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(1)

Represents the estimated maximum number of shares of common stock of Phillips Edison & Company, Inc. (“PECO”), $0.01 par value per share (‘‘PECO common stock’’), to be issued or reserved in connection with the merger described herein, including pursuant to the option to receive additional shares of PECO common stock in lieu of the cash portion of the merger consideration. The number of shares of PECO common stock to be registered is the sum of (a) the product of multiplying 6,306,405 shares of Class A common stock of Phillips Edison Grocery Center REIT III, Inc. (“PECO III”), $0.01 par value per share (“Class A common shares”), the number of Class A common shares estimated to be outstanding immediately prior to the merger, and the Class A exchange ratio of 0.6693 (the number of shares of PECO common stock that a holder of Class A common shares will receive for each Class A common share), plus (b) the product of multiplying 113,817 shares of Class I common stock of PECO III, $0.01 par value per share (“Class I common shares”), the number of Class I common shares estimated to be outstanding immediately prior to the merger, and the Class I exchange ratio of 0.7436 (the number of shares of PECO common stock that a holder of Class I common shares will receive for each Class I common share), plus (c) the product of multiplying 319,372 shares of Class T common stock of PECO III, $0.01 par value per share (“Class T common shares”), the number of Class T common shares estimated to be outstanding immediately prior to the merger, and the Class T exchange ratio of 0.7749 (the number of shares of PECO common stock that a holder of Class T common shares will receive for each Class T common share), plus (d) the quotient of (i) the product of multiplying 6,306,405 Class A common shares times by $0.0939 (the cash consideration per Class A common share) divided by (ii) $11.10 (PECO’s current estimated net asset value per share), plus (e) the quotient of (i) the product of multiplying 113,817 Class I common shares times by $0.0941 (the cash consideration per Class I common share) divided by (ii) $11.10 (PECO’s current estimated net asset value per share), plus (f) the quotient of (i) the product of multiplying 319,372 Class T common shares times by $0.0989 (the cash consideration per Class T common share) divided by (ii) $11.10 (PECO’s current estimated net asset value per share).

(2)	Estimated solely for purposes of calculating the registration fee required by Section 6(b) of the Securities Act of 1933, as amended (the “Securities Act”), and calculated pursuant to Rule 457(f)(2) under the Securities Act.

(3)	Determined in accordance with Section 6(b) of the Securities Act at a rate equal to $121.20 per $1 million of the proposed maximum aggregate offering price.

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•

Merger Consideration Represents Significant Premium to PECO III’s Estimated Net Asset Value Per Share: The merger consideration, on an aggregate basis and for each of the Class A, Class I and Class T shares, represents a significant premium over both the mid-point ($6.54) and high end ($6.88) of the EVPS range of PECO III, as determined by the PECO III Special Committee based on the advice of its financial advisor.

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Valuation Support from PECO III’s Advisor/Co-Sponsors: The weighted average merger consideration of $7.59 per share (based on PECO’s most recent EVPS of $11.10) offered by PECO includes the following commitments of PECO III’s advisor and co-sponsors: effectively waiving the reimbursement of all organization or offering expenses incurred in PECO III’s private and public offerings that are currently owed to the advisor; effectively waiving or crediting all asset management fees and acquisition fees and expenses owed or paid to the advisor by PECO III since its inception; waiving all disposition fees that would be owed to the advisor in connection with the merger; paying all of PECO III’s merger transaction expenses; and incremental cash contributions from the co-sponsors.

•	Enhanced Distribution: The distribution rate that PECO III stockholders will receive after the consummation of the merger will be significantly higher than the recently reduced distribution rate PECO III intends to pay, which is based on its anticipated cash flows from operations as a stand-alone company.

•	Significantly Improved Liquidity Event Prospects: PECO is significantly better positioned than PECO III to achieve a successful liquidity event as a result of PECO’s significantly greater scale, its internalized management, and its superior asset, geographic, and tenant diversification.

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Best Available Option for PECO III: The PECO III Special Committee considered possible alternatives to the merger, including continuing to operate PECO III on a stand-alone basis, liquidating the company, or seeking a business combination with or sale of assets to another party, and believes that the merger is the best available option for PECO III and its stockholders given relative valuation, timing and transaction cost considerations. Any such alternative to the merger would not include the benefit of the aforementioned commitments of the advisor and co-sponsors and would likely result in significantly reduced proceeds paid to PECO III stockholders.

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1.

Approve the transactions contemplated by the agreement and plan of merger, dated September 3, 2019, by and among PECO III, Phillips Edison & Company, Inc., a Maryland corporation (“PECO”), and certain of their respective affiliates, a copy of which is attached as Annex A to this proxy statement/prospectus, including the merger of PECO III with and into a wholly-owned subsidiary of PECO (as further discussed in the section titled “The Merger” beginning on page 50) (collectively, the “Merger Proposal”).

2.	Approve the amendment of the PECO III charter as set forth in the form of Articles of Amendment attached as Annex B to this proxy statement/prospectus, to be effective only upon stockholder approval of the Merger Proposal.

3.	Adjourn the PECO III Special Meeting, if necessary or appropriate, as determined by the Chair of the PECO III Special Meeting, to solicit additional proxies in favor of the Merger Proposal if there are not sufficient votes to approve the Merger Proposal.

4.	Attend to such other business as may properly come before the PECO III Special Meeting and any adjournment or postponement thereof.

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•	‘‘acquired companies’’ are to PECO III and each of its subsidiaries;

•	“advisor” are to PECO-Griffin REIT Advisor, LLC, a Delaware limited liability company, which is jointly owned by affiliates of PECO and Griffin;

•	“Amended PECO III Charter” are to the charter of PECO III as amended by the PECO III charter amendment;

•	‘‘Code’’ are to the Internal Revenue Code of 1986, as amended;

•	‘‘Combined Company’’ are to PECO and its consolidated subsidiaries (including the Surviving Entity) after the closing of the merger;

•	“co-sponsors” are to PECO and Griffin, who are the co-sponsors of PECO III;

•	‘‘Exchange Act’’ are to the Securities Exchange Act of 1934, as amended;

•	“Griffin” are to Griffin Capital Company, LLC, a Delaware limited liability company and the co-sponsor of PECO III;

•	‘‘merger agreement’’ are to the agreement and plan of merger, dated as of September 3, 2019, by and among PECO, Merger Sub, PECO OP, and PECO III, as it may be amended from time to time, a copy of which is attached as Annex A to this proxy statement/prospectus;

•	‘‘merger’’ is to the merger of PECO III with and into Merger Sub, with Merger Sub surviving the merger;

•	‘‘Merger Sub’’ are to REIT Merger Sub, LLC, a Maryland limited liability company and wholly owned subsidiary of PECO OP;

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‘‘ordinary course of business’’ are to, with respect to an action taken by any person or entity, an action that (i) is consistent with the past practices of such person or entity and is taken in the ordinary course of the normal day-to-day operations of the business of such person or entity; (ii) is not required to be authorized by the board of directors of such person or entity (or by any person or entity or group of persons or entities exercising similar authority) and is not required to be specifically authorized by the parent company (if any) or the holders of the capital stock or other equity interests of such person or entity; and (iii) is similar in nature and magnitude to actions customarily taken, without any authorization by the board of directors (or by any person or entity or group of persons or entities exercising similar authority), in the ordinary course of the normal day-to-day operations of other persons or entities that are in the same line of business as such person or entity;

•	‘‘Outside Date’’ is to July 3, 2020;

•	‘‘PECO’’ are to Phillips Edison & Company, Inc., a Maryland corporation, and co-sponsor of PECO III;

•	‘‘PECO Board’’ are to the board of directors of PECO;

•	‘‘PECO common stock’’ are to the common stock of PECO, $0.01 par value per share;

•	‘‘PECO III’’ are to Phillips Edison Grocery Center REIT III, Inc., a Maryland corporation;

•	‘‘PECO III Board’’ are to the board of directors of PECO III;

•	‘‘PECO III charter amendment’’ are to the proposed amendment to the charter of PECO III set forth in the form of Articles of Amendment attached as Annex B to this proxy statement/prospectus;

•	‘‘PECO III charter approval’’ are to the affirmative vote of the holders of outstanding shares of PECO III common stock entitled to cast a majority of the votes entitled to be cast on the PECO III charter amendment;

•	‘‘PECO III common stock’’ are collectively to the Class A, Class I, and Class T common stock of PECO III, $0.01 par value per share;

•	‘‘PECO III merger approval’’ are to the affirmative vote of the holders of outstanding shares of PECO III common stock entitled to cast a majority of all the votes entitled to be cast on the merger;

•	‘‘PECO III Special Committee’’ are to the special committee of the PECO III Board that was formed by the PECO III Board in connection with the merger and the other transactions contemplated by the merger agreement;

•	‘‘PECO OP’’ are to Phillips Edison Grocery Center Operating Partnership I, L.P., a Delaware limited partnership;

•	‘‘PECO parties’’ are to PECO, PECO OP, and Merger Sub;

•	‘‘SEC’’ are to the U.S. Securities and Exchange Commission;

•	‘‘Securities Act’’ are to the Securities Act of 1933, as amended; and

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•	“Surviving Entity” are to REIT Merger Sub, LLC, a wholly owned subsidiary of PECO OP, after the effective time of the merger.

•	the holders of PECO III common stock vote to approve the PECO III charter amendment; and

•	the holders of PECO III common stock vote to approve the merger and the other transactions contemplated by the merger agreement.

(i)	holders of PECO III Class A common stock will receive 0.6693 shares of PECO common stock and $0.0939 in cash per each share of Class A common stock they hold;

(ii)	holders of PECO III Class I common stock will receive 0.7436 shares of PECO common stock and $0.0941 in cash per each share of Class I common stock they hold; and

(iii)	holders of PECO III Class T common stock will receive 0.7749 shares of PECO common stock and $0.0989 in cash per each share of Class T common stock they hold.

•	To approve the PECO III charter amendment.

•	To approve one or more adjournments of the PECO III Special Meeting to another date, time or place, if necessary or appropriate, as determined by the Chair of the PECO III Special Meeting, to solicit additional proxies in favor of the

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•	changes in the respective businesses, operations, assets, liabilities and prospects of PECO and PECO III;

•	changes in the estimated value per share of either the shares of PECO common stock or PECO III common stock;

•	interest rates, general market and economic conditions and other factors generally affecting the businesses of PECO and PECO III;

•	federal, state and local legislation, governmental regulation and legal developments in the businesses in which PECO and PECO III operate; and

•	other factors beyond the control of PECO and PECO III, including those described or referred to elsewhere in this ‘‘Risk Factors’’ section.

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•	the Combined Company may not have enough cash to pay such distributions due to changes in the Combined Company’s cash requirements, capital spending plans, cash flow or financial position;

•	decisions on whether, when and in which amounts to make any future distributions will remain at all times entirely at the discretion of the Combined Company’s board of directors, which reserves the right to change PECO’s current distribution practices at any time and for any reason;

•	the Combined Company may desire to retain cash to maintain or improve its credit ratings; and

•	the amount of distributions that the Combined Company’s subsidiaries may distribute to the Combined Company may be subject to restrictions imposed by state law, restrictions that may be imposed by state regulators, and restrictions imposed by the terms of any current or future indebtedness that these subsidiaries may incur.

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•	it would be subject to U.S. federal corporate income tax on its net income for the years it did not qualify for taxation as a REIT (and, for such years, would not be allowed a deduction for distributions paid to stockholders in computing its taxable income);

•	it could be subject to the federal alternative minimum tax for taxable years prior to 2018 and possibly increased state and local taxes for such periods;

•	unless it is entitled to relief under applicable statutory provisions, neither it nor any ‘‘successor’’ company could elect to be taxed as a REIT until the fifth taxable year following the year during which it was disqualified; and

•	for five years following re-election of REIT status, upon a taxable disposition of an asset owned as of such re-election, it could be subject to corporate level tax with respect to any built-in gain inherent in such asset at the time of re-election.

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•	a stockholder would be able to resell his or her shares at the estimated value per share;

•	a stockholder would ultimately realize distributions per share equal to PECO’s estimated value per share upon liquidation of PECO’s assets and settlement of PECO’s liabilities or a sale of PECO;

•	shares of PECO common stock would trade at the estimated value per share on a national securities exchange;

•	a third party would offer the estimated value per share in an arm’s-length transaction to purchase all or substantially all shares of PECO common stock;

•	an independent third-party appraiser or third-party valuation firm would agree with PECO’s estimated value per share; or

•	the methodology used to calculate PECO’s estimated value per share would be acceptable to FINRA or for compliance with Employee Retirement Income Security Act of 1974 (‘‘ERISA’’) reporting requirements.

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•	downturns in national, regional, and local economic conditions;

•	increased competition for real estate assets targeted by its investment strategies;

•	adverse local conditions, such as oversupply or reduction in demand for similar properties in an area and changes in real estate zoning laws that may reduce the desirability of real estate in an area;

•	vacancies, changes in market rental rates and the need to periodically repair, renovate and re-let space;

•	changes in interest rates and the availability of financing, which may render the sale or refinance of a property or loan difficult or unattractive;

•	changes in tax, real estate, environmental, and zoning laws;

•	periods of high interest rates and tight money supply; and

•	the illiquidity of real estate investments generally.

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•	stagger the PECO Board into three classes;

•	require a two-thirds stockholder vote for removal of directors;

•	provide that only the board can fix the size of the board;

•	require that special stockholder meetings may only be called by holders of a majority of the voting shares entitled to be cast at the meeting; and

•	provide the PECO Board with the exclusive right to fill vacancies on the PECO Board, with any individual elected to fill such a vacancy to serve for the full term of the directorship.

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•	the investment is consistent with their fiduciary and other obligations under ERISA and the Code;

•	the investment is made in accordance with the documents and instruments governing the plan or IRA, including the plan’s or account’s investment policy;

•	the investment satisfies the prudence and diversification requirements of Sections 404(a)(1)(B) and 404(a)(1)(C) of ERISA and other applicable provisions of ERISA and the Code;

•	the investment in PECO’s shares, for which, in each case, no public market currently exists, is consistent with the liquidity needs of the plan or IRA;

•	the investment will not produce an unacceptable amount of ‘‘unrelated business taxable income’’ for the plan or IRA;

•	PECO’s stockholders will be able to comply with the requirements under ERISA and the Code to value the assets of the plan or IRA annually; and

•	the investment will not constitute a prohibited transaction under Section 406 of ERISA or Section 4975 of the Code.

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•	each of PECO’s and PECO III’s success, or the success of the Combined Company, in implementing its business strategy and its ability to identify, underwrite, finance, consummate and integrate acquisitions or investments;

•	changes in national, regional and local economic conditions;

•	changes in financial markets and interest rates, or to the business or financial condition of PECO, PECO III or the Combined Company or their respective businesses;

•	the nature and extent of future competition;

•	each of PECO’s and PECO III’s ability, or the ability of the Combined Company, to pay down, refinance, restructure and/or extend its indebtedness as it becomes due;

•	the ability and willingness of each of PECO, PECO III and the Combined Company to maintain its qualification as a REIT due to economic, market, legal, tax or other considerations;

•	availability to PECO, PECO III and the Combined Company of financing and capital;

•	each of PECO’s and PECO III’s ability, or the ability of the Combined Company, to deliver high quality properties and services, to attract and retain qualified personnel and to attract and retain customers;

•	the ability and willingness of the Combined Company to complete a liquidity event, such as a listing of the shares of common stock of the Combined Company;

•	risks associated with the companies’ ability to consummate the merger, the timing of the closing of the merger and unexpected costs or unexpected liabilities that may arise from the merger, whether or not consummated;

•	PECO and PECO III’s ability to continue paying distributions at their current rate; and

•	those additional risks and factors discussed in reports filed with the SEC, by PECO and PECO III from time to time, including those discussed under the heading ‘‘Risk Factors’’ in their respective most recently filed reports on Forms 10-K and 10-Q.

