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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2023
OR
     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number: 000-54691
https://cdn.kscope.io/1018daf866c417ed3b106654268f8bc1-pecohorizontallogobluea27.jpg
PHILLIPS EDISON & COMPANY, INC.
(Exact name of registrant as specified in its charter)

Maryland27-1106076
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)

11501 Northlake Drive, Cincinnati, Ohio
45249
(Address of principal executive offices)(Zip code)

(513) 554-1110
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, par value $0.01 per sharePECONasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesNo  ☐ 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).YesNo  ☐  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.    
Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging 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.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YesNo  ☑
There were 117.3 million shares of the registrant’s Common Stock, $0.01 par value per share, outstanding as of April 26, 2023.



PHILLIPS EDISON & COMPANY, INC. FORM 10-Q
TABLE OF CONTENTS
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
PHILLIPS EDISON & COMPANY
MARCH 31, 2023 FORM 10-Q
1


w PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

PHILLIPS EDISON & COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2023 AND DECEMBER 31, 2022
(Condensed and Unaudited)
(In thousands, except per share amounts)
  March 31, 2023December 31, 2022
ASSETS    
Investment in real estate:    
Land and improvements$1,701,404 $1,674,133 
Building and improvements3,639,646 3,572,146 
In-place lease assets478,477 471,507 
Above-market lease assets72,524 71,954 
Total investment in real estate assets5,892,051 5,789,740 
Accumulated depreciation and amortization(1,373,124)(1,316,743)
Net investment in real estate assets4,518,927 4,472,997 
Investment in unconsolidated joint ventures26,584 27,201 
Total investment in real estate assets, net4,545,511 4,500,198 
Cash and cash equivalents6,405 5,478 
Restricted cash5,559 11,871 
Goodwill29,066 29,066 
Other assets, net200,373 188,879 
Total assets$4,786,914 $4,735,492 
LIABILITIES AND EQUITY    
Liabilities:    
Debt obligations, net$1,967,252 $1,896,594 
Below-market lease liabilities, net111,007 109,799 
Accounts payable and other liabilities111,471 113,185 
Deferred income24,243 18,481 
Total liabilities2,213,973 2,138,059 
Commitments and contingencies (see Note 8)
  
Equity:    
Preferred stock, $0.01 par value per share, 10,000 shares authorized, zero shares issued and outstanding at March 31, 2023 and December 31, 2022
  
Common stock, $0.01 par value per share, 1,000,000 shares authorized, 117,259 and 117,126 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively
1,172 1,171 
Additional paid-in capital (“APIC”)3,382,368 3,383,978 
Accumulated other comprehensive income (“AOCI”)
15,181 21,003 
Accumulated deficit(1,186,074)(1,169,665)
Total stockholders’ equity2,212,647 2,236,487 
Noncontrolling interests360,294 360,946 
Total equity2,572,941 2,597,433 
Total liabilities and equity$4,786,914 $4,735,492 

See notes to consolidated financial statements.
PHILLIPS EDISON & COMPANY
MARCH 31, 2023 FORM 10-Q
2



PHILLIPS EDISON & COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022
(Condensed and Unaudited)
(In thousands, except per share amounts)
Three Months Ended March 31,
  20232022
Revenues:
Rental income$147,728 $138,748 
Fees and management income2,478 2,461 
Other property income858 954 
Total revenues151,064 142,163 
Operating Expenses:
Property operating25,062 23,320 
Real estate taxes18,056 17,491 
General and administrative11,533 11,532 
Depreciation and amortization58,498 57,226 
Total operating expenses113,149 109,569 
Other:
Interest expense, net(19,466)(18,199)
Gain on disposal of property, net942 1,368 
Other expense, net(755)(4,365)
Net income18,636 11,398 
Net income attributable to noncontrolling interests(2,017)(1,319)
Net income attributable to stockholders$16,619 $10,079 
Earnings per share of common stock:
Net income per share attributable to stockholders - basic and diluted (see Note 10)
$0.14 $0.09 
Comprehensive income:
Net income$18,636 $11,398 
Other comprehensive (loss) income:
Change in unrealized value on interest rate swaps(6,499)27,573 
Comprehensive income12,137 38,971 
Net income attributable to noncontrolling interests(2,017)(1,319)
Change in unrealized value on interest rate swaps attributable to noncontrolling interests704 (2,702)
Reallocation of comprehensive loss upon conversion of noncontrolling interests(27)(212)
Comprehensive income attributable to stockholders$10,797 $34,738 

See notes to consolidated financial statements.
PHILLIPS EDISON & COMPANY
MARCH 31, 2023 FORM 10-Q
3


PHILLIPS EDISON & COMPANY, INC.
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022
(Condensed and Unaudited)
(In thousands, except per share amounts)
Three Months Ended March 31, 2023 and 2022
  Common StockClass B Common StockAPICAOCIAccumulated DeficitTotal Stockholders’ EquityNoncontrolling InterestsTotal Equity
  SharesAmountSharesAmount
Balance at January 1, 202219,550 $196 93,665 $936 $3,264,038 $(24,819)$(1,090,837)$2,149,514 $326,812 $2,476,326 
Conversion of Class B common stock93,665 936 (93,665)(936)— — — — —  
Change in unrealized value on interest
    rate swaps
— — — — — 24,871 — 24,871 2,702 27,573 
Common distributions declared, $0.27
   per share
— — — — — — (30,915)(30,915)— (30,915)
Distributions to noncontrolling interests— — — — — — — — (4,104)(4,104)
Share-based compensation71 1 — — 467 — — 468 2,678 3,146 
Conversion of noncontrolling interests533 5 — — 11,646 (212)— 11,439 (11,439) 
Settlement of earn-out liability— — — — — — — — 54,245 54,245 
Net income— — — — — — 10,079 10,079 1,319 11,398 
Balance at March 31, 2022113,819 $1,138  $ $3,276,151 $(160)$(1,111,673)$2,165,456 $372,213 $2,537,669 
Balance at January 1, 2023117,126 $1,171  $ $3,383,978 $21,003 $(1,169,665)$2,236,487 $360,946 $2,597,433 
Change in unrealized value on interest
    rate swaps
— — — — — (5,795)— (5,795)(704)(6,499)
Common distributions declared, $0.2799
    per share
— — — — — — (33,028)(33,028)— (33,028)
Distributions to noncontrolling interests— — — — — — — — (4,073)(4,073)
Share-based compensation133 1 — — (1,610)— — (1,609)2,081 472 
Conversion of noncontrolling interests— — — — — (27)— (27)27  
Net income— — — — — — 16,619 16,619 2,017 18,636 
Balance at March 31, 2023117,259 $1,172  $ $3,382,368 $15,181 $(1,186,074)$2,212,647 $360,294 $2,572,941 

