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As filed with the Securities and Exchange Commission on June 21, 2021
Registration No. 333-255846            
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-11
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933
OF SECURITIES OF CERTAIN REAL ESTATE COMPANIES
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PHILLIPS EDISON & COMPANY, INC.
(Exact Name of Registrant as Specified in its Governing Instruments)
11501 Northlake Drive
Cincinnati, Ohio 45249
(513) 554-1110
(Address, Including Zip Code, and Telephone Number, including Area Code, of Registrant’s Principal Executive Offices)
Jeffrey S. Edison
Chief Executive Officer
11501 Northlake Drive
Cincinnati, Ohio 45249
(513) 554-1110
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)
Copies to:
Julian T.H. Kleindorfer
Bradley A. Helms
Lewis W. Kneib
Latham & Watkins LLP
355 South Grand Avenue, Suite 100
Los Angeles, California 90071-1560
(213) 485-1234
Yoel Kranz
David Roberts
Goodwin Procter LLP
620 Eighth Avenue
New York, New York 10018
(212) 813-8800
Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.
If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box. ☐ 
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐ 
If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐ 
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐ 
If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. ☐ 
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 filerx Smaller 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 7(a)(2)(B) of the Securities Act: ☐




The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine.



The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to Completion, dated June 21, 2021
PROSPECTUS    
Shares
PHILLIPS EDISON & COMPANY, INC.
Common Stock
Phillips Edison & Company, Inc. is an internally-managed real estate investment trust, or REIT, and one of the nation’s largest owners and operators of omni-channel grocery-anchored neighborhood and community shopping centers. We are offering               shares of our common stock as described in this prospectus. All of the shares of our common stock offered by this prospectus are being sold by us. We currently expect the public offering price to be between $               and $               per share. We intend to apply to have our common stock listed on the Nasdaq Stock Market LLC, or Nasdaq, under the symbol “PECO.” Currently, our common stock is not traded on a national securities exchange, and this will be our first listed public offering.
We were formed as a Maryland corporation in October 2009 and have elected to be taxed as a REIT for U.S. federal income tax purposes beginning with our taxable year ended December 31, 2010. Shares of our common stock are subject to ownership limitations that are primarily intended to assist us in maintaining our qualification as a REIT. Our charter contains certain restrictions relating to the ownership and transfer of our common stock, including, subject to certain exceptions, a 9.8% ownership limit of common stock by value or number of shares, whichever is more restrictive. See “Description of Capital Stock—Restrictions on Ownership and Transfer” beginning on page 148 of this prospectus.
Investing in our common stock involves risk. See “Risk Factors” beginning on page 16 of this prospectus.
Per ShareTotal
Public offering price
Underwriting discount(1)
Proceeds, before expenses, to us
(1)See the section entitled “Underwriting” for a complete description of the compensation payable to the underwriters.
We have granted the underwriters the option to purchase an additional               shares of our common stock on the same terms and conditions set forth above within 30 days after the date of this prospectus to cover overallotments, if any.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The underwriters expect to deliver the shares of our common stock on or about               , 2021.

Morgan StanleyBofA SecuritiesJ.P. Morgan

The date of this prospectus is               , 2021





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TABLE OF CONTENTSPAGE
INDUSTRY AND MARKET DATA
You should rely only on the information contained in this prospectus or in any free writing prospectus prepared by us. We have not, and the underwriters have not, authorized anyone to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not, and the underwriters are not, making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus and in any free writing prospectus prepared by us is accurate only as of their respective dates or on the date or dates specified in these documents. Our business, financial condition, liquidity, results of operations, and prospects may have changed since those dates.

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MARKET, INDUSTRY, AND OTHER DATA
We use market data throughout the prospectus, generally obtained from publicly available information and industry publications. We have also obtained the information in “Industry and Market Data,” as well as certain information in “Prospectus Summary,” “Our Business and Properties,” and in other sections of this prospectus where indicated, from the market study prepared for us by Jones Lang LaSalle Americas Inc., or JLL, an independent third-party real estate advisory and consulting services firm. Such information is included herein in reliance on JLL's authority as an expert on such matters. See “Experts.” These sources generally state that the information they provide has been obtained from sources believed to be reliable, but the accuracy and completeness of the information are not guaranteed. The market data includes forecasts and projections that are based on industry surveys and the preparers’ experiences in the industry, and there is no assurance that any of the projections or forecasts will be achieved. We believe that the surveys and market research others have performed are reliable, but we have not independently verified this information.
Unless otherwise indicated, references in this prospectus to a grocer’s ranking (e.g., the #1 or #2 grocer) refer to its ranking by sales within its format and trade area (i.e., the 3-mile area surrounding its stores). Store formats include conventional supermarkets, natural and gourmet food supermarkets, supercenters, limited assortment supermarkets and wholesale club stores. We categorize grocery anchors into store formats that are established by Nielsen TDLinx.
Unless otherwise indicated, references in this prospectus to information reported by our public peers or public peer group refer to metrics and data publicly reported by our public peer group, as identified by JLL. See “Certain Terms Used in this Prospectus.” Our public peers may define or calculate such metrics or data differently than we do. Accordingly, such metrics or data for our public peer group and us may not be comparable.

RECAPITALIZATION
Our stockholders have approved an amendment to our charter, or Articles of Amendment, that effects a change of each share of our common stock that is outstanding before this offering into one share of a newly created class of Class B common stock, which we refer to as the “Recapitalization.”
Our Class B common stock will be identical to our common stock offered in this offering, except that (i) we do not intend to list our Class B common stock on a national securities exchange in connection with this offering, and (ii) upon the six-month anniversary of the listing of our common stock for trading on a national securities exchange (or such earlier date or dates as may be approved by our Board in certain circumstances with respect to all or any portion of the outstanding shares of our Class B common stock), each share of our Class B common stock will automatically, and without any stockholder action, convert into one share of our listed common stock.
We intend to file the Articles of Amendment prior to the consummation of this offering on or around July 2, 2021.
Unless otherwise indicated, all information in this prospectus gives effect to the Recapitalization.

REVERSE STOCK SPLIT
We intend to effect a one-for-three reverse stock split on or around July 2, 2021. In addition, we intend to effect a corresponding reverse split of our Operating Partnership’s OP units. As a result of the reverse stock and OP unit splits, every three shares of our common stock and OP units will be automatically combined and converted into one issued and outstanding share of common stock or OP unit, as applicable, rounded to the nearest 1/100th share or OP unit. The reverse stock and OP unit splits impact all classes of common stock and OP units proportionately and will have no impact on any stockholder’s or limited partner’s percentage ownership of all issued and outstanding common stock or OP units. Unless otherwise indicated, the information in this prospectus gives effect to the reverse stock and OP unit splits.
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CERTAIN DEFINED TERMS USED IN THIS PROSPECTUS
Unless the context otherwise requires, the following terms and phrases are used throughout this prospectus as described below:
“anchor space” means a space greater than or equal to 10,000 square feet of gross leasable area, or GLA;
“ABR” means monthly contractual base rent as of the end of the applicable reporting period, multiplied by 12 months;
“ABR per square foot” is calculated by dividing ABR by leased GLA;
“Board” means the board of directors of Phillips Edison & Company, Inc.;
“BOPIS” means buy-online-pickup-in-store;
“comparable lease” means a lease with consistent structure that is executed for substantially the exact same space that has been vacant less than twelve months;
“comparable rent spread” is calculated as the percentage increase or decrease in first-year ABR (excluding any free rent or escalations) on new or renewal leases (excluding options) where the lease was considered a comparable lease;
“Exchange Act” means the Securities and Exchange Act of 1934, as amended;
“fully diluted basis” means information is presented assuming all outstanding OP units have been exchanged for shares of common stock on a one-for-one basis and includes the incremental impact of non-vested stock and stock units granted under share-based performance plans;
“GAAP” means generally accepted accounting principles as promulgated by the Financial Accounting Standards Board in the United States of America;
“GLA” means gross leasable area, or the total occupied and unoccupied square footage of a building that is available for our Neighbors or other retailers to lease;
“health ratio,” also commonly referred to as “occupancy cost percentage,” is calculated by dividing (i) the retailer’s annual rent and expense reimbursement paid to the landlord by (ii) such retailer’s annual gross sales (we believe a lower health ratio is an indication of favorable retailer economics);
“inline space” means a space containing less than 10,000 square feet of GLA;
“leased occupancy” is calculated as the percentage of total applicable GLA for which a lease has been signed, regardless of whether the lease has commenced or the Neighbor has taken possession;
“Merger” means the November 2018 merger with Phillips Edison Grocery Center REIT II, Inc., a public non-traded REIT that was advised and managed by us;
“MGCL” means the Maryland General Corporation Law;
“necessity-based goods and services” or “necessity-based retail” means 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) as further discussed in “Our Business and Properties – Properties”;
“Neighbor” means one of our tenants;
“OP units” means units of limited partnership interest in the Operating Partnership, which are redeemable for cash or, at our election, shares of our common stock on a one-for-one basis;
“Operating Partnership” means Phillips Edison Grocery Center Operating Partnership I, L.P., a Delaware limited partnership, of which Phillips Edison Grocery Center OP GP I LLC, our wholly-owned subsidiary, is the sole general partner (substantially all of our business is conducted through the Operating Partnership);
“PECO,” “Phillips Edison,” “we,” “our,” “us,” and “Company” mean Phillips Edison & Company, Inc., a Maryland corporation, together with its consolidated subsidiaries, including the Operating Partnership; provided, however, that in statements relating to qualification as a REIT, such terms refer solely to Phillips Edison & Company, Inc.;
“PELP Transaction” means the October 2017 transaction pursuant to which we internalized our management structure through the acquisition of certain real estate assets and the third-party investment management business of Phillips Edison Limited Partnership, or PELP, in exchange for OP units and cash;
“portfolio retention rate” is calculated by dividing (i) the total square feet of retained Neighbors with current period lease expirations by (ii) the total square feet of leases expiring during the period (the portfolio retention rate provides insight into our ability to retain Neighbors at our shopping centers as their leases approach expiration; generally, the costs to retain an existing Neighbor are lower than costs to replace with a new Neighbor);
“public peers” or “public peer group” refers to a group of 11 REITs identified by JLL where at least 50% of the portfolio’s shopping centers are neighborhood or community centers and the REIT had a minimum market capitalization of at least $900 million as of the end of trading on May 21, 2021. These 11 REITs are Acadia Realty Trust, Brixmor Property Group Inc., Federal Realty Investment Trust, Kimco Realty Corporation, Kite Realty Group Trust, Regency Centers Corporation, Retail Opportunity Investments Corp., Retail Properties of America, Inc., RPT Realty, Saul Centers, Inc., and Weingarten Realty Investors.
“psf” means per square foot;
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“revolving credit facility” means the $500 million unsecured revolving credit facility, which we expect to refinance prior to the completion of this offering;
“Same-Center” means a property, or portfolio of properties, that have been owned and operational for the entirety of each of the applicable reporting periods (e.g., since January 1, 2019 for the 2020 Same-Center portfolio or since January 1, 2020 for the 2021 Same-Center portfolio); for the purposes of comparing Same-Center NOI for the years ended 2019, 2018, 2017, and 2016, “Same-Center NOI” refers to “Same-Center NOI (Adjusted for Transactions)”;
“Same-Center NOI (Adjusted for Transactions)” is Same-Center NOI presented as if the PELP Transaction and the Merger had occurred on January 1 of the earliest comparable period in each presentation (see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Measures”);
“Securities Act” means the Securities Act of 1933, as amended;
“Sun Belt” means the following U.S. states: Alabama, Arizona, California, Florida, Georgia, Louisiana, Mississippi, Nevada, New Mexico, South Carolina, Tennessee, and Texas;
“top grocers” means the top three grocers in each state, as identified by JLL, based on the number of visitors that grocer received in each state in the month of March 2021, as estimated by Placer.ai;
“trade area” means the 3-mile area surrounding a shopping center;
“unconsolidated joint ventures” means the two unconsolidated third-party institutional joint ventures through which we have equity interests in 22 shopping centers; and
“wholly-owned properties,” “wholly-owned portfolio,” “wholly-owned centers” and other similar terms mean the 278 shopping centers we owned and consolidated in our financial statements as of March 31, 2021 and excludes (i) two shopping centers we disposed of subsequent to March 31, 2021 and (ii) 22 shopping centers owned by two unconsolidated joint ventures in which we had equity interests as of March 31, 2021.
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PROSPECTUS SUMMARY
This summary highlights some of the information in this prospectus. It does not contain all of the information that you should consider before investing in our common stock. You should read carefully the more detailed information set forth under the heading “Risk Factors” and the other information included in this prospectus. Unless otherwise indicated, the information contained in this prospectus assumes that the common stock to be sold in this offering is sold at $               per share, which is the midpoint of the price range set forth on the front cover of this prospectus, and that the underwriters do not exercise their option to purchase up to an additional               shares of our common stock to cover overallotments, if any.

Company Overview
Phillips Edison is one of the nation’s largest owners and operators of omni-channel grocery-anchored shopping centers and has the highest percentage of its properties anchored by top grocers among its public peers, according to JLL. Grocery-anchored neighborhood shopping centers have been our primary focus since we started our business in 1991, and we believe this focus has generated superior growth and attractive risk-adjusted returns over time. Our portfolio primarily consists of neighborhood centers anchored by the #1 or #2 grocer tenants by sales within their respective formats by trade area. As of March 31, 2021, our portfolio was 94.8% occupied. Our tenants, who we refer to as “Neighbors,” are a mix of national, regional, and local retailers that primarily provide necessity-based goods and services.
As of March 31, 2021, we owned equity interests in 300 shopping centers, including 278 wholly-owned properties which contributed more than 98% of our ABR, and 22 shopping center properties owned through two unconsolidated third-party institutional joint ventures. In total, our portfolio of wholly-owned shopping centers and our prorated portion of shopping centers owned through our unconsolidated institutional joint ventures comprises approximately 31.7 million square feet in 31 states. The following table provides the percentage of our total ABR that was generated in each of the indicated U.S. geographic regions as of March 31, 2021:
% ABR by Region
Sun Belt(1)
Midwest(2)
East(3)
Mountain(4)
Total
48.8%25.5%19.0%6.7%100.0%
(1)Includes Arizona, California, Florida, Georgia, Nevada, New Mexico, South Carolina, Tennessee, and Texas.
(2)Includes Illinois, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Missouri, Ohio, and Wisconsin.
(3)Includes Connecticut, Maryland, Massachusetts, New Jersey, New York, North Carolina, Pennsylvania, and Virginia.
(4)Includes Colorado, Oregon, Utah, and Washington.
As of March 31, 2021, 96.4% of our ABR was generated from omni-channel grocery-anchored shopping centers and 82.2% of our ABR was generated from shopping centers with the #1 or #2 grocer by sales within their respective format. Phillips Edison has the highest share of its centers anchored by top grocers among its public peers, according to JLL.
As of March 31, 2021, our top five Neighbors were grocers:
Kroger, which includes such banners as Ralphs, Harris Teeter, King Soopers, and Smith’s, anchors 54 locations and generates 6.6% of our ABR — we are Kroger’s largest landlord by number of stores;
Publix, which anchors 47 locations and generates 5.5% of our ABR — we are Publix’s second largest landlord by number of stores;
Ahold Delhaize, which includes such banners as Stop & Shop and Giant, anchors 23 locations and generates 4.5% of our ABR;
Albertsons-Safeway, which includes such banners as Safeway and Jewel-Osco, anchors 28 locations and generates 4.3% of our ABR; and
Walmart, which anchors 13 locations and generates 2.3% of our ABR.
Our business model is founded on owning and operating omni-channel grocery-anchored neighborhood shopping centers that provide necessity-based goods and services to the average American household. As of March 31, 2021, for our wholly-owned shopping centers and our prorated portion of shopping centers owned through our unconsolidated joint ventures, approximately 72.6% of our ABR comes from necessity-based goods and services retailers. As of March 31, 2021, our wholly-owned centers averaged approximately 113,000 square feet in size, and our average inline Neighbor occupied 2,100 square feet. Our average center, at 113,000 square feet in size, is smaller than those of our public peers, at 217,000 square feet, according to JLL. We believe that smaller shopping centers and smaller Neighbor spaces create a positive leasing dynamic as spaces are sized to meet demand from the large variety of retailers that are growing and opening new stores, which we believe creates pricing power. In 2019, 65% of leasing activity in strip shopping centers was in spaces of less than 2,500 square feet.
We believe our grocery focus is ecommerce resilient and adaptive, with many customers visiting our Neighbors to collect online purchases. We believe that grocery sales are ecommerce resilient because the economics of delivery typically remain unattractive to grocers. We believe grocery margins are typically 2-4% and the additional costs associated with delivery produce an overall loss for the grocer unless the customer is willing to pay for the cost of delivery. We believe delivery fees are a major deterrent for customers in our markets and that customers have demonstrated a preference for buy-online-pickup-in-store, or BOPIS, over delivery and therefore the store remains the delivery point.
We believe that our centers are a critical component of our Neighbors’ omni-channel strategies and that, as ecommerce continues to grow, our centers provide omni-channel retailers with a solution for critical last mile delivery and BOPIS options. As of March 31, 2021, we estimate that 87% of our grocers offer BOPIS options to customers. In 2020, we established Front
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Row To Go®, a program that provides convenient curbside pick-up and clearly marked parking spaces to facilitate customer pickup from all Neighbors. Approximately 91% of our portfolio now provides Front Row To Go®. We believe this program complements our grocers’ expansion of BOPIS and brings consistently high levels of foot traffic to our centers. Our centers now record foot traffic that exceeds levels prior to the onset of the COVID-19 pandemic. During March 2021, foot traffic at our centers was 104% of average monthly levels during 2019 according to data provided to us by Placer.ai, a company that analyzes location and foot traffic for retailers, commercial real estate owners and municipalities by collecting geolocation and proximity data.
Our Shopping Centers
The map below presents the geographic distribution of our wholly-owned portfolio as of March 31, 2021, consisting of 278 properties located in 31 states (excluding two dispositions that occurred subsequent to March 31, 2021):


