Good day and welcome to the Brixmor Property Group Fourth Quarter 2015 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Stacy Slater, Senior Vice President Investor Relations. Please go ahead.

Thank you, operator and thank you all for joining Brixmor’s fourth quarter conference call. With me on the call today are Daniel Hurwitz, Interim Chief Executive Officer and Barry Lefkowitz, Interim Chief Financial Officer as well as other key executives including Michael Hyun, Chief Investment Officer; Brian Finnegan, Executive Vice President Leasing and Mike Cathers, Interim Chief Accounting Officer who will 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 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. Lastly, we ask that you please be mindful of your fellow call participants and limit your questions to one per person. If you have additional questions regarding today’s announcement, please re-queue. At this time, it’s my pleasure to introduce Dan Hurwitz.

Thank you, Stacy. Good morning and thank you all for joining us today. Let me start by recognizing all the individuals who worked diligently and with a great sense of urgency to ensure that we would reach the February 29th filing deadline without delay. It’s been a difficult three weeks, but the team work and professionalism has been extraordinary. Before I discuss financial and operating results I first like to describe the process behind our financial statements in response to the announcement on February 8th. Immediately following the announcement that highlighted the smoothing of quarterly same property NOI growth this company has been under extensive review by the audit teams from Ernst & Young and Deloitte. And due to the nature of the situation in addition to the audit review personnel, the forensic accounting teams of E&Y and Deloitte have also been involved in the process. Additionally it is important to keep in mind that the issue surrounding same property NOI and the detail set forth in the February 8th press release were the result of a separate third party audit firm’s analysis as retained by the audit committee of the Board of Directors. All of this work conducted by five independent review teams was also supervised by an outside law firm separate from our corporate counsel who is obviously also involved. The bottom-line is our fourth quarter and yearend financial statements have been reviewed and approved by two teams from E&Y, two teams from Deloitte, two law firms, one forensic accounting firm and hundreds of hours of hard work from internal personnel. The net result while immaterial to GAAP financial statements overall did impact same store NOI for Q4 2015. In regard to same property NOI for the fourth quarter, please understand that the focus of our work was…

Thanks, Dan. Good morning, everyone. I also look forward to helping navigate the company through this transition period. Let me start by saying that the company’s 10-K was filed on a timely basis and as expected in the information provided on February 8th given the industry reality of incorrect entries we were not required to restate prior periods’ financial results. As Dan elaborated in his remarks the level of systematic and independent review was substantial. In addition to the steps he outlined we also undertook an in depth assessment of balance sheet and income statement line items to define other potential risk areas. We then performed additional work to ensure that these other areas were not impacted. As a result of both our comprehensive internal reviews as well as the multiple external reviews the company has concluded that the errors did not mask a change in earnings or other trends, did not change a loss into income or vice-a-versa, did not affect compliance with regulatory requirements including REIT status, did not affect compliance with loan covenants or other contractual requirements and lastly did not involve the consumer of an unlawful transaction. While we are certainly pleased with these conclusions we did however report a material weakness in our internal controls over financial reporting. The weakness related specifically to the failure to demonstrate a commitment to integrity and ethical values and of senior level management to assess an appropriate tone at the top. We were currently working with our internal auditor PWC to assess this weakness and develop a remediation plan. These actions include increased communication and training to employees regarding ethical values of the company, legal requirements and compliance with codes of conduct and other policies. Additionally we are evaluating our organizational structure and assessing other internal controls to enhance…

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Craig Schmidt of Bank of America. Please go ahead.

Thank you and good morning. The percentage rents for same store NOI was down, I just wondered if perhaps you could provide some color on what happened to that number.

Sure Craig, one of the adjustments that we booked at year end was to reflect the change in methodology on the recognition of percentage rents. Essentially we’ve gone from an accrual basis to a cash basis and the effect of that entry was about $3.1 million in the fourth quarter.

And our next question, I’m sorry.

I was just going to say reduced income by $3.1 million to be clear.

Our next question comes from Steve Sakwa of Evercore ISI. Please go ahead.

