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): November 3, 2022
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||||||||||||
| (Address of principal executive offices) | (Zip Code) | |||||||
| (Registrant’s telephone number, including area code) | ||
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:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
$0.01 par value per share | ||||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
Item 7.01 Regulation FD Disclosure.
On November 3, 2022 , Phillips Edison & Company, Inc. (the “Company”) issued a press release announcing its results for the quarter ended September 30, 2022. A copy of that press release is attached hereto as Exhibit 99.1 and incorporated herein by reference. A copy of the Company’s Third Quarter 2022 Supplemental Disclosure is attached hereto as Exhibit 99.2 and incorporated herein by reference. The Company will host a conference call on Friday, November 4, 2022, at 12:00 p.m. Eastern Time to discuss the third quarter results and provide commentary on its business performance and guidance. The conference call can be accessed by dialing (888) 210-4659 (domestic) or (646) 960-0383 (international). A live webcast of the presentation can be accessed by visiting https://events.q4inc.com/attendee/413179432, and a replay of the webcast will be available approximately one hour after the conclusion of the live webcast at the webcast link above.
The information in this Current Report on Form 8-K, including Exhibits 99.1 and 99.2, are being furnished to the Securities and Exchange Commission (“SEC”), and shall not be deemed to be “filed” with the SEC for any purpose, including for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section and shall not be deemed to be incorporated by reference into any other filing with the SEC except as expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit Number | Description of Exhibit | |||||||
| 99.1 | ||||||||
| 99.2 | ||||||||
| 104 | Cover Page Interactive Data File (formatted as inline XBRL) | |||||||
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 & COMPANY, INC. | ||||||||
| Dated: November 3, 2022 | By: | /s/ Jennifer L. Robison | ||||||
| Jennifer L. Robison | ||||||||
| Chief Accounting Officer and Senior Vice President (Principal Accounting Officer) | ||||||||
Phillips Edison & Company Reports
Third Quarter 2022 Results and
Raises Full Year Guidance
CINCINNATI - November 3, 2022 - Phillips Edison & Company, Inc. (Nasdaq: PECO) (“PECO” or the “Company”), one of the nation’s largest owners and operators of grocery-anchored omni-channel neighborhood shopping centers, reported net income attributable to stockholders of $11.0 million, or $0.09 per diluted share, for the three months ended September 30, 2022.
Highlights for the Third Quarter Ended September 30, 2022
•Nareit FFO totaled $72.0 million, or $0.55 per diluted share
•Core FFO totaled $76.6 million, or $0.58 per diluted share
•Same-center NOI increased 4.3% versus the third quarter ended September 30, 2021
•Leased portfolio occupancy as of September 30, 2022 increased to a record-high 97.1%
•Comparable new and renewal rent spreads were 21.3% and 15.5%, respectively
•Acquired one grocery-anchored shopping center and two outparcels for $59.5 million
•Net debt to annualized adjusted EBITDAre was 5.4x compared to 5.6x at December 31, 2021
•Increased monthly distributions by 3.7% to $0.0933 per share
Management Commentary
“PECO’s grocery-anchored and necessity-based Neighbor mix, our right-sized format and well-positioned locations in growing markets, resulted in continued strong leasing demand,” stated Jeff Edison, chairman and chief executive officer of PECO. “Our team delivered another strong quarter with same-center NOI growth of 4.3% and record occupancy of 97.1%. Our performance allows us to raise the midpoint of our 2022 guidance for the third quarter in a row. As reflected in our results, 2022 has been a year of reaching record highs in occupancy and releasing spreads. Our grocery-anchored neighborhood centers continue to benefit from structural and macroeconomic trends that create tailwinds for us as we head into 2023 and beyond, providing us with confidence in our ability to continue to deliver strong results.”
Financial Results for the Third Quarter and Nine Months Ended September 30, 2022
Net Income
Third quarter 2022 net income attributable to stockholders totaled $11.0 million, or $0.09 per diluted share, compared to net income of $14.6 million, or $0.13 per diluted share, during the third quarter of 2021.
For the nine months ended September 30, 2022, net income attributable to stockholders totaled $34.6 million, or $0.30 per diluted share, compared to net income of $20.3 million, or $0.21 per diluted share, for the same period in 2021.
Nareit FFO
Third quarter 2022 funds from operations attributable to stockholders and operating partnership (“OP”) unit holders as defined by Nareit (“Nareit FFO”) increased 26.4% to $72.0 million, or $0.55 per diluted share, from $56.9 million, or $0.46 per diluted share, during the third quarter of 2021.
For the nine months ended September 30, 2022, Nareit FFO increased 29.9% to $210.2 million, or $1.62 per diluted share, from $161.8 million, or $1.44 per diluted share, during the same period in 2021.
The $15.1 million increase for the third quarter of 2022 and the $48.4 million increase for the nine months ended September 30, 2022 were driven by an increase in rental income as a result of the Company’s portfolio expansion, lower interest expense, and a reduction in non-cash expense as a result of the final settlement of the earn-out liability with the issuance of 1.6 million OP units in January 2022.
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Core FFO
Third quarter 2022 core funds from operations (“Core FFO”) increased 15.4% to $76.6 million, or $0.58 per diluted share, compared to $66.4 million, or $0.54 per diluted share, during the third quarter of 2021.
For the nine months ended September 30, 2022, Core FFO increased 13.8% to $221.0 million, or $1.70 per diluted share, from $194.2 million, or $1.73 per diluted share, during the same period in 2021.
Results for both periods were driven by increased rental income as a result of the Company’s portfolio expansion, increased occupancy, improved average base rent per square foot, as well as lower interest costs. The decrease in the per diluted share result for the nine months ended was primarily due to an increase in the share count of 18% as a result of PECO’s July 2021 underwritten IPO.
Same-Center NOI
Third quarter 2022 same-center net operating income (“NOI”) increased 4.3% to $92.5 million compared to $88.7 million during the third quarter of 2021.
For the nine months ended September 30, 2022, same-center NOI increased 5.1% to $271.8 million from $258.6 million during the nine months ended September 30, 2021.
Results for both periods were driven by a $0.37 increase in average base rent per square foot and an improvement in average occupancy, offset by reduced out-of-period collections in 2022 when compared to the same year-ago period.
Portfolio Overview for the Third Quarter and Nine Months Ended September 30, 2022
Portfolio Statistics
As of September 30, 2022, PECO’s wholly-owned portfolio consisted of 270 properties, totaling approximately 31.1 million square feet, located in 31 states. This compared to 267 properties, totaling approximately 30.4 million square feet, located in 31 states as of September 30, 2021.
Leased portfolio occupancy increased to 97.1% at September 30, 2022 compared to 95.6% at September 30, 2021.
Anchor occupancy increased to 98.9% at September 30, 2022 compared to 97.6% at September 30, 2021, and inline occupancy increased to 93.6% at September 30, 2022 compared to 91.9% at September 30, 2021.
Leasing Activity
During the third quarter of 2022, 240 leases (new, renewal, and options) were executed totaling 1.2 million square feet. This compared to 268 leases executed totaling 1.4 million square feet during the third quarter of 2021.
During the nine months ended September 30, 2022, 749 leases (new, renewal, and options) were executed totaling 3.6 million square feet. This compared to 882 leases executed totaling 4.2 million square feet during the same year-ago period.
Comparable rent spreads during the third quarter of 2022, which compare the percentage increase (or decrease) of new or renewal leases to the expiring lease of a unit that was occupied within the past twelve months, were 21.3% for new leases, 15.5% for renewal leases (excluding options), and 16.9% combined (new and renewal leases only).
Comparable rent spreads during the nine months ended September 30, 2022 were 31.3% for new leases, 14.9% for renewal leases (excluding options), and 18.5% combined (new and renewal leases only).
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Acquisition & Disposition Activity
During the third quarter of 2022, one property and two outparcels were acquired for $59.5 million. During the same period, one outparcel was sold for $0.4 million. Third quarter 2022 grocery-anchored shopping center acquisitions included:
•Crossroads Towne Center, a 149,000 square foot shopping center shadow-anchored by Walmart in Las Vegas, Nevada. The center is located in a high-traffic area with strong median household income and a growing population. At the time of purchase, the center occupancy was 88.7%, providing room for growth through leasing vacant space.
During the nine months ended September 30, 2022, five properties and three outparcels were acquired for $228.8 million. During the same period, three properties and three outparcels were sold for $28.7 million.
Balance Sheet Highlights as of September 30, 2022
As of September 30, 2022, PECO had $757.8 million of total liquidity, comprised of $24.4 million of cash, cash equivalents, and restricted cash, plus $733.4 million of borrowing capacity available on its $800 million revolving credit facility.
PECO’s net debt to annualized adjusted EBITDAre was 5.4x, compared to 5.6x at December 31, 2021.
PECO’s outstanding debt had a weighted-average interest rate of 3.3%, a weighted-average maturity of 4.6 years, and 86.5% of its total debt was fixed-rate debt.
Monthly Stockholder Distributions
For the three months ended September 30, 2022, total distributions of $36.1 million were paid to common stockholders and OP unit holders. Distributions paid in July, August, and September were each $0.09 per share.
PECO’s Board of Directors (the “Board”) unanimously approved monthly distributions payable October 3, 2022 and November 1, 2022 to stockholders of record at the close of business on September 16, 2022 and October 17, 2022, respectively. The Board approved the distribution at a rate of $0.0933 per share of the Company’s common stock and per OP unit. When annualized, this is equal to a rate of $1.12 per share, representing an increase of 3.7% over the previous annualized rate of $1.08 per share. PECO has paid, and plans to continue to pay, distributions monthly.
Subsequent to quarter end, the Board authorized monthly distributions of $0.0933 per share payable in December 2022, January 2023, and February 2023 to stockholders of record at the close of business on November 15, 2022, December 15, 2022, and January 17, 2023, respectively.