See notes to consolidated financial statements.
PHILLIPS EDISON & COMPANY
MARCH 31, 2023 FORM 10-Q
4



PHILLIPS EDISON & COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022
(Condensed and Unaudited)
(In thousands)
Three Months Ended March 31,
  20232022
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net income
$18,636 $11,398 
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization of real estate assets57,953 56,321 
Depreciation and amortization of corporate assets545 905 
Net amortization of above- and below-market leases(1,228)(1,002)
Amortization of deferred financing expenses894 801 
Amortization of debt and derivative adjustments667 586 
Gain on disposal of property, net
(942)(1,368)
Change in fair value of earn-out liability 1,809 
Straight-line rent(2,566)(1,818)
Share-based compensation472 3,146 
Return on investment in unconsolidated joint ventures11  
Other(350)487 
Changes in operating assets and liabilities:    
Other assets, net(16,715)(10,978)
Accounts payable and other liabilities5,386 (66)
Net cash provided by operating activities
62,763 60,221 
CASH FLOWS FROM INVESTING ACTIVITIES:    
Real estate acquisitions(69,431)(101,440)
Capital expenditures(23,878)(18,608)
Proceeds from sale of real estate, net1,091 12,770 
Return of investment in unconsolidated joint ventures606 781 
Insurance proceeds for property damage claims194  
Net cash used in investing activities
(91,418)(106,497)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Proceeds from revolving credit facility162,000 102,000 
Payments on revolving credit facility(76,000)(56,000)
Payments on mortgages and loans payable(25,477)(62,515)
Distributions paid(33,276)(30,926)
Distributions to noncontrolling interests(3,977)(4,343)
Net cash provided by (used in) financing activities
23,270 (51,784)
NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
(5,385)(98,060)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH:    
Beginning of period17,349 115,529 
End of period$11,964 $17,469 
RECONCILIATION TO CONSOLIDATED BALANCE SHEETS:
Cash and cash equivalents$6,405 $5,063 
Restricted cash5,559 12,406 
Cash, cash equivalents, and restricted cash at end of period$11,964 $17,469 
PHILLIPS EDISON & COMPANY
MARCH 31, 2023 FORM 10-Q
5


PHILLIPS EDISON & COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022
(Condensed and Unaudited)
(In thousands)
Three Months Ended March 31,
  20232022
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest$15,166 $14,849 
SUPPLEMENTAL SCHEDULE OF NON-CASH ACTIVITIES:
Settlement of earn-out liability 54,245 
Right-of-use (“ROU”) assets obtained in exchange for new lease liabilities888  
Accrued capital expenditures7,570 6,486 
Assumed debt obligations, net9,619  
Assumed below-market debt443  
Change in distributions payable(248)(11)
Change in distributions payable - noncontrolling interests96 (239)

See notes to consolidated financial statements.
PHILLIPS EDISON & COMPANY
MARCH 31, 2023 FORM 10-Q
6



Phillips Edison & Company, Inc.
Notes to Consolidated Financial Statements
(Condensed and Unaudited)

1. ORGANIZATION
Phillips Edison & Company, Inc. (“we,” the “Company,” “PECO,” “our,” or “us”) was formed as a Maryland corporation in October 2009. Substantially all of our business is conducted through Phillips Edison Grocery Center Operating Partnership I, L.P., (the “Operating Partnership”), a Delaware limited partnership formed in December 2009. We are a limited partner of the Operating Partnership, and our wholly-owned subsidiary, Phillips Edison Grocery Center OP GP I LLC, is the sole general partner of the Operating Partnership.
We are a real estate investment trust (“REIT”) that invests primarily in omni-channel grocery-anchored neighborhood and community shopping centers that have a mix of creditworthy national, regional, and local retailers that sell necessity-based goods and services in strong demographic markets throughout the United States. In addition to managing our own shopping centers, our third-party investment management business provides comprehensive real estate and asset management services to two unconsolidated institutional joint ventures, Grocery Retail Partners I LLC (“GRP I”) and Necessity Retail Partners (“NRP”), in which we have partial ownership interests, and one private fund (collectively, the “Managed Funds”) as of March 31, 2023.
As of March 31, 2023, we wholly-owned 275 real estate properties. Additionally, we owned a 14% interest in GRP I, which owned 20 properties.
NRP—As of March 31, 2023, we owned a 20% equity interest in NRP. NRP was initially formed in March 2016 pursuant to the terms of a joint venture agreement between Phillips Edison Grocery Center REIT II, Inc. and an affiliate of TPG Real Estate and is set to expire seven years after the date of the joint venture contribution agreement unless otherwise extended by the members. In May 2022, we sold the final property in the joint venture as a result of the planned expiration in 2023. With the monetization of the joint venture, we exceeded the targeted return and as such were paid compensation of $0.1 million and $0.2 million during the three months ended March 31, 2023 and 2022, respectively, which is recorded in Fees and Management Income in our consolidated statements of operations and comprehensive income (“consolidated statements of operations”).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Set forth below is a summary of the significant accounting estimates and policies that management believes are important to the preparation of our condensed consolidated interim financial statements. Certain of our accounting estimates are particularly important for an understanding of our financial position and results of operations and require the application of significant judgment by management. For example, significant estimates and assumptions have been made with respect to the useful lives of assets, remaining hold periods of assets, recoverable amounts of receivables, and other fair value measurement assessments required for the preparation of the consolidated interim financial statements. As a result, these estimates are subject to a degree of uncertainty.
There were no changes to our significant accounting policies during the three months ended March 31, 2023, except for those discussed below. For a full summary of our significant accounting policies, refer to our 2022 Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission (“SEC”) on February 21, 2023.
Basis of Presentation and Principles of Consolidation—The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. Readers of this Quarterly Report on Form 10-Q should refer to our audited consolidated financial statements for the year ended December 31, 2022, which are included in our 2022 Annual Report on Form 10-K. In the opinion of management, all normal and recurring adjustments necessary for the fair presentation of the unaudited consolidated financial statements for the periods presented have been included in this Quarterly Report. Our results of operations for the three months ended March 31, 2023 are not necessarily indicative of the operating results expected for the full year.
The accompanying consolidated financial statements include our accounts and the accounts of the Operating Partnership and its wholly-owned subsidiaries (over which we exercise financial and operating control). The financial statements of the Operating Partnership are prepared using accounting policies consistent with our accounting policies. All intercompany balances and transactions are eliminated upon consolidation.
Income Taxes—Our consolidated financial statements include the operations of wholly-owned subsidiaries that have jointly elected to be treated as taxable REIT subsidiary entities and are subject to U.S. federal, state, and local income taxes at regular corporate tax rates. We recognized an insignificant amount of federal, state, and local income tax expense for the three months ended March 31, 2023 and 2022, and we retain a full valuation allowance for our net deferred tax asset. All income tax amounts are included in Other Expense, Net on our consolidated statements of operations.
Newly Adopted Accounting Pronouncements—There were no newly adopted accounting pronouncements during the three months ended March 31, 2023 that impacted the Company.
PHILLIPS EDISON & COMPANY
MARCH 31, 2023 FORM 10-Q
7


