UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 18, 2017
PHILLIPS EDISON GROCERY CENTER REIT I, INC.
(Exact name of registrant specified in its charter)
| Maryland | 000-54691 | 27-1106076 |
(State or other jurisdiction of incorporation or organization) |
(Commission File Number) | IRS Employer Identification No. |
11501 Northlake Drive
Cincinnati, Ohio 45249
(Address of principal executive offices)
Registrant’s telephone number, including area code: (513) 554-1110
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☒ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 7.01. Regulation FD Disclosure
On May 18, 2017, Phillips Edison Grocery Center REIT I, Inc. (the “Company”) entered into a definitive contribution agreement (the “Contribution Agreement”) to acquire real estate assets and the third party asset management business of its sponsor, Phillips Edison Limited Partnership (“PELP”), in a stock and cash transaction valued at approximately $1 billion, subject to closing adjustments. In connection with entry into the Contribution Agreement, certain investor communications were prepared and are filed herewith.
The Company prepared a script to accompany an investor presentation regarding the Contribution Agreement, which is attached hereto as Exhibit 99.1 and is incorporated herein by reference. The related presentation was filed as Exhibit 99.3 to the Company’s Current Report on Form 8-K filed on May 19, 2017.
The Company prepared an additional presentation regarding the Contribution Agreement, which is attached hereto as Exhibit 99.2 and is incorporated herein by reference.
Cautionary Statement Concerning Forward-Looking Statements:
Certain statements contained in this Current Report on Form 8-K may be considered forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including statements regarding the transaction and the ability to consummate the transaction and anticipated accretion, dividend coverage, dividends and other anticipated benefits of the transaction. The Company intends for all such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act and Section 21E of the Exchange Act, as applicable. Such statements include, in particular, statements about the Company’s plans, strategies, and prospects and are subject to certain risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ materially from those projected or anticipated. Therefore, such statements are not intended to be a guarantee of the Company’s performance in future periods. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as “pro forma,” “may,” “will,” “would,” “could,” “should,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” or other similar words. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release. The Company makes no representation or warranty (express or implied) about the accuracy of any such forward-looking statements contained in this release, and does not intend, and undertakes no obligation, to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Additional Information and Where to Find It:
This communication does not constitute a solicitation of materials of any vote or approval in respect of the proposed transaction involving the Company or otherwise. In connection with the proposed merger, a stockholder meeting will be announced soon to obtain stockholder approval. In connection with the proposed transaction, the Company intends to file relevant materials, including a proxy statement, with the Securities and Exchange Commission (the “SEC”). The Company’s stockholders are urged to read the definitive proxy statement and other relevant materials when they become available because they will contain important information about the Company and the proposed transaction. The proxy statement and other relevant materials (when they become available), and any other documents filed by the Company with the SEC, may be obtained free of charge at the SEC’s website at www.sec.gov at the Company’s website at www.grocerycenterREIT1.com or by sending a written request to the Company at 11501 Northlake Drive, Cincinnati, OH 45249, Attention: Investor Relations.
Participants in the Solicitation
The Company and its directors, executive officers and certain other members of management may be deemed to be participants in soliciting proxies from the Company’s stockholders in favor of the proposed merger. Information regarding the persons who may, under the rules of the SEC, be considered to be participants in the solicitation of the Company’s stockholders in connection with the proposed transaction and their ownership of the Company’s common stock will be set forth in the proxy statement for its annual meeting of stockholders. Investors can find more information about the Company’s executive officers and directors in its Annual Report on Form 10-K for the fiscal year ended December 31, 2016.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit No. | Description | ||
| 99.1 | Presentation Script | ||
| 99.2 | Presentation | ||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| PHILLIPS EDISON GROCERY CENTER REIT I, INC | ||
| Dated: May 22, 2017 | By: | /s/ R. Mark Addy |
| R. Mark Addy President and Chief Operating Officer | ||
EXHIBIT INDEX
| Exhibit No. | Description | ||
| 99.1 | Presentation Script | ||
| 99.2 | Presentation | ||
Phillips Edison Grocery Center REIT I 8-K
Exhibit 99.1
REIT ONE INVESTOR CALL SCRIPT 5.22.2017
To be posted to Phillips Edison and PECO REIT I websites on Monday, May 22 2017 at 3:00 p.m. Eastern time.
MARK
Hello and good afternoon everyone. I am Mark Addy, President and Chief Operating Officer of Phillips Edison Grocery Center REIT One. Thank you for joining us on today’s webinar to discuss Phillips Edison Grocery Center REIT One’s proposed acquisition of Phillips Edison Limited Partnership.
Before we begin, I would like to remind you that statements made during this call may contain forward-looking statements, which are subject to various risks and uncertainties. Please refer to SLIDES 2 and 3 for additional disclosure and direction on where you can find more information regarding potential risks. In addition, we will also refer today to certain non-GAAP financial measures, including funds from operations, or F-F-O, and Same Store Net Operating Income, or S-S-N-O-I. Further information regarding our use of these measures and reconciliations of these measures to our GAAP results are available in our SEC Filings, as well as the end of this presentation.
For more information, please refer to the form 8-K which will be filed with the SEC today, which identifies important risk factors that could cause actual results to differ from those contained in the forward-looking statements.
Also, please note that during this call we will be referring to Phillips Edison Grocery Center REIT One, as “PECO ONE” and we will be referring to Phillips Edison Limited Partnership as “PELP.”
SLIDE 4 outlines today’s agenda. We will start with a review of the transaction, then move to an overview of PELP, then speak to the pro forma combined company, and finally I will address how all of this impacts our liquidity.
Turning to SLIDE 5, on May 19, 2017, PECO ONE announced that it entered into a definitive contribution agreement to acquire the real estate assets and the asset management business of its sponsor and external advisor, PELP, in a stock and cash transaction valued at approximately $1 billion. This strategic acquisition will result in the largest internally-managed, non-traded grocery-anchored shopping center REIT in the U.S.
PELP was founded in 1991, and since its inception, has been focused on grocery-anchored shopping centers. Currently there are two major parts to PELP’s business – one part owns shopping centers, and the other provides real estate asset management services to PELP’s wholly owned properties as well as to a number of third parties, including PECO ONE. A snapshot of the company is provided on Slide 5.
When the transaction is complete, as you will see on SLIDE 6, PECO ONE will own 230 shopping centers, and also own an asset manager which will provide services to PECO ONE’s wholly owned properties, as well as additional third party properties.
SLIDE 7, provides some details on the two entities before the merger. PECO I is currently an externally managed non-traded REIT with estimated $3.0 billion total enterprise value. It owns 154 shopping centers with 16.8 million square feet of gross leasable area. It’s IPO closed in 2014; raising $1.75B.
PELP is a vertically integrated owner and operator of 76 shopping centers that has been exclusively focused on grocery-anchored shopping centers since inception in 1991. PELP also has an asset management platform which advises approximately $4.9B of grocery-anchored shopping center assets, including PECO ONE.
As you will see on SLIDE 8, the resulting company will have a total enterprise value of approximately $4.0 billion, and will be exclusively focused on grocery-anchored shopping centers – just like we are in PECO ONE.
The combined company will own a high-quality, nationally-diversified portfolio of 230 shopping centers located in 32 states, with over 25.5 million square feet of Gross Leasable Area, or G-L-A.
Additionally, we are acquiring PELP’s asset management business, which manages over $1.9 billion of third party real estate and which generates annual revenue of approximately $25 million.
The transaction, which is expected to close during the fourth quarter of 2017, will provide for meaningful synergies including:
| • | A projected accretion of 8 to 10 percent for pro forma F-F-O, per share for the first quarter of 2017 compared to standalone PECO ONE for the same period |
| • | Secondly, our estimated pro forma dividend coverage is expected to exceed 100 percent on an F-F-O to total dividends basis, which would be up from 92 percent for standalone PECO ONE for the first quarter of 2017 |
| • | Importantly, now that we will be an internally managed REIT, we will be much better positioned for capital market opportunities, which include a potential future liquidity event |
Now, turning to SLIDE 9. In exchange for PELP’s 76 shopping centers and asset management business, PELP will receive approximately 45.2 million operating partnership units, or “O-P units”, in PECO ONE’s operating partnership, Phillips Edison Grocery Center Operating Partnership One, L.P., as well as $50.0 million in cash. Additionally, PECO ONE will assume or refinance $501 million of PELP’s debt. This brings the total value of the transaction to approximately $1.0 billion.
It is important to note, that this transaction does not include any internalization fees, meaning that no fees will be paid in respect of ongoing management advisory services provided by PELP to PECO ONE. Additionally, PECO ONE’s management is NOT receiving ANY cash consideration. In fact, 100 percent of the cash will be used to retire certain minority partnership interests in order to ensure that the combined company maintains its qualification as a REIT.
