UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM 8-K
_______________________
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 12, 2020
_______________________
Phillips Edison & Company, Inc.
(Exact name of registrant as specified in its charter)
_______________________
Maryland | 000-54691 | 27-1106076 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
11501 Northlake Drive Cincinnati, Ohio | 45249 | |
(Address of principal executive offices) | (Zip Code) | |
(513) 554-1110
(Registrant’s telephone number, including area code)
_______________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
None | None | None | ||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition
period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Item 2.02 Results of Operations and Financial Condition.
Item 7.01 Regulation FD Disclosure.
On August 12, 2020, Phillips Edison & Company, Inc. (the “Company”) issued a press release announcing its results for the quarter ended June 30, 2020 and providing an update on the impact of the COVID-19 pandemic. A copy of that press release as well as the Company's Second Quarter 2020 Results Presentation are attached hereto as Exhibits 99.1 and 99.2 and incorporated herein by reference. The Company will host a stockholder update conference call and presentation on Thursday, August 13, 2020, at 12:00 p.m. Eastern Time, during which management will discuss the second quarter results and provide commentary on business performance and provide an update on the impact of the COVID-19 pandemic. The conference call can be accessed by dialing 888-346-2646 (domestic). The webcast of the presentation can be accessed by visiting https://services.choruscall.com/links/peco200813.html. A replay of the webcast will be available approximately one hour after the conclusion of the webcast on our website at http://investors.phillipsedison.com/event-calendar.
The information in this Current Report on Form 8-K, including Exhibits 99.1 and 99.2, is being furnished to the Securities and Exchange Commission (“SEC”), and shall not be deemed to be “filed” with the SEC for any purpose, including for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section and shall not be deemed to be incorporated by reference into any other filing with the SEC.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit Number | Description of Exhibit | |
99.1 | ||
99.2 | ||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
PHILLIPS EDISON & COMPANY, INC. | ||
Dated: August 12, 2020 | By: | /s/ Jennifer L. Robison |
Jennifer L. Robison | ||
Chief Accounting Officer and Senior Vice President (Principal Accounting Officer) | ||
Exhibit 99.1
Phillips Edison & Company Reports Second Quarter 2020 Results and Provides Update on COVID-19 Impact
July rent and recovery collections totaled 90% of monthly billings
Neighbors representing approximately 98% of annualized base rent are open and operating as of August 10, 2020
CINCINNATI -- August 12, 2020 - Phillips Edison & Company, Inc. (“PECO” or the “Company”), an internally-managed real estate investment trust (“REIT”) and one of the nation’s largest owners and operators of grocery-anchored shopping centers, reported a net loss of $6.4 million, and net income of $4.8 million, for the three- and six-month periods ended June 30, 2020, respectively.
Second Quarter 2020 Highlights (vs. Second Quarter 2019)
• | Same-center net operating income (“NOI”) decreased 5.2% to $80.3 million |
• | Rent and recovery collections totaled 86% of monthly billings for the quarter |
• | Leased portfolio occupancy totaled 95.6%, an increase from 94.6% at June 30, 2019 |
• | Executed 169 leases (new, renewal, and options) totaling 1.2 million square feet compared to 259 leases (new, renewal, and options) totaling 1.1 million square feet |
• | Comparable new lease spreads were 15.5% and comparable renewal lease spreads were 7.1% |
• | Core funds from operations (“Core FFO”) decreased 6.1% to $51.7 million; Core FFO per diluted share decreased to $0.16 from $0.17 |
• | Paid off the outstanding balance on the $500 million revolving credit facility |
Six Months Ended June 30, 2020 Highlights (vs. Six Months Ended June 30, 2019)
• | Same-center NOI decreased 1.3% to $167.0 million |
• | Executed 383 leases (new, renewal, and options) totaling 2.3 million square feet compared to 529 leases (new, renewal, and options) totaling 2.1 million square feet |
• | Comparable new lease spreads were 10.8% and comparable renewal lease spreads were 9.2% |
• | Core FFO increased 1.2% to $111.9 million; Core FFO per diluted share was unchanged at $0.34 |
Management Commentary
“The second quarter of 2020 was the most challenging quarter our company has faced since the global financial crisis in 2008,” said Jeff Edison, chairman and chief executive officer of PECO. “Our talented associates rose to the occasion and demonstrated how they could successfully execute during this unprecedented time. In a matter of days, our team was deployed remotely and began implementing a revised strategy required by the difficult COVID-19 operating environment.”
“As 37% of our neighbors faced government mandates requiring them to close their doors, our team’s relentless commitment to communication and service resulted in strong collections during the quarter, which improved each month since April. Further, we deftly implemented cost cutting measures, which contributed to a 28% decrease in general and administrative expenses compared to Q2 2019.
“Because of the adaptability of our organization, and the necessity-based and essential nature of many of our neighbors, we are pleased with our results considering the environment. We believe that with a conservative, yet opportunistic, approach, we will emerge from this pandemic in a position of strength, although our near-term expectations remain tempered.
“When considering the reestablishment of our monthly distributions, we must have a higher level of confidence that our future cash flows will remain uninterrupted. The recent increase in COVID-19 cases and potential impact
Exhibit 99.1
on the economy may again negatively affect our neighbors. We believe protecting the principal value of our stockholders’ investment is paramount, and we remain committed to positioning the company for long-term growth.”
Collection Details
The tables below outline how PECO’s neighbors have been impacted and the ensuing impact to PECO throughout the COVID-19 pandemic:
April 2020 | May 2020 | June 2020 | Q2 2020 | July 2020 | |||
Rent and recoveries collected (% of monthly billings)(1)(2) | 84% | 86% | 89% | 86% | 90% | ||
April 2020 | May 2020 | June 2020 | July 2020 | ||||
Neighbor Spaces Open for Business:(2) | |||||||
% of total spaces | 65% | 89% | 97% | 97% | |||
% of total ABR(3) | 75% | 91% | 97% | 98% | |||
(1) | Collections include monthly billings for rent and recoverable expenses that were received through August 10, 2020. |
(2) | Statistics are approximate and include our pro rata ownership through joint ventures and exclude statistics related to properties that have since been disposed. The total number of neighbor spaces that were temporarily closed in connection with COVID-19 is approximately 2,100. |
(3) | Annualized base rent (“ABR”) is calculated as monthly contractual rent as of the applicable period end, multiplied by 12 months. |
Three and Six Months Ended June 30, 2020 Financial Results
Net Income (Loss)
For the second quarter of 2020, net loss totaled $6.4 million, or $0.02 per diluted share, compared to a net loss of $42.2 million, or $0.13 per diluted share, for the second quarter of 2019.
For the six months ended June 30, 2020, net income totaled $4.8 million, or $0.01 per diluted share, compared to a net loss of $48.0 million, or $0.15 per diluted share, for the first six months of 2019.
The improvement in both periods was driven by a decrease in non-cash impairments of real estate and other assets, lower interest expense from lower interest rates, and reductions in general and administrative expenses resulting from a reduction in headcount, temporary executive salary and director compensation reductions, and estimated lower performance-based compensation. The decreases were partially offset by lower rental revenues from an increase in collectability reserves as a result of the COVID-19 pandemic.
FFO as Defined by the National Association of Real Estate Investment Trusts (“Nareit”)
For the second quarter ended June 30, 2020, FFO attributable to stockholders and convertible noncontrolling interests increased 15.8% to $50.0 million, or $0.15 per diluted share, from $43.1 million, or $0.13 per diluted share, during the second quarter of 2019.
For the six months ended June 30, 2020, FFO attributable to stockholders and convertible noncontrolling interests increased 13.5% to $118.2 million, or $0.35 per diluted share, from $104.1 million, or $0.32 per diluted share, during the six months ended June 30, 2019.
The improvements in both periods were driven by lower non-cash impairments and other non-recurring charges as compared to 2019, along with items previously discussed for net income (loss).
Core FFO
For the second quarter of 2020, Core FFO decreased 6.1% to $51.7 million, or $0.16 per diluted share, compared to $55.1 million, or $0.17 per diluted share, during the same year-ago period.
This decrease was primarily attributable to the decline in NOI due to the impact of the COVID-19 pandemic, including lower rent and recovery collections and an increase in rent and recovery billings that are estimated to be uncollectible. This decline was partially offset by expense reduction initiatives to lessen the economic impact of the COVID-19 pandemic, and lower interest expense as compared to the second quarter of 2019.
Exhibit 99.1
For the first six months of 2020, Core FFO increased 1.2% to $111.9 million, or $0.34 per diluted share, compared to $110.7 million, or $0.34 per diluted share, during the same year-ago period.
This improvement was driven by the aforementioned expense reduction initiatives and lower interest expense, partially offset by the decline in NOI due to the impact of the COVID-19 pandemic.
