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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2021
OR
     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number: 000-54691
https://cdn.kscope.io/6c2624e4f5ba6e71c04808db4ed77850-cik0001476204-20210331_g1.jpg
PHILLIPS EDISON & COMPANY, INC.
(Exact name of registrant as specified in its charter)

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

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

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

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
NoneNoneNone
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☑    No  ☐ 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes  ☑    No  ☐  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.    
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
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.   ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  ☑
As of April 15, 2021, there were 280.8 million outstanding shares of common stock of the Registrant.



PHILLIPS EDISON & COMPANY, INC.
FORM 10-Q
TABLE OF CONTENTS
 
PART I. FINANCIAL INFORMATION
   
ITEM 1.
   
 

   
 
  
 
   
 
   
 
   
ITEM 2.
   
ITEM 3.
   
ITEM 4.
  
PART II. OTHER INFORMATION
   
ITEM 1.
ITEM 1A.
ITEM 2.
ITEM 5.
   
ITEM 6.
  

1


w PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PHILLIPS EDISON & COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2021 AND DECEMBER 31, 2020
(Condensed and Unaudited)
(In thousands, except per share amounts)
  March 31, 2021December 31, 2020
ASSETS    
Investment in real estate:    
Land and improvements$1,549,667 $1,549,362 
Building and improvements3,205,125 3,237,986 
In-place lease assets440,009 441,683 
Above-market lease assets65,212 66,106 
Total investment in real estate assets5,260,013 5,295,137 
Accumulated depreciation and amortization(980,981)(941,413)
Net investment in real estate assets4,279,032 4,353,724 
Investment in unconsolidated joint ventures33,813 37,366 
Total investment in real estate assets, net4,312,845 4,391,090 
Cash and cash equivalents20,258 104,296 
Restricted cash41,995 27,641 
Goodwill29,066 29,066 
Other assets, net138,068 126,470 
Real estate investment and other assets held for sale24,369  
Total assets$4,566,601 $4,678,563 
LIABILITIES AND EQUITY    
Liabilities:    
Debt obligations, net$2,276,972 $2,292,605 
Below-market lease liabilities, net97,865 101,746 
Earn-out liability38,000 22,000 
Derivative liabilities42,970 54,759 
Deferred income19,127 14,581 
Accounts payable and other liabilities80,152 176,943 
Liabilities of real estate investment held for sale2,109  
Total liabilities2,557,195 2,662,634 
Commitments and contingencies (Note 8)
  
Equity:    
Preferred stock, $0.01 par value per share, 10,000 shares authorized, zero shares issued and
    
outstanding at March 31, 2021 and December 31, 2020
  
Common stock, $0.01 par value per share, 1,000,000 shares authorized, 280,746 and 279,836
    
shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively
2,807 2,798 
Additional paid-in capital (“APIC”)2,746,891 2,739,358 
Accumulated other comprehensive loss (“AOCI”)
(41,695)(52,306)
Accumulated deficit(1,023,155)(999,491)
Total stockholders’ equity1,684,848 1,690,359 
Noncontrolling interests324,558 325,570 
Total equity2,009,406 2,015,929 
Total liabilities and equity$4,566,601 $4,678,563 

See notes to consolidated financial statements.
2


PHILLIPS EDISON & COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020
(Condensed and Unaudited)
(In thousands, except per share amounts)
Three Months Ended March 31,
  20212020
Revenues:
Rental income$127,623 $128,466 
Fees and management income2,286 2,165 
Other property income472 892 
Total revenues130,381 131,523 
Operating Expenses:
Property operating22,202 21,762 
Real estate taxes16,573 17,112 
General and administrative9,341 10,740 
Depreciation and amortization55,341 56,227 
Impairment of real estate assets5,000  
Total operating expenses108,457 105,841 
Other:
Interest expense, net(20,063)(22,775)
Gain (loss) on disposal of property, net13,841 (1,577)
Other (expense) income, net(15,585)9,869 
Net income117 11,199 
Net income attributable to noncontrolling interests(14)(1,430)
Net income attributable to stockholders$103 $9,769 
Earnings per common share:
Net income per share attributable to stockholders - basic and diluted (Note 10)
$0.00 $0.03 
Comprehensive income (loss):
Net income$117 $11,199 
Other comprehensive income (loss):
Change in unrealized value on interest rate swaps12,120 (43,364)
Comprehensive income (loss)12,237 (32,165)
Net income attributable to noncontrolling interests(14)(1,430)
Change in unrealized value on interest rate swaps attributable to noncontrolling interests(1,509)5,574 
Comprehensive income (loss) attributable to stockholders$10,714 $(28,021)

See notes to consolidated financial statements.
3


PHILLIPS EDISON & COMPANY, INC.
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020
(Condensed and Unaudited)
(In thousands, except per share amounts)
Three Months Ended March 31, 2021 and 2020
  Common StockAPICAOCIAccumulated DeficitTotal Stockholders’ EquityNoncontrolling InterestsTotal Equity
  SharesAmount
Balance at January 1, 2020289,047 $2,890 $2,779,130 $(20,762)$(947,252)$1,814,006 $354,788 $2,168,794 
DRIP1,436 14 15,926 — — 15,940 — 15,940 
Share repurchases(288)(3)(2,697)— — (2,700)— (2,700)
Change in unrealized value on interest
    rate swaps
— — — (37,790)— (37,790)(5,574)(43,364)
Common distributions declared, $0.17
    per share
— — — — (48,809)(48,809)— (48,809)
Distributions to noncontrolling interests— — — — — — (7,105)(7,105)
Share-based compensation103 1 140 — — 141 (290)(149)
Conversion of noncontrolling interests118 1 1,304 — — 1,305 (1,305)— 
Net income— — — — 9,769 9,769 1,430 11,199 
Balance at March 31, 2020290,416 $2,903 $2,793,803 $(58,552)$(986,292)$1,751,862 $341,944 $2,093,806 
Balance at January 1, 2021279,836 $2,798 $2,739,358 $(52,306)$(999,491)$1,690,359 $325,570 $2,015,929 
DRIP842 8 7,360 — — 7,368 — 7,368 
Share repurchases (73) (123)— — (123)— (123)
Change in unrealized value on interest
    rate swaps
— — — 10,611 — 10,611 1,509 12,120 
Common distributions declared, $0.085
    per share
— — — — (23,767)(23,767)— (23,767)
Distributions to noncontrolling interests— — — — — — (3,319)(3,319)
Share-based compensation141 1 325 — — 326 784 1,110 
Other— (29)—  (29) (29)
Net income— — — — 103 103 14 117 
Balance at March 31, 2021280,746 $2,807 $2,746,891 $(41,695)$(1,023,155)$1,684,848 $324,558 $2,009,406 

See notes to consolidated financial statements.
4


PHILLIPS EDISON & COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020
(Condensed and Unaudited)
(In thousands)
Three Months Ended March 31,
  20212020
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net income$117 $11,199 
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization of real estate assets54,341 54,817 
Impairment of real estate assets5,000  
Depreciation and amortization of corporate assets1,000 1,410 
Net amortization of above- and below-market leases(838)(788)
Amortization of deferred financing expenses1,227 1,251 
Amortization of debt and derivative adjustments354 1,061 
(Gain) loss on disposal of property, net(13,841)1,577 
Change in fair value of earn-out liability16,000 (10,000)
Straight-line rent(1,424)(2,288)
Share-based compensation1,110 (149)
Return on investment in unconsolidated joint ventures1,546 246 
Other(567)707 
Changes in operating assets and liabilities:    
Other assets, net(10,787)(15,117)
Accounts payable and other liabilities(4,487)(8,313)
Net cash provided by operating activities48,751 35,613 
CASH FLOWS FROM INVESTING ACTIVITIES:    
Real estate acquisitions(39,850)(4,319)
Capital expenditures(13,537)(15,965)
Proceeds from sale of real estate58,356 17,447 
Investment in third parties(3,000) 
Return of investment in unconsolidated joint ventures2,721 424 
Net cash provided by (used in) investing activities4,690 (2,413)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Proceeds from revolving credit facility 55,000 
Payments on revolving credit facility (21,000)
Payments on mortgages and loans payable(16,505)(32,657)
Distributions paid, net of DRIP(24,296)(32,792)
Distributions to noncontrolling interests(4,530)(7,108)
Repurchases of common stock(77,765)(5,176)
Other(29) 
Net cash used in financing activities(123,125)(43,733)
NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH(69,684)(10,533)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH:    
Beginning of period131,937 95,108 
End of period$62,253 $84,575 
RECONCILIATION TO CONSOLIDATED BALANCE SHEETS:
Cash and cash equivalents$20,258 $36,532 
Restricted cash41,995 48,043 
Cash, cash equivalents, and restricted cash at end of period$62,253 $84,575 
5