Updated 2022 Guidance
PECO has updated earnings guidance for the year ending December 31, 2022 to reflect the following:
•Strong property results from record occupancy and leasing spreads to date
•Lower than expected corporate and general and administrative expenses
Updated Full Year 2022 Guidance | Prior Full Year 2022 Guidance | ||||||||||
| Net income per share | $0.36 - $0.39 | $0.34 - $0.40 | |||||||||
| Nareit FFO per share | $2.11 - $2.15 | $2.09 - $2.15 | |||||||||
| Core FFO per share | $2.22 - $2.26 | $2.19 - $2.25 | |||||||||
| Same-Center NOI growth | 4.1% - 4.5% | 3.75% - 4.5% | |||||||||
| Acquisitions (net of dispositions) | $200 - $250 million | $200 - $300 million | |||||||||
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The following table provides a reconciliation of the range of the Company's 2022 estimated net income to estimated Nareit FFO and Core FFO:
| (Unaudited) | Low End | High End | |||||||||
| Net income | $ | 0.36 | $ | 0.39 | |||||||
| Depreciation and amortization of real estate assets | 1.77 | 1.78 | |||||||||
| Gain on sale of real estate assets | (0.03) | (0.03) | |||||||||
| Adjustments related to unconsolidated joint ventures | 0.01 | 0.01 | |||||||||
| Nareit FFO | $ | 2.11 | $ | 2.15 | |||||||
| Depreciation and amortization of corporate assets | 0.03 | 0.03 | |||||||||
| Change in fair value of earn-out liability | 0.01 | 0.01 | |||||||||
| Loss on extinguishment of debt, net | 0.01 | 0.01 | |||||||||
| Transactions and other | 0.06 | 0.06 | |||||||||
| Core FFO | $ | 2.22 | $ | 2.26 | |||||||
Jeff Edison summarized the quarter: “Our third quarter results continue to highlight the strength of PECO’s focused and differentiated strategy of owning and operating small-format, neighborhood centers anchored by the #1 or #2 grocer in a market which drives high-recurring foot traffic and Neighbor demand and results in superior financial and operating performance. Our experienced cycle-tested team, integrated operating platform, and grocery-anchored strategy place PECO in a strong position, despite an uncertain macroeconomic environment, with a fortress balance sheet and liquidity that will allow us to take advantage of opportunities as they arise.”
Conference Call Details
PECO plans to host a conference call and webcast on Friday, November 4, 2022 at 12:00 p.m. Eastern Time to discuss these results. Chairman and Chief Executive Officer Jeff Edison, President Devin Murphy, and Chief Financial Officer John Caulfield will host the presentation.
Third Quarter 2022 Earnings Conference Call Details:
Date: Friday, November 4, 2022
Time: 12:00 p.m. ET
Toll-Free Dial-In Number: (888) 210-4659
International Dial-In Number: (646) 960-0383
Conference ID: 2035308
Webcast: https://events.q4inc.com/attendee/413179432
A webcast replay will be available approximately one hour after the conclusion of the presentation using the webcast link above.
For more information on the Company’s financial results, please refer to the Company’s Form 10-Q, filed with the SEC on November 3, 2022 and available on the SEC’s website at www.sec.gov.
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PHILLIPS EDISON & COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2022 AND DECEMBER 31, 2021
(Condensed and Unaudited)
(In thousands, except per share amounts)
| September 30, 2022 | December 31, 2021 | ||||||||||
| ASSETS | |||||||||||
| Investment in real estate: | |||||||||||
| Land and improvements | $ | 1,656,666 | $ | 1,586,993 | |||||||
| Building and improvements | 3,539,035 | 3,355,433 | |||||||||
| In-place lease assets | 470,184 | 452,504 | |||||||||
| Above-market lease assets | 72,294 | 68,736 | |||||||||
| Total investment in real estate assets | 5,738,179 | 5,463,666 | |||||||||
| Accumulated depreciation and amortization | (1,272,653) | (1,110,426) | |||||||||
| Net investment in real estate assets | 4,465,526 | 4,353,240 | |||||||||
| Investment in unconsolidated joint ventures | 27,601 | 31,326 | |||||||||
| Total investment in real estate assets, net | 4,493,127 | 4,384,566 | |||||||||
| Cash and cash equivalents | 4,789 | 92,585 | |||||||||
| Restricted cash | 19,657 | 22,944 | |||||||||
| Goodwill | 29,066 | 29,066 | |||||||||
| Other assets, net | 183,774 | 138,050 | |||||||||
| Real estate investments and other assets held for sale | — | 1,557 | |||||||||
| Total assets | $ | 4,730,413 | $ | 4,668,768 | |||||||
| LIABILITIES AND EQUITY | |||||||||||
| Liabilities: | |||||||||||
| Debt obligations, net | $ | 1,872,939 | $ | 1,891,722 | |||||||
| Below-market lease liabilities, net | 108,548 | 107,526 | |||||||||
| Earn-out liability | — | 52,436 | |||||||||
| Derivative liabilities | — | 24,096 | |||||||||
| Deferred income | 21,586 | 19,145 | |||||||||
| Accounts payable and other liabilities | 112,433 | 97,229 | |||||||||
| Liabilities of real estate investments held for sale | — | 288 | |||||||||
| Total liabilities | 2,115,506 | 2,192,442 | |||||||||
| Equity: | |||||||||||
Preferred stock, $0.01 par value per share, 10,000 shares authorized, zero shares issued and outstanding at September 30, 2022 and December 31, 2021 | — | — | |||||||||
Common stock, $0.01 par value per share, 1,000,000 shares authorized, 117,084 shares issued and outstanding at September 30, 2022; 650,000 shares authorized, 19,550 shares issued and outstanding at December 31, 2021 | 1,170 | 196 | |||||||||
Class B common stock, $0.01 par value per share, zero shares authorized, issued, and outstanding at September 30, 2022; 350,000 shares authorized, 93,665 shares issued and outstanding at December 31, 2021 | — | 936 | |||||||||
| Additional paid-in capital | 3,381,638 | 3,264,038 | |||||||||
| Accumulated other comprehensive income (loss) | 21,123 | (24,819) | |||||||||
| Accumulated deficit | (1,150,337) | (1,090,837) | |||||||||
| Total stockholders’ equity | 2,253,594 | 2,149,514 | |||||||||
| Noncontrolling interests | 361,313 | 326,812 | |||||||||
| Total equity | 2,614,907 | 2,476,326 | |||||||||
| Total liabilities and equity | $ | 4,730,413 | $ | 4,668,768 | |||||||
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PHILLIPS EDISON & COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
(Condensed and Unaudited)
(In thousands, except per share amounts)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Rental income | $ | 142,857 | $ | 128,826 | $ | 418,835 | $ | 386,784 | |||||||||||||||
| Fees and management income | 2,081 | 2,435 | 9,323 | 7,095 | |||||||||||||||||||
| Other property income | 716 | 1,073 | 2,175 | 1,906 | |||||||||||||||||||
| Total revenues | 145,654 | 132,334 | 430,333 | 395,785 | |||||||||||||||||||
| Operating Expenses: | |||||||||||||||||||||||
| Property operating | 23,089 | 21,608 | 69,261 | 65,784 | |||||||||||||||||||
| Real estate taxes | 18,041 | 16,375 | 52,005 | 49,762 | |||||||||||||||||||
| General and administrative | 10,843 | 11,627 | 33,751 | 32,905 | |||||||||||||||||||
| Depreciation and amortization | 60,013 | 53,901 | 178,008 | 165,829 | |||||||||||||||||||
| Impairment of real estate assets | — | 698 | — | 6,754 | |||||||||||||||||||
| Total operating expenses | 111,986 | 104,209 | 333,025 | 321,034 | |||||||||||||||||||
| Other: | |||||||||||||||||||||||
| Interest expense, net | (17,569) | (18,570) | (52,895) | (57,765) | |||||||||||||||||||
| (Loss) gain on disposal of property, net | (10) | 14,093 | 4,151 | 31,678 | |||||||||||||||||||
| Other expense, net | (3,916) | (7,086) | (9,738) | (25,595) | |||||||||||||||||||
| Net income | 12,173 | 16,562 | 38,826 | 23,069 | |||||||||||||||||||
| Net income attributable to noncontrolling interests | (1,135) | (1,929) | (4,181) | (2,739) | |||||||||||||||||||
| Net income attributable to stockholders | $ | 11,038 | $ | 14,633 | $ | 34,645 | $ | 20,330 | |||||||||||||||
| Earnings per share of common stock: | |||||||||||||||||||||||
Net income per share attributable to stockholders - basic and diluted | $ | 0.09 | $ | 0.13 | $ | 0.30 | $ | 0.21 | |||||||||||||||
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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 and nine months ended September 30, 2022 and 2021, Same-Center NOI represents the NOI for the 255 properties that were wholly-owned and operational for the entire portion of all comparable reporting periods. The Company believes Same-Center NOI provides useful information to its investors about its financial and operating performance because it provides a performance measure of the revenues and expenses directly involved in owning and operating real estate assets and provides a perspective not immediately apparent from net income (loss). Because Same-Center NOI excludes the change in NOI from properties acquired or disposed of after December 31, 2020, it highlights operating trends such as occupancy levels, rental rates, and operating costs on properties that were operational for all comparable periods. Other REITs may use different methodologies for calculating Same-Center NOI, and accordingly, PECO’s Same-Center NOI may not be comparable to other REITs.
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. The National Association of Real Estate Investment Trusts (“Nareit”) defines FFO as net income (loss) computed in accordance with GAAP, excluding: (i) gains (or losses) from sales of property and gains (or losses) from change in control; (ii) depreciation and amortization related to real estate; and (iii) impairment losses on real estate and impairments of in-substance real estate investments in investees that are driven by measurable decreases in the fair value of the depreciable real estate held by the unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect Nareit FFO on the same basis. The Company calculates Nareit FFO Attributable to Stockholders and OP Unit Holders in a manner consistent with the Nareit definition.
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 Attributable to Stockholders and OP Unit Holders 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, Nareit FFO Attributable to Stockholders and OP Unit Holders, 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, Nareit FFO Attributable to Stockholders and OP Unit Holders, 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, Nareit FFO Attributable to Stockholders and OP Unit Holders, 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 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)
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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 has included the calculation of EBITDAre to better align with publicly traded REITs. 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.
