Brixmor to Acquire Slate Grocery REIT in $2.34B Grocery Retail Deal

Key Points

• Brixmor will acquire Slate Grocery REIT in a $2.34 billion transaction, directly purchasing 23 properties and acquiring the remaining 92 through a joint venture with Everview Partners. The deal is expected to close in the first quarter of 2027, pending Slate unitholder approval.
• The portfolio adds roughly 15 million square feet of primarily grocery-anchored retail space, with assets concentrated in Brixmor’s existing Southeastern markets. Brixmor sees upside from below-market rents, small-shop leasing, redevelopment and other operational improvements, including about $100 million in identified redevelopment opportunities.
• Brixmor expects the transaction to be immediately accretive to funds from operations, adjusted funds from operations and free cash flow. It plans to invest about $1 billion using cash, debt and capital recycling while retaining a 20% joint-venture stake, a 9% preferred-equity investment and recurring management fees.

Brixmor Property Group NYSE: BRX said it has entered definitive agreements with Everview Partners to acquire Slate Grocery REIT, a Canadian-listed owner of U.S. grocery-anchored shopping centers, in a transaction valued at $2.34 billion.

Under the transaction structure, Brixmor will directly acquire 23 grocery-anchored shopping centers comprising about 3 million square feet for $636 million. A newly formed joint venture between Brixmor and affiliates of Everview will acquire the remaining 92 properties, totaling about 12 million square feet, for $1.71 billion.

Brixmor will hold a 20% interest in the joint venture, while Everview will own 80%. The company will serve as the venture’s asset manager, property manager and leasing representative, creating recurring fee income. Brixmor also plans to make a $174 million preferred-equity investment in the venture carrying a 9% dividend.

The transaction has been approved by Brixmor’s board and Slate’s board of trustees and is expected to close in the first quarter of 2027, subject to Slate unitholder approval and customary closing conditions.

Portfolio Focused on Grocery-Anchored Retail

CEO and President Brian Finnegan said the acquisition fits Brixmor’s strategy of investing in grocery-anchored, open-air retail centers and applying its leasing, redevelopment and operating platform to drive growth.

The 23 properties Brixmor will own outright are 96% leased and located entirely within the company’s current footprint, with concentrations in Florida, Georgia and the Carolinas. The portfolio is fully grocery anchored, with tenants including Publix, Harris Teeter and Kroger.

The joint venture’s 92 properties are 94% grocery anchored, and about 70% are located in markets where Brixmor already operates. Finnegan said the company expects to use its retailer relationships and leasing platform to pursue long-term net operating income growth across both portfolios consistent with Brixmor’s long-term 4% growth expectation.

Management cited several potential value-creation opportunities, including small-shop leasing, merchandising changes, rent growth, redevelopment, improved expense recoveries and specialty income. While the overall acquired portfolio is substantially occupied, Finnegan said small-shop occupancy is 88%, presenting an opportunity for improvement.

In-place rents across the portfolios average more than 30% below Brixmor’s current portfolio, management said, and several legacy anchor leases carry rents below $9 per square foot. Slate also generated mid-teens renewal growth in the past year and new-lease growth near 40%, according to Finnegan.

Redevelopment and Pricing

Brixmor identified about $100 million of redevelopment and outparcel-development opportunities in the directly acquired portfolio. Those projects include multiple Publix redevelopments in high-growth Southeastern markets, and Finnegan said the company expects to begin pursuing some opportunities immediately after closing.

The company characterized the overall transaction as priced at a low-7% yield. Finnegan said the directly acquired real estate carries a cap rate in the high-6% range, while the joint venture properties are priced at a low- to mid-7% cap rate. The yield on Brixmor’s overall investment includes the preferred-equity investment and a conservative estimate of recurring fee income, management said.

Chief Investment Officer Mark Horgan said the real estate yields discussed on the call were before fees and that Brixmor views the portfolio as attractively priced relative to current pricing for individual open-air retail assets. Finnegan also cited a purchase price of approximately $155 per square foot, which he said is below replacement cost.

The company said the transaction will be immediately accretive to Nareit funds from operations per share and accretive to adjusted funds from operations and free cash flow from day one. Management said it expects to provide more detailed accretion guidance when it issues 2027 guidance and closes the transaction.

Funding Plan and Joint Venture Leverage

Brixmor said it has sized its investment at approximately $1 billion, including its preferred-equity investment, to limit capital-markets dependency. The company has $1 billion in interim financing commitments and reported $1.5 billion of liquidity at the end of the second quarter.

The company expects to fund approximately $300 million with cash on hand, including $115 million of unsettled forward at-the-market proceeds. About $500 million is expected to come from debt, including roughly $95 million of assumed mortgages, while normal capital recycling is expected to fund the remainder. Brixmor said it does not expect to need to issue equity at current trading levels.

Finnegan said Brixmor intends to maintain leverage consistent with recent levels, targeting low- to mid-5-times debt to EBITDA in 2027. The joint venture will carry more leverage than Brixmor’s wholly owned balance sheet assets. Horgan said the venture is expected to assume about $513 million of mortgage debt with maturities into the 2030s and rates in the low-4% range, with overall joint venture leverage expected in the low-60% range.

While Brixmor does not plan to sell any of the 23 wholly owned assets, Finnegan said the joint venture may pursue some strategic dispositions as part of its business plan. He added that Brixmor does not expect adverse tax implications from the transaction.

Management said the joint venture structure enabled Brixmor to preserve financial flexibility while partnering with Everview, whose investment group includes ADIA. Finnegan said the structure also could provide Brixmor with potential future acquisition opportunities from the joint venture portfolio.

About Brixmor Property Group (NYSE:BRX)

Brixmor Property Group Inc NYSE: BRX is a real estate investment trust that owns and operates open-air shopping centers in the United States. Its properties are generally anchored by grocery stores and serve communities with a mix of essential retail, dining, service, and other consumer-oriented businesses.

The company's activities include leasing retail space, managing shopping-center operations, and investing in property redevelopment and improvements. Brixmor focuses on maintaining well-located centers and strengthening tenant mixes to support the long-term needs of the communities in which its properties are located.

Brixmor was formed in 2011 and became a publicly traded company in 2013.

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