Highlights for the First Quarter Ended
- Reported Nareit FFO of
$80.1 million , or$0.59 per diluted share - Reported Core FFO of
$81.7 million , or$0.60 per diluted share - Affirmed 2024 Nareit FFO and Core FFO guidance ranges of
$2.34 to$2.41 per diluted share and$2.37 to$2.45 per diluted share, respectively - The midpoint of full year 2024 Nareit FFO guidance represents 6.0% year-over-year growth
- The midpoint of full year 2024 Core FFO guidance represents 3.0% year-over-year growth
- Increased same-center NOI year-over-year by 3.7%
- Reported leased portfolio occupancy of 97.2% and same-center leased portfolio occupancy of 97.5%
- Leased inline occupancy increased 50 basis points year-over-year to 94.8%; same-center leased inline occupancy increased 50 basis points year-over-year to 94.9%
- Executed portfolio comparable new leases at a rent spread of 29.1% and inline comparable new leases at a record-high rent spread of 37.4% during the quarter
- Executed portfolio comparable renewal leases at a rent spread of 16.9% and inline comparable renewal leases at a rent spread of 19.2% during the quarter
- Acquired two shopping centers and one land parcel for a total of
$55 .9 million
Management Commentary
Financial Results for the First Quarter Ended
Net Income
First quarter 2024 net income attributable to stockholders totaled $17.7 million, or
Nareit FFO
First quarter 2024 funds from operations attributable to stockholders and operating partnership (“OP”) unit holders as defined by Nareit (“Nareit FFO”) increased 4.9% to
Core FFO
First quarter 2024 core funds from operations attributable to stockholders and OP unit holders (“Core FFO”) increased 4.5% to
Same-Center NOI
First quarter 2024 same-center net operating income (“NOI”) increased 3.7% to
Portfolio Overview for the First Quarter Ended
Portfolio Statistics
As of
Leased portfolio occupancy was 97.2% as of
Leased anchor occupancy was 98.4% as of
Leasing Activity
During the first quarter of 2024, 245 leases were executed totaling 1.3 million square feet. This compared to 263 leases executed totaling 1.1 million square feet during the first quarter of 2023.
Comparable rent spreads during the first quarter of 2024, which compare the percentage increase of new or renewal leases to the expiring lease of a unit that was occupied within the past twelve months, were 29.1% for new leases, 16.9% for renewal leases and 20.0% combined.
Transaction Activity
During the three months ended
- Shoppes at
Lake Mary , a 74,234 square foot shopping center anchored byPublix located in anOrlando, Florida suburb. - Memorial at
Kirkwood , a 104,887 square foot shopping center located in aHouston, Texas suburb.
Balance Sheet Highlights
As of
PECO’s net debt to annualized adjusted EBITDAre was unchanged from 5.1x at
2024 Guidance
PECO has updated its 2024 earnings guidance, as summarized in the table below, which is based upon the Company’s current view of existing market conditions and assumptions for the year ending
(in thousands, except per share amounts) | Q1 YTD | Updated Full Year 2024 Guidance |
Previous Full Year 2024 Guidance |
||
Net income per share | |||||
Nareit FFO per share | |||||
Core FFO per share | |||||
Same-Center NOI growth | 3.7% | 3.25% - 4.25% | 3.25% - 4.25% | ||
Portfolio Activity: | |||||
Acquisitions, net | |||||
Other: | |||||
Interest expense, net | |||||
G&A expense | |||||
Non-cash revenue items(1) | |||||
Adjustments for collectibility | |||||
(1) Represents straight-line rental income and net amortization of above- and below-market leases.
The Company does not provide a reconciliation for same-center NOI estimates on a forward-looking basis because it is unable to provide a meaningful or reasonably accurate calculation or estimation of certain reconciling items which could be significant to the Company’s results without unreasonable effort.