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Same-Center Net Operating Income—The table below compares Same-Center NOI (dollars in thousands):
| Three Months Ended September 30, | Favorable (Unfavorable) | Nine Months Ended September 30, | Favorable (Unfavorable) | ||||||||||||||||||||||||||||||||||||||||||||
| 2022 | 2021 | $ Change | % Change | 2022 | 2021 | $ Change | % Change | ||||||||||||||||||||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||||||||||||||||||||||||||
Rental income(1) | $ | 96,067 | $ | 90,949 | $ | 5,118 | $ | 284,629 | $ | 270,090 | $ | 14,539 | |||||||||||||||||||||||||||||||||||
| Tenant recovery income | 30,696 | 29,645 | 1,051 | 90,468 | 86,566 | 3,902 | |||||||||||||||||||||||||||||||||||||||||
Reserves for uncollectibility(2) | 112 | 59 | 53 | (403) | 1,280 | (1,683) | |||||||||||||||||||||||||||||||||||||||||
| Other property income | 581 | 989 | (408) | 1,767 | 1,740 | 27 | |||||||||||||||||||||||||||||||||||||||||
| Total revenues | 127,456 | 121,642 | 5,814 | 4.8 | % | 376,461 | 359,676 | 16,785 | 4.7 | % | |||||||||||||||||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||||||||||||||||||||||
| Property operating expenses | 18,559 | 17,156 | (1,403) | 56,664 | 52,912 | (3,752) | |||||||||||||||||||||||||||||||||||||||||
| Real estate taxes | 16,381 | 15,819 | (562) | 48,031 | 48,160 | 129 | |||||||||||||||||||||||||||||||||||||||||
| Total operating expenses | 34,940 | 32,975 | (1,965) | (6.0) | % | 104,695 | 101,072 | (3,623) | (3.6) | % | |||||||||||||||||||||||||||||||||||||
| Total Same-Center NOI | $ | 92,516 | $ | 88,667 | $ | 3,849 | 4.3 | % | $ | 271,766 | $ | 258,604 | $ | 13,162 | 5.1 | % | |||||||||||||||||||||||||||||||
(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 September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Net income | $ | 12,173 | $ | 16,562 | $ | 38,826 | $ | 23,069 | |||||||||||||||
| Adjusted to exclude: | |||||||||||||||||||||||
| Fees and management income | (2,081) | (2,435) | (9,323) | (7,095) | |||||||||||||||||||
Straight-line rental income(1) | (3,932) | (2,476) | (9,060) | (6,868) | |||||||||||||||||||
| Net amortization of above- and below- market leases | (1,081) | (908) | (3,161) | (2,633) | |||||||||||||||||||
| Lease buyout income | (221) | (560) | (2,362) | (3,138) | |||||||||||||||||||
| General and administrative expenses | 10,843 | 11,627 | 33,751 | 32,905 | |||||||||||||||||||
| Depreciation and amortization | 60,013 | 53,901 | 178,008 | 165,829 | |||||||||||||||||||
| Impairment of real estate assets | — | 698 | — | 6,754 | |||||||||||||||||||
| Interest expense, net | 17,569 | 18,570 | 52,895 | 57,765 | |||||||||||||||||||
| Loss (gain) on disposal of property, net | 10 | (14,093) | (4,151) | (31,678) | |||||||||||||||||||
| Other expense, net | 3,916 | 7,086 | 9,738 | 25,595 | |||||||||||||||||||
| Property operating expenses related to fees and management income | 704 | 1,489 | 3,061 | 3,611 | |||||||||||||||||||
| NOI for real estate investments | 97,913 | 89,461 | 288,222 | 264,116 | |||||||||||||||||||
Less: Non-same-center NOI(2) | (5,397) | (794) | (16,456) | (5,512) | |||||||||||||||||||
| Total Same-Center NOI | $ | 92,516 | $ | 88,667 | $ | 271,766 | $ | 258,604 | |||||||||||||||
(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.
9
Nareit Funds from Operations and Core Funds from Operations—The following table presents the Company’s calculation of Nareit FFO Attributable to Stockholders and OP Unit Holders and Core FFO and provides additional information related to its operations (in thousands, except per share amounts):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Calculation of Nareit FFO Attributable to Stockholders and OP Unit Holders | |||||||||||||||||||||||
Net income | $ | 12,173 | $ | 16,562 | $ | 38,826 | $ | 23,069 | |||||||||||||||
| Adjustments: | |||||||||||||||||||||||
| Depreciation and amortization of real estate assets | 59,136 | 52,984 | 175,305 | 162,979 | |||||||||||||||||||
| Impairment of real estate assets | — | 698 | — | 6,754 | |||||||||||||||||||
| Loss (gain) on disposal of property, net | 10 | (14,093) | (4,151) | (31,678) | |||||||||||||||||||
| Adjustments related to unconsolidated joint ventures | 662 | 776 | 181 | 676 | |||||||||||||||||||
| Nareit FFO attributable to stockholders and OP unit holders | $ | 71,981 | $ | 56,927 | $ | 210,161 | $ | 161,800 | |||||||||||||||
| Calculation of Core FFO | |||||||||||||||||||||||
| Nareit FFO attributable to stockholders and OP unit holders | $ | 71,981 | $ | 56,927 | $ | 210,161 | $ | 161,800 | |||||||||||||||
| Adjustments: | |||||||||||||||||||||||
| Depreciation and amortization of corporate assets | 877 | 917 | 2,703 | 2,850 | |||||||||||||||||||
| Change in fair value of earn-out liability | — | 5,000 | 1,809 | 23,000 | |||||||||||||||||||
| Transaction and acquisition expenses | 3,740 | 1,775 | 7,820 | 2,850 | |||||||||||||||||||
| (Gain) loss on extinguishment or modification of debt and other, net | (4) | 1,674 | 1,025 | 2,784 | |||||||||||||||||||
| Amortization of unconsolidated joint venture basis differences | 1 | 80 | 220 | 905 | |||||||||||||||||||
Realized performance income(1) | — | — | (2,742) | — | |||||||||||||||||||
| Core FFO | $ | 76,595 | $ | 66,373 | $ | 220,996 | $ | 194,189 | |||||||||||||||
| Nareit FFO Attributable to Stockholders and OP Unit Holders/Core FFO per Diluted Share | |||||||||||||||||||||||
| Weighted-average shares of common stock outstanding - diluted | 131,593 | 122,573 | 129,805 | 112,317 | |||||||||||||||||||
| Nareit FFO attributable to stockholders and OP unit holders per share - diluted | $ | 0.55 | $ | 0.46 | $ | 1.62 | $ | 1.44 | |||||||||||||||
| Core FFO per share - diluted | $ | 0.58 | $ | 0.54 | $ | 1.70 | $ | 1.73 | |||||||||||||||
(1)Realized performance income includes fees received related to the achievement of certain performance targets in our NRP joint venture.
10
EBITDAre and Adjusted EBITDAre—The following table presents the Company’s calculation of EBITDAre and Adjusted EBITDAre (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | Year Ended December 31, | |||||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | 2021 | |||||||||||||||||||||||||
Calculation of EBITDAre | |||||||||||||||||||||||||||||
Net income | $ | 12,173 | $ | 16,562 | $ | 38,826 | $ | 23,069 | $ | 17,233 | |||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||||||||
| Depreciation and amortization | 60,013 | 53,901 | 178,008 | 165,829 | 221,433 | ||||||||||||||||||||||||
| Interest expense, net | 17,569 | 18,570 | 52,895 | 57,765 | 76,371 | ||||||||||||||||||||||||
| Loss (gain) on disposal of property, net | 10 | (14,093) | (4,151) | (31,678) | (30,421) | ||||||||||||||||||||||||
| Impairment of real estate assets | — | 698 | — | 6,754 | 6,754 | ||||||||||||||||||||||||
| Federal, state, and local tax expense | 179 | 165 | 373 | 496 | 327 | ||||||||||||||||||||||||
| Adjustments related to unconsolidated joint ventures | 927 | 1,107 | 1,061 | 1,704 | 1,431 | ||||||||||||||||||||||||
EBITDAre | $ | 90,871 | $ | 76,910 | $ | 267,012 | $ | 223,939 | $ | 293,128 | |||||||||||||||||||
Calculation of Adjusted EBITDAre | |||||||||||||||||||||||||||||
EBITDAre | $ | 90,871 | $ | 76,910 | $ | 267,012 | $ | 223,939 | $ | 293,128 | |||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||||||||
| Change in fair value of earn-out liability | — | 5,000 | 1,809 | 23,000 | 30,436 | ||||||||||||||||||||||||
| Transaction and acquisition expenses | 3,740 | 1,775 | 7,820 | 2,850 | 5,363 | ||||||||||||||||||||||||
| Amortization of unconsolidated joint venture basis differences | 1 | 80 | 220 | 905 | 1,167 | ||||||||||||||||||||||||
Realized performance income(1) | — | — | (2,742) | — | (675) | ||||||||||||||||||||||||
Adjusted EBITDAre | $ | 94,612 | $ | 83,765 | $ | 274,119 | $ | 250,694 | $ | 329,419 | |||||||||||||||||||
(1)Realized performance income includes fees received related to the achievement of certain performance targets in our NRP joint venture.
11
Financial Leverage Ratios—The Company believes its net debt to Adjusted EBITDAre, net debt to total enterprise value, and debt covenant compliance as of September 30, 2022 allow it access to future borrowings as needed in the near term. The following table presents the Company’s calculation of net debt and total enterprise value, inclusive of its prorated portion of net debt and cash and cash equivalents owned through its unconsolidated joint ventures, as of September 30, 2022 and December 31, 2021 (in thousands):
| September 30, 2022 | December 31, 2021 | ||||||||||
| Net debt: | |||||||||||
| Total debt, excluding discounts, market adjustments, and deferred financing expenses | $ | 1,914,397 | $ | 1,941,504 | |||||||
| Less: Cash and cash equivalents | 5,249 | 93,109 | |||||||||
| Total net debt | $ | 1,909,148 | $ | 1,848,395 | |||||||
| Enterprise value: | |||||||||||
| Net debt | $ | 1,909,148 | $ | 1,848,395 | |||||||
Total equity market capitalization(1)(2) | 3,678,197 | 4,182,996 | |||||||||
| Total enterprise value | $ | 5,587,345 | $ | 6,031,391 | |||||||
(1)Total equity market capitalization is calculated as diluted shares multiplied by the closing market price per share, which includes 131.1 million and 126.6 million diluted shares as of September 30, 2022 and December 31, 2021, respectively, and the closing market price per share of $28.05 and $33.04 as of September 30, 2022 and December 31, 2021, respectively.
(2)Fully diluted shares include common stock and OP units as of September 30, 2022 and Class B common stock, common stock, and OP units as of December 31, 2021.
The following table presents the Company’s calculation of net debt to Adjusted EBITDAre and net debt to total enterprise value as of September 30, 2022 and December 31, 2021 (dollars in thousands):
| September 30, 2022 | December 31, 2021 | ||||||||||
Net debt to Adjusted EBITDAre - annualized: | |||||||||||
| Net debt | $ | 1,909,148 | $ | 1,848,395 | |||||||
Adjusted EBITDAre - annualized(1) | 352,844 | 329,419 | |||||||||
Net debt to Adjusted EBITDAre - annualized | 5.4x | 5.6x | |||||||||
| Net debt to total enterprise value: | |||||||||||
| Net debt | $ | 1,909,148 | $ | 1,848,395 | |||||||
| Total enterprise value | 5,587,345 | 6,031,391 | |||||||||
| Net debt to total enterprise value | 34.2% | 30.6% | |||||||||
(1)Adjusted EBITDAre is based on a trailing twelve month period.
About Phillips Edison & Company
Phillips Edison & Company, Inc. (“PECO”), an internally-managed REIT, is one of the nation’s largest owners and operators of grocery-anchored shopping centers. Founded in 1991, PECO has generated strong results through its vertically-integrated operating platform and national footprint of well-occupied shopping centers. PECO’s centers feature a mix of national and regional retailers providing necessity-based goods and services in fundamentally strong markets throughout the United States. PECO’s top grocery anchors include Kroger, Publix, Ahold Delhaize, and Albertsons. As of September 30, 2022, PECO manages 290 shopping centers, including 270 wholly-owned centers comprising 31.1 million square feet across 31 states, and 20 shopping centers owned in one institutional joint venture. PECO is exclusively focused on creating great omni-channel, grocery-anchored shopping experiences and improving communities, one neighborhood shopping center at a time.