In addition to the equity consideration due at the closing of the transaction, there are two major performance-based earn-outs, which incentivize future action and performance.
The first earn-out, which can potentially be valued at 5 million additional OP Units, will be earned if a liquidity event for PECO ONE is achieved.
The second earn-out, which can potentially be valued at 8 million additional OP Units, can be earned based on achievement of certain fundraising targets for PECO THREE, which we believe will be assisted, to a degree, by a successful liquidity event.
Post transaction, company management will own 18 million units of the combined company, before any earn-outs, and will be PECO ONE’s largest equity holder. Once the transaction closes, management will be subject to a significant lock-up period.
As you can see, this equity-based consideration aligns management with stockholders and preserves capital for future investments.
Although a stockholder vote is not required for this transaction, we do intend to receive stockholder approval before proceeding with the transaction. It is our goal to provide our investors with the appropriate approval opportunity and transparency around this transaction. As such, more information will be provided to you via a definitive proxy statement which we expect to be mailed to you, as well as filed with the SEC, during July.
The board of directors of the company has recommended that you to vote in favor of the transaction and believe it is in the best interest of the company.
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Now, let’s turn to SLIDE 10, As I touched on earlier, one of the main benefits to this transaction is that it is expected to be immediately accretive to earnings. Again, we expect an accretion of 8 to 10 percent for pro forma F-F-O per share for the first quarter of 2017 compared to standalone PECO ONE for the same period.
Our estimated pro forma dividend coverage is expected to exceed 100 percent on an F-F-O to total dividends basis, which is up from 92 percent for standalone PECO I for the first quarter of 2017.
Upon the closing of the transaction, we expect there to be 183.3 million equity shares of PECO ONE common stock and 45.2 million PELP-Owned, PECO ONE O-P Units outstanding. Both the common stock and the O-P Units are valued at $10.20 per share.
PECO ONE stockholders are expected to own 80.2 percent of the combined company, and PELP stockholders are expected to own 19.8 percent of the combined company.
Additionally, the combined company will have a total debt of $1.6 billion, which includes PECO ONE’s $1.1 billion of debt, and PELP’s $501 million of debt which will be assumed and or refinanced in this transaction.
This will result in a company with a total enterprise value of approximately $4.0 billion.
We anticipate our leverage on a Debt to Total Enterprise Value basis, will be approximately 41.2 percent, which is a figure we are comfortable with.
Of the outstanding debt, 87 percent will be fixed rate debt, and 13 percent will be floating rate debt. The weighted average interested rate will fall between 3.45 percent and 3.65 percent with a weighted average term that includes options of 4.8 to 5.3 years.
Now, I would like to provide you some details on the real estate which we are acquiring from PELP on SLIDE 11.
PECO ONE is acquiring 76 retail shopping centers, in 25 states, which total 8.7 million square feet. These shopping centers are highly complementary to the shopping centers that we own in PECO ONE, as they have a similar anchor lineup, a high level of exposure to national and regional tenants, and a preference for necessity based service providers, like grocers. These properties have demonstrated a stable, growing cash flow profile over the company’s history.
Further, PELP and PECO ONE share four out of five top grocers by ABR – these include Kroger, Safeway/Albertsons, Ahold Delhaize, and Giant Eagle.
The resulting company’s G-L-A profile will be over 44 percent grocery anchored, and its overall portfolio will benefit from a strong mix of national and regional tenants.
As we have mentioned, the resulting combined company is expected to see an estimated increase in its pro forma F-F-O per share of approximately 8 to 10 percent for the first quarter of 2017 compared to standalone PECO ONE for the same period.
Turning to SLIDE 12, PELP has a total of $4.8B of real estate assets under management, as of December 31, 2016.
These assets generate regular fees for PELP, which totaled approximately $71 million for 2016. This consistent asset management fee stream is generated from our non-traded REITs and Necessity Retail Partners, a value-added joint venture between Phillips Edison Grocery Center REIT Two and TPG Real Estate.
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Further, PELP has sponsored 11 third party funds since 2000 which have raised over $3.8 billion of equity capital from a variety of sources including high net worth investors, institutional investors and public non-traded REITs.
The chart below illustrates the growth in both PELP’s total real estate assets under management as well as its fee stream. Back in 2008, PELP had approximately $839 million of assets under management, and generated annual fee income of approximately $14 million. Since then, PELP has grown significantly, and now has approximately $4.8 billion of assets and generates annual fee income of over $71 million.
SLIDE 13 provides a quick snapshot of the pro forma real estate portfolio. The combined company will own a high-quality, nationally-diversified portfolio of 230 shopping centers located in 32 states totaling over 25.5 million square feet. These properties have a leased occupancy of 93.9 percent and generate 78 percent of their A-B-R from Grocers, National tenants, and Regional tenants.
Additionally, the top three anchor tenants of the combined company are all grocers – Kroger, Publix, and Albertsons – Safeway. These three tenants combine for approximately 18 percent of our total A-B-R and account for 106 stores.
Turning to SLIDE 14, for the next step in this transaction a proxy statement will be mailed to you, which we expect to occur in July. This statement will include detailed pro forma financials on the combined company, as well as the proxy, which will allow you to submit your vote to approve this transaction. Assuming we get approval and receive the necessary debt consents during September, the transaction is expected to close during the fourth quarter of 2017.
Turning to SLIDE 15, in summary, we believe the strategic acquisition of PELP will create the largest internally-managed, grocery-anchored shopping center REIT.
This transaction includes a number of benefits which are as follows:
| • | It is expected to be immediately accretive to F-F-O per share and is expected to improve our dividend coverage |
| • | It will strengthen our balance sheet and increase our future earnings growth potential |
| • | Cost synergies will be realized through our internal management structure; and |
| • | It will improve our valuation potential with our increased earnings, larger scale and internalized manager |
Now, on SLIDE 16
| • | The transaction does not have internalization fees, meaning that no fees will be paid in respect of ongoing management advisory services provided by PELP to PECO ONE |
| • | The asset management fees will provide consistent, predictable income through market cycles |
| • | Equity-based transaction enhances REIT I’s capital position and better aligns management with the shareholders |
| • | Management will own over 18 million shares of the combined company excluding the earn-out and will be the biggest shareholder of REIT ONE; and |
| • | And our managed portfolios provide an embedded acquisition pipeline with increased opportunities for growth |
Turning to SLIDE 17, our goal is to provide liquidity to our stockholders, and we believe this transaction is a major step toward that event. We remain one of the only public REITs that has an exclusive focus on grocery-anchored shopping centers, which we believe is the most attractive space in shopping center real estate. The transaction clearly reflects that our integrated veteran management team is vested in the success of PECO ONE. This is a very positive step toward a liquidity event for PECO I stockholders.
And as a reminder, it remains our intention to begin the process of achieving a Liquidity Event not later than three to five years after the termination of our primary offering, which was in February 2014.
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We encourage you to read the press release that was issued today, as well as the related S-E-C filings, which are both available on our website, grocery center REIT numeral 1 .com.
If you have further questions, we encourage you to reach out to our investor relations team by emailing INVESTORRELATIONS@PHILLIPSEDISON .COM or calling the phone number on SLIDE 18.
Thank you very much for joining us on today’s webinar – this concludes our presentation.