The following table provides a reconciliation of the range of the Company's 2024 estimated net income to estimated Nareit FFO and Core FFO:
(Unaudited) | Low End | High End | |||
Net income per share | $ | 0.51 | $ | 0.55 | |
Depreciation and amortization of real estate assets | 1.81 | 1.83 | |||
Gain on sale of real estate assets | — | — | |||
Adjustments related to unconsolidated joint ventures | 0.02 | 0.03 | |||
Nareit FFO per share | $ | 2.34 | $ | 2.41 | |
Depreciation and amortization of corporate assets | 0.01 | 0.01 | |||
Transaction costs and other | 0.02 | 0.03 | |||
Core FFO per share | $ | 2.37 | $ | 2.45 | |
Conference Call Details
PECO plans to host a conference call and webcast on
First Quarter 2024 Earnings Conference Call Details:
Date:
Time:
Toll-Free Dial-In Number: (888) 210-4659
International Dial-In Number: (646) 960-0383
Conference ID: 2035308
Webcast: First Quarter 2024 Webcast Link
An audio replay will be available approximately one hour after the conclusion of the conference call using the webcast link above.
For more information on the Company’s financial results, please refer to the Company’s Form 10-Q for the quarter ended
Connect with PECO
For additional information, please visit https://www.phillipsedison.com/
Follow PECO on:
- Twitter at https://twitter.com/PhillipsEdison
- Facebook at https://www.facebook.com/phillipsedison.co
- Instagram at https://www.instagram.com/phillips.edison/; and
- Find PECO on LinkedIn at https://www.linkedin.com/company/phillipsedison&company
About
PECO uses, and intends to continue to use, its Investors website, which can be found at https://investors.phillipsedison.com, as a means of disclosing material nonpublic information and for complying with its disclosure obligations under Regulation FD.
CONSOLIDATED BALANCE SHEETS
AS OF
(Condensed and Unaudited)
(In thousands, except per share amounts)
ASSETS | |||||||
Investment in real estate: | |||||||
Land and improvements | $ | 1,789,539 | $ | 1,768,487 | |||
Building and improvements | 3,860,003 | 3,818,184 | |||||
In-place lease assets | 500,918 | 495,525 | |||||
Above-market lease assets | 74,499 | 74,446 | |||||
Total investment in real estate assets | 6,224,959 | 6,156,642 | |||||
Accumulated depreciation and amortization | (1,598,743 | ) | (1,540,551 | ) | |||
Net investment in real estate assets | 4,626,216 | 4,616,091 | |||||
Investment in unconsolidated joint ventures | 24,656 | 25,220 | |||||
Total investment in real estate assets, net | 4,650,872 | 4,641,311 | |||||
Cash and cash equivalents | 5,631 | 4,872 | |||||
Restricted cash | 4,466 | 4,006 | |||||
29,066 | 29,066 | ||||||
Other assets, net | 196,474 | 186,411 | |||||
Total assets | $ | 4,886,509 | $ | 4,865,666 | |||
LIABILITIES AND EQUITY | |||||||
Liabilities: | |||||||
Debt obligations, net | $ | 2,015,554 | $ | 1,969,272 | |||
Below-market lease liabilities, net | 110,774 | 108,223 | |||||
Accounts payable and other liabilities | 102,162 | 116,461 | |||||
Deferred income | 20,621 | 18,359 | |||||
Total liabilities | 2,249,111 | 2,212,315 | |||||
Equity: | |||||||
Preferred stock, |
— | — | |||||
Common stock, |
1,223 | 1,220 | |||||
Additional paid-in capital | 3,551,678 | 3,546,838 | |||||
Accumulated other comprehensive income | 13,144 | 10,523 | |||||
Accumulated deficit | (1,266,541 | ) | (1,248,273 | ) | |||
Total stockholders’ equity | 2,299,504 | 2,310,308 | |||||
Noncontrolling interests | 337,894 | 343,043 | |||||
Total equity | 2,637,398 | 2,653,351 | |||||
Total liabilities and equity | $ | 4,886,509 | $ | 4,865,666 | |||
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
(Condensed and Unaudited)
(In thousands, except per share amounts)
Three Months Ended |
|||||||
2024 | 2023 | ||||||
Revenues: | |||||||
Rental income | $ | 158,068 | $ | 147,728 | |||
Fees and management income | 2,565 | 2,478 | |||||
Other property income | 669 | 858 | |||||
Total revenues | 161,302 | 151,064 | |||||
Operating Expenses: | |||||||
Property operating | 26,534 | 25,062 | |||||
Real estate taxes | 18,854 | 18,056 | |||||
General and administrative | 11,813 | 11,533 | |||||
Depreciation and amortization | 60,206 | 58,498 | |||||
Total operating expenses | 117,407 | 113,149 | |||||
Other: | |||||||
Interest expense, net | (23,335 | ) | (19,466 | ) | |||
(Loss) gain on disposal of property, net | (5 | ) | 942 | ||||
Other expense, net | (929 | ) | (755 | ) | |||
Net income | 19,626 | 18,636 | |||||
Net income attributable to noncontrolling interests | (1,956 | ) | (2,017 | ) | |||
Net income attributable to stockholders | $ | 17,670 | $ | 16,619 | |||
Earnings per share of common stock: | |||||||
Net income per share attributable to stockholders - basic and diluted | $ | 0.14 | $ | 0.14 | |||
Discussion and Reconciliation of Non-GAAP Measures
Same-Center Net Operating Income
The Company presents Same-Center NOI as a supplemental measure of its performance. The Company defines NOI as total operating revenues, adjusted to exclude non-cash revenue items, less property operating expenses and real estate taxes. For the three months ended
Same-Center NOI should not be viewed as an alternative measure of the Company’s financial performance as it does not reflect the operations of its entire portfolio, nor does it reflect the impact of general and administrative expenses, depreciation and amortization, interest expense, other income (expense), or the level of capital expenditures and leasing costs necessary to maintain the operating performance of the Company’s properties that could materially impact its results from operations.
