CEO, CFO and two others resign following audit committee review
New York -- Brixmor Property Group announced today that it has named Daniel Hurwitz, former CEO of DDR Corp. and the founder and CEO of Raider Hill Advisors as Interim CEO, effective immediately. Hurwitz will also be appointed to serve on the company's board of directors.
The company also announced that CEO Michael Carroll, president and CFO Michael Pappagallo, and chief accounting officer Steven Splain, along with an accounting employee, have resigned, effective immediately. Carroll has also stepped down from the company's board of directors.
These management changes follow the completion of an audit committee review of a Non-GAAP financial reporting measure that began after the company received information in late December 2015 through its established compliance processes. The review led the board to conclude that specific company accounting and financial reporting personnel, in certain instances, were smoothing income items, both up and down, between reporting periods in an effort to achieve consistent quarterly same property net operating income ("same property NOI") growth, an industry non-GAAP financial measure.
Brixmor believes the amounts involved were not material to non-GAAP same property NOI or the company's GAAP financial results. The company believes it will not be required to restate historical financial results and that this matter will not impact the company's compliance with the financial covenants in its debt agreements. Final determinations on these matters remain subject to the completion of the 2015 audit and the filing of the company's Form 10-K. The company believes this does not impact the financial strength or prospects of the company.
John Schreiber, chairman of the Brixmor board, stated: "The board is disappointed to have learned of the conduct and lack of appropriate management supervision uncovered as a result of the audit committee review. Once the facts were known, we moved swiftly to take remedial action. We are fortunate to be able to bring in a seasoned real estate executive of Dan Hurwitz's caliber, who can lead the company through this period and effectively manage our portfolio as we move to identify a new CEO and CFO."
Michael Berman, chairman of the Brixmor Audit Committee, stated, "While the board believes this issue does not materially impact our previously reported results, we also believe the integrity of our financial reporting is paramount. We have voluntarily reported this matter to the SEC."
The table below is based on unaudited information prepared for the Audit Committee by the independent forensic accounting firm engaged to assist with the review. It includes year over year growth percentages for same property NOI as originally reported by the company and as updated in connection with the Audit Committee's review.
The company expects to meet its previously announced guidance for 2015 FFO attributable to stockholders and non-controlling interests convertible into common stock per common share - diluted of $1.96 - $1.98. In addition, the company announced that the board has declared a quarterly cash dividend of $0.245 per common share (equivalent to $0.98 per annum) for the first quarter of 2016. This is the same quarterly cash dividend amount paid last quarter. The dividend is payable on April 15, 2016 to stockholders of record on April 5, 2016, representing an ex-dividend date of April 1, 2016.
Brixmor is rescheduling its 2015 fourth quarter earnings announcement, originally scheduled for today, February 8, 2016 and now expects to release full year 2015 fourth quarter results and 2016 guidance on Monday, February 29, 2016.
The board and its outside advisors are continuing to assess whether any further remediation is appropriate with respect to the company's internal reporting controls and procedures. The company currently expects to file its Form 10-K for the year ending December 31, 2015 within the period prescribed by applicable SEC regulations.
Prior to founding Raider Hill Advisors, LLC, Hurwitz spent five years as CEO of DDR Corp. where he led the execution of a strategic vision that resulted in the full transformation of key management positions, the complete upgrade of portfolio quality and its cash flow credit profile, the revival and stabilization of a distressed balance sheet, and establishment of market credibility from the investment community. Based on the results, Hurwitz was voted by sell-side analysts as the Best CEO in the REIT Sector in the 2013 Institutional Investor Magazine All-America Team. Hurwitz is a member of the board of directors of General Growth Properties, a member of International Council of Shopping Centers (ICSC) and a former member of the ICSC Board of Trustees Executive Committee. He also previously served as a member of the NAREIT Executive board of governors, and Governance Committee in addition to the Board of Directors of DDR Corp., CubeSmart, Sonae Sierra Brasil, SA and Boscovs Department Store, Inc. Hurwitz is a graduate of Colgate University and currently serves as chairman of the Colgate University Board of Trustees.