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Phillips Edison Grocery Center REIT I 8-K
Exhibit 99.2
Phillips Edison Grocery Center REIT I to Acquire Phillips Edison Limited Partnership May 2017
2 · FORWARD - LOOKING STATEMENT DISCLOSURE Certain statements contained in this press release may be considered forward - looking statements within the meaning of Section 27 A of the Securities Act of 1933 , as amended (the “Securities Act”), and Section 21 E of the Securities Exchange Act of 1934 , as amended (the “Exchange Act”), including statements regarding the transaction and the ability to consummate the transaction and anticipated dividends . We intend for all such forward - looking statements to be covered by the safe harbor provisions for forward - looking statements contained in Section 27 A of the Securities Act and Section 21 E of the Exchange Act, as applicable . Such statements include, in particular, statements about PECO I’s plans, strategies, and prospects and are subject to certain risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ materially from those projected or anticipated . Therefore, such statements are not intended to be a guarantee of PECO I’s performance in future periods . Such forward - looking statements can generally be identified by our use of forward - looking terminology such as “may,” “will,” “would,” “could,” “should,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” or other similar words . Readers are cautioned not to place undue reliance on these forward - looking statements, which speak only as of the date of this release . PECO I makes no representation or warranty (express or implied) about the accuracy of any such forward - looking statements contained in this release, and does not intend, and undertakes no obligation, to publicly update or revise any forward - looking statements, whether as a result of new information, future events, or otherwise . 2
3 · INFORMATION DISCLOSURE Additional Information About the Transaction and Where to Find It This communication does not constitute a solicitation of materials of any vote or approval in respect of the proposed transac tio n involving PECO I or otherwise. In connection with the proposed transaction, a stockholder meeting will be announced soon to obtain stockholder approval. In connection with the proposed transaction, PECO I intends to file relevant materials, includi ng a proxy statement, with the Securities and Exchange Commission (the “SEC”). Investors and security holders of PECO I are urged to read the definitive proxy statement and other relevant materials when they become available because they will contain importa nt information about PECO I and the proposed transaction. The proxy statement and other relevant materials (when they become available), and any other documents filed by PECO I with the SEC, may be obtained free of charge at the SEC’s website at www.sec.gov , at PECO I’s website at www.grocerycenterREIT1.com or by sending a written request to the Company at 11501 Northlake Drive, Cincinnati, OH 45249, Attention: Investor Relations. Participants in the Solicitation PECO I and its directors, executive officers and certain other members of management and employees may be deemed to be participants in soliciting proxies from the stockholders of PECO I in favor of the proposed transaction. Information regardin g t he persons who may, under the rules of the SEC, be considered to be participants in the solicitation of PECO I’s stockholders in connection with the proposed transaction and their ownership of PECO I’s common stock will be set forth in the proxy statemen t for its stockholder meeting. Investors can find more information about PECO I’s executive officers and directors in its Annu al Report on Form 10 - K for the fiscal year ended December 31, 2016 and in its definitive proxy statement filed with the SEC on Schedule 14A on June 28, 2016. 3
4 · TABLE OF CONTENTS Section 1 The Transaction Page 5 Section II The Portfolio Page 16 Section III Why Grocery? Page 25 Section IV The Platform Page 39 Phillips Edison represents the unique opportunity to invest in what is becoming the most attractive space within shopping center real estate 4
PHILLIPS EDISON & COMPANY | 5 The Transaction
6 · Phillips Edison Limited Partnership Real Estate 76 Shopping Centers 1 Necessity Retail Partners (20% Interest) 12 Shopping Centers Property Count as of 3/31/2017 PECO I TO ACQUIRE PELP Phillips Edison Grocery Center REIT II, Inc. 78 Shopping Centers Phillips Edison Grocery Center REIT I, Inc. 154 Shopping Centers Phillips Edison Grocery Center REIT III, Inc. Currently Raising Capital Phillips Edison Grocery Center REIT I, Inc. Pre Transaction Post Transaction Real Estate 230 Shopping Centers 6 Asset Manager Phillips Edison Grocery Center REIT II, Inc. 78 Shopping Centers Phillips Edison Grocery Center REIT III, Inc. Currently Raising Capital Asset Manager 1 ) Excludes certain assets not included in the transaction Necessity Retail Partners (20% Interest) 12 Shopping Centers
7 · DETAILS: PECO I TO ACQUIRE PELP PECO I PELP • Externally managed non - traded REIT with estimated $3.0B TEV • 154 shopping centers with 16.8M square feet of GLA • IPO closed in 2014; raised $1.75B • Vertically integrated owner and operator of 76 shopping centers • Exclusively focused on grocery - anchored shopping centers since inception in 1991 • Asset management platform advises approximately $4.9B of grocery - anchored shopping center assets, including PECO I POST TRANSACTION: • Estimated $4.0B TEV internally managed REIT with exclusive focus on grocery - anchored shopping centers • 230 properties with 25.5M square feet of GLA located in 32 states • Third party asset management business with over $1.9B of AUM and annual revenues of approximately $25M from PECO II, PECO III, and Necessity Retail Partners, a JV between PECO II and TPG Real Estate • Projected accretion of 8 - 10% for pro forma FFO per s hare for Q1 2017 compared to standalone PECO I * • Estimated pro forma dividend coverage expected to exceed 100% (on a FFO/Total Dividends basis), up from 92% for standalone PECO I for Q1 2017 * • Internally managed REIT well positioned for capital market opportunities, including strategic liquidity alternatives Phillips Edison Grocery Center REIT I (PECO I) to acquire Phillips Edison Limited Partnership (PELP) All figures are as of 3/31/17 unless otherwise noted *Please see the appendix for reconciliation of non - GAAP measures 7
8 · TRANSACTION CONSIDERATION • Assets acquired include 76 real estate assets and 100% of PELP’s third - party asset management businesses • Transaction consideration excludes internalization fees 1 in accordance with PECO I’s advisory agreement with PELP • Earnout structure incentivizes future performance: – 5 million additional OP Units earned if a liquidity event is achieved by December 31, 2019 at a share value of $10.20 or greater – 8 million additional OP Units earned based on achievement of certain fundraising targets for PECO III – Total earnout subject to cap of 12.49 million OP Units • Equity - based consideration and earn - out aligns management with stockholders and preserves capital for future investments • Management is receiving no cash consideration – 100% of cash will be used to retire certain minority interests in PELP in order to preserve PECO I REIT status • Management will be PECO I’s largest stockholder, owning over 18 million OP Units and common shares 3 , with a long term view of increasing stockholder value, and will be subject to significant lock up periods • Transaction will be subject to stockholder vote, although not legally required TRANSACTION CONSIDERATION 45.2 million PECO I Issued OP Units 2 ($10.20/share) $461 M Debt Assumed/ Refinanced $501 M Cash Consideration $50 M TOTAL VALUE $1,012 M 1. Refers to the absence of any fee paid with respect to ongoing management advisory services provided to PECO I from PELP 2. Includes 4.8 million Class B OP Units in PECO I Operating Partnership received as payment for asset management services 3. Includes phantom shares held by employees 8
