Prepared remarks
Greetings, and welcome to Brixmor Property Group Second Quarter 2026 Earnings Conference Call. 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, and thank you all for joining Brixmor's second quarter conference call. With me on the call today are Brian Finnegan, CEO and President; and Steve 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, and 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 requeue. At this time, it's my pleasure to introduce Brian Finnegan.
Thank you, Stacy, and good morning, everyone. Before turning to our results, I would 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 and 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 square feet 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 on 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 certain tenants. Importantly, we are already at lease on six of the eight recaptured 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; Southtown in Dayton, Ohio, where we are reconfiguring the center to accommodate HomeSense, Sierra and Barnes & Noble; and Market Plaza in Suburban Dallas, where we're repositioning underutilized space to elevate an already highly productive central market-anchored asset with a stronger tenant 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 four new outparcel developments during the quarter, bringing the total added in the first half of the year to a record ten 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 four 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. Mayfaire 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 Mayfaire 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. And most importantly, our team continues to demonstrate what Jim established with our first cultural tenant that great real estate matters but great people matter even more. And 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 demonstrate 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 lease provisions we've executed over the last several years. While quarterly NAREIT FFO was $0.58 and benefited from the strong underlying property performance, results were partially offset by lower noncash rental income resulting from straight-line reversals associated with certain tenant bankruptcies. We expect noncash 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% to 5.75% and FFO guidance of $2.35 to $2.37 per share reflects the continued strength of operations. The increase primarily reflects the improved expectations from revenue deemed uncollectible, which we now expect to be 60 to 85 basis points of total revenues reflecting the strength of our tenant base. Leasing activity remains strong. Rent spreads remain healthy, and our signed but not yet commenced 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 yet 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. And with that, I'll turn the call over to the operator for Q&A.
Questions and answers
Occupancy was down sequentially in the second quarter, and you had messaged that last quarter as a result of anticipated box recapture. So was the occupancy decline that actually happened in line with those expectations? Or were there any incremental headwinds? And 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 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 the 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 them to come online in 2027. So occupancy is not always linear. As we talked about, we do expect to get back on the trajectory of growth in the back half of the year. But it was as expected in terms of what happened during the quarter.
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 than 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? And maybe some added color on if there's anything else in the back half we are not appreciating and some color on the cadence for same-store and FFO would be helpful, too.
I'll let Steve chime in here, but first, Haendel, thanks for the kind words on Jim. Obviously, we miss him a lot as well. I think, 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 same-property NOI perspective, we feel very confident about the growth trajectory there. Steve can give you a touch on just what some of the intricacies are between that and FFO.
The move in same-property NOI has 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. But I think importantly, we're equally as focused on making sure that top-line growth and all of 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.
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? And then 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 is 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: 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 College Station deal did include significant outparcel development opportunities in front of an HEB that's really driving massive traffic. We're really excited about that one from a future growth perspective. Overall, the cap rate in the quarter blended to a low 6%, which did include effectively land that's zoning for development in the near term. In terms of pipeline in the market, we do have an additional asset we're under hard contract on in Southern California for about $50 million and the cap rate there will be higher than what we just said for Q2. And the pipeline beyond that continues to look quite strong. If you think about the competition that you're really referencing, I do agree it's out there; we're seeing more private capital seeking exposure to the space. But our pipeline of assets is really driven by relationship building. For example, the Mayfaire deal we did was driven by a relationship that we've been working on for eight years. The Jones Crossing deal we've been pursuing since 2018. So a lot of the deals that we're looking at acquiring are assets that we've actively been evaluating for a long time and building that relationship. To the extent you can get them off-market or in a controlled process, you're a preferred buyer. That's how we think about our ability to transact. I would also say that a lot of capital coming into the space is more focused on core-like or lower-return opportunities that don't require our platform to drive value through redevelopment or densification, so that really, I think, will help us continue to compete in the part of the market we choose to pursue. 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 do not rely on acquisitions to drive value given our base business plan.
I wanted to ask about the reinvestment pipeline that increased a bit this quarter to roughly $350 million. 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 pipeline?
It's a great question, Todd. What you can expect from us is consistent movement from that future pipeline into the active pipeline. As I mentioned, we were thrilled with what we brought online this quarter in North Jersey and Dayton and Market Plaza. We've been bringing on larger projects, and as projects move into the active pipeline they de-risk because the leases are in place. We are certainly seeing rents increase and we feel very confident in that high single-digit to low double-digit return profile. As you think about the trajectory looking into next year, the future pipeline and the active pipeline 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 timing of the pool, but we're really thrilled with the cadence of bringing projects online. And Mark touched on it in his commentary on acquisitions — we're finding opportunities to refuel externally as well. We have a lot within what we own today, but bringing on that asset in College Station offers outparcel opportunities in Long Island which can be very challenging to do. So we're pleased with the cadence and expect to continue to deliver a steady flow of projects.
