BRIXMOR PROPERTY GROUP INC. Q2 2026 Earnings Call

Greetings, welcome to Brixmor Property Group second quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Stacy Slater, EVP of IR. Thank you. You may begin.

Thank you, operator, thank you all for joining Brixmor's second quarter conference call. With me on the call today are Brian Finnegan, CEO and President, and Steven Gallagher, Chief Financial Officer. Mark Horgan, Executive Vice President and Chief Investment Officer, will also be available for Q&A. Before we begin, let me remind everyone that some of our comments today 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. Actual future results 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. At this time, it's my pleasure to introduce Brian Finnegan.

Thank you, Stacy, good morning, everyone. Before turning to our results, I want to acknowledge the passing of Jim Taylor. Jim's impact on Brixmor is hard to overstate. He cared deeply about this company, the people who make it special, and the communities we serve. He brought humility, integrity, and purpose to everything he did, and those values remain deeply embedded in our culture today. For me personally, Jim was not only a great leader but a mentor and a friend. We are grateful for the foundation he helped build here at Brixmor, the tremendous outpouring of support from across the industry over the past month, and our thoughts remain with him and his family. He will be deeply missed. Turning to the results, I am pleased to report another strong quarter of execution by the Brixmor team.

We delivered 5.8% same-property NOI growth, $0.58 per share of FFO, record small shop occupancy, and a record signed but not yet commenced pipeline. These results again demonstrate the strength of our operating platform and the visibility of growth embedded in the portfolio. The fundamentals for high-quality, open-air, grocery-anchored retail remain strong. Visits to our centers continue to grow. Retailers continue to prioritize stores as the hub of customer engagement, fulfillment, and distribution, and new supply remains limited. Against that backdrop, our business continues to benefit from strong tenant demand, a low rent basis, and a portfolio that has been materially improved over the last several years. Leasing activity remained broad-based and highly productive. We executed 1.4 million sq ft of new and renewal leases at a blended cash spread of 19%, including new lease spreads of 31% and renewal spreads of 16%.

New lease spreads have now remained above 30% for three years, while renewal spreads in the mid-teens continue to reflect the lack of available space and the value retailers place in staying in our centers. That value is also reflected in our intrinsic lease terms, as this quarter our team achieved record-embedded rent growth of 2.8% across new and renewal leases. The quality of the tenants we continue to attract is every bit as important as the rent growth itself. During the quarter, we continued to upgrade our merchandising with retailers such as Sierra, HomeSense, Barnes & Noble, Ross Dress for Less, and Trader Joe's, while also driving small shop occupancy to a new record through strong demand from restaurant, service, health and wellness, and other growing categories.

Total leased occupancy ended the quarter at 94.8%, down 30 basis points sequentially as expected, due to proactive move-outs at redevelopment assets and the recaptures from Painted Tree and Wren Kitchens. Importantly, we are already at lease on six of the eight recaptured Wren and Painted Tree boxes at spreads of over 40%. In addition, the record small shop occupancy level we achieved this quarter is a clear reflection of the improved quality of the portfolio and the follow-on demand created by our reinvestment activity. Our signed but not yet commenced pipeline reached a record $71 million of annualized base rent. That pipeline remains one of the clearest bridges from the leasing activity we are generating today to future NOI growth and gives us strong visibility into the next phase of earnings growth as leases commence over time.

Importantly, a significant portion of that pipeline commences in 2027 and beyond, providing visibility well beyond the current year. Reinvestment remains one of the best uses of capital in our business, and the scale of our pipeline stands out across the open-air sector. We ended the quarter with nearly $350 million of active reinvestments at an expected 10% incremental yield. Beyond that, our future pipeline exceeds $700 million across the portfolio. This pipeline continues to differentiate Brixmor, giving us a long runway of high return internal growth in assets we already own and control. We added eight new projects to the active pipeline during the quarter. These include Morris Hills in northern New Jersey, where we are advancing a large-scale redevelopment with a new specialty grocer.

South Towne Centre in Dayton, Ohio, where we are reconfiguring the center to accommodate HomeSense, Sierra, and Barnes & Noble, and Market Plaza in suburban Dallas, where our repositioning underutilized space to elevate an already highly productive Central Market anchored asset with Kirby Ice House and a more compelling merchandising mix. Each project reflects the same approach of optimizing our tenancy to create greater long-term value rather than simply filling space. We also added 4 new out parcel developments during the quarter, bringing the total added in the first half of the year to a record 10 projects at a 16% average incremental return. We continue to build momentum with the program and see significant runway for future densification outside of redevelopments moving forward. On the transaction front, we completed 4 strategic acquisitions during the quarter for $164 million.