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•	Acquisitions—PECO’s acquisitions team takes a disciplined, targeted approach to acquisitions as it reviews thousands of properties each year. After a thorough financial review, comprehensive underwriting analysis, and exhaustive due diligence process, only the most financially attractive grocery-anchored properties are ultimately added to PECO’s portfolio.

•	Leasing—PECO’s national footprint of experienced leasing professionals is dedicated to increasing rental income by capitalizing on PECO’s portfolio’s below-market leases and increasing the occupancy at PECO’s centers through the lease-up of property vacancies by leveraging national and regional tenant relationships.

•	Portfolio Management—PECO’s portfolio management team seeks to add value by overseeing all aspects of operations at PECO’s properties, as well as optimizing the centers’ merchandising mix, and identifying opportunities for redevelopment or repositioning.

•	Property Management—PECO’s national footprint of property managers strives to develop and maintain a pleasant, clean, and safe environment where retailers can be successful and customers can enjoy their shopping experience. Property management is committed to effectively managing operating costs at the property level in order to maximize cash flows and improve profitability.

•	Capital Markets—PECO’s capital markets team is dedicated to maintaining a conservative balance sheet with an appropriately staggered debt maturity profile that is well positioned for long-term growth.

•

Legal, Finance, Accounting, Tax, Marketing, Risk Management, IT, Human Resources, etc.—PECO’s other in-house teams add value by utilizing technology and broad processes to create efficiencies through scale, creating a better experience for PECO’s tenants while reducing costs. PECO’s associates are dedicated to PECO’s long-term commitment of being the leading owner and operator of grocery-anchored shopping centers.

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(1)	We calculate ABR as monthly contractual rent as of June 30, 2019, multiplied by 12 months.

(2)	Gross leasable area (“GLA”) is defined as the portion of the total square feet of a building that is available for tenant leasing.

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(1)	Number of locations excludes auxiliary leases with grocery anchors such as fuel stations, pharmacies, and liquor stores.

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(1)	PECO III calculates ABR as monthly contractual rent as of June 30, 2019, multiplied by 12 months.

(2)	GLA is defined as the portion of the total square feet of a building that is available for tenant leasing.

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1.	to consider and vote on a proposal to approve the merger and the other transactions contemplated by the merger agreement;

2.	to consider and vote on a proposal to approve the PECO III charter amendment in connection with the merger;

3.

to consider and vote on a proposal to approve one or more adjournments of the PECO III Special Meeting to another date, time or place, if necessary or appropriate, as determined by the Chair of the PECO III Special Meeting, to solicit additional proxies in favor of the proposal to approve the merger and the other transactions contemplated by the merger agreement or the proposal to approve the charter amendment; and

4.	to attend to such other business as may properly come before the meeting and any adjournment or postponement thereof.

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•	Internet. PECO III stockholders may submit a proxy over the Internet by going to www.proxyvote.com/PERIII with use of the control number on their proxy card. Once at the website, they should follow the instructions to submit a proxy.

•	Telephone. PECO III stockholders may submit a proxy using the toll-free number at 1-800-690-6903 and follow the recorded instructions. PECO III stockholders will be asked to provide the control number from the enclosed proxy card.

•	Mail. PECO III stockholders may submit a proxy by completing, signing, dating and returning their proxy card or voting instruction card in the preaddressed postage-paid envelope provided.

•	submitting notice in writing to PECO III’s Secretary at Phillips Edison Grocery Center REIT III, Inc., 11501 Northlake Drive, Cincinnati, Ohio 45249, Attn: Secretary;

•	executing and delivering a later-dated proxy card or submitting a later-dated proxy by telephone or on the Internet; or

•	voting in person at the PECO III Special Meeting.

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•	PECO III would face significant challenges if it continues as a stand-alone company, including:

◦

based on PECO III’s financial statements and consultations with PECO III management, the PECO III Special Committee determined that PECO III’s anticipated cash flows from operations, assuming current assets and indebtedness, can only support a distribution of approximately $0.10 per share, or 16% of the distribution PECO III has historically paid, which had been based on anticipated future cash flows assuming a successful public offering and investment of the net proceeds in additional shopping centers;

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◦	after consultation with its advisors and PECO III management, and considering the challenges PECO III has had raising capital in its recently suspended public offering, the PECO III Special Committee determined that PECO III will likely continue to face significant challenges in growing to an appropriate scale for a public company;

◦	the PECO III Special Committee considered that absent significant growth, PECO III would not be able to increase its distribution or achieve the scale necessary to pursue a listing of PECO III’s common stock; and

◦	the significant risks to PECO III stockholders from having the company’s assets concentrated in so few properties.

•	The proposed merger would provide PECO III stockholders with significant advantages over remaining as a stand-alone company, liquidating or engaging in a sale to or merger with another party, including:

◦	the merger consideration, on an aggregate basis and for each of the Class A, Class I and Class T shares, represents a significant premium over both the mid-point ($6.54) and high-end ($6.88) of the estimated NAV per share range of PECO III, as determined by the PECO III Special Committee based on the advice of its financial advisor;

◦

the PECO III Special Committee’s understanding that PECO, in determining the merger consideration it was willing to pay, took into account factors favorable to PECO III that another buyer would not consider, including the following commitments of PECO and Griffin, as advisors and co-sponsors of PECO III: effectively waiving the reimbursement of all organization or offering expenses incurred in PECO III’s private and public offerings that are currently owed to the advisor; effectively waiving or crediting all asset management fees and acquisition fees and expenses owed or paid to the advisor by PECO III since its inception; waiving all disposition fees that would be owed to the advisor in connection with the merger; paying all of PECO III’s merger transaction expenses; and incremental cash contributions from the co-sponsors;

◦

the distribution rate that PECO III stockholders would receive after the consummation of the merger as a PECO stockholder (currently an annualized rate of approximately $0.67) would be significantly higher than the recently reduced distribution rate PECO III will pay (currently an annualized rate of approximately $0.10) based on PECO III’s anticipated cash flow from operations as a stand-alone company;

◦	PECO is better positioned than PECO III to achieve a successful liquidity event as a result of PECO’s significantly increased scale, diversification and internalized management;

◦	the receipt of shares of PECO common stock as merger consideration provides PECO III stockholders the opportunity to continue ownership in the Combined Company with dramatic increase to scale, size and geographic and tenant diversification - PECO wholly owned 298 grocery anchored shopping centers and had an estimated enterprise value of $6.1 billion as of June 30, 2019;

◦	the Combined Company is internally-managed, thereby eliminating the costs to PECO III stockholders from PECO III having to pay fees to its advisor (which totaled $1.2 million in 2018), and will continue to have the same management following the merger, providing for a seamless transition;

◦	the Combined Company will maintain PECO III’s strategy of focusing exclusively on grocery-anchored shopping centers, which assets have proven to be internet resistant and recession resilient;

◦	the merger agreement provides PECO III with the ability to consider competing proposals and provides the PECO III Board with the ability, under certain specified circumstances, to change its recommendation in favor of the merger and to terminate the merger agreement in order to enter into an agreement with respect to a superior proposal without the payment of termination fees;

◦	the exchange ratios in the merger are fixed and will not fluctuate as a result of changes in the value of PECO III or PECO, which provides certainty as to the consideration to be paid to PECO III stockholders and limits the impact of external factors on the merger;

◦

there are no anticipated transaction fees in the merger as a result of the co-sponsors’ willingness to pay for all of PECO III’s merger transaction expenses, whereas the transaction fees that would be paid in a liquidation, such as real estate brokerage commissions, transfer taxes and advisor disposition fees, or paid in an alternative merger transaction would be substantial and would significantly reduce the consideration paid to PECO III stockholders;

◦	PECO III might not obtain the consent of its joint venture partner to a sale of such interest to a party other than PECO; and

◦	shopping center REITs are generally currently trading at significant discounts to net asset value which reduces the likelihood PECO III would receive a premium offer from an alternative buyer.

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•	the merger will not result in an immediate liquidity event for stockholders of PECO III and there is no guarantee that the Combined Company will complete a liquidity event in the future;

•	the risk that a different strategic alternative could prove to be more beneficial to PECO III stockholders than the proposed merger;

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under the terms of the merger agreement, PECO III must reimburse PECO for up to $900,000 in out of pocket expenses if the merger agreement is terminated under certain circumstances, which might discourage or deter other parties from proposing an alternative transaction that may be more advantageous to PECO III’s stockholders, or which may become payable in circumstances where no alternative transaction or superior proposal is available to PECO III;

•	the terms of the merger agreement place limitations on the ability of PECO III to initiate, solicit or knowingly facilitate, encourage or assist any inquiries or the making of any proposal by or with a third party with respect to a competing transaction and to furnish information to, or enter into discussions with, a third party interested in pursuing an alternative strategic transaction;

•	the risk that, while the merger is expected to be completed, there is no assurance that all of the conditions to the parties’ obligations to complete the merger will be satisfied or waived;

•	the risk of diverting management’s focus and resources from operational matters and other strategic opportunities while working to implement the merger;

•	PECO III and PECO are affiliated entities, with PECO III managed by employees of PECO, and there are conflicts of interest inherent where the individuals who comprise the management teams of PECO III and PECO are assisting the PECO Board in connection with the merger and providing certain assistance to PECO III; and

•	the types and nature of the risks described under the section entitled ‘‘Risk Factors’’ beginning on page 15.

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•	Reviewed the following documents:

◦	An unexecuted draft of the merger agreement and certain related documents;

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Information regarding the real estate assets and investments held by PECO III (the “PECO III Properties”) provided by PECO III management, including, but not limited to, building size, year of construction, land size, rent rolls, lease rates and terms, historical and projected net operating income, planned capital expenditures, and other physical, financial and economic characteristics for the PECO III Properties;

◦	PECO III’s annual report and audited financial statements on Form 10-K filed with the SEC for the year ended December 31, 2018 and PECO III’s unaudited interim financial statements for the three and six months ended March 31, 2019 and June 30, 2019, respectively, included in the Company’s Form 10-Qs filed with the SEC;

◦	PECO III’s unaudited balance sheet as of June 30, 2019 provided by PECO III management;

◦	PECO’s annual report and audited financial statements on Form 10-K filed with the SEC for the year ended December 31, 2018 and PECO’s unaudited interim financial statements for the three and six months ended March 31, 2019 and June 30, 2019, respectively, included in the Company’s Form 10-Qs filed with the SEC;

◦	Other internal documents and information relating to the history and current operations of PECO III and the PECO III Properties provided to Duff & Phelps by management of PECO III;

◦	The Appraisal Report of the Assets and Liabilities of PECO. as of March 31, 2019 prepared by Duff & Phelps (the “Appraisal Report”);

◦	The offer letter to the independent directors of PECO III from PECO regarding a potential strategic business combination dated July 29, 2019; and

◦	The offer letter to the PECO III Special Committee from PECO regarding a potential strategic business combination dated August 20, 2019;

•	Discussed the information referred to above and the background and other elements of the merger with PECO III management;

•	Discussed with PECO III management its plans and intentions with respect to the management and operation of PECO III and the PECO III Properties;

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•	Performed certain valuation and comparative analyses using generally accepted valuation and analytical techniques including discounted cash flow analyses and an analysis of selected comparable property sales that Duff & Phelps deemed appropriate; and

•	Conducted such other analyses and considered such other factors as Duff & Phelps deemed appropriate.

•	Relied upon the accuracy, completeness, and fair presentation of all information, data, advice, opinions and representations obtained from public sources or provided to it from private sources, including PECO III management, and did not independently verify such information;

•	Relied upon the fact that the PECO III Special Committee and PECO III have been advised by counsel as to all legal matters with respect to the merger, including whether all procedures required by law to be taken in connection with the merger have been duly, validly and timely taken;

•	Assumed that any estimates, evaluations, forecasts and projections furnished to Duff & Phelps were reasonably prepared and based upon the best currently available information and good faith judgment of the person furnishing the same (and Duff & Phelps expresses no opinion with respect to such projections or the underlying assumptions);

•	Assumed that information supplied and representations made by PECO III management are accurate and complete regarding PECO III, the PECO III Properties and the merger;

•	Assumed that the representations and warranties made in the merger agreement are accurate and complete;

•	Assumed that the final versions of all documents reviewed by Duff & Phelps in draft form conform in all material respects to the drafts reviewed;

•

Assumed that there has been no material change in the assets, liabilities, financial condition, results of operations, business, or prospects of PECO III, the PECO III Properties or PECO since the date of the most recent financial statements and other information made available to Duff & Phelps, and that there is no information or facts that would make the information reviewed by Duff & Phelps incomplete or misleading;

•	Assumed that all of the conditions required to implement the merger will be satisfied and that the merger will be completed in accordance with the merger agreement without any amendments thereto or any waivers of any terms or conditions thereof; and

•	Assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the merger (if any) will be obtained without any adverse effect on PECO III or the PECO III Properties.

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(1)

As used in this table, “Net Operating Income” is defined as the sum of base rent, percentage rent, and recoveries from tenants and other income, less operating and maintenance, real estate taxes, ground rent, and provision for doubtful accounts from the properties owned by PECO. Net Operating Income excludes straight-line rental income, above and below market rent, and lease buyout income. Net Operating Income is a non-GAAP financial measure and should not be considered as an alternative to net income as a measure of operating performance.

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(1)

As used in this table, “Net Operating Income” is defined as the sum of base rent, percentage rent, and recoveries from tenants and other income, less operating and maintenance, real estate taxes, ground rent, and provision for doubtful accounts from the properties owned by PECO III. Net Operating Income excludes straight-line rental income, above and below market rent, and lease buyout income. Net Operating Income is a non-GAAP financial measure and should not be considered as an alternative to net income as a measure of operating performance.

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(1)

Represents the aggregate grant date fair value of restricted stock unit awards made to PECO’s directors in 2018, calculated in accordance with FASB ASC Topic 718, excluding any estimated forfeitures related to service-vesting conditions. The amounts reported in this column reflect the accounting cost for these restricted stock awards, and do not correspond to the actual economic value that may be received by the director upon vesting of the awards. Assumptions used in the calculation of these amounts are included in Note 14 to PECO’s audited consolidated financial statements in PECO’s Annual Report on Form 10-K.

(2)	As of December 31, 2018, each director except Messrs. Garrison and Strong held 7,816 shares of unvested restricted stock.

(3)	Represents distributions paid on unvested restricted stock.

(4)	Messrs. Garrison and Strong joined PECO’s board on November 16, 2018 after the merger with REIT II. Accordingly, the amounts in the table reflect pro rated retainers for the remainder of 2018.

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•	Completed a $1.9 billion merger with REIT II, a public non-traded REIT that was previously advised and managed by PECO, which grew its portfolio by 86 wholly-owned grocery-anchored shopping centers and a joint venture

•	Formed a joint venture (“GRP I”) with The Northwestern Mutual Life Insurance Company, investing in 17 grocery-anchored shopping centers valued at $359 million

•	Together, PECO and REIT II surpassed $1.0 billion of cumulative stockholder distributions as of December 31, 2018

•	Net income totaled $47.0 million for the year ended December 31, 2018

•	Funds from operations (“FFO”) per diluted share increased to $0.65 from $0.43; total FFO represented 101.8% of total distributions made during the year

•	Modified funds from operations (“MFFO”) per diluted share increased 6.3% to $0.68; total MFFO represented 108.5% of total distributions made during the year

•	Pro forma same-center net operating income (“NOI”) increased 3.7% to $325.5 million

•	Executed 0.7 million square feet of new leases and 2.8 million square feet of renewal leases, with comparable rent spreads of 14.6% and 6.7%, respectively

•	Acquired five grocery-anchored shopping centers for a total cost of $97.9 million and realized $78.7 million of net proceeds from the sale of eight properties (excluding the merger and joint venture activity described above)

•	Further enhanced its balance sheet by recapitalizing a significant portion of its debt, reduced its interest rate spreads on several loans, and increased its weighted average loan maturity to 4.9 years. Highlights include:

◦	PECO transferred $175 million of debt to GRP I and used proceeds from GRP I to pay down $130 million of outstanding debt to reduce leverage.