9 · TRANSACTION CAPITAL STRUCTURE • Transaction to be immediately accretive: Estimated pro forma FFO per share for Q1 2017 is higher by approximately 8 - 10% relative to the performance of stand - alone PECO I * • Estimated pro forma dividend coverage expected to exceed 100% (on a FFO/Total Dividends basis), up from 92% for standalone PECO I for Q1 2017 * • PECO I stockholders to own 80.2% and PELP stockholders to own 19.8% of the combined company (without giving effect to the earn - out) • Pro forma debt to total enterprise value of 41.4% PRO FORMA CAPITAL STRUCTURE (NON - GAAP) 183.3 M PECO I Existing Equity ($10.20/share) $1,870 M 45.2 M PELP Owned OP Units 1 ($10.20/share) $461 M PECO I Total Outstanding Debt 2 $1,144 M PELP Debt Assumed/Refinanced in Transaction 2 $501 M TOTAL ENTERPRISE VALUE $3,976 M 1. Includes 4.8 million Class B OP Units in PECO I Operating Partnership received as payment for asset management services 2. Represents principal amount of outstanding debt and includes estimated transaction costs of $20.0 million in total and $50.0 mil lion of cash consideration 3. Assumes all forward starting swaps are effective 9 PRO FORMA DEBT METRICS ESTIMATED 3/31/2017 Fixed Rate / Floating Rate 87% / 13% Portfolio Weighted Average Interest Rate 3 3.45 to 3.65% Weighted Average Term with Options 4.8 to 5.3 years *Please see the appendix for reconciliation of non - GAAP measures
10 · 2016 FFO/Share: $0.58 Projected accretion of 8 - 10% on estimated pro forma FFO per share for Q1 2017 * SSNOI Growth (‘16 v ‘15): 3.2% REAL ESTATE • National platform focused from its inception in 1991 on grocery - anchored shopping centers • Owns and operates 76 shopping centers, in 25 states, totaling 8.7 million square feet • PECO I and PELP share 4 out of the top 5 grocers by % of ABR: • Highly complementary portfolios: OVERVIEW OF PELP Local 15.7% National & Regional 39.5% Grocery 44.8% Pro Forma GLA by Tenant Type Local 14.0% National & Regional 33.1% Grocery 52.9% PECO I GLA by Tenant Type Local 19.2% National & Regional 52.6% Grocery 28.2% PELP GLA by Tenant Type 10 *Please see the appendix for reconciliation of non - GAAP measures
11 · ASSET MANAGEMENT BUSINESS • $4.8B of third - party assets under management as of December 31, 2016 • Consistent asset management fees from PECO I, PECO II, PECO III and Necessity Retail Partners, a value - added joint venture between PECO II and TPG Real Estate • Generates annual fee and management income of approximately $71 million • Sponsored 11 third party funds (high net worth, institutional and public non - traded REITs) since 2000 • Raised over $3.8 billion of equity capital • Generated strong investor returns: 5 of the 6 realized funds have achieved net IRRs in excess of 13% OVERVIEW OF PELP 11 1) Includes PECO I, PECO II, PECO III and Necessity Retail Partners and certain other third - party owned centers 2) Certain amounts of fee income have been normalized to the periods earned $839 $913 $1,002 $1,032 $1,271 $2,657 $3,063 $3,768 $4,759 2008 : $ 14.2 M 2016 : $ 70.9 M 10.0 30.0 50.0 70.0 90.0 110.0 130.0 150.0 170.0 190.0 2008 2009 2010 2011 2012 2013 2014 2015 2016 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 $5,000 Total Invested Capital Fee Income Strong Growth in Third Party Assets Under Management 1,2 (in Millions) (Excluding PELP)
12 · COMBINATION OF COMPLEMENTARY PORTFOLIOS 12 PELP PECO I COMBINED Property Count 76 in 25 states 154 in 28 states 230 in 32 states Square Feet 8.7 million 16.8 million 25.5 million Leased Occupancy 90.0% 96.0% 93.9% % ABR from Grocers, National, and Regional Tenants 76% 79% 78% PELP PECO I COMBINED Tenant % of ABR # Tenant % of ABR # Tenant % of ABR # Top 3 Grocers by % of ABR Kroger 8.7% 14 Kroger 8.4% 38 Kroger 8.5% 52 Albertsons – Safeway 3.0% 5 Publix 7.4% 31 Publix 5.9% 33 Ahold Delhaize 2.9% 9 Albertsons – Safeway 4.3% 14 Albertsons – Safeway 4.0% 19 Top 3 Inline Tenants by % of ABR H&R Block 0.8% 18 Subway 0.8% 45 Subway 0.8% 62 Dollar Tree 0.8% 7 Wells Fargo Financial 0.7% 14 Anytime Fitness 0.6% 26 Hibbett Sports 0.8% 11 Anytime Fitness 0.6% 18 H&R Block 0.6% 50
13 · AUGUST JULY PROJECTED TIMELINE May 2017 • Executed Contribution Agreement July 2017 • Proxy mailed to stockholders September 2017 • Stockholder vote • Receipt of required non recourse debt consents Q4 2017 • Transaction expected to close MAY JUNE SEPTEMBER Q4 2017 13
14 · KEY TAKEAWAYS • The result of this transaction will be the largest internally managed REIT exclusively focused on grocery - anchored properties • Expected to be immediately accretive to FFO per share • Estimated pro forma dividend coverage expected to exceed 100% • Strengthens balance sheet • Increases future earnings growth potential • Drives cost synergies realized through internal management • Improved valuation potential with increased earnings, scale and internalized manager • Transaction consideration does not include internalization fees 1 and management receives no cash consideration • Asset management fees provide consistent, predictable income through market cycles • Equity - based transaction enhances REIT I’s capital position and better aligns management with the stockholders • PECO I management is the REIT’s largest equity owner and will own over 18 million share equivalents (excluding earn - out) • Managed portfolios provide embedded acquisition pipeline with increased opportunities for growth 14 1. Refers to the absence of any fee paid with respect to ongoing management advisory services provided to PECO I from PELP
15 · GOAL: TO PROVIDE LIQUIDITY FOR PECO I STOCKHOLDERS • Exclusive focus on grocery - anchored shopping centers: the most attractive space in shopping center real estate • Integrated veteran management team vested in the success of PECO I through a meaningful ownership stake • $4 billion TEV combined company with expected higher earnings per share and well positioned for future growth • Appropriately leveraged balance sheet All positive steps toward a liquidity event for PECO I stockholders 15
PHILLIPS EDISON & COMPANY | 16 The Portfolio
17 · Property Count As of 3/31/2017 PRO FORMA PECO I Post Transaction Phillips Edison Grocery Center REIT I, Inc. Real Estate 230 Shopping Centers Asset Manager Necessity Retail Partners (20% Interest) 12 Shopping Centers Phillips Edison Grocery Center REIT II, Inc. 78 Shopping Centers Phillips Edison Grocery Center REIT III, Inc. Currently Raising Capital 17
18 · PRO FORMA PHILLIPS EDISON HAS A NATIONAL FOOTPRINT Diversified National Presence 346 properties under management across 33 states 1 Pro forma PECO I All Assets Under Management Pro forma PECO I Owned Only FL 8% OH 7% GA 7% IL 4% TX 3% CA 3% MA 3% VA 3% NC 2% Other 60% 18 ( 1 ) AS OF 3/31/2017
19 · PURE - PLAY GROCERY - ANCHORED PORTFOLIO RELATIVE TO PEERS 91 % 74 % 69 % 45 % 40 % 31 % 28 % 23 % 21 % 16 % 16 % 10 % 22 % 21 % 44 % 49 % 54 % 12 % 47 % 46 % 52 % 63 % 78 % 9 % 4 % 10 % 11 % 11 % 15 % 60 % 30 % 33 % 32 % 21 % 12 % PF PECO I ROIC REG WRI BRX KIM AKR FRT UE RPAI AAT DDR Grocery-Anchored Power Center Other Sources: Green Street Advisors and Company filings Note: Peer breakdown by total asset value as of FYE 2016. ¹ Defined as a shopping center with 3 or more big box tenants and only a limited amount of space dedicated to smaller tenants . 1 19
20 · PRO FORMA PECO I PORTFOLIO DETAILS Notes: Portfolio data as of 3/31/2017; All other financial data pro forma is as of 3/31/2017 Portfolio Highlights Financial Stats Total Assets (count) 230 Total GLA 25.5 Median Income - 3 mile (000s) $55,641 Population - 3 mile (000s) 58,024 Anchor Term (yrs) 4.8 Total Occupancy 93.9% Anchor Occupancy 97.8% Inline Occupancy 86.2% Total ABR / SF $11.02 Anchor ABR / SF $8.40 Inline ABR / SF $16.94 Grocery 37% Retail Stores 26% Services 23% Restaurant 14% % ABR BY INDUSTRY National & Regional 41% Local 22% Grocery 37% % ABR BY TENANT TYPE 20 Financial Stats Fully Diluted Share Count 228.5 NAV / Share $10.20 Total Debt $1,645.0 Total Enterprise Value $3,975.7 Credit Information 2017 Q1 Debt / TEV 41.4%
21 · INVESTMENT MANAGEMENT TRACK RECORD OF CAPITAL RAISED History of building deep relationships, representing a broad spectrum of equity capital sources throughout all cycles - $3.9 Billion in total High Net Worth LP’s $200 Million Institutional LP’s $695 Million Public REITs $3.0 Billion 2000: Fund I $20 M 2002: Fund II $57 M 2007: SIF1 $65 M 2011: SIF II $57 M 2005: Fund III $275 M 2008: Fund IV $120 M 2011: CBRE JV $50 M 2016: TPG JV $250 M 2010: REIT I $1.8 B 2014: REIT II $1.2 B 2016: REIT III $1.5 B 2 NOTES: (1) FOR PURPOSES OF PERFORMANCE FIGURES AND THE INFORMATION ABOVE, “FUND” MEANS PHILLIPS EDISON STRATEGIC INVESTMENT FUND LLC (“ SIF I”), PHILLIPS EDISON STRATEGIC INVESTMENT FUND II LLC (“SIF II”), PHILLIPS EDISON & COMPANY SHOPPING CENTER OPPORTUNITY FUND LLC (“FUND I”), PHILLIPS EDISON & COMPANY SHO PPING CENTER OPPORTUNITY FUND II LLC (“FUND II”), PHILLIPS EDISON SHOPPING CENTER FUND III LP (“FUND III”) OR PHILLIPS EDISON SHOPPING CENTER FUND IV LP (“FUND IV”), AS APPLIC ABL E. (2) CURRENTLY IN OFFERING – REPRESENTS TARGET EQUITY RAISE TRACK RECORD OF VALUE CREATION: STRONG PERFORMANCE IN 6 OUT OF 7 CLOSED - END, CO - MINGLED FUNDS 21