These included Mayfair Shopping Center on Long Island, Jones Crossing in College Station, Texas, Vintage Marketplace in Houston, and Stanford Station in Panama City, Florida. These are high-quality, predominantly grocery-anchored assets in markets where we have a large presence and where our platform can create value through remerchandising, reinvestment, and operating execution. Mayfair was also an important milestone for Brixmor, as it marked the first time we used OP units as acquisition currency for a portion of the purchase price. That structure reflects the importance of relationships in sourcing and executing these types of transactions, particularly with private owners, and it gives us another tool as we pursue disciplined external growth. Both Mayfair and Jones Crossing were also immediately added to our future redevelopment pipeline, demonstrating Mark and his team's ability to find assets that fit our reinvestment strategy.

Looking ahead, we remain encouraged by the opportunities we are underwriting and expect to continue expanding our footprint through disciplined relationship-driven acquisitions. Given the strength of first half execution and the visibility we have from our leasing and reinvestment pipelines, we increased our 2026 expectations for both same property NOI growth and FFO, which Steve will discuss in more detail. The increased outlook reflects the durability of our operating platform, the continued strength of tenant demand, and the embedded growth we are creating across the portfolio. In closing, we are pleased with our first half execution and the momentum we are seeing across the business. Our leasing platform continues to deliver strong spreads and exceptional visibility into future growth. Our reinvestment pipeline continues to generate high return internal growth. Our acquisition activity is expanding the portfolio in markets where we can create value.

Our balance sheet remains positioned to support disciplined capital allocation. Most importantly, our team continues to demonstrate what Jim established with our first cultural tenet, that great real estate matters, but great people matter even more. I want to thank the Brixmor team for their dedication and resilience in what has been an emotional period for the company. With that, I'll turn the call over to Steve for a deeper review of our financial results and updated 2026 outlook. Steve? Thanks, Brian. We delivered another strong quarter with second quarter results continuing to demonstrate the strength of the operating environment, the embedded growth within our portfolio, and the visibility we have into future earnings.

Same property NOI increased 5.8%, driven by a 440 basis point contribution from base rent. In addition to base rent, performance was strong across virtually every component of NOI, reflecting favorable collections, strong expense recoveries, and continued improvement in the overall performance of our tenants and portfolio. Taken together, this quarter's results demonstrates that growth is not driven by a single factor, but rather by healthy underlying portfolio performance and the cumulative benefit of the leasing activity, improved escalations, and CAM provisions we've executed over the last several years.

While quarterly Nareit FFO of $0.58 benefited from the strong underlying property performance, results were partially offset by lower non-cash rental income resulting from straight-line reversals on the Wren and Painted Tree Boutiques bankruptcies. We expect non-cash rental income to return to our run rate for the remainder of the year. Turning to guidance, our increased expectation for same property NOI growth of 5%-5.75% and FFO guidance of $2.35-$2.37 per share reflects the continued strength of operations. The increase primarily reflects the improved expectations from revenues deemed uncollectible, which we now expect to be 60-85 basis points of total revenues, reflecting the strength of our tenant base. Leasing activity remains strong, rent spreads remain healthy, and our SNOC pipeline provides visibility into future earnings growth while delivering same property NOI over 5% this year.

From a balance sheet perspective, S&P revised our outlook to positive, reflecting the improvements to the balance sheet and portfolio resulting from our value add business plan. During the quarter, we repaid our June $600 million maturity and issued $400 million of 5.375% senior notes and settled a forward hedge at 3.99%, resulting in an effective yield on the new notes of approximately 5.22%. This transaction addressed our near-term maturity, extended duration, and preserved balance sheet flexibility. We have no material maturities until March 2027.

We ended the quarter with leverage of 5.3x on a quarter annualized basis and liquidity of $1.5 billion, including $115 million of unsettled forward ATM issuance. Overall, our second quarter results reflect strong operating performance, a record signed but not commenced pipeline, and a redevelopment pipeline that provides another source of future earnings growth. Combined with our balance sheet strength and liquidity, we remain well-positioned heading into the second half of the year and as we begin to look towards 2027. With that, I'll turn the call over to the operator for Q&A.

Thank you. At this time, we'll be conducting a question-and-answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you'd like to remove your question from the queue. As a reminder, we ask that you please limit to one question and re-queue if necessary. One moment please, while we poll for questions. Our first question comes from Michael Goldsmith with UBS. Your line is now live.

