Edgar Filing: Brixmor Property Group Inc.

brx10q06302015

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q



þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2015



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from_____ to_____

Commission File Number: 001-36160 (Brixmor Property Group)

Commission File Number: 333-201464-01 (Brixmor Operating Partnership LP)

Brixmor Property Group Inc.

Brixmor Operating Partnership LP

(Exact Name of Registrant as Specified in Its Charter)



Maryland (Brixmor Property Group Inc.)		45-2433192
Delaware (Brixmor Operating Partnership LP)		80-0831163
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

420 Lexington Avenue, New York, New York 10170

(Address of Principal Executive Offices) (Zip Code)

212-869-3000

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Brixmor Property Group Inc. Yes þ No ¨ Brixmor Operating Partnership LP Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Brixmor Property Group Inc. Yes þ No ¨ Brixmor Operating Partnership LP Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting

company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.



Brixmor Property Group Inc.				Brixmor Operating Partnership LP
Large accelerated filer	þ	Non-accelerated filer	¨	Large accelerated filer	¨	Non-accelerated filer	þ
Smaller reporting company	¨	Accelerated filer	¨	Smaller reporting company	¨	Accelerated filer	¨
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Brixmor Property Group Inc. Yes ¨ No þ Brixmor Operating Partnership LP Yes ¨ No þ

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

As of July 1, 2015, Brixmor Property Group Inc. had 298,488,602 shares of common stock outstanding.

EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the period ended June 30, 2015 of Brixmor Property Group Inc. and Brixmor Operating Partnership LP. Unless stated otherwise or the context otherwise requires, references to the “Parent Company” or “BPG” mean Brixmor Property Group Inc. and its consolidated subsidiaries; and references to the “Operating Partnership” mean Brixmor Operating Partnership LP and its consolidated subsidiaries. The terms the “Company,” “Brixmor,” “we,” “our” and “us” mean the Parent Company and the Operating Partnership, collectively.

The Parent Company is a real estate investment trust (“REIT”) which owns 100% of the common stock of BPG Subsidiary Inc. (“BPG Sub”), which, in turn, is the sole owner of Brixmor OP GP LLC, or the General Partner, the sole general partner of the Operating Partnership. As of June 30, 2015, the Parent Company beneficially owned, through its direct and indirect interest in BPG Sub and the General Partner, approximately 98.1% of the outstanding partnership common units of interest (the “OP Units”) in the Operating Partnership. Certain investments funds affiliated with The Blackstone Group L.P. and certain current and former members of the Company’s management collectively owned the remaining 1.9% interest in the Operating Partnership.

The Company believes combining the quarterly reports on Form 10-Q of the Parent Company and the Operating Partnership into this single report provides the following benefits:


•	Enhances investors’ understanding of the Parent Company and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;


•	Eliminates duplicative disclosure and provides a more streamlined and readable presentation; and


•	Creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.

Management operates the Parent Company and the Operating Partnership as one business. The management of the Parent Company consists of the same individuals as the management of the Operating Partnership. These individuals are officers of both the Parent Company and the Operating Partnership.

We believe it is important to understand the few differences between the Parent Company and the Operating Partnership in the context of how the Parent Company and the Operating Partnership operate as a consolidated company. The Parent Company is a REIT, whose only material asset is its indirect interest in the Operating Partnership. As a result, the Parent Company does not conduct business itself other than issuing public equity from time to time. The Parent Company does not incur any material indebtedness. The Operating Partnership holds substantially all of our assets. Except for net proceeds from public equity issuances by the Parent Company, which are contributed to the Operating Partnership in exchange for OP Units, the Operating Partnership generates all remaining capital required by the Company’s business. Sources of this capital include the Operating Partnership’s operations, its direct or indirect incurrence of indebtedness, and the issuance of OP Units.

Stockholders’ equity, partners’ capital, and non-controlling interests are the primary areas of difference between the unaudited condensed consolidated financial statements of the Parent Company and those of the Operating Partnership. The Operating Partnership’s capital includes OP Units owned by the Parent Company through BPG Sub and the General Partner as well as OP Units owned by certain investments funds affiliated with The Blackstone Group L.P. and certain current and former members of the our management. OP Units owned by third parties are accounted for in partners’ capital in the Operating Partnership’s financial statements and outside of stockholders’ equity in non-controlling interests in the Parent Company’s financial statements.

In order to highlight the differences between the Parent Company and the Operating Partnership, there are sections in this report that separately discuss the Parent Company and the Operating Partnership, including separate financial statements (but combined footnotes), separate controls and procedures sections, separate certification of periodic report under Section 302 of the Sarbanes-Oxley Act of 2002 and separate certification pursuant to 18 U.S.C Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. In the sections that combine disclosure for the Parent Company and the Operating Partnership, this report refers to actions or holdings as being actions or holdings of the Company.

The Parent Company consolidates the Operating Partnership for financial reporting purposes, and the Parent Company does not have material assets other than its indirect investment in the Operating Partnership. Therefore, while stockholders’ equity and partners’ capital differ as discussed above, the assets and liabilities of the Parent Company and the Operating Partnership are materially the same on their respective financial statements.

TABLE OF CONTENTS



Item No.		Page
Part I - FINANCIAL INFORMATION
1.	Financial Statements	5
	Brixmor Property Group Inc. (unaudited)
	Condensed Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014	5
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2015 and 2014	6
	Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2015 and 2014	7
	Condensed Consolidated Statements of Changes in Equity for the Six Months Ended June 30, 2015 and 2014	8
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2015 and 2014	9
	Brixmor Operating Partnership LP (unaudited)
	Condensed Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014	10
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2015 and 2014	11
	Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2015 and 2014	12
	Condensed Consolidated Statements of Changes in Capital for the Six Months Ended June 30, 2015 and 2014	13
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2015 and 2014	14
	Brixmor Property Group Inc. and Brixmor Operating Partnership (unaudited)
	Notes to Condensed Consolidated Financial Statements	15
2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	27
3.	Quantitative and Qualitative Disclosures about Market Risk	41
4.	Controls and Procedures	41
Part II - OTHER INFORMATION
1.	Legal Proceedings	42
1A.	Risk Factors	42
2.	Unregistered Sales of Equity Securities and Use of Proceeds	42
3.	Defaults Upon Senior Securities	42
4.	Mine Safety Disclosures	42
5.	Other Information	42
6.	Exhibits	43

- 3 -

Forward-Looking Statements

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 which reflect our current views with respect to, among other things, our operations and financial performance. You can identify these forward-looking statements by the use of words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates,” “targets” or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. We believe these factors include but are not limited to those described under the section entitled “Risk Factors” in our Form 10-K for the year ended December 31, 2014, as such factors may be updated from time to time in our periodic filings with the Securities and Exchange Commission (the “SEC”), which are accessible on the SEC’s website at www.sec.gov. These factors include (1) changes in national, regional or local economic climates; (2) local conditions, including an oversupply of space in, or a reduction in demand for, properties similar to those in our Portfolio; (3) the attractiveness of properties in our Portfolio to our tenants; (4) the financial stability of tenants, including the ability of tenants to pay rents and expense reimbursements; (5) in the case of percentage rents, our tenants’ sales volumes; (6) competition from other available properties; (7) changes in market rental rates; and (8) changes in the regional demographics of our properties. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this report and in our other periodic filings. The forward-looking statements speak only as of the date of this report, and we expressly disclaim any obligation or undertaking to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except to the extent otherwise required by law.

