NEW YORK (TheStreet) -- Concerns about the arrival of higher interest rates might be weighing on publicly traded REIT shares. But from an performance perspective, REITs are solid, argued Mike Pappagallo, president and CFO of Brixmor Property Group (BRX) in an interview with TheStreet.
Quality supply is at a premium because there has not been much development at all over the past few years," Pappagallo said. "Clearly it's a good time for landlords" he said because most can raise rents. Shares of Brixmore are roughtly flat for the year thus far, yet have risen 15% over the past 12 months, more than double the rate of iShares US Real Estate ETF (IYR).
Pappagallo said Brixmor is capitalizing on these market forces as leases expire in its shopping-center portfolio. Brixmor signed new leases in 2014 at rates on average of $13.45 per square foot, compared to its portfolio average rents of $12.14 per square foot.
Brixmor has also been busy with itsRaising the Bar program, which focuses on upgrading the appeal and merchandise mix at its shopping centers to drive higher sales, traffic and small-shop leasing. Small-shop occupancy for his company rose 130 basis points year over year in the first quarter, to 83.2%, and Pappagallo said Brixmor has "more room to run."
Our "anchor space repositioning" will be a catalyst to "bring in small-shop tenants at accretive rents," said Pappagallo.
In 2014, Brixmor completed 18 anchor-space repositioning and redevelopment projects representing $76 million of investment, with a return on average of 13%. Pappagallo said Brixmor has an additional 28 transformational projects under way with a total expected investment of $96 million.
"The demand is there and the supply is tight and what we are focused on is all the essential type uses," whether it's food, discount apparel or medical services, Pappagallo said.
In regard to reports about big online players moving aggressively into the arena of brick-and-mortar stores, that's more the "exception to the rule," Pappagallo said.
"The store is still the focal point for most retailers and that's really where the action is happening," said Pappagallo.
TheStreet Ratings team rates Brixmor Property Group as a sell with a ratings score of D.
TheStreet Ratings Team has this to say about its recommendation: "We rate BRIXMOR PROPERTY GROUP INC (BRX) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. Among the areas we feel are negative, one of the most important has been poor profit margins."You can view the full analysis from the report here: BRX Ratings Report