Reclassifications—Certain prior period amounts have been reclassified to conform to current year presentation in the consolidated statements of equity. The reallocation of operating partnership interests is now reflected within Conversion of Noncontrolling Interests, as opposed to being presented as a separate financial statement line item. There was no impact to the Company’s financial position as a result of this reclassification.

3. LEASES
Lessor—The majority of our leases are largely similar in that the leased asset is retail space within our properties, and the lease agreements generally contain similar provisions and features, without substantial variations. All of our leases are currently classified as operating leases. Lease income related to our operating leases was as follows (in thousands):
Three Months Ended March 31,
20232022
Rental income related to fixed lease payments(1)
$108,864 $101,510 
Rental income related to variable lease payments(1)(2)
35,763 33,467 
Straight-line rent amortization(3)
2,443 1,695 
Amortization of lease assets1,216 992 
Lease buyout income355 1,964 
Adjustments for collectibility(4)
(913)(880)
Total rental income$147,728 $138,748 
(1)Includes rental income related to lease payments before assessing for collectibility.
(2)Variable payments are primarily related to tenant recovery income.
(3)Includes revenue adjustments to straight-line rent for tenants considered non-creditworthy.
(4)Includes general reserves as well as adjustments for tenants considered non-creditworthy for which we are recording revenue on a cash basis, per Accounting Standards Codification (“ASC”) Topic 842, Leases.
Approximate future fixed contractual lease payments to be received under non-cancelable operating leases in effect as of March 31, 2023, assuming no new or renegotiated leases or option extensions on lease agreements, and including the impact of rent abatements and tenants who have been moved to the cash basis of accounting for revenue recognition purposes, are as follows (in thousands):
YearAmount
Remaining 2023$326,815 
2024403,547 
2025346,840 
2026281,485 
2027216,408 
Thereafter539,314 
Total$2,114,409 
No single tenant comprised 10% or more of our aggregate annualized base rent (“ABR”) as of March 31, 2023. As of March 31, 2023, our wholly-owned real estate investments in Florida and California represented 12.2% and 10.9% of our ABR, respectively. As a result, the geographic concentration of our portfolio makes it particularly susceptible to adverse weather or economic events in the Florida (see “Hurricane Ian” in Note 4) and California real estate markets.

PHILLIPS EDISON & COMPANY
MARCH 31, 2023 FORM 10-Q
8


4. REAL ESTATE ACTIVITY
AcquisitionsThe following table summarizes our real estate acquisition activity (dollars in thousands):
Three Months Ended March 31,
20232022
Number of properties acquired4 3 
Contract price$78,650 $100,400 
Total price of acquisitions(1)
69,431 101,440 
(1)Total price of acquisitions includes closing costs less credits and assumed debt obligations.
The aggregate purchase price of the assets acquired during the three months ended March 31, 2023 and 2022 were allocated as follows (in thousands):
March 31, 2023March 31, 2022
ASSETS
   Land and improvements$25,079 $30,274 
   Building and improvements49,853 65,028 
   In-place lease assets592 8,557 
   Above-market lease assets7,111 708 
   Below-market debt443  
Total assets83,078 104,567 
LIABILITIES
   Debt obligations, net9,619  
   Below-market lease liabilities4,028 3,127 
Total liabilities13,647 3,127 
Net assets acquired$69,431 $101,440 
The weighted-average amortization periods for in-place, above-market, and below-market lease intangibles and below-market debt acquired during the three months ended March 31, 2023 and 2022 are as follows (in years):
March 31, 2023March 31, 2022
Acquired in-place leases1214
Acquired above-market leases86
Acquired below-market leases1824
Assumed below-market debt2
Property DispositionsThe following table summarizes our real estate disposition activity (dollars in thousands):
Three Months Ended March 31,
20232022
Number of properties sold 2 
Contract price$ $13,325 
Proceeds from sale of real estate, net(1)(2)
1,091 12,770 
Gain on disposal of property, net(2)
942 1,368 
(1)Total proceeds from sale of real estate, net includes closing costs less credits.
(2)Activity for the three months ended March 31, 2023 was primarily related to land acquired from us by local authorities.