- 4 -

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements



BRIXMOR PROPERTY GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except share information)
	June 30, 2015			December 31, 2014
Assets
Real estate
Land	$	2,008,601		$	2,000,415
Buildings and improvements	8,870,376			8,801,834
	10,878,977			10,802,249
Accumulated depreciation and amortization	(1,711,841		)	(1,549,234		)
Real estate, net	9,167,136			9,253,015

Investments in and advances to unconsolidated joint ventures	5,039			5,072
Cash and cash equivalents	42,735			60,595
Restricted cash	61,163			53,164
Marketable securities	20,034			20,315
Receivables, net of allowance for doubtful accounts of $13,435 and $14,070	169,359			182,424
Deferred charges and prepaid expenses, net	97,923			94,269
Other assets	14,115			13,059
Total assets	$	9,577,504		$	9,681,913


Liabilities
Debt obligations, net	$	5,998,651		$	6,022,508
Accounts payable, accrued expenses and other liabilities	636,610			679,102
Total liabilities	6,635,261			6,701,610

Commitments and contingencies (Note 12)

Equity
Common stock, $0.01 par value; authorized 3,000,000,000 shares; 298,488,602 and 296,552,142 shares outstanding	2,985			2,966
Additional paid in capital	3,257,439			3,223,941
Accumulated other comprehensive loss	(6,136		)	(4,435		)
Distributions in excess of net income/loss	(369,194		)	(318,762		)
Total stockholders’ equity	2,885,094			2,903,710
Non-controlling interests	57,149			76,593
Total equity	2,942,243			2,980,303
Total liabilities and equity	$	9,577,504		$	9,681,913
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

- 5 -



BRIXMOR PROPERTY GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)
	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Revenues
Rental income	$	244,030		$	239,987		$	487,600		$	477,154
Expense reimbursements	65,512			65,655			135,266			134,251
Other revenues	2,569			2,307			4,538			4,120
Total revenues	312,111			307,949			627,404			615,525

Operating expenses
Operating costs	30,667			31,889			65,827			66,764
Real estate taxes	43,974			43,812			88,163			88,246
Depreciation and amortization	104,441			109,600			212,985			222,820
Provision for doubtful accounts	2,525			2,980			5,020			5,846
Impairment of real estate assets	—			—			807			—
General and administrative	20,285			19,939			51,000			39,597
Total operating expenses	201,892			208,220			423,802			423,273

Other income (expense)
Dividends and interest	90			159			184			267
Interest expense	(62,158		)	(65,953		)	(124,722		)	(133,919		)
Gain on sale of real estate assets	9,224			—			9,224			378
Gain (loss) on extinguishment of debt, net	493			(757		)	785			(3,033		)
Other	(2,811		)	(1,969		)	(2,995		)	(4,130		)
Total other expense	(55,162		)	(68,520		)	(117,524		)	(140,437		)

Income before equity in income of unconsolidated joint ventures	55,057			31,209			86,078			51,815
Equity in income of unconsolidated joint ventures	110			71			225			136
Gain on disposition of investments in unconsolidated joint ventures	—			—			—			1,820
Income from continuing operations	55,167			31,280			86,303			53,771

Discontinued operations
Income from discontinued operations	—			18			—			4,841
Gain on disposition of operating properties	—			—			—			14,426
Income from discontinued operations	—			18			—			19,267

Net income	55,167			31,298			86,303			73,038

Net income attributable to non-controlling interests	(1,055		)	(7,825		)	(1,768		)	(34,164		)

Net income attributable to common stockholders	$	54,112		$	23,473		$	84,535		$	38,874
Per common share:
Income from continuing operations:
Basic	$	0.18		$	0.10		$	0.28		$	0.17
Diluted	$	0.18		$	0.10		$	0.28		$	0.17
Net income attributable to common stockholders:
Basic	$	0.18		$	0.10		$	0.28		$	0.17
Diluted	$	0.18		$	0.10		$	0.28		$	0.17
Weighted average shares:
Basic	298,464			228,978			297,332			228,547
Diluted	298,994			230,469			304,719			229,907
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

- 6 -



BRIXMOR PROPERTY GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited, in thousands)
	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Net income	$	55,167		$	31,298		$	86,303		$	73,038
Other comprehensive income (loss)
Unrealized loss on interest rate hedges	(1,772		)	(4,264		)	(6,673		)	(6,530		)
Amortization of interest rate swaps to interest expense	2,490			2,490			4,954			4,954
Unrealized gain (loss) on marketable securities	(16		)	17			18			23
Total other comprehensive income (loss)	702			(1,757		)	(1,701		)	(1,553		)
Comprehensive income	55,869			29,541			84,602			71,485
Comprehensive income attributable to non-controlling interests	(1,055		)	(7,825		)	(1,768		)	(34,164		)
Comprehensive income attributable to the Company	$	54,814		$	21,716		$	82,834		$	37,321
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

- 7 -



BRIXMOR PROPERTY GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(Unaudited, in thousands)
	Common Stock
	Number	Amount		Additional Paid in Capital			Accumulated Other Comprehensive Loss			Distributions in Excess of Net Income/Loss			Non-controlling Interests			Total
Beginning balance, January 1, 2014	229,689	$	2,297	$	2,543,690		$	(6,812	)	$	(196,707	)	$	942,052		$	3,284,520
Common stock dividends ($0.40 per common share)	—	—		—			—			(95,134		)	—			(95,134		)
Distributions to non-controlling interests	—	—		—			—			—			(26,753		)	(26,753		)
Redemption of Series A	—	—		6,222			—			—			(201,400		)	(195,178		)
Equity based compensation expense	—	—		3,876			—			—			1,247			5,123
Acquisition of non-controlling interests	—	—		437			—			—			(1,437		)	(1,000		)
Other comprehensive loss	—	—		—			(1,553		)	—			—			(1,553		)
Conversion of Operating Partnership units and BPG Sub shares into common stock	15,406	154		155,086			—			—			(155,240		)	—
Net income	—	—		—			—			38,874			33,520			72,394
Ending balance, June 30, 2014	245,095	$	2,451	$	2,709,311		$	(8,365	)	$	(252,967	)	$	591,989		$	3,042,419