PHILLIPS EDISON & COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020
(Condensed and Unaudited)
(In thousands)
  20212020
SUPPLEMENTAL CASH FLOW DISCLOSURE, INCLUDING NON-CASH INVESTING AND FINANCING ACTIVITIES:
Cash paid for interest$18,891 $20,329 
Right-of-use (“ROU”) assets obtained in exchange for new lease liabilities194 551 
Accrued capital expenditures3,442 3,392 
Change in distributions payable(7,897)77 
Change in distributions payable - noncontrolling interests(1,211)(3)
Change in accrued share repurchase obligation(77,642)(2,476)
Distributions reinvested7,368 15,940 

See notes to consolidated financial statements.
6


Phillips Edison & Company, Inc.
Notes to Consolidated Financial Statements
(Condensed and Unaudited)
March 31, 2021

1. ORGANIZATION
Phillips Edison & Company, Inc. (“we,” the “Company,” “PECO,” “our,” or “us”) was formed as a Maryland corporation in October 2009. Substantially all of our business is conducted through Phillips Edison Grocery Center Operating Partnership I, L.P., (the “Operating Partnership”), a Delaware limited partnership formed in December 2009. We are a limited partner of the Operating Partnership, and our wholly-owned subsidiary, Phillips Edison Grocery Center OP GP I LLC, is the sole general partner of the Operating Partnership.
We are a real estate investment trust (“REIT”) that invests primarily in well-occupied, grocery-anchored, neighborhood and community shopping centers that have a mix of creditworthy national, regional, and local retailers that sell necessity-based goods and services in strong demographic markets throughout the United States. In addition to managing our own shopping centers, our third-party investment management business provides comprehensive real estate and asset management services to two institutional joint ventures, in which we have a partial ownership interest, and one private fund (collectively, the “Managed Funds”) as of March 31, 2021.
As of March 31, 2021, we wholly-owned 278 real estate properties. Additionally, we owned a 20% equity interest in Necessity Retail Partners (“NRP”), a joint venture that owned two properties, and a 14% interest in Grocery Retail Partners I LLC (“GRP I”), a joint venture that owned 20 properties.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Set forth below is a summary of the significant accounting estimates and policies that management believes are important to the preparation of our condensed consolidated interim financial statements. Certain of our accounting estimates are particularly important for an understanding of our financial position and results of operations and require the application of significant judgment by management. For example, significant estimates and assumptions have been made with respect to the useful lives of assets, remaining hold period of assets, recoverable amounts of receivables, and other fair value measurement assessments required for the preparation of the consolidated interim financial statements. As a result, these estimates are subject to a degree of uncertainty.
Beginning in 2020, the coronavirus (“COVID-19”) pandemic has caused significant disruption to our operations. All temporarily closed tenants have since been permitted to reopen. Some may be limiting the number of customers allowed in their stores, or have modified their operations in other ways that may impact their profitability, either as a result of government mandates or self-elected efforts to reduce the spread of COVID-19. These actions, as well as the continuing economic impacts of the COVID-19 pandemic, could result in increased permanent store closures. In addition to the permanent closures that have occurred in our portfolio, this could reduce the demand for leasing space in our shopping centers and result in a decline in occupancy and rental revenues in our real estate portfolio. Because of the adverse economic conditions that have occurred as a result of the impacts of the COVID-19 pandemic and the ongoing uncertainty related to the pandemic, it is possible that the estimates and assumptions that have been utilized in the preparation of the consolidated financial statements could change significantly. All of this activity impacts our estimates around the collectibility of revenue and valuation of real estate assets, goodwill and other intangible assets, and certain liabilities, among others.
There were no changes to our significant accounting policies during the three months ended March 31, 2021. For a full summary of our accounting policies, refer to our 2020 Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on March 12, 2021.
Basis of Presentation and Principles of Consolidation—The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. Readers of this Quarterly Report on Form 10-Q should refer to our audited consolidated financial statements for the year ended December 31, 2020, which are included in our 2020 Annual Report on Form 10-K. In the opinion of management, all normal and recurring adjustments necessary for the fair presentation of the unaudited consolidated financial statements for the periods presented have been included in this Quarterly Report. Our results of operations for the three months ended March 31, 2021 are not necessarily indicative of the operating results expected for the full year.
The accompanying consolidated financial statements include our accounts and those of our majority-owned subsidiaries. All intercompany balances and transactions are eliminated upon consolidation.
Certain amounts in prior periods have been reclassified to conform to current presentation.
Income Taxes—Our consolidated financial statements include the operations of wholly-owned subsidiaries that have jointly elected to be treated as Taxable REIT Subsidiaries and are subject to U.S. federal, state, and local income taxes at regular corporate tax rates. We recognized an insignificant amount of federal, state, and local income tax expense for the three months ended March 31, 2021 and 2020, and we retain a full valuation allowance for our deferred tax asset. All income tax
7


amounts are included in Other (Expense) Income, Net on the consolidated statements of operations and comprehensive income (loss) (“consolidated statements of operations”).
Recently Issued Accounting Pronouncements—On January 7, 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-01 to amend the scope of the guidance in ASU 2020-04 on facilitation of the effects of reference rate reform on financial reporting. Specifically, the amendments in ASU 2021-01 clarify that certain optional expedients and exceptions in Accounting Standards Codification (“ASC”) Topic 848, Reference Rate Reform for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. We adopted ASU 2021-01 upon its issuance and the adoption of this standard did not have a material impact on our consolidated financial statements.
Reclassifications—The following line items on our consolidated statement of cash flows for the three months ended March 31, 2020 were reclassified to conform to current year presentation:
Return on Investment in Unconsolidated Joint Ventures was listed on a separate line from Other Assets, Net; and
Net Change in Credit Facility was separated into two lines, Proceeds from Revolving Credit Facility and Payments on Revolving Credit Facility.