Thanks, good morning. Dan I guess you sort of addressed some of these issues as did Barry, and I just want to try and get a little bit better handle in terms of kind of the material weakness and the things that you’re pursuing and looking at your processes and procedures have you built in to the guidance any potential extra cost for hiring more people, for changing the systems. And then I guess as that relates to the SEC investigation it sounds like you guys have done obviously a very thorough review internally. It sounds like their investigation is going to probably cover the same areas. I guess I’m just trying to understand sort of the outcome sort of what they would be looking at if it’s any different than what you guys have already done and ultimately does that come with monetary penalties potentially, or just trying to understand sort of the outcome of that.

Yes, it’s a good question, Steve, and we are having the same conversations with our counsel in regard to the SEC. At the present time we’ve had -- they’re doing an informal investigation and they’ve asked for voluntary request for information that we have provided. That’s all we really know at this point in time and they have the information that we have, they are looking at a lot of the exact information that Barry and I looked at and the auditors have looked at over time and where that goes is really on their timeframe, we can’t comment much more on that. In regard to our internal processes we have not assumed that we’re going to have material increase in our G&A or expenses as a result of the material weakness, we think that under the guidance and the assistance of Pricewaterhouse we’re working on a remediation plan that we’ll have in place in the next few months and then we’ll be able to execute over the next several months and test this time next year for efficiency. So we’re confident that that will take place. Clearly is already begun our cultural shift under Barry’s leadership and under the leadership of Mike Cathers both of which have spent an enormous amount of time with our accounting personnel so they understand where the weaknesses were, where the weakness may have been and how we intend to fix it.

And our next question comes from Alexander Goldfarb of Sandler O'Neill. Please go ahead.

Yes, hi, good morning. Dan and Barry, can you guys just talk a little bit about some of the preliminary conversations you’ve had with the banks, lenders and perhaps maybe even some of your current senior bond holders if they all are comfortable with what’s happened or if any of what’s transpired has caused some to either pull back from maybe lending or a little cautious if they were going to participate in another bond offering?

We’ve had a number of conversations with all the constituents that you just mentioned, Alex, and none of them have indicated concern about their continued interest in doing business with this company. In fact it’s been quite gratifying how many have come to the table and said, look we understand that particularly after we filed our necessary documents and the K, but we understand that this is behind you and we are with you and we are looking forward to helping you in any way we can. So we expect that we will have full cooperation from those constituents and that we will continue to work with them on the exact same strategy that was in place prior to February 8th.

Our next question comes from Michael Mueller of JP Morgan. Please go ahead.

Yes, hi, you talked a little bit about cost and just kind of the ramp up there can you talk a little bit about what you expect for ongoing cost related to the investigation, legal, the search and what may occur if it’s not embedded in guidance?

In regard to the investigation from our perspective investigation is over. The internal investigation and the work that we had to do and the millions of dollars that we spent to get to this point today is now behind us Michael. So there is -- we do not anticipate additional cost in that regard. From a legal perspective time will tell, I mean it’s premature to really comment on that, but obviously that will be public information at the time that it occurs and if it occurs and we will deal with it at that stage. But we do not have significant expenses in our numbers for 2016 as a result of what we announced on February 8th because we have concluded the investigation as we mentioned it has been determined to be immaterial, you see the information that’s before you and we are moving on.

Our next question comes from Jason White of Green Street Advisors. Please go ahead.

Hey guys, a quick question back to same store NOI growth kind of except for number that you provided the 3.6%, when we look at that is that comped on the as adjusted numbers based on the press release on February 8th or are those based on the previously published numbers? And are there true ups from basically three years in that adjusted number or can you kind of walk through what’s kind of in and out of annual 3.2% and what may have been left out of that?

Sure, essentially the net adjustments that affected NOI in the fourth quarter that were booked post February 8th were about $2 million, okay. Those are clearly immaterially less than a call it two-third of a penny to earnings. So they are clearly immaterial to the overall financial statement. But when you start to look at what the effect of those were on fourth quarter same store NOI remembering that same store NOI is in the mid $200 million range they are fairly significant to that smaller subset population that you’re looking at. So that’s kind of the effect and that’s one of the reasons why we didn’t necessarily published a number because it was going to be really apples and oranges in comparison to the other numbers as a result of that. And the comp was based on the comp for fourth quarter of the prior year that I just gave you which had some ins and outs in it and some adjustments and as you saw as was previously provided in the supplemental and also in the information that was provided in the February 8th disclosure.