Beginning balance, January 1, 2015	296,552	$	2,966	$	3,223,941		$	(4,435	)	$	(318,762	)	$	76,593		$	2,980,303
Common stock dividends ($0.450 per common share)	—	—		—			—			(134,967		)	—			(134,967		)
Distributions to non-controlling interests	—	—		—			—			—			(2,835		)	(2,835		)
Equity based compensation expense	—	—		15,201			—			—			347			15,548
Issuance of common stock and OP Units	33	—		(743		)	—			—			765			22
Other comprehensive loss	—	—		—			(1,701		)	—			—			(1,701		)
Conversion of Operating Partnership units into common stock	1,903	19		19,470			—			—			(19,489		)	—
Shared-based awards retained for taxes	—	—		(430		)	—			—			—			(430		)
Net income	—	—		—			—			84,535			1,768			86,303
Ending balance, June 30, 2015	298,488	$	2,985	$	3,257,439		$	(6,136	)	$	(369,194	)	$	57,149		$	2,942,243
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

- 8 -



BRIXMOR PROPERTY GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
	Six Months Ended June 30,
	2015			2014
Operating activities:
Net income	$	86,303		$	73,038
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	212,985			223,364
Debt premium and discount amortization	(9,859		)	(10,547		)
Deferred financing cost amortization	4,090			4,656
Above- and below-market lease intangible amortization	(24,437		)	(23,181		)
Provisions for impairment	807			—
Gain on disposition of operating properties, disposition of investments in unconsolidated joint ventures and acquisition of joint venture interest	(9,224		)	(16,624		)
Equity based compensation	15,548			5,123
Other	90			(113		)
Gain on extinguishment of debt, net	(795		)	(3,783		)
Changes in operating assets and liabilities:
Restricted cash	(8,863		)	6,168
Receivables	13,057			6,064
Deferred charges and prepaid expenses	(11,545		)	(16,867		)
Other assets	(253		)	330
Accounts payable, accrued expenses and other liabilities	3,489			(28,988		)
Net cash provided by operating activities	271,393			218,640

Investing activities:
Improvements to and investments in real estate assets	(97,875		)	(88,794		)
Acquisitions of real estate assets	(52,278		)	—
Proceeds from sales of real estate assets	41,795			2,778
Distributions from unconsolidated joint venture	—			187
Change in restricted cash attributable to investing activities	864			3,473
Purchase of marketable securities	(9,651		)	(19,604		)
Proceeds from sale of marketable securities	9,905			20,085
Net cash used in investing activities	(107,240		)	(81,875		)

Financing activities:
Repayment of debt obligations and financing liabilities	(495,437		)	(815,089		)
Repayment of borrowings under unsecured revolving credit facility	(682,475		)	(655,047		)
Proceeds from borrowings under unsecured revolving credit facility	460,000			802,343
Proceeds from unsecured term loan and notes	695,156			600,000
Deferred financing costs	(1,899		)	(2,995		)
Distributions to common stockholders	(134,238		)	(75,109		)
Distributions to non-controlling interests	(23,120		)	(42,953		)
Net cash used in financing activities	(182,013		)	(188,850		)

Change in cash and cash equivalents	(17,860		)	(52,085		)
Cash and cash equivalents at beginning of period	60,595			113,915
Cash and cash equivalents at end of period	$	42,735		$	61,830

Supplemental disclosure of cash flow information:
Cash paid for interest, net of amount capitalized of $1,475 and $1,627	$	117,687		$	143,619
Supplemental non-cash investing and/or financing activities:
Net carrying value of properties distributed to non-controlling owners	$	—		$	178,969
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

- 9 -



BRIXMOR OPERATING PARTNERSHIP LP AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands, except unit information)
	June 30, 2015			December 31, 2014
Assets
Real estate
Land	$	2,008,601		$	2,000,415
Buildings and improvements	8,870,376			8,801,834
	10,878,977			10,802,249
Accumulated depreciation and amortization	(1,711,841		)	(1,549,234		)
Real estate, net	9,167,136			9,253,015

Investments in and advances to unconsolidated joint ventures	5,039			5,072
Cash and cash equivalents	42,697			60,450
Restricted cash	61,163			53,164
Marketable securities	19,824			20,113
Receivables, net of allowance for doubtful accounts of $13,435 and $14,070	169,359			182,424
Deferred charges and prepaid expenses, net	97,923			94,269
Other assets	14,115			13,059
Total assets	$	9,577,256		$	9,681,566


Liabilities
Debt obligations, net	$	5,998,651		$	6,022,508
Accounts payable, accrued expenses and other liabilities	636,610			679,102
Total liabilities	6,635,261			6,701,610

Commitments and contingencies (Note 12)

Capital
Partnership common units: 304,302,444 and 304,246,750 units outstanding	2,948,120			2,984,381
Accumulated other comprehensive loss	(6,125		)	(4,425		)
Total capital	2,941,995			2,979,956
Total liabilities and capital	$	9,577,256		$	9,681,566
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

- 10 -



BRIXMOR OPERATING PARTNERSHIP LP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per unit data)
	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Revenues
Rental income	$	244,030		$	239,987		$	487,600		$	477,154
Expense reimbursements	65,512			65,655			135,266			134,251
Other revenues	2,569			2,307			4,538			4,120
Total revenues	312,111			307,949			627,404			615,525

Operating expenses
Operating costs	30,667			31,889			65,827			66,764
Real estate taxes	43,974			43,812			88,163			88,246
Depreciation and amortization	104,441			109,600			212,985			222,820
Provision for doubtful accounts	2,525			2,980			5,020			5,846
Impairment of real estate assets	—			—			807			—
General and administrative	20,285			19,939			51,000			39,597
Total operating expenses	201,892			208,220			423,802			423,273

Other income (expense)
Dividends and interest	90			159			184			267
Interest expense	(62,158		)	(65,953		)	(124,722		)	(133,919		)
Gain on sale of real estate assets	9,224			—			9,224			378
Gain (loss) on extinguishment of debt, net	493			(757		)	785			(3,033		)
Other	(2,811		)	(1,969		)	(2,995		)	(4,130		)
Total other expense	(55,162		)	(68,520		)	(117,524		)	(140,437		)

Income before equity in income of unconsolidated joint ventures	55,057			31,209			86,078			51,815
Equity in income of unconsolidated joint ventures	110			71			225			136
Gain on disposition of investments in unconsolidated joint ventures	—			—			—			1,820
Income from continuing operations	55,167			31,280			86,303			53,771

Discontinued operations
Income from discontinued operations	—			18			—			4,841
Gain on disposition of operating properties	—			—			—			14,426
Income from discontinued operations	—			18			—			19,267