https://cdn.kscope.io/f320d089b271f72201fda29c9033cb5a-cik0001476204-20210621_g3.jpg
https://cdn.kscope.io/f320d089b271f72201fda29c9033cb5a-cik0001476204-20210621_g4.jpg
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The following table provides summary information regarding our wholly-owned portfolio (unless otherwise noted) as of March 31, 2021 (dollars and square feet in thousands, excluding per square foot data):
March 31, 2021
Number of shopping centers278 
Number of states31 
Total GLA31,306 
Average shopping center GLA113 
Total ABR$386,971 
Total ABR from necessity-based goods and services(1)
72.6 %
Grocery-related:
Percent of ABR from omni-channel grocery-anchored shopping centers
96.4 %
Percent of ABR from grocery anchors35.4 %
Percent of ABR from nongrocery anchors13.6 %
Percent of ABR from inline spaces51.0 %
Percent of GLA leased to grocery Neighbors48.7 %
Grocer health ratio(2)
2.1 %
Percent of ABR from centers with grocery anchors that are #1 or #2 by sales82.2 %
Average annual sales per square foot of reporting grocers$609 
Leased occupancy as a percentage of rentable square feet:
Total portfolio94.8 %
Anchor spaces97.3 %
Inline spaces89.8 %
Average remaining lease term (in years):(3)
Total portfolio4.6 
Grocery anchor spaces4.7 
Nongrocery anchor spaces5.0 
Inline spaces4.1 
Portfolio retention rate:(4)
Total portfolio88.8 %
Anchor spaces92.9 %
Inline spaces80.3 %
Average ABR per square foot:
Total portfolio$13.05 
Anchor spaces$9.34 
Inline spaces$20.82 
(1)Inclusive of our prorated portion of shopping centers owned through our unconsolidated joint ventures.
(2)Based on the most recently reported sales data available.
(3)The average remaining lease term in years is as of March 31, 2021. Including future options to extend the term of the lease, the average remaining lease term in years for our total portfolio, grocery anchors, nongrocery anchors and inline spaces is 20.9, 31.4, 16.0, and 7.9, respectively.
(4)For the three months ended March 31, 2021.
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Competitive Strengths
We believe our position as a leading omni-channel grocery-anchored neighborhood shopping center owner and operator is founded on the following competitive strengths:
Exclusive Focus on Omni-Channel Grocery-Anchored Shopping Centers
Since starting our business in 1991, our core strategy has focused exclusively on owning and operating grocery-anchored shopping centers. We believe that our centers are anchored by leading grocery banners that drive customers to our centers. We categorize our grocery anchors into store formats that are established by Nielsen TDLinx. The grocery store formats in our wholly-owned centers today are set forth below, including Neighbor detail as of March 31, 2021:
Conventional, which includes full-line, self-service grocery. Our top two conventional grocery Neighbors are:
Kroger, which anchors 54 locations and generates 6.6% of our ABR. We are Kroger’s largest landlord by number of stores.
Publix, which anchors 47 locations and generates 5.5% of our ABR. We are Publix’s second largest landlord by number of stores.
Natural and Gourmet, which includes self-service grocery stores primarily offering natural, organic or gourmet foods. Our top two natural grocery Neighbors are:
Sprouts, which anchors eleven locations and generates 1.3% of our ABR. We are Sprouts’ largest landlord by number of stores.
Trader Joe’s, which anchors six locations and generates 0.4% of our ABR.
Supercenter, which includes a full-line supermarket with a full-line discount merchandiser under one roof. We have one supercenter grocery Neighbor:
Walmart, which anchors 13 locations and generates 2.3% of our ABR.
Limited Assortment, which includes supermarkets with a limited selection of items in a reduced number of categories. Our top two limited assortment grocery Neighbors are:
Aldi, which anchors four locations and generates 0.2% of our ABR.
Save A Lot, which anchors two locations and generates 0.1% of our ABR.
Wholesale Club, which includes membership club stores distributing packaged and bulk foods and general merchandise. We have one wholesale club grocery Neighbor:
BJ’s Wholesale Club, which anchors two locations and generates 0.4% of our ABR.
We believe omni-channel grocery-anchored shopping centers are a critical element of a community’s infrastructure providing essential goods and services, and as such, we believe our centers have superior durability and higher return potential relative to other forms of retail real estate. As of March 31, 2021, 96.4% of our ABR was generated by omni-channel grocery-anchored shopping centers, and 35.4% of our ABR was generated by our grocery Neighbors across our wholly-owned portfolio. In addition, as of March 31, 2021, only 13.6% of our ABR was generated by anchors that are not grocers. Our non-grocery anchors are well-diversified. Our largest non-grocery anchor is TJX Companies, which includes the T.J. Maxx brand, and which generated 1.3% of our ABR as of March 31, 2021. Our next largest non-grocery anchor, Dollar Tree, generated approximately 1.0% of our ABR as of March 31, 2021.
We believe omni-channel grocery-anchored shopping center property values are resilient through economic cycles. According to Jones Lang LaSalle Americas, Inc., or JLL, asset prices for grocery-anchored retail properties have increased by 21.5% since 2015, which compares favorably to the price performance of non-grocery-anchored retail properties, which have declined in value by 21.8% over the same period.
We maintain strong relationships with our grocery Neighbors. Our portfolio consists of 34 grocer companies across more than 55 unique banners. For the three months ended March 31, 2021, our grocery Neighbor retention rate was 92.2%, and for the year ended December 31, 2020, this rate was 97.1%. In addition, we actively monitor the performance of our grocery Neighbors to balance rent growth and their ability to generate profitability. On average, our grocery Neighbors who report sales to us exhibit a 2.1% health ratio as of March 31, 2021, which represents the amount of annual rent and expense recoveries paid by the Neighbor as a percentage of its annual gross sales. This health ratio compares favorably to the average grocer health ratio of 2.7%, according to JLL. Low grocer health ratios provide us with the knowledge to manage our rents effectively while seeking to ensure the financial stability of our grocery anchors.
We believe our grocery anchors and our necessity-based inline Neighbors are essential businesses with greater stability and resiliency than other types of retail, as demonstrated by our strong absolute and relative performance throughout the COVID-19 pandemic. During the year ended December 31, 2020, our average annual sales per square foot of reporting grocers was $609, an increase of 14.1% over the prior year for grocers who reported in both periods, which compares favorably to the 11% increase for all grocery sales in 2020, according to the U.S. Census Bureau.
We believe that we and our inline Neighbors have benefited from strong recurring foot traffic generated by our grocery anchors. We believe our omni-channel grocery-anchored shopping centers have benefited from a multitude of factors, including increasing demand for last-mile delivery, BOPIS, work-from-home, shop local, and changing consumer preferences away from regional malls and into local retail options, including open-air shopping centers. On average, U.S. consumers visited grocery stores 1.6 times per week during 2019, according to The Food Marketing Institute. During 2020, our shopping centers averaged over 19,000 customer visits per week, according to Placer.ai. We believe that frequent foot traffic generated by our grocery anchors supports our inline spaces with consistent sales volume and enhances the ability of our inline
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Neighbors to pay rent. During the three months ended March 31, 2021 and year ended December 31, 2020, our comparable rent spreads for new inline leases were 12.4% and 10.9%, respectively.
Differentiated National and Scaled Portfolio Anchored by Market Leading Grocers in Suburban Communities
As of March 31, 2021, we own equity interests in 300 shopping centers, including 278 wholly-owned shopping centers and 22 shopping centers through two unconsolidated third-party institutional joint ventures. Our centers are located in 31 states. Our investment thesis is focused on owning neighborhood centers that are anchored by the #1 or #2 grocer in a trade area that are right sized and that have our targeted trade area demographic profile. As of March 31, 2021, 82.2% of our ABR was generated from shopping centers with a grocery Neighbor ranked #1 or #2 by sales. We believe that the format of a shopping center matters, and our strategy is focused on owning and operating smaller neighborhood and community centers. Approximately 93% of our portfolio is composed of neighborhood and community centers, which is a higher percentage than any of our public peers, according to JLL. Our average center size is 113,000 square feet, which is much smaller than the average center size of our public peers at 217,000 square feet, according to JLL. We believe that smaller centers provide higher growth potential because they enjoy a positive leasing dynamic as (i) there is less space to lease, (ii) we believe retailer demand is higher as smaller spaces are the ones preferred by retailers today, (iii) there is less exposure to big box retailers, which we believe have higher risk because there is less demand from big box retailers currently and they are costly to backfill, and (iv) smaller centers typically have lower capital expenditures.
We target investments with attractive going-in yields and growth potential in markets with demographic profiles that support necessity-based retail concepts. According to Costar, there are approximately 15,000 grocery-anchored shopping centers within the United States. We believe, based upon our market research, that there are approximately 5,800 properties that are anchored by a grocer ranked #1 or #2 by sales with our targeted demographic profile that we view as potential acquisition candidates for us. Our portfolio median household income in the 3-mile trade area is approximately $68,100, which compares favorably to the U.S. median household income of $68,700 in 2019 according to US Census Bureau data. The average population in the 3-mile trade area in our portfolio is approximately 61,000 people. We believe our demographic metrics line up well with those of our top two grocer Neighbors, Kroger and Publix. According to Synergos Technologies, Inc., Kroger stores average 55,000 people in the three-mile trade area with median household incomes of $63,000, and Publix stores average 63,000 people in the three mile trade area with median household incomes of $68,000. Our performance and experience have proven these demographics support our grocer and inline Neighbors as we have maintained high occupancy levels and successfully grown rents. We have realized sector-leading renewal spreads among our public peers for the three year period 2017-2019 and in the first quarter of 2021.
Consistent Track Record of Delivering Strong Performance
We believe that our business model and targeted market approach have generated strong growth over time. For the years ended December 31, 2020, 2019, 2018, and 2017, our net income (loss) was $5.5 million, $(72.8) million, $47.0 million, and $(41.7) million, respectively. For the three year period of 2017, 2018, and 2019, prior to the COVID-19 pandemic, our Same-Center NOI growth averaged 3.6% and our core funds from operations, or Core FFO, per share growth averaged 4.8%. The COVID-19 pandemic impacted our operating results, with our Same-Center NOI declining 4.1% and Core FFO per share declining 6.2% in the year ended December 31, 2020. The impact of the COVID-19 pandemic on our operating results decreased in the three months ended March 31, 2021. Our net income for the three months ended March 31, 2021 was $0.1 million, with our Same-Center NOI having declined 0.9% compared to the three months ended March 31, 2020 and our Core FFO per share having increased by 9.3% compared to the three months ended March 31, 2020. Our comparable renewal lease spreads averaged 9.5% for the three years ended December 31, 2019, 6.7% for the year ended December 31, 2020, and 8.0% for the three months ended March 31, 2021. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Measures” included elsewhere in this prospectus for a reconciliation of the non-GAAP measures to Net Income (Loss).
We believe our returns are enhanced due to our focus on omni-channel grocery-anchored neighborhood shopping centers, which require a lower level of capital expenditures to maintain net operating income, or NOI. Our level of capital expenditures as a percentage of NOI is significantly lower than our public peers. For the three year period 2018-2020, our capital expenditures as a percentage of NOI averaged approximately 19.8%, which is significantly lower than the average capital expenditure as a percentage of NOI of our public peer group of approximately 31%. We believe that our centers require lower capital expenditures as a percentage of NOI for a number of reasons, including our high tenant retention rates, a favorable supply demand dynamic for space in our centers, reduced exposures to tenant categories we believe are more ecommerce-vulnerable such as office supplies, entertainment and electronics, and the smaller average tenant size in our centers.
Our results in the following table demonstrate our consistent record (dollars in thousands):
 Three Months Ended
March 31, 2021(1)
Year Ended
December 31, 2020(1)
Three Years Ended
 December 31, 2019(2)
Net income (loss)$117 $5,462 $(67,569)
Same-Center NOI (decline) growth(3)(4)
(0.9)%(4.1)%3.6 %
Comparable renewal lease spreads average8.0 %6.7 %9.5 %
Leased occupancy94.8 %94.7 %94.2 %
Core FFO per share growth (decline)(3)
9.3 %(6.2)%4.8 %
(1)Growth or decline is calculated based on the comparable prior year period.
(2)Growth or decline as well as occupancy are calculated as an average over the three year period.
(3)For the three years ended December 31, 2019, represents Same-Center NOI (Adjusted for Transactions). See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Measures.”
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(4)Our Same-Center NOI, Same-Center NOI (Adjusted for Transactions), NOI, and Core FFO referenced above are non-GAAP financial measures. For definitions of Same-Center NOI, Same-Center NOI (Adjusted for Transactions), NOI, and Core FFO, reconciliations of these metrics to net income (loss), the most directly comparable GAAP financial measure, and a statement of why our management believes the presentation of these metrics provides useful information to investors and any additional purposes for which management uses these metrics, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Measures.”
Stable, Resilient and Increasing Rents from Adaptive and Diversified Neighbors
Our portfolio demonstrated strong resilience throughout the difficult economic conditions caused by the COVID-19 pandemic. As of March 31, 2021, our portfolio leased occupancy was 94.8%, and 100% of our occupied spaces were open for business. For the month ended March 31, 2021, our foot traffic was 104% of the average monthly levels during the year ended December 31, 2019 according to data provided by Placer.ai. We believe that our portfolio has minimal exposure to distressed retailers as evidenced by the fact that less than 1% of our ABR came from the 15 largest retailers that declared bankruptcy in 2020.
We collected a high percentage of rents and recovery billings from our Neighbors throughout 2020 and had better collection results than any of our public peers, according to JLL. For the three months ended June 30, 2020, for our wholly-owned portfolio and the prorated portion owned through our unconsolidated joint ventures, we initially collected 86% of rents and recovery billings and we have since collected 93% of such amounts for that period. We continue to collect amounts owed for past billing periods. As of June 15, 2021, we have collected 96% of all rent and recovery billings for April 2020 through March 2021. Additionally, as of June 15, 2021, we have collected 98% and 97% in rent and recoveries billed during April and May 2021, respectively. Despite the challenging economic conditions that certain Neighbors experienced throughout 2020 as a result of the COVID-19 pandemic, we granted limited requests for rent deferrals and abatements. As of March 31, 2021, from the beginning of the COVID-19 pandemic in March 2020, we had executed rent abatements totaling less than 2% of portfolio ABR.
We believe that our necessity-based retail strategy, coupled with the successful execution of our capital recycling program in recent years positioned our portfolio to successfully weather the economic downturn in 2020. We began a disciplined capital recycling program in 2017 to improve the overall quality of our portfolio, delever our balance sheet and prepare the Company for an initial public offering. Since 2017, we have sold 45 assets for $442.1 million.
As of December 31, 2020, portfolio leased occupancy declined by only 0.9% to 94.7%, and inline leased occupancy declined by 1.2% to 88.9%, compared to March 31, 2020. Between December 31, 2020 and March 31, 2021, portfolio leased occupancy increased by 0.1% to 94.8% and inline leased occupancy increased by 0.9% to 89.8%. We believe, based upon current leasing activity, that we can increase inline occupancy and total occupancy above current levels. As higher occupancy levels are achieved, we believe that we will be able to accelerate rent growth given a more favorable supply/demand dynamic.
We achieve cash flow stability through geographic, property and Neighbor diversification, as well as lease structure. As of March 31, 2021, our centers are located in 31 states. As of March 31, 2021, no single property contributed more than 1.2% to our ABR, and no single MSA contributed more than 7.2% to our ABR. Our wholly-owned shopping centers and those owned through our institutional joint ventures contained approximately 5,400 occupied spaces as of March 31, 2021. We believe that our necessity-based retail strategy combined with strong geographical and Neighbor diversification limited the effects of state and local stay-at-home and lock down orders during the COVID-19 pandemic. In addition, our management team has successfully operated our business for 30 years through many other difficult economic environments, including the 2001 recession and the 2007-09 financial crisis, gaining experience and significant insight that allow us to effectively manage difficult economic conditions.
We believe the innovative and adaptive nature of our grocery Neighbors allows them to successfully respond to evolving market demands and enhances our portfolio. Our top five Neighbors by ABR are five of the largest grocers in the U.S. by sales volume and their combined total sales represent approximately 60% of the total U.S. grocery market sales of $1.01 trillion in 2020, according to FoodIndustry.com. As a large landlord for a number of our grocery Neighbors, we work closely with them on their adaptive strategies. These Neighbors are well-capitalized and complement their in-store strategy with ecommerce concepts such as home delivery and curbside pickup. We believe our Neighbors’ ability to adapt to changing demand patterns contributed to our resilient foot traffic trends.
Balance Sheet Positioned for External Growth and Investment Grade Rating
Upon completion of this offering, we believe we will be well positioned to grow our portfolio by opportunistically pursuing acquisitions in a disciplined manner, while maintaining an attractive leverage profile and flexible balance sheet.
As of March 31, 2021, we had total debt of $               million (as adjusted for this offering) and our net loss for the trailing 12-months then ended was $5.6 million. As of March 31, 2021, as adjusted for this offering, our net debt to trailing 12-month Adjusted EBITDAre was               . In addition, as of March 31, 2021 and as adjusted for this offering, we anticipate that we will have $               million of total liquidity comprised of $               million of undrawn capacity under our $500 million revolving credit facility and $               million of cash and cash equivalents. We believe our conservative leverage profile and significant liquidity will compare favorably to our public shopping center REIT peers and will position us to pursue attractive external growth opportunities. We believe that becoming a publicly traded REIT will allow us to access multiple forms of equity and debt capital currently not available to us, further enhancing our financial flexibility and external growth. Approximately 73% of our in-place NOI for the three months ended March 31, 2021 was unencumbered, which we believe provides us with flexibility to refinance our existing debt, either with our existing relationship banks or by accessing the private or public debt capital markets that we anticipate will be available to us as a publicly traded company at attractive levels. We believe that our balance sheet profile provides us with the financial capacity to pursue external growth initiatives in an accretive and prudently capitalized manner. Our net debt, our Adjusted EBITDAre, and our ratio of net debt to EBITDAre referenced above are non-GAAP financial measures. For definitions of net debt and Adjusted EBITDAre, reconciliations of these metrics to total debt and net income (loss), respectively, the most directly comparable GAAP financial measures, and a statement of why our management believes the presentation of these metrics provides useful information to investors and any additional purposes
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for which management uses these metrics, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Measures” and “—Liquidity and Capital Resources—Financial Leverage Ratios.”
We intend to maintain a strong balance sheet in order to pursue an investment grade credit rating.
Fully-Integrated National Operating Platform Drives Strong Operating Performance
We believe in fully controlling all aspects of owning and operating our shopping centers with PECO employees, who we refer to as associates. We do not employ outside leasing brokers or property managers. Our fully-integrated and internally-managed operating platform had approximately 300 associates located in 20 states across the United States as of March 31, 2021. We believe our strong operating results are due to our locally smart™ operational platform, which allows our associates to gather market intelligence from thousands of Neighbors and other market participants. In addition, due to our extensive operations across the United States, and supporting platform of associates, we believe we have the ability to acquire and integrate shopping centers quickly and deploy capital effectively as opportunities arise. Our diversified merchandising mix of Neighbors and geography provide us with proprietary insights into which retail segments are performing well and which emerging brands are realizing financial success. Our portfolio management team uses these insights to optimize merchandising mix and maximize lease agreement terms. We have twelve associates on our portfolio management team with an average tenure of eleven years with our Company and average industry experience of 17 years.
We believe our leasing team structure is unique, optimizes our relationship with Neighbors, and allows us to create meaningful value across our portfolio. Our in-house leasing team of 30 associates consists of a new lease execution team, a dedicated renewals team, and a national accounts team that is focused exclusively on emerging brands. For the three months ended March 31, 2021, we executed 153 new leases compared to 87 in the prior year period and we achieved comparable leasing spreads of 12.4% for new leases. For the same period, we also renewed 163 leases comprising one million square feet of GLA, at comparable leasing spreads of 8.0%. Our portfolio retention rate with all Neighbors for the three months ended March 31, 2021 was 88.8%, and for the five years ended December 31, 2020, it averaged 86.9%. We believe our strong leasing performance and high retention rates are a result of our strong focus on creating the right merchandising mix for each center and our new lease execution team, dedicated renewals team, and national accounts team.
We have a proven track record of successfully managing institutional capital. Our first institutional fund was raised in 2005. Our three most recent institutional funds include unconsolidated joint ventures with Northwestern Mutual, TPG Real Estate, and CBRE Investors. Our Northwestern Mutual joint venture is a $411 million omni-channel grocery-anchored shopping center venture formed in November 2018 named Grocery Retail Partners I, or GRP I. We currently own 14% of this joint venture. We formed a $250 million equity joint venture with TPG Real Estate in March 2016 named Necessity Retail Partners, or NRP, to invest in omni-channel grocery-anchored shopping centers. We hold a 20% interest in this joint venture. Further, in September 2011, we entered into a $100 million equity joint venture with a group of international institutional investors advised by CBRE Investors. We served as general partner and held a 54% interest in this joint venture, which has since been realized. We generated a 16.1% internal rate of return in the CBRE joint venture. Our Northwestern Mutual and TPG Real Estate ventures are still active and have not been fully realized. We currently expect them to meet their targeted returns.
We have made meaningful investments in technology to enhance our operating capabilities and investment decisions. Our technology initiatives have been recognized through numerous industry awards including awards from ComSpark, MRI Software and Realcomm. Some of the tools that we employ include advanced machine learning, robotic process automation, and a Neighbor service portal. In machine learning, we are developing algorithms using internal proprietary data and third-party data sources. The four areas we are currently focused on are Neighbor credit, rent prediction, grocer health and optimal merchandising mix. We use Robotic Process Automation to perform repetitive tasks and to reduce labor costs. Our Neighbor service platform, which we refer to as DashComm®, is a proprietary Neighbor platform to improve how we deliver Neighbor-facing customer service. Over the last five years, we have invested over $43.3 million in technology initiatives. Our investments in technology enabled us to seamlessly transition our workforce to a remote work environment during the pandemic.
We believe our technology investments have enhanced our investment and asset management processes. We have developed the PECO Power ScoreTM, a proprietary asset evaluation algorithm created to analyze thousands of data points to better understand which variables correlate with, and contribute to, strong center performance. The PECO Power ScoreTM is comprised of 45 variables, including grocer sales per square foot, percentage of trade area population with a bachelor’s degree, center age, percent of GLA in multi-Neighbor units, grocer credit rating, and three-mile population growth. We believe the PECO Power ScoreTM provides a data-based score of the strength and quality of a grocery-anchored shopping center. As such, we believe the PECO Power ScoreTM is a critical metric for our transaction team in assessing the quality of potential shopping center acquisitions and to our portfolio management team in measuring the performance of our assets. We believe this disciplined data driven approach to evaluating assets contributes to sector leading operating performance and cash flow growth.
We have also created a qualitative model to assess the stability of a grocery anchor. The Grocery Occupancy Longevity Dynamics score, or GOLD ScoreTM, was created to better assess the health and stability of our grocery anchors. Utilizing our 30 year track record with grocery partners, we assess hundreds of variables to determine which variables have the highest impact on the longevity of a grocery Neighbor at a particular shopping center. The GOLD ScoreTM is back-tested and adjusted annually.
Experienced and Aligned Management Team
We believe our executive management team has strong insight and operating acumen developed from over 30 years of successfully operating grocery-anchored centers and creating value through prudent balance sheet management. Our Chief Executive Officer, Jeffrey S. Edison, co-founded Phillips Edison Limited Partnership in 1991, starting with a single grocery-anchored shopping center that we still own today. Since that time, Mr. Edison has overseen the acquisition of assets having an aggregate value of approximately $6.8 billion, of which the majority were grocery-anchored shopping centers. In addition, our five member executive management team has extensive real estate experience with an average of 27 years in real estate related roles and an average tenure of 14 years with the Company. In addition to our executive management team, our next
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most senior executives are our Senior Vice Presidents who are responsible for running each business unit, such as Accounting, Leasing, Property Management, and Portfolio Management. As of March 31, 2021 we had eleven Senior Vice Presidents with an average of 19 years of real estate industry experience and an average tenure of nine years with our Company. We benefit from the significant experience of our management team and its ability to effectively navigate changing market conditions in order to achieve sustained growth. In addition, we believe the interests of our executive management team are strongly aligned with our stockholders. As of the completion of this offering, we expect our executive management team to collectively own approximately                % of our outstanding common stock and OP units on a fully diluted basis, which represents $                million at the midpoint of the price range set forth on the front cover of this prospectus.
Business Objectives and Growth Strategies
Our primary objective is to provide attractive risk-adjusted returns for our stockholders by executing on internal and external business and growth initiatives, which include:
Driving NOI Growth from Re-Leasing Below Market Rents
We seek to increase NOI at our centers by maximizing rental rates and attracting high quality retailers while improving the merchandising mix and credit profile of our rental revenue. As of March 31, 2021, for our wholly-owned portfolio, we have a total of 416 leases expiring in 2021, representing 1.6 million square feet of GLA. While we cannot predict what rental rates we will achieve in 2021 as we renew or replace these expiring leases, the comparable rent spread of new leases signed during 2020 was 8.2%, and the comparable rent spread for lease renewals and options was 6.7% for the year ended December 31, 2020. The comparable rent spread of new leases signed was 12.4% and the comparable rent spread for lease renewals and options was 8.0% for the three months ended March 31, 2021.
Recent leasing activity has been strong. During the three months ended March 31, 2021, we executed 316 new and renewal leases totaling 1.4 million square feet. This compares to our average quarterly leasing results for the three-year period ended December 31, 2019, the last period prior to the onset of the COVID-19 pandemic, of 195 executed leases per quarter, representing 0.9 million square feet per quarter.
Lease-up Vacant Space to Drive Occupancy and NOI
We intend to increase the percentage of leased space at our centers to drive additional cash flow and NOI. Our national footprint of experienced leasing professionals is dedicated to (i) increasing occupancy, (ii) creating the optimal merchandising mix, (iii) maximizing rental income, and (iv) executing leases with annual contractual rent increases. As of March 31, 2021, our anchor space is 97.3% leased and our inline space is 89.8% leased, as compared to 98.0% and 90.2%, respectively, in the period ended December 31, 2019, the last period prior to the onset of the COVID-19 pandemic. We believe, based upon current leasing activity, that we can increase inline occupancy and total occupancy above current levels. As higher occupancy levels are achieved, we believe that we will be able to accelerate rent growth given a more favorable supply/demand dynamic. Demand for our well-located omni-channel grocery-anchored retail space increased during the third and fourth quarters of 2020 and was approaching 2019 leasing levels. For the three months ended March 31, 2021, we leased 1.4 million square feet, which represented a 29% increase over the prior year period and a 43% increase compared to the three months ended March 31, 2019. Our leased occupancy levels prior to the onset of the COVID-19 pandemic coupled with our current leasing demand and pipeline position us well to further increase our occupancy rate.
Selectively Acquire Omni-Channel Grocery-Anchored Shopping Centers
We intend to selectively acquire omni-channel grocery-anchored shopping centers with attractive yields in markets that support our necessity-based retail strategy. We focus on acquisitions in our targeted markets that have capitalization rates that we believe are generally 50-100 bps higher than those observed in primary markets. We have a dedicated transactions team of six professionals with an average of 12 years of real estate transaction experience and a 10-year average tenure at our Company that is responsible for executing all of our acquisitions and dispositions. In considering and evaluating potential acquisition opportunities, and to augment our seasoned acquisition team, we employ our proprietary underwriting methodology, which includes the use of the PECO Power ScoreTM, to assess shopping center attributes and projected returns. We believe that we maintain a competitive advantage in acquiring centers given the scale of our business and the experience of our team. We maintain a network of thousands of retailers, real estate brokers, and other market participants which gives us unique insight into new and highly desirable acquisition opportunities. We are often sought out as a preferred buyer of shopping centers due to our track record and reputation in our markets. For the 7-year period 2012-2018, we acquired 280 assets for a total of $4.7 billion, an average of 40 assets for $670 million per year. For the three year period 2018-2020, we were the largest acquiror of grocery-anchored neighborhood centers among our public peers, according to JLL. We believe that there is a large acquisition opportunity set for us and that there are approximately 5,800 shopping centers anchored by the #1 or #2 grocer by sales with our target demographic profile that we view as potential acquisition candidates for us.
Execute Redevelopment Opportunities
Our team of seasoned professionals identifies opportunities to unlock additional value at our centers through investments in our redevelopment program. Our strategies primarily consist of outparcel development, footprint reconfiguration, anchor repositioning, and anchor expansion. Our capital expenditures were prioritized in 2020 to support new leasing activity due to the impact from the COVID-19 pandemic. In more normal operating environments, we look for redevelopment opportunities to increase the overall yield and value of our centers, which we believe will allow us to generate higher returns for our stockholders while creating exceptional omni-channel grocery-anchored shopping center experiences. Our underwritten incremental unlevered yields on redevelopment projects are expected to range between 9% - 11%. Our current in process projects represent an estimated total investment of $35.1 million, and the total underwritten incremental unlevered yield range on this estimated investment is expected to be between 9.5% - 10.5%. 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 annual NOI at stabilization. Our average net investment per redevelopment project is between $2 and $3 million. We believe the small average size of our redevelopment projects is a positive, as our risk in this activity is well-diversified.
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Capitalize on Favorable Macroeconomic Trends
We believe there are a number of macroeconomic trends that are positive for the growth potential of our shopping centers including the population trends in Sun Belt states, the population shift from urban to non-urban communities, the increase in work from home initiatives, the importance of last mile delivery, the increase in “shop local” trends, and Neighbors relocating from malls to open air shopping centers.
The Sun Belt region has experienced significant growth in population. Between 2000 and 2020, Sun Belt states increased their collective population by 28 million people, which represented 56% of all U.S. population growth, according to the U.S. Census Bureau. Sun Belt states represent 40% of the U.S. population as of 2020, an increase from 37% in 2000. Approximately 49% of our portfolio ABR is located in Sun Belt states. We believe we benefit from increased demand resulting from the Sun Belt’s increased percentage of the total population.
The net population flow out of U.S. urban neighborhoods and into non-urban neighborhoods doubled in the period between March and September 2020 as compared to the average for the same months in 2017 through 2019, according to the Federal Reserve Bank of Cleveland. We believe our suburban focus is well-positioned to capture additional growth from such trends.
We believe the increase in work from home initiatives across the United States will increase the growth potential of our shopping centers. We believe customers spending more time at home are more likely to visit our suburban stores.
We believe consumers increasingly prefer to “shop local” rather than purchase products from large retailers. We believe local stores create vibrant communities with unique businesses and strong neighborhood social bonds. We believe our inline Neighbors are representative of many of the “shop local” qualities that our customers demand.
We believe the COVID-19 pandemic has generated and, in some cases, accelerated the migration of retailers from malls to open air shopping centers. Retailers cite a number of reasons for this trend, including changing lifestyles, a customer preference for open air environments due to the pandemic, cost savings and getting closer to the customer. We have executed leases with retailers, including Lenscrafters, Panda Express, Pearle Vision, and Shoe Sensation, which we believe are following this trend.
Corporate Governance Profile
We have structured our corporate governance in a manner we believe closely aligns our interests with those of our stockholders. Notable features of our corporate governance structure that we expect to be in effect upon the completion of this offering include the following:
our Board will not be classified and each of our directors will be subject to election annually, and our charter will provide that we may not elect to be subject to the provision of the MGCL that would permit us to classify our Board, unless we receive prior approval from stockholders;
we have fully independent audit, compensation and nominating and corporate governance committees;
at least one of our directors qualifies as an “audit committee financial expert” by applicable SEC regulations and all members of the Audit Committee are financially literate in accordance with the Nasdaq listing standards;
we have opted out of the business combination and control share acquisition statutes in the MGCL;
we will not have a stockholder rights plan, and we will not adopt a stockholder rights plan in the future without (i) the approval of our stockholders or (ii) seeking ratification from our stockholders within 12 months of adoption of the plan if the Board determines, in the exercise of its duties under applicable law, that it is in our best interest to adopt a rights plan without the delay of seeking prior stockholder approval;
we will have adopted a stock ownership policy that requires each non-employee director, the chief executive officer and each other named executive officer to own a certain amount of specified equity interests in the Company;
the Circuit Court for Baltimore City, Maryland, or, if that court does not have jurisdiction, the United States District Court for the District of Maryland, Baltimore Division, will be the sole and exclusive forum for certain claims;
our bylaws will provide that our stockholders may alter or repeal any provision of our bylaws and adopt new bylaws if any such alteration, repeal or adoption is approved by the affirmative vote of a majority of the votes entitled to be cast on the matter; and
while holders of OP units have certain approval rights, including with respect to a change of control transaction, we are required to vote the full number of OP units that we own in any such vote in the same proportion as votes cast by our stockholders at a stockholders meeting relating to such transaction. After giving effect to this offering, we would have directly or indirectly controlled                 % of the OP units as of March 31, 2021.
Pursuant to an equity holder agreement entered into at the closing of the PELP transaction, Mr. Edison, our Chairman and Chief Executive Officer, or his designee, will be nominated to the Board through 2027, subject to certain terminating events, including the sale or transfer of more than 35% of the OP units that Mr. Edison beneficially owned immediately following the closing of the PELP Transaction.
Recapitalization and Structure of Our Company
Recapitalization
Our stockholders have approved an amendment to our charter, or Articles of Amendment, that effects a change of each share of our common stock that is outstanding before this offering into one share of a newly created class of Class B common stock, which we refer to as the “Recapitalization.” Upon the six-month anniversary of the listing of our common stock for trading on a national securities exchange or such earlier date or dates as approved by our Board with respect to all or any portion of the outstanding shares of our Class B common stock, each share of our Class B common stock will automatically, and without any
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stockholder action, convert into one share of our listed common stock. In all other respects, our Class B common stock will have identical preferences, rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications, and terms and conditions of redemption as our currently outstanding common stock.
The Articles of Amendment will become effective upon the filing with, and acceptance for record by, the State Department of Assessments and Taxation of Maryland, or the SDAT. We intend to file the Articles of Amendment on or around July 2, 2021. See “Recapitalization” for more information.
Reverse Stock Split
We intend to effect a one-for-three reverse stock split effective on or around July 2, 2021. In addition, we intend to effect a corresponding reverse split of the OP units. As a result of the reverse stock and OP unit split, every three shares of our common stock and OP units will be automatically combined and converted into one issued and outstanding share of common stock or OP unit, as applicable, rounded to the nearest 1/100th share or OP unit. The reverse stock and OP unit splits impact all common stock and OP units proportionately and will have no impact on any stockholder’s or limited partner’s percentage ownership of all issued and outstanding common stock or OP units. Unless otherwise indicated, the information in this prospectus gives effect to the reverse stock and OP unit splits.
Our Operating Partnership
Substantially all of our business is conducted through the Operating Partnership. We will contribute the net proceeds received by us from this offering to the Operating Partnership in exchange for OP units. Our interest in the Operating Partnership generally entitles us to share in cash distributions from, and in the profits and losses of, the Operating Partnership in proportion to our percentage ownership. Through our wholly-owned subsidiary, Phillips Edison Grocery Center OP GP I LLC, the sole general partner of the Operating Partnership, we generally have the exclusive power under the partnership agreement to manage and conduct the business and affairs of the Operating Partnership, subject to certain limited approval and voting rights of the limited partners. After giving effect to this offering, we would have directly or indirectly controlled               % of the OP units as of March 31, 2021.
Beginning on and after the date that is one year after the issuance of OP units to a limited partner, such limited partner has the right to require the Operating Partnership to redeem part or all of such OP units for cash, based upon the value of an equivalent number of shares of our common stock at the time of the redemption, or, at our election, shares of our common stock on a one-for-one basis, subject to certain adjustments and the restrictions on ownership and transfer of our stock set forth in our charter and described under the section entitled “Description of Capital Stock—Restrictions on Ownership and Transfer.” Each redemption of OP units will increase our percentage ownership interest in the Operating Partnership and our share of its cash distributions and profits and losses. See “The Operating Partnership and the Partnership Agreement” for more information.
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Our Structure
The following chart sets forth information about our Company, the Operating Partnership, and certain related parties upon completion of the Recapitalization and this offering. Ownership percentages below assume that the underwriters’ option to purchase additional shares of our common stock is not exercised and include the Listing Equity Grants, as defined below.
https://cdn.kscope.io/f320d089b271f72201fda29c9033cb5a-cik0001476204-20210621_g5.jpg
__________
(1)Includes               shares of unvested restricted stock and stock underlying unvested time-based restricted stock units. Excludes (i)               shares of our common stock available for future issuance under our 2020 Omnibus Incentive Plan and (ii) 218,421 shares of stock underlying unvested performance-based restricted stock units (such number of shares assumes that we issue shares of common stock underlying such unvested performance-based awards at maximum levels for the performance and market conditions that have not yet been achieved; to the extent that performance or market conditions do not meet maximum levels, the actual number of shares issued under those plans could be less than the amount reflected above).
(2)Includes (i) 1,000,000 OP units we expect to issue to settle the earn-out we entered into in connection with the PELP Transaction and (ii)               unvested time-based LTIP units. Excludes (x) up to 666,667 additional OP units we may issue to settle the earn-out we entered into in connection with the PELP Transaction and (y) 1,073,869 unvested performance-based LTIP units (such number of OP units assumes that such unvested performance-based awards vest at maximum levels for the performance and market conditions that have not yet been achieved; to the extent that performance or market conditions do not meet maximum levels, the actual number of OP units which vest under those awards could be less than the amount reflected above). See “Sensitivity Analysis.” OP units are redeemable for cash or, at our election, shares of our common stock on a one-for-one basis, subject to adjustment in certain circumstances. For purposes of the foregoing, LTIP units are long-term equity incentive awards in the form of Class B or Class C limited partnership units of the Operating Partnership that vest over time or based on performance. Upon the occurrence of certain events described in the Operating Partnership’s partnership agreement, Class B or Class C units may convert into an equal number of OP units.
Benefits to Related Parties
Upon completion of this offering, certain of our directors, executive officers, and associates are expected to receive material benefits, including the following:
Earn-out
As described in “Certain Relationships and Related Transactions—PELP Transaction Contribution Agreement,” the Contribution Agreement establishes an earn-out structure by which the contributors have the right to receive a minimum of 1,000,000 and a maximum of 1,666,667 OP units as contingent consideration if a liquidity event, including the approval and listing for trading of our common stock on a national securities exchange, is successfully achieved by the Company by December 31, 2021. Mr. Edison, our Chairman and Chief Executive Officer; Mr. Murphy, our President; and Mr. Myers, our Chief Operating Officer, are
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expected to receive 47.2%, 8.1%, and 1.1%, respectively, of the OP units awarded pursuant to the Contribution Agreement. See “Sensitivity Analysis.”
Public Listing Grants
In connection with this offering, our Compensation Committee intends to authorize the Company to grant LTIP units and/or restricted stock units, or RSUs, to certain of our associates, including our named executive officers, and restricted stock awards to certain of our directors, or the Listing Equity Grants. The Listing Equity Grants will be subject to and become effective upon the listing of our common stock on Nasdaq.
Our Tax Status
We elected to be taxed as a real estate investment trust, or REIT, for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2010. To maintain REIT status, we must meet a number of organizational and operational requirements, including a requirement that we make distributions each taxable year equal to at least 90% of our taxable income (excluding capital gains and computed without regard to the dividends paid deduction). See “Federal Income Tax Considerations.”
Distribution Policy
We intend to make a distribution to holders of our common stock offered in this offering, when, as and if authorized by our Board, out of legally-available funds based on a distribution rate of $               per share of common stock beginning the first month following this offering. On an annualized basis, this would be $               per share of common stock, or an annualized distribution rate of approximately               % based on the public offering price of $               per share, which is the midpoint of the price range set forth on the front cover of this prospectus. We intend to maintain this distribution rate for the 12 months following the completion of this offering unless our results of operations; funds from operations, or FFO; Core FFO; adjusted FFO, or Adjusted FFO; liquidity; cash flows; financial condition or prospects, economic conditions or other factors differ materially from the assumptions used in projecting our distribution rate. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Key Performance Indicators and Defined Terms” for more information regarding FFO, Core FFO, and Adjusted FFO. We intend to make distributions that will enable us to meet the distribution requirements applicable to REITs and to eliminate or minimize our obligation to pay corporate-level federal income and excise taxes. We do not intend to reduce the expected distribution per share if the underwriters’ option to purchase additional shares is exercised.
Any distributions will be at the sole discretion of our Board, and their form, timing and amount will depend upon a number of factors, including our actual and projected results of operations; FFO; Core FFO; Adjusted FFO; liquidity; cash flows and financial condition; the revenue we actually receive from our shopping centers; our operating expenses; our debt service requirements; our capital expenditures; prohibitions and other limitations under our financing arrangements; our REIT taxable income; the annual REIT distribution requirements; applicable law and such other factors as our Board deems relevant.
Restrictions on Ownership and Transfer of Our Common Stock
Our charter contains restrictions on the ownership and transfer of our common stock, preferred stock, and other capital stock that are intended to assist us in maintaining our qualification for taxation as a REIT for U.S. federal income tax purposes. The relevant sections of our charter provide that, subject to limited exceptions, no person or entity may beneficially own, or be deemed to own by virtue of the applicable constructive ownership provisions of the Internal Revenue Code of 1986, as amended, or the Code, more than 9.8% (by value or by number of shares, whichever is more restrictive) of the aggregate of the outstanding shares of our common stock, or more than 9.8% of the value of our outstanding capital stock. We refer to these restrictions as the “common stock ownership limit” and the “aggregate stock ownership limit,” respectively. Our Board, in its sole discretion, may exempt (prospectively or retroactively) a person or entity from the aggregate stock ownership limit and the common stock ownership limit, as the case may be, and may establish or increase an excepted holder limit for such person if certain conditions are satisfied. The foregoing restrictions on the ownership and transfer will not apply if the Board determines that it is no longer in our best interests to attempt to qualify, or to continue to qualify, as a REIT or that compliance with the restrictions and limitations on beneficial ownership, constructive ownership and transfers of shares of capital stock is no longer required in order for us to qualify as a REIT. Such restrictions may have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price for holders of our common stock. See “Description of Capital Stock—Restrictions on Ownership and Transfer.”
Corporate Information
Phillips Edison & Company, Inc. was formed as a Maryland corporation in October 2009. Our principal executive office is located at 11501 Northlake Drive, Cincinnati, Ohio 45249. Our telephone number is (513) 554-1110. We maintain a website at http://www.phillipsedison.com. Information contained on, or accessible through, our website is not incorporated by reference into and does not constitute a part of this prospectus.
Summary of Risk Factors
An investment in our common stock involves risks. You should carefully consider the risks discussed below and described more fully along with other risks in the “Risk Factors” section beginning on page 16 of this prospectus for factors you should consider before investing in shares of our common stock.
Risks Related to Our Business and Operations
Our revenues and cash flows will be affected by the success and economic viability of our anchor Neighbors.
A significant percentage of our revenues is derived from non-anchor Neighbors, and our net income and ability to make distributions to stockholders may be adversely affected if these Neighbors are not successful.
The ongoing COVID-19 pandemic has had, and is expected to continue to have, a negative effect on our and our Neighbors’ businesses, financial condition, results of operations, cash flows, and liquidity.
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Long-term leases with our Neighbors may not result in fair value over time.
We may be unable to sell shopping centers when desired, at an attractive price, or at all, and the sale of a shopping center could cause significant tax payments.
We face competition and other risks in pursuing acquisition opportunities that could increase the cost of such acquisitions and/or limit our ability to grow, and we may not be able to generate expected returns or successfully integrate completed acquisitions into our existing operations.
We share ownership of our unconsolidated joint ventures and do not have exclusive decision-making power, and as such, we are unable to ensure that our objectives will be pursued.
Our real estate assets may decline in value and be subject to significant impairment losses, which may reduce our net income.
We actively reinvest in our portfolio in the form of development and redevelopment projects, which have inherent risks that could adversely affect our financial condition, cash flows and results of operations.
The continued shift in retail sales towards ecommerce may adversely affect our financial condition, cash flows and results of operations.
Actual incremental yields for our development and redevelopment projects may vary from our underwritten incremental yield range.
Risks Related to Our Indebtedness and Liquidity
We have substantial indebtedness and may need to incur additional indebtedness in the future, which could adversely affect our business, financial condition and ability to make distributions to our stockholders
Risks Related to Our Corporate Structure and Organization
We have agreed to nominate Jeffrey S. Edison, Chairman of the Board and Chief Executive Officer, to our Board for each annual meeting through 2027, and it is possible Mr. Edison may continue to be nominated as a director when the independent directors would not otherwise have nominated or elected him.
We and the Operating Partnership entered into a tax protection agreement with certain protected partners, which may limit the Operating Partnership’s ability to sell or otherwise dispose of certain shopping centers and may require the Operating Partnership to maintain certain debt levels that otherwise would not be required to operate its business.
Risks Related to Our REIT Status and Other Tax Risks
Failure to qualify as a REIT would cause us to be taxed as a regular C corporation, which would substantially reduce funds available for distributions to stockholders.
If the Operating Partnership fails to qualify as a partnership for U.S. federal income tax purposes, we would fail to qualify as a REIT and would suffer adverse consequences.
Complying with REIT requirements may cause us to forgo otherwise attractive opportunities or liquidate otherwise attractive investments.
Risks Related to Business Continuity
We and our Neighbors face risks relating to cybersecurity attacks, which could cause loss of confidential information and other disruptions to business operations, and compliance with new laws and regulations regarding cybersecurity and privacy may result in substantial costs and may decrease cash available for distributions.
Risks Related to this Offering
The estimated value per share, or EVPS, of our common stock is based on a number of assumptions that may not be accurate or complete and may not reflect the price at which shares of our common stock will trade when listed on a national securities exchange or the price a third party would pay to acquire us.
The market price and trading volume of shares of our common stock may be volatile.
Because we have a large number of stockholders and shares of our common stock have not been listed on a national securities exchange prior to this offering, there may be significant pent-up demand to sell shares of our common stock. Significant sales of shares of our common stock, or the perception that significant sales of such shares could occur, may cause the price of shares of our common stock to decline significantly.
Although shares of our Class B common stock will not be listed on a national securities exchange following the closing of this offering, sales of such shares or the perception that such sales could occur could have a material adverse effect on the per share trading price of shares of our common stock.
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The Offering
Common stock offered by us
               shares (or               shares if the underwriters exercise in full their option to purchase additional shares)
Total common stock (including Class B common stock) to be outstanding upon completion of this offering(1)     
               shares
Common stock(1)
               shares
Class B common stock(2)
93,638,700 shares
Total common stock (including Class B common stock) and OP units to be outstanding upon completion of this offering(1)(2)(3)
               shares and 13,317,843 OP units
Conversion rightsUpon the six-month anniversary of the listing of our common stock for trading on a national securities exchange or such earlier date or dates as approved by our Board with respect to all or any portion of the outstanding shares of our Class B common stock, each share of our Class B common stock will automatically, and without any stockholder action, convert into one share of our listed common stock.
Dividend rightsOur listed common stock and our Class B common stock will share equally in any dividends authorized by our Board and declared by us.
Voting rightsEach share of our listed common stock and each share of our Class B common stock will entitle its holder to one vote per share.
Use of proceeds
We will use the net proceeds from the offering to pay off our $375 million unsecured term loan, fund external growth with property acquisitions, and fund other general corporate uses. See “Use of Proceeds.”
Risk factors
Investing in our common stock involves risks. Before you invest in our common stock, you should carefully consider the risk factors set forth under the heading “Risk Factors” beginning on page 16, together with all of the other information included in this prospectus.
Proposed               symbol/Listing    
“PECO”
(1)As of June 15, 2021. Excludes (i) up to               shares of our common stock that may be issued by us upon exercise of the underwriters’ overallotment option, (ii)               shares of our common stock available for future issuance under our 2020 Omnibus Incentive Plan, (iii) 218,421 shares of stock underlying unvested performance-based restricted stock units (such number of shares assumes that we issue shares of common stock underlying such unvested performance-based awards at maximum levels for the performance and market conditions that have not yet been achieved; to the extent that performance or market conditions do not meet maximum levels, the actual number of shares issued under those plans could be less than the amount reflected above), and (iv) shares of common stock that may be acquired by redeeming OP units.
(2)As of June 15, 2021. Includes               shares of unvested restricted stock and stock underlying unvested time-based restricted stock units, including the Listing Equity Grants.
(3)As of June 15, 2021. Includes (i) 1,000,000 OP units we expect to settle the earn-out we entered into in connection with the PELP Transaction and (ii)               unvested time-based LTIP units, including the Listing Equity Grants. Excludes (x) OP units held directly or indirectly by PECO, (y) up to 666,667 additional OP units we may issue to settle the earn-out we entered into in connection with the PELP Transaction, and (z) 1,073,869 unvested performance-based LTIP units (such number of OP units assumes that such unvested performance-based awards vest at maximum levels for the performance and market conditions that have not yet been achieved; to the extent that performance or market conditions do not meet maximum levels, the actual number of OP units which vest under those awards could be less than the amount reflected above). See “Sensitivity Analysis.” OP units are redeemable for cash or, at our election, shares of our common stock on a one-for-one basis, subject to adjustment in certain circumstances. For purposes of the foregoing, LTIP units are long-term equity incentive awards in the form of Class B or Class C limited partnership units of the Operating Partnership, that vest over time or based on performance. Upon the occurrence of certain events described in the Operating Partnership’s partnership agreement, Class B or Class C units may convert into an equal number of OP units.