3. LEASES
LessorThe majority of our leases are largely similar in that the leased asset is retail space within our properties, and the lease agreements generally contain similar provisions and features, without substantial variations. All of our leases are currently classified as operating leases. Lease income related to our operating leases was as follows for the three months ended March 31, 2021 and 2020 (in thousands):
March 31, 2021March 31, 2020
Rental income related to fixed lease payments(1)
$94,966 $96,027 
Rental income related to variable lease payments(1)
31,401 31,838 
Straight-line rent amortization(2)
1,369 2,309 
Amortization of lease assets827 779 
Lease buyout income797 94 
Adjustments for collectibility(2)(3)
(1,737)(2,581)
Total rental income$127,623 $128,466 
(1)Includes rental income related to lease payments before assessing for collectibility.
(2)Includes revenue adjustments for non-creditworthy tenants.
(3)Contains general reserves; excludes reserves for straight-line rent amortization.
Approximate future fixed contractual lease payments to be received under non-cancelable operating leases in effect as of March 31, 2021, assuming no new or renegotiated leases or option extensions on lease agreements, and including the impact of rent abatements, payment plans, and tenants who have been moved to the cash basis of accounting for revenue recognition purposes are as follows (in thousands):
YearAmount
Remaining 2021$284,609 
2022351,031 
2023303,854 
2024248,929 
2025193,599 
Thereafter470,135 
Total$1,852,157 
In response to the COVID-19 pandemic, we executed payment plans with our tenants. As of April 20, 2021, we have $5.2 million of outstanding payment plans with our tenants, and we had recorded rent abatements totaling approximately $4.4 million during 2021. These payment plans and rent abatements represented approximately 1.4% and 1.1% of our wholly-owned portfolio’s annualized base rent (“ABR”), respectively. As of April 20, 2021, approximately 85% of payments are scheduled to be received by December 31, 2021 for all executed payment plans, and the weighted-average remaining term over which we expect to receive payment on executed payment plans is approximately twelve months. For the three months ended March 31, 2021 and 2020, we had $4.8 million and $2.8 million, respectively, in unfavorable monthly revenue adjustments for tenants not considered creditworthy. These amounts include the estimated impact of tenants who have filed for bankruptcy. Revenue for tenants deemed non-creditworthy is only recorded as cash is received.
No single tenant comprised 10% or more of our aggregate ABR as of March 31, 2021. As of March 31, 2021, our wholly-owned real estate investments in Florida and California represented 12.4% and 10.4% of our ABR, respectively. As a result, the geographic concentration of our portfolio makes it particularly susceptible to adverse weather or economic events, including the impact of the COVID-19 pandemic, in the Florida and California real estate markets.
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LesseeLease assets and liabilities, grouped by balance sheet line where they are recorded, consisted of the following as of March 31, 2021 and December 31, 2020 (in thousands):
Balance Sheet InformationBalance Sheet LocationMarch 31, 2021December 31, 2020
ROU assets, net - operating leasesInvestment in Real Estate$4,032 $3,867 
ROU assets, net - operating and finance leasesOther Assets, Net1,260 1,438 
Operating lease liabilityAccounts Payable and Other Liabilities5,774 5,731 
Finance lease liabilityDebt Obligations, Net91 164 

4. REAL ESTATE ACTIVITY
Property SalesThe following table summarizes our real estate disposition activity (dollars in thousands):
Three Months Ended March 31,
20212020
Number of properties sold6 3 
Number of outparcels sold(1)
1  
Proceeds from sale of real estate$58,356 $17,447 
Gain (loss) on sale of properties, net(2)
14,355 (826)
(1)The outparcel sold in the first quarter of 2021 was the only remaining portion of one of our properties, and therefore the sale resulted in a reduction in our total property count.
(2)The gain (loss) on sale of properties, net does not include miscellaneous write-off activity, which is also recorded in Gain (Loss) on Disposal of Property, Net on the consolidated statements of operations.
Subsequent to March 31, 2021, we sold two properties for $20.2 million.
AcquisitionsThe following table summarizes our real estate acquisition activity (dollars in thousands):
Three Months Ended March 31,
20212020
Number of properties acquired2  
Number of outparcels acquired(1)
2 2
Total acquisition price$39,850 $4,319 
(1)Outparcels acquired are adjacent to shopping centers that we own.
The fair value and weighted-average useful life at acquisition for lease intangibles acquired are as follows (dollars in thousands, weighted-average useful life in years):
Three Months Ended March 31, 2021
Fair ValueWeighted-Average Useful Life
In-place leases$4,155 7
Above-market leases52 5
Below-market leases(1,652)6
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Property Held for Sale—As of March 31, 2021, two properties were classified as held for sale. As of December 31, 2020, no properties were classified as held for sale. Properties classified as held for sale as of March 31, 2021 were under contract to sell, with no substantive contingencies, and the prospective buyers had significant funds at risk as of the reporting date. Subsequent to March 31, 2021, one of our held for sale properties was sold. A summary of assets and liabilities for the properties held for sale as of March 31, 2021 is below (in thousands):
March 31, 2021
ASSETS
Total investment in real estate assets, net $23,852 
Other assets, net 517 
Total assets $24,369 
LIABILITIES
Below-market lease liabilities, net $1,866 
Accounts payable and other liabilities 243 
Total liabilities $2,109 

5. OTHER ASSETS, NET
The following is a summary of Other Assets, Net outstanding as of March 31, 2021 and December 31, 2020, excluding amounts related to assets held for sale (in thousands):
March 31, 2021December 31, 2020
Other assets, net:
Deferred leasing commissions and costs$42,946 $41,664 
Deferred financing expenses(1)
13,971 13,971 
Office equipment, ROU assets, and other22,045 21,578 
Corporate intangible assets6,804 6,804 
Total depreciable and amortizable assets85,766 84,017 
Accumulated depreciation and amortization(47,819)(45,975)
Net depreciable and amortizable assets37,947 38,042 
Accounts receivable, net(2)
47,659 46,893 
Accounts receivable - affiliates 1,073 543 
Deferred rent receivable, net(3)
33,257 32,298 
Prepaid expenses and other15,132 8,694 
Investment in third parties3,000  
Total other assets, net$138,068 $126,470 
(1)Deferred financing expenses per the above table are related to our revolving line of credit and as such we have elected to classify them as an asset rather than as a contra-liability.
(2)Net of $7.2 million and $8.9 million of general reserves for uncollectible amounts as of March 31, 2021 and December 31, 2020, respectively. Receivables that were removed for tenants considered to be non-creditworthy were $19.6 million and $22.8 million as of March 31, 2021 and December 31, 2020, respectively.
(3)Net of $5.1 million and $4.4 million of adjustments as of March 31, 2021 and December 31, 2020, respectively, for straight-line rent removed for tenants considered to be non-creditworthy.
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6. DEBT OBLIGATIONS
The following is a summary of the outstanding principal balances and interest rates, which include the effect of derivative financial instruments, for our debt obligations as of March 31, 2021 and December 31, 2020 (dollars in thousands):
   
Interest Rate(1)
March 31, 2021December 31, 2020
Revolving credit facility
LIBOR + 1.4%
$ $ 
Term loans(2)
1.4% - 4.6%
1,622,500 1,622,500 
Secured loan facilities
3.4% - 3.5%
395,000 395,000 
Mortgages
3.5% - 7.2%
273,590 290,022 
Finance lease liability91 164 
Assumed market debt adjustments, net(1,587)(1,543)
Deferred financing expenses, net(12,622)(13,538)
Total  $2,276,972 $2,292,605 
Weighted-average interest rate3.0 %3.1 %
(1)Interest rates are as of March 31, 2021.
(2)Our term loans carry an interest rate of LIBOR plus a spread. While most of the rates are fixed through the use of swaps, there is a portion of these loans that are not subject to a swap, and thus are still indexed to LIBOR.
In April 2021, we repaid $25.1 million in mortgage loans ahead of their scheduled maturities.
The allocation of total debt between fixed-rate and variable-rate as well as between secured and unsecured, excluding market debt adjustments and deferred financing expenses, net, and including the effects of derivative financial instruments (see Notes 7 and 12) as of March 31, 2021 and December 31, 2020, is summarized below (in thousands):
   March 31, 2021December 31, 2020
As to interest rate:
Fixed-rate debt$1,598,681 $1,727,186
Variable-rate debt692,500 580,500
Total$2,291,181 $2,307,686
As to collateralization:
Unsecured debt$1,622,500 $1,622,500
Secured debt668,681 685,186
Total  $2,291,181 $2,307,686