Good morning. Thanks a lot for taking my questions. Occupancy was down sequentially in the second quarter, and you had messaged that last quarter as a result of anticipated box recapture. Was the occupancy decline that actually happened in line with those expectations, or were there any incremental headwinds? As you look ahead, can you discuss the cadence of the occupancy recovery and maybe provide some color on the redevelopment releasing or other projects that are enabled by recapturing those boxes? Thanks. Good morning, Michael. Thanks for the question.

It was definitely in line with what we expected. As we touched on last quarter, we did have some tenants that we were going to recapture at some reinvestment assets, one that went into the reinvestment pipeline in the first quarter with a specialty grocer in Northern New Jersey, another large one that we took back in Orlando. Interestingly, it's as expected, despite the fact that we took back those additional boxes, and we've seen great activity, as I mentioned, on those with spreads of over 40% in income we expect to come online in 2027. Occupancy is not always linear. As we talked about, we do expect to get back on a trajectory of growth in the back half of the year. It was as expected in terms of what happened during the quarter.

Thank you very much. Good luck in the back half.

You got it. Thanks, Michael.

Our next question comes from Haendel St. Juste with Mizuho. Your line is now live.

Hey, guys. I guess first condolences on Jim. He was a great man and will be missed. My question, I guess it's somewhat similar to Michael's question just now. I wanted to get maybe a bigger sense of why the strong same-store NOI growth that you're seeing here isn't translating into better FFO growth in the updated guide. I think you mentioned straight lining in your remarks. Could the timing of dispositions or maybe some conservatism be playing a role? Maybe some added color on if there's anything else in the back half that you were not appreciating and some color on the cadence for same NOI and FFO would be helpful too. Thank you. I'll let Steve chime in here.

First, Haendel, thanks for the kind words on Jim. Obviously, we miss him a lot as well. I think, look, just in terms of the trajectory of our business, we raised our outlook this year despite the fact that we took back those boxes in the second quarter, really across all facets of NOI, whether it's our base rent growth, our recoveries, our specialty income, which continues to grow at records, and then the strong things that we're seeing from a tenant health perspective. So from an overall within same property NOI, we feel very confident about the growth trajectory there. Then Steve can give you a touch on just what some of the intricacies are between that and FFO.

Yeah. The move in same property NOI would have corresponded to that move in FFO. I think the disconnect was really just a result of about a $3 million charge in straight line associated with some of the boxes we took back in the quarter. I think importantly, we're equally as focused on making sure that top-line growth and all the tailwinds we have in the business continues to drop to the FFO growth that we've been delivering over the last couple of years.

Thank you. Thanks, Haendel. Our next question comes from Michael Griffin with Evercore.

Your line is now live.

Great. Thanks. I was wondering if you could give some color on the acquisitions in the quarter, either cap rates, IRRs that you're underwriting to, or redevelopment opportunity at these properties. Maybe Mark, if you could just talk more broadly about what the acquisition opportunity set looks like right now, given there is such a strong private bid for open-air retail these days.

I think Brian highlighted a lot of what we like about the assets in his opening remarks and what we like. Consistent with what Brian said, the assets that we acquired in this quarter are very consistent with the assets we've been acquiring over time, and that they're assets where we believe we can put our platform to work to drive value through rent mark-to-market densification and redevelopment. I would highlight that the deal in College Station did include significant outparcel development opportunities in front of an H-E-B that's really driving massive traffic. We're really excited about that one from a future growth perspective. Overall, I think the cap rate in the quarter blended to a low six, which did include effectively that land that's sitting there waiting for development in the near term. In terms of pipeline on the market, we do have an additional asset.

We're under hard contract on Southern California for about $50 million. The cap rate there will be higher than what I just said here in Q2. The pipeline beyond that continues to look quite strong. If you think about that competition that you're really referencing, I do agree it's out there. We're seeing more private capital seeking exposure to this space. Our pipeline of assets is really driven by relationship building. For example, the Opiana deal we did, that was driven by a relationship that we've been working on for eight years. The deal in College Station, we've been chasing that since 2018. A lot of the deals that we're looking to acquire in our asset side, we've actively been looking at acquiring for long-term and building that relationship.

To the extent you can get them off-market, or when they come to market, you're a preferred buyer. That's how we kind of think about our ability to transact. I would also say that a lot of capital that's coming into the space is more focused on core-like or more lower return opportunities that don't require our platform like us to drive value through redevelopment or densification. That really, I think, will help us continue to be a net acquirer to the extent we choose to be. I would also highlight, again, as we have in the past, our first dollar of investment is going to be the redevelopment pipeline. We really not require or leaning on acquisitions to drive value given our base business plan.

Great. Thanks so much. Thanks, Michael.

Our next question comes from Todd Thomas with KeyBanc Capital Markets. Your line is now live.