◦	At the closing of the merger with REIT II, PECO entered into two new unsecured term loans totaling $400 million and exercised an accordion feature for $217.5 million on an existing unsecured term loan. The weighted average term of the $617.5 million of new unsecured debt is 5.6 years as of December 31, 2018.

◦	PECO has no unsecured loan maturities until 2021, including extension options.

◦	PECO reduced its interest rate spreads by 5 basis points, subject to its leverage levels, on $400 million of unsecured term loans as compared to a previous term loan, and reduced its interest rate spread by 10 basis points, subject to its leverage levels, on $255 million of an existing unsecured term loan.

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√	Added a second performance measure to the annual incentive program for PECO’s executives (other than Mr. Addy) - same store NOI growth, which the Compensation Committee believes is integral for measuring the ongoing performance of PECO’s portfolio

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√	Increased the portion of the long-term incentive equity awards made to executive officers that are tied to future performance to 60% (up from 50% in 2018) and consequently decreased the portion of the award that is time-based to 40% (down from 50%)

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(1)	Of the total amount paid, $1,200,000 was attributable to the Company's performance against AFFO/share and $300,000 was attributable to his individual performance.

(2)	Of the total amount paid, $572,886 was attributable to the Company's performance against AFFO/share and $143,222 was attributable to his individual performance.

(3)	Of the total amount paid, $120,000 was attributable to the Company's performance against AFFO/share and $50,000 was attributable to his individual performance.

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(1)

Represents amounts paid under the 2018 Annual Cash Incentive Program for the portion attributable to individual performance, which in 2018 was 20% for Messrs. Edison, Murphy, and Myers and 90% for Mr. Addy. In accordance with the terms of the 2018 Annual Cash Incentive Program, PECO paid 150% of the individual performance portion of the award to Messrs. Edison, Murphy, and Myers, and Mr. Addy received 31.5% of his individual portion. These amounts were earned with respect to 2018 performance and were paid in March 2019 to Messrs. Edison, Murphy, and Myers. As discussed in "Compensation Discussion & Analysis - 2018 Annual Cash Incentive Program", the individual performance-based portion of Mr. Addy's bonus was approved by the Compensation Committee and paid on a quarterly basis; the amount shown in the table was earned in the first quarter of 2018 and paid in May 2018. See "Compensation Discussion & Analysis - 2018 Annual Cash Incentive Program" for additional information.

(2)

Amounts reflect the grant date fair value of time-based and performance-based LTIP Units granted in 2018, as computed in accordance with FASB ASC Topic 718. The time-based LTIP Units were awarded in 2017 under prior compensation programs and granted in March 2018. The performance-based LTIP Units were awarded and granted in March 2018 under the 2018 LTIP. See "Compensation Discussion & Analysis - Long-Term Equity Incentive Program" for additional information regarding these awards. The following table shows the grant date fair value of each award type granted to the NEOs in 2018:

(3)

Represents amounts paid under the 2018 Annual Cash Incentive Program for the portion attributable to PECO performance. In accordance with the terms of the 2018 Annual Cash Incentive Program, PECO paid 150% of the company performance portion of the award to the NEOs. These amounts were earned with respect to 2018 performance and paid in March 2019. See "Compensation Discussion & Analysis - 2018 Annual Cash Incentive Program" for additional information.

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(4)

Amounts reported in the "All Other Compensation" column for 2018 include company contributions to the 401(k) plan, the dollar value of premiums paid by PECO and a related tax gross-up for excess liability insurance under an umbrella policy available to employees at the senior vice president level and above, and dividend equivalents paid on phantom shares, the value of tax services provided by PECO’s internal tax department. The following table identifies the value of each benefit.

(b)	For Mr. Edison, this amount includes $70,000 for personal tax services provided by PECO’s tax department and $8,490 for personal use of PECO’s leased airplane. See "Related Party Transactions - Airplane Leases" for more information on personal use of the airplane.

(1)	These amounts relate to the 2018 Annual Cash Incentive Program. The amounts actually earned under this plan were paid in March 2019 and are included in the Summary Compensation Table for 2018 in the "Bonus" and "Non-Equity Incentive Plan Compensation" columns and described in footnotes 1 and 3 to that table.

(2)

These amounts represent performance based LTIP Units awarded under the 2018 Long Term Equity Incentive Plan, which covers performance during the three year period 2018 through 2020. The aggregate grant date fair value reported in the last column is based on the probable outcome of the performance conditions as of the grant date. This amount is consistent with the estimate of aggregate compensation cost to be recognized by PECO over the three-year performance period of the award determined as of the grant date under FASB ASC Topic 718, excluding the effect of estimated forfeitures. The aggregate grant date fair value for these awards is included in the Summary Compensation Table for 2018 in the "Stock Awards" column and described in footnote 2 to that table.

(3)

Represents the number of time-based LTIP Units granted in 2018 pursuant to awards under the 2017 long-term equity incentive plan. These units vest in equal annual installments beginning on the first anniversary of the grant date. The aggregate grant date fair value reported in the last column is calculated in accordance with FASB ASC 718. The aggregate grant date fair value for these awards is included in the Summary Compensation Table for 2018 in the "Stock Awards" column and described in footnote 2 to that table.

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(1)

Performance-based LTIP Units granted under the 2018 LTIP Program and earned, to the extent performance conditions are achieved, as of December 31, 2020, the last day of the performance period. Half of the earned units will vest on December 31, 2020 and half will vest on December 31, 2021. Because the units earned are not currently determinable, in accordance with SEC rules, the number of units and the corresponding market value reflect actual performance through 2018, which is reported at maximum performance.

(2)

At issuance, the LTIP Units were subject to vesting, and did not have full parity with OP Units with respect to liquidating distributions, but upon the occurrence of certain events described in PECO OP's partnership agreement, could over time achieve full parity with the OP Units for all purposes. Upon vesting and achieving full parity with OP Units, the LTIP Units would convert into an equal number of OP Units. Each OP Unit acquired upon conversion of a LTIP Unit may be presented for redemption at the election of the holder, for cash equal to the fair market value of a share of PECO common stock, except that PECO OP may, at its election, acquire each OP Unit so presented for one share of PECO common stock.

(3)	Time-based LTIP Units that vest in equal amounts over four years, beginning on the first anniversary of the grant date.

(4)	Phantom units that vest in equal amounts on January 1, 2020 and January 1, 2021.

(5)	Phantom units that vest in full on January 1, 2020.

(6)	In accordance with his Vesting Agreement, all of Mr. Murphy’s awards set forth in the table vest on June 3, 2019, which is the date he reaches both age 58 and a combined age and years of service to PECO of 65 years. Additional information about the Vesting Agreement is in the CD&A under the heading "Vesting Agreement with Mr. Murphy".

(7)	Phantom units that vest in full on December 31, 2019.

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(1)

Represents the aggregate present value of continued participation in PECO’s group health insurance coverage based on the portion of the premiums payable by PECO during the eligible period. The eligible period for a termination without cause or resignation for good reason is 24 months for Mr. Edison and 18 months for the other NEOs. The eligible period for a change in control with termination is 30 months for Mr. Edison and 24 months for the other NEOs. The amounts reported may ultimately be lower if the NEO is no longer eligible to receive benefits, which could occur upon obtaining other employment and becoming eligible for group health insurance coverage through the new employer.

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•	the Code;

•	current, temporary and proposed Treasury Regulations promulgated under the Code;

•	the legislative history of the Code;

•	administrative interpretations and practices of the IRS; and

•	court decisions;

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•	banks, insurance companies, and other financial institutions;

•	tax-exempt organizations or governmental organizations;

•	S corporations, partnerships or other entities or arrangements treated as partnerships for U.S. federal income tax purposes (and investors therein);

•	persons or entities who hold shares of PECO III common stock (or, following the merger, PECO common stock) pursuant to the exercise of any employee stock option or otherwise as compensation;

•	persons or entities subject to the alternative minimum tax;

•	regulated investment companies and REITs;

•	‘‘controlled foreign corporations,’’ ‘‘passive foreign investment companies,’’ and corporations that accumulate earnings to avoid U.S. federal income tax;

•	broker, dealers or traders in securities;

•	U.S. expatriates and former citizens or long-term residents of the United States;

•	persons who hold 10% or more (by vote or value) of PECO III common stock (or, following the merger, PECO common stock);

•	persons holding shares of PECO III common stock (or, following the merger, PECO common stock) as part of a hedge, straddle or other risk reduction strategy or as part of a conversion transaction or other integrated investment;

•	United States persons or entities whose functional currency is not the U.S. dollar;

•	tax-qualified retirement plans; or

•	persons or entities subject to special tax accounting rules as a result of any item of gross income with respect to the stock being taken into account in an applicable financial statement.

•	an individual who is a citizen or resident of the United States;

•	a corporation created or organized under the laws of the United States, any state thereof, or the District of Columbia;

•	an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or

•	a trust that (i) is subject to the primary supervision of a United States court and the control of one or more ‘‘United States persons’’ (within the meaning of Section 7701(a)(30) of the Code), or (ii) has a valid election in effect under applicable Treasury Regulations to be treated as a United States person for U.S. federal income tax purposes.

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•	the fair market value of PECO common stock and the amount of cash received in the merger in exchange for PECO III common stock; and

•	the U.S. holder’s adjusted tax basis in its PECO III common stock.

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•	in the case of a U.S. holder, furnishes a correct taxpayer identification number and certifies that it is not subject to backup withholding on an IRS Form W-9 or successor form;

•	in the case of a non-U.S. holder, furnishes an applicable IRS Form W-8 or successor form; or

•	is otherwise exempt from backup withholding and complies with other applicable rules and certification requirements.

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•	PECO will be subject to regular U.S. federal corporate income tax on any undistributed “REIT taxable income.” REIT taxable income is the taxable income of the REIT subject to specified adjustments, including a deduction for dividends paid.

•	If PECO has net income from the sale or other disposition of “foreclosure property” that is held primarily for sale to customers in the ordinary course of business, or other nonqualifying income from foreclosure property, PECO will be subject to tax at the highest U.S. federal corporate income rate on this income.

•	If PECO has net income from “prohibited transactions” it will be subject to a 100% tax on this income. In general, prohibited transactions are sales or other dispositions of property held primarily for sale to customers in the ordinary course of business other than foreclosure property.

•

If PECO fails to satisfy either the 75% gross income test or the 95% gross income test discussed below, but nonetheless maintains its qualification as a REIT because other requirements are met, PECO will be subject to a tax equal to the gross income attributable to the greater of either (1) the amount by which it fails the 75% gross income test for the taxable year or (2) the amount by which it fails the 95% gross income test for the taxable year, multiplied by a fraction intended to reflect its profitability.

•

If PECO fails to satisfy any of the REIT asset tests, as described below, other than a failure by a de minimis amount of the 5% or 10% assets tests, and it qualifies for and satisfy certain cure provisions, then PECO will be required to pay a tax equal to the greater of $50,000 or the product of (1) the net income generated by the nonqualifying assets during the period in which it failed to satisfy the asset tests and (2) the highest U.S. federal income tax rate then applicable to corporations.

•	If PECO fails to satisfy any provision of the Code that would result in its failure to qualify as a REIT (other than a gross income or asset test requirement) and that violation is due to reasonable cause and not due to willful neglect, PECO may retain its REIT qualification, but it will be required to pay a penalty of $50,000 for each such failure.

•

If PECO fails to qualify for taxation as a REIT because it failed to distribute by the end of the relevant year any earnings and profits PECO inherited from a taxable C corporation during the year (e.g., by tax-free merger or tax-free liquidation), and the failure is not due to fraud with intent to evade tax, PECO generally may retain its REIT status by paying a special distribution, but it will be required to pay an interest charge on 50% of the amount of undistributed non-REIT earnings and profits.

•	PECO may be required to pay monetary penalties to the IRS in certain circumstances, including if PECO fails to meet record-keeping requirements intended to monitor its compliance with rules relating to the composition of its stockholders, as described below in “—Requirements for Qualification as a REIT.”

•

PECO will be subject to a nondeductible 4% excise tax on the excess of the required distribution over the sum of amounts actually distributed and amounts retained for which federal income tax was paid, if it fails to distribute during each calendar year at least the sum of 85% of its REIT ordinary income for the year, 95% of its REIT capital gain net income for the year; and any undistributed taxable income from prior taxable years.

•	PECO will be subject to a 100% penalty tax on some payments it receives or on certain other amounts (or on certain expenses deducted by its TRSs) if arrangements among PECO, its tenants and/or its TRSs are not comparable to similar arrangements among unrelated parties.

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•

PECO may be subject to tax on gain recognized in a taxable disposition of assets acquired by way of a tax-free merger or other tax-free reorganization with a non-REIT corporation or a tax-free liquidation of a non-REIT corporation into PECO. Specifically, to the extent PECO acquires any asset from a C corporation in a carry-over basis transaction and it subsequently recognizes gain on a disposition of such asset during a five-year period beginning on the date on which PECO acquired the asset, then, to the extent of any “built-in gain,” such gain will be subject to U.S. federal income tax at the highest regular corporate tax rate, which is currently 21%. Built-in gain means the excess of (1) the fair market value of the asset as of the beginning of the applicable recognition period over (2) its adjusted basis in such asset as of the beginning of such recognition period. See “—Tax on Built-in Gains of Former C Corporation Assets.”

•

PECO may elect to retain and pay income tax on its net long-term capital gain. In that case, a stockholder would: (1) include its proportionate share of its undistributed long-term capital gain (to the extent PECO makes a timely designation of such gain to the stockholder) in its income, (2) be deemed to have paid its proportionate share of the tax that PECO paid on such gain and (3) be allowed a credit for its proportionate share of the tax deemed to have been paid, with an adjustment made to increase the stockholders’ basis in its stock by the difference between (a) the amount of capital gain included in income and (b) the amount of tax deemed paid by the stockholder.

•	PECO may have subsidiaries or own interests in other lower-tier entities that are C corporations that will elect, jointly with PECO, to be treated as its TRSs, the earnings of which would be subject to U.S. federal corporate income tax.

(1)	that is managed by one or more trustees or directors;

(2)	the beneficial ownership of which is evidenced by transferable shares, or by transferable certificates of beneficial interest;

(3)	that would be taxable as a domestic corporation, but for its election to be subject to tax as a REIT under Sections 856 through 860 of the Code;

(4)	that is neither a financial institution nor an insurance company subject to applicable provisions of the Code;

(5)	the beneficial ownership of which is held by 100 or more persons;

(6)	during the last half of each taxable year not more than 50% in value of the outstanding shares of which is owned directly or indirectly by five or fewer “individuals,” as defined in the Code to include specified entities;

(7)	that makes an election to be taxable as a REIT, or has made this election for a previous taxable year, which has not been revoked or terminated, and satisfies all relevant filing and other administrative requirements established by the IRS that must be met to elect and maintain REIT status;

(8)	that uses a calendar year for U.S. federal income tax purposes and complies with the recordkeeping requirements of the Code and regulations promulgated thereunder; and

(9)	that meets other applicable tests, described below, regarding the nature of its income and assets and the amount of its distributions.