7. DERIVATIVES AND HEDGING ACTIVITIES
Risk Management Objective of Using Derivatives—We are exposed to certain risks arising from both our business operations and economic conditions. We principally manage our exposure to a wide variety of business and operational risks through management of our core business activities. We manage economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of our debt funding, and through the use of derivative financial instruments. Specifically, we enter into interest rate swaps to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. Our derivative financial instruments are used to manage differences in the amount, timing, and duration of our known or expected cash receipts and our known or expected cash payments principally related to our investments and borrowings.
Cash Flow Hedges of Interest Rate Risk—Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for our making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.
The changes in the fair value of derivatives designated, and that qualify, as cash flow hedges are recorded in AOCI and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the three months ended March 31, 2021 and 2020, such derivatives were used to hedge the variable cash flows associated with certain variable-rate debt. Amounts reported in AOCI related to these derivatives will be reclassified to Interest Expense, Net as interest payments are made on the variable-rate debt. During the next twelve months, we estimate that an additional $18.9 million will be reclassified from AOCI as an increase to Interest Expense, Net.
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The following is a summary of our interest rate swaps that were designated as cash flow hedges of interest rate risk as of March 31, 2021 and December 31, 2020 (dollars in thousands):
March 31, 2021December 31, 2020
Count5 6 
Notional amount$930,000 $1,042,000 
Fixed LIBOR
1.3% - 2.9%
1.3% - 2.9%
Maturity date2022 - 20252021 - 2025
We assumed five hedges with a notional amount of $570 million as a part of a merger. The fair value of the five hedges assumed was $14.7 million and is amortized over the remaining lives of the respective hedges and recorded in Interest Expense, Net in the consolidated statements of operations. The net unamortized amount remaining as of March 31, 2021 and December 31, 2020 was $4.7 million and $5.0 million, respectively.
The table below details the nature of the gain and loss recognized on interest rate derivatives designated as cash flow hedges in the consolidated statements of operations (in thousands):
Three Months Ended March 31,
  20212020
Amount of gain (loss) recognized in Other Comprehensive Income (Loss)
$7,265 $(44,916)
Amount of loss reclassified from AOCI into interest expense
4,855 1,552 
Credit-risk-related Contingent Features—We have agreements with our derivative counterparties that contain provisions where, if we default, or are capable of being declared in default, on any of our indebtedness, we could also be declared to be in default on our derivative obligations. As of March 31, 2021, the fair value of our derivatives in a net liability position, which included accrued interest but excluded any adjustment for nonperformance risk related to these agreements, was approximately $43.0 million. As of March 31, 2021, we had not posted any collateral related to these agreements and were not in breach of any agreement provisions. If we had breached any of these provisions, we could have been required to settle our obligations under the agreements at their termination value of $43.0 million.

8. COMMITMENTS AND CONTINGENCIES
Litigation—We are involved in various claims and litigation matters arising in the ordinary course of business, some of which involve claims for damages. Many of these matters are covered by insurance, although they may nevertheless be subject to deductibles or retentions. Although the ultimate liability for these matters cannot be determined, based upon information currently available, we believe the resolution of such claims and litigation will not have a material adverse effect on our consolidated financial statements.
Environmental Matters—In connection with the ownership and operation of real estate, we may potentially be liable for costs and damages related to environmental matters. In addition, we may own or acquire certain properties that are subject to environmental remediation. Depending on the nature of the environmental matter, the seller of the property, a tenant of the property, and/or another third party may be responsible for environmental remediation costs related to a property. Additionally, in connection with the purchase of certain properties, the respective sellers and/or tenants may agree to indemnify us against future remediation costs. We also carry environmental liability insurance on our properties that provides limited coverage for any remediation liability and/or pollution liability for third-party bodily injury and/or property damage claims for which we may be liable. We are not aware of any environmental matters which we believe are reasonably likely to have a material effect on our consolidated financial statements.
Captive Insurance—Our captive insurance company, Silver Rock Insurance, Inc. (“Silver Rock”) provides general liability insurance, wind, reinsurance, and other coverage to us and our related-party joint ventures. We capitalize Silver Rock in accordance with applicable regulatory requirements.
Silver Rock established annual premiums based on the past loss experience of the insured properties. An independent third party was engaged to perform an actuarial estimate of projected future claims, related deductibles, and projected future expenses necessary to fund associated risk management programs. Premiums paid to Silver Rock may be adjusted based on these estimates, and such premiums may be reimbursed by tenants pursuant to specific lease terms.
As of March 31, 2021, we had four letters of credit outstanding totaling approximately $8.0 million to provide security for our obligations under Silver Rock’s insurance and reinsurance contracts.

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9. EQUITY
General—The holders of common stock are entitled to one vote per share on all matters voted on by stockholders, including one vote per nominee in the election of the Board. Our charter does not provide for cumulative voting in the election of directors.
On April 29, 2021, our board of directors (“Board”) increased the estimated value per share (“EVPS”) of our common stock to $10.55 based substantially on the estimated market value of our portfolio of real estate properties and our third-party investment management business as of March 31, 2021. We engaged a third-party valuation firm to provide a calculation of the range in EVPS of our common stock as of March 31, 2021, which reflected certain balance sheet assets and liabilities as of that date. Previously, our EVPS was $8.75, based substantially on the estimated market value of our portfolio of real estate properties and our third-party investment management business as of March 31, 2020.
Dividend Reinvestment Plan—The DRIP allows stockholders to invest distributions in additional shares of our common stock, subject to certain limits. Stockholders who elect to participate in the DRIP may choose to invest all or a portion of their cash distributions in shares of our common stock at a price equal to our most recent EVPS.
Stockholders who elect to participate in the DRIP, and who are subject to U.S. federal income taxation laws, will incur a tax liability on an amount equal to the fair value on the relevant distribution date of the shares of our common stock purchased with reinvested distributions, even though such stockholders have elected not to receive the distributions in cash.
The Third Amended and Restated Dividend Reinvestment Plan has been suspended, beginning with the distribution payable on April 1, 2021. Stockholders will receive their full monthly distribution of $0.02833333 per share in cash until further notice.
Distributions—Distributions paid to stockholders and Operating Partnership unit (“OP unit”) holders of record subsequent to March 31, 2021 were as follows (dollars in thousands, excluding per share amounts):
MonthDate of RecordMonthly Distribution RateDate Distribution PaidGross Amount of Distribution PaidNet Cash Distribution
March3/19/2021$0.02833333 4/1/2021$9,059 $9,059 
April4/19/20210.02833333 5/3/20219,059 9,059 
On April 29, 2021, our Board authorized distributions for May 2021 to the stockholders of record at the close of business on May 17, 2021 equal to a monthly amount of $0.02833333 per share of common stock. OP unit holders will receive distributions at the same rate as common stockholders. We pay distributions to stockholders and OP unit holders based on monthly record dates, and we expect to pay the May 2021 distributions on June 1, 2021.
Share Repurchase Program (“SRP”)—The SRP provides an opportunity for stockholders to have shares of common stock repurchased, subject to certain restrictions and limitations. The Board reserves the right, in its sole discretion, at any time and from time to time, to reject any request for repurchase. The Fourth Amended and Restated Share Repurchase Program (the “Fourth Amended SRP”), which is currently limited to repurchases resulting from the death, qualifying disability, or the declaration of incompetence (“DDI”) of stockholders, has been suspended, and the March 31, 2021 repurchases related to stockholder DDI were not executed. The SRP for both standard and DDI requests will remain suspended until further notice.
Convertible Noncontrolling Interests—As of March 31, 2021 and December 31, 2020, we had approximately 40.1 million and 39.8 million outstanding OP units, respectively. Additionally, certain of our outstanding restricted share and performance share awards will result in the issuance of OP units upon vesting in future periods.
Under the terms of the Fourth Amended and Restated Agreement of Limited Partnership (the “Partnership Agreement”), OP unit holders may elect to exchange their OP units. The Operating Partnership controls the form of the redemption, and may elect to exchange OP units either for shares of our common stock, provided that the OP units have been outstanding for at least one year, or for cash. As the form of redemption for OP units is within our control, the OP units outstanding as of March 31, 2021 and December 31, 2020 are classified as Noncontrolling Interests within permanent equity on our consolidated balance sheets.
During the three months ended March 31, 2020, 0.1 million OP units were converted into shares of our common stock at a 1:1 ratio. There were no OP units converted into shares of our common stock for the three months ended March 31, 2021. The $3.3 million and $7.1 million of distributions for the three months ended March 31, 2021 and 2020, respectively, that have been paid on OP units are included in Distributions to Noncontrolling Interests on the consolidated statements of equity.