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Summary Selected Consolidated Financial and Other Data
Our consolidated balance sheet data as of December 31, 2020 and 2019 and consolidated operating data for the years ended December 31, 2020, 2019, and 2018 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. Our consolidated balance sheet data as of December 31, 2018 has been derived from our consolidated financial statements not included in this prospectus. The below information also includes our unaudited consolidated balance sheet data as of March 31, 2021 and our unaudited consolidated operating data for the three months ended March 31, 2021 and 2020, which have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus. The unaudited consolidated balance sheet data as of March 31, 2020 has been derived from our unaudited consolidated financial statements not included in this prospectus. The unaudited consolidated financial statements were prepared on a basis consistent with our audited financial statements and include, in the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary for the fair statement of the financial information contained in those statements. Our consolidated financial data included below and set forth elsewhere in this prospectus are not necessarily indicative of our future performance.
You should read the following summary selected consolidated financial and other data together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business and Properties” and our consolidated financial statements and related notes appearing elsewhere in this prospectus.
As of and for the
Three Months Ended March 31,
As of and for the
Years Ended December 31,
(in thousands, except per share amounts)20212020202020192018
Operating Data:      
Total revenues$130,381 $131,523 $498,017 $536,706 $430,392 
Property operating expenses22,202 21,762 87,490 90,900 77,209 
Real estate tax expenses16,573 17,112 67,016 70,164 55,335 
General and administrative expenses9,341 10,740 41,383 48,525 50,412 
Impairment of real estate assets5,000 — 2,423 87,393 40,782 
Interest expense, net20,063 22,775 85,303 103,174 72,642 
Net income (loss)117 11,199 5,462 (72,826)46,975 
Net income (loss) attributable to stockholders103 9,769 4,772 (63,532)39,138 
Per Share Data:      
Net income (loss) per share - basic$0.00 $0.10 $0.05 $(0.67)$0.60 
Net income (loss) per share - diluted$0.00 $0.10 $0.05 $(0.67)$0.59 
Common stock distributions declared per share$0.255 $0.503 $0.588 $2.010 $2.010 
Weighted-average shares outstanding - basic93,490 96,652 96,760 94,636 65,534 
Weighted-average shares outstanding - diluted106,995 111,076 111,156 109,039 80,456 
Balance Sheet Data:      
Total investment in real estate assets$5,260,013 $5,256,532 $5,295,137 $5,257,999 $5,380,344 
Cash and cash equivalents20,258 36,532 104,296 17,820 16,791 
Total assets4,566,601 4,767,012 4,678,563 4,828,195 5,163,477 
Debt obligations, net2,276,972 2,356,401 2,292,605 2,354,099 2,438,826 
Other Operational Data:(1)
NOI$87,079 $87,936 $332,023 $355,796 $272,450 
FFO attributable to stockholders and convertible noncontrolling interests44,980 68,247 221,681 217,010 156,222 
Core FFO63,558 60,242 220,407 230,866 176,126 
Adjusted FFO56,879 52,820 187,613 189,330 130,770 
(1)For definitions of these metrics, reconciliations of these metrics to the most directly comparable GAAP financial measure and a statement of why our management believes the presentation of these metrics provides useful information to investors and any additional purposes for which management uses these metrics, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Measures.”