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.
12
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. Phillips Edison & Company, Inc. (the “Company”) intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and includes this statement for purposes of complying with the safe harbor provisions. Such forward-looking statements can generally be identified by the Company’s use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” “seek,” “objective,” “goal,” “strategy,” “plan,” “focus,” “priority,” “should,” “could,” “potential,” “possible,” “look forward,” “optimistic,” 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 earnings release. Such statements include, but are not limited to: (a) statements about the Company’s plans, strategies, initiatives, and prospects; (b) statements about the Company’s underwritten incremental yields; and (c) statements about the Company’s future results of operations, capital expenditures, and liquidity. Such statements are subject to known and unknown risks and uncertainties, which could cause actual results to differ materially from those projected or anticipated, including, without limitation: (i) changes in national, regional, or local economic climates; (ii) local market conditions, including an oversupply of space in, or a reduction in demand for, properties similar to those in the Company’s portfolio; (iii) vacancies, changes in market rental rates, and the need to periodically repair, renovate, and re-let space; (iv) competition from other available shopping centers and the attractiveness of properties in the Company’s portfolio to its tenants; (v) the financial stability of the Company’s tenants, including, without limitation, their ability to pay rent; (vi) the Company’s ability to pay down, refinance, restructure, or extend its indebtedness as it becomes due; (vii) increases in the Company’s borrowing costs as a result of changes in interest rates and other factors; (viii) potential liability for environmental matters; (ix) damage to the Company’s properties from catastrophic weather and other natural events, and the physical effects of climate change; (x) the Company’s ability and willingness to maintain its qualification as a REIT in light of economic, market, legal, tax, and other considerations; (xi) changes in tax, real estate, environmental, and zoning laws; (xii) information technology security breaches; (xiii) the Company’s corporate responsibility initiatives; (xiv) loss of key executives; (xv) the concentration of the Company’s portfolio in a limited number of industries, geographies, or investments; (xvi) the economic, political, and social impact of, and uncertainty relating to, the COVID-19 pandemic; (xvii) the Company’s ability to re-lease its properties on the same or better terms, or at all, in the event of non-renewal or in the event the Company exercises its right to replace an existing tenant; (xviii) the loss or bankruptcy of the Company’s tenants; (xix) to the extent the Company is seeking to dispose of properties, the Company’s ability to do so at attractive prices or at all; and (xx) the impact of inflation on the Company and on its tenants. Additional important factors that could cause actual results to differ are described in the filings made from time to time by the Company with the SEC and include the risk factors and other risks and uncertainties described in the Company’s 2021 Annual Report on Form 10-K, filed with the SEC on February 16, 2022, as updated from time to time in the Company’s periodic and/or current reports filed with the SEC, which are accessible on the SEC’s website at www.sec.gov. Therefore, such statements are not intended to be a guarantee of the Company’s performance in future periods.
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:
Phillips Edison & Company, Inc.
Kimberly Green, Vice President of Investor Relations
(513) 692-3399
kgreen@phillipsedison.com
Stephanie Hout, Director of Investor Relations
(513) 746-2594
shout@phillipsedison.com
Source: Phillips Edison & Company, Inc.
###
13
| Table of Contents | |||||
Earnings Release | |||||
Consolidated Statements of Operations (Quarterly) | |||||
FFO, Core FFO, and Adjusted FFO (Quarterly) | |||||
Joint Venture Summary and Financials | |||||
Summary of Outstanding Debt | |||||
Covenant Disclosures | |||||
| INVESTOR INFORMATION | |||||
| Phillips Edison & Company | 2 | |||||||
| Introductory Notes | ||||||||
SUPPLEMENTAL INFORMATION | ||
Phillips Edison & Company, Inc. (“we,” the “Company,” “our,” “us,” or "PECO") is one of the nation’s largest owners and operators of omni-channel grocery-anchored neighborhood shopping centers. The enclosed information should be read in conjunction with our filings with the U.S. Securities and Exchange Commission (“SEC”), including, but not limited to, our Form 10-Qs filed quarterly and Form 10-Ks filed annually. Additionally, the enclosed information does not purport to disclose all items required under Generally Accepted Accounting Principles (“GAAP”).
| CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS | ||
This supplemental disclosure 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. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and includes this statement for purposes of complying with the safe harbor provisions. Such forward-looking statements can generally be identified by the Company’s use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” “seek,” “objective,” “goal,” “strategy,” “plan,” “focus,” “priority,” “should,” “could,” “potential,” “possible,” “look forward,” “optimistic,” 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 supplemental disclosure. Such statements include, in particular, statements about the Company’s plans, strategies, and prospects, are based on the current beliefs and expectations of the Company’s management, and are subject to known and unknown risks and uncertainties, which could cause actual results to differ materially from those projected or anticipated. These risks include, without limitation: (i) changes in national, regional, or local economic climates; (ii) local market conditions, including an oversupply of space in, or a reduction in demand for, properties similar to those in the Company’s portfolio; (iii) vacancies, changes in market rental rates, and the need to periodically repair, renovate, and re-let space; (iv) competition from other available properties and the attractiveness of properties in the Company’s portfolio to its tenants; (v) the financial stability of tenants, including, without limitation, the ability of tenants to pay rent; (vi) the Company’s ability to pay down, refinance, restructure, or extend its indebtedness as it becomes due; (vii) increases in the Company’s borrowing costs as a result of changes in interest rates and other factors; (viii) potential liability for environmental matters; (ix) damage to the Company’s properties from catastrophic weather and other natural events, and the physical effects of climate change; (x) the Company’s ability and willingness to maintain its qualification as a REIT in light of economic, market, legal, tax, and other considerations; (xi) changes in tax, real estate, environmental, and zoning laws; (xii) information technology security breaches; (xiii) the Company’s corporate responsibility initiatives; (xiv) the loss of key executives; (xv) the concentration of the Company’s portfolio in a limited number of industries, geographies, or investments; (xvi) the economic, political, and social impact of, and uncertainty relating to, the COVID-19 pandemic; (xvii) the Company's ability to re-lease its properties on the same or better terms, or at all, in the event of non-renewal or in the event the Company exercises its right to replace an existing tenant; (xviii) the loss or bankruptcy of the Company’s tenants; (xix) to the extent the Company is seeking to dispose of properties, its ability to do so at attractive prices or at all; (xx) the impact of inflation on the Company and its tenants; and (xxi) any of the other risks included in the Company’s SEC filings. Therefore, such statements are not intended to be a guarantee of the Company’s performance in future periods.
Additional important factors that could cause actual results to differ are described in the filings made from time to time by the Company with the SEC and include the risk factors and other risks and uncertainties described in the Company’s 2021 Annual Report on Form 10-K, filed with the SEC on February 16, 2022, which is accessible on the SEC’s website at www.sec.gov. Except as required by law, the Company does not undertake any obligation to update or revise any forward-looking statements contained in this supplement to reflect actual results, new information or future events, changes in assumptions or changes in other factors affecting such forward-looking statements.
| NOTICE REGARDING NON-GAAP FINANCIAL MEASURES | ||
In addition to GAAP measures, this supplemental disclosure contains and refers to certain non-GAAP measures. We do not consider our non-GAAP measures included in our Glossary of Terms to be alternatives to measures required in accordance with GAAP. Certain non-GAAP measures should not be viewed as an alternative measure of our financial performance as they may not reflect the operations of our entire portfolio, and they may not 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 our properties that could materially impact our results from operations. Additionally, certain non-GAAP measures should not be considered as an indication of our liquidity, nor as an indication of funds available to cover our cash needs, including our ability to fund distributions, and may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate our business in the manner currently contemplated. Accordingly, non-GAAP measures 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. Other REITs may use different methodologies for calculating similar non-GAAP measures, and accordingly, our non-GAAP measures may not be comparable to other REITs. Reconciliations of our non-GAAP measures to the most directly comparable GAAP financial measures are included in this supplemental disclosure on pages 15-19 and definitions of our non-GAAP measures are included in our Glossary of Terms on page 58.
| Phillips Edison & Company | 3 | |||||||
| Introductory Notes | ||||||||
PRO RATA FINANCIAL INFORMATION | ||
We may present our consolidated financial information inclusive of our prorated portion owned through unconsolidated joint ventures. The presentation of pro rata financial information has limitations as an analytical tool, which include but are not limited to: (i) amounts shown on individual line items were calculated by applying our overall economic ownership interest percentage determined when applying the equity method of accounting, and may not represent our legal claim to the assets and liabilities, or the revenues and expenses; and (ii) other REITs may use different methodologies for calculating their pro-rata interest. Accordingly, pro-rata financial information 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.
| REVERSE STOCK SPLIT | ||
We effected a one-for-three reverse stock split effective on July 2, 2021. In addition, we effected a corresponding reverse split of our Operating Partnership’s OP units. As a result of the reverse stock and OP unit split, every three shares of our common stock and OP units were automatically combined and converted into one issued and outstanding share of common stock or OP unit, as applicable, rounded to the nearest 1/100th share or OP unit. The reverse stock and OP unit splits impacted all classes of common stock and OP units proportionately and had no impact on any stockholder’s or limited partner’s percentage ownership of all issued and outstanding common stock or OP units. Unless otherwise indicated, the information in this supplement gives effect to the reverse stock and OP unit splits.
| CLASS B COMMON STOCK | ||
Our stockholders approved an amendment to our charter (the "Articles of Amendment") that effected a change of each share of our common stock outstanding at the time the amendment became effective into one share of a newly created class of Class B common stock (the "Recapitalization"). The Articles of Amendment became effective upon filing with, and acceptance by, the State Department of Assessments and Taxation of Maryland on July 2, 2021.
Our Class B common stock was identical to our common stock except that it was not listed on a national securities exchange. Per the terms of the Recapitalization, on January 18, 2022, each share of our Class B common stock automatically converted into one share of our listed common stock.
On May 5, 2022, we filed Articles Supplementary to our charter with the Maryland State Department of Assessments and Taxation in order to reclassify and designate all of the 350 million authorized shares of our Class B common stock, $0.01 par value per share, all of which were unissued at such time, as shares of our common stock, $0.01 par value per share. We no longer have Class B common stock authorized for issue.