Net income	55,167			31,298			86,303			73,038

Net income attributable to non-controlling interests	—			(322		)	—			(644		)

Net income attributable to Brixmor Operating Partnership LP	$	55,167		$	30,976		$	86,303		$	72,394
Net income attributable to:
Series A interest	$	—		$	—		$	—		$	21,014
Partnership common units	55,167			30,976			86,303			51,380
Net income attributable to Brixmor Operating Partnership LP	$	55,167		$	30,976		$	86,303		$	72,394
Per common unit:
Income from continuing operations:
Basic	$	0.18		$	0.10		$	0.28		$	0.17
Diluted	$	0.18		$	0.10		$	0.28		$	0.17
Net income attributable to partnership common units:
Basic	$	0.18		$	0.10		$	0.28		$	0.17
Diluted	$	0.18		$	0.10		$	0.28		$	0.17
Weighted average number of partnership common units:
Basic	304,283			302,173			303,710			302,161
Diluted	304,813			303,664			304,719			303,521
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

- 11 -



BRIXMOR OPERATING PARTNERSHIP LP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited, in thousands)
	Three Months Ended June 30,						Six Months Ended June 30,
	2015			2014			2015			2014
Net income	$	55,167		$	31,298		$	86,303		$	73,038
Other comprehensive income (loss)
Unrealized loss on interest rate hedges	(1,772		)	(4,264		)	(6,673		)	(6,530		)
Amortization of interest rate swaps to interest expense	2,490			2,490			4,954			4,954
Unrealized gain on marketable securities	(12		)	14			19			18
Total other comprehensive income (loss)	706			(1,760		)	(1,700		)	(1,558		)
Comprehensive income	55,873			29,538			84,603			71,480
Comprehensive income attributable to non-controlling interests	—			(322		)	—			(644		)
Comprehensive income attributable to Brixmor Operating Partnership LP	$	55,873		$	29,216		$	84,603		$	70,836
Comprehensive income attributable to:
Series A interest	$	—		$	—		$	—		$	21,014
Partnership common units	55,873			29,216			84,603			49,822
Comprehensive income attributable to Brixmor Operating Partnership LP	$	55,873		$	29,216		$	84,603		$	70,836
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

- 12 -



BRIXMOR OPERATING PARTNERSHIP LP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN CAPITAL
(Unaudited, in thousands)

	Partnership Common Units			Series A Interest			Accumulated Other Comprehensive Loss			Non-controlling Interests			Total
Beginning balance, January 1, 2014	$	3,108,398		$	180,386		$	(6,797	)	$	1,437		$	3,283,424
Distributions to partners	(121,135		)	—			—			—			(121,135		)
Redemption of Series A interest	6,222			(201,400		)	—			—			(195,178		)
Equity based compensation expense	5,123			—			—			—			5,123
Acquisition of non-controlling interests	437			—			—			(1,437		)	(1,000		)
Other comprehensive loss	—			—			(1,558		)	—			(1,558		)
Net income	51,380			21,014			—			—			72,394
Ending balance, June 30, 2014	$	3,050,425		$	—		$	(8,355	)	$	—		$	3,042,070

Beginning balance, January 1, 2015	$	2,984,381		$	—		$	(4,425	)	$	—		$	2,979,956
Distributions to partners	(137,704		)	—			—			—			(137,704		)
Equity based compensation expense	15,548			—			—			—			15,548
Other comprehensive loss	—			—			(1,700		)	—			(1,700		)
Issuance of OP Units	22						—						22
Share-based awards retained for taxes	(430		)	—			—			—			(430		)
Net income	86,303			—			—			—			86,303
Ending balance, June 30, 2015	$	2,948,120		$	—		$	(6,125	)	$	—		$	2,941,995
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

- 13 -



BRIXMOR OPERATING PARTNERSHIP LP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
	Six Months Ended June 30,
	2015			2014
Operating activities:
Net income	$	86,303		$	73,038
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	212,985			223,364
Debt premium and discount amortization	(9,859		)	(10,547		)
Deferred financing cost amortization	4,090			4,656
Above- and below-market lease intangible amortization	(24,437		)	(23,181		)
Provisions for impairment	807			—
Gain on disposition of operating properties, disposition of investments in unconsolidated joint ventures and acquisition of joint venture interest	(9,224		)	(16,624		)
Equity based compensation	15,548			5,123
Other	90			(113		)
Gain on extinguishment of debt, net	(795		)	(3,783		)
Changes in operating assets and liabilities:
Restricted cash	(8,863		)	6,168
Receivables	13,057			6,064
Deferred charges and prepaid expenses	(11,545		)	(16,867		)
Other assets	(253		)	330
Accounts payable, accrued expenses and other liabilities	3,491			(28,991		)
Net cash provided by operating activities	271,395			218,637

Investing activities:
Improvements to and investments in real estate assets	(97,875		)	(88,794		)
Acquisitions of real estate assets	(52,278		)	—
Proceeds from sales of real estate assets	41,795			2,778
Distributions from unconsolidated joint venture	—			187
Change in restricted cash attributable to investing activities	864			3,473
Purchase of marketable securities	(9,649		)	(19,597		)
Proceeds from sale of marketable securities	9,905			20,085
Net cash used in investing activities	(107,238		)	(81,868		)

Financing activities:
Repayment of debt obligations and financing liabilities	(495,437		)	(815,089		)
Repayment of borrowings under unsecured revolving credit facility	(682,475		)	(655,047		)
Proceeds from borrowings under unsecured revolving credit facility	460,000			802,343
Proceeds from unsecured term loan and notes	695,156			600,000
Deferred financing costs	(1,899		)	(2,995		)
Partner distributions	(137,384		)	(116,663		)
Distributions to non-controlling interests	(19,871		)	(644		)
Net cash used in financing activities	(181,910		)	(188,095		)

Change in cash and cash equivalents	(17,753		)	(51,326		)
Cash and cash equivalents at beginning of period	60,450			113,006
Cash and cash equivalents at end of period	$	42,697		$	61,680

Supplemental disclosure of cash flow information:
Cash paid for interest, net of amount capitalized of $1,475 and $1,627	$	117,687		$	143,619
Supplemental non-cash investing and/or financing activities:
Net carrying value of properties distributed to non-controlling owners	$	—		$	178,969
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

- 14 -

BRIXMOR PROPERTY GROUP INC. AND BRIXMOR OPERATING PARTNERSHIP LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, in thousands, unless otherwise stated)

1. Nature of Business and Financial Statement Presentation

Description of Business

Brixmor Property Group Inc. and subsidiaries (collectively, the “Parent Company”) is an internally-managed REIT. Brixmor Operating Partnership LP and subsidiaries (collectively, the “Operating Partnership”) is the entity through which the Parent Company conducts substantially all of its operations and owns substantially all of its assets. The Parent Company owns 100% of the common stock of BPG Subsidiary Inc. (“BPG Sub”), which, in turn, is the sole member of Brixmor OP GP LLC (the “General Partner”), the sole general partner of the Operating Partnership. The Parent Company engages in the ownership, management, leasing, acquisition and development of retail shopping centers through the Operating Partnership, and has no other substantial assets or liabilities other than through its investment in the Operating Partnership. The Parent Company, the Operating Partnership and their controlled subsidiaries on a consolidated basis (collectively the “Company” or “Brixmor”) owns and operates the largest wholly-owned portfolio of grocery-anchored community and neighborhood shopping centers in the United States.

