower growth prospects with going forward. I guess, what I was trying to say in the earlier comments is -- which was broad -- at least my interpretation of it was more at a market orientation. We're still seeing strong growth across the markets we operate. And while we do that, we won't be big sellers. But what I'm trying to communicate to the investors and the analysts here is that as times continues to go and as we continue to harvest these NOI gains, when we see things flattening out, you'll see us be a seller and manage our way out of those assets and recycle capital. And as I look today, I would just expect you to see that as we continue to have this year go through and re-harvest these NOI gains that next year would be a year that we would start to see the potential to be selling some things.

Mike, one other point I would make, as we think about financial plan as we go forward, we're still assuming a net 0 activity going forward, so to the extent we harvest, sell certain assets, our intention is to plow it back, obviously, use the funds for both redevelopment and the existing opportunities, but also potentially some acquisition. But at least take that and recognize that, we're not going to have a -- either a major disposition or major acquisition program as we sit here and looking out into '15.

Asset-by-asset, driven by growth.

Our next question is from Ki Bin Kim of SunTrust.

If you go back to your comments about small shop occupancy, and what you expect for that group of space, you've also talked about as you move in your anchors, small shop tenants move raise up on small basis points, but if you build it up piece by piece and look at it portfolio level, what should we -- what do you guys expect as a normalize level once you have everything done in your portfolio of small shop occupancy?

The way....

Compare to that -- compared to the 80% today?

Yes, we've thought about it at least through the 2016 timeframe in terms of our projections and estimates. We estimate that the small shop occupancy will be somewhere in the 88-plus percent level surrounding -- surrounded by an anchor occupancy of probably in the 97-plus percent level. That should pencil out to somewhere close to a 95% occupancy for portfolio wide, which I think is a fair representation of both stabilized occupancy for a primarily grocery anchor shopping center. Plenty of things can happen in the macro environment through that timeframe, but on a current-state basis with the dynamics, the macro environment of supply and demand, I think that's where we are headed.

Okay, that helpful. And then second question, in your press release and some of your opening commentary, you mentioned that $15 new ABR rent per square foot, I was just curious given that -- is that the level of rent that you're expecting to sign maybe in 2014, '15, overall? Is that a good number or is there a mix issue why that was $15?

Well, it's certainly -- we did a lot small shop leasings this quarter. And so this is a second quarter that we've been over $15. The market's at least on a rental basis continue to get better. Our centers continued to be more appealing than we can drive higher rents. And so I think, directionally, we're higher if we look at 2013 new leases signed, we're $13.69 and we're just over $14 on a trailing 12 basis right now. So I think the message I will have, Ki, is we're just generally, it's directionally higher, I really don't want to give guidance on a number, per se, today because if there is a little bit of a mix issue when we are working on some larger anchored transactions, which will have an influence on a weighted average basis. But I think the real key point is we have a substantially below market portfolio. It is structurally different than our peers because of the age of the portfolio and the constraints that it had on it the past, and we are invariably taking those rents higher.

Our next question is from Vincent Chao of Deutsche Bank.

Just wanted to stick with the occupancy discussion there, the 95%, just given that there is such a little amount of supply here coming on right now. Is it possible that 95%, just from a cyclical perspective, could go higher than that? And then, on the foot side of that question, I know development is relatively contained but are there any markets that you're in where you're starting to see some signs of increased supply?

I'll take the first part. Then -- and I would say, don't expect it. And I think part of that is because there's always going to be the normal cycle of retailer store closings. And as Mike had pointed out in his remarks, occupancy will be bumping and there will be more than a few occasions where we will openly accept vacancy to drive a better product, a better rent over time. So I just think the dynamics of a portfolio and every community shopping center portfolio is such that you might get higher but I really wouldn't estimate that we would or should, notwithstanding the macro environment.

And then on the supply piece, really if you -- if we look at the landscape today, we just don't see any true drivers in place for it. Really, when we look at all of the traditional tenants who drove development, they're generally on the side lines whether it be the large format department stores, the -- generally, the traditional grocers are not opening, Net new stores are doing a lot of on-site replacement and expansion and renovation and what everybody's generally doing new stores. So it's very limited what we see, I mean, I'll give an example, as Publix is entering the Charlotte market and the -- and they are doing store there. They're entering the Raleigh market, they're doing stores there and there are new centers. But it takes something like that, it takes somebody presiding that they're going to a new market. That's more than a mid-box retailer, somebody who has a large format, who's willing to sign a 20-year lease, that's financeable to really drive development. So very spotty, but as far as couple of markets like that. But in general, almost nothing and I'll get back to the staff that we had after the first quarter where it was less than 650,000 square feet of new shopping center space was delivered in the first quarter, say that again, 650,000 square feet, so that's 1 or 2 property, so it's very limited.

Our next question comes from Nathan Isbee with Stifel.

Mike, just going back to your comments on the national footprint and the quality of this underappreciated markets. I think if you look at what some of your peers are selling in this sector, it's not so much quality at this point, it's -- a lot of it is geographic concentration, which helps from leasing and asset management. I was just curious, how would you address that side of the equation, that even if it is a higher quality, it's clearly more efficient to own a more geographically concentrated portfolio?

Look, I don't think we have anything substantial on a G&A basis. I mean, our properties are not the type of properties that have someone at the properties, right? So they're not there on a daily basis, that's really not driving any material cost to manage couple of properties in a market. I think if you look at our regional structure, it really is awfully efficient, I think, our G&A load as it relates to our peers, is awfully efficient. So -- running this company on a -- on the basis that we run it, which is effectively decentralized with the regional teams, it really takes a lot of that inefficiency off the table.

So I mean have you ever looked at it from taking some of your more concentrated markets relative to some of your more dispersed assets and done a study in terms of cost and leasing efficiency, et cetera?

Well, I think is as we have looked at it. And again, we just don't see it. Like we cover all the markets in Texas from our Houston and Dallas office. If I had -- if I didn't have the H-E-B-anchored property at Odessa, my savings on that would be minimal, it would be minimal. And the upside, I you would lose, in my view, would be a lot more than that. So look, do we want be in every place that we are forever? No. But we want to be there to be able to harvest the growth that we see, that we hadn't been to capitalize in the past? Yes. So I think as we move forward, you'll see some rationalization around some of those concepts, but it will be more of a growth in a market question do want to be in that market, because we think we have the efficiencies pretty well covered.

Our next question comes from Ryan Peterson with Sandler O'Neill.

Yes, sorry my question was actually already answered.

[Operator Instructions] There appears to be no further questions at this time. So I'd like to turn the conference back over to management for any closing remarks.

Thank you. We appreciate everybody's time this afternoon, and I know we have meetings scheduled with several of you at either ICSE or NAREIT, and we look forward to seeing you then. Thanks again.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.