Nareit Funds from Operations and Core Funds from Operations
Nareit FFO is a non-GAAP financial performance measure that is widely recognized as a measure of REIT operating performance.
Core FFO is an additional financial performance measure used by the Company as Nareit FFO includes certain non-comparable items that affect its performance over time. The Company believes that Core FFO is helpful in assisting management and investors with the assessment of the sustainability of operating performance in future periods, and that it is more reflective of its core operating performance and provides an additional measure to compare PECO’s performance across reporting periods on a consistent basis by excluding items that may cause short-term fluctuations in net income (loss). To arrive at Core FFO, the Company adjusts Nareit FFO to exclude certain recurring and non-recurring items including, but not limited to: (i) depreciation and amortization of corporate assets; (ii) changes in the fair value of the earn-out liability; (iii) amortization of unconsolidated joint venture basis differences; (iv) gains or losses on the extinguishment or modification of debt and other; (v) other impairment charges; (vi) transaction and acquisition expenses; and (vii) realized performance income.
Nareit FFO and Core FFO should not be considered alternatives to net income (loss) under GAAP, as an indication of the Company’s liquidity, nor as an indication of funds available to cover its cash needs, including its ability to fund distributions. Core FFO may not be a useful measure of the impact of long-term operating performance on value if the Company does not continue to operate its business plan in the manner currently contemplated.
Accordingly, Nareit FFO and Core FFO should be reviewed in connection with other GAAP measurements, and should not be viewed as more prominent measures of performance than net income (loss) or cash flows from operations prepared in accordance with GAAP. The Company’s Nareit FFO and Core FFO, as presented, may not be comparable to amounts calculated by other REITs.
Earnings Before Interest, Taxes, Depreciation, and Amortization for Real Estate and Adjusted EBITDAre
Nareit defines Earnings Before Interest, Taxes, Depreciation, and Amortization for Real Estate (“EBITDAre”) as net income (loss) computed in accordance with GAAP before: (i) interest expense; (ii) income tax expense; (iii) depreciation and amortization; (iv) gains or losses from disposition of depreciable property; and (v) impairment write-downs of depreciable property. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect EBITDAre on the same basis.
Adjusted EBITDAre is an additional performance measure used by the Company as EBITDAre includes certain non-comparable items that affect the Company’s performance over time. To arrive at Adjusted EBITDAre, the Company excludes certain recurring and non-recurring items from EBITDAre, including, but not limited to: (i) changes in the fair value of the earn-out liability; (ii) other impairment charges; (iii) amortization of basis differences in the Company’s investments in its unconsolidated joint ventures; (iv) transaction and acquisition expenses; and (v) realized performance income.
The Company uses EBITDAre and Adjusted EBITDAre as additional measures of operating performance which allow it to compare earnings independent of capital structure, determine debt service and fixed cost coverage, and measure enterprise value. Additionally, the Company believes they are a useful indicator of its ability to support its debt obligations. EBITDAre and Adjusted EBITDAre should not be considered as alternatives to net income (loss), as an indication of the Company’s liquidity, nor as an indication of funds available to cover its cash needs, including its ability to fund distributions. Accordingly, EBITDAre and Adjusted EBITDAre should be reviewed in connection with other GAAP measurements, and should not be viewed as more prominent measures of performance than net income (loss) or cash flows from operations prepared in accordance with GAAP. The Company’s EBITDAre and Adjusted EBITDAre, as presented, may not be comparable to amounts calculated by other REITs.