Unless otherwise indicated, all information in this supplemental disclosure gives effect to the Recapitalization and references to "shares" and per share metrics refer to our common stock and Class B common stock, collectively.
| Phillips Edison & Company | 4 | |||||||
| FINANCIAL RESULTS | ||
Quarter Ended September 30, 2022 | ||
Earnings Release Unaudited | ||||||||
Phillips Edison & Company Reports
Third Quarter 2022 Results and
Raises Full Year Guidance
CINCINNATI - November 3, 2022 - Phillips Edison & Company, Inc. (Nasdaq: PECO) (“PECO” or the “Company”), one of the nation’s largest owners and operators of grocery-anchored omni-channel neighborhood shopping centers, reported net income attributable to stockholders of $11.0 million, or $0.09 per diluted share, for the three months ended September 30, 2022.
Highlights for the Third Quarter Ended September 30, 2022
•Nareit FFO totaled $72.0 million, or $0.55 per diluted share
•Core FFO totaled $76.6 million, or $0.58 per diluted share
•Same-center NOI increased 4.3% versus the third quarter ended September 30, 2021
•Leased portfolio occupancy as of September 30, 2022 increased to a record-high 97.1%
•Comparable new and renewal rent spreads were 21.3% and 15.5%, respectively
•Acquired one grocery-anchored shopping center and two outparcels for $59.5 million
•Net debt to annualized adjusted EBITDAre was 5.4x compared to 5.6x at December 31, 2021
•Increased monthly distributions by 3.7% to $0.0933 per share
Management Commentary
“PECO’s grocery-anchored and necessity-based Neighbor mix, our right-sized format and well-positioned locations in growing markets, resulted in continued strong leasing demand,” stated Jeff Edison, chairman and chief executive officer of PECO. “Our team delivered another strong quarter with same-center NOI growth of 4.3% and record occupancy of 97.1%. Our performance allows us to raise the midpoint of our 2022 guidance for the third quarter in a row. As reflected in our results, 2022 has been a year of reaching record highs in occupancy and releasing spreads. Our grocery-anchored neighborhood centers continue to benefit from structural and macroeconomic trends that create tailwinds for us as we head into 2023 and beyond, providing us with confidence in our ability to continue to deliver strong results.”
Financial Results for the Third Quarter and Nine Months Ended September 30, 2022
Net Income
Third quarter 2022 net income attributable to stockholders totaled $11.0 million, or $0.09 per diluted share, compared to net income of $14.6 million, or $0.13 per diluted share, during the third quarter of 2021.
For the nine months ended September 30, 2022, net income attributable to stockholders totaled $34.6 million, or $0.30 per diluted share, compared to net income of $20.3 million, or $0.21 per diluted share, for the same period in 2021.
Nareit FFO
Third quarter 2022 funds from operations attributable to stockholders and operating partnership (“OP”) unit holders as defined by Nareit (“Nareit FFO”) increased 26.4% to $72.0 million, or $0.55 per diluted share, from $56.9 million, or $0.46 per diluted share, during the third quarter of 2021.
For the nine months ended September 30, 2022, Nareit FFO increased 29.9% to $210.2 million, or $1.62 per diluted share, from $161.8 million, or $1.44 per diluted share, during the same period in 2021.
The $15.1 million increase for the third quarter of 2022 and the $48.4 million increase for the nine months ended September 30, 2022 were driven by an increase in rental income as a result of the Company’s portfolio expansion, lower interest expense, and a reduction in non-cash expense as a result of the final settlement of the earn-out liability with the issuance of 1.6 million OP units in January 2022.
| Phillips Edison & Company | 6 | |||||||
Earnings Release Unaudited | ||||||||
Core FFO
Third quarter 2022 core funds from operations (“Core FFO”) increased 15.4% to $76.6 million, or $0.58 per diluted share, compared to $66.4 million, or $0.54 per diluted share, during the third quarter of 2021.
For the nine months ended September 30, 2022, Core FFO increased 13.8% to $221.0 million, or $1.70 per diluted share, from $194.2 million, or $1.73 per diluted share, during the same period in 2021.
Results for both periods were driven by increased rental income as a result of the Company’s portfolio expansion, increased occupancy, improved average base rent per square foot, as well as lower interest costs. The decrease in the per diluted share result for the nine months ended was primarily due to an increase in the share count of 18% as a result of PECO’s July 2021 underwritten IPO.
Same-Center NOI
Third quarter 2022 same-center net operating income (“NOI”) increased 4.3% to $92.5 million compared to $88.7 million during the third quarter of 2021.
For the nine months ended September 30, 2022, same-center NOI increased 5.1% to $271.8 million from $258.6 million during the nine months ended September 30, 2021.
Results for both periods were driven by a $0.37 increase in average base rent per square foot and an improvement in average occupancy, offset by reduced out-of-period collections in 2022 when compared to the same year-ago period.
Portfolio Overview for the Third Quarter and Nine Months Ended September 30, 2022
Portfolio Statistics
As of September 30, 2022, PECO’s wholly-owned portfolio consisted of 270 properties, totaling approximately 31.1 million square feet, located in 31 states. This compared to 267 properties, totaling approximately 30.4 million square feet, located in 31 states as of September 30, 2021.
Leased portfolio occupancy increased to 97.1% at September 30, 2022 compared to 95.6% at September 30, 2021.
Anchor occupancy increased to 98.9% at September 30, 2022 compared to 97.6% at September 30, 2021, and inline occupancy increased to 93.6% at September 30, 2022 compared to 91.9% at September 30, 2021.
Leasing Activity
During the third quarter of 2022, 240 leases (new, renewal, and options) were executed totaling 1.2 million square feet. This compared to 268 leases executed totaling 1.4 million square feet during the third quarter of 2021.
During the nine months ended September 30, 2022, 749 leases (new, renewal, and options) were executed totaling 3.6 million square feet. This compared to 882 leases executed totaling 4.2 million square feet during the same year-ago period.
Comparable rent spreads during the third quarter of 2022, which compare the percentage increase (or decrease) of new or renewal leases to the expiring lease of a unit that was occupied within the past twelve months, were 21.3% for new leases, 15.5% for renewal leases (excluding options), and 16.9% combined (new and renewal leases only).
Comparable rent spreads during the nine months ended September 30, 2022 were 31.3% for new leases, 14.9% for renewal leases (excluding options), and 18.5% combined (new and renewal leases only).
| Phillips Edison & Company | 7 | |||||||
Earnings Release Unaudited | ||||||||
Acquisition & Disposition Activity
During the third quarter of 2022, one property and two outparcels were acquired for $59.5 million. During the same period, one outparcel was sold for $0.4 million. Third quarter 2022 grocery-anchored shopping center acquisitions included:
•Crossroads Towne Center, a 149,000 square foot shopping center shadow-anchored by Walmart in Las Vegas, Nevada. The center is located in a high-traffic area with strong median household income and a growing population. At the time of purchase, the center occupancy was 88.7%, providing room for growth through leasing vacant space.
During the nine months ended September 30, 2022, five properties and three outparcels were acquired for $228.8 million. During the same period, three properties and three outparcels were sold for $28.7 million.
Balance Sheet Highlights as of September 30, 2022
As of September 30, 2022, PECO had $757.8 million of total liquidity, comprised of $24.4 million of cash, cash equivalents, and restricted cash, plus $733.4 million of borrowing capacity available on its $800 million revolving credit facility.
PECO’s net debt to annualized adjusted EBITDAre was 5.4x, compared to 5.6x at December 31, 2021.
PECO’s outstanding debt had a weighted-average interest rate of 3.3%, a weighted-average maturity of 4.6 years, and 86.5% of its total debt was fixed-rate debt.
Monthly Stockholder Distributions
For the three months ended September 30, 2022, total distributions of $36.1 million were paid to common stockholders and OP unit holders. Distributions paid in July, August, and September were each $0.09 per share.
PECO’s Board of Directors (the “Board”) unanimously approved monthly distributions payable October 3, 2022 and November 1, 2022 to stockholders of record at the close of business on September 16, 2022 and October 17, 2022, respectively. The Board approved the distribution at a rate of $0.0933 per share of the Company’s common stock and per OP unit. When annualized, this is equal to a rate of $1.12 per share, representing an increase of 3.7% over the previous annualized rate of $1.08 per share. PECO has paid, and plans to continue to pay, distributions monthly.
Subsequent to quarter end, the Board authorized monthly distributions of $0.0933 per share payable in December 2022, January 2023, and February 2023 to stockholders of record at the close of business on November 15, 2022, December 15, 2022, and January 17, 2023, respectively.
Updated 2022 Guidance
PECO has updated earnings guidance for the year ending December 31, 2022 to reflect the following:
•Strong property results from record occupancy and leasing spreads to date
•Lower than expected corporate and general and administrative expenses
Updated Full Year 2022 Guidance | Prior Full Year 2022 Guidance | ||||||||||
| Net income per share | $0.36 - $0.39 | $0.34 - $0.40 | |||||||||
| Nareit FFO per share | $2.11 - $2.15 | $2.09 - $2.15 | |||||||||
| Core FFO per share | $2.22 - $2.26 | $2.19 - $2.25 | |||||||||
| Same-Center NOI growth | 4.1% - 4.5% | 3.75% - 4.5% | |||||||||
| Acquisitions (net of dispositions) | $200 - $250 million | $200 - $300 million | |||||||||
| Phillips Edison & Company | 8 | |||||||
Earnings Release Unaudited | ||||||||
The following table provides a reconciliation of the range of the Company's 2022 estimated net income to estimated Nareit FFO and Core FFO:
| (Unaudited) | Low End | High End | |||||||||
| Net income | $ | 0.36 | $ | 0.39 | |||||||
| Depreciation and amortization of real estate assets | 1.77 | 1.78 | |||||||||
| Gain on sale of real estate assets | (0.03) | (0.03) | |||||||||
| Adjustments related to unconsolidated joint ventures | 0.01 | 0.01 | |||||||||
| Nareit FFO | $ | 2.11 | $ | 2.15 | |||||||
| Depreciation and amortization of corporate assets | 0.03 | 0.03 | |||||||||
| Change in fair value of earn-out liability | 0.01 | 0.01 | |||||||||
| Loss on extinguishment of debt, net | 0.01 | 0.01 | |||||||||
| Transactions and other | 0.06 | 0.06 | |||||||||
| Core FFO | $ | 2.22 | $ | 2.26 | |||||||
Jeff Edison summarized the quarter: “Our third quarter results continue to highlight the strength of PECO’s focused and differentiated strategy of owning and operating small-format, neighborhood centers anchored by the #1 or #2 grocer in a market which drives high-recurring foot traffic and Neighbor demand and results in superior financial and operating performance. Our experienced cycle-tested team, integrated operating platform, and grocery-anchored strategy place PECO in a strong position, despite an uncertain macroeconomic environment, with a fortress balance sheet and liquidity that will allow us to take advantage of opportunities as they arise.”
Conference Call Details
PECO plans to host a conference call and webcast on Friday, November 4, 2022 at 12:00 p.m. Eastern Time to discuss these results. Chairman and Chief Executive Officer Jeff Edison, President Devin Murphy, and Chief Financial Officer John Caulfield will host the presentation.