Our next question comes from Rich Moore of RBC Capital. Please go ahead.

Hi, good morning guys. Dan it’s nice to hear your voice on a conference call again.

Thanks, Rich.

It strikes me that you guys might be a little liquidity constraint at this point. I mean you mentioned that refinancing the mortgages do this year would be kind of a life line I’m thinking. I think you’d prefer to unencumber those if you can. You can’t really issue equity, dispositions are later in the year, bond issuance probably later in the year. So are you sort of in cost control mode at this point, I mean maybe no acquisitions, lower investment in properties, that kind of thing?

Well let’s talk about the liquidity constraints; by no means we feel that we are liquidity constrained at all. We have about $900 million of debt that we’ve got to rollover. Net debt today is all secured at 5.6% rate, when you look at that debt you look at the underlying assets it’s about a 40% leverage rate on those. And there is significant demand for those kinds of assets in the secured market. That being said, our intention is to go unsecure with the refinancing there. Also you have to look we have on our credit facility we have around $800 million of availability currently. So in terms of available liquidity for us we are not concerned at all.

I think from an operational standpoint Rich; I’d be remised if I didn’t say we’re always conscious of cost. So cost control is important to us, but there is no situation that we are in currently that would inhibit us from executing our strategy whether it would be the repositioning strategy, the redevelopments of some of the assets or just the high velocity of tenant leases that we’re doing that requires tenant improvement dollars. So we do not feel at all as Barry mentioned that we are inhibited in any way by the financial position of this company to execute this strategy. And we think we are very favorably positioned to enter the market for the refinancings at the appropriate time.

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

Hi, thanks good morning. Dan just curious if you could talk about your desire if any and whether or not you’re having discussions with the Board about you taking on the more permanent role at Brixmor and ultimately, what’s the timeline look like to have a permanent executive team in place?

Hi Todd, thank you. The discussions we’re having with the Board right now are to find my replacement and to execute on a search as efficiently as possible as I mentioned without rushing to judgment and making sure we do the right thing. So we are all very committed to finding a permanent CEO, which is not me, and we have retained Kron Ferry as I mentioned they have commenced their work in the market. The timeframe is a little tough to pin down because as you know this is a large company, it’s an important company in the sector and we’re going to be highly selective. And the applicant pool out there has been impressive so far the reverse inquiry into this company has been impressive. But if I were a betting man I would tell you it’s going to be hard to execute this inside of three months and it will be probably closer to six months I would think to do it properly by the time we identify a series of candidates to go through the interview process and then you have a proper transition for that person to come in and assume the leadership role. So I would say between three and six months would be my guess and we are going to work real hard to get it done within that time frame.

Our next question comes from Michael Bilerman of Citi. Please go ahead.

Hey, good morning. It’s Michael Bilerman. Dan, I’m curious in the internal control report in the 10-K and I think you mentioned this also on the call talked about that senior management do not set an appropriate tone at the top and if you go back to the February call the sort of the question that I had asked about what tone did Mike C and/or Mike P sort of set where people would have to make such small adjustments to a non-GAAP measure and what did that tone on the top potentially influence across the organization. And so I wonder if you can sort of expand a little bit on that comment specifically this tone at the top and what else did it create and maybe elaborate on what effectively is trying to being implied by that comment in the 10-K.