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RISK FACTORS
Investing in our common stock involves risks. Before you invest in our common stock, you should carefully consider the risk factors below, together with all of the other information included in this prospectus. If any of the risks discussed in this prospectus were to occur, our business, financial condition, cash flows, results of operations, liquidity and prospects, and our ability to service our debt and make distributions to our stockholders could be materially and adversely affected, the market price of our common stock could decline significantly and you could lose all or part of your investment in our common stock. In the below risk factors, we refer to our tenants as “Neighbors” and our employees as “associates.” Some statements in this prospectus, including statements in the following risk factors, constitute forward-looking statements. See the section titled “Cautionary Statement Concerning Forward Looking Statements.”
RISKS RELATED TO OUR BUSINESS AND OPERATIONS
Our revenues and cash flows will be affected by the success and economic viability of our anchor Neighbors.
Anchor Neighbors (a Neighbor occupying 10,000 or more square feet) occupy large stores in our shopping centers, pay a significant portion of the total rent at a property, and contribute to the success of other Neighbors by attracting shoppers to the property. Our revenues and cash flows may be adversely affected by the loss of revenues and additional costs in the event a significant anchor Neighbor: (i) becomes bankrupt or insolvent; (ii) experiences a downturn in its business; (iii) defaults on its lease; (iv) decides not to renew its lease as it expires; (v) renews its lease at lower rental rates and/or requires tenant improvements; or (vi) renews its lease but reduces its store size, which results in down-time and additional tenant improvement costs to us to re-lease the space. Some anchors have the right to vacate their space and may prevent us from re-tenanting by continuing to comply and pay rent in accordance with their lease agreement. Vacated anchor space, including space owned by the anchor, can reduce rental revenues generated by the shopping center in other spaces because of the loss of the departed anchor’s customer-drawing power. In the event that we are unable to re-lease the vacated space to a new anchor Neighbor in such situations, we may incur additional expenses in order to re-model the space to be able to re-lease the space to more than one Neighbor.
If a significant Neighbor vacates a property, co-tenancy clauses in select lease contracts may allow other Neighbors to modify or terminate their rent or lease obligations. Co-tenancy clauses have several variants: (i) they may allow a Neighbor to postpone a store opening if certain other Neighbors fail to open their stores; (ii) they may allow a Neighbor to close its store prior to lease expiration if another Neighbor closes its store prior to lease expiration; or (iii) they may allow a Neighbor to pay reduced levels of rent until a certain number of Neighbors open their stores within the same shopping center.
The leases of some anchor Neighbors may permit the anchor Neighbor to transfer its lease to another retailer. The transfer to a new anchor Neighbor could cause customer traffic in the retail center to decrease and thereby reduce the income generated by that retail center. A lease transfer to a new anchor Neighbor could also allow other Neighbors to make reduced rental payments or to terminate their leases.
A significant percentage of our revenues is derived from non-anchor Neighbors, and our net income and ability to make distributions to stockholders may be adversely affected if these Neighbors are not successful.
A significant percentage of our revenues is derived from non-anchor Neighbors, some of which may be more vulnerable to negative economic conditions as they typically have more limited resources than anchor Neighbors. Significant Neighbor distress across our portfolio could adversely affect our financial condition, results of operations and cash flows, and our ability to service our debt and make distributions to our stockholders. A property may incur vacancies either by the expiration of a Neighbor lease, the continued default of a Neighbor under its lease, or the early termination of a lease by a Neighbor. In order to maintain occupancy, we may have to offer inducements, such as free rent and tenant improvements, to compete for the right type or mix of non-anchor Neighbors in our shopping centers. In addition, if we are unable to attract additional or replacement Neighbors, the resale value of the property could be diminished, even below our acquisition cost, because the market value of a particular property depends principally upon the value of the cash flows generated by the leases associated with that property.
We face considerable competition in the leasing market and may be unable to renew leases or re-lease space as leases expire. Consequently, we may be required to make rent or other concessions and/or incur significant capital expenditures to retain and attract Neighbors, which could adversely affect our financial condition, cash flows and results of operations.
There are numerous shopping venues, including other shopping centers and ecommerce, that compete with our portfolio in attracting and retaining retailers. This competition may hinder our ability to attract and retain Neighbors, leading to increased vacancy rates, reduced rents, and/or increased capital investments. For leases that renew, rental rates upon renewal may be lower than current rates. For those leases that do not renew, we may not be able to promptly re-lease the space on favorable terms or with reasonable capital investments, or at all. In these situations, our financial condition, cash flows and results of operations could be adversely affected. See “Our Business and Properties – Our Properties” of this prospectus for information regarding scheduled lease expirations subsequent to March 31, 2021 and see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Overview” of this prospectus for information regarding the lease renewals and the ABR of new leases signed during the three months ended March 31, 2021 and during 2020.
We may be unable to collect balances due from Neighbors in bankruptcy.
The bankruptcy or insolvency of a significant Neighbor or a number of smaller Neighbors may adversely affect our financial condition, cash flows and results of operations, and our ability to pay distributions to our stockholders. Generally, under bankruptcy law, a debtor Neighbor has the legal right to reject any or all of their leases and close related stores. If the Neighbor rejects the lease, we will have a claim against the Neighbor’s bankruptcy estate. Although rent owing for the period between filing for bankruptcy and rejection of the lease may be afforded administrative expense priority and paid in full, pre-bankruptcy arrears and amounts owing under the remaining term of the lease will be afforded general unsecured claim status (absent collateral securing the claim). General unsecured claims are the last claims paid in a bankruptcy, and, therefore, funds may not be available to pay such claims in full. Moreover, amounts owing under the remaining term of the lease will be capped. As a result, it is likely that we would recover substantially less than the full value of any unsecured claims we hold.
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Additionally, we may incur significant expense to recover our claim and to re-lease the vacated space. In the event that a Neighbor with a significant number of leases in our shopping centers files bankruptcy and rejects its leases, we may experience a significant reduction in our revenues and may not be able to collect all pre-petition amounts owed by the bankrupt Neighbor. As of March 31, 2021, several Neighbors were in bankruptcy proceedings and continued to occupy space in our centers without us having received notice that their leases have been assumed or rejected, representing an exposure of approximately 1% of portfolio ABR.
The ongoing COVID-19 pandemic has had, and is expected to continue to have, a negative effect on our and our Neighbors’ businesses, financial condition, results of operations, cash flows, and liquidity.
In March 2020, the World Health Organization declared COVID-19 a global pandemic. The COVID-19 pandemic has caused, and is expected to continue to cause, significant disruptions to the United States and global economy and has contributed to significant volatility and negative pressure in financial markets. The global impact of the outbreak is continually evolving and, as additional cases of the virus are identified, many countries, including the United States, reacted by instituting quarantines, restrictions on travel, and/or mandatory closures of businesses. Certain states and cities, including where our properties are located, also reacted by instituting quarantines, restrictions on travel, “shelter-in-place” or “stay-at-home” rules, restrictions on types of businesses that may continue to operate, and/or restrictions on the types of construction projects that may continue. In May 2020, many state and local governments began lifting, in whole or in part, the “stay-at-home” mandates, effectively removing or lessening the limitations on travel and allowing many businesses to reopen in full or limited capacity.
The COVID-19 pandemic has impacted our business and financial performance, and we expect this impact to continue. Our retail and service-based Neighbors depend on in-person interactions with their customers to generate unit-level profitability, and the COVID-19 pandemic has decreased, and may continue to decrease, customers’ willingness to frequent, and mandated “shelter-in-place” or “stay-at-home” orders may prevent customers from frequenting our Neighbors’ businesses, which may result in their inability to maintain profitability and make timely rental payments to us under their leases or to otherwise seek lease modifications or to declare bankruptcy. At the peak of the pandemic-related closure activity, for our wholly-owned properties and those owned through our joint ventures, our temporary closures reached approximately 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, certain of our Neighbors have permanently closed, and we are working to backfill these spaces. 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 average rental rates on expiring leases.
While most of our Neighbors have reopened, we cannot presently determine how many of the Neighbors that remain closed will reopen, or whether a portion of those that have reopened will be required by government mandates to temporarily close again or will encounter financial difficulties that require them to close permanently. 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 believe it is best to begin negotiation of relief only once a Neighbor has reopened and made payments toward rent and recovery charges accrued. Inclusive of our prorated share of properties owned through our joint ventures, as of June 15, 2021, we have $5.4 million of outstanding payment plans with our Neighbors, and we had recorded rent abatements of approximately $6.4 million during 2021. These payment plans and rent abatements represented 1.4% and 1.6% of portfolio ABR, respectively, and the weighted-average term over which we expect to receive remaining amounts owed on executed payment plans is approximately six months. We are still actively pursuing past due amounts under the terms negotiated with our Neighbors. We are in negotiations with additional Neighbors, which we believe will lead to more Neighbors repaying their past due charges. As of June 15, 2021, we have collected approximately 95% of rent and recoveries billed during the second through fourth quarters of 2020, and approximately 98% of rent and recoveries billed during the first quarter of 2021. Additionally, as of June 15, 2021, we have collected approximately 98% and 97% of rent and recoveries billed during April and May 2021, respectively. In the event of any default by a Neighbor under its lease agreement or relief agreement, we may not be able to fully recover, and/or may experience delays in recovering and additional costs in enforcing our rights as landlord to recover, amounts due to us under the terms of the lease agreement and/or relief agreement.
Moreover, the ongoing COVID-19 pandemic, restrictions intended to prevent and mitigate its spread, resulting consumer behavior, and the economic slowdown or recession could have additional adverse effects on our business, including with regards to:
the ability and willingness of our Neighbors to renew their leases upon expiration, our ability to re-lease the properties on the same or better terms in the event of nonrenewal or in the event we exercise our right to replace an existing Neighbor, and obligations we may incur in connection with the replacement of an existing Neighbor, particularly in light of the adverse impact to the financial health of many retailers and service providers that has occurred and continues to occur as a result of the COVID-19 pandemic and the significant uncertainty as to when and the conditions under which certain potential Neighbors will be able to operate physical retail locations in the future;
a potential sustained or permanent increase in online shopping instead of shopping at physical retail properties, thereby reducing demand for space in our shopping centers and possible related reductions in rent or increased costs to lease space;
the adverse impact of current economic conditions on the market value of our real estate portfolio and our third-party investment management business, and consequently on the estimated value per share of our common stock;
the adverse impact of the current economic conditions on our ability to effect a liquidity event at an attractive price or at all in the near term and for a potentially lengthy period of time;
the financial impact and continued economic uncertainty that could continue to negatively impact our ability to pay distributions to our stockholders and/or to repurchase shares;
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to the extent we were seeking to sell properties in the near term, significantly greater uncertainty regarding our ability to do so at attractive prices or at all;
anticipated returns from development and redevelopment projects, which have been prioritized to support the reopening of our Neighbors and new leasing activity, or deferred if possible;
the broader impact of the severe economic contraction due to the COVID-19 pandemic, the resulting increase in unemployment that has occurred in the short-term and its effect on consumer behavior, and negative consequences that will occur if these trends are not reversed in a timely way;
state, local, or industry-initiated efforts, such as a rent freeze for Neighbors or a suspension of a landlord’s ability to enforce evictions, which may affect our ability to collect rent or enforce remedies for the failure to pay rent;
severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions, which could make it difficult for us to access debt and equity capital on attractive terms, or at all, and impact our ability to fund business operations and activities and repay liabilities on a timely basis;
our ability to pay down, refinance, restructure, or extend our indebtedness as it becomes due, and our potential inability to comply with the financial covenants of our credit facility and other debt agreements, which could result in a default and potential acceleration of indebtedness and impact our ability to make additional borrowings under our credit facility or otherwise in the future; and
the potential negative impact on the health of our personnel, particularly if a significant number of them and/or key personnel are impacted, and the potential impact of adaptations to our operations in order to protect our personnel, such as remote work arrangements, could introduce operational risk, including but not limited to cybersecurity risks, and could impair our ability to manage our business.
We may in the future choose to pay distributions in shares of our common stock rather than solely in cash, which may result in our stockholders having a tax liability with respect to such distributions that exceeds the amount of cash received, if any.
While the rapid developments regarding the COVID-19 pandemic preclude any prediction as to its ultimate adverse impact, the current economic, political, and social environment presents material risks and uncertainties with respect to our and our Neighbors’ business, financial condition, results of operations, cash flows, liquidity, and ability to satisfy debt service obligations.
Long-term leases with our Neighbors may not result in fair value over time.
From time to time, we enter into long-term leases with our Neighbors. Long-term leases do not typically allow for significant changes in rental payments and do not expire in the near term. If we do not accurately judge the potential for increases in market rental rates when negotiating these long-term leases, significant increases in future property operating costs could result in receiving less than fair value from these leases, which would adversely affect our revenues and the funds available for distributions to stockholders.
We may be restricted from leasing space to certain retailers.
Some of our leases contain provisions that give a specific retailer the exclusive right to sell particular types of goods or services within that shopping center. These provisions may limit the number and types of prospective retailers to which we are able to lease space in a particular shopping center, which may result in increased costs to find a permissible retailer and decreased revenues if one or more spaces sit vacant or we have to accept lower rental rates or a less qualified retailer to fill the space.
We may be unable to sell shopping centers when desired, at an attractive price, or at all, and the sale of a property could cause significant tax payments.
Our shopping centers, including related tangible and intangible assets, represent the majority of our total consolidated assets and they may not be readily convertible to cash. As a result, our ability to sell one or more of our shopping centers, including shopping centers held in unconsolidated joint ventures, in response to changes in economic, industry, or other conditions, may be limited. The real estate market is affected by many factors that are beyond our control, including, but not limited to, general economic conditions, availability and terms of financing, interest rates, supply and demand for space, and other factors. There may be less demand for lower quality shopping centers that we have identified for ultimate disposition in markets with uncertain economic or retail environments, and where buyers are more reliant on the availability of third-party mortgage financing. If we want to sell a property, we can provide no assurance that we will be able to dispose of it in the desired time period or at all, or that the sales price of the property will be attractive at the relevant time or even exceed the carrying value of our investment. Moreover, if a property is mortgaged, we may not be able to obtain a release of the lien on that property without the payment of a substantial prepayment penalty, which may restrict our ability to dispose of the property, even though the sale might otherwise be desirable.
Some of our shopping centers have a low tax basis, which may result in a taxable gain on sale. We intend to utilize tax-deferred exchanges under Section 1031 of the Code, or Section 1031 Exchanges, to mitigate taxable income; however, there can be no assurance that we will identify exchange shopping centers that meet our investment objectives for acquisitions. In the event that we do not utilize Section 1031 Exchanges, we may be required to distribute the gain proceeds to stockholders or pay income tax, which may reduce cash flows available to fund our commitments and distributions to stockholders. Moreover, it is possible that future legislation could be enacted that could modify or repeal the laws with respect to Section 1031 Exchanges, which could make it more difficult or impossible for us to dispose of shopping centers on a tax-deferred basis. The current administration has also indicated its intention to modify the laws with respect to Section 1031 Exchanges in a manner that could make it more difficult or impossible for us to dispose of shopping centers on a tax-deferred basis.
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We face competition and other risks in pursuing acquisition opportunities that could increase the cost of such acquisitions and/or limit our ability to grow, and we may not be able to generate expected returns or successfully integrate completed acquisitions into our existing operations.
We continue to evaluate the market for acquisition opportunities, and we may acquire shopping centers when we believe strategic opportunities exist. Our ability to acquire shopping centers on favorable terms and successfully integrate, operate, reposition, or redevelop them is subject to several risks. We may be unable to acquire a desired property because of competition from other real estate investors, including from other well-capitalized REITs and institutional investment funds. Even if we are able to acquire a desired property, competition from such investors may significantly increase the purchase price. We may also abandon acquisition activities after expending significant resources to pursue such opportunities. Once we acquire new shopping centers, these shopping centers may not yield expected returns for several reasons, including: (i) failure to achieve expected occupancy and/or rent levels within the projected time frame, if at all; (ii) inability to successfully integrate new shopping centers into existing operations; and (iii) exposure to fluctuations in the general economy, including due to the time lag between signing definitive documentation to acquire a new property and the closing of the acquisition. If any of these events occur, the cost of the acquisition may exceed initial estimates or the expected returns may not achieve those originally contemplated, which could adversely affect our financial condition, cash flows and results of operations.
We share ownership of our unconsolidated joint ventures and do not have exclusive decision-making power, and as such, we are unable to ensure that our objectives will be pursued.
We have invested capital, and may invest additional capital, in unconsolidated joint ventures (instead of directly acquiring wholly-owned assets), for which we do not have exclusive decision-making power over development, financing, leasing, management, and other aspects of these investments. As a result, the institutional joint venture partners might have interests or goals that are inconsistent with ours, take action contrary to our interests, or otherwise impede our objectives. Conflicts arising between us and our partners may be difficult to manage and/or resolve, and it could be difficult to manage or otherwise monitor the existing business arrangements.
In addition, unconsolidated joint venture arrangements may decrease our ability to manage risk and implicate additional risks, such as: (i) potentially inferior financial capacity, diverging business goals and strategies and the need for our venture partners’ continued cooperation; (ii) the possibility that our institutional joint venture partners might become bankrupt, suffer a deterioration in their creditworthiness, or fail to fund their share of required capital contributions; (iii) our inability to take actions with respect to the unconsolidated joint ventures’ activities that we believe are favorable to us if our institutional joint venture partners do not agree; (iv) our inability to control the legal entities that have title to the real estate associated with the joint ventures; (v) our lenders may not be easily able to sell our unconsolidated joint venture assets and investments or may view them less favorably as collateral, which could negatively affect our liquidity and capital resources; (vi) our institutional joint venture partners can take actions that we may not be able to anticipate or prevent, which could result in negative impacts on our debt and equity; and (vii) our institutional joint venture partners’ business decisions or other actions or omissions may result in harm to our reputation or adversely affect the value of our investments.
Our real estate assets may decline in value and be subject to significant impairment losses, which may reduce our net income.
Our real estate properties are carried at cost, less depreciation, unless circumstances indicate that the carrying value of the properties may not be recoverable. We routinely evaluate whether there are any impairment indicators, including property operating performance, property occupancy trends, and actual marketing or listing price of properties being targeted for disposition, such that the value of the real estate properties (including any related tangible or intangible assets or liabilities) may not be recoverable. If, through our evaluation, we determine that a given asset exhibits one or more such indicators, we then compare the current carrying value of the asset to the estimated undiscounted cash flows that are directly associated with the use and ultimate disposition of the asset. Our estimated cash flows are based on several key assumptions, including rental rates, costs of Neighbor improvements, leasing commissions, anticipated holding periods, and assumptions regarding the residual value upon disposition, including the estimated exit capitalization rate. These key assumptions are subjective in nature and may differ materially from actual results. Changes in our disposition strategy or changes in the marketplace may alter the holding period of an asset or asset group, which may result in an impairment loss, and such loss may be material to our financial condition or operating performance. To the extent that the carrying value of the asset exceeds the estimated undiscounted cash flows, an impairment loss is recognized equal to the excess of carrying value over fair value.
The fair value of real estate assets is subjective and is determined through the use of comparable sales information and other market data if available. These subjective assessments have a direct effect on our net income because recording an impairment charge results in an immediate negative adjustment to net income, which may be material. During the years ended December 31, 2020 and 2019, we incurred impairment charges of $2.4 million and $87.4 million, respectively, related to real estate assets currently under contract or actively marketed for sale at a disposition price that was less than the carrying value. We recorded an impairment charge of $5.0 million during the three months ended March 31, 2021 related to one property under contract at a disposition price that was less than the carrying value. We have recorded such impairment charges as we have been selling non-core assets to improve the quality of our portfolio. We continue to sell non-core assets and may potentially recognize impairment charges in the future.
If we set aside insufficient capital reserves, we may be required to defer necessary capital improvements.
If we do not have enough reserves to supply needed funds for capital improvements throughout the life of the investment in a property and there is insufficient cash available from our operations, we may be required to defer necessary improvements to a property, which may cause that property to suffer from a greater risk of obsolescence or a decline in value, or a greater risk of decreased cash flow as a result of fewer potential Neighbors being attracted to the property. If this happens, we may not be able to maintain projected rental rates for affected shopping centers, and our financial condition, cash flows and results of operations may be negatively affected.
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We actively reinvest in our portfolio in the form of development and redevelopment projects, which have inherent risks that could adversely affect our financial condition, cash flows and results of operations.
We actively pursue opportunities for outparcel development and existing property redevelopment. Development and redevelopment activities require various government and other approvals for entitlements, and any delay in or failure to receive such approvals may significantly delay this process or prevent us from recovering our investment. We are subject to other risks associated with these activities, including the following:
we may be unable to lease developments and redevelopments to full occupancy on a timely basis;
the occupancy rates and rents of a completed project may not be sufficient to make the project profitable;
actual costs of a project may exceed original estimates, possibly making the project unprofitable;
delays in the development or construction process may increase our costs;
construction cost increases may reduce investment returns on development and redevelopment opportunities;
we may abandon redevelopment opportunities and lose our investment due to adverse market conditions;
the size of our development and redevelopment pipeline may strain our labor or capital capacity to complete projects within targeted timelines and may reduce our investment returns;
a reduction in the demand for new retail space may reduce our future development and redevelopment activities, which in turn may reduce our NOI; and
changes in the level of future development activity may adversely impact our results from operations by reducing the amount of internal general overhead costs that may be capitalized.
If we fail to reinvest in our portfolio or maintain its attractiveness to retailers and consumers, if our capital improvements are not successful, or if retailers or consumers perceive that shopping at other venues (including ecommerce) is more convenient, cost-effective, or otherwise more compelling, our financial condition, cash flows and results of operations could be adversely affected.
Adverse economic, regulatory, market, and real estate conditions may adversely affect our financial condition, cash flows and results of operations.
Our portfolio is predominantly comprised of omni-channel grocery-anchored neighborhood shopping centers, and during the three months ended March 31, 2021, our wholly-owned shopping centers in Florida and California accounted for 12.4% and 10.4%, respectively, of our ABR. Therefore, our performance is subject to risks associated with owning and operating omni-channel grocery-anchored neighborhood shopping centers, and may be further subject to additional risks as a result of the geographic concentration noted above. Such risks include, but are not limited to: (i) changes in national, regional, and local economic climates or demographics; (ii) competition from other available shopping centers and ecommerce, and the attractiveness of our shopping centers to our Neighbors; (iii) increased competition for real estate assets targeted by our investment strategies; (iv) adverse local conditions, such as oversupply of or reduction in demand for similar shopping centers in an area and changes in real estate zoning laws that may reduce the desirability of real estate in an area; (v) vacancies, changes in market rental rates, and the need to periodically repair, renovate, and re-lease space; (vi) ongoing disruption and/or consolidation in the retail sector and the financial stability of our Neighbors, including their ability to pay rent and expense reimbursements; (vii) increases in operating costs, including common area expenses, utilities, insurance and real estate taxes, which are relatively inflexible and generally do not decrease if revenue or occupancy decreases; (viii) increases in the costs to repair, renovate, and re-lease space; (ix) changes in interest rates and the availability of financing, which may render the sale or refinance of a property or loan difficult or unattractive; (x) earthquakes, tornadoes, hurricanes, wildfires, or other natural disasters, civil unrest, terrorist acts, or acts of war, which may result in uninsured or underinsured losses; (xi) epidemics, pandemics, or other widespread outbreaks or resulting public fear that disrupt the businesses of our Neighbors causing them to fail to pay rent on time or at all; and (xii) changes in laws and governmental regulations, including those governing usage, zoning, the environment, and taxes. These and other factors could adversely affect our financial condition, cash flows and results of operations.
The continued shift in retail sales towards ecommerce may adversely affect our financial condition, cash flows and results of operations.
Retailers are increasingly affected by ecommerce and changes in customer buying habits, which have been further accelerated as a result of the COVID-19 pandemic, including the delivery or curbside pick-up of items ordered online. Retailers are considering these ecommerce trends when making decisions regarding their brick and mortar stores and how they will compete and innovate in a rapidly changing ecommerce environment. Many retailers in our shopping centers provide services or sell goods that are unable to be performed online (such as haircuts, massages, and fitness centers) or that have historically been less likely to be purchased online (such as grocery stores, restaurants, and coffee shops); however, the continuing increase in ecommerce sales in all retail categories (including online orders for immediate delivery or pick-up in store) may cause retailers to adjust the size or number of retail locations in the future or close stores. Our grocery Neighbors are incorporating ecommerce concepts through home delivery or curbside pick-up, which could reduce foot traffic at our centers and adversely affect our occupancy and rental rates. Changes in shopping trends as a result of the growth in ecommerce may also affect the profitability of retailers that do not adapt to changes in market conditions. While we devote considerable effort and resources to analyze and respond to Neighbor trends, Neighbor and consumer preferences, and consumer spending patterns, we cannot predict with certainty what future Neighbors will want, what future retail spaces will look like, or how much revenue will be generated at traditional brick and mortar locations. If we are unable to anticipate and respond promptly to trends in the market (such as space for a drive through or curbside pickup), our occupancy levels and rental rates may decline, and our financial condition, cash flows and results of operations may be adversely impacted.
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Actual incremental yields for our development and redevelopment projects may vary from our underwritten incremental yield range.
As part of our standard development and redevelopment underwriting process, we analyze the yield for each project and establish a range of target yields, or underwritten incremental yields. Underwritten incremental yields reflect the yield we target to generate from each project upon expected stabilization and are 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 from a 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.
Underwritten incremental yields are based solely on our estimates, using data available to us in our development and redevelopment underwriting processes. The actual total cost to complete a development or redevelopment project may differ substantially from our estimates due to various factors, including unanticipated expenses, delays in the estimated start and/or completion date of planned development projects, effects of the COVID-19 pandemic, and other contingencies. In addition, the actual incremental NOI from our planned development and redevelopment activities may differ substantially from our estimates based on numerous other factors, including delays and/or difficulties in leasing and stabilizing a development or redevelopment project, failure to obtain estimated occupancy and rental rates, inability to collect anticipated rental revenues, Neighbor bankruptcies, and unanticipated expenses that we cannot pass on to our Neighbors. Actual incremental yields may vary from our underwritten incremental yield range based on the actual total cost to complete a project and its incremental NOI at stabilization.
The tools we use to measure the financial stability of our grocery Neighbors, such as their health ratio, PECO Power ScoreTM, and GOLD ScoreTM, may not be accurate.
Many of our grocery Neighbors are required to provide corporate-level financial information to us periodically or, in some instances, at our request. This financial information may include balance sheet, income statement and cash flow statement data, or other financial and operating data. Additionally, as of March 31, 2021, leases contributing approximately 61% of our grocer ABR required our grocery Neighbors to provide us with specified store-level financial information. For our grocery Neighbors that do not report sales to us, we utilize a third-party service, Nielsen TDLinx, to estimate store-level sales. To assist in our determination of a grocery Neighbor’s financial stability, we evaluate its health ratio, which represents the amount of annual rent and expense recoveries as a percentage of grocer annual sales. We have also created a proprietary asset evaluation algorithm to better understand which variables correlate with, and contribute to, center performance, or the PECO Power ScoreTM, and a qualitative model to assess the health and stability of our grocery anchors, the Grocery Occupancy Longevity Dynamics score, or GOLD ScoreTM.
Our methods of determining a grocery Neighbor’s financial stability may not adequately assess the risk of an investment in our grocery Neighbors. We do not receive store-level or corporate-level financial information from all of our grocery Neighbors, and the Neighbor-provided information and third-party estimates we receive may not accurately reflect the results of operations and financial condition of our portfolio as a whole. Our calculations of our grocery Neighbors’ health ratios are unaudited and are based on Neighbor-provided information and third-party estimates without independent verification on our part, and we must assume the appropriateness of estimates and judgments that were made by the party preparing such information or estimates. In addition, the PECO Power ScoreTM and the GOLD ScoreTM are proprietary models that may not assess all relevant variables or may not provide an accurate assessment of center performance or our grocery Neighbors’ health and stability. If our assessment of center performance or our grocery Neighbors’ financial stability prove to be inaccurate, we may be subject to defaults, and investors may view our cash flows as less stable.
The internal rates of return or other performance metrics achieved by our unconsolidated joint ventures are not necessarily indicative of the performance of our Company, any property in our portfolio or an investment in our common stock.
We have presented in this prospectus historical information regarding the performance achieved by certain unconsolidated third-party institutional joint ventures. While we believe these financial metrics may be useful to investors in evaluating our performance, they are not necessarily indicative of the future performance of our Company, any property in our portfolio or an investment in our common stock. In particular, in considering the internal rates of return or other performance metrics presented in this prospectus, you should consider that our leverage and hedging strategies may differ substantially from those employed by our unconsolidated joint ventures, and the initial investments in our unconsolidated joint ventures were made under market conditions that may differ substantially from current or future market conditions.
In addition, the internal rates of return or other performance metrics presented in this prospectus do not reflect the impact of general and administrative expenses we have incurred and expect to incur in the future in connection with the operation of our portfolio. Our general and administrative expenses will include salaries, wages and equity-based compensation for our corporate associates and other expenses primarily related to our corporate operations (e.g., legal, insurance, accounting and other expenses related to corporate governance, periodic SEC reporting and other compliance matters) and may impact the performance of our Company and the per share trading price of our common stock. We can provide no assurance that we will be able to replicate the performance achieved by our unconsolidated joint ventures.