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(1)

at least 75% of the value of PECO’s total assets must be represented by real estate assets, cash, cash items and U.S. Government securities. Real estate assets include interests in real property (such as land, buildings, leasehold interest in real property and, for taxable years beginning on or after January 1, 2016, personal property leased with real property if the rents attributable to the personal property would be rents from real property under the income tests discussed above), interests in mortgages on real property or on interests in real property, shares in other qualifying REITs, and stock or debt instruments held for less than one year purchased with the proceeds from an offering of shares of PECO’s stock or certain debt and, for tax years beginning on or after January 1, 2016, debt instruments issued by publicly offered REITs;

(2)	not more than 25% of the value of PECO’s total assets may be represented by securities other than those in the 75% asset class;

(3)

except for equity investments in REITs, qualified REIT subsidiaries, other securities that qualify as “real estate assets” for purposes of the test described in clause (1) or securities of PECO’s TRSs, the value of any one issuer’s securities owned by PECO may not exceed 5% of the value of its total assets; PECO may not own more than 10% of any one issuer’s outstanding voting securities; and PECO may not own more than 10% of the value of the outstanding securities of any one issuer;

(4)	not more than 25% (for taxable years beginning before January 1, 2018) or 20% (for taxable years beginning on or after January 1, 2018) of the value of PECO’s total assets may be represented by securities of one or more TRSs; and

(5)	not more than 25% (for taxable years beginning on or after January 1, 2016) of the value of PECO’s total assets may be represented by debt instruments of publicly offered REITs that are not secured by mortgages on real property or interests in real property.

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(1)	85% of its REIT ordinary income for the year;

(2)	95% of its REIT capital gain net income for the year; and

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(3)	any undistributed taxable income from prior taxable years.

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•	interests in the partnership are traded on an established securities market; or

•	interests in the partnership are readily tradable on a “secondary market” or the “substantial equivalent” of a secondary market.

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•	is a corporation or comes within certain other exempt categories and, when required, demonstrates this fact; or

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•	provides a taxpayer identification number, certifies as to no loss of exemption from backup withholding and otherwise complies with the applicable requirements of the backup withholding rules.

•	evidencing that such non-U.S. holder is eligible for an exemption or reduced rate under an applicable income tax treaty, generally an IRS Form W-8BEN or Form W-8BEN-E (in which case PECO will withhold at the lower treaty rate); or

•	claiming that the distribution is income that is effectively connected with the non-U.S. holder’s conduct of a trade or business in the United States, generally an IRS Form W-8ECI (in which case PECO will not withhold tax).

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•

the gain is effectively connected with the non-U.S. holder’s U.S. trade or business, in which case, unless an applicable income tax treaty provides otherwise, the non-U.S. holder will be subject to the same treatment as U.S. holders with respect to such gain and may be subject to the 30% branch profits tax on its effectively connected earnings and profits, subject to adjustments, in the case of a foreign corporation; or

•

the non-U.S. holder is a nonresident alien individual who was present in the United States for 183 days or more during the taxable year and meets certain other criteria, in which case the non-U.S. holder will incur a 30% tax on his or her capital gains derived from sources within the United States (net of certain losses derived from sources within the United States), unless an applicable income tax treaty provides otherwise.

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•	organization, valid existence, good standing and qualification to conduct business, and books and records;

•	capitalization;

•	due authorization, execution, delivery, validity and enforceability of the merger agreement;

•	board and other applicable governing body approvals;

•	absence of any conflict with or violation of organizational documents or applicable laws, and the absence of any violation or breach of, or default or consent requirements under, certain agreements;

•	absence of certain changes since December 31, 2018;

•	SEC documents and financial statements, absence of undisclosed liabilities, internal controls and compliance with the Sarbanes-Oxley Act;

•	litigation;

•	brokers’, finders’, investment bankers’, financial advisors’ or other similar fees;

•	exemption of the merger from anti-takeover statutes;

•	absence of dissenters’, appraisal or similar rights in connection with the merger;

•	required stockholder votes in connection with the merger;

•	information in the Form S-4 registration statement and this proxy statement/prospectus; and

•	tax matters, including qualification as a REIT.

•	organization, valid existence, good standing and qualification to conduct business;

•	capitalization;

•	due authorization, execution, delivery, validity and enforceability of the merger agreement;

•	board and other applicable governing body approvals;

•	absence of any conflict with or violation of organizational documents or applicable laws, and the absence of any violation or breach of, or default or consent requirements under, certain agreements;

•	absence of certain changes since December 31, 2018;

•	SEC documents and financial statements, absence of undisclosed liabilities, internal controls and compliance with the Sarbanes-Oxley Act;

•	title to and sufficiency of assets;

•	real property;

•	indebtedness;

•	intellectual property;

•	material contracts;

•	compliance with permits;

•	insurance;

•	tax matters, including qualification as a REIT;

•	litigation;

•	compliance with law and environmental matters;

•	employee benefit plans;

•	employee and labor matters;

•	brokers’, finders’, investment bankers’, financial advisors’ or other similar fees;

•	information in the Form S-4 registration statement and this proxy statement/prospectus;

•	ownership of PECO III stock; and

•	related party agreements.

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•	amend its charter or bylaws (or comparable documents);

•	adjust, split, combine, subdivide or reclassify any shares of capital stock;

•

take any action that would, or fail to take any action, the failure of which to be taken would, reasonably be expected to cause (i) PECO III to fail to qualify as a REIT or (ii) any subsidiary of PECO III to cease to be treated as any of (a) a partnership or disregarded entity for federal income tax purposes or (b) a qualified REIT subsidiary or a taxable REIT subsidiary under the applicable provisions of Section 856 of the Code, as the case may be;

•	take any action under the charter or bylaws of PECO III or otherwise (including by resolution) that would give dissenters’, appraisal or similar rights to the holders of shares of PECO III common stock with respect to the merger or the other transactions contemplated by the merger agreement;

•	adopt a plan of merger, complete or partial liquidation or resolutions providing for or authorizing such merger, liquidation or a dissolution, consolidation, recapitalization or bankruptcy reorganization, except as permitted by the merger agreement; or

•	authorize, or commit or agree to, whether in writing or otherwise, any of the foregoing actions.

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•	amend its charter or bylaws (or comparable documents);

•	adjust, split, combine, subdivide or reclassify any shares of capital stock;

•	amend any term of any shares of PECO common stock or PECO OP units or other equity interests of PECO or PECO OP in a manner that would adversely affect the economic benefits of the mergers to the holders of shares of PECO III common stock;

•

take any action that would, or fail to take any action, the failure of which to be taken would, reasonably be expected to cause (i) PECO to fail to qualify as a REIT or (ii) any subsidiary of PECO to cease to be treated as any of (a) a partnership or disregarded entity for federal income tax purposes or (b) a qualified REIT subsidiary or a taxable REIT subsidiary under the applicable provisions of Section 856 of the Code, as the case may be;

•	take any action under the charter or bylaws of PECO or otherwise (including by resolution) that would give dissenters’, appraisal or similar rights to the holders of shares of PECO common stock with respect to the merger or the other transactions contemplated by the merger agreement;

•	adopt a plan of complete or partial liquidation or resolutions providing for or authorizing such liquidation or a dissolution or bankruptcy reorganization, except as permitted by the merger agreement;

•	effect or agree to any merger, consolidation or recapitalization other than (i) as permitted by the merger agreement, or (ii) in a manner that would not materially and adversely affect the economic benefits of the mergers to the holders of shares of PECO III common stock and would not prevent or materially delay or impair the ability of PECO and PECO OP to consummate the merger; or

•	authorize, or commit or agree to, whether in writing or otherwise, any of the foregoing actions.

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•

PECO III and PECO each notifying the other, as the case may be, of any legal proceeding related to the merger agreement, the merger or the other transactions contemplated by the merger agreement that is brought against PECO III, its representatives and/or its affiliates by security holders of PECO III, or is brought against PECO, its representatives and/or its affiliates by security holders of PECO, keeping one another informed on a current basis with respect to the status of such legal proceeding and allowing the other the opportunity to participate in the defense and settlement of any such litigation (provided, that no settlement by either party of any such litigation may be agreed to without the other party’s written consent, which consent shall not be unreasonably withheld, conditioned or delayed);

•	PECO III causing to be delivered to PECO resignations executed by each director of PECO III in office as of immediately prior to the effective time of the merger;

•	restrictions on PECO III and PECO from declaring a distribution to their respective stockholders and unitholders after the date of the merger agreement, except to the extent permitted under the merger agreement or required to maintain REIT status or avoid the imposition of entity level income or excise tax under the Code or applicable state law;

•	PECO III and PECO agreeing to terminate, or cause to be terminated, effective immediately prior to, but subject to, the effective time of the merger, without liability or expense to PECO III or any acquired company, the advisory

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PECO III will use commercially reasonable efforts to provide cooperation and assistance as the PECO parties may reasonably request to (i) sell or cause to be sold or transfer or cause to be transferred stock, partnership interests, limited liability company interests or other equity interests owned, directly or indirectly, by PECO III in one or more of its wholly-owned subsidiaries to a third party designated by the PECO parties at a price and on such other terms as designated by the PECO parties and (i) sell or cause to be sold or transfer or cause to be transferred any of the assets or properties of PECO III or one or more of its wholly-owned subsidiaries to a third party designated by the PECO parties at a price and on such other terms as designated by the PECO parties (any action or transaction described in clause (i) through (ii), a “PECO-Approved Transaction”), in each case, subject to certain conditions set forth in the merger agreement. Each of the PECO parties has agreed to indemnify and hold harmless PECO III and its subsidiaries and their respective representatives from and against any and all liabilities, losses, damages, claims, costs, expenses, interest, awards, judgments and penalties suffered or incurred by them in connection with any PECO-Approved Transaction; and

•	the parties to the merger agreement agreeing to execute and deliver, or cause to be executed and delivered, all such documents and instruments and to take, or cause to be taken, all such further or other actions as such other party may reasonably deem necessary or desirable to consummate the transactions contemplated by the merger agreement.

•	PECO III merger approval and the PECO III charter approval by PECO III stockholders;

•	the absence of any law or judgment of a governmental authority prohibiting, preventing, restraining, enjoining or making illegal the merger; and

•	the Form S-4 registration statement having been declared effective by the SEC and no stop order suspending the effectiveness thereof is issued by the SEC and no proceeding to that effect shall have been commenced or threatened.

•

the accuracy in all material respects as of the date of the merger agreement and the closing of the merger (except that representations and warranties that by their terms speak specifically as of the date of the merger agreement or another date will be true and correct as of such date) of certain representations and warranties made in the merger agreement by PECO III regarding its organization, standing and power, certain aspects of its capital structure, corporate authority, conflicts and consents relative to the merger agreement, brokers, and corporate approvals of PECO III required for the merger;

•	the accuracy as of the date of the merger agreement and the closing of the merger of all other representations and warranties not described immediately above made in the merger agreement by PECO III, except where any such inaccuracy would not, individually or in the aggregate, have and could not reasonably be expected to have an acquired company material adverse effect;

•	receipt by PECO of an officer’s certificate signed by a duly authorized executive officer of PECO III certifying that the closing conditions described in the two preceding bullet points have been satisfied;

•	PECO III having performed or complied in all material respects with each agreement, covenant and obligation required to be performed or complied with by it under the merger agreement on or prior to the effective time of the merger, and receipt by PECO of a certificate signed by a duly authorized executive officer of PECO III to such effect; and

•	no event shall have occurred since the date of the merger agreement, and no circumstance shall exist, that constitutes, or could reasonably be expected to result in, an acquired company material adverse effect.

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the accuracy in all material respects as of the date of the merger agreement and the closing of the merger (except that representations and warranties that by their terms speak specifically as of the date of the merger agreement or another date will be true and correct as of such date) of certain representations and warranties made in the merger agreement by each of PECO and PECO OP regarding its organization, standing and power, certain aspects of its capital structure, corporate authority, conflicts and consents relative to the merger agreement and brokers, and corporate approvals of PECO required for the merger;

•	the accuracy as of the date of the merger agreement and the closing of the merger of all other representations and warranties not described immediately above made in the merger agreement by each of PECO and PECO OP, except where any such inaccuracy would not, individually or in the aggregate, have and could not reasonably be expect to have a PECO material adverse effect;

•	receipt by PECO III of an officer’s certificate signed by a duly authorized executive officer of PECO certifying that the closing conditions described in the two preceding bullet points have been satisfied;

•	no event shall have occurred since the date of the merger agreement, and no circumstance shall exist, that constitutes, or could reasonably be expected to result in, a PECO material adverse effect;

•	each of PECO and PECO OP having performed or complied in all material respects with each agreement, covenant and obligation required to be performed or complied with by it under the merger agreement at or prior to the effective time of the merger, and receipt by PECO III of a certificate signed on behalf of PECO by a duly authorized executive officer of PECO to such effect;

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receipt by PECO III of an opinion dated as of the closing date from Goodwin Procter LLP or other counsel reasonably acceptable to PECO III, to the effect that for all taxable periods commencing with PECO’s taxable year ended December 31, 2010 through and including PECO’s taxable year ended December 31, 2018, PECO has been organized and has operated in conformity with the requirements for qualification and taxation as a REIT under the Code and that its proposed method of operation will enable PECO to continue to meet the requirements for qualification and taxation as a REIT under the Code for its taxable year which includes the effective time of the merger and future taxable years; and

•	the termination agreement shall remain in effect.

•

there has been a breach by the other party or parties of any representation, warranty or covenant set forth in the merger agreement, which causes a condition of the merger agreement not to be satisfied (and such breach is not curable prior to the Outside Date, or if curable prior to the Outside Date, has not been cured within the earlier of (i) 30 calendar days after the receipt of notice thereof by the defaulting party from the non-defaulting party and (ii) three business days before the Outside Date), except that a party may not terminate the merger agreement under this provision of the merger agreement if such party is then in material breach of any representation, warranty, covenant or agreement set forth in the merger agreement;

•	the effective time of the merger will not have occurred by 11:59 p.m., Eastern Time on the Outside Date;

•	A governmental entity of competent jurisdiction, that is within a jurisdiction that is material to the business and operations of PECO III, has issued a final, non-appealable judgment permanently restraining, enjoining or otherwise prohibiting the consummation of the merger or any of the other transactions contemplated by the merger agreement; or

•	the PECO III merger approval or PECO III charter amendment approval is not obtained at the PECO III stockholder meeting or at any adjournment or postponement thereof, in each case at which a vote on such approvals was taken.

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•	PECO because (1) the effective time of the merger has not occurred before the Outside Date, or (2) PECO III stockholders do not approve the merger and the other transactions contemplated by the merger agreement, if

◦	prior to such termination PECO III received a Competing Proposal, which Competing Proposal was made, proposed or communicated prior to the PECO III stockholder meeting (or termination of the merger agreement if there has been no PECO III stockholder meeting); and

◦	within 12 months of the termination, PECO III enters into a definitive agreement with respect to a Competing Proposal which Competing Proposal is later consummated, or a Competing Proposal is consummated; provided that the reference to “20%” in the definition of Competing Proposal above is deemed to be references to “50%”;

•	PECO III, if prior to the receipt of the PECO III merger approval at the PECO III stockholder meeting, in order to concurrently enter into any PECO III acquisition agreement that constitutes a Superior Proposal and that was not the result of a material breach of the non-solicitation provisions of the merger agreement;

•	PECO due to PECO III’s breach of PECO III’s representations or warranties set forth in the merger agreement; or

•	PECO, prior to the receipt of the PECO III merger approval at the PECO III stockholder meeting, if the PECO III Board has effected a PECO III Adverse Recommendation Change.