As of June 30, 2015, the Parent Company beneficially owned, through its direct and indirect interest in BPG Sub and the General Partner, 98.1% of the outstanding partnership common units of interest in the Operating Partnership (“OP Units”). Certain investments funds affiliated with The Blackstone Group L.P. (together with such affiliated funds, “Blackstone”) and certain members of the Parent Company’s current and former management collectively owned the remaining 1.9% of the outstanding OP Units. Holders of OP Units (other than the Parent Company, BPG Sub and the General Partner) may redeem their OP Units for cash based upon the market value of an equivalent number of shares of the Parent Company’s common stock or, at the Parent Company’s election, exchange their OP Units for shares of the Parent Company’s common stock on a one-for-one basis subject to customary conversion rate adjustments for splits, unit distributions and reclassifications. The number of OP Units in the Operating Partnership beneficially owned by the Parent Company is equivalent to the number of outstanding shares of the Parent Company’s common stock, and the entitlement of all OP Units to quarterly distributions and payments in liquidation is substantially the same as those of the Parent Company’s common stockholders.

The Company does not distinguish its principal business or group its operations on a geographical basis for purposes of measuring performance. Accordingly, the Company believes it has a single reportable segment for disclosure purposes in accordance with U.S. generally accepted accounting principles (“GAAP”).

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for the fair presentation of the unaudited Condensed Consolidated Financial Statements for the periods presented have been included. The operating results for the periods presented are not necessarily indicative of the results that may be expected for a full fiscal year. These financial statements should be read in conjunction with the financial statements for the year ended December 31, 2014 and accompanying notes included in the Company's annual report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 19, 2015.

Certain prior period balances in the accompanying unaudited Condensed Consolidated Statements of Operations have been reclassified to conform to the current period presentation for the results of discontinued operations and certain prior period balances in the accompanying unaudited Condensed Consolidated Balance Sheets have been reclassified to conform to the current period presentation for the adoption of Accounting Standards Update (“ASU”) 2015-13,“Interest - Imputation of Interest (Topic 835): Simplifying the Presentation of Debt Issuance Costs.”

Principles of Consolidation

The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of the Parent Company, the Operating Partnership, each of their wholly owned subsidiaries and all other entities in which they have a controlling financial interest. The portions of consolidated entities not owned by the Parent Company and the Operating

- 15 -

Partnership are presented as non-controlling interests as of and during the periods presented. All intercompany transactions have been eliminated.

Subsequent Events

In preparing the unaudited Condensed Consolidated Financial Statements, the Company has evaluated events and transactions occurring after June 30, 2015 for recognition or disclosure purposes. Based on this evaluation, there were no subsequent events from June 30, 2015 through the date the financial statements were issued.

Income Taxes

The Parent Company has elected to qualify as a REIT in accordance with the Internal Revenue Code (the “Code”). To qualify as a REIT, the Parent Company must meet a number of organizational and operational requirements, including a requirement that it currently distribute at least 90% of its adjusted REIT taxable income to its stockholders. It is management’s intention to adhere to these requirements and maintain the Parent Company’s REIT status.

As a REIT, the Parent Company generally will not be subject to federal income tax, provided that distributions to its stockholders equal at least the amount of its REIT taxable income as defined under the Code. If the Parent Company fails to qualify as a REIT in any taxable year, it will be subject to federal taxes at regular corporate rates (including any applicable alternative minimum tax) and may not be able to qualify as a REIT for four subsequent taxable years.

The Parent Company does not have any taxable REIT subsidiaries, but may in the future elect to treat newly formed subsidiaries as taxable REIT subsidiaries which would be subject to income tax. Taxable REIT subsidiaries may participate in non-real estate-related activities and/or perform non-customary services for tenants and are subject to United States federal and state income tax at regular corporate tax rates.

The Operating Partnership is organized as a limited partnership and is generally not subject to federal income tax. Accordingly, no provision for federal income taxes has been reflected in the accompanying unaudited Condensed Consolidated Financial Statements. The Operating Partnership, however, may be subject to certain state and local income taxes or franchise taxes.

The Company has analyzed the tax position taken on income tax returns for the open 2012 through 2014 tax years and has concluded that no provision for income taxes related to uncertain tax positions is required in the Company’s unaudited Condensed Consolidated Financial Statements as of June 30, 2015 and December 31, 2014.

New Accounting Pronouncements

In April 2015, the Financial Accounting Standards Board ("FASB") issued ASU 2015-03, “Interest - Imputation of Interest (Topic 835): Simplifying the Presentation of Debt Issuance Costs.” ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this update. ASU 2015-03 is effective for annual reporting periods beginning after December 15, 2015. Early adoption is permitted. The Company elected to early adopt ASU 2015-03 beginning with the period ending June 30, 2015 (see Note 6). The adoption of ASU 2015-03 did not have a material impact on the Company’s financial position or results of operations.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers.” ASU No. 2014-09 contains a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The guidance in ASU No. 2014-09 affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. For public entities, ASU No. 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early application is not permitted. The Company is currently in the process of evaluating the impact the adoption of ASU No. 2014-09 will have on the unaudited Condensed Consolidated Financial Statements of the Company.

- 16 -

Any other recently issued accounting standards or pronouncements not disclosed above have been excluded as they either are not relevant to the Company, or they are not expected to have a material effect on the unaudited Condensed Consolidated Financial Statements of the Company.