Mike, I think our answer to you now is going to be similar to our answer that it was on February 8th, while it is clear to us that there was conduct that was not appropriate that led to the point we’re in now. I don’t think it’s constructive or necessary to go into the detail of what that was. I think the important thing is that we recognize what the problems were. We recognized that there was remediation that needed to occur. We put people in place who understand very clearly what our expectations are going forward and they are in the process of executing on those expectations and I feel confident that the people under various leadership particularly on the accounting side of the business and Mike’s leadership in our Conshohocken office understand that we have a very high ethical standard in how we are going to proceed and that certain things that may have been tolerated in the past will not be tolerated going forward. This has been clearly a shock to the system. There is a lot of employees in this company that have been impacted by it and we are moving and we are moving on in a constructive way recognizing what happened in the past, but also emphasizing what we need to do in the future to do things properly. So I feel very confident that we have remediation plan that is in the process of being formulated and that will be executed. We will not compromise on that remediation plan and under Barry and Mike’s direction I have every confidence to believe that the tone at the top has already changed and we’ll continue to change for the better over the time.

Our next question comes from Vincent Chao of Deutsche Bank. Please go ahead.

Hey, good morning everyone. Just wanted to go back to the disposition discussion here, you’ve heard many of your peers talk about increasing dispositions into a still attractive market here you guys have done the same. Just curious if there is any potential for an increase in that $75 million to $175 million base and what you are seeing in the markets and if there is any potential to pull up those dispositions it sounds like those are back half weighted? And then just curious if there is anything to read into in terms of your desire to sell assets today as it relates to future pricing.

Hey this is Mike Hyun. With regard to the dispositions, look in a portfolio of this size and scale it’s prudent to constantly reevaluate the assets to identify properties where leasing potential has been maximized or where we would expect slower growth going forward. So our intention is to recycle that capital into higher growth and higher yielding opportunities. We think that that guidance is right. It is weighted towards the back half I think we're sort of squarely, we think it will be in the middle, but we’ve given ourselves some room to either side of it depending on the outcomes, depending on where we see the capital markets environment. But I don’t see us going outside of that range at least right now.

Our next question comes from Jeff Donnelly of Wells Fargo. Please go ahead.

Good morning. First Barry in 2016 do you expect to report any severance legal accounting cost related to this issue to be folded into reported FFO and or will that be separated out as maybe a one-time item? And I guess as a follow-up to address the tone at the top question is there a chance you guys might look to bring your accounting out of Conshohocken back into New York City?

Thanks, Jeff. In terms of any cost associated with the review we would expect that we’ll disclose what those are as we incur them. As a technical matter it has to be included in FFO, but we clearly separated out so everybody understands what the effects were on NAREIT FFO for those numbers. As it pertains to location of the accounting group currently we’re reviewing everything, but don’t anticipate that a move back to New York is going to be appropriate.

Our next question comes from Floris van Dijkum of Boenning. Please go ahead.

Thank you good morning, guys.

Good morning.

Want to follow-up on the dispositions question that was post earlier Mike you indicated that you could look to redeploy the call it up to $175 million of dispositions this year back into new acquisitions would that occur this year or is this is a net dispositions number that we should expect for 2016?

We’re looking at this as a net dispositions number, I think as we alluded to earlier we think that the market is difficult today for acquisitions look the markets can change and so that perspective may change. We think that that’s we got the right perspective right now with the $125 million net in the midpoint, but I think right now we’ll redeploy that money into the redevelopment pipeline that we have today. We think that that’s the most attractive and prudent use of our capital.

Our next question comes from Ki Bin Kim of SunTrust. Please go ahead.

Thank you, good morning everyone. So if I heard you guys correctly it sounds like you guys have investigated more than just the same store NOI issue, so just two part question first, did you expand that investigation into the other non-GAAP measures like development yields or lease spreads and how those are reported? And second, is there something that you changed in policy not necessarily you have to restate anything or a big deal, but something that you came on board and said this is probably not the best way to do it let’s just change to redo things slightly differently like you just mentioned about change in the cash or the percentage of rent from accrual to cash basis things like that. Thanks there.

Sure it’s a good question. We’ve looked at some of the other non-GAAP non-financial statement type measures we’ve reviewed the methodology there. We believe it is appropriate. As you would expect as companies evolve and move forward it get involve in different things we will continue to refine those measures to make the more relevant to the investment community as we move forward. In terms of other policies and procedures that we may have that look at principally the one I would say is the one you just described, which was percentage rent where we moved away from the accrual method to more of a cash method in terms of recognition of that. Other than that there really wasn’t anything of substance that I would -- that’s noteworthy.