Same-Center Net Operating Income—The table below compares Same-Center NOI (dollars in thousands):
Three Months Ended |
Favorable (Unfavorable) | |||||||||||||
2024 | 2023 | $ Change | % Change | |||||||||||
Revenues: | ||||||||||||||
Rental income(1) | $ | 112,756 | $ | 108,122 | $ | 4,634 | ||||||||
Tenant recovery income | 36,097 | 35,486 | 611 | |||||||||||
Reserves for uncollectibility(2) | (1,772 | ) | (906 | ) | (866 | ) | ||||||||
Other property income | 603 | 848 | (245 | ) | ||||||||||
Total revenues | 147,684 | 143,550 | 4,134 | 2.9 | % | |||||||||
Operating expenses: | ||||||||||||||
Property operating expenses | 23,188 | 22,421 | (767 | ) | ||||||||||
Real estate taxes | 17,753 | 18,241 | 488 | |||||||||||
Total operating expenses | 40,941 | 40,662 | (279 | ) | (0.7)% | |||||||||
Total Same-Center NOI | $ | 106,743 | $ | 102,888 | $ | 3,855 | 3.7 | % | ||||||
(1) Excludes straight-line rental income, net amortization of above- and below-market leases, and lease buyout income.
(2) Includes billings that will not be recognized as revenue until cash is collected or the Neighbor resumes regular payments and/or the Company deems it appropriate to resume recording revenue on an accrual basis, rather than on a cash basis.
Same-Center Net Operating Income Reconciliation—Below is a reconciliation of Net Income to NOI and Same-Center NOI (in thousands):
Three Months Ended |
|||||||
2024 | 2023 | ||||||
Net income | $ | 19,626 | $ | 18,636 | |||
Adjusted to exclude: | |||||||
Fees and management income | (2,565 | ) | (2,478 | ) | |||
Straight-line rental income(1) | (2,365 | ) | (2,580 | ) | |||
Net amortization of above- and below- market leases | (1,419 | ) | (1,228 | ) | |||
Lease buyout income | (246 | ) | (355 | ) | |||
General and administrative expenses | 11,813 | 11,533 | |||||
Depreciation and amortization | 60,206 | 58,498 | |||||
Interest expense, net | 23,335 | 19,466 | |||||
Loss (gain) on disposal of property, net | 5 | (942 | ) | ||||
Other expense, net | 929 | 755 | |||||
Property operating expenses related to fees and management income | 1,026 | 315 | |||||
NOI for real estate investments | 110,345 | 101,620 | |||||
Less: Non-same-center NOI(2) | (3,602 | ) | 1,268 | ||||
Total Same-Center NOI | $ | 106,743 | $ | 102,888 | |||
Period-end Same-Center Leased Occupancy % | 97.5 | % | 97.6 | % |
(1) Includes straight-line rent adjustments for Neighbors for whom revenue is being recorded on a cash basis.
(2) Includes operating revenues and expenses from non-same-center properties which includes properties acquired or sold and corporate activities.
Nareit FFO and Core FFO—The following table presents the Company’s calculation of Nareit FFO and Core FFO and provides additional information related to its operations (in thousands, except per share amounts):
Three Months Ended |
||||||
2024 | 2023 | |||||
Calculation of Nareit FFO Attributable to Stockholders and OP Unit Holders | ||||||
Net income | $ | 19,626 | $ | 18,636 | ||
Adjustments: | ||||||
Depreciation and amortization of real estate assets | 59,776 | 57,953 | ||||
Loss (gain) on disposal of property, net | 5 | (942 | ) | |||
Adjustments related to unconsolidated joint ventures | 649 | 698 | ||||
Nareit FFO attributable to stockholders and OP unit holders | $ | 80,056 | $ | 76,345 | ||
Calculation of Core FFO Attributable to Stockholders and OP Unit Holders | ||||||
Nareit FFO attributable to stockholders and OP unit holders | $ | 80,056 | $ | 76,345 | ||
Adjustments: | ||||||
Depreciation and amortization of corporate assets | 430 | 545 | ||||
Transaction and acquisition expenses | 1,174 | 1,338 | ||||
Amortization of unconsolidated joint venture basis differences | 3 | 1 | ||||
Realized performance income(1) | — | (75 | ) | |||
Core FFO attributable to stockholders and OP unit holders | $ | 81,663 | $ | 78,154 | ||
Nareit FFO/Core FFO Attributable to Stockholders and OP Unit Holders per Diluted Share | ||||||
Weighted-average shares of common stock outstanding - diluted | 136,404 | 131,943 | ||||
Nareit FFO attributable to stockholders and OP unit holders per share - diluted | $ | 0.59 | $ | 0.58 | ||
Core FFO attributable to stockholders and OP unit holders per share - diluted | $ | 0.60 | $ | 0.59 | ||
(1) Realized performance income includes fees received related to the achievement of certain performance targets in the Company’s NRP joint venture.