There and 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 or 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, I 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 drivers, improving our cancellation clauses, or 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 cap our cost. You've also seen tenants that have been much more flexible in terms of how they work with the existing space, which gets them in the space sooner. And then I think just adding on that, we're signing rents at the highest levels that we ever have. Everything is focused on 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 I'm really pleased with the team's effort and what we've been able to do in terms of further monetizing our leases.
I think Brian hit it right. Importantly, while it may result in us accelerating straight-line recognition, structuring deals so tenants take more of the near-term risk defers the liability to the tenant. Often times, we have hard rent commencement dates as well, which the tenant is then held to. So there are economic reasons why structuring deals this way can ultimately result in accelerating cash recognition even if it impacts straight-line accounting.
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 the smaller landlords working with assets you've been targeting. But what does that look like in terms of near-term acquisition opportunity? Is this pace of acquisitions you achieved in the first half of the year, $164 million, feel like a reasonable pace going forward? Or is there an opportunity to increase how much money you're putting to work from an external growth perspective?
I'll let Mark chime in on this as well. Our first dollar is going to continue to go towards reinvestment. As I touched on with Todd, we love the returns there and we have a great pipeline. We've been net acquirers now for the past five years; 45% of the acquisition activity we've done has been in the last two years. There's consistency across all those assets: they're additive to our long-term growth profile, they have mark-to-market opportunity, reinvestment opportunity, and they're in markets where we have a large presence. So we like what we're seeing in the pipeline. We don't give transaction guidance because we don't want to be dependent on transactions to grow. Overall, we're pleased with what we've been seeing and adding to the portfolio.
I would add two points. One is we expect transaction activity to be lumpy for the exact reasons Brian just mentioned. It's not a quarterly-by-quarter basis; we'll get deals 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 and we're seeing acceleration of assets hitting the market, driven by a bunch of factors. One, some holders can't sell other types of assets, so we're seeing more come into the market. Others want to take advantage of good pricing. We're pretty confident in the pipeline, but I would point back to Brian's comments on how we think about it.
I was hoping you could provide a little bit more color on the OP unit transaction. It sounds like you've been working on this for years. What was it that finally got the seller to move forward? And then just how big is your pipeline of similar deals now that you've got this first one done? And then finally, anything unique in how you structured it in terms of the price? Was it priced where the stock is trading or was the price something different as we think through you doing more of these in the future?
It's hard to discern exactly why the seller chose to transact at this timing, but we're really pleased we were able to put a deal together. The transaction is accretive to earnings on day one and the asset sits in a great trade area within our 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 straight equity to fund the deal at the time we negotiated the transaction. We do think we got a 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 strong value and access to our growing platform. We do believe OP transactions can be a win-win, both for us and for owners looking to take OP units. With respect to future acquisitions through OP units, we're in active discussions with a number of families. These conversations can take time but we are seeing some acceleration in those discussions, in part driven by overall liquidity in retail and owners' desire to plan longer ownership transitions. So we're excited about that pipeline, but it's hard to scale with respect to timing because these transactions can take a long time to come to fruition.
I would just add that the OP unit structure gives us another tool, particularly when engaging private owners who may be thinking about transitioning assets. It's about relationship building and understanding markets and centers we'd like to add to the portfolio long term so when owners decide to sell, we're in a good position to have the conversation. It was a great job by Mark and the team to get ahead of this one, and we think it's a tool we can utilize going forward.
Okay. Do you know if they were talking to other REITs?
They may have been talking to other potential buyers. All I know is 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 and where we have densification opportunities that align perfectly with our growth profile. As Mark said, it was accretive day one.
Thanks for your condolences to the team for the loss of Jim. I hope you are all doing well. Just a question on occupancy in the second half. I know you talked a little bit about growth trajectory in the second half last quarter, and the guidance implies a deceleration in the second half. I know you're probably being conservative, but just walk us through how to think about occupancy and NOI growth in the second half.
I did mention earlier, Samir, but I can touch on it again. First of all, we did hit another record in small shop occupancy at 92.6% and we still see room to run there. If you look at the future and active pipeline that we were talking about, it trends our stabilized projects by a few hundred basis points. It's not always linear; it can be lumpy. But we do expect to get back on a growth trajectory in the back half of the year. The spaces we took back are already in the process for reinvestment and other leases and we look forward to bringing that income online in 2027. Steve can touch on the cadence.