10. EARNINGS PER SHARE
We use the two-class method of computing earnings per share (“EPS”), which is an earnings allocation formula that determines EPS for common stock and any participating securities according to dividends declared (whether paid or unpaid). Under the two-class method, basic EPS is computed by dividing Net Income Attributable to Stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted EPS reflects the potential dilution that could occur from share equivalent activity.
OP units held by limited partners other than us are considered to be participating securities because they contain non-forfeitable rights to dividends or dividend equivalents, and have the potential to be exchanged for an equal number of shares of our common stock in accordance with the terms of the Partnership Agreement.
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The impact of these outstanding OP units on basic and diluted EPS has been calculated using the two-class method whereby earnings are allocated to the OP units based on dividends declared and the OP units’ participation rights in undistributed earnings. The effects of the two-class method on basic and diluted EPS were immaterial to the consolidated financial statements during the three months ended March 31, 2021 and 2020.
The following table provides a reconciliation of the numerator and denominator of the earnings per share calculations (in thousands, except per share amounts):
Three Months Ended
 March 31,
20212020
Numerator:
Net income attributable to stockholders - basic
$103 $9,769 
Net income attributable to convertible OP units(1)
14 1,430 
Net income - diluted$117 $11,199 
Denominator:
Weighted-average shares - basic280,469 289,955 
OP units(1)
40,063 42,848 
Dilutive restricted stock awards453 425 
Adjusted weighted-average shares - diluted320,985 333,228 
Earnings per common share:
Basic and diluted income per share
$0.00 $0.03 
(1)OP units include units that are convertible into common stock or cash, at the Operating Partnership’s option. The Operating Partnership income or loss attributable to these OP units, which is included as a component of Net Income Attributable to Noncontrolling Interests on the consolidated statements of operations, has been added back in the numerator as these OP units were included in the denominator for all periods presented.

11. REVENUE RECOGNITION AND RELATED PARTY TRANSACTIONS
Revenue—We have entered into agreements with the Managed Funds related to certain advisory, management, and administrative services we provide to their real estate assets in exchange for fees and reimbursement of certain expenses. Summarized below are amounts included in Fees and Management Income. The revenue includes the fees and reimbursements earned by us from the Managed Funds, and other revenues that are not in the scope of ASC Topic 606, Revenue from Contracts with Customers, but that are included in this table for the purpose of disclosing all related party revenues (in thousands):
Three Months Ended March 31,
20212020
Recurring fees(1)
$1,125 $1,216 
Transactional revenue and reimbursements(2)
468 430 
Insurance premiums(3)
693 519 
Total fees and management income $2,286 $2,165 
(1)Recurring fees include asset management fees and property management fees.
(2)Transactional revenue includes items such as leasing commissions, construction management fees, and acquisition fees.
(3)Insurance premium income includes amounts for reinsurance from third parties not affiliated with us.
Other Related Party Matters—We are the limited guarantor for up to $190 million, capped at $50 million in most instances, of debt for our NRP joint venture. As of March 31, 2021, the outstanding loan balance related to our NRP joint venture was $32.1 million. As of March 31, 2021, we were also the limited guarantor of a $175 million mortgage loan for GRP I. Our guaranty in both cases is limited to being the non-recourse carveout guarantor and the environmental indemnitor. Further, in both cases, we are also party to an agreement with our joint venture partners in which any potential liability under such guarantees will be apportioned between us and our applicable joint venture partner based on our respective ownership percentages in the applicable joint venture. We have no liability recorded on our consolidated balance sheets for either guaranty as of March 31, 2021 and December 31, 2020.