EBITDAre and Adjusted EBITDAre—The following table presents the Company’s calculation of EBITDAre and Adjusted EBITDAre (in thousands):
Three Months Ended |
Year Ended |
|||||||||
2024 | 2023 | 2023 | ||||||||
Calculation of EBITDAre | ||||||||||
Net income | $ | 19,626 | $ | 18,636 | $ | 63,762 | ||||
Adjustments: | ||||||||||
Depreciation and amortization | 60,206 | 58,498 | 236,443 | |||||||
Interest expense, net | 23,335 | 19,466 | 84,232 | |||||||
Loss (gain) on disposal of property, net | 5 | (942 | ) | (1,110 | ) | |||||
Federal, state, and local tax expense | 137 | 118 | 438 | |||||||
Adjustments related to unconsolidated joint ventures | 928 | 966 | 3,721 | |||||||
EBITDAre | $ | 104,237 | $ | 96,742 | $ | 387,486 | ||||
Calculation of Adjusted EBITDAre | ||||||||||
EBITDAre | $ | 104,237 | $ | 96,742 | $ | 387,486 | ||||
Adjustments: | ||||||||||
Impairment of investment in third parties | — | — | 3,000 | |||||||
Transaction and acquisition expenses | 1,174 | 1,338 | 5,675 | |||||||
Amortization of unconsolidated joint venture basis differences | 3 | 1 | 17 | |||||||
Realized performance income(1) | — | (75 | ) | (75 | ) | |||||
Adjusted EBITDAre | $ | 105,414 | $ | 98,006 | $ | 396,103 | ||||
(1) Realized performance income includes fees received related to the achievement of certain performance targets in the Company’s NRP joint venture.
Financial Leverage Ratios—The Company believes its net debt to Adjusted EBITDAre, net debt to total enterprise value, and debt covenant compliance as of
Net debt: | |||||
Total debt, excluding discounts, market adjustments, and deferred financing expenses | $ | 2,056,059 | $ | 2,011,093 | |
Less: Cash and cash equivalents | 5,813 | 5,074 | |||
Total net debt | $ | 2,050,246 | $ | 2,006,019 | |
Enterprise value: | |||||
Net debt | $ | 2,050,246 | $ | 2,006,019 | |
Total equity market capitalization(1)(2) | 4,880,652 | 4,955,480 | |||
Total enterprise value | $ | 6,930,898 | $ | 6,961,499 | |
(1) Total equity market capitalization is calculated as diluted shares multiplied by the closing market price per share, which includes 136.1 million and 135.8 million diluted shares as of
(2) Fully diluted shares include common stock and OP units.
The following table presents the Company’s calculation of net debt to Adjusted EBITDAre and net debt to total enterprise value as of
Net debt to Adjusted EBITDAre - annualized: | |||||||
Net debt | $ | 2,050,246 | $ | 2,006,019 | |||
Adjusted EBITDAre - annualized(1) | 403,511 | 396,103 | |||||
Net debt to Adjusted EBITDAre - annualized | 5.1x | 5.1x | |||||
Net debt to total enterprise value: | |||||||
Net debt | $ | 2,050,246 | $ | 2,006,019 | |||
Total enterprise value | 6,930,898 | 6,961,499 | |||||
Net debt to total enterprise value | 29.6 | % | 28.8 | % |
(1) Adjusted EBITDAre is based on a trailing twelve month period.
Forward-Looking Statements
This press release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Except as required by law, the Company does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.
Investors:
(513) 692-3399
kgreen@phillipsedison.com
(513) 824-7122
hharper@phillipsedison.com
Source: Phillips Edison & Company, Inc.