Same-Center NOI
For the second quarter of 2020, same-center NOI decreased 5.2% to $80.3 million compared to $84.7 million during the second quarter of 2019.
For the six months ended June 30, 2020, same-center NOI decreased 1.3% to $167.0 million compared to $169.2 million during the same period in 2019.
The decline in both periods was largely due to the aforementioned impact of the COVID-19 pandemic.
Three and Six Months Ended June 30, 2020 Portfolio Overview
Portfolio Statistics
At quarter-end, PECO’s wholly-owned portfolio consisted of 284 properties, totaling approximately 31.8 million square feet located in 31 states. This compares to 298 properties, totaling approximately 33.5 million square feet located in 32 states as of June 30, 2019.
Leased portfolio occupancy was 95.6%, an improvement from 94.6% at June 30, 2019. Anchor occupancy increased to 98.3% from 98.0% at June 30, 2019, while in-line occupancy increased to 90.3% from 87.9% at June 30, 2019. These strong results were driven by demand for retail space in well-located grocery-anchored neighborhood shopping centers. Leased portfolio occupancy accounts for all neighbors under an active lease; it does not consider temporarily closed neighbors.
Leasing Activity
During the second quarter of 2020, 169 leases (new, renewal and options) were executed totaling approximately 1.2 million square feet. This compared to 259 leases executed totaling approximately 1.1 million square feet during the second quarter of 2019.
Comparable rent spreads during the quarter, which compare the percentage increase (or decrease) of new or renewal leases to the expiring lease of a unit that was occupied within the past 12 months, were 15.5% for new leases, 7.1% for renewal leases (excluding options), and 8.5% combined (new and renewal leases).
During the first six months of 2020, 383 leases (new, renewal and options) were executed totaling approximately 2.3 million square feet. This compared to 529 leases executed totaling approximately 2.1 million square feet during the same year-ago period.
Comparable rent spreads during the first six months of 2020 were 10.8% for new leases, 9.2% for renewal leases (excluding options), and 9.5% combined (new and renewal leases).
Disposition & Acquisition Activity
During the quarter, the Company sold one property, generating $8.3 million in proceeds. In the near term, disposition proceeds are expected to be used to fund tax-efficient acquisitions and to help preserve liquidity during the current economic uncertainty. There were no acquisitions during the quarter.
During the six months ended June 30, 2020, the Company sold four properties, generating $25.8 million in proceeds.
During the first six months of 2020, PECO acquired land that was previously subject to a ground lease, as well as an outparcel adjacent to one of its shopping centers.
The Company may sell certain assets during the coming quarters as its capital recycling program winds down; however, the pace of dispositions and acquisitions will be impacted by the current economic uncertainty resulting from the COVID-19 pandemic.
Exhibit 99.1
Balance Sheet Highlights at June 30, 2020
At quarter-end, PECO had approximately $490 million of borrowing capacity available on its $500 million revolving credit facility, net of outstanding letters of credit. On April 1, 2020, the Company drew $200 million on its revolving credit facility, which was fully repaid during the quarter.
Net debt to total enterprise value (“TEV”) was 44.4% at June 30, 2020, compared to 39.5% at December 31, 2019. This increase was solely driven by the change in the estimated value per share of our common stock, as net debt decreased by $73.5 million from December 31, 2019.
Net debt to adjusted earnings before interest, taxes, depreciation, and amortization for real estate (“EBITDAre”) annualized was 7.1x at June 30, 2020, compared to 7.2x at December 31, 2019.
At June 30, 2020, the Company's outstanding debt had a weighted-average interest rate of 3.1%, a weighted-average maturity of 4.5 years, and 75.2% of its total debt was fixed-rate debt. This compared to a weighted-average interest rate of 3.4%, a weighted-average maturity of 5.0 years, and 89.4% fixed-rate debt at December 31, 2019.
Distributions
For the second quarter ended June 30, 2020, total distributions of $18.6 million were paid to common stockholders and operating partnership unit (“OP unit”) holders. All distributions were paid in cash as the distribution reinvestment plan is currently suspended.
For the first six months of 2020, total distributions of $74.4 million were paid to common stockholders and OP unit holders, including $15.9 million reinvested through the distribution reinvestment plan prior to its suspension, for net cash distributions of $58.5 million.
The Company made its March 2020 distribution of $0.05583344 per share ($0.67 annualized) to stockholders and OP unit holders of record as of March 16, 2020 on April 1, 2020. Following this distribution, monthly distributions were temporarily suspended.
The Company’s board of directors will reevaluate monthly distributions when they are able to better assess the impact the COVID-19 pandemic is having on the Company.
Together with Phillips Edison Grocery Center REIT II, Inc., the Company has distributed over $1.3 billion to its stockholders and OP unit holders in the form of monthly distributions to date.
Stockholder Update Call
Chairman and Chief Executive Officer Jeff Edison, President Devin Murphy, and Chief Financial Officer John Caulfield will host a conference call on Thursday, August 13, 2020, at 12:00 p.m. Eastern Time addressing the Company’s results and recent developments. Following management’s prepared remarks, there will be a question and answer session where questions may be submitted via the webcast interface during the call.
Date: Thursday, August 13, 2020
Time: 12:00 p.m. Eastern Time
Webcast link: https://services.choruscall.com/links/peco200813.html
U.S. listen-only: 888-346-2646
Replay: A webcast replay will be available approximately one hour after the conclusion of the presentation at http://investors.phillipsedison.com/event-calendar
Submit questions in advance of the call: InvestorRelations@phillipsedison.com
The conference call and accompanying slide presentation containing financial information can be accessed by visiting the Events and Presentations page on the Company’s website at http://investors.phillipsedison.com/event-calendar.
Interested parties can access the conference call via online webcast or by telephone. If dialing in, please call the conference telephone number fifteen minutes prior to the start time and an operator will register your name and organization. Participants should ask to join the Phillips Edison & Company call.
For more information on the Company’s second quarter 2020 results, please refer to the Company’s Form 10-Q for the quarter ended June 30, 2020, which will be filed with the SEC and available on the SEC’s website at www.sec.gov.
Exhibit 99.1
PHILLIPS EDISON & COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2020 AND DECEMBER 31, 2019
(Condensed and Unaudited)
(In thousands, except per share amounts)
June 30, 2020 | December 31, 2019 | ||||||
ASSETS | |||||||
Investment in real estate: | |||||||
Land and improvements | $ | 1,544,975 | $ | 1,552,562 | |||
Building and improvements | 3,206,224 | 3,196,762 | |||||
In-place lease assets | 441,067 | 442,729 | |||||
Above-market lease assets | 65,863 | 65,946 | |||||
Total investment in real estate assets | 5,258,129 | 5,257,999 | |||||
Accumulated depreciation and amortization | (841,154 | ) | (731,560 | ) | |||
Net investment in real estate assets | 4,416,975 | 4,526,439 | |||||
Investment in unconsolidated joint ventures | 41,545 | 42,854 | |||||
Total investment in real estate assets, net | 4,458,520 | 4,569,293 | |||||
Cash and cash equivalents | 53,262 | 17,820 | |||||
Restricted cash | 26,068 | 77,288 | |||||
Goodwill | 29,066 | 29,066 | |||||
Other assets, net | 135,274 | 128,690 | |||||
Real estate investment and other assets held for sale | — | 6,038 | |||||
Total assets | $ | 4,702,190 | $ | 4,828,195 | |||
LIABILITIES AND EQUITY | |||||||
Liabilities: | |||||||
Debt obligations, net | $ | 2,320,719 | $ | 2,354,099 | |||
Below-market lease liabilities, net | 105,857 | 112,319 | |||||
Earn-out liability | 22,000 | 32,000 | |||||
Derivative liabilities | 65,376 | 20,974 | |||||
Deferred income | 15,659 | 15,955 | |||||
Accounts payable and other liabilities | 85,110 | 124,054 | |||||
Total liabilities | 2,614,721 | 2,659,401 | |||||
Equity: | |||||||
Preferred stock, $0.01 par value per share, 10,000 shares authorized, zero shares issued and | |||||||
outstanding at June 30, 2020 and December 31, 2019 | — | — | |||||
Common stock, $0.01 par value per share, 1,000,000 shares authorized, 290,465 and 289,047 | |||||||
shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively | 2,905 | 2,890 | |||||