The implied deceleration is, I think, largely a function of comps. We had a very strong fourth quarter last year in ancillary and other income, so we're comping off a strong period in the fourth quarter which is a headwind as we head into the back half. Importantly, you should see base rent continue to grow as we commence rent from the new pipeline, which sets us up into 2027 to continue stacking rent as we've been doing.
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. But I'm wondering if you can talk about the outlook for rent spreads. It might seem that by now the low rent basis has been marked-to-market. So how is that not the case? And specifically, with 2Q the new and renewal spreads were lower than recent quarters. So is that part of normal variability or a new trend?
Good question, Caitlin. The interesting thing is as our ABR has risen from about $12 to over $19, the rents that we're signing have also risen dramatically. Simply put, we're signing leases in the mid-20s off a $19 base rent. We have anchors expiring over the next three years at around $11 — we've been signing those at close to $18 — which gives visibility to upside going forward. We've now had three years running of new lease growth over 30% and three years of renewal growth in the mid-teens. Our embedded lease growth has increased as well; our in-place portfolio today is about 1.6% and we hit a record 2.8% embedded growth during the quarter. Once we get those renewals and new leases in place, that growth is there at no additional cost. So while it can be lumpy in a given quarter, overall we're very pleased with the rent growth trajectory across the portfolio.
I know it's a bit early to be thinking about 2027, but your business is a little bit more stable with visibility. As we start to think about 2027, is there anything that could significantly boost the run-rate growth for Brixmor in the near term? Or should we continue to think about Brixmor as mid-single-digit FFO growth plus or minus in '27 and maybe '28?
I'd say we're encouraged by the growth trajectory. Leasing demand is healthy, rent growth trends are strong, and specialty income is at record levels. We'll update guidance early next year, but the drivers remain the same — get leases started sooner and continue stacking rent commencements. Overall, we're pleased with the trajectory.
It sounds boring, but it's the stacking of rent commencements: we still have $29 million of rent that we're expecting to commence in the back half of the year, and we'll get a partial benefit of that this year and the full benefit next year. Then we have almost $37 million of rent coming online in the year after that, with six months of leasing left to do. So you have a lot of visibility into that year. The offset is the spaces we take back for redevelopment, which can damp near-term earnings but accelerate long-term growth.
Thanks. I obviously, Jim will be missed. It looks like the company is in good hands. Brian, my question is regarding your CAM initiative and ancillary revenues. Could you touch upon what percentage of the portfolio has fixed CAM now and 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?
Thanks, Floris. We are pleased with the trajectory in specialty and other income — it's almost doubled from where we were in 2016 on a portfolio that's about 60% of the size. We're finding new ways to activate common areas, particularly as we've done larger reinvestments. We're about 40% of our ABR now under fixed CAM, and we're growing those rates at about 4.2% across both small shop and anchors. When setting those rates, we're conservative. Where we've implemented fixed CAM, we've done it efficiently. For tenants not on fixed CAM, we've been aggressive in negotiating CAM clauses, removing caps and ensuring we're reimbursed for investments. You can see that in improved recovery rates. These are two areas within NOI where we're continuing to drive improvement in addition to base rent growth.
Good morning. Your guidance for uncollectible income of 60 to 85 basis points of revenue implies some deterioration from the roughly 50 basis points you have recognized year-to-date. So what are you seeing that keeps you in this range? And more broadly, can you share how you thought about the high and low end of the uncollectible guidance?
Thanks, Paulina. We've talked about seasonality in collections due to cash-basis accounting and timing of property tax payments, which are more weighted to the first half of the year. That results in better first-half performance and a headwind in the second half historically. But the underlying strength of recurring monthly rent collections remains strong across the portfolio and allows us to have higher underwriting standards and better lease signatures.
You've followed this portfolio for a long time — this is the strongest underlying tenant base the company has ever had. Screen the top 40 tenants versus where it was historically: small shop move-outs year-to-date from a GLA perspective are at record lows. Our retention rate is up 300 basis points over where it was at this point last year. Put all that together and we are in a very strong position on tenant health for the balance of the year.
Thanks for your condolences to the team for the loss of Jim. I hope you are all doing well. Just a question on the acquisitions and the yields and kind of the competition backdrop in terms of rates, etc. For what you closed in the second quarter, I think you said the assets are entering the redevelopment pool shortly. So how should we think about the contribution of those couple of assets and what that means to the initial returns?