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the PECO Board obtains such representations and undertaking from such person or entity as are reasonably necessary to ascertain that no person or entity’s beneficial ownership or constructive ownership of such shares of capital stock would result in PECO (i) being “closely held” within the meaning of Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year), or (ii) otherwise failing to qualify as a REIT (including, but not limited to, beneficial or constructive ownership that would result in PECO owning, actually or constructively, an interest in a tenant that is described in Section 856(d)(2)(B) of the Code if the income derived by PECO from such tenant would cause PECO to fail to satisfy any of the gross income requirements of Section 856(c) of the Code);

•

such person or entity does not and represents that it will not own, actually or constructively, an interest in a tenant of PECO (or a tenant of any entity owned or controlled by PECO) that would cause PECO to own, actually or constructively, more than a 9.9% interest (as set forth in Section 856(d)(2)(B) of the Code) in such tenant and the PECO Board obtains such representations and undertakings from such person or entity as are reasonably necessary to ascertain this fact (for this purpose, a tenant from whom PECO, or an entity owned or controlled by PECO, derives (and is expected to continue to derive) a sufficiently small amount of revenue such that, in the opinion of the PECO Board, rent from such tenant would not adversely affect PECO’s ability to qualify as a REIT shall not be treated as a tenant of PECO); and

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•	such person agrees that any violation or attempted violation of such representations or undertakings (or other action which is contrary to the restrictions contained in PECO’s charter) will result in such shares of capital stock being automatically transferred to a trust in accordance with PECO’s charter.

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(1)

Amounts for each person assume that all OP Units held by the person are exchanged for shares of common stock, and amounts for all directors and executive officers as a group assume all OP Units held by them are exchanged for shares of PECO common stock, in each case, regardless of when such OP Units are exchangeable. The total number of shares of PECO common stock outstanding used in calculating this percentage assumes that none of the OP Units held by other persons are exchanged for shares of PECO common stock.

(2)	Beneficial ownership includes 567 shares held by Mr. Chao’s wife.

(3)	PELP owns 176,509 shares of PECO common stock that were previously owned by Phillips Edison NTR LLC, as well as an additional 55,556 shares of PECO common stock. Mr. Edison is the manager of the general partner of PELP, and therefore has voting and dispositive control of the shares held by it.

(4)	Amount of beneficial ownership in OP Units represents direct and indirect ownership held by these individuals or their affiliates.

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(1)	All schedules other than the ones listed in the index have been omitted as the required information is either not applicable or the information is already presented in the consolidated financial statements or the related notes.

(2)	Any reference to the year ended December 31, 2016, refers to the period from April 15, 2016 to December 31, 2016. Prior to April 15, 2016, the Company had not yet been formed; therefore, no financial statement information is available.

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•	whether the lease stipulates how and on what a tenant improvement allowance may be spent;

•	whether the tenant or landlord retains legal title to the improvements;

•	the uniqueness of the improvements;

•	the expected economic life of the tenant improvements relative to the length of the lease; and

•	who constructs or directs the construction of the improvements.

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•	Earn-out Liability was reclassified from Accounts Payable and Other Liabilities, and included as Earn-out Liability.

•	Deferred Income was reclassified from Accounts Payable and Other Liabilities, and included as Deferred Income.

•	Unrealized (Loss) Gain on Derivatives and Reclassification of Derivative Loss to Interest Expense were reclassified to Change in Unrealized Gain (Loss) on Interest Rate Swaps.

•	Acquisition Expenses was reclassified to General and Administrative.

•	Gain on the Sale of Property, Net was reclassified from Other (Expense) Income, Net and presented as Gain on Sale or Contribution of Property, Net.

•	Net Loss (Gain) on Write-off of Unamortized Capitalized Leasing Commissions, Market Debt Adjustments, and Deferred Financing Expenses were reclassified to Other.

(1)	The total number of shares of common stock issued was 95.5 million.

(2)	Previously a component of Other Assets, Net.

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(1)	In connection with the Merger, we derecognized management contracts associated with REIT II in the amount of $39.3 million. We also derecognized the associated accumulated amortization of $8.9 million, resulting in a net derecognition of $30.4 million.

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(1)	Stater Brothers and Target are in a portion of the shopping centers that we do not own.

(2)	The purchase price includes the fair value of debt assumed as part of the acquisition.

(1)	The purchase price includes the fair value of debt assumed as part of the acquisition.

(2)	These properties were contributed or sold to the GRP I joint venture in November 2018.

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(1)	Interest rates are as of December 31, 2018.

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(1)	Includes the effects of derivative financial instruments (see Notes 10 and 18).

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(1)

OP units include units previously issued for asset management services provided under our former advisory agreement (see Note 16), as well as units issued as part of the PELP transaction (see Note 4), all of which are convertible into common shares. The Operating Partnership income (loss) attributable to these OP units, which is included as a component of Net Income (Loss) Attributable to Noncontrolling Interests on the consolidated statements of operations, has been added back in the numerator because these OP units were included in the denominator for all years presented.

(2)	Includes the dilutive impact of unvested restricted share awards using the treasury stock method.

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(1)	All amounts earned from REIT II were earned prior to the close of the Merger in November 2018, and ceased upon its acquisition by us.

(2)	Recurring fees, transactional revenue and reimbursements, and insurance premium income from other parties includes amounts from third parties not affiliated with us in the amount of $1.7 million for the year ended December 31, 2018.

(3)	Recurring fees include asset management fees and property management fees.

(4)	Transaction revenue includes items such as leasing commissions, construction management fees, and acquisition fees.

(1)	Recurring fees, transactional revenue and reimbursements, and insurance premium income from other parties includes amounts from third parties not affiliated with us in the amount of $0.2 million for the year ended December 31, 2017.

•	Asset management and subordinated participation fees paid out monthly in cash and/or Class B units;

•	Acquisition fee based on the cost of investments acquired/originated;

•	Acquisition expenses reimbursed related to selecting, evaluating, and acquiring assets; and

•	Disposition fee paid for substantial assistance in connection with the sale of property.

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(1)	The majority of acquisition and due diligence fees are capitalized and allocated to the related investment in real estate assets on the consolidated balance sheets based on the acquisition-date fair values of the respective assets and liabilities acquired.

(2)	Asset management fees are presented in General and Administrative on the consolidated statements of operations.

(3)	Distributions are presented as Distributions to Noncontrolling Interests on the consolidated statements of equity.

(4)	The distributions paid to holders of unvested Class B units are presented in General and Administrative on the consolidated statements of operations.

(5)	Disposition fees are presented as Other (Expense) Income, Net on the consolidated statements of operations.

•	Property management fee based on monthly gross cash receipts from the properties managed;

•	Leasing commissions paid for leasing services rendered with respect to a particular property;

•	Construction management costs paid for construction management services rendered with respect to a particular property; and

•	Other expenses and reimbursement incurred by the Property Manager on our behalf.

(1)	The property management fees are included in Property Operating on the consolidated statements of operations.

(2)	Leasing commissions paid for leases with terms less than one year were expensed immediately and included in Depreciation and Amortization on the consolidated statements of operations. Leasing commissions paid for leases with terms greater than one year and construction management fees were capitalized and amortized over the life of the related leases or assets.

(3)	Other fees and reimbursements are included in Property Operating and General and Administrative on the consolidated statements of operations based on the nature of the expense.

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(1)	Recorded value does not include net deferred financing expenses of $18.0 million and $16.0 million as of December 31, 2018 and 2017, respectively.

(1)	We record derivative assets in Other Assets, Net and derivative liabilities in Accounts Payable and Other Liabilities on our consolidated balance sheets.

(2)	The estimated fair value of the earn-out is presented in Accounts Payable and Other Liabilities on the consolidated balance sheets.

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(1)	The increase in net income for the fourth quarter was primarily associated with the gain as a result of the contribution of properties to GRP I. Net income and revenue were also impacted by the Merger.

(2)	The net loss in the third quarter was primarily due to expenses related to the PELP transaction and the termination of our relationship with ARC.

(3)	The increases in revenue and net loss in the fourth quarter were primarily associated with the PELP transaction.

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(1)	Assets held for sale are not included in our Schedule III report.

(2)	Encumbrances do not include our capital leases.

(3)	The reduction to costs capitalized subsequent to acquisition could include parcels/out-parcels sold, and assets held-for-sale.

(4)	The aggregate cost of properties for Federal income tax purposes is approximately $4.8 billion at December 31, 2018.

(5)	Amounts consist of corporate building and land.

(6)	Amounts consist of elimination of intercompany construction management fees charged by the property manager to the owned real estate.

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•	if the lease transfers ownership of the underlying asset to the lessee by the end of the term;

•	if the lease grants the lessee an option to purchase the underlying asset that is reasonably certain to be exercised;

•	if the lease term is for the major part of the remaining economic life of the underlying asset; or

•	if the present value of the sum of the lease payments and any residual value guaranteed by the lessee equals or exceeds substantially all of the fair value of the underlying asset.

•	whether the lease stipulates how and on what a tenant improvement allowance may be spent;

•	whether the tenant or landlord retains legal title to the improvements;

•	the uniqueness of the improvements;

•	the expected economic life of the tenant improvements relative to the length of the lease; and

•	who constructs or directs the construction of the improvements.

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•	Tenant Recovery was combined with Rental Income, and

•	Other Expense, Net previously included activity from property disposals, and this is now presented as (Loss) Gain on Disposal of Property, Net.

•	Accounts Receivable - Affiliates was combined with Other Assets, Net;

•	Accounts Payable - Affiliates was combined with Accounts Payable and Other Liabilities; and

•	Net Loss on Write-off of Unamortized Capitalized Leasing Commissions, Market Debt Adjustments, and

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(1)	As of June 30, 2019, the weighted average remaining lease term was approximately 2.4 years for finance leases and 18.3 years for operating leases. The weighted average discount rate was 3.54% for finance leases and 4.07% for operating leases.

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(1)	The total number of shares of common stock issued was 95.5 million.

(2)	Previously a component of Other Assets, Net.

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(1)	The gain on sale of properties, net does not include miscellaneous write-off activity, which is also recorded in Gain on Disposal of Property, Net on the consolidated statements of operations.

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(1)	Our investment in NRP differs from our proportionate share of the entity’s underlying net assets due to basis differences initially recorded at $6.2 million arising from the Merger and recording the investment at fair value.

(1)	These amounts are amortized starting at the date of the Merger and recorded as an offset to earnings from the NRP joint venture in Other Expense, Net on our consolidated statements of operations.

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(1)	Interest rates are as of June 30, 2019.

(2)	The gross borrowings and payments under our revolving credit facility were $105.6 million and $179.0 million, respectively, during the six months ended June 30, 2019. The gross borrowings and payments under our revolving credit facility were $151.0 million and $166.0 million, respectively, during the six months ended June 30, 2018.

(1)	Includes the effects of derivative financial instruments (see Notes 9 and 15).

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(1)	Changes in value are solely driven from changes in LIBOR futures as a result of various economic factors.

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(1)

Certain performance-based awards granted during the period contain terms which dictate that the number of award units to be issued will vary based upon actual performance compared to target performance. The number of shares deemed to be issued per this table reflect our probability-weighted estimate of the number of shares that will vest based upon current and expected company performance. The maximum number of award units to be issued under all outstanding grants, excluding phantom stock units as they are settled in cash, was 4.0 million and 1.2 million as of June 30, 2019 and December 31, 2018, respectively.

(2)	On an annual basis, we engage an independent third-party valuation advisory consulting firm to estimate the EVPS of our common stock.

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(1)	Insurance premium income from other parties includes amounts from third parties not affiliated with us in the amount of $0.5 million and $1.0 million for the three and six months ended June 30, 2019.

(2)	Recurring fees include asset management fees and property management fees.

(3)	Transaction revenue includes items such as leasing commissions, construction management fees, and acquisition fees.

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(1)	All amounts earned from REIT II were earned prior to the close of the Merger in November 2018, and ceased upon its acquisition by us.

(2)	Recurring fees and other revenue from other parties includes amounts from third parties not affiliated with us in the amount of $0.5 million and $0.9 million for the three and six months ended June 30, 2018.

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(1)	Recorded value does not include net deferred financing expenses of $16.1 million and $18.0 million as of June 30, 2019 and December 31, 2018, respectively.

(1)	We record derivative assets in Other Assets, Net and derivative liabilities in Accounts Payable and Other Liabilities on our consolidated balance sheets.

(2)	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.

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•	whether the lease stipulates how and on what a tenant improvement allowance may be spent;

•	whether the tenant or landlord retains legal title to the improvements;

•	the uniqueness of the improvements;

•	the expected economic life of the tenant improvements relative to the length of the lease; and

•	who constructs or directs the construction of the improvements.

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•	Real Estate Taxes Payable was combined to Accounts Payable and Other Liabilities.

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(1)	Although the maximum capacity is $125 million, this is subject to further covenant-based restrictions. This represents the amount available for borrowing as of the relevant year-end dates.

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(1)	In accordance with the terms of our SRP, all share repurchases completed were sought upon a stockholder’s death, “qualifying disability,” or “determination of incompetence.”

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(1)	This amount represents all organization and offering costs incurred. This includes amounts currently earned through the contingent advisor payment, which were immaterial as of December 31, 2018.

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(1)	Acquisition fees and expenses are capitalized and allocated to the related investment in real estate assets on the consolidated balance sheets based on the acquisition-date fair values of the respective assets and liabilities acquired.

(2)	Asset management fees are included in General and Administrative on the consolidated statements of operations.

(1)	The property management fees are included in Property Operating on the consolidated statements of operations.

(2)	Leasing commissions paid for leases with terms less than one year are expensed and included in Depreciation and Amortization on the consolidated statements of operations. Leasing commissions paid for leases with terms greater than one year, and construction management fees, are capitalized and amortized over the life of the related leases or assets.

(3)	Other fees and reimbursements are included in Property Operating and General and Administrative on the consolidated statements of operations based on the nature of the expense.

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(1)	Stockholder servicing fees are included in Offering Costs on the consolidated statements of equity and included in Accounts Payable-Affiliates on the consolidated balance sheets. We will accrue the full cost of the stockholder servicing fee as an offering cost at the time each Class T share is sold during the Public Offering.

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(1)	Impacts on revenue and net income in the fourth quarter were primarily due to real estate contribution made as part of the Joint Venture transaction. See Note 3.

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(1)	The aggregate cost of real estate owned at December 31, 2018 for federal income tax purposes is $28.5 million.

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•	if the lease transfers ownership of the underlying asset to the lessee by the end of the term;

•	if the lease grants the lessee an option to purchase the underlying asset that is reasonably certain to be exercised;

•	if the lease term is for the major part of the remaining economic life of the underlying asset; or

•	if the present value of the sum of the lease payments and any residual value guaranteed by the lessee equals or exceeds substantially all of the fair value of the underlying asset.

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•	whether the lease stipulates how and on what a tenant improvement allowance may be spent;

•	whether the tenant or landlord retains legal title to the improvements;

•	the uniqueness of the improvements;

•	the expected economic life of the tenant improvements relative to the length of the lease; and

•	who constructs or directs the construction of the improvements.

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•	Deferred Income was separated out from Accounts Payable and Other Liabilities.

•	Tenant Recovery was combined with Rental Income.

•	Accounts Receivable, Net was combined with Other Assets, Net; and

•	Straight-line Rental Income and Net Amortization of Above- and Below-market Leases were combined with Non-cash Rental Income Adjustments.