Additional paid-in capital (“APIC”) | 2,795,434 | 2,779,130 | |||||
Accumulated other comprehensive loss (“AOCI”) | (60,075 | ) | (20,762 | ) | |||
Accumulated deficit | (991,939 | ) | (947,252 | ) | |||
Total stockholders’ equity | 1,746,325 | 1,814,006 | |||||
Noncontrolling interests | 341,144 | 354,788 | |||||
Total equity | 2,087,469 | 2,168,794 | |||||
Total liabilities and equity | $ | 4,702,190 | $ | 4,828,195 | |||
Exhibit 99.1
PHILLIPS EDISON & COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019
(Condensed and Unaudited)
(In thousands, except per share amounts)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Revenues: | |||||||||||||||
Rental income | $ | 115,654 | $ | 129,030 | $ | 244,120 | $ | 257,890 | |||||||
Fees and management income | 2,760 | 3,051 | 4,925 | 6,312 | |||||||||||
Other property income | 626 | 500 | 1,518 | 1,148 | |||||||||||
Total revenues | 119,040 | 132,581 | 250,563 | 265,350 | |||||||||||
Operating Expenses: | |||||||||||||||
Property operating | 19,629 | 20,933 | 41,391 | 43,799 | |||||||||||
Real estate taxes | 16,453 | 17,930 | 33,565 | 35,278 | |||||||||||
General and administrative | 9,806 | 13,540 | 20,546 | 26,750 | |||||||||||
Depreciation and amortization | 56,370 | 59,554 | 112,597 | 120,543 | |||||||||||
Impairment of real estate assets | — | 25,199 | — | 38,916 | |||||||||||
Total operating expenses | 102,258 | 137,156 | 208,099 | 265,286 | |||||||||||
Other: | |||||||||||||||
Interest expense, net | (22,154 | ) | (25,758 | ) | (44,929 | ) | (50,842 | ) | |||||||
(Loss) gain on disposal of property, net | (541 | ) | (1,266 | ) | (2,118 | ) | 5,855 | ||||||||
Other (expense) income, net | (500 | ) | (10,573 | ) | 9,369 | (3,037 | ) | ||||||||
Net (loss) income | (6,413 | ) | (42,172 | ) | 4,786 | (47,960 | ) | ||||||||
Net loss (income) attributable to noncontrolling interests | 825 | 5,602 | (605 | ) | 6,195 | ||||||||||
Net (loss) income attributable to stockholders | $ | (5,588 | ) | $ | (36,570 | ) | $ | 4,181 | $ | (41,765 | ) | ||||
Earnings per common share: | |||||||||||||||
Net (loss) income per share attributable to stockholders - basic and diluted | $ | (0.02 | ) | $ | (0.13 | ) | $ | 0.01 | $ | (0.15 | ) | ||||
Exhibit 99.1
Non-GAAP Disclosures
Same-Center Net Operating Income
We present Same-Center NOI as a supplemental measure of our performance. We define NOI as total operating revenues, adjusted to exclude non-cash revenue items, less property operating expenses and real estate taxes. For the three and six months ended June 30, 2020 and 2019, Same-Center NOI represents the NOI for the 278 properties that were wholly-owned and operational for the entire portion of both comparable reporting periods. We believe Same-Center NOI provides useful information to our investors about our financial and operating performance because it provides a performance measure of the revenues and expenses directly involved in owning and operating real estate assets and provides a perspective not immediately apparent from net income (loss). Because Same-Center NOI excludes the change in NOI from properties acquired or disposed of after December 31, 2018, it highlights operating trends such as occupancy levels, rental rates, and operating costs on properties that were operational for both comparable periods. Other REITs may use different methodologies for calculating Same-Center NOI, and accordingly, our Same-Center NOI may not be comparable to other REITs.
Same-Center NOI should not be viewed as an alternative measure of our financial performance as it does not reflect the operations of our entire portfolio, nor does it reflect the impact of general and administrative expenses, depreciation and amortization, interest expense, other income (expense), or the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties that could materially impact our results from operations.
Funds from Operations and Core Funds from Operations
FFO is a non-GAAP performance financial measure that is widely recognized as a measure of REIT operating performance. The National Association of Real Estate Investment Trusts (“Nareit”) defines FFO as net income (loss) computed in accordance with GAAP, excluding gains (or losses) from sales of property and gains (or losses) from change in control, plus depreciation and amortization, and after adjustments for impairment losses on real estate and impairments of in-substance real estate investments in investees that are driven by measurable decreases in the fair value of the depreciable real estate held by the unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO on the same basis. We calculate FFO Attributable to Stockholders and Convertible Noncontrolling Interests in a manner consistent with the Nareit definition, with an additional adjustment made for noncontrolling interests that are not convertible into common stock.
Core FFO is an additional performance financial measure used by us as FFO includes certain non-comparable items that affect our performance over time. We believe that Core FFO is helpful in assisting management and investors with the assessment of the sustainability of operating performance in future periods. We believe it is more reflective of our core operating performance and provides an additional measure to compare our performance across reporting periods on a consistent basis by excluding items that may cause short-term fluctuations in net income (loss). To arrive at Core FFO, we adjust FFO attributable to stockholders and convertible noncontrolling interests to exclude certain recurring and non-recurring items including, but not limited to, depreciation and amortization of corporate assets, changes in the fair value of the earn-out liability, amortization of unconsolidated joint venture basis differences, gains or losses on the extinguishment or modification of debt, other impairment charges, and transaction and acquisition expenses.
FFO, FFO Attributable to Stockholders and Convertible Noncontrolling Interests, and Core FFO should not be considered alternatives to net income (loss) or income (loss) from continuing operations under GAAP, as an indication of our liquidity, nor as an indication of funds available to cover our cash needs, including our ability to fund distributions. Core FFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate our business plan in the manner currently contemplated.
Accordingly, FFO, FFO Attributable to Stockholders and Convertible Noncontrolling Interests, and Core FFO should be reviewed in connection with other GAAP measurements, and should not be viewed as more prominent measures of performance than net income (loss) or cash flows from operations prepared in accordance with GAAP. Our FFO, FFO Attributable to Stockholders and Convertible Noncontrolling Interests, and Core FFO, as presented, may not be comparable to amounts calculated by other REITs.
Earnings Before Interest, Taxes, Depreciation, and Amortization for Real Estate and Adjusted EBITDAre
We have included the calculation of EBITDAre to better align with publicly traded REITs. Additionally, we believe that, as another important earnings metric, it is a useful indicator of our ability to support our debt obligations. Nareit defines EBITDAre as net income (loss) computed in accordance with GAAP before (i) interest expense, (ii) income tax expense, (iii) depreciation and amortization, (iv) gains or losses from disposition of depreciable property, and (v) impairment write-downs of depreciable property. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect EBITDAre on the same basis.
Adjusted EBITDAre is an additional performance measure used by us as EBITDAre includes certain non-comparable items that affect our performance over time. To arrive at Adjusted EBITDAre, we exclude certain
Exhibit 99.1
recurring and non-recurring items from EBITDAre, including, but not limited to: (i) changes in the fair value of the earn-out liability; (ii) other impairment charges; (iii) amortization of basis differences in our investments in our unconsolidated joint ventures; and (iv) transaction and acquisition expenses.
We use EBITDAre and Adjusted EBITDAre as additional measures of operating performance which allow us to compare earnings independent of capital structure, determine debt service and fixed cost coverage, and measure enterprise value. EBITDAre and Adjusted EBITDAre should not be considered as alternatives to net income (loss), as an indication of our liquidity, nor as an indication of funds available to cover our cash needs, including our ability to fund distributions. Accordingly, EBITDAre and Adjusted EBITDAre should be reviewed in connection with other GAAP measurements, and should not be viewed as more prominent measures of performance than net income (loss) or cash flows from operations prepared in accordance with GAAP. Our EBITDAre and Adjusted EBITDAre, as presented, may not be comparable to amounts calculated by other REITs.