Our next question is from George Auerbach of Credit Suisse. Please go ahead.

Thanks. Just back to dispositions can you characterize the kinds of assets you intend to sell, expected cap rates on those sales and if you don’t sell those assets would there be any impact to the yearend lease rate or same store guidance from those assets that are still in the pool?

Hey this is Mike again. The assets that we’re looking to sell are ones where again we maximize the outcome the guys have done a great job over the past several years leasing up these assets to where we feel like they stabilized and where we would expect less growth going forward. So those are the type of assets that we are selling we are projecting right now a higher GAAP rate on these assets simply because they are in tertiary markets they are assets where we’ve maximized the growth. So people are buying the yield. So we’re anticipating a non-cap conservatively on these assets, but we’ll see how that works out over the course of the year.

Our next question is a follow up from Michael Mueller of JP Morgan. Please go ahead

Yes hi I was wondering as you looked at 2017, how much more do you see the non-cash rents burning off relative to the $50 million to $53 million for this year?

If you -- I don’t have that number handy with me would you mind if I follow-up with you separately?

Yes of course. Okay, thank you.

I’ll give you call after the call.

Our next question is a follow up from Jason White of Green Street Advisors. Please go ahead.

Hey, Barry. Just a quick follow-up on some of the adjustments in your same store NOI. On the February 8th press release, it looks like there about $500,000 of net NOI adjustments over the course of the last call it 2.5 years. Why was a $2 million adjustment necessary in 4Q ‘16 to kind a true up prior kind of in improprieties? And then secondly just as you -- the company looks down the road in same store NOI growth one of the selling points of the company has been that it will post above average same store NOI growth versus the peer group and then feels like that’s moderated now. It’s kind of a peer performer looking forward into ‘16. Is that something is the company looks down the road there is an expectation of kind of better than peer performance NOI growth or are we kind of reached the end of the road there?

Well in terms of adjustments as I mentioned before it was net kind of $2 million adjustment relative to all the numbers that got book in the fourth quarter. That reflects -- substantial portion of that was related to the percentage rent change that we talked about previously. In terms of same store NOI growth, I’ll let…

Jason hey this is Brian look we thought it was prudent to be somewhat conservative with potential upcoming tenant dislocation particularly in the sporting goods category as well as office supply. So if those things don’t materialize we have the ability to outperform and we’ll see how that progresses through the year.

Our next question is a follow from Michael Bilerman of Citi. Please go ahead

Great. I just had two quick follow-ups. So Dan in your opening comments you talked about the occupancy setbacks and you talked about taking a very hard look in investigation of your processes and your procedures taking a look at the organization structure and taking a look at the individual performance. And I’m just wondering if you can sort of go a little bit deeper into your review over the last month of sort of the leasing platform that you see at Brixmor and where there maybe opportunity where the company may not be firing on all cylinders. And how much if it’s a reflective of perhaps your view of the portfolio and maybe that’s [indiscernible] some dispositions versus things sort of left on the table. And then the second question was just on interest expense, Barry if you can just elaborate, I think you said in your opening comments $0.04 to $0.06 of refinancing savings. And I’m wondering if you can just break that out how much of that was the recent refinancings that were done in the fourth quarter versus what’s pending in ‘15 just as your bonds right now and arguably their credit spread are awfully wide your bonds are trading at high 5s, low 5s for six to nine year average duration. I’m just wondering what’s baked into that $0.04 to $0.06? Thank you.