Third Quarter 2022 Earnings Conference Call Details:
Date: Friday, November 4, 2022
Time: 12:00 p.m. ET
Toll-Free Dial-In Number: (888) 210-4659
International Dial-In Number: (646) 960-0383
Conference ID: 2035308
Webcast: https://events.q4inc.com/attendee/413179432
A webcast replay will be available approximately one hour after the conclusion of the presentation using the webcast link above.
For more information on the Company’s financial results, please refer to the Company’s Form 10-Q, filed with the SEC on November 3, 2022 and available on the SEC’s website at www.sec.gov.
| Phillips Edison & Company | 9 | |||||||
Overview of Results Unaudited, in thousands (excluding per share and per square foot amounts) | |||||||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| SUMMARY FINANCIAL RESULTS | |||||||||||||||||||||||
Total revenues (page 13) | $ | 145,654 | $ | 132,334 | $ | 430,333 | $ | 395,785 | |||||||||||||||
Net income attributable to stockholders (page 13) | 11,038 | 14,633 | 34,645 | 20,330 | |||||||||||||||||||
Net income per share - basic and diluted (page 13) | $ | 0.09 | $ | 0.13 | $ | 0.30 | $ | 0.21 | |||||||||||||||
Same-Center NOI (page 19) | 92,516 | 88,667 | 271,766 | 258,604 | |||||||||||||||||||
Adjusted EBITDAre (page 17) | 94,612 | 83,765 | 274,119 | 250,694 | |||||||||||||||||||
Nareit FFO (page 15) | 71,981 | 56,927 | 210,161 | 161,800 | |||||||||||||||||||
Nareit FFO per share - diluted (page 15) | $ | 0.55 | $ | 0.46 | $ | 1.62 | $ | 1.44 | |||||||||||||||
Core FFO (page 15) | 76,595 | 66,373 | 220,996 | 194,189 | |||||||||||||||||||
Core FFO per share - diluted (page 15) | $ | 0.58 | $ | 0.54 | $ | 1.70 | $ | 1.73 | |||||||||||||||
| SUMMARY OF FINANCIAL AND OPERATING RATIOS | |||||||||||||||||||||||
Same-Center NOI margin (page 19) | 72.6 | % | 72.9 | % | 72.2 | % | 71.9 | % | |||||||||||||||
Same-Center NOI change (page 19)(1) | 4.3 | % | 8.7 | % | 5.1 | % | 6.0 | % | |||||||||||||||
| LEASING RESULTS | |||||||||||||||||||||||
Comparable rent spreads - new leases (page 39)(2) | 21.3 | % | 14.1 | % | 31.3 | % | 14.9 | % | |||||||||||||||
Comparable rent spreads - renewals (page 39)(2) | 15.5 | % | 8.9 | % | 14.9 | % | 8.2 | % | |||||||||||||||
| Portfolio retention rate | 88.5 | % | 91.2 | % | 90.1 | % | 88.3 | % | |||||||||||||||
| As of September 30, | |||||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||
| OUTSTANDING STOCK AND PARTNERSHIP UNITS | |||||||||||||||||||||||
| Common stock outstanding | 117,084 | 19,550 | |||||||||||||||||||||
| Class B common stock outstanding | — | 93,663 | |||||||||||||||||||||
| Operating Partnership (OP) units outstanding | 14,046 | 13,368 | |||||||||||||||||||||
SUMMARY PORTFOLIO STATISTICS(2) | |||||||||||||||||||||||
| Number of properties | 270 | 267 | |||||||||||||||||||||
GLA - all properties (page 41) | 31,098 | 30,443 | |||||||||||||||||||||
Leased occupancy (page 35) | 97.1 | % | 95.6 | % | |||||||||||||||||||
Economic occupancy (page 35) | 96.4 | % | 94.7 | % | |||||||||||||||||||
Leased ABR PSF (page 35) | $ | 14.21 | $ | 13.33 | |||||||||||||||||||
Leased Anchor ABR PSF (page 35) | $ | 9.85 | $ | 9.44 | |||||||||||||||||||
Leased Inline ABR PSF (page 35) | $ | 23.00 | $ | 21.41 | |||||||||||||||||||
(1)Reflects Same-Center NOI change as initially reported for the specified period.
(2)Statistics represent our wholly-owned properties.
| Phillips Edison & Company | 10 | |||||||
| FINANCIAL SUMMARY | ||
Quarter Ended September 30, 2022 | ||
Consolidated Balance Sheets Condensed and Unaudited, in thousands (excluding per share amounts) | |||||||||||
| September 30, 2022 | December 31, 2021 | ||||||||||
| ASSETS | |||||||||||
| Investment in real estate: | |||||||||||
| Land and improvements | $ | 1,656,666 | $ | 1,586,993 | |||||||
| Building and improvements | 3,539,035 | 3,355,433 | |||||||||
| In-place lease assets | 470,184 | 452,504 | |||||||||
| Above-market lease assets | 72,294 | 68,736 | |||||||||
| Total investment in real estate assets | 5,738,179 | 5,463,666 | |||||||||
| Accumulated depreciation and amortization | (1,272,653) | (1,110,426) | |||||||||
| Net investment in real estate assets | 4,465,526 | 4,353,240 | |||||||||
| Investment in unconsolidated joint ventures | 27,601 | 31,326 | |||||||||
| Total investment in real estate assets, net | 4,493,127 | 4,384,566 | |||||||||
| Cash and cash equivalents | 4,789 | 92,585 | |||||||||
| Restricted cash | 19,657 | 22,944 | |||||||||
| Goodwill | 29,066 | 29,066 | |||||||||
| Other assets, net | 183,774 | 138,050 | |||||||||
| Real estate investments and other assets held for sale | — | 1,557 | |||||||||
| Total assets | $ | 4,730,413 | $ | 4,668,768 | |||||||
| LIABILITIES AND EQUITY | |||||||||||
| Liabilities: | |||||||||||
| Debt obligations, net | $ | 1,872,939 | $ | 1,891,722 | |||||||
| Below-market lease liabilities, net | 108,548 | 107,526 | |||||||||
| Earn-out liability | — | 52,436 | |||||||||
| Derivative liabilities | — | 24,096 | |||||||||
| Deferred income | 21,586 | 19,145 | |||||||||
| Accounts payable and other liabilities | 112,433 | 97,229 | |||||||||
| Liabilities of real estate investments held for sale | — | 288 | |||||||||
| Total liabilities | 2,115,506 | 2,192,442 | |||||||||
| Equity: | |||||||||||
Preferred stock, $0.01 par value per share, 10,000 shares authorized as of September 30, 2022 and December 31, 2021 | — | — | |||||||||
Common stock, $0.01 par value per share, 1,000,000 and 650,000 shares authorized as of September 30, 2022 and December 31, 2021, respectively | 1,170 | 196 | |||||||||
Class B common stock, $0.01 par value per share, zero and 350,000 shares authorized as of September 30, 2022 and December 31, 2021, respectively | — | 936 | |||||||||
| Additional paid-in capital | 3,381,638 | 3,264,038 | |||||||||
| Accumulated other comprehensive income (loss) | 21,123 | (24,819) | |||||||||
| Accumulated deficit | (1,150,337) | (1,090,837) | |||||||||
| Total stockholders’ equity | 2,253,594 | 2,149,514 | |||||||||
| Noncontrolling interests | 361,313 | 326,812 | |||||||||
| Total equity | 2,614,907 | 2,476,326 | |||||||||
| Total liabilities and equity | $ | 4,730,413 | $ | 4,668,768 | |||||||
| Phillips Edison & Company | 12 | |||||||
Consolidated Statements of Operations Condensed and Unaudited, in thousands (excluding per share amounts) | |||||||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| REVENUES | |||||||||||||||||||||||
| Rental income | $ | 142,857 | $ | 128,826 | $ | 418,835 | $ | 386,784 | |||||||||||||||
| Fees and management income | 2,081 | 2,435 | 9,323 | 7,095 | |||||||||||||||||||
| Other property income | 716 | 1,073 | 2,175 | 1,906 | |||||||||||||||||||
| Total revenues | 145,654 | 132,334 | 430,333 | 395,785 | |||||||||||||||||||
| OPERATING EXPENSES | |||||||||||||||||||||||
| Property operating | 23,089 | 21,608 | 69,261 | 65,784 | |||||||||||||||||||
| Real estate taxes | 18,041 | 16,375 | 52,005 | 49,762 | |||||||||||||||||||
| General and administrative | 10,843 | 11,627 | 33,751 | 32,905 | |||||||||||||||||||
| Depreciation and amortization | 60,013 | 53,901 | 178,008 | 165,829 | |||||||||||||||||||
| Impairment of real estate assets | — | 698 | — | 6,754 | |||||||||||||||||||
| Total operating expenses | 111,986 | 104,209 | 333,025 | 321,034 | |||||||||||||||||||
| OTHER | |||||||||||||||||||||||
| Interest expense, net | (17,569) | (18,570) | (52,895) | (57,765) | |||||||||||||||||||
| (Loss) gain on disposal of property, net | (10) | 14,093 | 4,151 | 31,678 | |||||||||||||||||||
Other expense, net | (3,916) | (7,086) | (9,738) | (25,595) | |||||||||||||||||||
Net income | 12,173 | 16,562 | 38,826 | 23,069 | |||||||||||||||||||
Net income attributable to noncontrolling interests | (1,135) | (1,929) | (4,181) | (2,739) | |||||||||||||||||||
Net income attributable to stockholders | $ | 11,038 | $ | 14,633 | $ | 34,645 | $ | 20,330 | |||||||||||||||
| EARNINGS PER SHARE OF COMMON STOCK | |||||||||||||||||||||||
Net income per share attributable to stockholders - basic and diluted | $ | 0.09 | $ | 0.13 | $ | 0.30 | $ | 0.21 | |||||||||||||||
| Phillips Edison & Company | 13 | |||||||
Consolidated Statements of Operations Condensed and Unaudited, in thousands (excluding per share amounts) | |||||||||||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||||||||||
| September 30, 2022 | June 30, 2022 | March 31, 2022 | December 31, 2021 | September 30, 2021 | |||||||||||||||||||||||||
| REVENUES | |||||||||||||||||||||||||||||
| Rental income | $ | 142,857 | $ | 137,230 | $ | 138,748 | $ | 132,711 | $ | 128,826 | |||||||||||||||||||