Exhibit 99.1
The table below compares Same-Center NOI (in thousands):
Three Months Ended June 30, | Favorable (Unfavorable) | Six Months Ended June 30, | Favorable (Unfavorable) | ||||||||||||||||||||||||||
2020 | 2019(1) | $ Change | % Change | 2020 | 2019 | $ Change | % Change | ||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||
Rental income(1) | $ | 84,506 | $ | 90,089 | $ | (5,583 | ) | $ | 175,422 | $ | 179,696 | $ | (4,274 | ) | |||||||||||||||
Tenant recovery income | 28,067 | 27,277 | 790 | 58,372 | 56,005 | 2,367 | |||||||||||||||||||||||
Other property income | 591 | 447 | 144 | 1,465 | 1,059 | 406 | |||||||||||||||||||||||
Total revenues | 113,164 | 117,813 | (4,649 | ) | (3.9 | )% | 235,259 | 236,760 | (1,501 | ) | (0.6 | )% | |||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||||
Property operating expenses | 16,728 | 16,140 | (588 | ) | 34,971 | 34,213 | (758 | ) | |||||||||||||||||||||
Real estate taxes | 16,164 | 17,001 | 837 | 33,284 | 33,383 | 99 | |||||||||||||||||||||||
Total operating expenses | 32,892 | 33,141 | 249 | 0.8 | % | 68,255 | 67,596 | (659 | ) | (1.0 | )% | ||||||||||||||||||
Total Same-Center NOI | $ | 80,272 | $ | 84,672 | $ | (4,400 | ) | (5.2 | )% | $ | 167,004 | $ | 169,164 | $ | (2,160 | ) | (1.3 | )% | |||||||||||
(1) | Excludes straight-line rental income, net amortization of above- and below-market leases, and lease buyout income. |
Below is a reconciliation of Net (Loss) Income to NOI for our real estate investments and Same-Center NOI (in thousands):
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2020 | 2019(1) | 2020 | 2019(1) | ||||||||||||
Net (loss) income | $ | (6,413 | ) | $ | (42,172 | ) | $ | 4,786 | $ | (47,960 | ) | ||||
Adjusted to exclude: | |||||||||||||||
Fees and management income | (2,760 | ) | (3,051 | ) | (4,925 | ) | (6,312 | ) | |||||||
Straight-line rental expense (income)(2) | 948 | (2,819 | ) | (1,364 | ) | (4,532 | ) | ||||||||
Net amortization of above- and below-market leases | (795 | ) | (1,091 | ) | (1,583 | ) | (2,224 | ) | |||||||
Lease buyout income | (214 | ) | (223 | ) | (308 | ) | (456 | ) | |||||||
General and administrative expenses | 9,806 | 13,540 | 20,546 | 26,750 | |||||||||||
Depreciation and amortization | 56,370 | 59,554 | 112,597 | 120,543 | |||||||||||
Impairment of real estate assets | — | 25,199 | — | 38,916 | |||||||||||
Interest expense, net | 22,154 | 25,758 | 44,929 | 50,842 | |||||||||||
Loss (gain) on disposal of property, net | 541 | 1,266 | 2,118 | (5,855 | ) | ||||||||||
Other expense (income), net | 500 | 10,573 | (9,369 | ) | 3,037 | ||||||||||
Property operating expenses related to fees and management income | 891 | 1,531 | 1,528 | 2,826 | |||||||||||
NOI for real estate investments | 81,028 | 88,065 | 168,955 | 175,575 | |||||||||||
Less: Non-same-center NOI(3) | (756 | ) | (3,393 | ) | (1,951 | ) | (6,411 | ) | |||||||
Total Same-Center NOI | $ | 80,272 | $ | 84,672 | $ | 167,004 | $ | 169,164 | |||||||
(1) | Certain prior period amounts have been reclassified to conform with current year presentation. |
(2) | Excludes straight-line rent adjustments for neighbors deemed to be non-creditworthy. |
(3) | Includes operating revenues and expenses from non-same-center properties which includes properties acquired or sold and corporate activities. |
Exhibit 99.1
The following table presents our calculation of FFO, FFO Attributable to Stockholders and Convertible Noncontrolling Interests, and Core FFO and provides additional information related to our operations (in thousands, except per share amounts):
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019(1) | ||||||||||||
Calculation of FFO Attributable to Stockholders and Convertible Noncontrolling Interests | |||||||||||||||
Net (loss) income | $ | (6,413 | ) | $ | (42,172 | ) | $ | 4,786 | $ | (47,960 | ) | ||||
Adjustments: | |||||||||||||||
Depreciation and amortization of real estate assets | 54,892 | 57,828 | 109,709 | 117,170 | |||||||||||
Impairment of real estate assets | — | 25,199 | — | 38,916 | |||||||||||
Loss (gain) on disposal of property, net | 541 | 1,266 | 2,118 | (5,855 | ) | ||||||||||
Adjustments related to unconsolidated joint ventures | 940 | 1,051 | 1,594 | 2,106 | |||||||||||
FFO attributable to the Company | 49,960 | 43,172 | 118,207 | 104,377 | |||||||||||
Adjustments attributable to noncontrolling interests not convertible into common stock | — | (41 | ) | — | (231 | ) | |||||||||
FFO attributable to stockholders and convertible noncontrolling interests | $ | 49,960 | $ | 43,131 | $ | 118,207 | $ | 104,146 | |||||||
Calculation of Core FFO | |||||||||||||||
FFO attributable to stockholders and convertible noncontrolling interests | $ | 49,960 | $ | 43,131 | $ | 118,207 | $ | 104,146 | |||||||
Adjustments: | |||||||||||||||
Depreciation and amortization of corporate assets | 1,478 | 1,726 | 2,888 | 3,373 | |||||||||||
Change in fair value of earn-out liability | — | — | (10,000 | ) | (7,500 | ) | |||||||||
Amortization of unconsolidated joint venture basis differences | 254 | 353 | 721 | 697 | |||||||||||
Loss on extinguishment or modification of debt, net | — | — | 73 | — | |||||||||||
Other impairment charges | — | 9,661 | — | 9,661 | |||||||||||
Transaction and acquisition expenses | 14 | 188 | 59 | 276 | |||||||||||
Core FFO | $ | 51,706 | $ | 55,059 | $ | 111,948 | $ | 110,653 | |||||||
FFO Attributable to Stockholders and Convertible Noncontrolling Interests per share and Core FFO per share | |||||||||||||||
Weighted-average common shares outstanding - diluted(2) | 333,494 | 326,607 | 333,420 | 326,124 | |||||||||||
FFO attributable to stockholders and convertible noncontrolling interests per share - diluted | $ | 0.15 | $ | 0.13 | $ | 0.35 | $ | 0.32 | |||||||
Core FFO per share - diluted | $ | 0.16 | $ | 0.17 | $ | 0.34 | $ | 0.34 | |||||||
(1) | Certain prior period amounts have been reclassified to conform with current year presentation. |
(2) | Restricted stock awards were dilutive to FFO Attributable to Stockholders and Convertible Noncontrolling Interests per share and Core FFO per share for the three and six months ended June 30, 2020 and 2019, and, accordingly, their impact was included in the weighted-average common shares used in their respective per share calculations. For the three months ended June 30, 2020 and for the three and six months ended June 30, 2019, restricted stock awards had an anti-dilutive effect upon the calculation of earnings per share and thus were excluded. |
Exhibit 99.1
The following table presents our calculation of EBITDAre and Adjusted EBITDAre and provides additional information related to our operations (in thousands, except per share amounts):
Three Months Ended June 30, | Six Months Ended June 30, | Year Ended | |||||||||||||||||
2020 | 2019 | 2020 | 2019 | 2019 | |||||||||||||||
Calculation of EBITDAre | |||||||||||||||||||
Net (loss) income | $ | (6,413 | ) | $ | (42,172 | ) | $ | 4,786 | $ | (47,960 | ) | $ | (72,826 | ) | |||||
Adjustments: | |||||||||||||||||||
Depreciation and amortization | 56,370 | 59,554 | 112,597 | 120,543 | 236,870 | ||||||||||||||
Interest expense, net | 22,154 | 25,758 | 44,929 | 50,842 | 103,174 | ||||||||||||||
Loss (gain) on disposal of property, net | 541 | 1,266 | 2,118 | (5,855 | ) | (28,170 | ) | ||||||||||||
Impairment of real estate assets | — | 25,199 | — | 38,916 | 87,393 | ||||||||||||||
Federal, state, and local tax expense | 180 | 341 | 209 | 341 | 785 | ||||||||||||||
Adjustments related to unconsolidated joint ventures | 1,391 | 1,763 | 2,568 | 3,529 | 2,571 | ||||||||||||||
EBITDAre | $ | 74,223 | $ | 71,709 | $ | 167,207 | $ | 160,356 | $ | 329,797 | |||||||||
Calculation of Adjusted EBITDAre | |||||||||||||||||||
EBITDAre | $ | 74,223 | $ | 71,709 | $ | 167,207 | $ | 160,356 | $ | 329,797 | |||||||||
Adjustments: | |||||||||||||||||||
Change in fair value of earn-out liability | — | — | (10,000 | ) | (7,500 | ) | (7,500 | ) | |||||||||||
Other impairment charges | — | 9,661 | — | 9,661 | 9,661 | ||||||||||||||
Transaction and acquisition expenses | 14 | 188 | 59 | 276 | 598 | ||||||||||||||
Amortization of unconsolidated joint venture basis differences | 254 | 353 | 721 | 697 | 2,854 | ||||||||||||||
Adjusted EBITDAre | $ | 74,491 | $ | 81,911 | $ | 157,987 | $ | 163,490 | $ | 335,410 | |||||||||
Financial Leverage Ratios
We believe our debt to Adjusted EBITDAre, debt to total enterprise value, and debt covenant compliance as of June 30, 2020 allow us access to future borrowings as needed in the near term. The following table presents our calculation of net debt and total enterprise value, inclusive of our prorated portion of net debt and cash and cash equivalents owned through our joint ventures, as of June 30, 2020 and December 31, 2019 (dollars in thousands):
June 30, 2020 | December 31, 2019 | ||||||
Net debt: | |||||||
Total debt, excluding market adjustments and deferred financing expenses | $ | 2,384,553 | $ | 2,421,520 | |||
Less: Cash and cash equivalents | 54,894 | 18,376 | |||||
Net debt | $ | 2,329,659 | $ | 2,403,144 | |||
Enterprise value: | |||||||
Net debt | $ | 2,329,659 | $ | 2,403,144 | |||
Total equity value(1) | 2,914,931 | 3,682,161 | |||||
Total enterprise value | $ | 5,244,590 | $ | 6,085,305 | |||
(1) | Total equity value is calculated as the number of common shares and OP units outstanding multiplied by the EVPS as of June 30, 2020 and December 31, 2019, respectively. There were 333.1 million diluted shares outstanding with an EVPS of $8.75 and 331.7 million diluted shares outstanding with an EVPS of $11.10 as of June 30, 2020 and December 31, 2019, respectively. |
The following table presents our calculation of net debt to Adjusted EBITDAre and net debt to total enterprise value as of June 30, 2020 and December 31, 2019 (dollars in thousands):
June 30, 2020 | December 31, 2019 | ||||||
Net debt to Adjusted EBITDAre - annualized: | |||||||
Net debt | $ | 2,329,659 | $ | 2,403,144 | |||
Adjusted EBITDAre - annualized(1) | 329,907 | 335,410 | |||||
Net debt to Adjusted EBITDAre - annualized | 7.1 | x | 7.2 | x | |||
Net debt to total enterprise value | |||||||
Net debt | $ | 2,329,659 | $ | 2,403,144 | |||
Total enterprise value | 5,244,590 | 6,085,305 | |||||
Net debt to total enterprise value | 44.4 | % | 39.5 | % | |||
(1) | Adjusted EBITDAre is annualized based on trailing twelve months. |
About Phillips Edison & Company
Phillips Edison & Company, Inc. (“PECO”), an internally-managed REIT, is one of the nation’s largest owners and operators of grocery-anchored shopping centers. PECO’s diversified portfolio of well-occupied neighborhood shopping centers features a mix of national and regional retailers selling necessity-based goods and services in fundamentally strong markets throughout the United States. Through its vertically-integrated operating platform, the Company manages a portfolio of 311 properties, including 284 wholly-owned properties comprising approximately 31.8 million square feet across 31 states (as of June 30, 2020). PECO has generated strong operating results over its 29+ year history and has partnered with leading institutional commercial real estate investors including TPG Real Estate and The Northwestern Mutual Life Insurance Company. The Company remains exclusively focused on creating great grocery-anchored shopping experiences and improving the communities it serves one center at a time. For more information, please visit www.phillipsedison.com.