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(1)	This property was contributed to the Joint Venture in November 2018.

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(1)	Availability is subject to certain covenant-based restrictions. This represents the amount available for borrowing as of the relevant period end dates.

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(1)	The majority of acquisition fees and expenses are capitalized and allocated to the related investment in real estate assets on the consolidated balance sheets based on the acquisition-date fair values of the respective assets and liabilities acquired.

(2)	Asset management fees are presented as General and Administrative on the consolidated statements of operations.

(3)

In connection with the suspension of the Public Offering, we reduced our organization and offering costs liability for the Public Offering to the amount owed under the Advisory Agreement. This amount is limited to 3.5% of gross offering proceeds from the Primary Offering, with the organization and offering costs incurred up to the first 1.0% of gross proceeds subject to reimbursement through the contingent advisor payment as discussed previously.

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(1)	The property management fees are included in Property Operating on the consolidated statements of operations.

(2)	Leasing commissions paid for leases with terms less than one year are expensed and included in Depreciation and Amortization on the consolidated statements of operations. Leasing commissions paid for leases with terms greater than one year and construction management fees are capitalized and amortized over the life of the related leases or assets.

(3)	Other fees and reimbursements are included in Property Operating and General and Administrative on the consolidated statements of operations based on the nature of the expense.

(1)	Stockholder servicing fees are included in Offering Costs on the consolidated statements of equity and included in Accounts Payable-Affiliates on the consolidated balance sheets. We will accrue the full cost of the stockholder servicing fee as an offering cost at the time each Class T share is sold during the Public Offering.

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ARTICLE I	THE MERGER                                     A-2

Section 1.1	The Merger                                 A-2

Section 1.2	Closing                                     A-2

Section 1.3	Effective Time                                 A-2

Section 1.4	Governing Documents                             A-2

Section 1.5	Officers                                     A-2

Section 1.6	Tax Consequences                             A-2

ARTICLE II	TREATMENT OF SECURITIES                             A-3

Section 2.1	Treatment of Capital Stock                         A-3

Section 2.2	Payment for Securities                             A-4

Section 2.3	Dissenters’ Rights                             A-5

Section 2.4	Withholding                                 A-5

ARTICLE III	REPRESENTATIONS AND WARRANTIES OF THE COMPANY             A-5

Section 3.1	Organization, Standing and Power; Books and Records             A-5

Section 3.2	Equity Securities of the Acquired Companies                 A-6

Section 3.3	Authority; Execution and Delivery; Enforceability                 A-6

Section 3.4	Company Approvals                             A-6

Section 3.5	No Conflicts; Consents                             A-7

Section 3.6	Absence of Changes or Events                         A-7

Section 3.7	SEC Documents and Financial Statements                     A-7

Section 3.8	Proceedings                                 A-8

Section 3.9	Brokers                                     A-8

Section 3.10	Takeover Statutes                                 A-8

Section 3.11	Dissenters’ Rights                             A-8

Section 3.12	Vote Required                                 A-8

Section 3.13	Information in the Form S-4 and Proxy Statement                 A-8

Section 3.14	Taxes                                     A-9

Section 3.15	No Additional Representations or Warranties                     A-9

ARTICLE IV	REPRESENTATIONS AND WARRANTIES OF PECO AND PECO OP         A-9

Section 4.1	Organization, Standing and Power; Books and Records             A-9

Section 4.2	Equity Securities of the PECO Entities                     A-10

Section 4.3	Authority; Execution and Delivery; Enforceability                 A-10

Section 4.4	PECO Approvals                                 A-10

Section 4.5	No Conflicts; Consents                             A-11

Section 4.6	Absence of Changes or Events                         A-11

Section 4.7	SEC Documents and Financial Statements                     A-11

Section 4.8	Title to Assets/Sufficiency                             A-12

Section 4.9	Real Property                                 A-12

Section 4.10	Indebtedness                                 A-13

Section 4.11	Intellectual Property                             A-13

Section 4.12	Contracts                                 A-13

Section 4.13	Permits                                     A-14

Section 4.14	Insurance                                 A-14

Section 4.15	Taxes                                     A-14

Section 4.16	Proceedings                                 A-15

Section 4.17	Compliance with Laws; Environmental Matters                 A-16

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Section 4.18	Benefit Plans                                 A-16

Section 4.19	Employee and Labor Matters                         A-17

Section 4.20	Brokers                                     A-17

Section 4.21	Information in the Form S-4 and Proxy Statement                 A-17

Section 4.22	Ownership of Company Common Stock                     A-17

Section 4.23	Vote Required                                 A-18

Section 4.24	Related Party Agreements                             A-18

Section 4.25	No Additional Representations or Warranties                     A-18

ARTICLE V	CONDUCT OF BUSINESS PENDING THE MERGER                 A-18

Section 5.1	Conduct of Business by the Company Pending the Closing             A-18

Section 5.2	Conduct of Business by PECO Pending the Closing                 A-19

Section 5.3	No Solicitation by the Company; Company Change in Recommendation     A-20

Section 5.4	Form S-4; Proxy Statement.                         A-22

ARTICLE VI	ADDITIONAL AGREEMENTS                             A-23

Section 6.1	Access; Confidentiality; Notice of Certain Events                 A-23

Section 6.2	Consents, Approvals and Debt Payoff                     A-24

Section 6.3	Publicity                                 A-25

Section 6.4	Directors’ and Officers’ Liability                         A-25

Section 6.5	Security Holder Litigation                             A-26

Section 6.6	Director Resignations                             A-26

Section 6.7	Tax Matters                                 A-26

Section 6.8	Dividends                                 A-27

Section 6.9	Certain Transactions                             A-27

Section 6.10	Termination of Offering                             A-27

Section 6.11	Other Transactions.                             A-27

Section 6.12	Further Assurances                             A-28

ARTICLE VII	CONDITIONS TO CONSUMMATION OF THE MERGER                 A-28

Section 7.1	Conditions to Each Party’s Obligations to Effect the Merger             A-28

Section 7.2	Conditions to Obligations of the PECO Parties                 A-29

Section 7.3	Conditions to Obligations of the Company                     A-29

ARTICLE VIII	TERMINATION                                     A-30

Section 8.1	Termination                                 A-30

Section 8.2	Effect of Termination                             A-30

ARTICLE IX	MISCELLANEOUS                                 A-32

Section 9.1	Amendment and Modification; Waiver                     A-32

Section 9.2	Non-Survival of Representations and Warranties                 A-33

Section 9.3	Expenses                                 A-33

Section 9.4	Notices                                     A-33

Section 9.5	Certain Definitions                             A-34

Section 9.6	Terms Defined Elsewhere                             A-40

Section 9.7	Interpretation                                 A-42

Section 9.8	Counterparts                                 A-43

Section 9.9	Entire Agreement; Third-Party Beneficiaries                     A-43

Section 9.10	Severability                                 A-43

Section 9.11	Governing Law; Jurisdiction                         A-43

Section 9.12	Waiver of Jury Trial                             A-44

Section 9.13	Assignment                                 A-44

Section 9.14	Enforcement; Remedies                             A-44

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Exhibit A	Articles of Amendment

Exhibit B	Form of REIT Opinion of Goodwin Procter LLP

Exhibit C	Knowledge Persons of the Company

Exhibit D	Knowledge Persons of PECO

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i.	Commencing with its taxable year ended December 31, 2010, the Company has been organized in conformity with the requirements for qualification and taxation as a REIT under the Code; and

ii.	The Company’s prior, current and proposed ownership, organization, distributions and method of operations as described in the REIT Certificate have allowed and will continue to allow the Company to satisfy the

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1.	Jeffrey Edison

2.	Devin Murphy

3.	Robert Myers

4.	Mark Addy

5.	Tanya Brady

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1.	Jeffrey Edison

2.	Devin Murphy

3.	Robert Myers

4.	Mark Addy

5.	Tanya Brady

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(1)	Property acquisitions include the 86 properties acquired as part of the Merger.

(2)	The average remaining lease term in years excludes future options to extend the term of the lease.

•	Completed a $1.9 billion merger with REIT II, a public non-traded REIT that was previously advised and managed by us, which grew our portfolio by 86 wholly-owned grocery-anchored shopping centers and a joint venture

•	Formed the GRP I joint venture with Northwestern Mutual, investing in 17 grocery-anchored shopping centers valued at $359 million

•	Together, PECO and REIT II surpassed $1.0 billion of cumulative stockholder distributions as of December 31, 2018

•	Net income totaled $47.0 million for the year ended December 31, 2018

•	FFO per diluted share increased to $0.65 from $0.43; total FFO represented 101.8% of total distributions made during the year

•	MFFO per diluted share increased 7.8% to $0.69; total MFFO represented 108.5% of total distributions made during the year

•	Pro forma same-center NOI increased 3.7% to $325.5 million

•	Executed 0.7 million square feet of new leases and 2.8 million square feet of renewal leases, with comparable rent spreads of 14.6% and 6.7%, respectively

•	Acquired five grocery-anchored shopping centers for a total cost of $97.9 million and realized $78.7 million of net proceeds from the sale of eight properties (excluding the merger and joint venture activity described above)

•	Further enhanced our balance sheet by recapitalizing a significant portion of our debt, reduced our interest rate spreads on several loans, and increased PECO’s weighted average loan maturity to 4.9 years. Highlights include:

◦	We used proceeds from the GRP I joint venture to pay down $130 million of outstanding debt to reduce our leverage.

◦	At the closing of the Merger, we entered into two new unsecured term loans totaling $400 million and exercised an accordion feature for $217.5 million on an existing unsecured term loan. The weighted average term of the $617.5 million of new unsecured debt is 5.6 years as of December 31, 2018.

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◦	We have no unsecured loan maturities until 2021, including extension options.

◦	We reduced our interest rate spreads by 5 basis points, subject to our leverage levels, on $400 million of unsecured term loans as compared to a previous term loan, and reduced our interest rate spread by 10 basis points, subject to our leverage levels, on $255 million of an existing unsecured term loan.

(1)	Per square foot amounts may not recalculate exactly based on other amounts presented within the table due to rounding.

(2)	We consider an inline deal to be a lease for less than 10,000 square feet of gross leasable area.

(3)	Leasing activity in 2018 only reflects activity for the REIT II properties from the date they were acquired, November 16, 2018.

(4)	Leasing activity in 2017 only reflects activity for the PELP properties from the date they were acquired, October 4, 2017.

(5)	The cost of executing new leases, renewals, and options includes leasing commissions, tenant improvement costs, landlord work, and tenant concessions. The costs associated with landlord work are excluded for repositioning and redevelopment projects, if any.

(6)	A comparable lease is a lease that is executed for the exact same space (location and square feet) in which a tenant was previously located. For a lease to be considered comparable, it must have been executed within 365 days from the earlier of legal possession or the day the prior tenant physically vacated the space.

(7)	The comparable rent spread compares the first year ABR of a new lease over the last year ABR of the prior lease of a unit that was occupied within the past twelve months.

(8)	The portfolio retention rate is calculated by dividing (a) total square feet of retained tenants with current period lease expirations by (b) the square feet of leases expiring during the period.

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•	$91.0 million was related to the acquisition of properties from the PELP transaction, of which $27.1 million is attributed to the third-party management business and captive insurance company.

•	$18.4 million was related to the Merger, which includes $20.7 million related to the 86 properties acquired, which is partially offset by a reduction of $2.3 million in management fee revenue previously received from the acquired properties.

•	$3.0 million was related to the properties acquired before January 1, 2017, outside of the PELP transaction and the Merger (“same-center portfolio”). The increase was driven by a $0.19 increase in rental rate, which is a combination of renewals of expiring leases and positive new leasing spreads.

•	$6.1 million was the net impact of property activity since January 1, 2017, which are assets not included in the same-center portfolio. This includes 13 properties acquired and 9 properties disposed of during the period. Also included are the 17 properties contributed or sold to GRP I, as well as the acquired PELP properties during the comparable periods presented.

•

The $24.0 million expense in 2017 resulted from the PELP transaction and was a combination of the vesting of 2.8 million Class B units as well as the reclassification of previous distributions on those Class B units to noncontrolling interests. The vesting of the Class B units was a non-cash expense of $27.6 million for asset management services rendered between December 2014 and September 2017. Distributions paid on these units totaled $3.6 million over this time period and were reclassified from the 2017 consolidated statement of operations and reflected as distributions from equity.

•	The $5.5 million of expense in 2017 was related to the redemption of unvested Class B units at the estimated value per share on the date of termination that had been earned by our former advisor for historical asset management services (see Note 13).

•	The $60.6 million increase in depreciation and amortization included a $50.8 million increase related to the total fair value of the 76 properties and the management contracts acquired in the PELP transaction.

•	The increase also included $10.0 million of expense related to the total base value of 86 properties acquired in the Merger.

•	The increase also included a $1.8 million net increase related to property acquired in the PELP transaction, as well as 13 properties acquired outside of the PELP transaction since January 1, 2017, offset by the 17 properties contributed or sold to GRP I, as well as nine properties sold outside of GRP I since January 1, 2017.

•	These amounts were offset by a $2.0 million decrease attributed to certain intangible lease assets becoming fully amortized on our same-center portfolio.

•	During the year ended December 31, 2018, we recognized impairment charges totaling $40.8 million associated with eleven properties where the book value exceeded the estimated fair value, of which two properties were sold and nine properties were determined to be impaired based upon operational factors during the year ended December 31, 2018. See Note 18 for more details.

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•	The $107.5 million increase was related to the sale or contribution of 25 properties during the year ended December 31, 2018 (see Notes 5 and 6), as compared to the sale of one property during the year ended December 31, 2017.

•

Transaction expenses include third-party professional fees, such as financial advisory, consulting, accounting, legal, and tax fees necessary to complete such transactions. The $12.4 million decrease in transaction expenses was primarily driven by the business combination treatment of the PELP transaction (see Note 4) and related costs of $15.7 million incurred in 2017, as compared to the asset acquisition treatment related to the Merger (see Note 3) in 2018 which allowed for the capitalization of transaction expenses.

•	This decrease is offset by non-capitalizable costs incurred in 2018 of $1.8 million related to the formation of the GRP I joint venture, $0.8 million related to the Merger, and $0.7 million related to other property acquisitions (see Notes 3 and 6).

•	The $2.4 million change was partially due to a $1.5 million expense to increase the fair value of our earn-out liability in 2018 (see Note 18).

•	The change also included a $0.5 million reduction in gains recognized from the sale of land.

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$29.2 million was related to the acquisition of PELP. This includes $21.2 million related to the acquisition of the 76 properties under PELP, as well as services provided to the Managed Funds including $4.0 million attributed to advisory agreements, inclusive of acquisition, disposition, and asset management fees, and $3.8 million attributed to property management agreements, inclusive of property management fees, leasing commissions, and construction management fees.

•	$21.4 million was related to 15 properties acquired after December 31, 2015, exclusive of the PELP transaction, net of two properties disposed of during each reporting period.

•	$3.2 million was related to the properties acquired before January 1, 2016, outside of the PELP transaction (“same-center portfolio”). The increase was driven by a $0.23 increase in minimum rent per square foot and a 0.9% increase in occupancy.

•

The increase in general and administrative expenses, as shown in the chart above, is primarily driven by the acquisition of the management company during the PELP transaction. This resulted in additional employee compensation costs for managing the day-to-day affairs of the Managed Funds, identifying and making acquisitions and investments on their behalf, and recommending to the respective boards of directors an approach for providing investors of the Managed Funds with liquidity, offset by the elimination of the asset management fee.