| Fees and management income | 2,081 | 4,781 | 2,461 | 3,240 | 2,435 | ||||||||||||||||||||||||
| Other property income | 716 | 505 | 954 | 1,110 | 1,073 | ||||||||||||||||||||||||
| Total revenues | 145,654 | 142,516 | 142,163 | 137,061 | 132,334 | ||||||||||||||||||||||||
| OPERATING EXPENSES | |||||||||||||||||||||||||||||
| Property operating | 23,089 | 22,852 | 23,320 | 27,130 | 21,608 | ||||||||||||||||||||||||
| Real estate taxes | 18,041 | 16,473 | 17,491 | 15,619 | 16,375 | ||||||||||||||||||||||||
| General and administrative | 10,843 | 11,376 | 11,532 | 15,915 | 11,627 | ||||||||||||||||||||||||
| Depreciation and amortization | 60,013 | 60,769 | 57,226 | 55,604 | 53,901 | ||||||||||||||||||||||||
| Impairment of real estate assets | — | — | — | — | 698 | ||||||||||||||||||||||||
| Total operating expenses | 111,986 | 111,470 | 109,569 | 114,268 | 104,209 | ||||||||||||||||||||||||
| OTHER | |||||||||||||||||||||||||||||
| Interest expense, net | (17,569) | (17,127) | (18,199) | (18,606) | (18,570) | ||||||||||||||||||||||||
| (Loss) gain on disposal of property, net | (10) | 2,793 | 1,368 | (1,257) | 14,093 | ||||||||||||||||||||||||
| Other expense, net | (3,916) | (1,457) | (4,365) | (8,766) | (7,086) | ||||||||||||||||||||||||
| Net income (loss) | 12,173 | 15,255 | 11,398 | (5,836) | 16,562 | ||||||||||||||||||||||||
| Net (income) loss attributable to noncontrolling interests | (1,135) | (1,727) | (1,319) | 627 | (1,929) | ||||||||||||||||||||||||
| Net income (loss) attributable to stockholders | $ | 11,038 | $ | 13,528 | $ | 10,079 | $ | (5,209) | $ | 14,633 | |||||||||||||||||||
| EARNINGS PER SHARE OF COMMON STOCK | |||||||||||||||||||||||||||||
| Net income (loss) per share attributable to stockholders - basic and diluted | $ | 0.09 | $ | 0.12 | $ | 0.09 | $ | (0.05) | $ | 0.13 | |||||||||||||||||||
| Phillips Edison & Company | 14 | |||||||
Nareit FFO, Core FFO, and Adjusted FFO Unaudited, in thousands (excluding per share amounts) | |||||||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| NAREIT FFO ATTRIBUTABLE TO STOCKHOLDERS AND OP UNIT HOLDERS | |||||||||||||||||||||||
Net income | $ | 12,173 | $ | 16,562 | $ | 38,826 | $ | 23,069 | |||||||||||||||
| Adjustments: | |||||||||||||||||||||||
| Depreciation and amortization of real estate assets | 59,136 | 52,984 | 175,305 | 162,979 | |||||||||||||||||||
| Impairment of real estate assets | — | 698 | — | 6,754 | |||||||||||||||||||
| Loss (gain) on disposal of property, net | 10 | (14,093) | (4,151) | (31,678) | |||||||||||||||||||
| Adjustments related to unconsolidated joint ventures | 662 | 776 | 181 | 676 | |||||||||||||||||||
| Nareit FFO attributable to stockholders and OP unit holders | $ | 71,981 | $ | 56,927 | $ | 210,161 | $ | 161,800 | |||||||||||||||
| CORE FFO | |||||||||||||||||||||||
| Nareit FFO attributable to stockholders and OP unit holders | $ | 71,981 | $ | 56,927 | $ | 210,161 | $ | 161,800 | |||||||||||||||
| Adjustments: | |||||||||||||||||||||||
| Depreciation and amortization of corporate assets | 877 | 917 | 2,703 | 2,850 | |||||||||||||||||||
| Change in fair value of earn-out liability | — | 5,000 | 1,809 | 23,000 | |||||||||||||||||||
| Transaction and acquisition expenses | 3,740 | 1,775 | 7,820 | 2,850 | |||||||||||||||||||
| (Gain) loss on extinguishment or modification of debt and other, net | (4) | 1,674 | 1,025 | 2,784 | |||||||||||||||||||
| Amortization of unconsolidated joint venture basis differences | 1 | 80 | 220 | 905 | |||||||||||||||||||
Realized performance income(1) | — | — | (2,742) | — | |||||||||||||||||||
| Core FFO | $ | 76,595 | $ | 66,373 | $ | 220,996 | $ | 194,189 | |||||||||||||||
| ADJUSTED FFO | |||||||||||||||||||||||
| Core FFO | $ | 76,595 | $ | 66,373 | $ | 220,996 | $ | 194,189 | |||||||||||||||
| Adjustments: | |||||||||||||||||||||||
| Straight-line and non-cash adjustments | (3,498) | (1,866) | (7,893) | (4,804) | |||||||||||||||||||
Capital expenditures and leasing commissions(2) | (17,296) | (12,639) | (42,970) | (30,847) | |||||||||||||||||||
| Non-cash share-based compensation expense | 2,502 | 2,455 | 6,740 | 7,704 | |||||||||||||||||||
| Adjustments related to unconsolidated joint ventures | (236) | (183) | (467) | (547) | |||||||||||||||||||
| Adjusted FFO | $ | 58,067 | $ | 54,140 | $ | 176,406 | $ | 165,695 | |||||||||||||||
| NAREIT FFO ATTRIBUTABLE TO STOCKHOLDERS AND OP UNIT HOLDERS AND CORE FFO PER DILUTED SHARE | |||||||||||||||||||||||
| Weighted-average shares of common stock outstanding - diluted | 131,593 | 122,573 | 129,805 | 112,317 | |||||||||||||||||||
| Nareit FFO attributable to stockholders and OP unit holders per share - diluted | $ | 0.55 | $ | 0.46 | $ | 1.62 | $ | 1.44 | |||||||||||||||
| Core FFO per share - diluted | $ | 0.58 | $ | 0.54 | $ | 1.70 | $ | 1.73 | |||||||||||||||
(1)Realized performance income includes fees received related to the achievement of certain performance targets in our NRP joint venture.
(2)Excludes development and redevelopment projects.
| Phillips Edison & Company | 15 | |||||||
Nareit FFO, Core FFO, and Adjusted FFO Unaudited, in thousands (excluding per share amounts) | |||||||||||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||||||||||
| September 30, 2022 | June 30, 2022 | March 31, 2022 | December 31, 2021 | September 30, 2021 | |||||||||||||||||||||||||
| NAREIT FFO ATTRIBUTABLE TO STOCKHOLDERS AND OP UNIT HOLDERS | |||||||||||||||||||||||||||||
| Net income (loss) | $ | 12,173 | $ | 15,255 | $ | 11,398 | $ | (5,836) | $ | 16,562 | |||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||||||||
| Depreciation and amortization of real estate assets | 59,136 | 59,849 | 56,320 | 54,585 | 52,984 | ||||||||||||||||||||||||
| Impairment of real estate assets | — | — | — | — | 698 | ||||||||||||||||||||||||
| Loss (gain) on disposal of property, net | 10 | (2,793) | (1,368) | 1,257 | (14,093) | ||||||||||||||||||||||||
| Adjustments related to unconsolidated joint ventures | 662 | (1,186) | 705 | (604) | 776 | ||||||||||||||||||||||||
| Nareit FFO attributable to stockholders and OP unit holders | $ | 71,981 | $ | 71,125 | $ | 67,055 | $ | 49,402 | $ | 56,927 | |||||||||||||||||||
| CORE FFO | |||||||||||||||||||||||||||||
| Nareit FFO attributable to stockholders and OP unit holders | $ | 71,981 | $ | 71,125 | $ | 67,055 | $ | 49,402 | $ | 56,927 | |||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||||||||
| Depreciation and amortization of corporate assets | 877 | 920 | 906 | 1,019 | 917 | ||||||||||||||||||||||||
| Change in fair value of earn-out liability | — | — | 1,809 | 7,436 | 5,000 | ||||||||||||||||||||||||
| Transaction and acquisition expenses | 3,740 | 2,035 | 2,045 | 2,513 | 1,775 | ||||||||||||||||||||||||
| (Gain) loss on extinguishment or modification of debt and other, net | (4) | 129 | 900 | 808 | 1,674 | ||||||||||||||||||||||||
| Amortization of unconsolidated joint venture basis differences | 1 | 175 | 44 | 262 | 80 | ||||||||||||||||||||||||
Realized performance income(1) | — | (2,546) | (196) | (675) | — | ||||||||||||||||||||||||
| Core FFO | $ | 76,595 | $ | 71,838 | $ | 72,563 | $ | 60,765 | $ | 66,373 | |||||||||||||||||||
| ADJUSTED FFO | |||||||||||||||||||||||||||||
| Core FFO | $ | 76,595 | $ | 71,838 | $ | 72,563 | $ | 60,765 | $ | 66,373 | |||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||||||||
| Straight-line and non-cash adjustments | (3,498) | (2,963) | (1,432) | (1,944) | (1,866) | ||||||||||||||||||||||||
Capital expenditures and leasing commissions(2) | (17,296) | (11,898) | (13,776) | (21,162) | (12,639) | ||||||||||||||||||||||||
| Non-cash share-based compensation expense | 2,502 | 2,005 | 2,233 | 5,826 | 2,455 | ||||||||||||||||||||||||
| Adjustments related to unconsolidated joint ventures | (236) | (139) | (92) | (236) | (183) | ||||||||||||||||||||||||
| Adjusted FFO | $ | 58,067 | $ | 58,843 | $ | 59,496 | $ | 43,249 | $ | 54,140 | |||||||||||||||||||
| NAREIT FFO ATTRIBUTABLE TO STOCKHOLDERS AND OP UNIT HOLDERS AND CORE FFO PER DILUTED SHARE | |||||||||||||||||||||||||||||
Weighted-average shares of common stock outstanding - diluted(3) | 131,593 | 129,117 | 128,503 | 128,139 | 122,573 | ||||||||||||||||||||||||
| Nareit FFO attributable to stockholders and OP unit holders per share - diluted | $ | 0.55 | $ | 0.55 | $ | 0.52 | $ | 0.39 | $ | 0.46 | |||||||||||||||||||
| Core FFO per share - diluted | $ | 0.58 | $ | 0.56 | $ | 0.56 | $ | 0.47 | $ | 0.54 | |||||||||||||||||||
(1)Realized performance income includes fees received related to the achievement of certain performance targets in our NRP joint venture.
(2)Excludes development and redevelopment projects.