RISKS RELATED TO OUR INDEBTEDNESS AND LIQUIDITY
We have substantial indebtedness and may need to incur additional indebtedness in the future, which could adversely affect our business, financial condition and ability to make distributions to our stockholders.
We have obtained, and are likely to continue to obtain, lines of credit and other long-term financing that are secured by our shopping centers and other assets. At March 31, 2021, on a pro forma basis for this offering and the use of proceeds therefrom, we had indebtedness of $               billion, which comprises $               billion in unsecured debt, $              million in secured loan facilities and $               million in mortgage loans and finance lease obligations. In connection with executing
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our business strategies, we expect to evaluate the possibility of additional acquisitions and strategic investments, and we may elect to finance these endeavors by incurring additional indebtedness. We may also incur mortgage debt and other property-level debt on shopping centers that we already own in order to obtain funds to acquire additional shopping centers or make other capital investments. In addition, we may borrow as necessary or advisable to ensure that we maintain our qualification as a REIT for U.S. federal income tax purposes, including borrowings to satisfy the REIT requirement that we distribute at least 90% of our annual REIT taxable income to our stockholders (computed without regard to the dividends-paid deduction and excluding net capital gain). However, we cannot guarantee that we will be able to obtain any such borrowings on satisfactory terms.
If we mortgage a property and there is a shortfall between the cash flows from that property and the cash flows needed to service mortgage debt on that property, then the amount of cash available for distributions to stockholders may be reduced. In addition, incurring mortgage debt increases the risk of loss of a property since defaults on indebtedness secured by a property may result in lenders initiating foreclosure actions. If any mortgages contain cross-collateralization or cross-default provisions, a default on a single shopping center could affect multiple shopping centers. Additionally, we may give full or partial guarantees to lenders of mortgage debt on behalf of the entities that own our shopping centers. When we give a guaranty on behalf of an entity that owns one of our shopping centers, we will be responsible to the lender for satisfaction of the debt if it is not paid by such entity. Currently, we are a limited guarantor on a mortgage loan for two of our unconsolidated joint ventures. In each case, our guarantee is limited to being the non-recourse carve out guarantor and the environmental indemnitor.
We may also obtain recourse debt to finance our acquisitions and meet our REIT distribution requirements. If we have insufficient income to service our recourse debt obligations, our lenders could institute proceedings against us to foreclose upon our assets.
High debt levels could have material adverse consequences on our business, including hindering our ability to adjust to changing market, industry or economic conditions; limiting our ability to access the capital markets to refinance maturing debt or to fund acquisitions or emerging businesses; requiring the use of a substantial portion of our cash flows for the payment of principal and interest on our debt, thereby limiting the amount of free cash flow available for future operations, acquisitions, distributions, stock repurchases, or other uses; making us more vulnerable to economic or industry downturns, including interest rate increases; and placing us at a competitive disadvantage compared to less leveraged competitors.
We may not be able to access financing on favorable terms, or at all.
We may finance our assets over the long term through a variety of means, including repurchase agreements, credit facilities, issuance of commercial mortgage-backed securities, collateralized debt obligations, and other structured financings. Our ability to execute this strategy will depend on various market conditions that are beyond our control, including lack of liquidity and greater credit spreads. We cannot be certain that these markets will remain an efficient source of long-term financing for our assets. If our strategy is not viable, we will have to find alternative forms of long-term financing for our assets, as secured revolving credit facilities and repurchase facilities may not accommodate long-term financing. This could subject us to more recourse indebtedness and the risk that debt service on less efficient forms of financing would require a larger portion of our cash flows, thereby reducing cash available for distribution to our stockholders and funds available for operations and for future business opportunities.
Covenants in our loan agreements may restrict our operations and adversely affect our financial condition and ability to make distributions to our stockholders.
When providing financing, a lender may impose restrictions on us that affect our distribution and operating policies and our ability to incur additional debt. Our loan agreements may contain covenants that limit our ability to further mortgage a property or discontinue insurance coverage. In addition, loan agreements may limit our ability to replace a property’s manager or terminate certain operating or lease agreements related to a property. Mortgage debt and other property-level debt that we incur may also limit our ability to transfer properties from one subsidiary to another. These or other limitations would decrease our operating flexibility and our ability to achieve our operating objectives, which may adversely affect our financial condition and ability to make distributions to our stockholders.
Covenants in certain of our loan agreements specify that certain named individuals must remain a member of management and/or the Board or require certain level of management or Board continuity in connection with a fundamental transaction.
A number of our loan agreements, representing approximately $150 million in aggregate outstanding principal amount, contain covenants that require certain named individuals, including Mr. Edison, to continue serving as a member of management and/or the Board or require certain levels of senior management and/or Board continuity following a change of control or other fundamental transaction. If such individuals were to depart from the Company within a specified time prior to such transaction or within such specified time after such a transaction, we may be required to negotiate waivers of such covenants or obtain replacement financing, which we may not be able to do on satisfactory terms or at all.
Higher market capitalization rates and lower NOI for our shopping centers may adversely impact our ability to sell shopping centers and fund developments and acquisitions, and may dilute earnings.
As part of our capital recycling strategy, we sell shopping centers that no longer meet our growth and investment objectives due to stabilization or perceived future risk. Sales proceeds are then used to fund the construction of developments, redevelopments, expansions, and acquisitions, and to repay debt. An increase in market capitalization rates or a decline in NOI may cause a reduction in the value of shopping centers identified for sale, which would have an adverse effect on the amount of cash generated. In order to meet the cash requirements of our capital recycling program, we may be required to sell more shopping centers than initially planned, which may have a negative effect on our earnings. Additionally, the sale of shopping centers resulting in significant tax gains may require higher distributions to our stockholders in order to maintain our REIT status or payment of additional income taxes. We intend to utilize Section 1031 Exchanges to mitigate taxable income.
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However, there can be no assurance that we will identify exchange shopping centers that meet our investment objectives for acquisitions.
The phase-out, replacement, or unavailability of LIBOR could affect interest rates for a significant portion of our indebtedness, as well as our ability to obtain future debt financing on favorable terms.
As of March 31, 2021, we had approximately $1.6 billion of indebtedness tied to the London Interbank Offered Rate, or LIBOR, $0.9 billion of which was fixed through the use of interest rate swaps. Additionally, we have a revolving credit facility tied to LIBOR with a capacity of $500 million, on which we had no outstanding balance (excluding letters of credit in an amount of $9.7 million) as of March 31, 2021. In July 2017, the Financial Conduct Authority (the regulatory authority over LIBOR) stated that it would phase out LIBOR as a benchmark. In November 2020, the Federal Reserve Board announced that banks must stop writing new U.S. dollar, or USD, LIBOR contracts by the end of 2021 and that, no later than June 30, 2023, when USD LIBOR will no longer be published, market participants should amend legacy contracts to use the Secured Overnight Financing Rate, or SOFR, or another alternative reference rate. If a published USD LIBOR rate is unavailable after 2021, the interest rates on our indebtedness that is indexed to LIBOR will be determined using alternative methods, any of which may result in interest obligations that are more than, or do not otherwise correlate over time with, the payments that would have been made on such debt if USD LIBOR had been available in its current form. Additionally, the phase-out of USD LIBOR and the transition to SOFR or another alternative reference rate may be disruptive to financial markets. Such disruption could have a material adverse effect on our financing costs, and as a result, on our financial condition, operating results, and cash flows.
Increases in interest rates could increase the amount of our loan payments and adversely affect our ability to pay distributions to our stockholders.
Although a significant amount of our outstanding debt has fixed interest rates, we do borrow funds at variable interest rates under our credit facilities and term loans. As of March 31, 2021, $692.5 million or 30.2% of our outstanding debt was variable rate debt. Increases in interest rates would increase our interest expense on any variable rate debt to the extent we have not hedged our exposure to changes in interest rates. In addition, increases in interest rates will affect the terms under which we refinance our existing debt as it matures, to the extent we have not hedged our exposure to changes in interest rates, resulting in higher interest rates and increased interest expense. Either of these events would reduce our future earnings and cash flows, which may adversely affect our ability to service our debt and meet our other obligations and also may reduce the amount we are able to distribute to stockholders.
Hedging activity may expose us to risks, including the risks that a counterparty will not perform and that the hedge will not yield the economic benefits we anticipate, which may adversely affect our financial condition, cash flows and results of operations.
From time to time, we manage our exposure to interest rate volatility by using interest rate hedging arrangements that involve risk, including, but not limited to, the risk that counterparties may fail to honor their obligations under these arrangements, that these arrangements may not be effective in reducing our exposure to interest rate changes, and that we may be required to pay the counterparty if interest rates decrease in the future below the hedged amount. There can be no assurance that our hedging arrangements will qualify for hedge accounting or that our hedging activities will have the desired beneficial impact on our results of operations. Should we desire to terminate a hedging agreement, there may be significant costs and cash requirements involved to fulfill our obligations under the hedging agreement. Failure to hedge effectively against interest rate changes may adversely affect our financial condition, cash flows and results of operations.

RISKS RELATED TO OUR CORPORATE STRUCTURE AND ORGANIZATION
We have agreed to nominate Jeffrey S. Edison, Chairman of the Board and Chief Executive Officer, to our Board for each annual meeting through 2027.
As part of the 2017 PELP Transaction, in which we acquired certain real estate assets and a third-party investment management business of Phillips Edison Limited Partnership, or PELP, in exchange for OP units and cash, we entered into an equity holder agreement pursuant to which we agreed to nominate Jeffrey S. Edison to the Board for each annual meeting through 2027, subject to certain terminating events. As a result, it is possible that Mr. Edison may continue to be nominated as a director in circumstances when the independent directors would not otherwise have nominated or elected him.
The Operating Partnership’s limited partnership agreement grants rights and protections to the limited partners, which allows them to vote in connection with a change of control transaction that might involve a premium price for shares of our common stock.
The Operating Partnership’s limited partnership agreement grants certain rights and protections to the limited partners, including granting them the right to vote in connection with a change of control transaction. As described in more detail under “The Operating Partnership and the Partnership Agreement—Transferability of Operating Partnership Units; Extraordinary Transactions,” any such change of control transaction is required to be approved by holders of OP units (including our Company and its subsidiaries) at the same level of approval as required for approval by holders of shares of our common stock. For purposes of any such vote, we will be deemed to vote the OP units held by us and our subsidiaries in proportion to the manner in which all of our outstanding shares of common stock were voted at a stockholders meeting relating to such transaction. After giving effect to this offering, we would have directly or indirectly controlled               % of the OP units as of March 31, 2021. Furthermore, as of March 31, 2021, Mr. Edison had voting control over approximately               % of the OP units (after giving effect to this offering and including OP units owned by us), and therefore could have influence over votes on change of control transactions.
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We and the Operating Partnership entered into a tax protection agreement with certain protected partners, which may limit the Operating Partnership’s ability to sell or otherwise dispose of certain shopping centers and may require the Operating Partnership to maintain certain debt levels that otherwise would not be required to operate its business.
We and the Operating Partnership entered into a tax protection agreement with, among others, Jeffrey S. Edison, our Chairman and Chief Executive Officer, and certain entities controlled by him at the closing of the PELP Transaction, pursuant to which if the Operating Partnership: (i) sells, exchanges, transfers or otherwise disposes of certain shopping centers in a taxable transaction, or undertakes any taxable merger, combination, consolidation or similar transaction (including a transfer of all or substantially all assets), for a period of ten years commencing on October 4, 2017; or (ii) fails, prior to the expiration of such period, to maintain certain minimum levels of indebtedness that would be allocable to each protected partner for tax purposes or, under certain circumstances, fails to offer such protected partners the opportunity to guarantee certain types of the Operating Partnership’s indebtedness, then the Operating Partnership will indemnify each affected protected partner, including Mr. Edison, against certain resulting tax liabilities. Our tax indemnification obligations include a tax gross-up.