2. Acquisition of Real Estate

During the three and six months ended June 30, 2015, the Company acquired the following properties, in separate transactions (dollars in thousands):



			Purchase Price
Property Name	Location	Month Acquired	Cash		Debt Assumed		Total		GLA
Retail Building at Bardin Place Center	Arlington, TX	Jun-15	$	9,258	$	—	$	9,258	96,127
Larchmont Centre	Mt. Laurel, NJ	Jun-15	11,000		7,000		18,000		103,787
Webster Square Shopping Center	Marshfield, MA	Jun-15	31,950		—		31,950		182,756
			$	52,208	$	7,000	$	59,208	382,670

The purchase price for these acquisitions has been preliminarily allocated to real estate and related intangible assets acquired and liabilities assumed, as applicable, in accordance with our accounting policies for business combinations. The purchase price allocations and related accounting will be finalized after the Company’s valuation studies are complete. The aggregate purchase price of the properties acquired during the six months ended June 30, 2015, has been preliminarily allocated as follows:



Assets
		Land	$	12,924
		Buildings	35,640
		Building Improvements	4,634
		Tenant Improvements	2,273
		Above Market Rents	120
		In-Place Leases	4,010
	Real estate, net		59,601
	Deferred charges and prepaid expenses, net		1,787
Total assets			61,388

Liabilities
		Mortgage payable	$	7,000
		Mortgage Fair Value Adjustment	440
	Debt obligations, net		7,440
	Accounts payable, accrued expenses and other liabilities (Below Market Leases)		1,740
Total liabilities			9,180
Net Assets Acquired			$	52,208

The real estate operations acquired were not considered material to the Company, individually or in the aggregate, and therefore pro forma financial information is not necessary.

During each of the three and six months ended June 30, 2015, the Company incurred $1.5 million of acquisition related expenses and are included in Other in the unaudited Condensed Consolidated Statements of Operations.

3. Disposals, Discontinued Operations and Assets Held for Sale

During the three months ended June 30, 2015, the Company disposed of three shopping centers and two outparcels for net proceeds of $31.9 million resulting in an aggregate gain of $9.2 million.

During the six months ended June 30, 2015, the Company disposed of four shopping centers and two outparcels for net proceeds of $41.8 million resulting in an aggregate gain of $9.2 million and an aggregate impairment of $0.8 million.

- 17 -

The impairment charge was based upon the sales price in the signed contract with the third party buyer, adjusted to reflect associated disposition costs. These inputs are classified as Level 3 of the fair value hierarchy.

The Company had no properties held for sale as of June 30, 2015.

As a result of adopting ASU No. 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity,” there were no discontinued operations for the three and six months ended June 30, 2015 as none of the current year disposals represented a strategic shift in the Company’s business that would qualify as discontinued operations. The following table provides a summary of revenues and expenses from properties included in discontinued operations during the three and six months ended June 30, 2014:



	Three Months Ended June 30, 2014			Six Months Ended June 30, 2014
Discontinued operations:
Revenues	$	128		$	514
Operating expenses	(110		)	(1,488		)
Other income (expense), net	—			5,815
Income from discontinued operating properties	18			4,841
Gain on disposition of operating properties	—			14,426
Income from discontinued operations	$	18		$	19,267

Discontinued operations includes the results of 34 shopping centers disposed of during the year ended December 31, 2014, including 33 shopping centers distributed to Blackstone in connection with the Company's initial public offering ("IPO").

4. Real Estate

The Company’s components of Real estate, net consisted of the following:



	June 30, 2015			December 31, 2014
Land	$	2,008,601		$	2,000,415
Buildings and improvements:
Building	7,355,857			7,332,073
Building and tenant improvements	619,757			552,351
Other rental property ⁽¹⁾	894,762			917,410
	10,878,977			10,802,249
Accumulated depreciation and amortization ⁽¹⁾	(1,711,841		)	(1,549,234		)
Total	$	9,167,136		$	9,253,015

⁽¹⁾

At June 30, 2015 and December 31, 2014, Other rental property consisted of intangible assets including: (i) $812.7 million and $833.3 million, respectively, of in-place lease value, (ii) $82.1 million and $84.1 million, respectively, of above-market leases, and (iii) $577.4 million and $550.4 million, respectively, of accumulated amortization. These intangible assets are amortized over the term of each related lease.

In addition, at June 30, 2015 and December 31, 2014, the Company had intangible liabilities relating to below-market leases of $517.0 million and $528.7 million, respectively, and accumulated amortization of $220.3 million and $202.7 million, respectively. These intangible liabilities, which are included in Accounts payable, accrued expenses and other liabilities in the Company’s unaudited Condensed Consolidated Balance Sheets, are accreted over the term of each related lease, including any renewal periods, with fixed rentals that are considered to be below market.

Amortization expense associated with the above mentioned intangible assets and liabilities recognized for the three months ended June 30, 2015 and 2014 was $11.2 million and $18.6 million, respectively. Amortization expense associated with the above mentioned intangible assets and liabilities recognized for the six months ended June 30, 2015 and 2014 was $22.7 million and $40.3 million, respectively. The estimated net amortization expense associated with the Company’s intangible assets and liabilities for the next five years is as follows:

- 18 -



Year Ended December 31,	Estimated net amortization expense
2015 (remaining six months)	$	20,175
2016	23,142
2017	11,208
2018	5,056
2019	2,881

On a continuous basis, management assesses whether there are any indicators, including property operating performance and general market conditions, that the value of the Company’s assets (including any related amortizable intangible assets or liabilities) may be impaired. To the extent impairment has occurred, the carrying value of the asset would be adjusted to an amount to reflect the estimated fair value of the asset.

5. Financial Instruments - Derivatives and Hedging

The Company’s use of derivative instruments is limited to the utilization of interest rate agreements or other instruments to manage interest rate risk exposures and not for speculative purposes. In certain situations, the Company may enter into derivative financial instruments such as interest rate swap and interest rate cap agreements to manage interest rate risk exposure arising from variable rate debt transactions that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s objective in using interest rate derivatives is to add stability to interest expense and to manage its exposure to interest rate movements.

Cash Flow Hedges of Interest Rate Risk

The Company uses interest rate swaps to manage its exposure to changes in benchmark interest rates. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without changing the underlying notional amount. During the three and six months ended June 30, 2015 and 2014, the Company did not enter into any new interest rate swap agreements.

A detail of the Company’s interest rate derivatives designated as cash flow hedges outstanding as of June 30, 2015 is as follows:



	Number of Instruments	Notional Amount
Interest Rate Swaps	5	$	1,500,000

The Company has elected to present its interest rate derivatives on its unaudited Condensed Consolidated Balance Sheets on a gross basis as interest rate swap assets and interest rate swap liabilities. A detail of the Company’s fair value of interest rate derivatives on a gross and net basis as of June 30, 2015 and December 31, 2014, respectively, is as follows:



	Fair Value of Derivative Instruments
Interest rate swaps classified as:	June 30, 2015			December 31, 2014
Gross derivative assets	$	—		$	—
Gross derivative liabilities	(6,143		)	(4,423		)
Net derivative liability	$	(6,143	)	$	(4,423	)

The gross derivative liabilities are included in accounts payable, accrued expenses and other liabilities on the unaudited Condensed Consolidated Balance Sheets. All of the Company’s outstanding interest rate swap agreements for the periods presented were designated as cash flow hedges of interest rate risk. The fair value of the Company's interest rate derivatives is determined using market standard valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. These inputs are classified as Level 2 of the fair value hierarchy. The effective portion of changes in the fair value of derivatives designated as, and that qualify as, cash flow hedges is recorded in other comprehensive income (“OCI”)

- 19 -

and is reclassified into earnings as interest expense in the period that the hedged forecasted transaction affects earnings. The Company estimates that approximately $6.3 million will be reclassified from accumulated other comprehensive loss as an increase to interest expense over the next twelve months. No gain or loss was recognized related to hedge ineffectiveness or to amounts excluded from effectiveness testing on the Company’s cash flow hedges during the three and six months ended June 30, 2015 and 2014.