12. FAIR VALUE MEASUREMENTS
The following describes the methods we use to estimate the fair value of our financial and nonfinancial assets and liabilities: 
Cash and Cash Equivalents, Restricted Cash, Accounts Receivable, and Accounts Payable—We consider the carrying values of these financial instruments to approximate fair value because of the short period of time between origination of the instruments and their expected realization.
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Real Estate Investments—The purchase prices of the investment properties, including related lease intangible assets and liabilities, were allocated at estimated fair value based on Level 3 inputs, such as discount rates, capitalization rates, comparable sales, replacement costs, income and expense growth rates, and current market rents and allowances as determined by management.
Debt Obligations—We estimate the fair value of our debt by discounting the future cash flows of each instrument at rates currently offered for similar debt instruments of comparable maturities by our lenders using Level 3 inputs. The discount rates used approximate current lending rates for loans or groups of loans with similar maturities and credit quality, assuming the debt is outstanding through maturity and considering the debt’s collateral (if applicable). We have utilized market information, as available, or present value techniques to estimate the amounts required to be disclosed.
The following is a summary of borrowings as of March 31, 2021 and December 31, 2020 (in thousands):
March 31, 2021December 31, 2020
Recorded Principal Balance(1)
Fair Value
Recorded Principal Balance(1)
Fair Value
Term loans$1,611,119 $1,621,987 $1,610,204 $1,621,902 
Secured portfolio loan facilities391,251 391,391 391,131 404,715 
Mortgages(2)
274,602 282,497 291,270 303,647 
Total$2,276,972 $2,295,875 $2,292,605 $2,330,264 
(1)Recorded principal balances include net deferred financing expenses of $12.6 million and $13.5 million as of March 31, 2021 and December 31, 2020, respectively. Recorded principal balances also include assumed market debt adjustments of $1.6 million and $1.5 million as of March 31, 2021 and December 31, 2020, respectively. We have recorded deferred financing expenses related to our revolving credit facility, which are not included in these balances, in Other Assets, Net on our consolidated balance sheets.
(2)Our finance lease liability is included in the mortgages line item, as presented.
Recurring and Nonrecurring Fair Value Measurements—Our earn-out liability and interest rate swaps are measured and recognized at fair value on a recurring basis, while certain real estate assets and liabilities are measured and recognized at fair value as needed. Fair value measurements that occurred as of and during the three months ended March 31, 2021 and the year ended December 31, 2020, were as follows (in thousands):
March 31, 2021December 31, 2020
Level 1Level 2Level 3Level 1Level 2Level 3
Recurring
Derivative liabilities(1)
$— $(42,970)$— $— $(54,759)$— 
Earn-out liability— — (38,000)— — (22,000)
Nonrecurring
Impaired real estate assets, net(2)
— 7,150 — — 19,350 — 
Impaired corporate ROU asset, net— — — — 537 — 
(1)We record derivative liabilities in Derivative 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.
Derivative Instruments—As of March 31, 2021 and December 31, 2020, we had interest rate swaps that fixed LIBOR on portions of our unsecured term loan facilities.
All interest rate swap agreements are measured at fair value on a recurring basis. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves.
To comply with the provisions of ASC Topic 820, Fair Value Measurement, we incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.
Although we determined that the significant inputs used to value our derivatives fell within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our counterparties and our own credit risk utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by us and our counterparties. However, as of March 31, 2021 and December 31, 2020, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we have determined that our derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.
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Earn-out—As part of our acquisition of Phillips Edison Limited Partnership (“PELP”) in 2017, an earn-out structure was established which gave PELP the opportunity to earn additional OP units based upon the potential achievement of certain performance targets subsequent to the acquisition. After the expiration of certain provisions in 2019, PELP is now eligible to earn up to five million OP units based on the timing and valuation of a liquidity event for PECO. The liquidity event can occur no later than December 31, 2021 for the maximum shares to be awarded, but can occur as late as December 31, 2023.
We estimate the fair value of this liability on a quarterly basis using the Monte Carlo method. This method requires us to make assumptions about future dividend yields, volatility, and timing and pricing of liquidity events, which are unobservable and are considered Level 3 inputs in the fair value hierarchy. A change in these inputs to a different amount might result in a significantly higher or lower fair value measurement at the reporting date. In calculating the fair value of this liability as of March 31, 2021, we have determined that the most likely range of potential outcomes includes a possibility of one million additional OP units issued as well as up to a maximum of five million units being issued.
We recorded expense of $16.0 million and income of $10.0 million, respectively, for the three months ended March 31, 2021 and March 31, 2020 related to changes in the fair value of the earn-out liability. The increase in the fair value of the liability during the three months ended March 31, 2021 was attributable to an increase in the EVPS of our common stock (as compared with a decrease in EVPS in the comparable prior year period), as described in Note 9, as well as improved market conditions in the first quarter of 2021. The change in fair value for both periods has been recognized in Other (Expense) Income, Net in the consolidated statements of operations.
Real Estate Asset Impairment—Our real estate assets are measured and recognized at fair value, less costs to sell for held-for-sale properties, on a nonrecurring basis dependent upon when we determine an impairment has occurred. During the three months ended March 31, 2021, we impaired an asset that was under contract at a disposition price that was less than carrying value, or that had other operational impairment indicators. The valuation technique used for the fair value of all impaired real estate assets was the expected net sales proceeds, which we consider to be a Level 2 input in the fair value hierarchy. There were no impairment charges recorded during the three months ended March 31, 2020.
On a quarterly basis, we employ a multi-step approach to assess our real estate assets for possible impairment and record any impairment charges identified. The first step is the identification of potential triggering events, such as significant decreases in occupancy or the presence of large dark or vacant spaces. If we observe any of these indicators for a shopping center, we then perform an additional screen test consisting of a years-to-recover analysis to determine if we will recover the net carrying value of the property over its remaining economic life based upon net operating income (“NOI”) as forecasted for the current year. In the event that the results of this first step indicate a triggering event for a center, we proceed to the second step, utilizing an undiscounted cash flow model for the center to identify potential impairment. If the undiscounted cash flows are less than the net book value of the center as of the balance sheet date, we proceed to the third step. In performing the third step, we utilize market data such as capitalization rates and sales price per square foot on comparable recent real estate transactions to estimate fair value of the real estate assets. We also utilize expected net sales proceeds to estimate the fair value of any centers that are actively being marketed for sale. If the estimated fair value of the property is less than the recorded net book value at the balance sheet date, we record an impairment charge.
In addition to these procedures, we also review undeveloped or unimproved land parcels that we own for evidence of impairment and record any impairment charges as necessary. Primary impairment triggers for these land parcels are changes to our plans or intentions with regards to such properties, or planned dispositions at prices that are less than the current carrying values.
Our quarterly impairment procedures have not been altered by the COVID-19 pandemic, as we believe key impairment indicators such as temporary store closings and large dark or vacant spaces will continue to be identified in our review. We have utilized forecasts that incorporate estimated decreases in NOI and cash flows as a result of the COVID-19 pandemic in performing our review procedures for the three months ended March 31, 2021 and 2020. However, it is possible that we could experience unanticipated changes in assumptions that are employed in our impairment review which could impact our cash flows and fair value conclusions. Such unanticipated changes relative to our expectations may include but are not limited to: increases or decreases in the duration or permanence of tenant closures, increases or decreases in collectibility reserves and write-offs, additional capital required to fill vacancies, extended lease-up periods, future closings of large tenants, changes in macroeconomic assumptions such as rate of inflation and capitalization rates, and changes to the estimated timing of disposition of the properties under review.
We recorded the following expense upon impairment of real estate assets (in thousands):
Three Months Ended March 31,
20212020
Impairment of real estate assets$5,000 $ 

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

Cautionary Note Regarding Forward-Looking Statements
Certain statements contained in this Quarterly Report on Form 10-Q (this “Report”) of Phillips Edison & Company, Inc. (“we,” the “Company,” “our,” or “us”) other than historical facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995 (collectively with the Securities Act and the Exchange Act, the “Acts”). We intend for all such forward-looking statements to be covered by the applicable safe harbor provisions for forward-looking statements contained in the Acts. Such forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “can,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” “possible,” “initiatives,” “focus,” “seek,” “objective,” “goal,” “strategy,” “plan,” “potential,” “potentially,” “preparing,” “projected,” “future,” “long-term,” “once,” “should,” “could,” “would,” “might,” “uncertainty,” or other similar words. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this report is filed with the SEC. Such statements include, but are not limited to, (a) statements about our focus, plans, strategies, initiatives, and prospects; (b) statements about the COVID-19 pandemic, including its duration and potential or expected impact on our tenants, our business, and our estimated value per share; (c) statements about our distributions, share repurchase program, and dividend reinvestment program; (d) statements about our underwritten incremental yields; and (e) statements about our future results of operations, capital expenditures, and liquidity (including any potential listing). 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 government 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 or at all; (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 2020 Annual Report on Form 10-K, filed with the SEC on March 12, 2021, and those included in this Report, 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.

Key Performance Indicators and Defined Terms
We use certain key performance indicators (“KPIs”), which include both financial and nonfinancial metrics, to measure the performance of our operations. We believe these KPIs, as well as the core concepts and terms defined below, allow our Board, management, and investors to analyze trends around our business strategy, financial condition, and results of operations in a manner that is focused on items unique to the real estate industry.
We do not consider our non-GAAP measures included as KPIs to be alternatives to measures calculated in accordance with GAAP. Certain non-GAAP measures should not be viewed as an alternative measure of our financial performance as they may not reflect the operations of our entire portfolio, and they may not reflect the impact of general and administrative expenses, depreciation and amortization, interest expense, other income (expense), or the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties that could materially impact our results from operations. Additionally, certain non-GAAP measures should not be considered as an indication of our liquidity, nor as an indication of funds available to cover our cash needs, including our ability to fund distributions, and may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate our business in the manner currently contemplated. Accordingly, non-GAAP measures should be reviewed in connection with other GAAP measurements, and should not be viewed as more prominent measures of performance than net income (loss) or cash flows from operations prepared in
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accordance with GAAP. Other REITs may use different methodologies for calculating similar non-GAAP measures, and accordingly, our non-GAAP measures may not be comparable to other REITs.
Our KPIs and terminology can be grouped into three key areas:
Portfolio—Portfolio metrics help management to gauge the health of our centers overall and individually.
Anchor space—We define an anchor space as a space greater than or equal to 10,000 square feet of gross leasable area (“GLA”).
ABR—We use ABR to refer to the monthly contractual base rent as of March 31, 2021, multiplied by twelve months.
ABR per Square Foot (“PSF”)—This metric is calculated by dividing ABR by leased GLA. Increases in ABR PSF can be an indication of our ability to create rental rate growth in our centers, as well as an indication of demand for our spaces, which generally provides us with greater leverage during lease negotiations.
Inline space—We define an inline space as a space containing less than 10,000 square feet of GLA.
GLA—We use GLA to refer to the total occupied and unoccupied square footage of a building that is available for tenants (whom we refer to as a “Neighbor” or our “Neighbors”) to lease.
Leased Occupancy—This metric is calculated as the percentage of total GLA for which a lease has been signed regardless of whether the lease has commenced or the Neighbor has taken possession. High occupancy is an indicator of demand for our spaces, which generally provides us with greater leverage during lease negotiations.
Underwritten incremental yield—This reflects the yield we target to generate from a project upon expected stabilization and is calculated as the estimated incremental NOI for a project at stabilization divided by its estimated net project investment. The estimated incremental NOI is the difference between the estimated annualized NOI we target to generate by project upon stabilization and the estimated annualized NOI without the planned improvements. Underwritten incremental yield does not include peripheral impacts, such as lease rollover risk or the impact on the long term value of the property upon sale or disposition. Actual incremental yields may vary from our underwritten incremental yield range based on the actual total cost to complete a project and its actual incremental NOI at stabilization.