PHILLIPS EDISON & COMPANY
MARCH 31, 2023 FORM 10-Q
9


Hurricane Ian - On September 28, 2022, Hurricane Ian struck the southeast United States and caused various amounts of damage to our properties located in the region. Based on our estimates at March 31, 2023, we expect to collect insurance proceeds of $1.0 million (net of deductibles and self-insurance of $1.7 million) equal to the replacement cost of the damaged properties. During 2022, we recorded gross cumulative accelerated depreciation of $2.7 million, which was reduced by expected insurance recoveries, for damages sustained to the properties. We also recognized a receivable for estimated insurance recoveries in excess of the deductible. As of March 31, 2023, we have received no insurance recoveries and have a receivable balance of $1.0 million, which is recorded in Other Assets, Net on our consolidated balance sheets.

5. OTHER ASSETS, NET
The following is a summary of Other Assets, Net outstanding as of March 31, 2023 and December 31, 2022, excluding amounts related to assets classified as held for sale (in thousands):
March 31, 2023December 31, 2022
Other assets, net:
Deferred leasing commissions and costs$50,253 $49,687 
Deferred financing expenses(1)
9,069 8,984 
Office equipment, including capital lease assets, and other23,132 23,051 
Corporate intangible assets6,692 6,692 
Total depreciable and amortizable assets89,146 88,414 
Accumulated depreciation and amortization(48,407)(47,483)
Net depreciable and amortizable assets40,739 40,931 
Accounts receivable, net(2)
43,471 37,274 
Accounts receivable - affiliates 1,470 513 
Deferred rent receivable, net(3)
54,729 52,141 
Derivative assets19,200 25,853 
Prepaid expenses and other22,745 14,575 
Investment in third parties9,800 9,800 
Investment in marketable securities8,219 7,792 
Total other assets, net$200,373 $188,879 
(1)Deferred financing expenses per the above table are related to our revolving credit facility, and as such we have elected to classify them as an asset rather than as a contra-liability.
(2)Net of $2.8 million and $3.0 million of general reserves for uncollectible amounts as of March 31, 2023 and December 31, 2022, respectively. Receivables that were removed for tenants considered to be non-creditworthy were $5.9 million and $6.2 million as of March 31, 2023 and December 31, 2022, respectively.
(3)Net of $4.0 million and $4.2 million of receivables removed as of March 31, 2023 and December 31, 2022, respectively, related to straight-line rent for tenants previously or currently considered to be non-creditworthy.

PHILLIPS EDISON & COMPANY
MARCH 31, 2023 FORM 10-Q
10


6. DEBT OBLIGATIONS
The following is a summary of the outstanding principal balances and interest rates, which includes the effect of derivative financial instruments, for our debt obligations as of March 31, 2023 and December 31, 2022 (dollars in thousands):
   
Interest Rate(1)
March 31, 2023December 31, 2022
Revolving credit facility
SOFR + 1.1%
$165,000 $79,000 
Term loans(2)
2.5% - 6.0%
955,000 955,000 
Senior unsecured notes due 20312.6%350,000 350,000 
Secured loan facilities
3.4% - 3.5%
395,000 395,000 
Mortgages
3.5% - 6.4%
117,549 133,199 
Finance lease liability529 585 
Discount on notes payable(6,828)(7,001)
Assumed market debt adjustments, net(1,512)(1,226)
Deferred financing expenses, net(7,486)(7,963)
Total  $1,967,252 $1,896,594 
Weighted-average interest rate(3)
3.8 %3.6 %
(1)Interest rates are as of March 31, 2023.
(2)Our term loans carry an interest rate of the Secured Overnight Financing Rate (“SOFR”) plus a spread. While most of the rates are fixed through the use of swaps, a portion of these loans are not subject to a swap, and thus are still indexed to SOFR.
(3)Includes the effects of derivative financial instruments that were effective as of March 31, 2023 and December 31, 2022 (see Notes 7 and 12).
2023 Debt Activity—During the three months ended March 31, 2023, we repaid $25.4 million in mortgage debt.
Debt AllocationThe allocation of total debt between fixed-rate and variable-rate as well as between secured and unsecured, excluding market debt adjustments, discount on senior notes, and deferred financing expenses, net, and including the effects of derivative financial instruments as of March 31, 2023 and December 31, 2022 is summarized below (in thousands):
   March 31, 2023December 31, 2022
As to interest rate:
Fixed-rate debt(1)
$1,618,078 $1,633,784
Variable-rate debt365,000 279,000
Total$1,983,078 $1,912,784
As to collateralization:
Unsecured debt$1,470,000 $1,384,000
Secured debt513,078 528,784
Total  $1,983,078 $1,912,784
(1)Fixed-rate debt includes, and variable-rate debt excludes, the portion of such debt that has been hedged by interest rate derivatives. As of March 31, 2023, $755 million in variable-rate debt is hedged to a fixed rate for a weighted-average period of 1.3 years (see Notes 7 and 12).

7. DERIVATIVES AND HEDGING ACTIVITIES
Risk Management Objective of Using Derivatives—We are exposed to certain risks arising from both our business operations and economic conditions. We principally manage our exposure to a wide variety of business and operational risks through management of our core business activities. We manage economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of our debt funding, and through the use of derivative financial instruments. Specifically, we enter into interest rate swaps to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. Our derivative financial instruments are used to manage differences in the amount, timing, and duration of our known or expected cash receipts and our known or expected cash payments principally related to our investments and borrowings.
PHILLIPS EDISON & COMPANY
MARCH 31, 2023 FORM 10-Q
11