22 · INVESTMENT MANAGEMENT - TRACK RECORD OF VALUE CREATION (1) For purposes of performance figures and the information above, “Fund” means Phillips Edison Strategic Investment Fund LLC (“S IF I”), Phillips Edison Strategic Investment Fund II LLC (“SIF II”), Phillips Edison & Company Shopping Center Opportunity Fund LLC (“Fund I”), Phillips Edison & Company Shopp ing Center Opportunity Fund II LLC (“Fund II”), Phillips Edison Shopping Center Fund III LP (“Fund III”) or Phillips Edison Shopping Center Fund IV LP (“Fund IV”), as applic abl e. (2) Vintage is the year in which the first capital call was made. (3) Past performance is not necessarily indicative of prospective returns for the Fund. There can be no assurances that the Fund wil l be profitable. The partially realized and unrealized returns are estimates and actual results may vary. Internal rate of return net of all fees and payments to the man age r. Calculated based on time of investment. Fund (1) Vintage (2) Equity Invested Targeted Investor Return Net IRR (3) Net Multiple REALIZED Fund I 2000 $19,900,000 15 - 20% 32.1% 2.04X Fund II 2002 $57,200,000 15 - 20% 26.5% 1.26X Fund IV 2008 $62,350,000 13 - 15% 17.0% 1.67X CBRE JV 2011 $50,000,000 8% 16.1% 1.26X PARTIALLY REALIZED Fund III 2005 $275,000,000 13 - 15% N/A .17X SIF I 2007 $64,866,250 15 - 17% 13.4% 1.38X UN - REALIZED SIF II 2011 $57,200,000 15 - 17% 14.0% 2.80X Strong performance in 6 out of 7 closed - end funds 22
PECO I – BOARD OF DIRECTORS Leslie T. Chao Mr. Chao retired as Chief Executive Officer of Chelsea Property Group, a subsidiary of Simon Property Group, Inc. (NYSE: SPG) , i n 2008. Previously he served in various senior capacities at Chelsea, including President and Chief Financial Officer, from 1987 through its IPO in 1993 (NYS E: CPG) and acquisition by Simon in 2004. He is a non - executive director of Value Retail PLC, a leading developer of outlet centers in Europe, and from 2006 to 2008 served as an independent non - executive director of The Link REIT, the first and largest public REIT in Hong Kong. Jeffrey S. Edison Mr. Edison, together with Michael C. Phillips, founded Phillips Edison & Company and has served as a principal of the company si nce 1995. From 1991 to 1995, he was employed by NationsBank’s South Charles Realty Corporation, serving as a Senior Vice President. Mr. Edison was employed b y M organ Stanley Realty Incorporated from 1987 until 1990 and The Taubman Company from 1984 until 1987. Paul J. Massey, Jr. Mr. Massey, together with partner Robert A. Knakal , whom he met at Coldwell Banker, founded Massey Knakal Realty Services, which became New York City’s largest investment property sales brokerage firm, of which Mr. Massey served as Chief Executive Officer. With 250 sales profe ssi onals serving more than 200,000 property owners, Massey Knakal Realty Services was ranked as New York City’s #1 property sales company in transaction volume by the CoStar Group, a national, independent real estate analytics provider. Mr. Massey also serves as Chairman for REBNY’s Ethics and Business Practice Subco mmi ttee, is Director of Commercial Board of Directors of REBNY, is an active member of the Board of Trustees for the Lower East Side Tenement Museum and serves as a chair or member of numerous other committees. Gregory S. Wood Mr. Wood has been Executive Vice President & Chief Financial Officer of EnergySolutions , Inc., a leading services provider to the nuclear industry, since June 2012. Prior to that, Mr. Wood held the role of chief financial officer at numerous public and private companies, including with Actian Corporation, Silicon Graphics, Liberate Technologies and InterTrust Technologies. Mr. Wood was a director of Steinway Musical Instruments, Inc. from October 2011 to October 2013, where he also served as Chairman of the Audit Committee. Stephen R. Quazzo Mr. Quazzo is co - founder and Chief Executive Officer of Pearlmark Real Estate, L.L.C. From 1991 to 1996, Mr. Quazzo served as President of Equity Institutional Investors, Inc., a subsidiary of investor Sam Zell’s private holding company, Equity Group Investments, Inc. Mr. Quazzo was responsible for raising equity capital and performing various portfolio management services in connection with the firm’s real estate investments, including institution al opportunity funds and public REITs. He is a member and past trustee of the Urban Land Institute, a member of the Pension Real Estate Association, and is a licens ed real estate broker in Illinois. In addition, Mr. Quazzo served as a director of Starwood Hotels & Resorts (NYSE: HOT) until its acquisition by Mariott and is an Investment Committee member of the Chicago Symphony Orchestra endowment and pension plans. Mr. Quazzo has served as a Trustee of The Latin School of Chicago since 2001 and since 1994 has been a Chicago Advisory Board member of City Year, a national service organization. 23
PHILLIPS EDISON & COMPANY – MANAGEMENT Robert F. Myers , Chief Operating Officer Bob Myers joined Phillips Edison in 2003 as a Senior Leasing Manager, was promoted to Regional Leasing Manager in 2005 and be cam e Vice President of Leasing in 2006. He was named Senior Vice President of Leasing and Operations in 2009, and Chief Operating Offic er in 2010. Before joining Phillips Edison, Mr. Myers spent six years with Equity Investment Group, where he started as a property manage r i n 1997. He served as Director of Operations from 1998 to 2000 and as Director of Lease Renegotiations/Leasing Agent from 2000 to 2003. R. Mark Addy , President and Chief Operating Officer, PECO I Mark Addy has served as the Co - President of Phillips Edison Grocery REIT I since April 2013 and as the Chief Operating Officer o f Phillips Edison Grocery REIT I since October 2010. Mr. Addy served as Chief Operating Officer for Phillips Edison & Company from 2004 to October 2010. He served Phillips Edison as Senior Vice President from 2002 until 2004, when he became Chief Operating Officer. Mr. Addy was the top executive in the Cincinnati, Ohio headquarters, responsible for implementing the company’s growth strategy. Jeffrey S. Edison, Principal and Chief Executive Officer Jeff Edison, together with Michael C. Phillips, founded Phillips Edison & Company and has served as a principal of the compan y s ince 1995. From 1991 to 1995, he was employed by NationsBank’s South Charles Realty Corporation, serving as a Senior Vice President. Mr. Edis on was employed by Morgan Stanley Realty Incorporated from 1987 until 1990 and The Taubman Company from 1984 until 1987. Devin I. Murphy, Principal and Chief Financial Officer Devin Murphy is the Chief Financial Officer of Phillips Edison Grocery Center REIT I, Inc. He previously served as Vice Chair man of Investment Banking at Morgan Stanley. He began his real estate career in 1986 when he joined the real estate group at Morgan Stanley as an associate. Prior to rejoining Morgan Stanley in June 2009, Mr. Murphy was a managing partner of Coventry Real Estate Advisors, a real estate p riv ate equity firm which sponsors institutional investment funds that acquire and develop retail properties. 24
PHILLIPS EDISON & COMPANY | 25 Why Grocery?
26 · ADVANTAGES OF OUR GROCERY ANCHORED FOCUS Grocery is the most attractive space in shopping center real estate • Average customer trips per week is 1.6 1 • Consistent demand generator — non - cyclical • Recession resistant NECESSITY - BASED • 18,000 avg. total trips per week • Benefits in - line tenant sales and growth • Rental revenue driven by convenience and service - based business • Online is currently 2.4% of total food sales 2 SOURCES: (1) FOOD MARKETING INSTITUTE (2) THE FUTURE OF FOOD RETAILING 2015, WILLARD BISHOP HIGH TRAFFIC E - COMMERCE RESISTANT 26