Yeah. Hi, thanks. Good morning. I wanted to ask about the reinvestment pipeline. It increased a bit this quarter to $350 million, roughly. Brian, you talked about some new projects, some activations, and I think some of the recaptures are driving that. How should we think about new starts and the size of the pipeline heading into 2027? And then with rents climbing and the lack of supply in the space, are you seeing potential for returns to increase overall from the current blended 10% stabilized yield forecast on the pipelines?

It's a great question, Todd. What you can expect from us is that consistent movement from that future pipeline, which we show all of you into the active pipeline. As I mentioned, we were thrilled with what we brought online this quarter in North Jersey, in Dayton, in Market Plaza. We've been bringing on larger assets, but effectively de-risked as they've been historically with the leases in place. We are certainly driving rents, and we feel very confident in that high single digit, low double digit return. As you think about the trajectory looking into next year, just the future pipeline and the active pipeline of what we're showing you gives us several years of $150 million to $200 million of reinvestment. We'll probably be towards the low end of that this year, just due to the nature of the pool.

Really thrilled with what we're seeing, and thrilled with what we're seeing in terms of the cadence of that coming on in the active pipeline. Last thing that I would mention, and Mark touched on it in his commentary on acquisitions, we're finding opportunities to refuel that externally. We have a lot with what we have in the pipeline today, just in what we own. Bringing on that asset in College Station, an opportunity to add densification in Long Island, which can be very challenging to do. We were thrilled with that as well. We're pleased with the cadence. I think it gives everybody on the phone good visibility in terms of the future pipeline, and expect to continue to see us deliver a strong cadence of bringing those online.

Our next question comes from Alexander Goldfarb with Piper Sandler. Your line is now live.

Thank you. Good morning down there, echoing the condolences on Jim. Brian, conversation on earnings acceleration. As you guys think about whether it's underwriting new leases and the terms, or how you manage tenant rollover when they take space. I know I've asked you this in the past, but just as you guys have more opportunity to manage the portfolio, are there little things that you've been able to figure out or to do that causes the FFO recognition to accelerate without obviously changing the underlying economics?

Well, Alex, appreciate the question and the condolences. I would just start by saying everything that we're doing is to accelerate growth in our business plan. Utilizing the environment to get the best intrinsic lease terms that we ever have, whether it's growth, whether it's improving our CAM clauses, whether it's adding more percentage rent. I think to your point, we are getting tenants to take possession sooner. You've seen a shift of us doing the work with tenants taking on allowances. That's capped our costs. You've also seen tenants that have been much more flexible in terms of how they work with existing space. That gets them in the space sooner. The add-on to that, we're signing rents at the highest level that we ever have.

I'll let Steve touch on it a little bit further, but everything is of the mind here of how do we get tenants open sooner? Because generally we're not getting paid until they start driving sales. That has been a focus and really pleased with the team's effort and pleased with what we've been able to do in terms of further monetizing our leases.

Yeah. Brian, I think you hit it. I think importantly what that does is while it does ultimately result in maybe us accelerating straight line, it's really deferring the liability to the tenant of them taking on the risk. Oftentimes we have hard rent commencement dates as well, which the tenant is then held to. I think there's economic reasons of why we are structuring deals that way that ultimately could result in us accelerating straight line recognition.

Thank you. Thanks, Alex. Our next question comes from Greg McGinniss with Scotiabank.

Your line is now live.

Hey, good morning. Brian, I appreciate the comments on the assets you've been looking at for a long time in terms of what you're acquiring and other smaller landlords you've been working with, assets you've been looking at. What does that look like in terms of near-term acquisition opportunity? Is this pace of acquisitions that you've achieved in the first half of the year, $164 million, does that feel like a reasonable pace as you're going forward, or is there an opportunity to increase how much money you're putting to work from an external growth perspective?

Well, I'll let Mark chime in on this as well. Again, our first dollar is going to continue to go towards reinvestment. As I touched on with Todd, we love the returns there. We have a great pipeline there. We have been growing. We've been net acquirers now for the past five years. 45% of the acquisition activity that we've done has been in the last two years, and there's a consistency across all those assets. Mark went through a lot of things, but what each of them has is that they're additive to our long-term growth profile. They have mark-to-market opportunity, they have reinvestment opportunity, and they're in markets where we have a large presence. We like what we're seeing in the pipeline.

We're going to be consistent around not giving transaction guidance because we don't want to be dependent on transactions, nor do we have to be dependent on transactions to grow. Overall, we're pleased with what we've been seeing and pleased with what we've been able to add to the portfolio.