Cash Flow Hedges of Interest Rate Risk—Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for our making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.
The changes in the fair value of derivatives designated, and that qualify, as cash flow hedges are recorded in AOCI and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the three months ended March 31, 2023 and 2022, such derivatives were used to hedge the variable cash flows associated with certain variable-rate debt. Amounts reported in AOCI related to these derivatives will be reclassified to Interest Expense, Net as interest payments are made on the variable-rate debt. During the next twelve months, we estimate that an additional $15.5 million will be reclassified from AOCI as a decrease to Interest Expense, Net.
On March 15, 2023, we entered into an interest rate swap which has a notional amount of $200 million and swaps SOFR for a fixed rate of approximately 3.36% effective September 15, 2023 and maturing September 1, 2026.
The following is a summary of our interest rate swaps that were designated as cash flow hedges of interest rate risk as of March 31, 2023 and December 31, 2022 (dollars in thousands):
March 31, 2023December 31, 2022
Count5 4 
Notional amount(1)
$755,000 $755,000 
Fixed SOFR
1.2% - 3.4%
1.2% - 2.8%
Maturity date2023-20262023-2025
Weighted-average term (in years)2.11.6
(1) Notional amount includes only interest rate swaps that were effective as of March 31, 2023 and December 31, 2022.
The table below details the nature of the gain and loss recognized on interest rate derivatives designated as cash flow hedges in the consolidated statements of operations (in thousands):
Three Months Ended March 31,
  20232022
Amount of (loss) gain recognized in Other Comprehensive (Loss) Income
$(1,952)$22,899 
Amount of (gain) loss reclassified from AOCI into Interest Expense, Net
(4,547)4,674 
Credit-risk-related Contingent Features—We have agreements with our derivative counterparties that contain provisions where, if we default, or are capable of being declared in default, on any of our indebtedness, we could also be declared to be in default on our derivative obligations. As of March 31, 2023, the fair value of our derivatives in a net liability position, which included accrued interest but excluded any adjustment for nonperformance risk related to these agreements and approximated $0.2 million, are recorded in Accounts Payable and Other Liabilities on our consolidated balance sheets. As of March 31, 2023, we had not posted any collateral related to these agreements and were not in breach of any agreement provisions. If we had breached any of these provisions, we could have been required to settle our obligations under the agreements at their termination value of $0.2 million.

8. COMMITMENTS AND CONTINGENCIES
Litigation—We are involved in various claims and litigation matters arising in the ordinary course of business, some of which involve claims for damages. Many of these matters are covered by insurance, although they may nevertheless be subject to deductibles or retentions. Although the ultimate liability for these matters cannot be determined, based upon information currently available, we believe the resolution of such claims and litigation will not have a material adverse effect on our consolidated financial statements.
Environmental Matters—In connection with the ownership and operation of real estate, we may potentially be liable for costs and damages related to environmental matters. In addition, we may own or acquire certain properties that are subject to environmental remediation. Depending on the nature of the environmental matter, the seller of the property, a tenant of the property, and/or another third party may be responsible for environmental remediation costs related to a property. Additionally, in connection with the purchase of certain properties, the respective sellers and/or tenants may agree to indemnify us against future remediation costs. We also carry environmental liability insurance on our properties that provides limited coverage for any remediation liability and/or pollution liability for third-party bodily injury and/or property damage claims for which we may be liable. We are not currently aware of any environmental matters that we believe are reasonably likely to have a material adverse effect on our consolidated financial statements.
Captive Insurance—Our captive insurance company, Silver Rock Insurance, Inc. (“Silver Rock”), provides general liability insurance, wind, reinsurance, and other coverage to us and our GRP I joint venture. We capitalize Silver Rock in accordance with applicable regulatory requirements.
Silver Rock establishes annual premiums based on the past loss experience of the insured properties. An independent third party was engaged to perform an actuarial estimate of projected future claims, related deductibles, and projected future expenses necessary to fund associated risk management programs. Premiums paid to Silver Rock may be adjusted based on this estimate, and such premiums may be reimbursed by tenants pursuant to specific lease terms.
PHILLIPS EDISON & COMPANY
MARCH 31, 2023 FORM 10-Q
12


As of March 31, 2023, we had four letters of credit outstanding totaling approximately $12.5 million to provide security for our obligations under Silver Rock’s insurance and reinsurance contracts.

9. EQUITY
General—The holders of common stock are entitled to one vote per share on all matters voted on by stockholders, including one vote per nominee in the election of our Board of Directors (the “Board”). Our charter does not provide for cumulative voting in the election of directors.
At-the-Market Offering (“ATM”)—On February 10, 2022, we and the Operating Partnership entered into a sales agreement relating to the potential sale of shares of common stock pursuant to a continuous offering program. In accordance with the terms of the sales agreement, we may offer and sell shares of our common stock having an aggregate offering price of up to $250 million from time to time through our sales agents, or, if applicable, as forward sellers. During the three months ended March 31, 2023 and 2022, no shares of our common stock were issued under the ATM program. As of March 31, 2023, $159.9 million of common stock remained available for issuance under the ATM program.
Class B Common Stock—On June 18, 2021, our stockholders approved an amendment to our charter (the “Articles of Amendment”) that effected a change, wherein each share of our common stock outstanding at the time the Articles of Amendment became effective was converted into one share of a newly created class of Class B common stock (the “Recapitalization”).
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.
Distributions—We declared 2023 monthly distributions of $0.0933 per common share and Operating Partnership unit (“OP unit”) for each month beginning January 2023 through April 2023. Distributions paid to stockholders and OP unit holders of record subsequent to March 31, 2023 were as follows (dollars in thousands, excluding per share amounts):
MonthDate of RecordDate Distribution PaidMonthly Distribution RateCash Distribution
March 3/15/20234/3/2023$0.0933 $12,226 
April4/17/20235/1/20230.0933 12,226 
Convertible Noncontrolling Interests—As of March 31, 2023 and December 31, 2022, we had approximately 14.3 million and 14.1 million outstanding non-voting OP units, respectively. Additionally, certain of our outstanding restricted share and performance share awards will result in the issuance of OP units upon vesting in future periods.
Under the terms of the Fourth Amended and Restated Agreement of Limited Partnership, OP unit holders may elect to cause the Operating Partnership to redeem their OP units. The Operating Partnership controls the form of the redemption, and may elect to redeem OP units for shares of our common stock, provided that the OP units have been outstanding for at least one year, or for cash. As the form of redemption for OP units is within our control, the OP units outstanding as of March 31, 2023 and December 31, 2022 are classified as Noncontrolling Interests within permanent equity on our consolidated balance sheets.
On January 18, 2022, we issued approximately 1.6 million OP units in full settlement of the earn-out liability (see note 12).
The table below is a summary of our OP unit activity for the three months ended March 31, 2023 and 2022 (dollars and shares in thousands):
Three Months Ended March 31,
20232022
OP units converted into shares of common stock(1)
 533 
Distributions declared on OP units(2)
$4,073 $4,104 
(1)Prior to the Recapitalization, OP units were converted to shares of common stock at a 1:1 ratio. From the Recapitalization through January 18, 2022, OP units were converted into shares of our Class B common stock at a 1:1 ratio. On January 18, 2022, each share of our Class B common stock automatically converted into one share of our listed common stock, and going forward, OP units will be converted into shares of our common stock at a 1:1 ratio.
(2)Distributions declared on OP units are included in Distributions to Noncontrolling Interests on the consolidated statements of equity.
Share Repurchase Program—On August 3, 2022, our Board approved a new share repurchase program of up to $250 million of common stock. The program may be suspended or discontinued at any time, and does not obligate us to repurchase any dollar amount or particular number of shares. No share repurchases have been made to date under this program.