•	This increase shown in the chart above is offset by $4.0 million in the capitalization of acquisition expenses recognized prior to January 1, 2017, directly related to asset acquisitions prior to that date, which was attributed to the implementation of ASU 2017-01 on January 1, 2017.

•

The $24.0 million expense resulted from the PELP transaction and was a combination of the vesting of 2.8 million Class B units as well as the reclassification of previous distributions on those Class B units to noncontrolling interests. The vesting of the Class B units was a noncash expense of $27.6 million for asset management services rendered between December 2014 and September 2017. Distributions paid on these units totaled $3.6 million over this time period and have been reclassified from the 2017 consolidated statement of operations and reflected as distributions from equity instead.

•	The $5.5 million expense was related to the redemption of unvested Class B units at the estimated value per share on the date of the termination, that had been earned by our former advisor for historical asset management services.

•	The $24.6 million increase in depreciation and amortization included a $16.1 million increase related to the 76 properties and the management contracts acquired in the PELP transaction.

•	The increase included a $12.1 million increase related to properties acquired after December 31, 2015, excluding properties acquired in the PELP transaction, as well as properties classified as redevelopment.

•	The increase was offset by a $1.7 million decrease due to the disposition of two properties in December 2016 and October 2017.

•	The increase was also offset by a $1.8 million decrease attributed to certain intangible lease assets becoming fully amortized on our same-center portfolio.

•	The $13.2 million increase was primarily due to additional borrowings on our revolving credit facility and new secured and unsecured term loan facilities entered into in 2017, including $485 million in new term loans that were entered into in order to extinguish the corporate debt from PELP in the PELP transaction.

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•	The transaction expenses incurred resulted from costs related to the PELP transaction (see Note 4), primarily third-party professional fees, such as financial advisor, consulting, accounting, legal, and tax fees, as well as fees associated with obtaining lender consents necessary to complete the transaction.

•	The $3.0 million decrease in gain on the sale of property, net is related to a $1.8 million gain recognized on one property sold during the year ended December 31, 2017, as compared to a $4.7 million gain recognized on one property sold during the year ended December 31, 2016.

•	The $0.6 million decrease was largely due to a 2016 gain related to hedging ineffectiveness that is no longer realized due to our adoption of a new accounting standard in 2017, partially offset by a gain on the sale of land in 2018.

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(1)	Adjusted for the same-center operating results of PELP and the Merger prior to the respective transaction dates for these periods. For additional information and details about the operating results of PELP and the Merger included herein, refer to the PELP and REIT II Same-Center NOI table below.

(2)	Excludes straight-line rental income, net amortization of above- and below-market leases, and lease buyout income.

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(1)	Excludes straight-line rental income, net amortization of above- and below-market leases, and lease buyout income.

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(1)	Certain prior period amounts have been reclassified to conform with current year presentation.

(2)	OP units and restricted stock awards were dilutive to FFO Attributable to Stockholders and Convertible Noncontrolling Interests and MFFO for the years ended December 31, 2018, 2017, and 2016, and, accordingly, were included in the weighted-average common shares used to calculate diluted FFO Attributable to Stockholders and Convertible Noncontrolling Interests/MFFO per share.

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•	cash distributions to stockholders;

•	repurchases of common stock;

•	capital expenditures and leasing costs;

•	investments in real estate;

•	redevelopment and repositioning projects; and

•	principal and interest payments on our outstanding indebtedness.

•	operating cash flows;

•	proceeds received from dispositions of properties;

•	reinvested distributions;

•	proceeds from debt financings, including borrowings under our unsecured credit facility;

•	distributions received from joint ventures; and

•	available, unrestricted cash and cash equivalents.

(1)	Net of outstanding letters of credit.

(2)	The revolving credit facility has an additional option to extend the maturity to October 2022.

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•	Property operations—Most of our operating cash comes from rental and tenant recovery income, offset by cash outflows for property operating expenses, real estate taxes, and general and administrative costs. Our change in cash flows from property operations primarily results from owning a larger portfolio year-over-year, as well as a 3.7% increase in Pro Forma Same-Center NOI.

•

Fee and management income—Following the completion of the PELP transaction, we also generate operating cash from our third-party investment management business, offset by the operational costs of the business. Our fee and management income was $32.9 million for the year ended December 31, 2018 as compared to $8.2 million for the year ended December 31, 2017. The increase is due to a full year of our internalized investment management business.

•	Cash paid for interest—During the year ended December 31, 2018, we paid $67.6 million for interest, an increase of $28.1 million over the same period in 2017.

•	Working capital—During the year ended December 31, 2018, aside from timing differences, payables increased primarily due to higher real estate taxes and employee compensation as a result of owning more properties and additional administrative costs from having a full year of operations related to the properties and management

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•	Other—Our transaction costs in 2018 were lower than 2017 partially as a result of the capitalization of certain transaction costs as part of the Merger due to its treatment as an asset acquisition. In addition, we had a decrease in costs due to the 2017 vesting of Class B units and termination of certain affiliate arrangements in connection with the PELP transaction.

•

Asset acquisitions and business combinations—During the year ended December 31, 2018, we acquired 86 shopping centers through the Merger (see Note 3 for more detail). The Merger was a 100% stock-for-stock transaction; however, we had a net cash outlay of $363.5 million, primarily as a result of debt from REIT II that we paid upon closing. During the year ended December 31, 2017, we acquired 84 shopping centers, including 76 shopping centers through the PELP transaction (see Note 4 for more detail). The net cash impact of the PELP transaction was a $446.2 million outlay.

•	Real estate acquisitions—During the year ended December 31, 2018, we purchased five shopping centers outside of the Merger, for a total cash outlay of $87.1 million, as compared to eight shopping centers purchased outside of the PELP transaction for a total cash outlay of $159.7 million during the year ended December 31, 2017.

•

Real estate dispositions and sales and contributions to joint venture—During the year ended December 31, 2018, we sold or contributed 25 shopping centers, including 17 shopping centers sold or contributed to the GRP I joint venture for a total cash inflow of $161.8 million. For the eight shopping centers sold outside of the GRP I joint venture, we had a total cash inflow of $78.7 million, as compared to one shopping center sold during the year ended December 31, 2017 for a total cash inflow of $7.4 million.

•	Capital expenditures—We invest capital into leasing our properties and maintaining or improving the condition of our properties. During the year ended December 31, 2018, cash used for capital expenditures increased by $6.8 million over the same period in 2017 as a result of our larger portfolio of shopping centers, as well as having a full year of corporate capital expenditures.

•

Debt borrowings and payments—Cash from financing activities is primarily affected by inflows from borrowings and outflows from payments on debt. As our debt obligations mature, we intend to refinance the remaining balance, if possible, or pay off the balances at maturity using proceeds from operations and/or corporate-level debt. During the year ended December 31, 2018, our net borrowings decreased by $323.6 million as a result of refinancing of existing debt in 2018, as compared to an increase in net borrowings in 2017 driven by entering into new term loan agreements and secured borrowings in connection with the PELP transaction.

•

Distributions to stockholders and OP unit holders—There was a large increase in distributions paid to OP unit holders in 2018 as a result of issuing 39.4 million OP units in the PELP transaction in the fourth quarter of 2017. Cash used for distributions to common stockholders also increased as a result of issuing 95.5 million additional shares through the Merger and due to the temporary suspension of the DRIP for the month of July 2018 in connection with the Merger; therefore all DRIP participants received their July 2018 distribution in cash rather than stock. The DRIP resumed in August 2018.

•	Share repurchases—Our SRP provides an opportunity for stockholders to have shares of common stock repurchased, subject to certain restrictions and limitations (see Note 13). Cash outflows for share repurchases increased by $6.6 million.

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(1)	See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Measures - Funds from Operations and Modified Funds from Operations for the definition of FFO, for information regarding why we present FFO, as well as for a reconciliation of this non-GAAP financial measure to Net Income (Loss).

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(1)	The revolving credit facility, which matures in October 2021, has options to extend the maturity to October 2022. One of our term loan facilities with a maturity in 2020 has an option to extend the maturity to 2021.

(2)	Future variable-rate interest payments are based on interest rates as of December 31, 2018, including the impact of our swap agreements.

•	limits the ratio of debt to total asset value, as defined, to 60% or less with a surge to 65% following a material acquisition;

•	requires the fixed-charge ratio, as defined, to be 1.5:1 or greater, or 1.4:1 following a material acquisition; and

•	limits the ratio of cash dividend payments to FFO, as defined, to a specified percentage that varies among debt agreements.

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(1)	The average remaining lease term in years excludes future options to extend the term of the lease.

(1)	We calculate annualized base rent (“ABR”) as monthly contractual rent as of June 30, 2019, multiplied by 12 months.

(2)	Gross leasable area (“GLA”) is defined as the portion of the total square feet of a building that is available for tenant leasing.

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(1)	Number of locations excludes auxiliary leases with grocery anchors such as fuel stations, pharmacies, and liquor stores.

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•	$35.7 million increase related to the Merger with REIT II, including $43.2 million from the properties acquired, partially offset by a reduction of $7.5 million in management fee revenue previously received from the acquired properties;

•	$1.4 million increase primarily related to fee and management income received from the joint ventures included as Managed Funds;

•	$0.7 million increase related to properties acquired before January 1, 2018, primarily driven by a $0.22 increase in average minimum rent per square foot as compared to the three months ended June 30, 2018;

•	$8.1 million decrease related to our net disposition of properties since January 1, 2018, outside of the Merger with REIT II, which includes 17 properties sold or contributed to GRP I and 14 properties sold to third parties, net of 6 properties acquired; and

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$1.3 million decrease related to the change in presentation of real estate tax payments paid directly by tenants. The adoption of ASC 842, which requires lessors to exclude from variable payments all costs paid by a lessee directly to a third party, precludes our recognition of real estate tax payments made by tenants directly to third parties as recoverable revenue or expense. As such, we recognized no applicable real estate tax revenue for these direct payments during the three months ended June 30, 2019. As the recorded revenue in prior periods was completely offset by the recorded expense, this has no net impact to earnings.

•	$4.4 million increase related to the properties acquired in the Merger with REIT II;

•	$0.2 million decrease related to our same-center portfolio; and

•	$0.2 million decrease related to our net disposal and corporate activity.

•	$6.3 million increase related to the properties acquired in the Merger with REIT II;

•	$0.4 million increase related to our same-center portfolio;

•	$0.8 million decrease related to our net disposal activity; and

•	$1.3 million decrease related to the change in presentation of real estate tax payments paid directly by tenants due to the adoption of ASC 842.

•	Our increase in impairment of real estate assets of $14.3 million is related to assets under contract or actively marketed for sale at a disposition price that was less than the carrying value. Upon disposition, we intend to use the funds to execute our initiatives to recycle capital into higher quality assets, invest in our existing properties through redevelopment, and reduce our leverage.

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•	The $2.3 million change was related to a net loss recognized from the sale of three properties during the three months ended June 30, 2019, as compared to a net gain recognized from the sale of two properties during the three months ended June 30, 2018.

•	Other impairment charges of $9.7 million are due to the suspension of the PECO III public offering. This included a $7.8 million impairment of a corporate intangible asset and a $1.9 million impairment of organization and offering costs (see Notes 14 and 15).

•	$0.9 million expense, net during the three months ended June 30, 2019 was primarily attributable to:

▪	$0.5 million expense from our unconsolidated joint ventures, primarily due to the amortization of basis adjustments as a result of our Merger with REIT II; and

▪	$0.3 million expense related to state and local income taxes.

•	$1.2 million expense, net during the three months ended June 30, 2018 was primarily attributable to a $1.5 million expense related to an increase in the fair value of our earn-out liability (see Note 15).

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•	$73.4 million increase related to the Merger with REIT II, including $87.9 million from the properties acquired, partially offset by a reduction of $14.5 million in management fee revenue previously received from the acquired properties;

•	$2.9 million increase primarily related to fee and management income received from the joint ventures included as Managed Funds;

•	$1.5 million increase related to properties acquired before January 1, 2018, primarily driven by a $0.20 increase in average minimum rent per square foot as compared to the six months ended June 30, 2018;

•	$16.4 million decrease related to our net disposition of properties since January 1, 2018, outside of the Merger with REIT II. This includes 17 properties sold or contributed to GRP I and 14 properties sold to third parties, net of 6 properties acquired; and

•	$3.4 million decrease related to the adoption of ASC 842 (see our Summary of Operating Activities for the Three Months Ended June 30, 2019 and 2018), which included a $2.7 million decrease related to the change in presentation of real estate tax payments paid directly by tenants, and a $0.7 million decrease related to the change in presentation of our assessment of lease collectability.

•	$9.6 million increase related to the properties acquired in the Merger with REIT II;

•	$0.7 million decrease related to our same-center portfolio; and

•	$0.2 million decrease related to our net disposal and corporate activity.

•	$12.8 million increase related to the properties acquired in the Merger with REIT II;

•	$0.6 million increase related to our same-center portfolio;

•	$1.9 million decrease related to our net disposal activity; and

•	$2.7 million decrease related to the change in presentation of real estate tax payments paid directly by tenants due to the adoption of ASC 842.

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•	The $2.8 million increase in general and administrative expenses was driven by the Merger with REIT II, primarily related to overhead costs such as compensation and benefits, accounting fees, and IT-related costs which are no longer reimbursable from REIT II as it is no longer an unconsolidated Managed Fund.

•	Our increase in impairment of real estate assets of $28.0 million is related to assets under contract or actively marketed for sale at a disposition price that was less than the carrying value. Upon disposition, we intend to use the funds to execute our initiatives to recycle capital into higher quality assets, invest in our existing properties through redevelopment, and reduce our leverage.

•	The $4.9 million increase was related to the sale of six properties during the six months ended June 30, 2019, as compared to the sale of two properties during the six months ended June 30, 2018 (see Note 5).

•	Other impairment charges of $9.7 million are due to the suspension of the PECO III public offering. This included a $7.8 million impairment of a corporate intangible asset and a $1.9 million impairment of organization and offering costs (see Notes 14 and 15).

•	$6.6 million income, net during the six months ended June 30, 2019 was primarily attributable to:

▪	$7.5 million income related to the change in fair value of our earn-out liability (see Note 15);

▪	$0.5 million income related to other non-recurring income associated with property acquisitions;

▪	$1.0 million expense from our unconsolidated joint ventures, primarily due to the amortization of basis adjustments as a result of our Merger with REIT II; and

▪	$0.3 million expense related to state and local income taxes.

•	$1.3 million expense, net during the six months ended June 30, 2018 was primarily attributable to a $1.5 million expense related to an increase in the fair value of our earn-out liability.

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(1)	Per square foot amounts may not recalculate exactly based on other amounts presented within the table due to rounding.

(2)	We consider an inline deal to be a lease for less than 10,000 square feet of GLA.

(3)	Leasing activity in 2018 does not include activity for the REIT II properties, as they were acquired in the Merger on November 16, 2018.

(4)	The cost of executing new leases, renewals, and options includes leasing commissions, tenant improvement costs, landlord work, and tenant concessions. The costs associated with landlord work for repositioning and redevelopment projects are excluded, if any.

(5)	A comparable lease is a lease that is executed for the exact same space (location and square feet) in which a tenant was previously located. For a lease to be considered comparable, it must have been executed within 365 days from the earlier of legal possession or the day the prior tenant physically vacated the space.

(6)	The comparable rent spread compares the percentage increase (or decrease) of new or renewal leases (excluding options) to the expiring lease of a unit that was occupied within the past 12 months.

(7)	The portfolio retention rate is calculated by dividing (a) total square feet of retained tenants with current period lease expirations by (b) the square feet of leases expiring during the period.

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(1)	See the footnotes to the summary of leasing activity table for the three months ended June 30, 2019, for more detail regarding certain items throughout this table.