Forward-Looking Statements
Certain statements contained in this press release for Phillips Edison & Company, Inc. (“we,” the “Company,” “our,” or “us”) other than historical facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. We intend for all such forward-looking statements to be covered by the applicable safe harbor provisions for forward-looking statements contained in those Acts. Such forward-looking statements generally can be identified by the use of forward-looking terminology such as “estimated,” “may,” “will,” “expect,” “expectations,” “intend,” “anticipate,” “believe,” “continue,” “remain,” “initiatives,” “focus,” “seek,” “strategy,” “plan,” “potential,” “projected,” “foreseeable,” “future,” “predict,” “long term,” “once,” “should,” “could,” “uncertainty,” or other similar words. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this report is filed with the U.S. Securities and Exchange Commission (“SEC”). Such statements include, but are not limited to, statements about our focus, plans, strategies, initiatives, and prospects; statements about the global pandemic of a novel coronavirus (“COVID-19”), including its duration and potential or expected impact on our tenants and our business; statements about our EVPS and when it may be updated; statements about the duration or extent of the suspension of our distributions, share repurchase program, and dividend reinvestment program; and statements about our future results of operations, capital expenditures, and liquidity. Such statements are subject to known and unknown risks and uncertainties, which could cause actual results to differ materially from those projected or anticipated, including, without limitation, (i) changes in national, regional, or local economic climates; (ii) local market conditions, including an oversupply of space in, or a reduction in demand for, properties similar to those in our portfolio; (iii) vacancies, changes in market rental rates, and the need to periodically repair, renovate, and re-let space; (iv) changes in interest rates and the availability of permanent mortgage financing; (v) competition from other available properties and the attractiveness of properties in our portfolio to our tenants; (vi) the financial stability of tenants, including the ability of tenants to pay rent; (vii) changes in tax, real estate, environmental, and zoning laws; (viii) the concentration of our portfolio in a limited number of industries, geographies, or investments; (ix) the effects of the COVID-19 pandemic, including on the demand for consumer goods and services and levels of consumer confidence in the safety of visiting shopping centers as a result of the COVID-19 pandemic; (x) the measures taken by federal, state, and local government agencies and tenants in response to the COVID-19 pandemic, including mandatory business shutdowns, stay-at-home orders and social distancing guidelines; (xi) the impact of the COVID-19 pandemic on our tenants and their ability to pay rent on time or at all, or to renew their leases and, in the case of non-renewal, our ability to re-lease the space at the same or more favorable terms or at all; (xii) the length and severity of the
Exhibit 99.1
COVID-19 pandemic in the United States; (xiii) the pace of recovery following the COVID-19 pandemic given the current severe economic contraction and increase in unemployment rates; (xiv) our ability to implement cost containment strategies; (xv) our and our tenants’ ability to obtain loans under the CARES Act or similar state programs; (xvi) our ability to pay down, refinance, restructure, or extend our indebtedness as it becomes due; (xvii) to the extent we were seeking to dispose of properties in the near term, significantly greater uncertainty regarding our ability to do so at attractive prices; (xviii) the impact of the COVID-19 pandemic on our business, results of operations, financial condition, and liquidity; and (xix) supply chain disruptions due to the COVID-19 pandemic. Additional important factors that could cause actual results to differ are described in the filings made from time to time by the Company with the SEC and include the risk factors and other risks and uncertainties described in our 2019 Annual Report on Form 10-K, filed with the SEC on March 12, 2020, and those included in our Quarterly Reports on Form 10-Q, in each case as updated from time to time in our periodic and/or current reports filed with the SEC, which are accessible on the SEC’s website at www.sec.gov.
Except as required by law, we do not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.
Investors:
Phillips Edison & Company, Inc.
Michael Koehler, Vice President of Investor Relations
(513) 338-2743
InvestorRelations@phillipsedison.com
Source: Phillips Edison & Company, Inc.