I would add really two points, Brian. One is we would expect transaction activity to be lumpy for the exact reasons you just mentioned. I don't look at it as a quarter by quarter basis. I look at it deal by deal and find the right ones for the company. With that said, we do have a strong pipeline. It's been a very busy summer. We're seeing an acceleration of assets hitting the market, driven by a bunch of factors. One, I think is some holders can't sell other type assets. We're seeing more come into the market. In others, it's just relative to pricing. We're seeing folks wanting to take advantage of good pricing. We're pretty confident in the pipeline, but I'd point back to Brian's comments on how we think about it.

Thank you both. Thanks. Our next question comes from Jamie Feldman with Wells Fargo.

Your line is now live.

Great. Thanks for taking the question. I was hoping you could provide a little bit more color on the OP unit transaction. Sounds like you've been working on this for years. What was it that finally got the seller to move forward? Just how big is your pipeline of similar deals now that you've got this first one done? Finally, just anything unique in how you structured it in terms of the price. Was it priced at where the stock is trading or is it priced at something different as we think through you doing more of these in the future? Thank you. I would say it's hard to discern exactly why sellers always choose to transact in their timing.

I would say that we're really pleased that we got it across the goal line. The deal is accretive to earnings on day one. We do think we got an asset that sits in a great trade area. It fits perfectly within our really strong Long Island portfolio. With respect to structure, it was structured as a convertible preferred, and the conversion rate set above where we would have issued equity to straight equity to fund the deal at the time that we negotiated the transaction. We do think we got a really strong value on the opportunity. We think the cap rate was 50 to 75 basis points above cash trade cap rates.

We also think the OP unit holder is getting a strong value through access to our growing platform. We do think that these OP unit transactions really can be a win-win both for us and for the folks looking to take OP units. With respect to future acquisitions through OP units, we're in active discussions with a number of families. As you highlighted, they can take some time. I think that we are seeing a slight acceleration in some of these conversations, I think in part driven by just overall liquidity and retail folks feel like retail is liquid today. I think more importantly, we are looking at some longer transition of ownership of assets that have been long held by families or in other private hands that may seek or may require OP units in the future.

We're excited about that pipeline, hard to scale it with respect to timing because they can take a long time to come to fruition.

I would just add, Jamie, it just gives us another tool, particularly as we are looking at private owners for the reasons Mark laid out that may be bringing assets to market. Again, it's relationship building. It's understanding the markets and centers that we may want to add to the portfolio long-term, so that when they do ultimately decide to sell, we're in a great position to have the conversation first. It was really a great job by Mark and the team of getting ahead of this one, and we think it's a tool that we may be able to utilize going forward.

Okay. Thank you. Do you know if they were talking to other REITs?

They may have been. I can't say in particular. All I know is that we were able to add an asset in a market where we've got a great presence, where we've done a lot of reinvestment, where we've got densification opportunities that aligns perfectly with our growth profile, and as Mark said, it was accretive day one.

Okay. Thank you. Got it.

Our next question comes from Samir Khanal with Bank of America. Your line is now live.

Good morning, everybody. I guess Brian or Steve, sorry if I missed this, did you provide a view on occupancy in the second half? I know you talked a little bit about, I think, growth trajectory in the second half last quarter, maybe to tie in the guidance. It implies a decel in the second half, I know you're probably being conservative, just walk us through kind of how to think about occupancy and NOI growth in the second half. Thanks. Well, I did mention earlier, Samir, I can touch on it again.

First of all, we did hit another record in small shop occupancy growth, 92.6%. We still see room to run there. If you look at that future and active pipeline that we were talking about, it trails our stabilized projects by a few hundred basis points. It's not always going to be linear. It can be lumpy, we do expect to get back on a growth trajectory in the back half of the year. The spaces we took back, like I said, are already in the position for both reinvestment assets as well as the other ones are effectively at lease and look forward to bringing that income online in 2027. Steve can touch on the Catoos same property.

The implied deceleration, I guess I'll first point to just our same property NOI guidance range of 5%-5.75% just shows the strength of the underlying portfolio. We did have a very strong fourth quarter, if you remember, in ancillary and other income, and it's really just comping off of that in the fourth quarter. That's the significant headwind as we head into the back. I think importantly, you should see base rent continue to grow as we commence rent from the SNOC pipeline and really set us up into 2027 to continue the stack rent that we've been doing over the last couple of years.

Our next question comes from Caitlin Burrows with Goldman Sachs. Your line is now live.