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(1)	Adjusted for the same-center operating results of the Merger prior to the transaction for these periods. For additional information and details about the operating results of the Merger included herein, refer to the REIT II Same-Center NOI table below.

(2)	Excludes straight-line rental income, net amortization of above- and below-market leases, and lease buyout income. In accordance with ASC 842, revenue amounts deemed uncollectible are included in rental income for 2019 and property operating expense in 2018.

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(1)	Excludes straight-line rental income, net amortization of above- and below-market leases, and lease buyout income.

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(1)	Restricted stock awards were dilutive to FFO Attributable to Stockholders and Convertible Noncontrolling Interests and MFFO for the three and six months ended June 30, 2019 and 2018, and, accordingly, their impact was included in the weighted-average common shares used to calculate diluted FFO Attributable to Stockholders and Convertible Noncontrolling Interests and MFFO per share.

•	cash distributions to stockholders;

•	capital expenditures and leasing costs;

•	investments in real estate;

•	redevelopment and repositioning projects;

•	repurchases of common stock; and

•	principal and interest payments on our outstanding indebtedness.

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•	operating cash flows;

•	proceeds received from dispositions of properties;

•	reinvested distributions;

•	proceeds from debt financings, including borrowings under our unsecured credit facility;

•	distributions received from joint ventures; and

•	available, unrestricted cash and cash equivalents.

(1)	Excludes assumed market debt adjustments and deferred financing expenses.

(2)	Net of outstanding letters of credit.

(3)	The revolving credit facility has additional options to extend the maturity to October 2022.

(1)	Total equity value is calculated as the product of the number of diluted shares outstanding and the estimated net asset value per share at the end of the period. There were 326.8 million and 324.6 million diluted shares outstanding as of June 30, 2019 and December 31, 2018, respectively.

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•	Property operations—Most of our operating cash comes from rental income and is offset by property operating expenses, real estate taxes, and general and administrative costs. Our change in cash flows from property operations primarily results from owning a larger portfolio year-over-year as a result of the Merger with REIT II.

•

Fee and management income—We also generate operating cash from our third-party investment management business, pursuant to various management and advisory agreements between us and the Managed Funds. Our fee and management income was $6.3 million for the six months ended June 30, 2019, a decrease of $11.5 million as compared to the same period in 2018, primarily due to fee and management income no longer received from the properties acquired in the Merger with REIT II, offset by increased fee and management income as a result of our joint ventures.

•	Cash paid for interest—During the six months ended June 30, 2019, we paid $44.2 million for interest, an increase of $11.7 million over the same period in 2018. This increase was largely due to $464.5 million of debt assumed and new debt entered into in connection with the Merger with REIT II.

•	Working capital—During the six months ended June 30, 2019, the increase in cash used for working capital was primarily driven by higher prepaid expenses, partially offset by higher third party payables as a result of owning a larger portfolio.

•

Accounting for lease costs—The adoption of ASC 842 has caused us to expense as incurred significant lease origination costs which were previously capitalized. Such origination costs are now included as operating expenses and are therefore included as a reduction of our cash flows from operations rather than classified as capital expenditures on the statements of cash flows in the current period. As a result of the adoption, we recognized an additional $1.9 million of lease origination costs as operating cash outflows during the six months ended June 30, 2019, as compared to the same period in 2018.

•

Real estate acquisitions and dispositions—During the six months ended June 30, 2019, we acquired one property and one outparcel for a total cash outlay of $49.9 million, as compared to one property acquisition during the same period in 2018 for a total cash outlay of $9.2 million. During the six months ended June 30, 2019, we disposed of six properties for a net cash inflow of $47.9 million, as compared to two property dispositions for a net cash inflow of $13.3 million during the same period in 2018.

•

Capital expenditures—We invest capital into leasing our properties and maintaining or improving the condition of our properties. During the six months ended June 30, 2019, we paid $27.2 million for capital expenditures, an increase of $9.9 million over the same period in 2018, primarily driven by tenant improvements due to higher leasing activity, and an increase in building improvements due to our larger portfolio. Additionally, we have invested in other value-added redevelopment and new development in our existing centers.

•

Debt borrowings and payments—Cash from financing activities is primarily affected by inflows from borrowings and outflows from payments on debt. As our debt obligations mature, we intend to refinance the remaining balance, if possible, or pay off the balances at maturity using proceeds from operations and/or corporate-level debt. During the six months ended June 30, 2019, our cash from borrowings decreased by $47.7 million as a result of an increase in cash flows received from the sale of properties as well as higher cash flows from operations. In May 2019, we executed a $60 million delayed draw feature on one of our term loans, the proceeds of which were used to to pay down our revolving credit facility balance. As of June 30, 2019, we had no outstanding balance on our revolver.

•	Distributions to stockholders and OP unit holders—Cash used for distributions to common stockholders and OP unit holders increased $22.7 million for the six months ended June 30, 2019, as compared to the same period in 2018 primarily due to the increase in the number of common stockholders as a result of the Merger.

•	Share repurchases—Our SRP provides an opportunity for stockholders to have shares of common stock repurchased, subject to certain restrictions and limitations (see Note 11). Cash outflows for share repurchases decreased by $32.7 million due to the timing of our standard share repurchase in the third quarter of 2019 as compared to the second quarter of 2018.

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(1)	See Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Measures - Funds from Operations and Modified Funds from Operations for the definition of FFO, for information regarding why we present FFO, as well as for a reconciliation of this non-GAAP financial measure to Net Loss.

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(1)	The average remaining lease term in years excludes future options to extend the term of the lease.

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(1)	Excludes non-cash rental income adjustments related to straight-line rental income and amortization of above- and below-market leases.

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•	investments in real estate;

•	capital expenditures and leasing costs;

•	cash distributions to stockholders; and

•	interest payments on our outstanding indebtedness.

•	proceeds from our Public Offering;

•	distributions received from Grocery Retail Partners II LLC (“GRP II”);

•	proceeds from our unsecured revolving credit facility;

•	reinvested distributions;

•	available, unrestricted cash and cash equivalents; and

•	operating cash flows.

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•	Property operations—Most of our operating cash comes from rental and tenant recovery income, and is offset by property operating expenses, real estate taxes, and general and administrative costs. Our change in cash flows from property operations primarily results from owning a larger portfolio year-over-year, and is expected to increase as we continue to acquire new properties.

•	Cash paid for interest—During the year ended December 31, 2018, we paid $1.1 million for interest, an increase of $0.6 million over the same period in 2017.

•	Working capital—Our working capital changes over the same period in 2017 are largely a result of owning four additional properties throughout a majority of 2018.

•	Real estate acquisitions—During the year ended December 31, 2018, we had a total cash outlay of $32.6 million related to the acquisition of two grocery-anchored shopping centers. During the same period in 2017, we also acquired two grocery-anchored shopping centers for a total cash investment of $26.6 million, resulting in an increase in our cash paid for acquisitions in 2018 compared to 2017.

•	Capital expenditures—We invest capital into leasing our properties and maintaining or improving the condition of our properties. During the year ended December 31, 2018, cash used for capital expenditures increased by $2.1 million over the same period in 2017, largely due to acquiring additional properties after December 31, 2017.

•

Distribution from unconsolidated joint venture—In conjunction with the contribution of three properties to the Joint Venture in November 2018, we received a distribution of approximately $40.9 million with an additional $0.4 million distribution receivable. We anticipate using the remaining cash from our distribution to fund future acquisitions of real estate assets. Subsequent to December 31, 2018, we purchased a property for $31.7 million.

•

Issuance of common stock and payment of offering costs—We ceased offering Class A shares in the private offering during the first quarter of 2018. In May 2018, we began offering Class T and Class I shares to the public in the Primary Offering. During the year ended December 31, 2018, our proceeds from issuing common stock decreased by $20.4 million over the same period in 2017, offset by a $1.9 million decrease in our payments for offering costs related to selling commissions and dealer manager fees.

•

Debt borrowings/payments and related deferred financing expenses—During the year ended December 31, 2018, we paid off the outstanding balance on our revolving credit facility using a portion of the distribution from the contribution of three properties to the Joint Venture and reduced the maximum borrowing capacity. In 2017 we paid $2.2 million in loan closing costs related to our revolving credit facility. As of December 31, 2018, the maximum capacity of our revolving credit facility was $125 million, but is subject to covenant-based restrictions. The amount available for borrowings as of December 31, 2018 was $15.8 million.

•	Cash distributions paid to stockholders—As a result of issuing additional shares of common stock, cash used for distributions increased $1.5 million during the year ended December 31, 2018, when compared to the same period in 2017.

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•	the ratio of debt to total asset value, as defined, is limited to 60% or 65% for four consecutive periods following a material acquisition; and

•	the fixed charge ratio, as defined, must be 1.5 to 1 or greater.

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(1)	The average remaining lease term in years excludes future options to extend the term of the lease.

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(1)	Excludes lease buy-out income and non-cash rental income adjustments related to straight-line rental income and amortization of above- and below-market leases.

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•	investments in real estate;

•	capital expenditures and leasing costs;

•	cash distributions to stockholders; and

•	interest payments on our outstanding indebtedness.

•	operating cash flows;

•	proceeds from our unsecured revolving credit facility;

•	available, unrestricted cash and cash equivalents; and

•	distributions received from GRP II.

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•	Operations—Our operating cash primarily comes from rental income, and is offset by property operating expenses, real estate taxes, and general and administrative costs.

•	Working capital—Our working capital changes over the same period in 2018 are largely a result of the timing of annual tax receipts at one of our properties as well as acquisition deposits associated with our most recent acquisition.

•	Real estate acquisitions—During the six months ended June 30, 2019, we acquired one grocery-anchored shopping center for a total cash outlay of $31.7 million. During the same period in 2018, we had one acquisition with a cash outlay of $13.3 million.

•	Capital expenditures—We invest capital into leasing our properties and maintaining or improving the condition of our properties.

•	Issuance of common stock and payment of offering costs—During the six months ended June 30, 2019, we raised $3.1 million in Class T and Class I shares. Our proceeds from issuing common stock decreased by $12.5 million over the same period in 2018, offset by a $1.5 million decrease in our payments for offering costs related to selling commissions and dealer manager fees.

•	Debt borrowings/payments—During the six months ended June 30, 2019, we borrowed $20.5 million, net, on our revolving credit facility for the acquisition of one property. The remaining availability on our revolving credit facility was $14.5 million as of June 30, 2019.

•	Repurchases of common stock—We repurchased $1.9 million of our securities during the six months ended June 30, 2019. We had no stock repurchases during the same period in 2018.

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1.	Reviewed the following documents:

a.	An unexecuted draft of the Agreement and certain related documents;

b.

Information regarding the real estate assets and investments held by PECO III (the “PECO III Properties”) provided by Company management, including, but not limited to, building size, year of construction, land size, rent rolls, lease rates and terms, historical and projected operating expenses, planned capital expenditures, and other physical, financial and economic characteristics for the PECO III Properties;

c.	The Company’s annual report and audited financial statements on Form 10-K filed with the Securities and Exchange Commission (“SEC”) for the year ended December 31, 2018 and the Company’s unaudited interim financial statements for the three and six months ended March 31, 2019 and June 30, 2019, respectively, included in the Company’s Form 10-Qs filed with the SEC;

d.	The Company’s unaudited balance sheet as of June 30, 2019 provided by Company management;

e.	PECO’s annual report and audited financial statements on Form 10-K filed with the SEC for the year ended December 31, 2018 and PECO’s unaudited interim financial statements for the three and six months ended March 31, 2019 and June 30, 2019, respectively, included in the Company’s Form 10-Qs filed with the SEC;

f.	Other internal documents and information relating to the history and current operations of the Company and the PECO III Properties provided to Duff & Phelps by management of the Company;

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g.	The Appraisal Report of the Assets and Liabilities of PECO as of March 31, 2019 prepared by Duff & Phelps (the “Appraisal Report”);

h.	The offer letter to the independent directors of the Company from PECO regarding a potential strategic business combination dated July 29, 2019; and

i.	The offer letter to the Special Committee from PECO regarding a potential strategic business combination dated August 20, 2019;

2.	Discussed the information referred to above and the background and other elements of the Proposed Transaction with Company management;

3.	Discussed with Company management its plans and intentions with respect to the management and operation of the Company and the PECO III Properties;

4.	Performed certain valuation and comparative analyses using generally accepted valuation and analytical techniques including discounted cash flow analyses and an analysis of selected comparable property sales that Duff & Phelps deemed appropriate; and

5.	Conducted such other analyses and considered such other factors as Duff & Phelps deemed appropriate.

1.	Relied upon the accuracy, completeness, and fair presentation of all information, data, advice, opinions and representations obtained from public sources or provided to it from private sources, including Company management, and did not independently verify such information;

2.	Relied upon the fact that the Special Committee and the Company have been advised by counsel as to all legal matters with respect to the Proposed Transaction, including whether all procedures required by law to be taken in connection with the Proposed Transaction have been duly, validly and timely taken;

3.	Assumed that any estimates, evaluations, forecasts and projections furnished to Duff & Phelps were reasonably prepared and based upon the best currently available information and good faith judgment of the person furnishing the same (and Duff & Phelps expresses no opinion with respect to such projections or the underlying assumptions);

4.	Assumed that information supplied and representations made by Company management are accurate and complete regarding the Company, the PECO III Properties and the Proposed Transaction;

5.	Assumed that the representations and warranties made in the Agreement are accurate and complete;

6.	Assumed that the final versions of all documents reviewed by Duff & Phelps in draft form conform in all material respects to the drafts reviewed;

7.

Assumed that there has been no material change in the assets, liabilities, financial condition, results of operations, business, or prospects of the Company, the PECO III Properties or PECO since the date of the most recent financial statements and other information made available to Duff & Phelps, and that there is no information or facts that would make the information reviewed by Duff & Phelps incomplete or misleading;

8.	Assumed that all of the conditions required to implement the Proposed Transaction will be satisfied and that the Proposed Transaction will be completed in accordance with the Agreement without any amendments thereto or any waivers of any terms or conditions thereof; and

9.	Assumed that all governmental, regulatory or other consents and approvals necessary for the consummation of the Proposed Transaction (if any) will be obtained without any adverse effect on the Company or the PECO III Properties.

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(i)	To include any prospectus required by Section 10(a)(3) of the Securities Act;

(ii)

To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and

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(iii)	To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

(2)	That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof;

(3)	To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering;

(4)

That, for the purpose of determining liability under the Securities Act, to any purchaser: if the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use;

(5)

That, for the purpose of determining liability of the registrant under the Securities Act, to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

(i)	Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

(ii)	Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

(iii)	The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and

(iv)	Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser;

(6)

That, for purposes of determining any liability under the Securities Act, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof;

(7)

That prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other Items of the applicable form;

(8)

That every prospectus (i) that is filed pursuant to the immediately preceding paragraph, or (ii) that purports to meet the requirements of Section 10(a)(3) of the Securities Act and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof;

(9)

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling

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(10)

To respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of Form S-4, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request; and

(11)	To supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.

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i.	Commencing with its taxable year ended December 31, 2010, the Company has been organized in conformity with the requirements for qualification and taxation as a REIT under the Code;

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ii.	The Company’s prior, current and proposed ownership, organization, distributions and method of operations as described in the REIT Certificate have allowed and will continue to allow the Company to satisfy the requirements for qualification and taxation as a REIT under the Code commencing with its taxable year ended December 31, 2010; and

iii.	The statements set forth under the heading “U.S. Federal Income Tax Considerations” in the Registration Statement, insofar as such statements describe applicable U.S. federal income tax law, are correct in all material respects.

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