###
Second Quarter 2020 Results Presentation Thursday, August 13, 2020
Agenda Prepared Remarks Jeff Edison - Chairman and CEO • Overview • Q2 2020 Highlights John Caulfield - CFO • Financial Results • Balance Sheet and Debt Profile Jeff Edison - Chairman and CEO • COVID-19 Update • 2020 Outlook Question and Answer Session www.phillipsedison.com/investors 2
Forward-Looking Statement Disclosure Certain statements contained in this presentation for Phillips Edison & Company, Inc. (“we,” the “Company,” “our,” or “us”) other than historical facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. We intend for all such forward-looking statements to be covered by the applicable safe harbor provisions for forward-looking statements contained in those Acts. Such forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “believe,” “hope,” “continue,” “likely,” “outlook,” “focus,” “seek,” “objective,” “goal,” “plan,” “potential,” “future,” “could,” “would,” “uncertainty,” “long term,” “expectations,” “look,” or other similar words. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this report is filed with the U.S. Securities and Exchange Commission (“SEC”). Such statements include, but are not limited to, statements about our plans, strategies, initiatives, and prospects; statements about the global pandemic of a novel coronavirus (“COVID-19”), including its duration and potential or expected impact on our tenants and our business; statements about the duration or extent of the suspension of our distributions, share repurchase program, and dividend reinvestment program; and statements about our future results of operations, capital expenditures, and liquidity. Such statements are subject to known and unknown risks and uncertainties, which could cause actual results to differ materially from those projected or anticipated, including, without limitation, (i) changes in national, regional, or local economic climates; (ii) local market conditions, including an oversupply of space in, or a reduction in demand for, properties similar to those in our portfolio; (iii) vacancies, changes in market rental rates, and the need to periodically repair, renovate, and re-let space; (iv) changes in interest rates and the availability of permanent mortgage financing; (v) competition from other available properties and the attractiveness of properties in our portfolio to our tenants; (vi) the financial stability of tenants, including the ability of tenants to pay rent; (vii) changes in tax, real estate, environmental, and zoning laws; (viii) the concentration of our portfolio in a limited number of industries, geographies, or investments; (ix) the effects of the COVID-19 pandemic, including on the demand for consumer goods and services and levels of consumer confidence in the safety of visiting shopping centers as a result of the COVID-19 pandemic; (x) the measures taken by federal, state, and local government agencies and tenants in response to the COVID-19 pandemic, including mandatory business shutdowns, stay-at-home orders and social distancing guidelines; (xi) the impact of the COVID-19 pandemic on our tenants and their ability to pay rent on time or at all, or to renew their leases and, in the case of non-renewal, our ability to re-lease the space at the same or more favorable terms or at all; (xii) the length and severity of the COVID-19 pandemic in the United States; (xiii) the pace of recovery following the COVID-19 pandemic given the current severe economic contraction and increase in unemployment rates; (xiv) our ability to implement cost containment strategies; (xv) our and our tenants’ ability to obtain loans under the CARES Act or similar state programs; (xvi) our ability to pay down, refinance, restructure, or extend our indebtedness as it becomes due; (xvii) to the extent we were seeking to dispose of properties in the near term, significantly greater uncertainty regarding our ability to do so at attractive prices; (xviii) the impact of the COVID-19 pandemic on our business, results of operations, financial condition, and liquidity; and (xix) supply chain disruptions due to the COVID-19 pandemic. Additional important factors that could cause actual results to differ are described in the filings made from time to time by the Company with the SEC and include the risk factors and other risks and uncertainties described in our 2019 Annual Report on Form 10-K, filed with the SEC on March 12, 2020 and those included in our Quarterly Reports on Form 10-Q, in each case as updated from time to time in our periodic and/or current reports filed with the SEC, which are accessible on the SEC’s website at www.sec.gov. Except as required by law, we do not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise. www.phillipsedison.com/investors 3
PECO’s National Portfolio 284 Our broad national footprint of grocery- Wholly-owned Properties anchored shopping centers is complemented by 97.0% local market expertise. Grocery-anchored 31 States 31.8 million Square Feet 95.6% Total Occupancy 90.3% In-line Occupancy 76.6% Grocer, national & regional neighbor rent* Atlanta, Chicago, Tampa/St. Petersburg, 77.0% Dallas, & Minneapolis/St. Paul Service & necessity-based neighbor rent* Top 5 markets by property count All Statistics as of June 30, 2020. *Annualized Base Rent (“ABR”) includes wholly-owned properties and the prorated share www.phillipsedison.com/investors owned through our joint ventures. Necessity-based neighbors include grocers, service providers, and restaurants. 4
Diverse Roster of Necessity- and Service-based Neighbors Top 5 Grocery-Anchors & Percent of Total ABR* Top 5 In-line Neighbors & Percent of In-line ABR* 6.8% 5.6% 4.5% 4.1% 2.3% 1.5% 1.3% 1.0% 1.0% 0.9% ABR by Neighbor Industry* ABR by Neighbor Type* Retail Grocery Grocery 23.0% National & Anchor Anchor Regional 35.5% 35.5% 41.1% Services Local Restaurant 26.2% 23.4% 15.3% www.phillipsedison.com/investors *Annualized base rent (“ABR”) equals monthly contractual rent as of June 30, 2020, multiplied by 12 months. Includes wholly-owned properties and the 5 prorated share owned through our joint ventures.
Highlights Second Quarter 2020 (vs. Second Quarter 2019) • 97% of neighbor spaces are open for business as of August 10, 2020 • Rent and recovery collections totaled 86% of monthly billings for the quarter • Reported net loss of $6.4 million • Same-center net operating income (“NOI”) decreased 5.2% • Core funds from operations (“Core FFO”) decreased 6.1% to $51.7 million, and decreased to $0.16 from $0.17 per diluted share • Expense reductions at the corporate level and lower interest partially mitigated the declines from lower collections at the property level • Paid off the outstanding balance on the $500 million revolving credit facility www.phillipsedison.com/investors 6
Same-Center NOI Six Months Ended June 30, 2020 Six Months Ended Favorable June 30, (Unfavorable) (in thousands) 2020 2019 $ Change % Change Revenues:(1) Rental income(2) $ 175,422 $ 179,696 $ (4,274) (2.4)% Tenant recovery income 58,372 56,005 2,367 4.2 % Other property income 1,465 1,059 406 38.3 % Total Revenues 235,259 236,760 (1,501) (0.6)% Operating Expenses:(1) Property operating expenses 34,971 34,213 (758) (2.2)% Real estate taxes 33,284 33,383 99 0.3 % Total Operating Expenses 68,255 67,596 (659) (1.0)% Total Same-Center NOI $ 167,004 $ 169,164 $ (2,160) (1.3)% (1) Same-Center represents 278 same-center properties. For additional information, see our reconciliation from Net Income (Loss) to NOI for real estate investments and Same-Center NOI in the appendix of this presentation. (2) Excludes straight-line rental income, net amortization of above- and below-market leases, and lease buyout income. www.phillipsedison.com/investors 7
Financial Results Six Months Ended June 30, 2020 Six Months Ended Favorable June 30, (Unfavorable) (in thousands, except per share amounts) 2020 2019 $ Change % Change Net Income (Loss) $ 4,786 $ (47,960) $ 52,746 110.0 % Adjustments(1) 113,421 152,106 (38,685) (25.4)% FFO Attributable to Stockholders and Convertible 118,207 104,146 14,061 13.5 % Noncontrolling Interests(2) Adjustments(3) (6,259) 6,507 (12,766) NM Core FFO $ 111,948 $ 110,653 $ 1,295 1.2 % Diluted FFO Attributable to Stockholders and Convertible $ 0.35 $ 0.32 $ 0.03 9.4 % Noncontrolling Interests(2)/Share Diluted Core FFO/Share $ 0.34 $ 0.34 $ — — % (1) Adjustments include depreciation and amortization of real estate assets, adjustments for impairment losses on depreciable real estate, net gain/loss on disposal of property, adjustments related to unconsolidated joint ventures, and noncontrolling interests not convertible into common stock. (2) Convertible noncontrolling interests = Phillips Edison Grocery Center Operating Partnership I, L.P. operating partnership units (“OP units”) (3) Adjustments include depreciation and amortization of corporate assets; change in fair value of earn-out liability; loss on extinguishment or modification of debt, net; amortization of unconsolidated joint venture basis differences; other impairment charges; and transaction and acquisition expenses. * See Appendix for a complete reconciliation of Net Income (Loss) to FFO and Core FFO www.phillipsedison.com/investors 8
Same-Center NOI and Core FFO Quarterly and YTD 2020 2019 % Change Same-Center NOI - Q1 $ 86,732 $ 84,492 2.7 % Same Center NOI - Q2 80,272 84,672 (5.2)% Same-Center NOI - YTD $ 167,004 $ 169,164 (1.3)% 2020 2019 % Change Q1 Core FFO $ 60,242 $ 55,594 8.4 % Core FFO per share - diluted $ 0.18 $ 0.17 5.9 % Q2 Core FFO $ 51,706 $ 55,059 (6.1)% Core FFO per share - diluted $ 0.16 $ 0.17 (5.9)% YTD Core FFO $ 111,948 $ 110,653 1.2 % Core FFO per share - diluted $ 0.34 $ 0.34 — % * See Appendix for a complete reconciliation of Net Income (Loss) to FFO and Core FFO and Net Income (Loss) to Same-Center NOI www.phillipsedison.com/investors 9