27 · GROCERY SALES HAVE OUTPERFORMED ALL OTHER RETAIL SALES Monthly Retail Store Sales per U.S. Census Data¹ Sources: U.S. Census Advanced Monthly Retail Trade Report as of February 2017 and NAICS retailer codes Note: Grocery includes supermarkets and other grocery stores, excluding convenience stores. Electronics includes electronics and appliance stores. Sporting Goods / Hobby includes sporting goods stores, hobby stores, book stores and music stores. Department stores includes all department stores. ¹ Includes both in - store and online sales for companies that have physical brick - and - mortar stores. Monthly sales are adjusted f or seasonal variation. Excludes pure - play online retail. 50.0 % 60.0 % 70.0 % 80.0 % 90.0 % 100.0 % 110.0 % 120.0 % 130.0 % 140.0 % 150.0 % 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Grocery Electronics Sporting Goods / Hobby Department Stores 137.8 % 97.2 % 109.4 % 72.0 % 27
28 · FOOD AND BEVERAGE IS MORE RESISTANT TO E - COMMERCE THAN OTHER RETAIL SECTORS Digital’s Share of U.S. Retail Sales by Type of Retailer Sources: U.S. Census Bureau, BI intelligence estimates, Cushman & Wakefield research and U.S. Department of commerce 28 0% 10% 20% 30% 40% 50% 60% 2005 2006 2007 2008 2009 2010 2011 2012 2013 E2014 E2015 E2016 Clothing & Accessories Health & Personal Care Electronics, Appliances, Computers Food & Beverage Media, Sporting & Hobby Goods 55 % 20 % 17 % 8 % 2 % Relative to other retail sectors, the food & beverage industry has been least impacted by e - commerce, with e - commerce comprising less than ~2% of total sales vs. over ~20% for apparel and over ~50% for electronics
29 · STORE CLOSURES ARE CONCENTRATED IN NON - GROCERY RETAIL, PARTICULARLY APPAREL 46.5 % 22.7 % 9.7 % 5.8 % 4.0 % 3.4 % 2.4 % 1.7 % Apparel, Footwear & Accessories Electronics Department Store Books Supermarket Sporting Goods Discount Store Office Supply Sources: TNT Store Closure Database Note: The above data excludes 3.7% of other, which includes beauty, convenience, crafts stores, dollar stores, drug retailers , h ome stores and toys. 1 PF PECO I exposure weighted by annualized base rent. Store Closings Completed or Announced YTD by Type of Retailer PECO I PF Exposure 1 5.8 % 0.8 % 2.7 % 0.3 % 37.4 % 1.2 % 4.0 % 0.9 % Less than 10% of PF PECO I’s revenues come from the 3 segments that have comprised over 78% of 2017 of store closures YTD Annual rent lost due to closures in Q1 2017 for PF PECO I totaled ~0.36% of annual rent 29
30 · INVESTMENT STRATEGY INVESTMENT THESIS GENERAL NOTES: (1) PROPRIETARY SCORECARD THAT USES A SERIES OF ALGORITHMS TO BE NCHMARK INDIVIDUAL ASSETS BASED ON A DEFINED SET OF CHARACTERIST ICS INCLUDING THOSE FEATURED ON THIS SLIDE. (2) HEALTH RATIO IS THE AMOUNT OF ANNUAL RENT AS A PERCENTAGE OF ANNUAL SALES. We invest in grocery - anchored shopping centers with a focus on the three - mile trade area – the micro - market – surrounding each shopping center with the following characteristics: • Geographically diverse portfolio in growing markets • Market leading grocery anchor • 70 - 80% national and regional creditworthy tenants • Diversification by tenancy, industry and lease term • E - commerce resistant TRADE AREA SPECIFIC • #1 or #2 traditional grocer in market with a favorable health ratio 2 • Walmart established in marketplace • Average population target of 55,000 in a three - mile radius • Average household income target of $60,000 • Employment diversity PROPERTY SPECIFIC – POWER SCORE 1 • Proprietary, algorithm based scorecard that ranks over 40 property criteria including: • Grocer strength – sales, market share, health ratio 2 , lease term • Functionality of site design • Asset age/quality • Access and visibility • Merchandising mix/opportunity 30
31 · INVESTMENT STRATEGY • #1 or #2 grocer in market with a favorable health ratio 2 • Walmart established in marketplace • Average population target of 55,000+ in a three - mile radius • Average HHI target of $65,000+ • Employment diversity and drivers FOCUS ON MAJOR GROCERY FORMATS TRADITIONAL NOTES: (1) 2011 – 2016 CAGR, SOURCE: PROGRESSIVE GROCER (2) GRAPH IS REPRESENTATIVE OF 198 GROCERY ANCHORED PROPERTIES ( EXCLUDING SHADOW ANCHORS) • DOMINANT FORMAT • 65% OF SUPERMARKET FOOD SALES • 3% CAGR 1 CHARACTERISTICS: • Full line of groceries, meat, and produce • 15% of sales in General Merchandise and Health & Beauty • Service deli, service bakery, and/or pharmacy • Second largest format • 25% of supermarket food sales • 0.7% CAGR 1 CHARACTERISTICS: • Mass Merchandiser + Grocery Component • Average size – 170,000 square feet • 40% dedicated to grocery • Fastest growing format • 6.4% 2013 sales growth • 1 2.3 % CAGR 1 CHARACTERISTICS: • Emphasize perishables and organics • 75% of sales from produce, meat, seafood, dairy • Smaller footprint PECO I focuses on the #1 or #2 market - leading grocer across the traditional format Traditional 89% Supercenter 4% Specialty 7% SUPERCENTER FRESH FORMAT 31 Pro Forma PECO I
32 · PROPERTIES LOCATED IN UNCROWDED MARKETS x Established position in markets outside the Top 15 GSA MSAs, supported by 25+ year operating history x Limited competition from public peers, which tend to focus on crowded major MSAs x Positioning outside Top 15 MSAs enables Phillips Edison to compete in markets with less existing retail SF on a per capita basis x Competitive advantage over local operators due to: • Scale of platform • Depth of market / management expertise; and • Spectrum of capabilities x Expertise in segment of market in which Public REITs do not have significant expertise • Expands opportunity set • Potential to pair with public currency in the future Key Opportunities % Exposure to Top 15 MSAs¹ 11 % 80 % 76 % 59 % 58 % 56 % 48 % 47 % 40 % 39 % 37 % 35 % PF PECO I UE AKR FRT REG KIM RPAI WRI BRX ROIC DDR AAT Sources: Green Street Advisors, J.P. Morgan research report (“ Dept Stores / Specialty Softlines ” dated 7 - May - 2017) ¹ Data for shopping center peers covered by Green Street Advisors is by asset value. 32
33 · PORTFOLIO BREAKDOWN BY TOP MSAS Notes: Includes Pro Forma PECO I properties as of 12/31/16 (227) MSA data is as of 7/1/16 Top 5 MSAs Properties in Top MSAs 18.1% of the portfolio 33 Number of Pro Forma Metropolitan Statistical Area Rank in Population PECO I Properties 1 Atlanta-Sandy Springs-Roswell, GA Metro Area 9 17 2 Tampa-St. Petersburg-Clearwater, FL Metro Area 18 8 3 Dallas-Fort Worth-Arlington, TX Metro Area 4 5 T4 Chicago-Naperville-Elgin, IL-IN-WI Metro Area 3 6 T4 Minneapolis-St. Paul-Bloomington, MN-WI Metro Area 16 5 Total 41 Number of Percent of Properties PF PECO I Portfolio Top 25 MSAs 80 35.2% Top 50 MSAs 120 52.9%
34 · Initial Entry Levered Free Cash Flows Levered Investment Cap Rate LTV 4 Year 1 Year 2 Year 3 Year 4 Year 5 IRR PF PECO I Markets 3 $100.0 6.5% 40.0% $5.9 $6.1 $6.5 $6.7 $6.9 14.4% Top 25 Shopping Center Markets¹ $100.0 5.4% 40.0% $4.9 $5.0 $5.2 $5.4 $5.5 11.8% DELTA: 259 bps SECONDARY MARKET RETAIL RETURNS BEAT CORE MARKETS Assets in the Top 25 shopping center markets would need to experience a ~67 bps decrease in exit cap rates to achieve a levered IRR comparable to PF PECO I assets Source: CBRE Econometric Advisors / Torto Wheaton and Real Capital Analytics ¹ Rent growth for PF PECO I Markets and Top 25 Strip Retail Markets are based on CBRE Econometric Advisors / Torto Wheaton re nt growth forecasts for each of their respective markets. Rent growth detail for PF PECO I Markets is not available for all markets – data shown reflect growth estimates based on data only for avail able markets, which represent approximately 55% of the portfolio by square feet ² Top 25 Markets include Atlanta, Baltimore, Boston, Charlotte, Chicago, Dallas, Denver, Fort Lauderdale, Fort Worth, Houston , J acksonville, Las Vegas, Long Island, Los Angeles, Miami, Orlando, West Palm Beach, Philadelphia, Phoenix, Raleigh, San Antonio, San Diego, San Francisco, San Jose and Tampa ³ PF PECO I Markets cap rate is an estimate based on average acquisition cap rates over the past 12 months. Top 25 Strip Reta il Markets cap rate is an estimate calculated as PF PECO I markets less the current 1.1% spread between A and B market cap rates. See next slide for details 4 The same debt assumptions are applied to both PF PECO I Markets and Top 25 Shopping Center Markets Hypothetical Returns Key Notes PF PECO I Markets vs. Top 25 Markets¹ x Historical indexed rent growth for PECO I markets has largely tracked and even beaten rent growth for the Top 25 shopping center markets since 2009 x Going forward, secondary market rent growth is expected to track growth in the Top 25 markets x Given the higher initial yields of secondary markets, this translates into higher potential total returns of over 250 bps or 25% 2009 - 2025 Rent Growth (Indexed) 2016 - 2025 Rent Growth (Indexed) PF PECO I Markets Top 25 Strip Retail Markets 2 34