Leasing—Leasing is a key driver of growth for our company.
Comparable lease—We use this term to refer to a lease with consistent structure that is executed for the exact same space that has been vacant less than twelve months.
Comparable rent spread—This metric is calculated as being the percentage increase or decrease in first-year ABR (excluding any free rent or escalations) on new or renewal leases (excluding options) where the lease was considered a comparable lease. This metric provides an indication of our ability to generate revenue growth through leasing activity.
Cost of executing new leases—We use this term to refer to certain costs associated with new leasing, namely, leasing commissions, tenant improvement costs, and tenant concessions.
Portfolio retention rate—This metric is calculated by dividing (a) total square feet of retained Neighbors with current period lease expirations by (b) the square feet of leases expiring during the period. The portfolio retention rate provides insight into our ability to retain Neighbors at our shopping centers as their leases approach expiration. Generally, the costs to retain an existing Neighbor are lower than costs to replace with a new Neighbor.
Recovery rate—This metric is calculated by dividing (a) total recovery income by (b) total recoverable expenses during the period. A high recovery rate is an indicator of our ability to recover certain property operating expenses and capital costs from our Neighbors.
Financial Performance—In addition to financial metrics calculated in accordance with GAAP, such as net income or cash flows from operations, we utilize non-GAAP metrics to measure our operational and financial performance. See the section within this Item 2 titled Management’s Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Measures for further discussion on the following metrics.
Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization for Real Estate (“Adjusted EBITDAre”)—To arrive at Adjusted EBITDAre, we adjust EBITDAre, as defined below, to exclude certain recurring and non-recurring items 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 and evaluate debt leverage and fixed cost coverage.
Core Funds From Operations (“Core FFO”)—To arrive at Core FFO, we adjust FFO attributable to stockholders and OP unit holders, as defined below, to exclude certain recurring and non-recurring items including, but not limited to: (i) depreciation and amortization of corporate assets; (ii) changes in the fair value of the earn-out liability; (iii) amortization of unconsolidated joint venture basis differences; (iv) gains or losses on the extinguishment or modification of debt, (v) other impairment charges; and (vi) transaction and acquisition expenses. We believe FFO provides insight into our operating performance as it excludes certain items that are not indicative of such performance. Core FFO provides further insight into the sustainability of our 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).
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EBITDAre—The National Association of Real Estate Investment Trusts (“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.
FFO—Nareit defines FFO as net income (loss) computed in accordance with GAAP, excluding: (i) gains (or losses) from sales of property and gains (or losses) from change in control; (ii) depreciation and amortization related to real estate; (iii) impairment losses on real estate and impairments of in-substance real estate investments in investees that are driven by measurable decreases in the fair value of the depreciable real estate held by the unconsolidated partnerships and joint ventures; and (iv) adjustments for unconsolidated partnerships and joint ventures, calculated to reflect FFO on the same basis. We calculate FFO Attributable to Stockholders and OP Unit Holders in a manner consistent with the Nareit definition.
Net Debt to Adjusted EBITDAre—This ratio is calculated by dividing net debt by Adjusted EBITDAre (included on an annualized basis within the calculation). It provides insight into our leverage rate based on earnings and is not impacted by fluctuations in our equity price.
Net Debt to Total Enterprise Value—This ratio is calculated by dividing net debt by total enterprise value. It provides insight into our capital structure and usage of debt.
NOI—We calculate NOI as total operating revenues, adjusted to exclude non-cash revenue items, less property operating expenses and real estate taxes. NOI provides insight 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).
Same-Center—We use this term to refer to a property, or portfolio of properties, that have been owned and operational for the entirety of each reporting period (i.e., since January 1, 2020).

Overview
We are an internally-managed REIT and one of the nation’s largest owners and operators of grocery-anchored neighborhood shopping centers. The majority of our revenue is lease revenue derived from our real estate investments. Additionally, we operate an investment management business providing property management and advisory services to over $460 million of third-party institutional joint ventures. This business provides comprehensive real estate and asset management services to the Managed Funds.
As of March 31, 2021, we wholly-owned 278 real estate properties. Additionally, we owned a 20% interest in NRP, a joint venture that owned two properties, and a 14% interest in GRP I, a joint venture that owned 20 properties.
Liquidity Alternative Review Process—On March 25, 2021, our Board announced that we are reviewing alternatives in order to provide liquidity to our shareholders. In connection with the review process, the DRIP has been suspended, beginning with the distribution payable April 1, 2021. Additionally, the Fourth Amended SRP, which is currently limited to repurchases resulting from stockholder DDI, has been suspended. The SRP for both standard and DDI requests will remain suspended until further notice.
COVID-19 Strategy—During 2020, as a result of the COVID-19 pandemic, many state governments issued “stay-at-home” mandates that generally limited travel and movement of the general public to essential activities only and required all non-essential businesses to close. In response to the pandemic, we enacted several initiatives including: (1) the implementation of expense reduction initiatives at the property and corporate levels, including reductions to our workforce and travel costs; (2) the reprioritization of our capital investments to support the reopening of our Neighbors and new leasing activity, or deferment of such capital expenditures if possible; (3) temporary reductions in compensation for certain of our executives and our Board; and (4) the temporary suspension of dividends, the DRIP, and the SRP.
At the peak of the pandemic-related closure activity, temporary closures reached 37% of all Neighbor spaces, totaling 27% of our ABR and 22% of our GLA. All temporarily closed Neighbors have since been permitted to reopen; however, a portion of our Neighbors have permanently closed, and we are working to backfill these spaces. We continue to closely monitor the occupancy, operating performance, and Neighbor sales results at our centers, including any Neighbors operating with reduced hours or under government-imposed restrictions.
Our management team has determined the following are the key actions for recovery in our portfolio (all statistics are approximate and include the prorated portion attributable to properties owned through our joint ventures):
Returning to Monthly Payments—We continue to work with our Neighbors to resume normal monthly rent payments, and our efforts have included raising awareness of the benefits available through numerous governmental relief programs. We have seen our collections continue to improve from the second quarter of 2020. The following table
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summarizes our collections by quarter, as they were originally reported as well as updated for payments received subsequent to the month billed:
Originally Reported
Current(1)
Q2 202086 %93 %
Q3 202094 %96 %
Q4 202095 %96 %
Q1 2021N/A95 %
(1)Including collections received through April 20, 2021.
As of April 20, 2021, approximately 79% of our Neighbor spaces are paying their rent in full.
Recovering Missed Rent Charges—We believe substantially all Neighbors, including those that were required to temporarily close under governmental mandates, are contractually obligated to continue with their rent payments as documented in our lease agreements with them. However, we may negotiate relief for our Neighbors in the form of rent deferrals or abatements. As of April 20, 2021, we have $5.4 million of outstanding payment plans with our Neighbors, and we had recorded rent abatements of approximately $4.4 million during 2021. These payment plans and rent abatements represented 1.4% and 1.1% of portfolio ABR, respectively, and the weighted-average term over which we expect to receive remaining amounts owed on executed payment plans is approximately 13 months.
We are still actively pursuing past due amounts under the terms negotiated with our Neighbors. For our entire portfolio, inclusive of our prorated share of properties owned through joint ventures, 43% of missed monthly charges billed during the first quarter of 2021 have been collected subsequent to the month billed and 5% have been waived, as of April 20, 2021. We will continue to work with Neighbors on establishing plans to repay past due amounts, and will monitor the impact of such payment plans on our results of operations in future quarters. We cannot guarantee that we will ultimately be able to collect these amounts.
Monitoring for Credit Risk—The COVID-19 pandemic and resulting economic downturn has increased the uncertainty of collecting rents from a number of our Neighbors. We have been closely monitoring the status of our Neighbors to identify those who potentially pose a credit risk in order to appropriately account for the impact to revenue and in order to quickly take action when a Neighbor is ultimately unable to remain in a space.
For Neighbors with a higher degree of uncertainty as to their creditworthiness, we may not record revenue for amounts billed until the cash is received. Based on our analysis, no individual Neighbor category has been accounted for entirely on a cash basis as of March 31, 2021; however, we continue to evaluate each Neighbor individually to determine if they should be accounted for on a cash basis. For the three months ended March 31, 2021 and 2020, inclusive of the prorated portion attributable to properties owned through our joint ventures, we had $4.9 million and $2.9 million, respectively, in unfavorable monthly revenue adjustments for Neighbors who are being accounted for on a cash basis. As of March 31, 2021, our Neighbors currently being accounted for on a cash basis represented approximately 10% of our total Neighbor spaces, which represented 8.4% of portfolio ABR. Further, many of our Neighbors who are on a cash basis of accounting are actively making payments toward their outstanding balances. When considering the ABR associated with Neighbors who are currently on a cash basis of accounting, 56% of this ABR is represented by Neighbors who are actively making payments.
Additionally, certain of our Neighbors have entered into bankruptcy proceedings. While some of these cases have already been resolved, with the assumption or rejection of the lease already reflected in our results, in some cases these claims have yet to be resolved, and as such, the potential fallout is not yet reflected in our occupancy rate or ABR metrics. We believe that Neighbors in the bankruptcy process represent an exposure of approximately 1% of our total portfolio ABR as of March 31, 2021. We have included our assessment of the impact of these bankruptcies in our estimate of rent collectibility, which impacted recorded revenue, as noted previously.
Certain of our Neighbors have been unable to remain in their spaces as a result of the factors previously noted. Despite this fallout, our leasing activity has been strong as demand for space in our centers remains high, allowing us to re-lease these spaces to Neighbors who may increase our concentration of necessity-based and omni-channel retailers. For the three months ended March 31, 2021, our portfolio retention rate was 88.8%, and we executed 153 new leases, an increase as compared to the same period a year ago.
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Portfolio and Leasing Statistics—Below are statistical highlights of our wholly-owned portfolio as of March 31, 2021 and 2020 (dollars and square feet in thousands):
  March 31, 2021March 31, 2020
Number of properties278 285 
Number of states31 31 
Total square feet31,306 31,862 
ABR$386,971 $385,457 
% ABR from grocery-anchored properties96.4 %97.0 %
Leased % of rentable square feet:
Total portfolio spaces94.8 %95.6 %
Anchor spaces97.3 %98.3 %
Inline spaces89.8 %90.1 %
Average remaining lease term (in years)(1)
4.6 4.6 
(1)The average remaining lease term in years excludes future options to extend the term of the lease.