Debt Profile and Maturity Ladder June 30, 2020 Net Debt to Total Enterprise Value(1) 44.4% Net Debt to Adjusted EBITDAre(2) 7.1x Weighted-Average Interest Rate 3.1% Weighted-Average Years to Maturity(3) 4.5 Fixed-Rate Debt 75.2% Approximate Availability Remaining on $500M Line of Credit(4) $490M 600 500 400 ) s n o i l l i 300 M ( $ 200 100 0 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 Thereafter Secured Property Debt Unsecured Term Loans (1) Inclusive of our prorated portion of net debt and cash and cash equivalents owned through our joint ventures. Total equity value is calculated as the number of common shares and OP units outstanding multiplied by the EVPS as of June 30, 2020. There were 333.1 million diluted shares outstanding with an EVPS of $8.75 as of June 30, 2020. (2) Adjusted EBITDAre is annualized based on the trailing twelve months. See our reconciliation from Net Income (Loss) to Adjusted EBITDAre in the appendix of this presentation. (3) Excludes any extension options available. (4) Availability reduced by outstanding letters of credit. www.phillipsedison.com/investors 10
Impact of the COVID-19 Pandemic • Second Quarter 2020 U.S. GDP decreased 32.9%, the largest quarterly decrease ever(1) • July 2020 unemployment rate of 10.2%(2) • Initial unemployment claims have been over 1 million for the 20th consecutive week(3) • Concerns about retail - 23 major retailers (both public and private) have filed for bankruptcy(4) • Uncertainty around consumer discretionary spending during and after the pandemic (1) Bureau of Economic Analysis (2) Bureau of Labor Statistics (3) As of August 6, 2020. https://www.cnbc.com/2020/08/06/weekly-jobless-claims.html www.phillipsedison.com/investors (4) As of July 30, 2020. https://www.retaildive.com/news/the-running-list-of-2020-retail-bankruptcies/571159/ 11
PECO Portfolio Neighbor Details by ABR Essential Retail & Services represents businesses generally deemed essential under most state and local stay-at-home orders. ABR = Annualized Base www.phillipsedison.com/investors Rent. Statistics reflect percentage of ABR, including pro rata ownership through our joint ventures. Statistics as of June 30, 2020 12
Portfolio Impact as a Result of the COVID-19 Pandemic 100% of our centers have remained open and operating throughout the COVID-19 pandemic. However, our revenue and collections have been negatively impacted. Total Neighbor Spaces Open(1) Rent and Recoveries Collected(1,2) As a % of total ABR As a % of monthly billings As a % of total spaces 89% 90% 84% 86% 97% 98% 91% 97% 97% 89% 75% 65% April 2020 May 2020 June 2020 July 2020 April 2020 May 2020 June 2020 July 2020 (1) Statistics are approximate and include our pro rata ownership through joint ventures and exclude statistics related to properties that have since been disposed. The total number of neighbor spaces that are or were temporarily closed in connection with COVID-19 is approximately 2,100. (2) Collections include monthly billings for rent and recoveries that were received through August 10, 2020. www.phillipsedison.com/investors 13
Current Response to COVID-19 The following steps have been implemented to maximize financial flexibility and preserve cash given the uncertainty and fluidity of the COVID-19 pandemic: 1. Temporary reductions to the 2020 base salary of the CEO (25%) and executive management team (10%), and a temporary 10% reduction to board members’ base compensation for the 2020-2021 term. 2. Monthly distributions have been temporarily suspended. 3. Capital investments are being prioritized to support the reopening of our neighbors and new leasing, or delayed to the extent possible. 4. Expense reductions have been implemented at the property and corporate levels. 5. The Share Repurchase Program for DDI (death, qualifying disability or determination of incompetence) has been suspended. The Share Repurchase Program for standard requests remains suspended. www.phillipsedison.com/investors 14
Alignment with Stockholders • Temporary executive and board salary/compensation reductions Internal Management Structure • Total compensation for PECO’s CEO and executive management team is highly incentive-based and In 2017, we merged with dependent on Company performance: our external advisor to become a fully internally- • Approximately 83% of total CEO compensation managed REIT. • Approximately 65% of President, CFO, COO, and General Counsel compensation No asset management fees, or any other • The distribution suspension affects executives as well management fees, are (Company’s largest stockholder at ~8% combined) being paid to a third party. www.phillipsedison.com/investors 15
Distributions & Total Return Distributions PECO Total Return Distributions for original PECO stockholders total between and $4.17/ Original PECO investors have seen a total share and $6.32/share.(1) return between 29% and 65% on their original investment.(2) Over $1.3 Billion returned to stockholders in the form of monthly distributions between PECO and REIT II. REIT II Total Return Distributions were temporarily suspended following the April 1, 2020 Former REIT II investors (now PECO payment. investors) have seen a total return between -2% and 10% on their original investment.(3) (1) Depending on timing of investment. Distributions are not guaranteed and are made at the discretion of PECO's board of directors. Distribution rate increased from $0.65 annualized to $0.67 annualized in February 2013. (2) Assumes investment in Phillips Edison & Company, Inc. at $10.00 per share at the end of the initial public offering, assuming distributions are taken in cash; and at the beginning of the offering, assuming distributions are reinvested. (3) Assumes investment in Phillips Edison Grocery Center REIT II, Inc. at $25.00 per share at the end of the initial public offering, assuming distributions are taken in cash; and at the beginning of the offering, assuming distributions are reinvested. www.phillipsedison.com/investors 16
2020 Outlook 1.Focus on preservation of capital and net asset value a. Conserve cash and liquidity during this time of uncertainty b. Support our neighbors in reopening and implement plans to collect missed rent 2.Prepare for future strategic opportunities a. Acquisition opportunities b. Investment management growth c. Liquidity options - partial and full www.phillipsedison.com/investors 17
Question and Answer Session If you are logged in to the webcast presentation you can submit a question by typing it into the text box and clicking “Submit Question” www.phillipsedison.com/investors 18
Thank you for joining us For More Information: InvestorRelations@PhillipsEdison.com www.phillipsedison.com/investors Investors and NIGO Servicing: (888) 518-8073 Phillips Edison Advisor Services: (833) 347-5717 www.phillipsedison.com/investors 19
Appendix
Non-GAAP Measures We present Same-Center NOI as a supplemental measure of our performance. We define NOI as total operating revenues, adjusted to exclude non-cash revenue items, less property operating expenses and real estate taxes. For the three and six months ended June 30, 2020 and 2019, Same-Center NOI represents the NOI for the 278 properties that were wholly-owned and operational for the entire portion of both comparable reporting periods. We believe Same-Center NOI provides useful information to our investors about our financial and operating performance because it provides a performance measure of the revenues and expenses directly involved in owning and operating real estate assets and provides a perspective not immediately apparent from net income (loss). Because Same-Center NOI excludes the change in NOI from properties acquired or disposed of after December 31, 2018, it highlights operating trends such as occupancy levels, rental rates, and operating costs on properties that were operational for both comparable periods. Other REITs may use different methodologies for calculating Same-Center NOI, and accordingly, our Same-Center NOI may not be comparable to other REITs. Same-Center NOI should not be viewed as an alternative measure of our financial performance as it does not reflect the operations of our entire portfolio, nor does it reflect the impact of general and administrative expenses, depreciation and amortization, interest expense, other income (expense), or the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties that could materially impact our results from operations. www.phillipsedison.com/investors 21
Non-GAAP Measures Below is a reconciliation of Net (loss) income to NOI for real estate investments and Same-Center NOI (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2020 2019(1) 2020 2019(1) Net (loss) income $ (6,413) $ (42,172) $ 4,786 $ (47,960) Adjusted to exclude: Fees and management income (2,760) (3,051) (4,925) (6,312) Straight-line rental expense (income)(2) 948 (2,819) (1,364) (4,532) Net amortization of above- and below-market leases (795) (1,091) (1,583) (2,224) Lease buyout income (214) (223) (308) (456) General and administrative expenses 9,806 13,540 20,546 26,750 Depreciation and amortization 56,370 59,554 112,597 120,543 Impairment of real estate assets — 25,199 — 38,916 Interest expense, net 22,154 25,758 44,929 50,842 Loss (gain) on disposal of property, net 541 1,266 2,118 (5,855) Other expense (income), net 500 10,573 (9,369) 3,037 Property operating expenses related to fees and management income 891 1,531 1,528 2,826 NOI for real estate investments 81,028 88,065 168,955 175,575 Less: Non-same-center NOI(2) (756) (3,393) (1,951) (6,411) Total Same-Center NOI $ 80,272 $ 84,672 $ 167,004 $ 169,164 (1) Certain prior period amounts have been reclassified to conform with current year presentation. (2) Excludes straight-line rent adjustments for neighbors deemed to be non-creditworthy. (3) Includes operating revenues and expenses from non-same-center properties which includes properties acquired or sold and corporate activities. www.phillipsedison.com/investors 22