Non-Designated (Mark-to Market) Hedges of Interest Rate Risk

The Company does not use derivatives for trading or speculative purposes. As of June 30, 2015 and December 31, 2014, the Company did not have any material non-designated hedges.

Credit-risk-related Contingent Features

The Company has agreements with its derivative counterparties that contain a provision whereby if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations. If the Company were to breach any of the contractual provisions of the derivative contracts, it would be required to settle its obligations under the agreements at their termination value including accrued interest, or approximately $7.0 million.

6. Debt Obligations

As of June 30, 2015 and December 31, 2014, the Company had the following indebtedness outstanding:



	Carrying Value as of
	June 30, 2015			December 31, 2014			Stated Interest Rates	Scheduled Maturity Date
Mortgage and secured loans⁽¹⁾
Fixed rate mortgage and secured loans⁽²⁾	$	2,728,444		$	3,116,882		4.40% - 8.00%	2015 – 2024
Net unamortized premium	54,409			66,340
Net unamortized debt issuance cost⁽⁵⁾	$	(3,072	)	$	(4,381	)
Total mortgage and secured loans, net	$	2,779,781		$	3,178,841

Notes payables
Unsecured notes⁽³⁾	$	843,453		$	243,453		3.85% - 7.97%	2015 - 2029
Net unamortized discount	(1,787		)	(3,153		)
Net unamortized debt issuance cost⁽⁵⁾	$	(6,189	)	$	—
Total notes payable, net	$	835,477		$	240,300

Unsecured Credit Facility and Term Loan
Unsecured Credit Facility⁽⁴⁾	$	1,797,000		$	2,019,475		1.69%	2017 – 2018
Unsecured Term Loan	600,000			600,000			1.59%	2019
Net unamortized debt issuance cost⁽⁵⁾	(13,607		)	(16,108		)
Total Unsecured Credit Facility and Term Loan	$	2,383,393		$	2,603,367

Total debt obligations, net	$	5,998,651		$	6,022,508


⁽¹⁾	The Company’s mortgages and secured loans are collateralized by certain properties and the equity interests of certain subsidiaries. These properties had a carrying value as of June 30, 2015 of approximately $3.9 billion.


⁽²⁾	The weighted average interest rate on the Company’s fixed rate mortgage and secured loans was 6.03% as of June 30, 2015.


⁽³⁾	The weighted average interest rate on the Company’s unsecured notes was 4.13% as of June 30, 2015.

⁽⁴⁾

The Unsecured Credit Facility (as defined below) consists of a $1.25 billion revolving credit facility and a $1.5 billion term loan facility. The Company has in place five forward starting interest rate swap agreements that convert the floating interest rate on the $1.5 billion term loan facility to a fixed, combined interest rate of 0.844% plus an interest spread of 150 basis points. In February 2015, the Unsecured Credit Facility was amended to terminate the guarantees and release and discharge the Parent Guarantors from their respective obligations under the guarantees.

⁽⁵⁾

In April 2015, the FASB issued ASU 2015-03, which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. Beginning with the period ending June 30, 2015, the Company elected to early adopt ASU 2015-03 and appropriately and retrospectively applied the guidance to its debt obligations for all periods presented. These amounts were previously included in Deferred charges and prepaid expenses, net on the Company’s Condensed Consolidated Balance Sheets.

- 20 -

2015 Debt Transactions

In January 2015, the Operating Partnership issued $700.0 million aggregate principal amount of 3.850% Senior Notes due 2025 (the “2025 Notes”), the proceeds of which were used to repay outstanding borrowings under its $1.25 billion unsecured revolving credit facility that had been used to repay indebtedness and financial liabilities over the course of 2014. The 2025 Notes bear interest at a rate of 3.850% per annum, payable semi-annually on February 1 and August 1 of each year, commencing August 1, 2015. The 2025 Notes will mature on February 1, 2025. The 2025 Notes are the Operating Partnership’s unsecured and unsubordinated obligations and rank equally in right of payment with all of the Operating Partnership’s existing and future senior unsecured and unsubordinated indebtedness. The Operating Partnership may redeem the 2025 Notes at any time in whole or from time to time in part at the applicable make-whole redemption price specified in the Indenture. If the 2025 Notes are redeemed on or after November 1, 2024 (three months prior to the maturity date), the redemption price will be equal to 100% of the principal amount of the 2025 Notes being redeemed plus accrued and unpaid interest thereon to, but not including, the redemption date.

In addition, during the six months ended June 30, 2015, the Company repaid $381.4 million of mortgages and secured loans and $100.0 million of unsecured notes, resulting in a $0.8 million net gain on extinguishment of debt. These repayments were funded primarily from borrowings under the Company’s Unsecured Credit Facility.

Pursuant to the terms of an unsecured $600.0 million term loan (the “Term Loan”), a $2.75 billion senior unsecured credit facility (the “Unsecured Credit Facility”) and the 2025 Notes, the Company among other things is subject to maintenance of various financial covenants. The Company is currently in compliance with these covenants.

Debt Maturities

As of June 30, 2015 and December 31, 2014, the Company had accrued interest of $31.7 million and $20.4 million outstanding, respectively. As of June 30, 2015, scheduled maturities of the Company’s outstanding debt obligations were as follows:



Year ending December 31,
2015 (remaining six months)	$	157,519
2016	1,257,862
2017	646,659
2018	1,519,476
2019	620,126
Thereafter	1,767,255
Total debt maturities	5,968,897
Net unamortized premiums on mortgages	54,409
Net unamortized discount on notes	(1,787		)
Net unamortized debt issuance costs	(22,868		)
Total debt obligations	$	5,998,651

7. Fair Value Disclosures

All financial instruments of the Company are reflected in the accompanying unaudited Condensed Consolidated Balance Sheets at amounts which, in management’s judgment, reasonably approximate their fair values, except those instruments listed below:



	June 30, 2015				December 31, 2014
	Carrying Amounts		Fair Value		Carrying Amounts		Fair Value
	Carrying Amounts		Fair Value		Carrying Amounts		Fair Value
Mortgage and secured loans payable	$	2,779,781	$	2,906,292	$	3,178,841	$	3,337,250
Notes payable	835,477		815,332		240,300		252,441
Unsecured credit facility and term loan	2,383,393		2,397,000		2,603,367		2,619,475
Total debt obligations	$	5,998,651	$	6,118,624	$	6,022,508	$	6,209,166

As a basis for considering market participant assumptions in fair value measurements, a fair value hierarchy is included in GAAP that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and

- 21 -

the reporting entity’s own assumptions about market participant assumptions (unobservable inputs that are classified within Level 3 of the hierarchy).