The following table details information for our joint ventures as of March 31, 2021, which is the basis for determining the prorated information included in the subsequent tables (dollars and square feet in thousands):
March 31, 2021
Joint VentureOwnership PercentageNumber of PropertiesABRGLA
Necessity Retail Partners20%$3,845 228 
Grocery Retail Partners I14%20 28,735 2,215 

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Lease Expirations—The following chart shows the aggregate scheduled lease expirations, excluding our Neighbors who are occupying space on a temporary basis, after March 31, 2021 for each of the next ten years and thereafter for our wholly-owned properties and the prorated portion of those owned through our joint ventures:
https://cdn.kscope.io/6c2624e4f5ba6e71c04808db4ed77850-cik0001476204-20210331_g2.jpg
Our ability to create rental rate growth generally depends on our leverage during new and renewal lease negotiations with prospective and existing Neighbors, which typically occurs when occupancy at our centers is high or during periods of economic growth and recovery. Conversely, we may experience rental rate decline when occupancy at our centers is low or during periods of economic recession, as the leverage during new and renewal lease negotiations may shift to prospective and existing Neighbors.
See “Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Leasing Activity” of this filing on Form 10-Q for further discussion of leasing activity.
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Portfolio Tenancy—We define national Neighbors as those Neighbors that operate in at least three states. Regional Neighbors are defined as those Neighbors that have at least three locations in fewer than three states. The following charts present the composition of our portfolio, including our wholly-owned properties and the prorated portion of those owned through our joint ventures, by Neighbor type as of March 31, 2021:
https://cdn.kscope.io/6c2624e4f5ba6e71c04808db4ed77850-cik0001476204-20210331_g3.jpghttps://cdn.kscope.io/6c2624e4f5ba6e71c04808db4ed77850-cik0001476204-20210331_g4.jpg

The following charts present the composition of our portfolio by Neighbor industry as of March 31, 2021:
https://cdn.kscope.io/6c2624e4f5ba6e71c04808db4ed77850-cik0001476204-20210331_g5.jpghttps://cdn.kscope.io/6c2624e4f5ba6e71c04808db4ed77850-cik0001476204-20210331_g6.jpg
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We define “Necessity-based goods and services” as goods and services that are indispensable, necessary, or common for day-to-day living, or that tend to be inelastic (i.e., the demand for which does not change based on a consumer’s income level). We estimate that approximately 73% of our ABR, including the pro rata portion attributable to properties owned through our joint ventures, is from Neighbors providing necessity-based goods and services. Additionally, within these categories, we estimate that approximately 51% of our ABR is from retail and service businesses generally deemed essential under most state and local mandates issued in response to the COVID-19 pandemic. The composition of our portfolio as a percentage of ABR is as follows:
  March 31, 2021
Essential/Necessity retail and services:
Grocery35.5 %
Medical/pharmacy2.8 %
Banks2.5 %
Dollar stores2.3 %
Pet supply2.1 %
Hardware/automotive1.7 %
Wine, beer, and liquor1.4 %
Other essential2.7 %
Total Essential/Necessity-based retail and services(1)
51.0 %
Other Necessity:
Quick service - restaurant9.6 %
Beauty and hair care4.9 %
Health care services3.8 %
Other necessity3.3 %
Total ABR from other Necessity21.6 %
Total ABR from Necessity-based goods and services72.6 %
Other retail stores:
Soft goods12.2 %
Full service - restaurant6.3 %
Fitness and lifestyle services5.2 %
Other retail3.7 %
Total ABR from other retail and services27.4 %
Total ABR100.0 %
(1)Includes Neighbors that we believe are considered to be essential retail and service businesses but that may have temporarily closed at various points during the COVID-19 pandemic due to decreases in foot traffic and customer patronage as a result of “stay-at-home” mandates and social distancing guidelines implemented in response to the pandemic.
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The following table presents our top twenty Neighbors by ABR, including our wholly-owned properties and the prorated portion of those owned through our joint ventures, as of March 31, 2021 (dollars and square feet in thousands):
Neighbor(1)
ABR% of ABRLeased Square Feet% of Leased Square Feet
Number of Locations(2)
Kroger$26,032 6.6 %3,296 11.0 %60 
Publix22,003 5.6 %2,240 7.5 %56 
Ahold Delhaize17,274 4.4 %1,240 4.1 %23 
Albertsons-Safeway16,897 4.3 %1,624 5.4 %30 
Walmart8,933 2.3 %1,770 5.9 %13 
Giant Eagle7,293 1.9 %738 2.5 %11 
TJX Companies5,061 1.3 %428 1.4 %15 
Sprouts Farmers Market4,952 1.3 %334 1.1 %11 
Dollar Tree3,954 1.0 %406 1.4 %42 
Raley's3,884 1.0 %253 0.8 %
SUPERVALU3,209 0.8 %336 1.1 %
Subway Group2,829 0.7 %115 0.4 %82 
Schnucks2,785 0.7 %329 1.1 %
Anytime Fitness, Inc.2,662 0.7 %177