35 · SPREAD BETWEEN CAP RATES IN A MARKETS VS. B MARKETS HAS WIDENED Sources: Real Capital Analytics B Market Cap Rates Have Closely Tracked A Market Cap Rates Historically 0.0 % 2.0 % 4.0 % 6.0 % 8.0 % 10.0 % 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 10Y U.S. Treasuries A Market Cap Rates B Market Cap Rates 2.5 % 5.4 % 6.5 % Recently, the Spread Between A and B Markets has Widened and is Well Above the Long - Term Average (0.2)% 0.0 % 0.2 % 0.4 % 0.6 % 0.8 % 1.0 % 1.2 % 1.4 % 1.6 % 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Spread Between B and A Market Cap Rates Average Spread 1.1 % 0.6 % Per the prior page, A market cap rates would need to contract ~67 bps to achieve the same levered IRR as B markets. Today, A market cap rates are already 110 bps lower 35
36 · OUR STORES ARE RIGHT - SIZED 106 K 160 K PECO I Peers Source: Cushman & Wakefield Research ¹ Peers include AAT, AKR, BRX, DDR, FRT, KIM, REG, ROIC, RPAI, UE and WRI. Average Property Size (Square Feet) Commentary x Our assets are ~ 1/3 smaller than our peers’ assets , and our non - anchor stores, averaging 2,477 square feet, are also smaller than power center peers’ small shops x Meetings with national and regional tenants over the last 30 days indicate demand for over 6,500 new small shops (2K - 3K square feet) in the next year across several necessity retail tenant types x Trends expected in the next year will also favor smaller shops x Health & Wellness: spin classes, pilates studios, health - conscious fast casual restaurants, etc. x Clicks - to - Bricks: online retailers opening physical brick - and - mortar stores x A small portion of the retail world is contributing to the negative news: apparel, department stores, and office are the headliners x Food is major driver everywhere because Americans are eating out now more than ever x Neighborhood community centers and grocery - anchored centers are performing well because success in this area depends on in - line local services; vacant Class A space is being refilled easily 1 36
37 · ECONOMICS OF SMALL BOX VS. BIG BOX RETAILERS Our smaller tenants have more attractive unit economics than our anchor tenants, generating an IRR of ~14% over a 15 year period versus ~9% for anchor tenants Cash Flows IRR Assumes a 15 - year hold, classifying small box as ~2,000 sq. ft. at a 6.50% cap rate Assumes a 15 - year hold, classifying big box as ~10,000 sq. ft. at a 7.75% cap rate with rent per sq. ft. at $15.00 $(2,000) $(1,000) $ 0 $ 1,000 $ 2,000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Power Anchor Small Box $(20,000) $(10,000) $10,000 $20,000 13.7 % 9.3 % Small Box Power Anchor 37 m21 g5g6
38 · ECONOMICS OF SMALL BOX VS. BIG BOX RETAILERS Our smaller tenants have more attractive unit economics than our anchor tenants, generating an IRR of ~14% over a 15 year period versus ~9% for anchor tenants Power Anchor Cap Rate 7.75% Initial Term (yrs) 10 Initial TI / Sq. Ft. $35.00 Square Feet 10,000 Option (yrs) 5 Debt 50.0% $774,194 Initial Rent / Sq. Ft. $15.00 Option Rent 110.0% $16.50 Debt Service 3.00% 23,226 Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Terminal Rent $150,000 $150,000 $150,000 $150,000 $150,000 $150,000 $150,000 $150,000 $150,000 $150,000 $165,000 $165,000 $165,000 $165,000 $165,000 $165,000 Less: Prop. OpEx 20.0% (30,000) (30,000) (30,000) (30,000) (30,000) (30,000) (30,000) (30,000) (30,000) (30,000) (33,000) (33,000) (33,000) (33,000) (33,000) (33,000) Less: Tenant Improvements (350,000) Less: Debt Service (23,226) (23,226) (23,226) (23,226) (23,226) (23,226) (23,226) (23,226) (23,226) (23,226) (23,226) (23,226) (23,226) (23,226) (23,226) Entry (774,194) Exit 929,032 Cash Flow ($1,027,419) $96,774 $96,774 $96,774 $96,774 $96,774 $96,774 $96,774 $96,774 $96,774 $108,774 $108,774 $108,774 $108,774 $1,037,806 IRR 9.3% Small Shop Cap Rate 6.50% Initial Term (yrs) 7 Initial TI / Sq. Ft. $40.00 Downtime (yrs) 1.0 Square Feet 2,000 Option (yrs) 3 Retention Rate 75.0% Debt 50.0% $1,307,692 Tenants 5 10,000 Rent / Sq. Ft $25.00 New Lease Mark to Market 115.0% Debt Service 3.00% 39,231 Vacancy Factor 80.0% Option Growth 10.0% Annual Rent Growth 2.0% Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Terminal Rent: Tenant 1 $50,000 $51,000 $52,020 $53,060 $54,122 $55,204 $56,308 $61,939 $71,230 $72,654 $74,107 $75,590 $77,101 $78,643 $86,508 $88,238 Rent: Tenant 2 50,000 51,000 52,020 53,060 54,122 55,204 56,308 61,939 71,230 72,654 74,107 75,590 77,101 78,643 86,508 88,238 Rent: Tenant 3 50,000 51,000 52,020 53,060 54,122 55,204 56,308 61,939 71,230 72,654 74,107 75,590 77,101 78,643 0 88,238 Rent: Tenant 4 50,000 51,000 52,020 53,060 54,122 55,204 56,308 0 71,230 72,654 74,107 75,590 77,101 78,643 80,216 88,238 Rent: Tenant 5 (static vacancy) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Total Rent $200,000 $204,000 $208,080 $212,242 $216,486 $220,816 $225,232 $185,817 $284,919 $290,617 $296,430 $302,358 $308,406 $314,574 $253,232 $352,952 Less: Prop. OpEx 15.0% (30,000) (30,600) (31,212) (31,836) (32,473) (33,122) (33,785) (27,873) (42,738) (43,593) (44,464) (45,354) (46,261) (47,186) (37,985) (52,943) Less: Tenant Improvements (320,000) (80,000) Less: Debt Service (39,231) (39,231) (39,231) (39,231) (39,231) (39,231) (39,231) (39,231) (39,231) (39,231) (39,231) (39,231) (39,231) (39,231) (39,231) Entry (1,307,692) Exit 3,307,830 Cash Flow ($1,496,923) $134,169 $137,637 $141,175 $144,783 $148,463 $152,217 $118,714 $122,950 $207,794 $212,735 $217,774 $222,914 $228,157 $3,483,846 IRR 13.7% 38 m38 g7g8g9
PHILLIPS EDISON & COMPANY | 39 The Platform
40 · MANAGEMENT & PELP’S FULLY INTEGRATED OPERATING PLATFORM Highly experienced management team with a fully integrated operating platform with • Executive management averages 15 years at Philips Edison and 28 in commercial real estate • Fully integrated platform provides synergies and efficiencies • Control along every step of the value creation cycle , from sourcing an acquisition to property disposition • Platform scalable to own and operate 400+ shopping centers Accounting Acquisitions Capital Markets Construction Dispositions Due Diligence Finance IT Investor Relations Leasing Legal Marketing Property Management Risk Management Tax 281 associates 100% in house capabilities built over 20+ years Scalable for future growth 40
41 · SENIOR LEADERSHIP TEAM - OPERATIONS WEST REGION 1 NORTH REGION 1 MID - ATLANTIC REGION 1 SOUTHEAST REGION 1 NOTE: (1) CERTAIN EMPLOYEES HAVE MULTI - REGIONAL ROLES AND MAY BE COUNTED TWICE In addition, the operations team is complemented by a fully integrated platform of more than 160 associates within Finance, Capital Markets, Research, Accounting, Marketing, Information Technology, and more. Leasing Agent Offices: 8 Property Manager Offices: 18 26 TOTAL OFFICES NATIONWIDE NATIONAL, FULLY INTEGRATED OPERATING PLATFORM SENIOR LEADERSHIP TEAM - OPERATIONS Regional VP Portfolio Manager: 1 Property Management Associate: 1 Leasing Agents: 7 Retention Agents: 1 Property Managers: 6 Construction Managers: 2 Attorneys: 1 Paralegals: 1 WEST REGION 1 Regional VP Portfolio Manager: 1 Property Management Associate: 1 Leasing Agents: 7 Retention Agents: 1 Property Managers: 9 Construction Managers: 2 Attorneys: 1 Paralegals: 1 Regional VP Portfolio Manager: 1 Property Management Associate: 1 Leasing Agents: 6 Retention Agents: 1 Property Managers: 7 Construction Managers: 1 Attorneys: 1 Paralegals: 1 Vice President of Redevelopment: 1 Redevelopment Construction Managers: 2 Redevelopment Leasing Agents: 3 SVP, Portfolio/Asset Management SVP, Leasing VP, Leasing VP, Renewal Leasing SVP, Property Management Chief Marketing Officer SVP, Construction SVP, General Counsel Regional VP Portfolio Manager: 1 Property Management Associate: 1 Leasing Agents: 6 Retention Agents: 1 Property Managers: 8 Construction Managers: 1 Attorneys: 1 Paralegals: 1 SOUTHEAST REGION 1 WEST REGION 1 NORTH REGION 1 MID - ATLANTIC REGION 1 REDEVELOPMENT REGION 1 SENIOR LEADERSHIP TEAM - OPERATIONS Chief Operating Officer In - House Portfolio Management, Leasing and Operations team with regional focus and expertise 41
42 · GROCER RELATIONS NEW TENANT RELATIONS EXISTING TENANT RELATIONS NATIONAL ACCOUNTS OUTPARCEL PROGRAM REDEVELOPMENT EMERGING TRENDS National footprint with strategically focused teams NATIONAL, FULLY INTEGRATED OPERATING PLATFORM: IN - HOUSE LEASING New Leases Renewals NOTE: (1) 2017 LEASING STATS ARE YTD THROUGH 3/31/2017 Lease Count GLA First Yr ABR 2014 260 720,505 $11.02 2015 330 1,172,500 $11.62 2016 342 1,142,223 $12.47 2017 ¹ 89 281,254 $13.40 On pace for 356 new leases in 2017 Lease Count GLA Renewal Spread 2014 404 1,537,409 4.9% 2015 434 1,535,230 13.6% 2016 545 1,728,755 13.7% 2017 ¹ 131 347,722 13.1% On pace for 524 renewals in 2017 42