(3)Restricted stock awards were anti-dilutive during the three months ended December 31, 2021 due to the GAAP net loss, and, accordingly, their impact was excluded from the weighted-average shares of common stock used in the respective per share calculations.
| Phillips Edison & Company | 16 | |||||||
EBITDAre Metrics Unaudited, in thousands | ||||||||||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
CALCULATION OF EBITDAre | ||||||||||||||||||||||||||
Net income | $ | 12,173 | $ | 16,562 | $ | 38,826 | $ | 23,069 | ||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||
| Depreciation and amortization | 60,013 | 53,901 | 178,008 | 165,829 | ||||||||||||||||||||||
| Interest expense, net | 17,569 | 18,570 | 52,895 | 57,765 | ||||||||||||||||||||||
| Loss (gain) on disposal of property, net | 10 | (14,093) | (4,151) | (31,678) | ||||||||||||||||||||||
| Impairment of real estate assets | — | 698 | — | 6,754 | ||||||||||||||||||||||
| Federal, state, and local tax expense | 179 | 165 | 373 | 496 | ||||||||||||||||||||||
| Adjustments related to unconsolidated joint ventures | 927 | 1,107 | 1,061 | 1,704 | ||||||||||||||||||||||
EBITDAre | $ | 90,871 | $ | 76,910 | $ | 267,012 | $ | 223,939 | ||||||||||||||||||
CALCULATION OF ADJUSTED EBITDAre | ||||||||||||||||||||||||||
EBITDAre | $ | 90,871 | $ | 76,910 | $ | 267,012 | $ | 223,939 | ||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||
| Change in fair value of earn-out liability | — | 5,000 | 1,809 | 23,000 | ||||||||||||||||||||||
| Transaction and acquisition expenses | 3,740 | 1,775 | 7,820 | 2,850 | ||||||||||||||||||||||
| Amortization of unconsolidated joint venture basis differences | 1 | 80 | 220 | 905 | ||||||||||||||||||||||
Realized performance income(1) | — | — | (2,742) | — | ||||||||||||||||||||||
Adjusted EBITDAre | $ | 94,612 | $ | 83,765 | $ | 274,119 | $ | 250,694 | ||||||||||||||||||
(1)Realized performance income includes fees received related to the achievement of certain performance targets in our NRP joint venture.
| Phillips Edison & Company | 17 | |||||||
EBITDAre Metrics Unaudited, in thousands | |||||||||||||||||||||||||||||
| Three Months Ended | |||||||||||||||||||||||||||||
| September 30, 2022 | June 30, 2022 | March 31, 2022 | December 31, 2021 | September 30, 2021 | |||||||||||||||||||||||||
CALCULATION OF EBITDAre | |||||||||||||||||||||||||||||
| Net income (loss) | $ | 12,173 | $ | 15,255 | $ | 11,398 | $ | (5,836) | $ | 16,562 | |||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||||||||
| Depreciation and amortization | 60,013 | 60,769 | 57,226 | 55,604 | 53,901 | ||||||||||||||||||||||||
| Interest expense, net | 17,569 | 17,127 | 18,199 | 18,606 | 18,570 | ||||||||||||||||||||||||
| Loss (gain) on disposal of property, net | 10 | (2,793) | (1,368) | 1,257 | (14,093) | ||||||||||||||||||||||||
| Impairment of real estate assets | — | — | — | — | 698 | ||||||||||||||||||||||||
| Federal, state, and local tax expense (income) | 179 | 97 | 97 | (169) | 165 | ||||||||||||||||||||||||
| Adjustments related to unconsolidated joint ventures | 927 | (885) | 1,019 | (273) | 1,107 | ||||||||||||||||||||||||
EBITDAre | $ | 90,871 | $ | 89,570 | $ | 86,571 | $ | 69,189 | $ | 76,910 | |||||||||||||||||||
CALCULATION OF ADJUSTED EBITDAre | |||||||||||||||||||||||||||||
EBITDAre | $ | 90,871 | $ | 89,570 | $ | 86,571 | $ | 69,189 | $ | 76,910 | |||||||||||||||||||
| Adjustments: | |||||||||||||||||||||||||||||
| Change in fair value of earn-out liability | — | — | 1,809 | 7,436 | 5,000 | ||||||||||||||||||||||||
| Transaction and acquisition expenses | 3,740 | 2,035 | 2,045 | 2,513 | 1,775 | ||||||||||||||||||||||||
| Amortization of unconsolidated joint venture basis differences | 1 | 175 | 44 | 262 | 80 | ||||||||||||||||||||||||
Realized performance income(1) | — | (2,546) | (196) | (675) | — | ||||||||||||||||||||||||
Adjusted EBITDAre | $ | 94,612 | $ | 89,234 | $ | 90,273 | $ | 78,725 | $ | 83,765 | |||||||||||||||||||
(1)Realized performance income includes fees received related to the achievement of certain performance targets in our NRP joint venture.
| Phillips Edison & Company | 18 | |||||||
Same-Center Net Operating Income Unaudited, in thousands | |||||||||||||||||||||||||||||||||||
| Three Months Ended September 30, | Favorable (Unfavorable) % Change | Nine Months Ended September 30, | Favorable (Unfavorable) % Change | ||||||||||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||||||||||
SAME-CENTER NOI(1) | |||||||||||||||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||||||||||||||
Rental income(2) | $ | 96,067 | $ | 90,949 | $ | 284,629 | $ | 270,090 | |||||||||||||||||||||||||||
| Tenant recovery income | 30,696 | 29,645 | 90,468 | 86,566 | |||||||||||||||||||||||||||||||
Reserves for uncollectibility(3) | 112 | 59 | (403) | 1,280 | |||||||||||||||||||||||||||||||
| Other property income | 581 | 989 | 1,767 | 1,740 | |||||||||||||||||||||||||||||||
| Total revenues | 127,456 | 121,642 | 4.8% | 376,461 | 359,676 | 4.7 | % | ||||||||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||||||||||
| Property operating expenses | 18,559 | 17,156 | 56,664 | 52,912 | |||||||||||||||||||||||||||||||
| Real estate taxes | 16,381 | 15,819 | 48,031 | 48,160 | |||||||||||||||||||||||||||||||
| Total operating expenses | 34,940 | 32,975 | (6.0)% | 104,695 | 101,072 | (3.6) | % | ||||||||||||||||||||||||||||
| Total Same-Center NOI | $ | 92,516 | $ | 88,667 | 4.3% | $ | 271,766 | $ | 258,604 | 5.1 | % | ||||||||||||||||||||||||
| Same-Center NOI margin | 72.6% | 72.9% | 72.2% | 71.9% | |||||||||||||||||||||||||||||||
(1)Same-Center NOI represents the NOI for the 255 properties that were wholly-owned and operational for the entire portion of all comparable reporting periods. (2)Excludes straight-line rental income, net amortization of above- and below-market leases, and lease buyout income. (3)Includes billings that will not be recognized as revenue until cash is collected or the Neighbor resumes regular payments and/or we deem it appropriate to resume recording revenue on an accrual basis, rather than on a cash basis. | |||||||||||||||||||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
SAME-CENTER NOI RECONCILIATION TO NET INCOME | |||||||||||||||||||||||
Net income | $ | 12,173 | $ | 16,562 | $ | 38,826 | $ | 23,069 | |||||||||||||||
| Adjusted to exclude: | |||||||||||||||||||||||
| Fees and management income | (2,081) | (2,435) | (9,323) | (7,095) | |||||||||||||||||||
Straight-line rental income(1) | (3,932) | (2,476) | (9,060) | (6,868) | |||||||||||||||||||
| Net amortization of above- and below-market leases | (1,081) | (908) | (3,161) | (2,633) | |||||||||||||||||||
| Lease buyout income | (221) | (560) | (2,362) | (3,138) | |||||||||||||||||||
| General and administrative expenses | 10,843 | 11,627 | 33,751 | 32,905 | |||||||||||||||||||
| Depreciation and amortization | 60,013 | 53,901 | 178,008 | 165,829 | |||||||||||||||||||
| Impairment of real estate assets | — | 698 | — | 6,754 | |||||||||||||||||||
| Interest expense, net | 17,569 | 18,570 | 52,895 | 57,765 | |||||||||||||||||||
| Loss (gain) on disposal of property, net | 10 | (14,093) | (4,151) | (31,678) | |||||||||||||||||||
Other expense, net | 3,916 | 7,086 | 9,738 | 25,595 | |||||||||||||||||||
| Property operating expenses related to fees and management income | 704 | 1,489 | 3,061 | 3,611 | |||||||||||||||||||
| NOI for real estate investments | 97,913 | 89,461 | 288,222 | 264,116 | |||||||||||||||||||
Less: Non-same-center NOI(2) | (5,397) | (794) | (16,456) | (5,512) | |||||||||||||||||||
| Total Same-Center NOI | $ | 92,516 | $ | 88,667 | $ | 271,766 | $ | 258,604 | |||||||||||||||
(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. | |||||||||||||||||||||||
| Phillips Edison & Company | 19 | |||||||
Joint Venture Portfolio and Financial Summary Unaudited, dollars and square feet in thousands | |||||||||||||||||||||||||||||||||||
| UNCONSOLIDATED JOINT VENTURE PORTFOLIO SUMMARY | |||||||||||||||||||||||||||||||||||
| As of September 30, 2022 | |||||||||||||||||
| Joint Venture | Investment Partner | Ownership Percentage | Number of Shopping Centers | ABR | GLA | ||||||||||||
| Grocery Retail Partners I LLC ("GRP I") | The Northwestern Mutual Life Insurance Company | 14% | 20 | $30,356 | 2,209 | ||||||||||||
| UNCONSOLIDATED JOINT VENTURE FINANCIAL SUMMARY | |||||||||||||||||||||||||||||||||||
| As of September 30, 2022 | |||||||||||||||||
| GRP I | NRP(1) | ||||||||||||||||
| Total assets | $ | 381,877 | $ | 1,146 | |||||||||||||
| Gross debt | 174,026 | — | |||||||||||||||
| Pro rata share of debt | 24,358 | — | |||||||||||||||
| Three Months Ended September 30, 2022 | Nine Months Ended September 30, 2022 | ||||||||||||||||
| GRP I | NRP(1) | GRP I | NRP(1) | ||||||||||||||
Pro rata share of Nareit FFO(2)(3) | $ | 687 | $ | 4 | $ | 2,067 | $ | (464) | |||||||||
Pro rata share of NOI(2) | 1,020 | 7 | 3,018 | 195 | |||||||||||||
(1)During the second quarter of 2022, the final property in the NRP joint venture was sold, and the outstanding debt balance was repaid. PECO's ownership percentage of the joint venture is 20%.
(2)PECO's shares of our unconsolidated joint ventures' Nareit FFO and NOI results are all calculated based upon the respective ownership percentages presented in Unconsolidated Joint Venture Portfolio Summary table above.
(3)Results for NRP include $2.7 million of performance fees paid to PECO related to the achievement of certain performance targets in the NRP joint venture.
| Phillips Edison & Company | 20 | |||||||
Supplemental Balance Sheets Detail Unaudited, in thousands | |||||||||||
| September 30, 2022 | December 31, 2021 | ||||||||||
| OTHER ASSETS, NET | |||||||||||
| Deferred leasing commissions and costs | $ | ||||||||||