Therefore, although it may be in our stockholders’ best interest for us to cause the Operating Partnership to sell, exchange, transfer or otherwise dispose of one or more of these shopping centers, it may be economically prohibitive for us to do so until the expiration of the protection period in 2027 because of these indemnity obligations. Moreover, these obligations may require us to cause the Operating Partnership to maintain more or different indebtedness than we would otherwise require for our business. As a result, the tax protection agreement could, during its term, restrict our ability to take actions or make decisions that otherwise would be in our best interests.
Our stockholders have limited control over changes in our policies and operations, which increases the uncertainty and risks our stockholders face.
Our Board determines our major policies, including our policies regarding financing, growth, debt capitalization, REIT qualification and distributions. Our Board may amend or revise these and other policies without the vote of our stockholders. Under the Maryland General Corporation Law, or the MGCL, and our charter, our stockholders have a right to vote only on limited matters. Our Board’s broad discretion in setting policies and our stockholders’ inability to exert control over those policies increases the uncertainty and risks our stockholders face.
Our charter, bylaws and Maryland law contain terms that may discourage a third party from acquiring us in a manner that could result in a premium price to our stockholders.
Our charter, bylaws and Maryland law contain provisions that may delay, defer, or prevent a transaction or a change of control that might involve a premium price for our common stock or that our stockholders otherwise believe to be in their best interest. Our charter authorizes our Board to, without stockholder approval, amend our charter to increase or decrease the aggregate number of authorized shares of stock, to authorize us to issue additional shares of our common stock or preferred stock and to classify or reclassify unissued shares of our common stock or preferred stock and thereafter to authorize us to issue such classified or reclassified shares of stock. We believe these charter provisions will provide us with increased flexibility in structuring possible future financings and acquisitions and in meeting other needs that might arise. The additional classes or series, as well as the additional authorized shares of our common stock, will be available for issuance without further action by our stockholders, unless such action is required by applicable law or the rules of any stock exchange or automated quotation system on which our securities may be listed or traded, and our Board could authorize the issuance of preferred stock with priority as to distributions and amounts payable upon liquidation over the rights of the holders of our common stock.
Our charter, with certain exceptions, authorizes our Board to take such actions as are necessary and desirable to preserve our qualification as a REIT. To help us comply with the REIT ownership requirements under the Code, among other purposes, our charter prohibits any person from directly or constructively owning more than 9.8% in value of our aggregate outstanding stock or more than 9.8% in value or number of shares, whichever is more restrictive, of our aggregate outstanding common stock, unless exempted by our Board.
In addition, the MGCL permits our Board to implement certain takeover defenses without stockholder approval. See “Certain Provisions of Maryland Law and of Our Charter and Bylaws.”
These and other provisions of our charter, bylaws and Maryland law could have the effect of delaying, deferring or preventing a change in control, including an extraordinary transaction (such as a merger, tender offer, or sale of all or substantially all of our assets) that might provide a premium price to holders of our common stock.
Our rights and the rights of our stockholders to recover claims against our officers and directors are limited, which could reduce our stockholders’ and our recovery against them if they cause us to incur losses.
Maryland law provides that a director has no liability in that capacity if he or she performs his or her duties in good faith, in a manner he or she reasonably believes to be in the corporation’s best interests, and with the care that an ordinarily prudent person in a like position would use under similar circumstances. Our charter, in the case of our directors and officers, requires us to indemnify our directors and officers to the maximum extent permitted by Maryland law. Additionally, our charter limits the liability of our directors and officers for monetary damages to the maximum extent permitted under Maryland law. As a result, we and our stockholders may have more limited rights against our directors, officers, associates and agents than might otherwise exist under common law, which could reduce our stockholders’ and our recovery against them. In addition, we may be obligated to fund the defense costs incurred by our directors, officers, associates and agents in some cases which would decrease the cash otherwise available for distribution to stockholders.

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RISKS RELATED TO OUR REIT STATUS AND OTHER TAX RISKS
Failure to qualify as a REIT would cause us to be taxed as a regular C corporation, which would substantially reduce funds available for distributions to stockholders.
We elected to be taxed as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2010. We believe that our organization and method of operation has enabled and will continue to enable us to meet the requirements for qualification and taxation as a REIT for U.S. federal income tax purposes. However, we cannot assure you that we will qualify as such. This is because qualification as a REIT involves the application of highly technical and complex provisions of the Code as to which there are only limited judicial and administrative interpretations and involves the determination of facts and circumstances not entirely within our control. Future legislation, new regulations, administrative interpretations or court decisions may significantly change the tax laws or the application of the tax laws with respect to qualification as a REIT for federal income tax purposes or the federal income tax consequences of such qualification.
If we fail to qualify as a REIT in any taxable year, and are unable to obtain relief under certain statutory provisions, we will face serious tax consequences that will substantially reduce the funds available for distributions to our stockholders because:
we would not be allowed a deduction for dividends paid to stockholders in computing our taxable income and would be subject to federal and state income tax at regular corporate rates; and
we could not elect to be taxed as a REIT for four taxable years following the year during which we were disqualified.
As a result of all these factors, our failure to qualify as a REIT could impair our ability to expand our business and raise capital, and it could adversely affect the value of our common stock. If we fail to qualify as a REIT, we would no longer be required to make distributions to our stockholders.
Even if we qualify as a REIT, we may face other tax liabilities that reduce our cash flows.
Even if we qualify as a REIT for U.S. federal income tax purposes, we may be subject to certain U.S. federal, state and local taxes on our income and assets, including taxes on any undistributed income, tax on income from some activities conducted as a result of a foreclosure, and state or local income, property and transfer taxes. Any of these taxes would decrease cash available for distributions to stockholders.
If the Operating Partnership fails to qualify as a partnership for U.S. federal income tax purposes, we would fail to qualify as a REIT and would suffer adverse consequences.
We believe that the Operating Partnership is organized and will be operated in a manner so as to be treated as a partnership, and not an association or publicly traded partnership taxable as a corporation for U.S. federal income tax purposes. As a partnership, the Operating Partnership will not be subject to U.S. federal income tax on its income. Instead, each of its partners, including us, will be allocated that partner’s share of the Operating Partnership’s income. No assurance can be provided, however, that the Internal Revenue Service, or the IRS, will not challenge the Operating Partnership’s status as a partnership for U.S. federal income tax purposes, or that a court would not sustain such a challenge. If the IRS were successful in treating the Operating Partnership as an association or publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, we would fail to meet the gross income tests and certain of the asset tests applicable to REITs and, accordingly, would cease to qualify as a REIT. Also, the failure of the Operating Partnership to qualify as a partnership would cause it to become subject to U.S. federal corporate income tax, which would reduce significantly the amount of its cash available for debt service and for distribution to its partners, including us.
The Operating Partnership has a carryover tax basis on certain of its assets as a result of the PELP Transaction and the Merger, and the amount that we have to distribute to stockholders therefore may be higher.
In October 2017, we internalized our management structure through the acquisition of certain real estate assets and the third-party investment management business of PELP in exchange for OP units and cash, which we refer to as the PELP Transaction. In November 2018, we completed a merger, or the Merger, with Phillips Edison Grocery Center REIT II, Inc., a public non-traded REIT that was advised and managed by us. As a result of each of the PELP Transaction and the Merger, certain of the Operating Partnership’s shopping centers have carryover tax bases that are lower than the fair market values of these shopping centers at the time of the acquisition. As a result of this lower aggregate tax basis, the Operating Partnership will recognize higher taxable gain upon the sale of these assets and the Operating Partnership will be entitled to lower depreciation deductions on these assets than if it had purchased these shopping centers in taxable transactions at the time of the acquisition. Such lower depreciation deductions and increased gains on sales allocated to us generally will increase the amount of our required distribution under the REIT rules, and will decrease the portion of any distribution that otherwise would have been treated as a “return of capital” distribution.
Our property taxes could increase due to property tax rate changes or reassessment, which could impact our cash flow.
Even if we qualify as a REIT for U.S. federal income tax purposes, we are required to pay state and local property taxes on our shopping centers. The property taxes on our shopping centers may increase as property tax rates change or as our shopping centers are assessed or reassessed by taxing authorities. Therefore, the amount of property taxes we pay in the future may increase substantially from what we have paid in the past and such increases may not be covered by Neighbors pursuant to our lease agreements. If the property taxes we pay increase, our financial condition, results of operations, cash flow, per share trading price of our common stock, and ability to satisfy our principal and interest obligations and to make distributions to our stockholders could be adversely affected.
We use taxable REIT subsidiaries, which may cause us to fail to qualify as a REIT.
To qualify as a REIT for U.S. federal income tax purposes, we hold, and plan to continue to hold, substantially all of our non-qualifying REIT assets and conduct certain of our non-qualifying REIT income activities in or through one or more taxable REIT subsidiary, or TRS, entities. A TRS is a corporation other than a REIT in which a REIT directly or indirectly holds stock, and
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that has made a joint election with such REIT to be treated as a TRS. A TRS also includes any corporation other than a REIT with respect to which a TRS owns securities possessing more than 35% of the total voting power or value of the outstanding securities of such corporation. Other than some activities relating to lodging and health care facilities, a TRS may generally engage in any business, including the provision of customary or non-customary services to tenants of its parent REIT. A TRS is subject to U.S. federal income tax as a regular C-corporation at a current rate of 21%.
The net income of our TRS entities is not required to be distributed to us, and income that is not distributed to us will generally not be subject to the REIT income distribution requirement. However, our TRS entities may pay dividends. Such dividend income should qualify under the 95%, but not the 75%, gross income test. We will monitor the amount of the dividend and other income from our TRS entities and will take actions intended to keep this income, and any other non-qualifying income, within the limitations of the REIT income tests. While we expect these actions will prevent a violation of the REIT income tests, we cannot guarantee that such actions will in all cases prevent such a violation.
Our ownership of TRS entities is subject to limitations that could prevent us from growing our management business, and our transactions with our TRS entities could cause us to be subject to a 100% penalty tax on certain income or deductions if those transactions are not conducted on an arm’s-length basis.
No more than 20% of the value of a REIT’s gross assets may consist of interests in TRS entities. Compliance with this limitation could limit our ability to grow our management business. The Code also imposes a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis. We will monitor the value of investments in our TRS entities in order to ensure compliance with TRS ownership limitations and will structure our transactions with our TRS entities on terms that we believe are arm’s-length to avoid incurring the 100% excise tax described above. There can be no assurance, however, that we will be able to comply with the TRS ownership limitation or be able to avoid application of the 100% excise tax.
REIT distribution requirements could adversely affect our ability to execute our business plans, including because we may be required to borrow funds to make distributions to stockholders or otherwise depend on external sources of capital to fund such distributions.
We generally must distribute annually at least 90% of our REIT taxable income (which is determined without regard to the dividends paid deduction or net capital gain for this purpose) in order to continue to qualify as a REIT. To the extent that we satisfy the distribution requirement but distribute less than 100% of our taxable income, we will be subject to federal corporate income tax on our undistributed taxable income. In addition, we may elect to retain and pay income tax on our net long-term capital gain. In that case, if we so elect, a stockholder would be taxed on its proportionate share of our undistributed long-term gain and would receive a credit or refund for its proportionate share of the tax we paid. A stockholder, including a tax-exempt or foreign stockholder, would have to file a U.S. federal income tax return to claim that credit or refund. Furthermore, we will be subject to a 4% nondeductible excise tax if the actual amount that we distribute to our stockholders in a calendar year is less than a minimum amount specified under federal tax laws.
We intend to make distributions to our stockholders to comply with the REIT requirements of the Code and to avoid corporate income tax and the 4% excise tax. We may be required to make distributions to our stockholders at times when it would be more advantageous to reinvest cash in its business or when we do not have funds readily available for distribution. Thus, compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits.
If we do not have other funds available, we could be required to borrow funds on unfavorable terms, sell investments at disadvantageous prices, distribute amounts that would otherwise be invested in future acquisitions or capital expenditures or used for the repayment of debt, pay dividends in the form of “taxable stock dividends” or find another alternative source of funds to make distributions sufficient to enable us to distribute enough of our taxable income to satisfy the REIT distribution requirement and to avoid corporate income tax and the 4% excise tax in a particular year. These alternatives could increase our costs or reduce our equity.
Complying with REIT requirements may cause us to forgo otherwise attractive opportunities or liquidate otherwise attractive investments.
To continue to qualify as a REIT for U.S. federal income tax purposes, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to stockholders and the ownership of our stock. As discussed above, we may be required to make distributions to you at disadvantageous times or when we do not have funds readily available for distribution. Additionally, we may be unable to pursue investments that would be otherwise attractive to us in order to satisfy the requirements for qualifying as a REIT.
We must also ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, U.S. government securities and qualified real estate assets, including certain mortgage loans and mortgage-backed securities. The remainder of our investment in securities (other than U.S. government securities and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our assets can consist of the securities of any one issuer (other than U.S. government securities and qualified real estate assets) and no more than 20% of the value of our gross assets may be represented by securities of one or more TRS. Finally, no more than 25% of our assets may consist of debt investments that are issued by “publicly offered REITs” and would not otherwise be treated as qualifying real estate assets. If we fail to comply with these requirements at the end of any calendar quarter, we must correct such failure within 30 days after the end of the calendar quarter to avoid losing our REIT status and being subject to adverse tax consequences, unless certain relief provisions apply. As a result, compliance with the REIT requirements may hinder our ability to operate solely on the basis of profit maximization and may require us to liquidate investments from our portfolio, or refrain from making otherwise attractive investments. These actions could have the effect of reducing our income and amounts available for distribution to stockholders.
The prohibited transactions tax may limit our ability to engage in transactions, including disposition of assets, which would be treated as sales for U.S. federal income tax purposes.
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A REIT’s net income from prohibited transactions is subject to a 100% tax. In general, prohibited transactions are sales or other dispositions of dealer property, other than foreclosure property. We may be subject to the prohibited transaction tax upon a disposition of real property. Although a safe-harbor exception to prohibited transaction treatment is available, we cannot assure you that we can comply with such safe harbor or that we will avoid owning property that may be characterized as held primarily for sale to customers in the ordinary course of our trade or business. Consequently, we may choose not to engage in certain sales of real property or may conduct such sales through a TRS.
It may be possible to reduce the impact of the prohibited transaction tax by conducting certain activities through a TRS. However, to the extent that we engage in such activities through a TRS, the income associated with such activities will be subject to a corporate income tax. In addition, the IRS may attempt to ignore or otherwise recast such activities in order to impose a prohibited transaction tax on us, and there can be no assurance that such recast will not be successful.
We may recognize substantial amounts of REIT taxable income, which we would be required to distribute to our stockholders, in a year in which we are not profitable under GAAP or other economic measures.
We may recognize substantial amounts of REIT taxable income in years in which we are not profitable under GAAP or other economic measures as a result of the differences between GAAP and tax accounting methods. For instance, certain of our assets will be marked-to-market for GAAP purposes but not for tax purposes, which could result in losses for GAAP purposes that are not recognized in computing our REIT taxable income. Additionally, we may deduct our capital losses only to the extent of our capital gains in computing our REIT taxable income for a given taxable year. Consequently, we could recognize substantial amounts of REIT taxable income and would be required to distribute such income to you in a year in which we are not profitable under GAAP or other economic measures.
Our qualification as a REIT could be jeopardized as a result of an interest in joint ventures or investment funds.
We may hold certain limited partner or non-managing member interests in partnerships or limited liability companies that are joint ventures or investment funds. If a partnership or limited liability company in which we own an interest takes or expects to take actions that could jeopardize our qualification as a REIT or require us to pay tax, we may be forced to dispose of our interest in such entity. In addition, it is possible that a partnership or limited liability company could take an action which could cause us to fail a REIT gross income or asset test, and that we would not become aware of such action in time to dispose of our interest in the partnership or limited liability company or take other corrective action on a timely basis. In that case, we could fail to continue to qualify as a REIT unless we are able to qualify for a statutory REIT “savings” provision, which may require us to pay a significant penalty tax to maintain our REIT qualification.
Distributions paid by REITs do not qualify for the reduced tax rates that apply to other corporate distributions.
The maximum tax rate for “qualified dividends” paid by corporations to non-corporate stockholders generally is 20%. Distributions paid by REITs to non-corporate stockholders generally are taxed at rates lower than ordinary income rates, but those rates are higher than the 20% tax rate on qualified dividend income paid by corporations. Although this does not adversely affect the taxation of REITs or dividends payable by REITs, to the extent that the preferential rates continue to apply to regular corporate qualified dividends, the more favorable rates for corporate dividends may cause non-corporate investors to perceive that an investment in a REIT is less attractive than an investment in a non-REIT entity that pays dividends, thereby reducing the demand and market price of shares of our common stock.
Legislative or regulatory tax changes could adversely affect us or our stockholders.
At any time, the U.S. federal income tax laws or regulations governing REITs or the administrative interpretations of those laws or regulations may be amended. We cannot predict when or if any new U.S. federal income tax law, regulation or administrative interpretation, or any amendment to any existing U.S. federal income tax law, regulation or administrative interpretation, will be adopted, promulgated or become effective and any such law, regulation or interpretation may take effect retroactively. Any such change could result in an increase in our, or our stockholders’, tax liability or require changes in the manner in which we operate in order to minimize increases in our tax liability. A shortfall in tax revenues for states and municipalities in which we operate may lead to an increase in the frequency and size of such changes. If such changes occur, we may be required to pay additional taxes on our assets or income or be subject to additional restrictions. These increased tax costs could, among other things, adversely affect our financial condition, the results of operations, and the amount of cash available for the payment of dividends. We and our stockholders could be adversely affected by any such change in, or any new, U.S. federal income tax law, regulation, or administrative interpretation.
In addition, the COVID-19 pandemic has left many state and local governments with reduced tax revenue, which may lead such governments to increase taxes or otherwise make significant changes to their state and local tax laws. If such changes occur, we may be required to pay additional taxes on our assets or income.
If our assets are deemed to be plan assets, we may be exposed to liabilities under Title I of Employee Retirement Income Security Act of 1974, or ERISA, and the Code.
In some circumstances where an ERISA plan holds an interest in an entity, the assets of the entity are deemed to be ERISA plan assets unless an exception applies. This is known as the “look-through rule.” Under those circumstances, the obligations and other responsibilities of plan sponsors, plan fiduciaries and plan administrators, and of parties in interest and disqualified persons, under Title I of ERISA or Section 4975 of the Code, may be applicable, and there may be liability under these and other provisions of ERISA and the Code. We believe that our assets should not be treated as plan assets because the shares of our common stock should qualify as “publicly-offered securities” that are exempt from the look-through rules under applicable Treasury Regulations. We note, however, that because certain limitations are imposed upon the transferability of shares of our common stock so that we may qualify as a REIT, and perhaps for other reasons, it is possible that this exemption may not apply. If that is the case, and if we are exposed to liability under ERISA or the Code, our performance and results of operations could be adversely affected.