43 · NATIONAL, FULLY INTEGRATED OPERATING PLATFORM: IN - HOUSE ACQUISITIONS Head of Western Acquisitions Head of Midwest Acquisitions Head of Southeast Acquisitions Head of Northeast Acquisitions Vice President of Transactions Director of Underwriting Senior Vice President of Acquisitions SENIOR LEADERSHIP TEAM SOUTHEAST REGION SOUTH REGION 1 WEST REGION 1 MIDWEST REGION 1 NORTHEAST REGION 1 SENIOR LEADERSHIP TEAM NORTHEAST REGION 1 Acquisitions Associates: 1 Underwriting Analysts: 2 Transactions Analysts: 2 Acquisitions Associates: 1 Underwriting Analysts: 1 Transactions Analysts: 2 Acquisitions Associates: 1 Underwriting Analysts: 2 Transactions Analysts: 2 Acquisitions Associates: 1 Underwriting Analysts: 1 Transactions Analysts: 2 WEST REGION 1 Acquisitions Associates: 1 Underwriting Analysts: 1 Transactions Analysts: 2 CENTRAL REGION 1 MIDWEST REGION 1 CENTRAL REGION 1 NORTHEAST REGION 1 SOUTHEAST REGION 1 NOTE: (1) CERTAIN EMPLOYEES HAVE MULTI - REGIONAL ROLES AND MAY BE COUNTED TWICE 43
44 · NATIONAL, FULLY INTEGRATED OPERATING PLATFORM: IN - HOUSE ACQUISITIONS ACQUISITIONS ACTIVITY • Reviewed 3,134 deals • Underwrote 581 active opportunities • Sent out 434 LOIs • Closed on 77 grocery anchored centers representing $1.2 billion and 6 million square feet • 33 off - market and direct acquisitions • 44 on - market acquisitions ACQUISITIONS ACTIVITY • Reviewed 2,549 deals • Underwrote 386 active opportunities • Sent out 247 LOIs • Closed on 49 grocery anchored centers representing $808 million and 5.4 million square feet • 24 off - market and direct acquisitions • 25 on - market acquisitions ACQUISITIONS ACTIVITY • Reviewed 2,217 deals • Underwrote 364 active opportunities • Sent out 233 LOIs • Closed on 41 grocery anchored centers representing $880 million and 5.1 million square feet • 18 off - market and direct acquisitions • 23 on - market acquisitions 2014 2015 GROCERY ANCHORED PIPELINE (LOI’S OUTSTANDING AS OF 3/31/2017) 3.5 mm SQUARE FEET ~$700m AGGREGATE PURCHASE PRICE 32 PROPERTIES 2016 44
45 · SUPPORT DEPARTMENTS BUILT TO DRIVE SCALABLE EFFICIENCIES Back office platform focused on process efficiencies, driving high incremental margins with each new asset under management Finance Information Technology Accounting Legal Risk Management • Property Accounting • Financial Reporting • CAM • Accounts Receivable/Payable • Regional Portfolio support • FP&A and Corporate • Investor Relations • Acquisition support • Lease Administration • Corporate Governance • Insurance • Claims Management • Enterprise Risk Management • Strategic platform design • Systems implementation and integration • Cyber Security 45
46 · SHAREHOLDER ALIGNED COMPANY CULTURE • Ownership culture aligned with shareholders • Every associate receives ownership units after 1 year of service • Fosters environment of innovation and encourages associates to “act like an owner” • Culture of learning • PECO University: training department with employee - led curriculum featuring over 75 courses • Innovation Lab: annual cross - functional projects intended to promote forward thinking • Highly engaged, dedicated associates • 4 - time “Best Place to Work in Cincinnati” Finalist • In a study conducted by CEB, Phillips Edison employees ranked significantly higher in employee engagement 1 and retention versus a benchmark 2 comprised of 180 like - sized companies • Employee - led initiatives for promoting women and community service NOTES: (1) ENGAGEMENT CAPITAL SCORE IS THE AMOUNT OF COMMITMENT, DISCRETION ARY EFFORT AND INTENT TO STAY THAT ASSOCIATES EXHIBIT BASED ON P AST, PRESENT, AND FUTURE CONDITIONS (2) SURVEY CONDUCTED BY CEB AND BENCHMARKED AGAINST 180 LIKE - SIZED GLOBAL COMPANIES IN 20 I NDUSTRIES 46
For more information please contact: • Phillips Edison & Company: Michael Koehler, Director of Investor Relations InvestorRelations@PhillipsEdison.com (513) 338 - 2743
PHILLIPS EDISON & COMPANY | 48 Appendix
49 · Funds from Operations Funds from operations (“FFO”) is a non - GAAP performance financial measure that is widely recognized as a measure of REIT operati ng performance. We use FFO as defined by the National Association of Real Estate Investment Trusts (“NAREIT”) to be net income (loss), computed in accor dan ce with GAAP, adjusted for gains (or losses) from sales of depreciable real estate property (including deemed sales and settlements of pre - existing relationships ), plus depreciation and amortization on real estate assets and impairment charges, and after related adjustments for unconsolidated partnerships, joint ventures, and noncontrolling interests. We believe that FFO is helpful to our investors and our management as a measure of operating performance because, when compared year to yea r, it reflects the impact on operations from trends in occupancy rates, rental rates, operating costs, development activities, general and administrative exp enses, and interest costs, which are not immediately apparent from net income. FFO should not be considered as an alternative to net income (loss) or income (loss ) f rom continuing operations under GAAP, nor as an indication of our liquidity, nor is this measure indicative of funds available to fund our cash needs, includ ing our ability to fund distributions, Accordingly, FFO should be reviewed in connection with other GAAP measurements. FFO should not be viewed as more prominent me asu res of performance than our net income or cash flows from operations prepared in accordance with GAAP. Our FFO, as presented, may not be comparable t o a mounts calculated by other REITs. Pro Forma Funds from Operations – FFO for the quarter ended March 31, 2017, pro forma for the transaction, is not reasonably reconcilable to net income at this time as purchase accounting and other non - cash transaction adjustments have not yet been completed. The following section presents our calculation of FFO and provides additional information related to our operations (in thous and s): RECONCILIATION OF NON - GAAP FINANCIALS 49
50 · Same - Center Net Operating Income We present Same - Center NOI as a supplemental measure of our performance. We define NOI as total operating revenues, adjusted to exclude lease buy - out income and non - cash revenue items, less property operating expenses and real estate taxes. Same - Center NOI represents the NOI for the 1 32 properties for PECO I that were owned and operational for the entire portion of both comparable reporting periods, except for those properties we curren tly classify as redevelopment. A property is removed from the Same - Center pool and classified as redevelopment when it is being repositioned in the market and su ch repositioning is expected to have a significant impact on property operating income. While there is judgment surrounding changes in designations, once a r ede velopment property has stabilized, it is typically moved to the Same - Center pool the following year. Currently, we have identified five properties that we classify as redevelopment properties. We believe that NOI and Same - Center NOI provide useful information to our investors about our financial and operating performanc e because each provides a performance measure of the revenues and expenses directly involved in owning and operating real estate assets and provides a per spective not immediately apparent from net income. Because Same - Center NOI excludes the change in NOI from properties acquired after December 31, 2014, and those considered redevelopment properties, it highlights operating trends such as occupancy levels, rental rates, and operating costs on properties that wer e o perational for both comparable periods. Other REITs may use different methodologies for calculating Same - Center NOI, and accordingly, our Same - Center NOI may not be com parable to other REITs. Same - Center NOI should not be viewed as an alternative measure of our financial performance since it does not reflect the operat ions of our entire portfolio, nor does it reflect the impact of general and administrative expenses, acquisition expenses, depreciation and amortization, inter est expense, other income, or the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties that could materiall y i mpact our results from operations. RECONCILIATION OF NON - GAAP FINANCIALS 50
51 · RECONCILIATION OF NON - GAAP FINANCIALS 51