Good morning, everyone. Brian, you mentioned in the prepared remarks that Brixmor benefits from a few factors, one of which is a low rent basis, which is obviously not new news. I'm wondering if you can talk about the outlook for rent spreads. I guess it would maybe seem that by now the low rent basis has been mark to market. How is that not the case? Specifically, with 2Q, the new and renewal spreads were lower than recent quarters. Just wondering if you would consider that part of normal variability or some new trend.

It's a good question, Caitlin. Interesting thing is, as our ABR has risen from $12 to over $19, the rents that we're signing have also risen dramatically as well. Just said simply, we're signing leases in the mid-20s off a $19 base rent. We've got anchors expiring over the next three years at around $11. We've been signing those at close to $18. That gives you visibility in terms of what that upside looks like going forward. We've now been three years running of new lease growth at over 30%. We've been three years running of renewal growth in the mid-teens. We've been growing our embedded lease terms, our embedded growth significantly. Our in-place portfolio today is about 1.6%.

As I mentioned, we hit a record 2.8% during the quarter, which once we get those renewals and new leases in place, that growth is there at no additional cost. We're pleased with the rent trends in the portfolio. As we continue to improve our assets, we'll continue to be able to drive rents higher. We're signing both anchor leases and small shop leases at record rates over the last year. The trends continue to improve. It can be lumpy in a given quarter, but overall, we're really pleased with the rent growth trajectory across the portfolio.

Our next question comes from Craig Mailman with Citigroup. Your line is now live.

Hey, good morning. I know it's a bit early here to be thinking about 2027, Your business is a little bit more stable with visibility. I'm just kind of curious, the execution has been steady and solid here. As we start to think about 2027, is there anything that you could think about that could significantly boost the run rate growth for Brix in the near term? Or should we continue to think about Brix as a 5% FFO grower plus or minus in 2027 and maybe 2028?

I'd say Craig, Steve can jump in here too. We're encouraged by the growth trajectory of our business. The leasing demand environment is healthy. We just touched on the rent growth trends in the portfolio. Steve mentioned specialty income earlier for driving that business to record highs as well. We remain very encouraged. Obviously, we'll update our 2027 outlook when we do that in early next year. I'd say in terms of where we sit today, it's can we get those leases started sooner? It's really the same things that we've been doing, getting leases signed faster with tenants to enable us to get that growth moving a lot sooner. Overall, we're pleased with the trajectory. Steve, I don't know if you have anything to add.

It sounds kind of boring, but it's the stacking of rent commencements like we've been talking about over the last couple of years. We still have $29 million of rent that we're expecting to commence in the back half of the year. We'll get a partial benefit of that into this year, the full benefit into the next year. We have almost $37 million of rent coming online in next year, and that's with 6 months of leasing left to do. I think you have a lot of visibility into that year. What the offset to that is always is what is happening with the space we're taking back. Like you saw in this quarter, there are going to be times where we do take space back to really accelerate the growth into the future with redevelopments.

Our next question comes from Floris van Dijkum with Ladenburg Thalmann. Your line is now live.

Hey, guys. Thanks. Obviously Jim will be missed, but it looks like the company's in good hands. Brian, good luck with everything. My question is regarding your CAM initiative and auxiliary revenues. Touch upon maybe if you could, on the percentage of the portfolio that has 6 CAM now, what kind of impact that has on same store, as well as what you think the ancillary revenue opportunity could be relative to where it is today.

First, Floris, again, appreciate the kind words on Jim. Thank you for the condolences. We've been thrilled with the trajectory in specialty and other. If you look at that business, it's almost doubled from where we were in 2016. If you've seen scenes from the World Cup at Pointe Orlando, how we've been able to activate a place like that, what we've been able to do with our common areas as we've brought some of these larger centers online. Interestingly, we've doubled that business on an asset base that's 60% of the size that it was in 2016. We still see future growth because we've moved away from some of the shorter-term specialty deals.

We're still doing some of those across the portfolio, but really finding new ways to activate our common areas, particularly as we've done more larger reinvestments and we've got larger properties to be able to do that. We continue to deploy fixed CAM strategically, where about 40% of our ABR now has fixed CAM. We're growing those rates at 4.2% across both small shop and anchors. When we're setting those rates, we're doing that very conservatively. I don't know what the top end of that would be because every national tenant doesn't want to lock in at 4% growth, and there's going to be more negotiation on those rates up front. Where we've done that, we've done it very efficiently.

The other thing is, for those tenants that aren't on fixed CAM, we've been very aggressive in negotiating our CAM clauses, ensuring that we're removing caps and that we're getting paid back for the investments that we're making. You can really see that coming through in the recovery rate. You pointed out two areas within NOI that we continue to make improvement, that we continue to drive growth in addition to driving base rent growth near the top of the shopping center sector. Overall, pretty pleased with how the team has been working in those areas.