PHILLIPS EDISON & COMPANY
MARCH 31, 2023 FORM 10-Q
13


10. EARNINGS PER SHARE
Basic earnings per share (“EPS”) is computed by dividing Net Income Attributable to Stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted EPS reflects the potential dilution that could occur from share equivalent activity.
The following table provides a reconciliation of the numerator and denominator of the earnings per share calculations (in thousands, except per share amounts):
Three Months Ended March 31,
20232022
Numerator:
Net income attributable to stockholders - basic
$16,619 $10,079 
Net income attributable to convertible OP units(1)
2,017 1,319 
Net income - diluted
$18,636 $11,398 
Denominator:
Weighted-average shares - basic117,223 113,571 
OP units(1)
14,234 14,558 
Dilutive restricted stock awards486 374 
Adjusted weighted-average shares - diluted131,943 128,503 
Earnings per common share:
Basic and diluted income per share
$0.14 $0.09 
(1)OP units include units that are convertible into common stock or cash, at the Operating Partnership’s option. The Operating Partnership income or loss attributable to these OP units, which is included as a component of Net Income Attributable to Noncontrolling Interests on the consolidated statements of operations, has been added back in the numerator as these OP units were included in the denominator for all periods presented. OP units are allocated income on a consistent basis with the common stockholder and therefore have no dilutive impact to earnings per share of common stock.

11. RELATED PARTY TRANSACTIONS
Revenue—We have entered into agreements with the Managed Funds related to certain advisory, management, and administrative services we provide to their real estate assets in exchange for fees and reimbursement of certain expenses. Summarized below are amounts included in Fees and Management Income. The revenue includes the fees and reimbursements earned by us from the Managed Funds and other revenues that are not in the scope of ASC Topic 606, Revenue from Contracts with Customers, but that are included in this table for the purpose of disclosing all related party revenues (in thousands):
Three Months Ended March 31,
20232022
Recurring fees(1)
$1,012 $1,075 
Realized performance income(2)
75 196 
Transactional revenue and reimbursements(3)
542 394 
Insurance premiums(4)
849 796 
Total fees and management income $2,478 $2,461 
(1)Recurring fees include asset management fees and property management fees.
(2)Realized performance income includes fees received related to the achievement of certain performance targets in our NRP joint venture.
(3)Transactional revenue includes items such as leasing commissions and construction management fees.
(4)Insurance premium income includes amounts for reinsurance from third parties not affiliated with us.
PHILLIPS EDISON & COMPANY
MARCH 31, 2023 FORM 10-Q
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Tax Protection Agreement—Through our Operating Partnership, we are currently party to a tax protection agreement (the “2017 TPA”) with certain partners that contributed property to our Operating Partnership on October 4, 2017, among them certain of our executive officers, including Jeffrey S. Edison, our Chairman and Chief Executive Officer, under which the Operating Partnership agreed to indemnify such partners for tax liabilities that could accrue to them personally related to our potential disposition of certain properties within our portfolio. The 2017 TPA will expire on October 4, 2027. On July 19, 2021, we entered into an additional tax protection agreement (the “2021 TPA”) with certain of our executive officers, including Mr. Edison. The 2021 TPA carries a term of four years and will become effective upon the expiration of the 2017 TPA. As of March 31, 2023, the potential “make-whole amount” on the estimated aggregate amount of built-in gain subject to protection under the agreements is approximately $147.8 million. The protection provided under the terms of the 2021 TPA will expire in 2031. We have not recorded any liability related to the 2017 TPA or the 2021 TPA on our consolidated balance sheets for any periods presented, nor recognized any expense since the inception of the 2017 TPA, owing to the fact that any potential liability under the agreements is controlled by us and we believe we will either (i) continue to own and operate the protected properties or (ii) be able to successfully complete tax-deferred exchanges under Section 1031 of the Internal Revenue Code of 1986, as amended (unless there is a change in applicable law) or complete other tax-efficient transactions to avoid any liability under the agreements.
Other Related Party Matters— As of March 31, 2023, we were the limited guarantor of a $175 million mortgage loan secured by GRP I properties. Our guaranty for the GRP I debt is limited to being the non-recourse carveout guarantor and the environmental indemnitor. Further, we are also party to an agreement with GRP I in which any potential liability under such guarantee will be apportioned between us and GRP I based on our respective ownership percentages in the joint venture. We have no liability recorded on our consolidated balance sheets for the guaranty as of March 31, 2023 and December 31, 2022.