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

The valuation methodology used to estimate the fair value of the Company’s debt obligations is based on discounted cash flows, with assumptions that include credit spreads, loan amounts and debt maturities. The Company determined that the valuations of its debt obligations are classified within Level 3 of the fair value hierarchy. Such fair value estimates are not necessarily indicative of the amounts that would be realized upon disposition.

The Company’s marketable securities and interest rate derivatives are measured at fair value on a recurring basis. At June 30, 2015 and December 31, 2014, the fair values of the marketable securities are based on published values, securities dealers’ estimated market values or comparable market sales and fall within Level 2 of the fair value hierarchy. See Note 5 for fair value information on the interest rate derivatives.

The Company’s impairment charges are measured at fair value on a non-recurring basis. See Note 3 for fair value information on the impairment charges.

8. Equity and Capital

During the three months ended June 30, 2015, the Parent Company entered into an at-the-market equity offering program ("ATM") through which the Parent Company may sell from time to time up to an aggregate of $400.0 million of its common stock through sales agents over a three-year period. There were no shares issued under the ATM for the three months ended June 30, 2015. As of June 30, 2015, $400.0 million of common stock remained available for issuance under the ATM.

During the three months ended June 30, 2015 and 2014, the Company declared common stock dividends and OP unit distributions of $0.225 per share and $0.20 per share, respectively. During the six months ended June 30, 2015 and 2014, the Company declared common stock dividends and OP unit distributions of $0.45 per share and $0.40 per share, respectively. As of June 30, 2015 and December 31, 2014, the Company had declared but unpaid common stock dividends and OP unit distributions of $69.4 million and $68.8 million, respectively. These amounts are included in accounts payable, accrued expenses and other liabilities on the Company's unaudited Condensed Consolidated Balance Sheets.

The non-controlling interests presented in these unaudited Condensed Consolidated Financial Statements relate to portions of consolidated subsidiaries held by the non-controlling interest holders.

Certain investments funds affiliated with The Blackstone Group L.P. and certain members of the Company’s management collectively owned 1.91% and 2.54% of the Operating Partnership’s outstanding vested partnership common units as of June 30, 2015 and December 31, 2014, respectively. During the six months ended June 30, 2015, 1.9 million OP Units were converted to an equal number of the Company’s common shares.

9. Stock Based Compensation

In 2011 and 2013 prior to the IPO, certain employees of the Company were granted long-term incentive awards which provided them with equity interests as an incentive to remain in the Company’s service and align executives’ interests with those of the Company’s equity holders. The awards were granted to such employees by the Partnerships, in the form of Class B Units in each of the Partnerships. The awards were granted with service, performance and market conditions. In connection with the IPO, certain of these awards vested and the vested awards were exchanged for a combination of vested common shares of the Company and vested shares of BPG Sub. The remaining unvested Class B Units as of the IPO effective date were exchanged for a combination of unvested restricted common shares of the Company and unvested restricted common shares of BPG Sub, (collectively, the “RSAs”). The RSAs are subject to the same vesting terms as those applicable to the exchanged Class B Units. During the six months ended June 30, 2015, the achievement of the performance condition became probable and the Company recognized $9.9 million of

- 22 -

equity based compensation expense as a component of General and administrative expense in the Consolidated Statements of Operations.

In connection with the IPO, the Board of Directors approved the 2013 Omnibus Incentive Plan (the “Plan”). The Plan provides for a maximum of 15.0 million shares of the Company’s common stock to be issued for qualified and non-qualified options, stock appreciation rights, restricted stock and restricted stock units, OP Units in the Operating Partnership, performance awards and other stock-based awards.

During the six months ended June 30, 2015 and year ended December 31, 2014, the Company granted restricted stock units (“RSUs”) in the Company to certain employees, or at the election of certain employees, long-term incentive plan units (“LTIP Units”) in the Operating Partnership. The RSUs and LTIP Units are divided into multiple tranches, with each tranche subject to separate performance-based vesting conditions, market-based vesting conditions and service-based vesting conditions. Each award contains a threshold, target, and maximum number of units in respect to each tranche. The number of units actually earned for each tranche is determined based on performance during a specified performance period, and the earned units are then further subject to time-based vesting conditions. The aggregate number of RSUs and LTIP Units granted, assuming that the target level of performance is achieved, was 0.6 million and 0.6 million for the six months ended June 30, 2015 and year ended December 31, 2014, respectively, with service periods ranging from one to five years.

The Company recognized $2.6 million and $3.0 million of equity based compensation expense for the three months ended June 30, 2015 and 2014, respectively. The Company recognized $15.5 million and $5.1 million of equity based compensation expense for the six months ended June 30, 2015 and 2014, respectively. As of June 30, 2015, the Company had $16.1 million of total unrecognized compensation cost related to unvested stock compensation expected to be recognized over a weighted average period of approximately 2.5 years.

10. Earnings per Share

Basic earnings per share (“EPS”) is calculated by dividing net income attributable to the Company’s common stockholders, including participating securities, by the weighted average number of shares outstanding for the period. Certain restricted shares issued pursuant to the Company’s share-based compensation program are considered participating securities, as such shares have rights to receive non-forfeitable dividends. Unvested restricted shares are not allocated net losses and/or any excess of dividends declared over net income, as such amounts are allocated entirely to the common stockholders. Fully-diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into shares of common stock.

- 23 -

The following table provides a reconciliation of the numerator and denominator of the EPS calculations for the three and six months ended June 30, 2015 and 2014:



	Three Month Ended June 30,						Six Month Ended June 30,
	2015			2014			2015			2014
Computation of Basic Earnings Per Share:
Income from continuing operations	$	55,167		$	31,280		$	86,303		$	53,771
Income attributable to non-controlling interests	(1,055		)	(7,821		)	(1,768		)	(14,951		)
Non-forfeitable dividends on unvested restricted shares	(6		)	(268		)	(11		)	(536		)
Income from continuing operations attributable to common stockholders	54,106			23,191			84,524			38,284
Income from discontinued operations, net of non-controlling interests	—			14			—			54
Net income attributable to the Company’s common stockholders for basic earnings per share	$	54,106		$	23,205		$	84,524		$	38,338

Weighted average number shares outstanding - basic	298,464			228,978			297,332			228,547

Basic Earnings Per Share Attributable to the Company’s Common Stockholders:
Income from continuing operations	$	0.18		$	0.10		$	0.28		$	0.17
Income from discontinued operations	—