Our cap rates on the assets we acquired in the quarter blended to roughly the low-6s. As we think about growth there, we would anticipate the growth of the rents coming online starting in years three to four.
If you think about the composition of those assets: we have a highly productive HEB in College Station and other assets where we've historically done well. One has five outparcels and we are already in discussions with prospective tenants since we closed the acquisition a little over a month ago. Those deals can take a bit longer to get fully online, which is why Mark referenced a three- to four-year growth perspective because it takes time to entitle and execute the projects. We did our due diligence on grocer partnerships and expect the asset to at least grow in line with the portfolio given near-term rent mark-to-market in the existing asset. We're excited about the opportunities in front of us and the pipeline.
Any comments on competition or spread compression or capital compression from here?
We haven't seen material cap rate movement over the last quarter; cap rates appear generally stable despite rate volatility. We continue to see significant new capital seeking exposure to the space. From our perspective, we're not necessarily competing directly with that capital for the assets that require our platform — many new entrants are focused on core-like opportunities that don't require redevelopment or densification, which plays into our advantage.
First, nice comments about Jim. We'll definitely miss him as well. I did jump on a little late. Regarding the development or reinvestment 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 return on investment that will be different than the norm in the pipeline? Or will it be more of the traditional bread-and-butter redevelopments?
Thanks, Mike. You'll see a mix of both. Over the last few years we've been successful bringing larger projects online — think Davis, California; Block 59 South Dallas; Wynwood. In the current pipeline, Rockland Plaza in the New York suburbs will be a large investment. We started the third phase of redevelopment at an asset in Philadelphia that Mark bought a couple of years ago, and Britton Plaza will be another marquee larger reinvestment. We also added smaller outparcel and denser projects. Expect a consistent cadence with some larger projects announced in the back half of the year and stores opening next year as well. Outparcels continue to be a lever as municipalities have become more accommodating to densification and there's strong operator demand.
Got it. And a quick follow-up: the 440 basis point contribution from base rent — on the spaces above and below 10,000 square feet, was there a lot of variability attributing to that average?
Yes. The mix matters. On the larger 10,000-plus square foot spaces, the projects we took back this quarter contributed notably to that number, and on the small-shop side it's really the components of some small-shop leases within reinvestment projects that influence the spread. The anchor side tends to be where you see more pronounced mark-to-market.
Good morning, everyone. Also I wanted to say Jim will be missed — condolences to the company and his family. Regarding the signed but not yet commenced pipeline getting larger and the build-versus-occupied spread getting larger: I think we all find the future earnings growth per share appealing, but near-term there's the question of additional vacancy and fallout. Even though you're leasing it up and it's growing, near-term earnings are probably negatively impacted. How should we think about that balance and when we should expect to see the numbers shrink, indicating earnings acceleration?
Tayo, we expected build-to-lease spreads to be wider this year due to the nature of the spaces we took back and the size of the reinvestment pipeline. The signed but not yet commenced pipeline gives the clearest visibility on growth for the company because the rent is already signed, even if commencement is later. While we're still growing at over 5% this year, the fact that we keep adding to that pipeline gives visibility into 2027 and beyond. A substantial portion of the signed-but-not-commenced pool will commence in 2026, and adding to it demonstrates the strength of leasing demand and the quality of the growth.
If you look at where we sit for the first six months, we've actually commenced more rent out of the new pipeline than we thought at the beginning of the year. We continue to commence rent from that pipeline while also backfilling it, and that's the strength of the signed-but-not-yet-commenced strategy and the stacking of rent commencements that gives us growth over the next couple of years.
We've talked a lot about acquisitions, but not much about the funding side and the forward equity. You haven't settled much of the forward equity. What will drive the timing of settling that equity? Going forward, if you continue to buy assets, how are you planning on funding that? Do you have a target leverage and will you manage equity issuance and dispositions based on the share price?
You framed it well. We look at the balance sheet over a long horizon. At quarter end we had over $100 million of cash and our leverage was in the low 5x range. We consider upcoming sources and uses and tie out the disposition pipeline versus acquisition pipeline. That drives the decision on when to issue equity and how we'll finance acquisitions.
We will primarily fund with normal course capital recycling — maximize NOI on assets we choose to sell and recycle that capital into markets with higher growth potential. There's no longer a noncore overhang for this portfolio; it's about being disciplined and focused on highest-return uses of capital.
Thanks, everyone, for joining today. I hope you all enjoy the rest of your summer.
This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.