12. FAIR VALUE MEASUREMENTS
The following describes the methods we use to estimate the fair value of our financial and nonfinancial assets and liabilities: 
Cash and Cash Equivalents, Restricted Cash, Accounts Receivable, and Accounts Payable—We consider the carrying values of these financial instruments to approximate fair value because of the short period of time between origination of the instruments and their expected realization.
Real Estate Investments—The purchase prices of the investment properties, including related lease intangible assets and liabilities, are allocated at estimated fair value based on Level 3 inputs, such as discount rates, capitalization rates, comparable sales, replacement costs, income and expense growth rates, and current market rents and allowances as determined by management.
Debt Obligations—We estimate the fair value of our revolving credit facility, term loans, secured portfolio of loans, and mortgages by discounting the future cash flows of each instrument at rates currently offered for similar debt instruments of comparable maturities by our lenders using Level 3 inputs. The discount rates used approximate current lending rates for loans or groups of loans with similar maturities and credit quality, assuming the debt is outstanding through maturity and considering the debt’s collateral (if applicable). We have utilized market information, as available, or present value techniques to estimate the amounts required to be disclosed. We estimate the fair value of our senior unsecured notes by using quoted prices in active markets, which are considered Level 1 inputs.
The following is a summary of borrowings as of March 31, 2023 and December 31, 2022 (in thousands):
March 31, 2023December 31, 2022
Recorded Principal Balance(1)
Fair Value
Recorded Principal Balance(1)
Fair Value
Revolving credit facility$165,000 $165,677 $79,000 $79,299 
Term loans949,089 959,281 948,429 959,319 
Senior unsecured notes due 2031343,172 263,277 342,999 257,446 
Secured portfolio loan facilities392,214 343,049 392,093 343,921 
Mortgages(2)
117,777 115,763 134,073 132,563 
Total$1,967,252 $1,847,047 $1,896,594 $1,772,548 
(1)As of March 31, 2023 and December 31, 2022, respectively, recorded principal balances include: (i) net deferred financing fees of $7.5 million and $8.0 million; (ii) assumed market debt adjustments of $1.5 million and $1.2 million; and (iii) notes payable discounts of $6.8 million and $7.0 million.
(2)Our finance lease liability is included in the mortgages line item, as presented.
PHILLIPS EDISON & COMPANY
MARCH 31, 2023 FORM 10-Q
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Recurring and Nonrecurring Fair Value Measurements—Our marketable securities and interest rate swaps are measured and recognized at fair value on a recurring basis, while certain real estate assets and liabilities are measured and recognized at fair value as needed. Fair value measurements that occurred as of and during the three months ended March 31, 2023 and the year ended December 31, 2022 were as follows (in thousands):
March 31, 2023December 31, 2022
Level 1Level 2Level 3Level 1Level 2Level 3
Recurring
Marketable securities(1)
$8,219 $ $ $7,792 $ $ 
Derivative assets(1)
 19,200   25,853  
Derivative liabilities(2)
 184     
Nonrecurring
Impaired real estate assets, net(3)
$ $ $ $ $5,225 $ 
(1)We record marketable securities and derivative assets in Other Assets, Net on our consolidated balance sheets.
(2)We record derivative liabilities in Accounts Payable and Other Liabilities on our consolidated balance sheets.
(3)The carrying value of impaired real estate assets may have subsequently increased or decreased after the measurement date due to capital improvements, depreciation, or sale.
Marketable Securities—We estimate the fair value of marketable securities using Level 1 inputs. We utilize unadjusted quoted prices for identical assets in active markets that we have the ability to access.
Derivative Instruments—As of March 31, 2023 and December 31, 2022, we had interest rate swaps that fixed SOFR on portions of our unsecured term loan facilities.
All interest rate swap agreements are measured at fair value on a recurring basis. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves.
To comply with the provisions of ASC Topic 820, Fair Value Measurement, we incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.
Although we determined that the significant inputs used to value our derivatives fell within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our counterparties and our own credit risk utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by us and our counterparties. However, as of March 31, 2023 and December 31, 2022, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we have determined that our derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.
Real Estate Asset Impairment—Our real estate assets are measured and recognized at fair value, less costs to sell for held-for-sale properties, on a nonrecurring basis dependent upon when we determine an impairment has occurred. There were no impairment charges recorded during the three months ended March 31, 2023 and March 31, 2022.
On a quarterly basis, we employ a multi-step approach to assess our real estate assets for possible impairment and record any impairment charges identified. The first step is the identification of potential triggering events, such as significant decreases in occupancy or the presence of large dark or vacant spaces. If we observe any of these indicators for a shopping center, we then perform an additional screen test consisting of a years-to-recover analysis to determine if we will recover the net book value of the property over its remaining economic life based upon net operating income (“NOI”) as forecasted for the current year. In the event that the results of this first step indicate a triggering event for a center, we proceed to the second step, utilizing an undiscounted cash flow model for the center to identify potential impairment. If the undiscounted cash flows are less than the net book value of the center as of the balance sheet date, we record an impairment charge based on the fair value determined in the third step. In performing the third step, we utilize market data such as capitalization rates and sales price per square foot on comparable recent real estate transactions to estimate the fair value of the real estate assets. We also utilize expected net sales proceeds to estimate the fair value of any centers that are actively being marketed for sale.
In addition to these procedures, we also review undeveloped or unimproved land parcels that we own for evidence of impairment and record any impairment charges as necessary. Primary impairment triggers for these land parcels are changes to our plans or intentions with regards to such properties, or planned dispositions at prices that are less than the current carrying values.
PHILLIPS EDISON & COMPANY
MARCH 31, 2023 FORM 10-Q
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Earn-out—As part of our acquisition of Phillips Edison Limited Partnership (“PELP”) in 2017, an earn-out structure was established which gave PELP the opportunity to earn additional OP units based upon the potential achievement of certain performance targets subsequent to the acquisition. On January 11, 2022, we finalized the fair value of the earn-out liability based on our share price and issued approximately 1.6 million OP units in full settlement of the liability with a value of $54.2 million. Changes in the fair value of the earn-out liability were recorded to Other Expense, Net in the consolidated statements of operations. We recorded no expense for the three months ended March 31, 2023 and $1.8 million in expense for the three months ended March 31, 2022.