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RISKS RELATED TO BUSINESS CONTINUITY
Uninsured losses relating to real property or excessively expensive premiums for insurance coverage could adversely affect our cash flows and stockholder returns.
We maintain insurance coverage with third-party carriers who provide a portion of the coverage of potential losses, including commercial general liability, fire, flood, extended coverage and rental loss insurance on all of our properties. We currently self-insure a portion of our commercial insurance deductible risk through our captive insurance company. To the extent that our captive insurance company is unable to bear that risk, we may be required to fund additional capital to our captive insurance company, or we may be required to bear that loss. As a result, our operating results may be adversely affected.
There are some types of losses, generally catastrophic in nature, such as losses due to wars, acts of terrorism, earthquakes, floods, hurricanes, pollution or environmental matters, that are uninsurable or not economically insurable, or may be insured subject to limitations, such as large deductibles or sublimits. Insurance risks associated with potential acts of terrorism could sharply increase the premiums that we pay for coverage against property and casualty claims. Additionally, mortgage lenders in some cases insist that commercial property owners purchase coverage against terrorism as a condition for providing mortgage loans. Such insurance policies may not be available at reasonable costs, if at all, which could inhibit our ability to finance or refinance our shopping centers. In such instances, we may be required to provide other financial support, either through financial assurances or self-insurance, to cover potential losses. We may not have adequate, or any, coverage for such losses. Changes in the cost or availability of insurance could expose us to uninsured casualty losses. If any of our shopping centers incurs a casualty loss that is not fully insured, the value of our assets will be reduced by any such uninsured loss, which may reduce the value of our stockholders’ investment. In addition, other than any working capital reserve or other reserves we may establish, we have no source of funding to repair or reconstruct any uninsured property. Also, to the extent we must pay unexpectedly large amounts for insurance, such payments could adversely impact our cash flows and ability to make distributions to our stockholders.
Climate change may adversely affect our business, financial condition, cash flows and results of operations.
Climate change, including the impact of global warming, creates physical and financial risks. Physical risks from climate change include an increase in sea level and changes in weather conditions, such as an increase in storm intensity and severity of weather (e.g., floods, tornadoes or hurricanes) and extreme temperatures. The occurrence of sea level rise or one or more natural disasters, such as floods, tornadoes, hurricanes, tropical storms, wildfires, and earthquakes (whether or not caused by climate change), could cause considerable damage to our shopping centers, disrupt our operations and negatively affect our financial performance. To the extent any of these events results in significant damage to or closure of one or more of our shopping centers, our operations and financial performance could be adversely affected through lost Neighbors and an inability to lease or re‑lease the space. In addition, these events could result in significant expenses to restore or remediate a property, increases in fuel or other energy costs or a fuel shortage, and increases in the costs of (or making unavailable) insurance on favorable terms if they result in significant loss of property or other insurable damage. In addition, transition risks associated with new or more stringent laws or regulations or stricter interpretations of existing laws may require material expenditures by us. For example, various federal, state, and regional laws and regulations have been implemented or are under consideration to mitigate the effects of climate change caused by greenhouse gas emissions. Among other things, “green” building codes may seek to reduce emissions through the imposition of standards for design, construction materials, water and energy usage and efficiency, and waste management. Such codes could require us to make improvements to our shopping centers, increase the costs of maintaining or improving our shopping centers or developing new shopping centers, or increase taxes and fees assessed on us or our shopping centers.
As an owner and/or operator of real estate, we could become subject to liability for environmental violations, regardless of whether we caused such violations, and our efforts to identify environmental liabilities may not be successful.
We could become subject to liability in the form of fines or damages for noncompliance with environmental laws and regulations. These laws and regulations generally govern wastewater discharges; air emissions; the operation and removal of underground and above-ground storage tanks; the use, storage, treatment, transportation and disposal of hazardous materials and wastes; the remediation of contaminated property associated with the release or disposal of hazardous materials and wastes; and other health and safety-related concerns. U.S. federal, state, and local laws and regulations relating to the protection of the environment may require us, as a current or previous owner or operator of real property, to investigate and clean up hazardous or toxic substances or petroleum product releases at a property or at impacted neighboring properties. Some of these laws and regulations may impose strict or joint and several liability on tenants, owners, or operators for the costs of investigation or remediation of contaminated properties, regardless of fault or the legality of the original disposal. Under various federal, state, and local environmental laws, ordinances, and regulations, a current or former owner or operator of real property may be liable for the cost to remove or remediate hazardous or toxic substances, wastes, or petroleum products on, under, from, or in such property. These costs could be substantial and liability under these laws may attach whether or not the owner or manager knew of, or was responsible for, the presence of such contamination. Even if more than one person may have been responsible for the contamination, each liable party may be held entirely responsible for all of the clean-up costs incurred. For example, many of our sites are currently or were formerly used for dry cleaning operations, and there have been and could be releases of chlorinated solvents as a result of these operations, which have resulted in and could give rise in the future to the requirement that we perform clean-up actions. As another example, many of our sites are currently or were formerly used for motor vehicle filling station and maintenance operations, and there have been and could be releases of petroleum products, hydraulic oil, or other substances associated with these operations, which have resulted in and could give rise in the future to the requirement that we or others investigate or remediate the releases. We may be subject to regulatory action and may also be held liable to third parties for personal injury or property damage incurred by such parties in connection with exposure to or offsite contamination caused by hazardous or toxic substances. The costs of investigation, removal or remediation of hazardous or toxic substances, and related liabilities, may be substantial and could materially and adversely affect us. The presence of hazardous or toxic substances, or the failure to remediate the related contamination, may also adversely affect our ability to sell, lease or redevelop a property or to borrow money using a property as collateral.
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Although we believe that our portfolio is in substantial compliance with U.S. federal, state and local environmental laws and regulations regarding hazardous or toxic substances, and that there is no material contamination that we would be responsible for addressing, this belief is based on limited evaluation and testing. Nearly all of our shopping centers have been subjected to Phase I or similar environmental audits. These environmental audits (which do not include subsurface testing) have not revealed, nor are we aware of, any environmental liability that we believe is reasonably likely to have a material adverse effect on us. However, we cannot assure you that: (i) previous environmental studies with respect to the portfolio revealed all potential environmental liabilities; (ii) any previous owner, occupant or Neighbor of a property did not create any material environmental condition not known to us; (iii) the current environmental condition of the portfolio will not be affected by Neighbors and occupants, by the condition of nearby properties, or by other unrelated third parties; or (iv) future uses or conditions (including, without limitation, changes in applicable environmental laws and regulations or the interpretation thereof) will not result in environmental liabilities.
We and our Neighbors face risks relating to cybersecurity attacks, which could cause loss of confidential information and other disruptions to business operations, and compliance with new laws and regulations regarding cybersecurity and privacy may result in substantial costs and may decrease cash available for distributions.
Cybersecurity attacks include attempts to gain unauthorized access to our data and/or computer systems to disrupt operations, corrupt data, or steal confidential information. We may face such cybersecurity attacks through malware, computer viruses, attachments to e-mails, persons inside our organization or persons with access to systems inside our organization, and other significant disruptions of our information technology, or IT, systems. The risk of a cybersecurity attack, including by computer hackers (individual or hacking organizations), foreign governments, and cyber terrorists, has generally increased as the number, intensity, and sophistication of attempted attacks and intrusions from around the world have increased. The techniques and sophistication used to conduct cyber-attacks and breaches of IT systems, as well as the sources and targets of these attacks, change frequently and are often not recognized until such attacks are launched or have been in place for a period of time.
Our IT networks and related systems are essential to the operation of our business and our ability to perform day-to-day operations and, in some cases, may be critical to the operations of certain of our Neighbors. In addition to our own IT systems, we also depend on third parties to provide IT services relating to several key business functions, such as administration, accounting, communications, document management and storage, human resources, payroll, tax, investor relations and certain finance functions. Our IT systems and those provided by third parties may contain personal, financial, or other information that is entrusted to us by our Neighbors and associates, as well as proprietary PECO information and other confidential information related to our business. We and such third parties employ a number of measures to prevent, detect, and mitigate these threats, including password protection, firewalls, backup servers, malware detection, intrusion sensors, threat monitoring, user training, and periodic penetration testing; however, there is no guarantee that such efforts will be successful in preventing a cybersecurity attack.
As our reliance on technology has increased, so have the risks posed to our systems, both internal and those we have outsourced. The primary risks that could directly result from the occurrence of a cyber-incident include operational interruption, damage to our relationship with our Neighbors, and private data exposure. Our financial results and business operations may be negatively affected by such an incident or the resulting negative media attention. A cybersecurity attack could: (i) disrupt the proper functioning of our networks and systems and therefore our operations and/or those of certain of our Neighbors; (ii) compromise the confidential or proprietary information of our Neighbors, associates, and vendors, which others could use to compete against us or for disruptive, destructive, or otherwise harmful purposes and outcomes; (iii) result in our inability to maintain the building systems relied upon by our Neighbors for the efficient use of their leased space; (iv) require significant management attention and resources to remedy and damages that result; (v) result in misstated financial reports, violations of loan covenants and/or missed reporting deadlines; (vi) result in our inability to properly monitor our compliance with the rules and regulations regarding our qualification as a REIT; (vii) subject us to claims for breach of contract, damages, credits, penalties, or termination of leases or other agreements or relationships; (viii) cause reputational damage that adversely affects Neighbor, investor, and associate confidence in us, which could negatively affect our ability to attract and retain Neighbors, investors, and associates; (ix) result in significant remediation costs, some or all of which may not be recoverable from our insurance carriers; and (x) result in increases in the cost of obtaining insurance on favorable terms, or at all, if the attack results in significant insured losses. Such security breaches also could result in a violation of applicable federal and state privacy and other laws, and subject us to private consumer, business partner, or securities litigation and governmental investigations and proceedings, any of which could result in our exposure to material civil or criminal liability, and we may not be able to recover these expenses from our service providers, responsible parties or insurance carriers. Similarly, our Neighbors rely extensively on IT systems to process transactions and manage their businesses and thus are also at risk from and may be adversely affected by cybersecurity attacks. An interruption in the business operations of our Neighbors or a deterioration in their reputation resulting from a cybersecurity attack, including unauthorized access to customers’ credit card data and other confidential information, could indirectly negatively affect our business and cause lost revenues. As of the date of this prospectus, we have not had any material incidents involving cybersecurity attacks.

REGULATORY AND LEGAL RISKS
Compliance or failure to comply with the Americans with Disabilities Act, or the ADA, and fire, safety, and other regulations could result in substantial costs and may decrease cash available for stockholder distributions.
Our shopping centers are or may become subject to the ADA, which generally requires that all places of public accommodation comply with federal requirements related to access and use by disabled persons. Compliance with the ADA’s requirements could require the removal of access barriers, and noncompliance may result in the imposition of injunctive relief, monetary penalties, or in some cases, an award of damages. While we attempt to acquire shopping centers that are already in compliance with the ADA or place the burden of compliance on the seller or other third party, such as a Neighbor, we cannot
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assure stockholders that we will be able to acquire shopping centers or allocate responsibilities in this manner. In addition, we are required to operate the shopping centers in compliance with fire and safety regulations, building codes, and other land use regulations, as they may be adopted by governmental entities and become applicable to the shopping centers. We may be required to make substantial capital expenditures to comply with these requirements, and these expenditures may reduce our net income and may have a material adverse effect on our ability to meet our financial obligations and make distributions to our stockholders.
We could be subject to legal or regulatory proceedings that may adversely affect our cash flows and results of operations.
As an owner and operator of public shopping centers, from time to time, we are party to legal and regulatory proceedings that arise in the ordinary course of business. Due to the inherent uncertainties of litigation and regulatory proceedings, we cannot accurately predict the ultimate outcome of any such litigation or proceedings. We could experience an adverse effect to our cash flows, financial condition, and results of operations due to an unfavorable outcome.

RISKS RELATED TO THIS OFFERING
There is currently no public market for shares of our common stock, and we cannot assure you that a public market will develop.
Prior to this offering, there has been no public market for shares of our common stock, and we cannot assure you that an active trading market will develop or be sustained. In the absence of a public trading market, a stockholder may be unable to liquidate an investment in shares of our common stock. The initial public offering price for shares of our common stock will be determined by agreement among us and the underwriters, and we cannot assure you that shares of our common stock will not trade below the initial public offering price following the completion of this offering. Whether a public market for shares of our common stock will develop will depend on a number of factors including the extent of institutional investor interest in us, the general reputation of REITs and the attractiveness of their equity securities in comparison to other equity securities (including securities issued by other real estate based companies), our financial performance and general stock and bond market conditions. If a robust public market for shares of our common stock does not develop, you may have difficulty selling shares of our common stock, which could adversely affect the price that you receive for such shares.
The estimated value per share, or EVPS, of our common stock is based on a number of assumptions that may not be accurate or complete and may not reflect the price at which shares of our common stock will trade when listed on a national securities exchange or the price a third party would pay to acquire us.
On April 29, 2021, our Board increased the EVPS of our common stock to $31.65 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. The increase was primarily driven by a significantly improved outlook for omni-channel grocery-anchored neighborhood shopping centers, a decrease in the applied discount rate as a result of a more stable economic environment and the 4% decrease in share count resulting from our tender offer during the three months ended December 31, 2020. We engaged a third-party valuation firm, Duff & Phelps, LLC, 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 $26.25, 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. Our EVPS is based upon a number of estimates and assumptions that may not be accurate or complete. Different parties with different assumptions and estimates could derive a different EVPS, and this difference could be significant. The EVPS is not audited and does not represent a determination of the fair value of our assets or liabilities based on accounting principles generally accepted in the United States, nor does it represent a liquidation value of our assets and liabilities, the price a third party would pay to acquire us, the price at which our shares of common stock would trade in secondary markets, or the amount at which our shares of common stock would trade on a national securities exchange.
Accordingly, we can give no assurance that, (i) our shares would trade at or near the EVPS when listed on a national securities exchange; (ii) a stockholder would be able to resell his or her shares at the EVPS; (iii) a stockholder would ultimately realize distributions per share equal to the EVPS upon a liquidation of our assets and settlement of our liabilities; (iv) a stockholder would receive an amount per share equal to the EVPS upon a sale of the Company; (v) a third party would offer the EVPS in an arm’s-length transaction to purchase all or substantially all of our shares of common stock; (vi) another independent third-party appraiser or third-party valuation firm would agree with our EVPS; or (vii) the methodologies used to calculate our EVPS would be acceptable to the Financial Industry Regulatory Authority, or FINRA, for use on customer account statements or that the EVPS will satisfy the applicable annual valuation requirements under ERISA.
Furthermore, we have not made any adjustments to the valuation of our EVPS for the impact of other transactions occurring subsequent to March 31, 2021, including, but not limited to, asset acquisitions and dispositions. The value of our shares of common stock will fluctuate over time in response to developments related to individual real estate assets, the management of those assets, and changes in the real estate and finance markets. Because of, among other factors, the high concentration of our total assets in real estate and the number of shares of our common stock outstanding, changes in the value of individual real estate assets or changes in valuation assumptions could have a very significant impact on the value of our shares of common stock. The EVPS also does not take into account any disposition costs or fees for real estate properties, debt prepayment penalties that could apply upon the prepayment of certain of our debt obligations, or the impact of restrictions on the assumption of debt. Accordingly, the EVPS may or may not be an accurate reflection of the fair market value of our stockholders’ investments and will not likely represent the amount of net proceeds that would result from an immediate sale of our assets.
The market price and trading volume of shares of our common stock may be volatile.
The U.S. stock markets, including Nasdaq, on which we intend to apply to have shares of our common stock listed under the symbol “PECO”, have experienced significant price and volume fluctuations. As a result, the market price of shares of our
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common stock is likely to be similarly volatile, and investors in shares of our common stock may experience a decrease in the value of their shares, including decreases unrelated to our operating performance or prospects. We cannot assure you that the market price of shares of our common stock will not fluctuate or decline significantly in the future.
In addition to the risks listed in this “Risk Factors” section, a number of factors could negatively affect the share price of our common stock or result in fluctuations in the price or trading volume of shares of our common stock, including:
the annual yield from distributions on shares of our common stock as compared to yields on other financial instruments;
equity issuances by us, or future sales of substantial amounts of shares of our common stock by our existing or future stockholders, or the perception that such issuances or future sales may occur;
conversions of shares of our Class B common stock into shares of our common stock or sales of shares of our Class B common stock;
increases in market interest rates or a decrease in our distributions to stockholders that lead purchasers of shares of our common stock to demand a higher yield;
changes in market valuations of similar companies;
fluctuations in stock market prices and volumes;
additions or departures of key management personnel;
our operating performance and the performance of other similar companies;
actual or anticipated differences in our quarterly operating results;
changes in expectations of future financial performance or changes in estimates of securities analysts;
publication of research reports about us or our industry by securities analysts;
failure to qualify as a REIT;
adverse market reaction to any indebtedness we incur in the future;
strategic decisions by us or our competitors, such as acquisitions, divestments, spin offs, joint ventures, strategic investments or changes in business strategy;
the passage of legislation or other regulatory developments that adversely affect us or our industry;
speculation in the press or investment community;
changes in our earnings;
failure to satisfy the listing requirements of Nasdaq;
failure to comply with the requirements of the Sarbanes-Oxley Act;
actions by institutional stockholders;
changes in accounting principles; and
general market conditions, including factors unrelated to our performance.
In the past, securities class action litigation has often been instituted against companies following periods of volatility in the price of their common stock. This type of litigation could result in substantial costs and divert our management’s attention and resources, which could have a material adverse effect on our cash flows, our ability to execute our business strategy and our ability to make distributions to our stockholders.
Because we have a large number of stockholders and shares of our common stock have not been listed on a national securities exchange prior to this offering, there may be significant pent-up demand to sell shares of our common stock. Significant sales of shares of our common stock, or the perception that significant sales of such shares could occur, may cause the price of shares of our common stock to decline significantly.
As of               , 2021, we had approximately               million shares of our common stock issued. Prior to this offering, our common stock was not listed on any national securities exchange and the ability of stockholders to liquidate their investments was limited. Additionally, our share repurchase program, which, in any event, only allowed us to repurchase up to 5% of the weighted average number of shares of our common stock outstanding during the prior calendar year in any 12-month period, was suspended for DDI (death, qualifying disability or determination of incompetence) requests on March 25, 2021. The share repurchase program for standard requests had been suspended since August 7, 2019. As a result, there may be significant pent-up demand to sell shares of our common stock. A large volume of sales of shares of our common stock (whether they are shares of our common stock that are issued in the offering or shares of our common stock created by the automatic conversion of shares of our Class B common stock over time) could decrease the prevailing market price of shares of our common stock and could impair our ability to raise additional capital through the sale of equity securities in the future. Even if a substantial number of sales of shares of our common stock are not effected, the mere perception of the possibility of these sales could depress the market price of shares of our common stock and have a negative effect on our ability to raise capital in the future.
Although shares of our Class B common stock will not be listed on a national securities exchange following the closing of this offering, sales of such shares or the perception that such sales could occur could have a material adverse effect on the per share trading price of shares of our common stock.
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After giving effect to this offering and following the Recapitalization, approximately               million shares (or            million shares if the underwriters exercise their overallotment option in full) of our common stock will be issued and outstanding, of which approximately               million, or               % (               % if the underwriters exercise their overallotment option in full), will be shares of our Class B common stock. Although shares of our Class B common stock will not be listed on a national securities exchange, these shares are not subject to transfer restrictions (other than the restrictions on ownership and transfer of stock set forth in our charter); therefore, such stock will be freely tradable. As a result, it is possible that a market may develop for shares of our Class B common stock, and sales of such shares, or the perception that such sales could occur, could have a material adverse effect on the per share trading price of shares of our common stock.
Additionally, all of the shares of our Class B common stock will convert automatically into common stock upon the six-month anniversary of the listing of shares of our common stock for trading on a national securities exchange, or earlier as approved by our Board with respect to all or any portion of the outstanding shares of our Class B common stock. As a result, holders of shares of our Class B common stock seeking to immediately liquidate their investment in our common stock could engage in immediate short sales of shares of our common stock prior to the date on which the shares of our Class B common stock converts into shares of our common stock and use the shares of our common stock that they receive upon conversion of their Class B common stock to cover these short sales in the future. Such short sales could depress the market price of shares of our common stock and limit the effectiveness of the Recapitalization as a strategy for limiting the number of shares of our common stock held by our stockholders prior to this offering that may be sold shortly after this offering.
We may allocate the net proceeds from this offering in ways that you and other stockholders may not approve.
We intend to use a portion of the net proceeds received from us to pay off the $375 million unsecured term loan maturing in April 2022, which currently bears interest at LIBOR plus 1.30% and is fully prepayable without penalty. See “Use of Proceeds.” We expect to use any remaining net proceeds to fund external growth with property acquisitions and for general corporate purposes. However, we have not yet committed to acquire specific shopping centers, and you will be unable to evaluate the economic merits of such investments before making an investment decision to purchase shares of our common stock in this offering. We have broad authority to invest in real estate investments that we may identify in the future, and we may make investments with which you do not agree. In addition, our investment policies may be amended or revised from time to time without a vote of our stockholders. Our management could have broad discretion in the use of certain of the net proceeds from this offering and could spend the proceeds in ways that do not necessarily improve our operating results or enhance the value of shares of our common stock. These factors increase the uncertainty, and thus the risk, of an investment in shares of our common stock.
Future offerings of debt securities, which would be senior to our common stock, or equity securities, which would dilute our existing stockholders and may be senior to our common stock, may adversely affect the market price of our common stock.
In the future, we may attempt to increase our capital resources by offering debt or equity securities, including medium term notes, senior or subordinated notes, and classes of preferred or common stock. Debt securities or shares of preferred stock will generally be entitled to receive interest payments or distributions, both current and in connection with any liquidation or sale, prior to the holders of our common stock. We are not required to offer any such additional debt or equity securities to existing common stockholders on a preemptive basis. Therefore, offerings of common stock or other equity securities may dilute the holdings of our existing stockholders. Future offerings of debt or equity securities, or the perception that such offerings may occur, may reduce the market price of our common stock and/or the distributions that we pay with respect to our common stock. Because we may generally issue any such debt or equity securities in the future without obtaining the consent of our stockholders, you will bear the risk of our future offerings reducing the market price of our common stock and diluting your proportionate ownership.
Our distributions to stockholders may change, which could adversely affect the market price of shares of our common stock.
All distributions will be at the sole discretion of our Board and will depend upon our actual and projected financial condition, results of operations, cash flows, liquidity and FFO, maintenance of our REIT qualification and such other matters as our Board may deem relevant from time to time. We intend to evaluate distributions throughout 2021, and it is possible that stockholders may not receive distributions equivalent to those previously paid by us for various reasons, including the following: we may not have enough cash to pay such distributions due to changes in our cash requirements, indebtedness, capital spending plans, operating cash flows, or financial position; decisions on whether, when, and in what amounts to make any future distributions will remain at all times entirely at the discretion of the Board, which reserves the right to change our distribution practices at any time and for any reason; our Board may elect to retain cash for investment purposes, working capital reserves or other purposes, or to maintain or improve our credit ratings; and the amount of distributions that our subsidiaries may distribute to us may be subject to restrictions imposed by state law, state regulators, and/or the terms of any current or future indebtedness that these subsidiaries may incur. Stockholders have no contractual or other legal right to distributions that have not been authorized by the Board and declared by the Company. We may not be able to make distributions in the future or may need to fund such distributions from external sources, as to which no assurances can be given. In addition, as noted above, we may choose to retain operating cash flow, and these retained funds, although increasing the value of our underlying assets, may not correspondingly increase the market price of shares of our common stock. Our failure to meet the market’s expectations with regard to future cash distributions likely would adversely affect the market price of shares of our common stock.
If we pay distributions from sources other than our cash flows from operations, we may not be able to sustain our distribution rate, we may have fewer funds available for investment in shopping centers and other assets, and our stockholders’ overall returns may be reduced.
Our organizational documents permit us to pay distributions from any source without limit (other than those limits set forth under Maryland law). To the extent we fund distributions from borrowings, we will have fewer funds available for investment in real estate properties and other real estate-related assets, and our stockholders’ overall returns may be reduced. At times,
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we may need to borrow funds to pay distributions, which could increase the costs to operate our business. Furthermore, if we cannot cover our distributions with cash flows from operations, we may be unable to sustain our distribution rate.
Increases in market interest rates may result in a decrease in the value of shares of our common stock.
One of the factors that may influence the price of shares of our common stock will be the dividend distribution rate on our common stock (as a percentage of the price of shares of our common stock) relative to market interest rates. If market interest rates rise, prospective purchasers of shares of our common stock may expect a higher distribution rate. Higher interest rates would not, however, result in more funds being available for distribution and, in fact, would likely increase our borrowing costs and might decrease our funds available for distribution. We therefore may not be able, or we may not choose, to provide a higher distribution rate. As a result, prospective purchasers may decide to purchase other securities rather than shares of our common stock, which would reduce the demand for, and result in a decline in the market price of, shares of our common stock.
If we fail to maintain an effective system of internal control over financial reporting and disclosure controls, we may not be able to accurately and timely report our financial results.
Effective internal control over financial reporting and disclosure controls are necessary for us to provide reliable financial reports, effectively prevent fraud and to operate successfully as a public company. If we cannot provide reliable financial reports or prevent fraud, our reputation and operating results would be harmed. We are currently required to perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting, and as of December 31, 2022, we expect that we will be required to have our independent registered public accounting firm attest to the same, as required by Section 404 of the Sarbanes-Oxley Act of 2002. To date, the audit of our consolidated financial statements by our independent registered public accounting firm has included a consideration of internal control over financial reporting as a basis of designing their audit procedures, but not for the purpose of expressing an opinion (as will be required pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002) on the effectiveness of our internal control over financial reporting. If a material weakness or significant deficiency was to be identified in our internal control over financial reporting, we may also identify deficiencies in some of our disclosure controls and procedures that we believe require remediation. If we or our independent registered public accounting firm discover weaknesses, we will make efforts to improve our internal control over financial reporting and disclosure controls. However, there is no assurance that we will be successful. Any failure to maintain effective controls or timely effect any necessary improvement of our internal control over financial reporting and disclosure controls could harm operating results or cause us to fail to meet our reporting obligations, which could affect the listing of our common stock on Nasdaq. Ineffective internal control over financial reporting and disclosure controls could also cause investors to lose confidence in our reported financial information, which would likely have a negative effect on the per share trading price of our common stock.
We have no operating history as a publicly traded company and may not be able to successfully operate as a publicly traded company.
We have no operating history as a publicly traded company. We cannot assure you that the past experience of our senior management team will be sufficient to successfully operate our Company as a publicly traded company. Upon completion of this offering, we will be required to comply with the Nasdaq listing standards, and this transition could place a significant strain on our management systems, infrastructure and other resources. Failure to operate successfully as a publicly traded company would have an adverse effect on our financial condition, results of operations, cash flow and per share trading price of our common stock.