Non-GAAP Measures Funds from Operations and Core Funds from Operations FFO is a non-GAAP performance financial measure that is widely recognized as a measure of REIT operating performance. The National Association of Real Estate Investment Trusts (“Nareit”) defines FFO as net income (loss) computed in accordance with GAAP, excluding gains (or losses) from sales of property and gains (or losses) from change in control, plus depreciation and amortization, and after adjustments for impairment losses on real estate and impairments of in-substance real estate investments in investees that are driven by measurable decreases in the fair value of the depreciable real estate held by the unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO on the same basis. We calculate FFO Attributable to Stockholders and Convertible Noncontrolling Interests in a manner consistent with the Nareit definition, with an additional adjustment made for noncontrolling interests that are not convertible into common stock. Core FFO is an additional performance financial measure used by us as FFO includes certain non-comparable items that affect our performance over time. We believe that Core FFO is helpful in assisting management and investors with the assessment of the sustainability of operating performance in future periods. We believe it is more reflective of our core operating performance and provides an additional measure to compare our performance across reporting periods on a consistent basis by excluding items that may cause short-term fluctuations in net income (loss). To arrive at Core FFO, we adjust FFO attributable to stockholders and convertible noncontrolling interests to exclude certain recurring and non- recurring items including, but not limited to, depreciation and amortization of corporate assets, changes in the fair value of the earn-out liability, amortization of unconsolidated joint venture basis differences, gains or losses on the extinguishment or modification of debt, other impairment charges, and transaction and acquisition expenses. FFO, FFO Attributable to Stockholders and Convertible Noncontrolling Interests, and Core FFO should not be considered alternatives to net income (loss) or income (loss) from continuing operations under GAAP, as an indication of our liquidity, nor as an indication of funds available to cover our cash needs, including our ability to fund distributions. Core FFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate our business plan in the manner currently contemplated. Accordingly, FFO, FFO Attributable to Stockholders and Convertible Noncontrolling Interests, and Core FFO should be reviewed in connection with other GAAP measurements, and should not be viewed as more prominent measures of performance than net income (loss) or cash flows from operations prepared in accordance with GAAP. Our FFO, FFO Attributable to Stockholders and Convertible Noncontrolling Interests, and Core FFO, as presented, may not be comparable to amounts calculated by other REITs. www.phillipsedison.com/investors 23
Non-GAAP Measures The table below presents our calculation of FFO, FFO Attributable to Stockholders and Convertible Noncontrolling Interests, and Core FFO and provides additional information related to our operations (in thousands, except per share amounts): Three Months Ended June 30, Six Months Ended June 30, 2020 2019(1) 2020 2019(1) Calculation of FFO Attributable to Stockholders and Convertible Noncontrolling Interests Net (loss) income $ (6,413) $ (42,172) $ 4,786 $ (47,960) Adjustments: Depreciation and amortization of real estate assets 54,892 57,828 109,709 117,170 Impairment of real estate assets — 25,199 — 38,916 Loss (gain) on disposal of property, net 541 1,266 2,118 (5,855) Adjustments related to unconsolidated joint ventures 940 1,051 1,594 2,106 FFO attributable to the Company 49,960 43,172 118,207 104,377 Adjustments attributable to noncontrolling interests not convertible into common stock — (41) — (231) FFO attributable to stockholders and convertible noncontrolling interests $ 49,960 $ 43,131 $ 118,207 $ 104,146 Calculation of Core FFO FFO attributable to stockholders and convertible noncontrolling interests $ 49,960 $ 43,131 $ 118,207 $ 104,146 Adjustments: Depreciation and amortization of corporate assets 1,478 1,726 2,888 3,373 Change in fair value of earn-out liability — — (10,000) (7,500) Amortization of unconsolidated joint venture basis differences 254 353 721 697 Loss on extinguishment or modification of debt, net — — 73 — Other impairment charges — 9,661 — 9,661 Transaction and acquisition expenses 14 188 59 276 Core FFO $ 51,706 $ 55,059 $ 111,948 $ 110,653 FFO Attributable to Stockholders and Convertible Noncontrolling Interests per share and Core FFO per share FFO attributable to stockholders and convertible noncontrolling interests per share - diluted(2) $ 0.15 $ 0.13 $ 0.35 $ 0.32 Core FFO per share - diluted(2) $ 0.16 $ 0.17 $ 0.34 $ 0.34 (1) Certain prior period amounts have been reclassified to confirm with current year presentation. (2) Restricted stock awards were dilutive to FFO Attributable to Stockholders and Convertible Noncontrolling Interests per share and Core FFO per share for the three and six months ended June 30, 2020 and 2019, and, accordingly, their impact was included in the weighted-average common shares used in their respective per share calculations. For the three months ended June 30, 2020 and for the three and six months ended June 30, 2019, restricted stock awards had an anti-dilutive effect upon the calculation of earnings per share and thus were excluded. www.phillipsedison.com/investors 24
Non-GAAP Measures Three Months Ended Favorable June 30, (Unfavorable (in thousands, except per share amounts) 2020 2019 $ Change % Change Net Loss $ (6,413) $ (42,172) $ 35,759 (84.8)% Adjustments(1) 56,373 85,303 (28,930) (33.9)% FFO Attributable to Stockholders and Convertible Noncontrolling Interests(2) 49,960 43,131 6,829 15.8 % Adjustments(3) 1,746 11,928 (10,182) (85.4)% Core FFO $ 51,706 $ 55,059 $ (3,353) (6.1)% Diluted FFO Attributable to Stockholders and Convertible Noncontrolling Interests(2)/Share $ 0.15 $ 0.13 $ 0.02 15.4 % Diluted Core FFO/Share $ 0.16 $ 0.17 $ (0.01) (5.9)% (1) Adjustments include depreciation and amortization of real estate assets, adjustments for impairment losses on depreciable real estate, net gain/loss on disposal of property, adjustments related to unconsolidated joint ventures, and noncontrolling interests not convertible into common stock. (2) Convertible noncontrolling interests = Phillips Edison Grocery Center Operating Partnership I, L.P. OP units. (3) Adjustments include depreciation and amortization of corporate assets; change in fair value of earn-out liability; loss on extinguishment or modification of debt, net; amortization of unconsolidated joint venture basis differences; other impairment charges; and transaction and acquisition expenses. www.phillipsedison.com/investors 25
Non-GAAP Measures Earnings Before Interest, Taxes, Depreciation, and Amortization for Real Estate (“EBITDAre”) and Adjusted EBITDAre We have included the calculation of EBITDAre to better align with publicly traded REITs. Additionally, we believe that, as another important earnings metric, it is a useful indicator of our ability to support our debt obligations. Nareit defines EBITDAre as net income (loss) computed in accordance with GAAP before (i) interest expense, (ii) income tax expense, (iii) depreciation and amortization, (iv) gains or losses from disposition of depreciable property, and (v) impairment write-downs of depreciable property. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect EBITDAre on the same basis. Adjusted EBITDAre is an additional performance measure used by us as EBITDAre includes certain non-comparable items that affect our performance over time. To arrive at Adjusted EBITDAre, we exclude certain recurring and non-recurring items from EBITDAre, including, but not limited to: (i) changes in the fair value of the earn-out liability; (ii) other impairment charges; (iii) amortization of basis differences in our investments in our unconsolidated joint ventures; and (iv) transaction and acquisition expenses. We use EBITDAre and Adjusted EBITDAre as additional measures of operating performance which allow us to compare earnings independent of capital structure, determine debt service and fixed cost coverage, and measure enterprise value. EBITDAre and Adjusted EBITDAre should not be considered as alternatives to net income (loss), as an indication of our liquidity, nor as an indication of funds available to cover our cash needs, including our ability to fund distributions. Accordingly, EBITDAre and Adjusted EBITDAre should be reviewed in connection with other GAAP measurements, and should not be viewed as more prominent measures of performance than net income (loss) or cash flows from operations prepared in accordance with GAAP. Our EBITDAre and Adjusted EBITDAre, as presented, may not be comparable to amounts calculated by other REITs. www.phillipsedison.com/investors 26
Non-GAAP Measures The following table presents our calculation of EBITDAre and Adjusted EBITDAre and provides additional information related to our operations (in thousands, except per share amounts): Three Months Ended June 30, Six Months Ended June 30, Year Ended 2020 2019 2020 2019 2019 Calculation of EBITDAre Net (loss) income $ (6,413) $ (42,172) $ 4,786 $ (47,960) $ (72,826) Adjustments: Depreciation and amortization 56,370 59,554 112,597 120,543 236,870 Interest expense, net 22,154 25,758 44,929 50,842 103,174 Loss (gain) on disposal of property, net 541 1,266 2,118 (5,855) (28,170) Impairment of real estate assets — 25,199 — 38,916 87,393 Federal, state, and local tax expense 180 341 209 341 785 Adjustments related to unconsolidated joint ventures 1,391 1,763 2,568 3,529 2,571 EBITDAre $ 74,223 $ 71,709 $ 167,207 $ 160,356 $ 329,797 Calculation of Adjusted EBITDAre EBITDAre $ 74,223 $ 71,709 $ 167,207 $ 160,356 $ 329,797 Adjustments: Change in fair value of earn-out liability — — (10,000) (7,500) (7,500) Other impairment charges — 9,661 — 9,661 9,661 Transaction and acquisition expenses 14 188 59 276 598 Amortization of unconsolidated joint venture basis differences 254 353 721 697 2,854 Adjusted EBITDAre $ 74,491 $ 81,911 $ 157,987 $ 163,490 $ 335,410 www.phillipsedison.com/investors 27
Non-GAAP Measures The following table presents our calculation of net debt to Adjusted EBITDAre and net debt to total enterprise value as of June 30, 2020 and December 31, 2019 (dollars in thousands): June 30, 2020 December 31, 2019 Net debt to Adjusted EBITDAre - annualized: Net debt $ 2,329,659 $ 2,403,144 Adjusted EBITDAre - annualized(1) 329,907 335,410 Net debt to Adjusted EBITDAre - annualized 7.1x 7.2x Net debt to total enterprise value Net debt $ 2,329,659 $ 2,403,144 Total enterprise value 5,244,590 6,085,305 Net debt to total enterprise value 44.4% 39.5% (1) Adjusted EBITDAre is annualized based on trailing twelve months. www.phillipsedison.com/investors 28