13. SUBSEQUENT EVENTS
In preparing the condensed and unaudited consolidated financial statements, we have evaluated subsequent events through the date of filing of this report on Form 10-Q for recognition and/or disclosure purposes. Based on this evaluation, we have determined that there were no events that have occurred that require recognition or disclosure, other than certain events and transactions that have been disclosed elsewhere in these consolidated financial statements.
PHILLIPS EDISON & COMPANY
MARCH 31, 2023 FORM 10-Q
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our accompanying consolidated financial statements and notes thereto and the more detailed information contained in our 2022 Annual Report on Form 10-K, filed with the SEC on February 21, 2023. All references to “Notes” throughout this document refer to the footnotes to the consolidated financial statements in “Item 1. Financial Statements”. See also “Cautionary Note Regarding Forward-Looking Statements” below.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Quarterly Report on Form 10-Q of Phillips Edison & Company, Inc. (“we,” the “Company,” “our,” or “us”) other than historical facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995 (collectively with the Securities Act and the Exchange Act, the “Acts”). These forward-looking statements are based on current expectations, estimates, and projections about the industry and markets in which we operate, and beliefs of, and assumptions made by, management of our company and involve uncertainties that could significantly affect our financial results. We intend for all such forward-looking statements to be covered by the applicable safe harbor provisions for forward-looking statements contained in the Acts. Such forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “can,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” “possible,” “initiatives,” “focus,” “seek,” “objective,” “goal,” “strategy,” “plan,” “potential,” “potentially,” “preparing,” “projected,” “future,” “long-term,” “once,” “should,” “could,” “would,” “might,” “uncertainty,” or other similar words. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this report is filed with the SEC. Such statements include, but are not limited to: (a) statements about our plans, strategies, initiatives, and prospects; (b) statements about our underwritten incremental yields; and (c) statements about our 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 our 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 our portfolio to our tenants; (v) the financial stability of our tenants, including, without limitation, their ability to pay rent; (vi) our ability to pay down, refinance, restructure, or extend our indebtedness as it becomes due; (vii) increases in our borrowing costs as a result of changes in interest rates and other factors; (viii) potential liability for environmental matters; (ix) damage to our properties from catastrophic weather and other natural events, and the physical effects of climate change; (x) our ability and willingness to maintain our 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) our corporate responsibility initiatives; (xiv) loss of key executives; (xv) the concentration of our portfolio in a limited number of industries, geographies, or investments; (xvi) the economic, political, and social impact of, and uncertainty relating to, pandemics or other health crises; (xvii) our ability to re-lease our properties on the same or better terms, or at all, in the event of non-renewal or in the event we exercise our right to replace an existing tenant; (xviii) the loss or bankruptcy of our tenants; (xix) to the extent we are seeking to dispose of properties, our ability to do so at attractive prices or at all; and (xx) the impact of inflation on us and on our 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 our 2022 Annual Report on Form 10-K, filed with the SEC on February 21, 2023, as updated from time to time in our 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 our performance in future periods.

Except as required by law, we do not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

KEY PERFORMANCE INDICATORS AND DEFINED TERMS
We use certain key performance indicators (“KPIs”), which include both financial and nonfinancial metrics, to measure the performance of our operations. We believe these KPIs, as well as the core concepts and terms defined below, allow our Board, management, and investors to analyze trends around our business strategy, financial condition, and results of operations in a manner that is focused on items unique to the retail real estate industry.
We do not consider our non-GAAP measures 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 shopping centers 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.
PHILLIPS EDISON & COMPANY
MARCH 31, 2023 FORM 10-Q
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Our KPIs and terminology can be grouped into three key areas:
PORTFOLIO—Portfolio metrics help management to gauge the health of our centers overall and individually.
Anchor space—We define an anchor space as a space greater than or equal to 10,000 square feet of gross leasable area (“GLA”).
ABR—We use ABR to refer to the monthly contractual base rent at the end of the period multiplied by twelve months.
ABR Per Square Foot (“PSF”)—This metric is calculated by dividing ABR by leased GLA. Increases in ABR PSF can be an indication of our ability to create rental rate growth in our centers, as well as an indication of demand for our spaces, which generally provides us with greater leverage during lease negotiations.
GLA—We use GLA to refer to the total occupied and unoccupied square footage of a building that is available for tenants (whom we refer to as a “Neighbor” or our “Neighbors”) or other retailers to lease.
Inline space—We define an inline space as a space containing less than 10,000 square feet of GLA.
Leased Occupancy—This metric is calculated as the percentage of total GLA for which a lease has been signed regardless of whether the lease has commenced or the Neighbor has taken possession. High occupancy is an indicator of demand for our spaces, which generally provides us with greater leverage during lease negotiations.
Underwritten incremental unlevered yield—This reflects the yield we target to generate from a project upon expected stabilization and is calculated as the estimated incremental NOI for a project at stabilization divided by its estimated net project investment. The estimated incremental NOI is the difference between the estimated annualized NOI we target to generate by a project upon stabilization and the estimated annualized NOI without the planned improvements. Underwritten incremental unlevered yield does not include peripheral impacts, such as lease rollover risk or the impact on the long-term value of the property upon sale or disposition. Actual incremental unlevered yields may vary from our underwritten incremental unlevered yield range based on the actual total cost to complete a project and its actual incremental NOI at stabilization.
LEASING—Leasing is a key driver of growth for our company.
Comparable lease—We use this term to refer to a lease with consistent terms that is executed for substantially the same space that has been vacant less than twelve months.
Comparable rent spread—This metric is calculated as the percentage increase or decrease in first-year ABR (excluding any free rent or escalations) on new or renewal leases (excluding options) where the lease was considered a comparable lease. This metric provides an indication of our ability to generate revenue growth through leasing activity.
Cost of executing new leases—We use this term to refer to certain costs associated with new leasing, namely, leasing commissions, tenant improvement costs, and tenant concessions.
Portfolio retention rate—This metric is calculated by dividing (i) the total square feet of retained Neighbors with current period lease expirations by (ii) the total square feet of leases expiring during the period. The portfolio retention rate provides insight into our ability to retain Neighbors at our shopping centers as their leases approach expiration. Generally, the costs to retain an existing Neighbor are lower than costs to replace with a new Neighbor.
Recovery rate—This metric is calculated by dividing (i) total recovery income by (ii) total recoverable expenses during the period. A high recovery rate is an indicator of our ability to recover certain property operating expenses and capital costs from our Neighbors.