Thanks. You got it. Thank you.

As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. One moment while we poll for questions. Our next question comes from Paulina Rojas with Green Street Capital. Your line is now live.

Good morning. Your guidance for uncollectible income of 60 to 85 basis points of revenue assumes some deterioration from the 50 basis points you have recognized year to date. What are you seeing that keeps you these 50 basis points year to date outside of your expected range? More broadly, can you share how you thought about the high and low end of the uncollectible income guidance?

Yeah. Thanks for the question. I think we've talked about this over the last couple of years. There is some, it sounds weird to say, seasonality in collections due to the cash basis accounting and when we receive real estate state tax payments. That's more weighted to the first half of the year. You do get the benefit of that in the first half of the year, and then you have the headwind into the last half of the year. If you look back at the last couple of years, you'll notice that the first half has significant outperformance versus the second half. It's really kind of noise in the underlying. The strength of the actual collection that you're seeing on the recurring monthly rent continues to be very strong across the portfolio as our tenants continue to perform.

It just goes to the competition that we're seeing for spaces and allows us to have even higher standards that we're putting in on underwriting, making sure that we have the right signature on leases.

Paulina, I would just add, you've followed this portfolio for a long time. This is the strongest underlying tenant base that the company has ever had. I mean, screen the top 40 versus where it was historically. Small shop move-outs year to date from a GLA perspective are at record lows. Our retention rate's up 300 basis points over where it was at this point last year. As Steve said, we continue to have strong collection trends. You put all that together, it puts us in a really good position as we think about tenant health and the balance of the year.

Our next question comes from Juan Sanabria with BMO Capital Markets. Your line is now live.

Good morning, thanks for the time, condolences to the team for the loss of Jim. I hope he admits, obviously.

Thanks, Juan. Just a question on the acquisitions and the yields and kind of the competition backdrop in terms of rates, et cetera.

For what you closed in the second quarter, I think you said all the assets are entering the redevelopment pool pretty shortly. How should we think, I guess, about the contribution of those coupled assets and what that means to the initial returns?

Our cap rates on the assets that we acquired in the quarter blended to a low six. As we think about the growth there, we would anticipate the growth of the rentals coming online starting year three to four.

If you think about the complexion of those assets, we have a highly productive H-E-B in College Station, another place, College Towns, where we've done exceptionally well. There, Juan, you've got five outparcels. We've got a lot of inbounds, and we're already in discussions on a number of leases since we closed on the acquisition just over a month ago. From that perspective, sometimes those deals take a bit longer to get online. Similarly, the densification that we have out in Long Island, both in the front of the center, and we have a large parking field to the side as well. That's why Mark's pointing to a three, four-year growth perspective, because it does take some time. We've just got a great team to be able to get those projects entitled to move those forward.

We've got great tenant partnerships with the grocers out there as well to enable us to do what we want to do. That was part of the due diligence that we had in those properties. I think it fits with the strategy of assets that we're adding in markets that we know that ultimately complement the business plan of the company moving forward.

The other thing I would add, ex that redevelopment coming online, we think the assets should grow at least in line with the portfolio, given the near-term rent mark to market in the existing assets. We're excited about the opportunities we have in front of us, both here and in the pipeline we're looking at.

Any comments on competition or spread compression or cap rate compression from here?

Over the last quarter, I'd say cap rates seem to be generally stable, despite some of the volatility you've seen in the rate movement. We continue to see, and I continue to experience significant new capital coming in, seeking exposure to the space. From our perspective, again, we're not sure we're exactly competing with that capital for the assets that we want to buy.

Great. Thank you very much.

Thanks, Mark. Our next question comes from Michael Mueller with J.P.

Morgan. Your line is now live.

Yeah. Hi, first, those are nice comments about Jim. We'll definitely miss him as well. I did jump on a little bit late here. Later on, I was just wondering, as it relates to the development or the reinvestment pipeline, the development pipeline, as you look out over the next couple of years, are there going to be any projects that stand out in terms of significance, either size or from a return investment, that are going to be a little bit different than what the norm was in the pipeline, or do you expect it to be kind of more of the traditional bread and butter?

Thanks, Mike. I think you'll see a mix of both. I say that because over the last few years, we have been successful in bringing larger projects online. You think about Davis, California, Block 59, South Dallas in Wynnewood, then you look at the pipeline today, Rockland Plaza in the New York suburbs is going to be a large reinvestment. We started the third phase of Roosevelt Mall in Philadelphia, an asset that Mark bought a couple of years ago. Britton Plaza is going to be one of our marquee larger reinvestment projects. The two that we added will probably be more bread and butter or consistent with some of our smaller projects in terms of outparcel development. I think you can expect to see a mix of both. You'll continue to see a steady cadence of those Publix redevelopments coming online.