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CAUTIONARY STATEMENT CONCERNING FORWARD LOOKING STATEMENTS
Certain statements contained in this prospectus, other than historical facts, may be considered forward-looking statements within the meaning of the Securities Act, Section 21E of the Exchange Act and the Private Securities Litigation Reform Act of 1995 (collectively with the Securities Act and Exchange Act, the “Acts”). These forward-looking statements are based on current expectations, estimates and projections about the industry and markets in which the Company operates, and beliefs of, and assumptions made by, management of the Company and involve uncertainties that could significantly affect the financial results of the Company. 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: (i) statements about our plans, strategies, initiatives, and prospects; (ii) statements about the COVID-19 pandemic, including its duration and potential or expected impact on our tenants, our business and our view on forward trends; and (iii) 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:
changes in national, regional, or local economic climates;
local market conditions, including an oversupply of space in, or a reduction in demand for, shopping centers similar to those in our portfolio;
use of proceeds of this offering;
vacancies, changes in market rental rates, and the need to periodically repair, renovate, and re-let space;
competition from other available shopping centers and the attractiveness of shopping centers in our portfolio to our tenants;
the financial stability of our tenants, including, without limitation, their ability to pay rent;
our ability to pay down, refinance, restructure, or extend our indebtedness as it becomes due;
increases in our borrowing costs as a result of changes in interest rates and other factors, including the potential phasing out of LIBOR after 2021;
the economic, political and social impact of, and uncertainty relating to, the COVID-19 pandemic, including:
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, the duration of any such measures and the extent to which the revenues of our tenants recover following the lifting of such restrictions;
the effectiveness or lack of effectiveness of governmental relief in providing assistance to individuals and businesses adversely impacted by the COVID-19 pandemic, including our tenants;
the effects of the COVID-19 pandemic 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;
the impact of the COVID-19 pandemic on our tenants and their ability and willingness to renew their leases upon expiration;
our ability to re-lease our properties on the same or better terms, or at all, in the event of non-renewal or in the event we exercise our right to replace an existing tenant;
the loss or bankruptcy of our tenants, particularly in light of the adverse impact to the financial health of many retailers and service providers that has occurred and continues to occur as a result of the COVID-19 pandemic;
the pace of recovery following the COVID-19 pandemic given the current severe economic contraction and increase in unemployment rates;
to the extent we were and are seeking to dispose of properties in the near term, significantly greater uncertainty regarding our ability to do so at attractive prices or at all; and
our ability to implement cost containment strategies;
potential liability for environmental matters;
damage to our properties from catastrophic weather and other natural events, and the physical effects of climate change;
our ability and willingness to maintain our qualification as a REIT in light of economic, market, legal, tax and other considerations;
changes in tax, real estate, environmental, and zoning laws;
information technology security breaches;
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our corporate responsibility initiatives;
loss of key executives; and
additional factors described in this prospectus under the headings “Prospectus Summary,” “Risk Factors,” “Management's Discussion and Analysis of Financial Condition and Results of Operations” and “Our Business and Properties.”
Should one or more of the risks or uncertainties described above or elsewhere in this prospectus occur, or should underlying assumptions prove incorrect, actual results and plans could differ materially from those expressed in any forward-looking statements. You are cautioned not to place undue reliance on these statements, which speak only as of the date of this prospectus.
All forward-looking statements, expressed or implied, included in this prospectus are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that the Company or persons acting on their behalf may issue.
Except as required by law, we do not undertake any obligation to update or revise any forward-looking statements contained in this prospectus.
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USE OF PROCEEDS
We estimate that the net proceeds we will receive from this offering, after deducting the underwriting discount and our estimated offering expenses, will be approximately $               (or approximately $               if the underwriters exercise their overallotment option in full), assuming a public offering price of $               per share, which is the midpoint of the price range set forth on the front cover of this prospectus.
We will contribute the net proceeds from this offering to the Operating Partnership in exchange for OP units. We expect the Operating Partnership to use the net proceeds received from us to:
pay off the $375 million unsecured term loan maturing in April 2022, which currently bears interest at LIBOR plus 1.30% and is fully prepayable without penalty;
fund external growth with property acquisitions; and
fund other general corporate uses.
Pending the permanent use of the net proceeds from this offering, we intend to invest the net proceeds in interest-bearing, short-term investment-grade securities, money-market accounts or other investments that are consistent with our intention to qualify for taxation as a REIT for U.S. federal income tax purposes.
Affiliates of BofA Securities, Inc. and J.P. Morgan Securities LLC are lenders under our term loan credit facility, and will receive their pro rata portion of the approximately $               of the net proceeds from this offering used to repay amounts outstanding under the facility.

RECAPITALIZATION
Our stockholders have approved an amendment to our charter, or Articles of Amendment, that effects a change of each share of our common stock outstanding before this offering into one share of a newly created class of Class B common stock, which we refer to as the “Recapitalization.”
Upon the six-month anniversary of the listing of our common stock for trading on a national securities exchange (or such earlier date or dates as may be approved by our Board in certain circumstances with respect to all or any portion of the outstanding shares of our Class B common stock), each share of our Class B common stock will automatically, and without any stockholder action, convert into one share of our listed common stock. In all other respects, our Class B common stock will have identical preferences, rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications, and terms and conditions of redemption as our currently outstanding common stock.
There will be no public market for shares of our Class B common stock. Until the shares of our Class B common stock convert into common stock and become listed on a national securities exchange, they will not be traded on a national securities exchange. As a result, holders of our Class B common stock will have very limited, if any, liquidity options with respect to their shares of our Class B common stock until such conversion.
The Articles of Amendment will become effective upon the filing with, and acceptance for record by, the State Department of Assessments and Taxation of Maryland, or the SDAT. We intend to file the Articles of Amendment on or around July 2, 2021.

REVERSE STOCK SPLIT
We intend to effect a one-for-three reverse stock split effective on or around July 2, 2021. In addition, we intend to effect a corresponding reverse split of our Operating Partnership’s OP units. As a result of the reverse stock and OP unit split, every three shares of our common stock and OP units will be automatically combined and converted into one issued and outstanding share of common stock or OP unit, as applicable, rounded to the nearest 1/100th share or OP unit. The reverse stock and OP unit splits impact all classes of common stock and OP units proportionately and will have no impact on any stockholder’s or limited partner’s percentage ownership of all issued and outstanding common stock or OP units. Unless otherwise indicated, the information in this prospectus gives effect to the reverse stock and OP unit splits.
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DISTRIBUTION POLICY
We elected to be taxed as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2010. As a REIT, we have made, and intend to continue to make, distributions each taxable year equal to at least 90% of our taxable income (excluding capital gains and computed without regard to the dividends paid deduction). Since our inception, through May 2021, we made an aggregate of $1.8 billion of distributions and share repurchases. In March 2020, as a result of the uncertainty surrounding the COVID-19 pandemic, our Board temporarily suspended stockholder distributions, effective after the payment of the March 2020 distribution on April 1, 2020. Beginning in December 2020, we resumed making monthly distributions to our stockholders at the current rate of $0.08499999 per share, or $1.02 annualized, and have continued to do so at the same rate through June 2021. On June 14, 2021, our Board declared a distribution to our stockholders of the same amount payable on July 1, 2021. Purchasers of shares of common stock in this offering will not receive the distribution payable July 1, 2021 on such shares.
We intend to make a distribution to holders of our common stock offered in this offering, when, as and if authorized by our Board out of legally-available funds, based on a distribution rate of $               per share of common stock beginning the first month following this offering. On an annualized basis, this would be $                per share of common stock, or an annualized distribution rate of approximately               % based on the public offering price of               per share, which is the midpoint of the price range set forth on the front cover of this prospectus. We estimate that this annual distribution rate will represent approximately               % of our estimated cash available for distribution to stockholders for the 12 months ending March 31, 2022. We do not intend to reduce the annualized distribution per share of common stock if the underwriters exercise their option to purchase additional shares. Our intended annual distribution rate has been established based on our estimate of cash available for distribution for the 12 months ending March 31, 2022, which we have calculated based on adjustments to our net loss for the 12 months ended March 31, 2021. This estimate was based on our historical operating results and does not take into account our long-term business and growth strategies, nor does it take into account any unanticipated expenditures we may have to make or any financings for such expenditures. In estimating our cash available for distribution for the 12 months ending March 31, 2022, we have made certain assumptions as reflected in the table and footnotes below.
Our estimate of cash available for distribution does not include the effect of any changes in our working capital resulting from changes in our working capital accounts. In addition, our estimate of cash available for distribution does not include the approximately $4 million to $6 million of incremental cash general and administrative expenses expected to be incurred subsequent to the completion of this offering in order to operate as a listed public company but that are not reflected in our net loss for the 12 months ending March 31, 2021. It also does not reflect the amount of cash estimated to be used for investing activities, financing activities or other activities, other than estimated recurring capital expenditures, contractual obligations for tenant improvement costs, leasing commissions and redevelopment costs and scheduled principal payments on debt. Any such investing and/or financing activities may have a material and adverse effect on our estimate of cash available for distribution. Because we have made the assumptions described herein in estimating cash available for distribution, we do not intend this estimate to be a projection or forecast of our actual results of operations, FFO, Core FFO, Adjusted FFO, liquidity or financial condition, and we have estimated cash available for distribution for the sole purpose of determining our estimated annual distribution amount. Our estimate of cash available for distribution should not be considered as an alternative to cash flow from operating activities (computed in accordance with GAAP) or as an indicator of our liquidity or our ability to make distributions. In addition, the methodology upon which we made the adjustments described herein is not necessarily intended to be a basis for determining future distributions.
We intend to maintain or increase our distribution rate for the 12 months following the completion of this offering unless our results of operations, FFO, Core FFO, Adjusted FFO, liquidity, cash flows, financial condition, prospects, economic conditions or other factors differ materially from the assumptions used in projecting our distribution rate. We believe that our estimate of cash available for distribution constitutes a reasonable basis for setting the distribution rate. However, we cannot assure you that our estimate will prove accurate, and actual distributions may therefore be significantly below the expected distributions. Our actual results of operations will be affected by a number of factors, including the revenue received from our properties, our operating expenses, interest expense and unanticipated capital expenditures. We may, from time to time, be required, or elect, to borrow under our revolving credit facility or otherwise to pay distributions.
We cannot assure you that our estimated distributions will be made or sustained or that our Board will not change our distribution policy in the future. Any distributions will be at the sole discretion of our Board, and their form, timing and amount, if any, will depend upon a number of factors, including our actual and projected results of operations, FFO, Core FFO, Adjusted FFO, liquidity, cash flows and financial condition, the revenue we actually receive from our properties, our operating expenses, our debt service requirements, our capital expenditures, prohibitions and other limitations under our financing arrangements, our REIT taxable income, the annual REIT distribution requirements, applicable law, including restrictions on distributions under Maryland law, and such other factors as our Board deems relevant. For more information regarding risk factors that could materially and adversely affect us and our ability to make cash distributions, see “Risk Factors.” If our operations do not generate sufficient cash flow to enable us to pay our intended or required distributions, we may be required to fund distributions from working capital, borrow or raise equity, or reduce such distributions. In addition, our charter allows us to issue preferred stock that could have a preference on distributions and could limit our ability to make distributions to our stockholders. Additionally, under certain circumstances, agreements relating to our indebtedness could limit our ability to make distributions to our stockholders.
Federal income tax law requires that a REIT distribute annually at least 90% of its REIT taxable income (excluding capital gains and computed without regard to the dividends paid deduction) and that it pay tax at the corporate rate to the extent that it annually distributes less than 100% of its REIT taxable income (excluding capital gains and computed without regard to the dividends paid deduction). In addition, a REIT will be required to pay a 4% nondeductible excise tax on the amount, if any, by which the distributions it makes in a calendar year are less than the sum of 85% of its ordinary income, 95% of its capital gain net income and 100% of its undistributed income from prior years. For more information, see “Federal Income Tax Considerations.” We anticipate that our estimated cash available for distribution will be sufficient to enable us to meet the annual distribution requirements applicable to REITs and to avoid or minimize the imposition of corporate and excise taxes. However, under some circumstances, we may be required to make distributions in excess of cash available for distribution in
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order to meet these distribution requirements or to avoid or minimize the imposition of tax and we may need to borrow funds to make certain distributions.
The following table sets forth calculations relating to the estimated initial distribution after this offering based on our net loss for the 12 months ended March 31, 2021 and is provided solely for the purpose of illustrating the estimated initial distribution after this offering and is not intended to be a basis for future distribution. Dollar amounts are in thousands:
Net income for the year ended December 31, 2020$5,462 
Less: Net income for the three months ended March 31, 2020(11,199)
Add: Net income for the three months ended March 31, 2021117 
Net loss for the 12 months ended March 31, 2021
$(5,620)
Add: Depreciation and amortization of real estate assets218,262 
Add: Non-cash impairment charges(1)
7,782 
Add: Depreciation and amortization of corporate assets5,531 
Add: Non-cash change in fair value of earn-out liability(2)
16,000 
Add: Non-cash interest expense and loss on debt extinguishment7,309 
Add: Non-cash share-based compensation, net6,154 
Add: Estimated net increase in contractual lease revenues(3)
27,121 
Less: Estimated net decrease in contractual lease revenues(4)
(15,185)
Add: Estimated decrease in uncollectible tenant receivables(5)
20,052 
Less: Adjustments related to acquisition and disposition activity(6)
(5,359)
Add: Transaction and acquisition expenses(7)
635 
Less: Gain on the disposal of property, net(21,912)
Less: Amortization of above- and below-market leases(8)
(3,223)
Less: Straight-line rental income and expense adjustments(9)
(2,461)
Add: Adjustments related to unconsolidated joint ventures(10)
1,424 
Estimated cash flows from operating activities for the 12 months ending March 31, 2022$256,510 
Less: Estimated recurring capital expenditures(11)
(18,866)
Less: Contractual obligations for tenant improvement costs, leasing commissions, and redevelopment
  costs(12)
(36,412)
Less: Scheduled principal payments on debt(13)
(8,136)
Estimated cash available for distribution for the 12 months ending March 31, 2022$193,096 
Share of estimated cash available to the Operating Partnership for distribution attributable to holders of OP units%
Share of estimated cash available to the Operating Partnership for distribution attributable to Phillips Edison & Company, Inc.%
Total estimated initial annual distribution to our stockholders and to holders of OP units$
Total estimated initial annual distribution to holders of OP units$
Total estimated initial annual distribution to our stockholders$
Estimated initial annual distributions per share of our common stock(14)
$
Payout ratio based on our Company’s share of estimated cash available for distribution(15)        
%
(1)Represents the elimination of non-cash impairment charges recognized on properties and other assets for the 12 months ended March 31, 2021.
(2)Represents the elimination of non-cash charges recognized in connection with the change in the fair value of our earn-out liability, primarily as a result of an increase in the valuation of our common stock as well as improved market conditions during the 12 months ended March 31, 2021.
(3)Represents the net increase in contractual lease revenue from (i) scheduled fixed rent increases, (ii) net increases from new leases or renewals that were not in effect for the entire 12 months ended March 31, 2021 and (iii) new leases or renewals that were signed prior to the date of this prospectus and will go into effect during the 12 months ending March 31, 2022.
(4)Represents the net decrease in contractual rent from (i) lease expirations, including leases that are not projected to be renewed based on our portfolio retention rate of approximately 84.8%, which is the weighted average portfolio retention rate we experienced over the last three years ended December 31, 2020, and (ii) leases that expired during the 12 month period ended March 31, 2021. Our portfolio retention rates for each of the last three years were as follows: 2020 – 85.2%, 2019 – 85.7% and 2018 – 83.2%. Leases that are projected to be renewed are assumed to continue at the rental amount the Neighbors were obligated to pay in the last month of the expiring lease.
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(5)Represents an estimate of the reduction in the amount of uncollectible tenant receivables for the 12 months ending March 31, 2022 compared to the 12 months ended March 31, 2021. The COVID-19 pandemic had an outsized effect on the collectibility of receivables during the 12 months ended March 31, 2021, increasing our revenue adjustments for collectibility to approximately 5.3% of our lease revenues before non-cash amortization and straight-line rent adjustments, compared to approximately 1.1% and 0.8% of our lease revenues before non-cash amortization and straight-line rent adjustments for the years ended December 31, 2019 and 2018, respectively, or an average of approximately 1.0%. During the three months ended March 31, 2021, we recorded revenue adjustments for collectibility of $1.7 million, or 1.4% of our lease revenues before non-cash amortization and straight-line rent adjustments, demonstrating a reversion to collectibility adjustment levels more consistent with historical averages. While we believe our revenue adjustments for collectibility for the 12 months ended March 31, 2022 will further normalize, approximating historical averages, for purposes of calculating the distribution in the above table, we have assumed we will record approximately $6.9 million of revenue adjustments for collectibility for the 12 months ending March 31, 2022 based on an annualization of the revenue adjustments for collectibility of $1.7 million we recorded during the three months ended March 31, 2021. This $6.9 million of revenue adjustments for collectibility represents a decrease of approximately $20.1 million from the $27.0 million of adjustments we recorded for the 12 months ended March 31, 2021.
(6)Represents the net contribution to cash available for distribution from (i) the net decrease associated with property acquisitions and dispositions that were consummated during the 12 months ended March 31, 2021 and (ii) the net decrease associated with property acquisitions and dispositions that (a) were consummated after March 31, 2021 and (b) are subject to executed purchase and sale agreements prior to the date of this prospectus and are scheduled to be consummated during the 12 months ending March 31, 2022.
(7)Represents the elimination of non-capitalizable transaction expenses associated with the acquisition and disposition activity described in footnote 6 above.
(8)Represents the elimination of non-cash amortization of above-market and below-market lease intangibles for the 12 months ended March 31, 2021.
(9)Represents the elimination of adjustments from cash basis to straight-line accrual basis of revenue recognition for the 12 months ended March 31, 2021.
(10)Represents our pro rata share of the adjustments set forth in the above table associated with properties owned through our unconsolidated joint ventures.
(11)For purposes of calculating the distribution in the above table, we have assumed we will incur approximately $15.5 million of recurring capital expenditures, calculated based on $0.50 psf of recurring property-related capital expenditures and $3.4 million per year of recurring corporate capital expenditures, which are the weighted average recurring property-related capital expenditures and average corporate capital expenditures we experienced over the last three years ended December 31, 2020. Recurring property-related capital expenditures are costs to maintain properties and their common areas, including new roofs, paving of parking lots and other general upkeep items, and recurring corporate capital expenditures are primarily costs for computer software and equipment. Our recurring property-related capital expenditures psf for each of the last three years were as follows: 2020 – $0.42, 2019 – $0.62 and 2018 – $0.47. Our recurring corporate capital expenditures for each of the last three years were as follows: 2020 – $4.3 million, 2019 – $2.7 million and 2018 – $3.2 million.
(12)For purposes of calculating the distribution in the above table, we have assumed that between March 31, 2021 and March 31, 2022 we will incur (i) approximately $29.6 million of tenant improvements and leasing commissions costs that we are contractually obligated to provide pursuant to the terms of new and renewal leases that have been signed prior to the date of this prospectus, (ii) approximately $5.4 million of tenant improvements and leasing commissions costs for projected renewal leases described in footnote 4 above assuming tenant improvement and leasing commission costs of $2.66 psf, which is the weighted average tenant improvement and leasing commission costs psf for renewal leases we experienced over the last three years ended December 31, 2020, and (iii) interest expense of $1.5 million on approximately $49.3 million of capital expenditures related to redevelopment projects, as we intend to finance redevelopment projects using draws on our revolving credit facility. Our tenant improvement and leasing commission costs psf for renewal leases for each of the last three years were as follows: 2020 – $2.65 psf, 2019 – $2.53 psf and 2018 – $2.81 psf. During the 12 months ending March 31, 2022, we expect to have additional tenant improvement and leasing commission costs of approximately $6 million to $8 million related to new leasing that occurs after the date of this prospectus. Any increases in such costs would be directly related to such new leasing in that such costs would only be committed to when a new lease is signed. Except for the estimate of tenant improvement and leasing commission costs for the estimated renewal leases described in footnote 4 above, increases in costs for tenant improvements and leasing commissions for any such new leases are not included herein. We expect that all tenant improvements and leasing costs will be funded entirely from cash flow from operations.
(13)Represents scheduled payments of mortgage loan principal due during the 12 months ending March 31, 2022. Does not include $48.1 million of commercial mortgage-backed securities scheduled to mature during the 12 months ending March 31, 2022 based on the assumption that we will be able to fund these amounts under our revolving credit facility at the current interest rates on such maturing debt.
(14)Based on a total of               shares of our common stock and               OP units (excluding OP units held by us) to be outstanding after this offering.
(15)Calculated as estimated initial annual distribution per share divided by Phillips Edison & Company, Inc.’s share of estimated cash available for distribution per share for the 12 months ending March 31, 2022.
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CAPITALIZATION
The following table sets forth our capitalization as of March 31, 2021
on a historical basis; and
on an as adjusted basis to give effect to the Recapitalization (which will be effected prior to the completion of this offering), the issuance by us of               shares of common stock in this offering (assuming that the underwriters do not exercise their option to purchase up to an additional               shares to cover overallotments, if any) at an assumed public offering price of $               per share, which is the midpoint of the price range set forth on the front cover of this prospectus, the Listing Equity Grants and the use of the net proceeds from this offering as set forth in “Use of Proceeds.”
You should read this table together with “Use of Proceeds,” “Recapitalization,” “Selected Consolidated Financial and Operating Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and notes thereto included elsewhere in this prospectus.
As of March 31, 2021
(in thousands, except per share data)HistoricalAs Adjusted
Cash, cash equivalents, and restricted cash:
Cash and cash equivalents