Thanks, Mike. I’ll start with the question on the leasing. As part of my homework here obviously in order to give guidance, we had to spend a lot of time in the 2016 budget. And that is a ground of zero based budget. I was extraordinarily impressed with the budgeting process here at Brixmor because as a practical matter it is incredibly detailed and they were able to provide me with a lot of information. That being said, we need to lease more space, it’s really quite that simple. The occupancy rate at this portfolio from the small shop space and from the box space which is over 10,000 square feet needs to go up. And we are going to be looking at all different ways in which you do that whether it’s incentivizing our people, whether it’s processes, whether it’s tenant relationships, whether it’s leverage, whatever it takes, the organic growth potential in this portfolio is in the leasing of the portfolio when you have a grocery-anchored portfolio as solid as this is where like I mentioned you have average grocery sales of over 550 and you have 80% with the top one or two groceries in the portfolio. The occupancy level of this portfolio needs to lift. Now I understand that there are inhibitors to that particularly as it relates to boxes that come back to us through bankruptcy et cetera. But Brian and Michael Moss who runs the national account program are well aware that the expectations to fill those boxes swiftly, accretively, profitably is there and we are going to be looking to see how we can enhance the process, maybe streamline some of the internal approvals and get things done quicker because if you really look at what’s holding us back a little bit from a same store NOI growth standpoint it is our inability to grow the occupancy level of this portfolio, which I think we can improve upon and we should improve upon it.

Okay. As it pertains to interest rate savings, as you know we paid a little over $300 million towards the end of the year and we have slated refinancings for 2016 of about $900 million. So you basically pickup depend on what rate. So we figured what rate you think the refinancing gets done at, so we looked at it and we assume a 100 basis point spread between what the existing rate is on the debt versus what were slated to be financed into, that drives those assumptions drive that $0.04 to $0.06 interest saving for the year. Some of it is booked as we know because we’ve already refinanced or paid of some of the early debt and the rest of it is kind of back ended towards the third, fourth quarter in terms of the refinancing. And that’s how those numbers kind of work and depending on where rates are hopefully we can do better than 100 basis points spread at the existing rates. So there is some upside there potential.

Our next question comes from Linda Tsai of Barclays. Please go ahead.

Yes hi. Just a follow-up on the office supply and sporting goods stores comment in terms of some of those potentially going away. How much are you forecasting for these closures in ‘16 and how does that compared to the amount in ‘15?

Linda this is Brian. So we back filled, we lost seven office supply boxes in 2015, we actual re-leased 6 of them. Those will all come on line in 2016. So we did that some down time and cost associated with those boxes. At this point we are expecting to get two of our office supply boxes back in 2016. Those are good anchor re-positioning opportunities in good markets to upgrade both the use and the ABR per square-foot. In terms of sporting good category our exposure is relatively low for the sporting goods retailers that everybody is aware of that are in trouble. I would expect if we get a few of those boxes back those rents are under $10 a square-foot on particular to one sporting goods operator and we have the ability to upgrade those boxes. So we don’t expect much dislocation overall and again the boxes that we do back we have the ability to upgrade.

Our next question is a follow up from Vincent Chao of Deutsche Bank. Please go ahead.

Hey, good morning again guys. Just a question I know the internal review is now done and it’s come out fairly positive outcome from your perspective. Just curious though from a moral perspective, has there been any change among sort of the non-executive ranks and have you observed any abnormal turnover and do you anticipate any sort of increased level perhaps poaching by some of your competitors particularly of your leasing guys?

I will tell you that the overall moral of the company has been very strong. I think once you get through the initial shock wave that obviously repelled through the entire organization not just here and not in Philadelphia, but the regional offices. People settle down and went back to work and they went back to work in a way that really is commendable and admirable and I’ve been extremely impressed. We have been tracking your very question about whether we are loosing folks and the short answer is we haven’t and that’s the good news so far. I think it’s natural that when companies get into a situation like this that some of your competitors will try to poach some of the people because whenever there is internal dislocation it tends to be opportunity. We’ve seen that elsewhere in the business. But the truth is we haven’t seen any movement yet. We are going to monitor it very carefully. We are trying to create environment in which people can excel and are rewarded for their efforts. And hopefully that will be enough for us to keep all of our key people in place and execute on the strategy and I’m confident that people are excited about Brixmor. This is a very strong company and this is a good place to work and I think people recognize that and we are going to make sure that it continues to be a strong company and a good place to work.

And this concludes our question-and-answer session. I'd now like to turn the conference back over to Dan Hurwitz for any closing remarks.

Once again I want to thank everyone for their time and patience this morning. We covered a lot of ground and we all look forward to reporting on our continued progress in our various meetings and conversations that will occur over the next couple of months. So thank you again very much.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect your lines. Have a great day.