We expect to announce a few of them here in the back half of the year, you're going to see a few of those stores open next year as well. Probably say consistent cadence, more larger projects. Then I touched on outparcels on opening remarks. We actually touched on it last quarter, too, because the business, the momentum in it's been fantastic. We're seeing municipalities be much more accommodating and willing to allow for densification. Our team's developed great relationships with these jurisdictions, you're seeing just a ton of demand in the space from great operators. Expect that to be a lever for us as well as we accelerate that business. We're really pleased with all aspects of it, but importantly on those larger projects, how we've been able to execute and deliver them.

Got it. For a quick follow-up, the 440 basis points leased to occupied spread, if you're looking at the spaces above and below 10,000 square feet, was there a lot of variability contributing to that average?

I think on the 10,000 square foot space, just the nature of the projects that we took or the spaces that we took back during the quarter would be some of that. Then on a small shop perspective, it's really just the components of some of the small shops and reinvestment projects that would be the spread between those two. On the anchor side, that's where you're seeing it more pronounced.

Got it. Okay. Thank you.

Got it. Thank you. Our next question comes from Omotayo Okusanya with Deutsche Bank.

Your line is now live.

Yes. Good morning, everyone. Also wanted to say Jim definitely will be missed. Condolences to the company and to his family.

Thank you. In terms of questions, I just wanted to kind of stick onto the line of questioning that was just previously asked.

Again, the SNOC pipeline getting larger, the build versus occupied spread getting larger. I think, again, all signs of future earnings growth for sure, but I think sometimes there's also this question of if you continue to kind of have additional vacancy and fallout and yes, you're leasing it up and it's growing, but near-term earnings are probably negatively impacted. How do we just kind of think about, again, that balance and when we kind of think about the next 12 months, if we really do kind of start to see some of those numbers shrinking, which is, again, the clear indicator that earnings growth should accelerate at that point.

Well, I think, Teo, we expected build to lease to be wide this year just due to the nature of the spaces that we took back a year ago and the size of the reinvestment pipeline. I think what the signed but not commenced pool gives you is the clearest visibility on growth for the company that is signed. We've expanded that pipeline despite the fact that we are still going to grow at over 5% this year. We are delivering spaces and reinvestments today. We have a bulk of our, as Steve said, about 41% of the SNOC non-commence pool will commence here in 2026. The fact that we keep adding to it just gives you visibility on the strength of leasing demand and the fact that this growth is effectively baked as we look out into 2027 and beyond.

Yeah. If you look at where we sit for the first six months, we've actually commenced more rent out of the SNOC pipeline than we would have thought at the beginning of the year. I think Brian just hit it dead on. We continue to commence rent out of that, but also continue to backfill it, and that's the strength of the SNOC commencement and the stacking of that rent commencement that gives us the growth over the next couple of years.

Thank you. You got it.

Thanks, Theo. Our next question comes from Caitlin Burrows with Goldman Sachs.

Your line is now live.

Hi again, everyone. We've talked a lot about acquisitions, but I don't think we've talked on the funding side. You guys haven't settled any or much of the forward equity. What will drive the timing of settling that equity? Then going forward, if you continue to buy assets, how are you planning on funding that? What, I guess, is it a target leverage and then manage equity and dispositions based on the share price? Yeah, if you could just talk about that a bit.

I think you just said it pretty perfectly. Yeah, we look at the balance sheet over a long period of time. If you look at where we sit at the end of the quarter, we had over $100 million of cash on the balance sheet. Then our debt to leverage or our debt to EBITDA is still in the 5.3, so low fives. It's something that we continue to look for, just thinking about what are the upcoming sources and uses and Mark and I tying out on what does that disposition pipeline look like versus the acquisition pipeline and what are those opportunities. That's really the determination of when we would issue any equity and how we're going to finance them.

I would just add, we're going to primarily be funding those with normal course capital recycling, and that is, Caitlin, where we've maximized NOI, and you saw that with the assets that we sold a year ago and what we sold earlier this year. There's no longer a non-core overhang for this portfolio. It's simply in markets where we think that we maximize NOI to be able to recycle that capital into other markets where we see a higher growth potential.

Thanks. You got it. Thank you.

We have reached the end of the question and answer session. I'd now like to turn the call back over to Stacy Slater for closing comments.

Thanks everyone for joining today. Hope you all enjoy the rest of your summer.

This concludes today's conference. You may disconnect your lines at this time. We thank you for your participation.