Phillips Edison & Company, Inc. (Nasdaq: PECO) (“PECO” or the
“Company”), one of the nation’s largest owners and operators of
grocery-anchored neighborhood shopping centers, today reported
financial and operating results for the period ended March 31,
2024 and affirmed full year 2024 earnings guidance. For the three
months ended March 31, 2024, net income attributable to
stockholders was $17.7 million, or $0.14 per diluted share.
Highlights for the First
Quarter Ended March 31,
2024
- Reported Nareit FFO of $80.1
million, or $0.59 per diluted share
- Reported Core FFO of $81.7 million,
or $0.60 per diluted share
- Affirmed 2024 Nareit FFO and Core
FFO guidance ranges of $2.34 to $2.41 per diluted share and $2.37
to $2.45 per diluted share, respectively
- The midpoint of full year 2024
Nareit FFO guidance represents 6.0% year-over-year growth
- The midpoint of full year 2024 Core
FFO guidance represents 3.0% year-over-year growth
- Increased same-center NOI
year-over-year by 3.7%
- Reported leased portfolio occupancy
of 97.2% and same-center leased portfolio occupancy of 97.5%
- Leased inline occupancy increased 50
basis points year-over-year to 94.8%; same-center leased inline
occupancy increased 50 basis points year-over-year to 94.9%
- Executed portfolio comparable new
leases at a rent spread of 29.1% and inline comparable new leases
at a record-high rent spread of 37.4% during the quarter
- Executed portfolio comparable
renewal leases at a rent spread of 16.9% and inline comparable
renewal leases at a rent spread of 19.2% during the quarter
- Acquired two shopping centers and one land parcel for a total
of $55.9 million
Management Commentary
Jeff Edison, Chairman and Chief Executive Officer of PECO
stated: “The PECO team delivered another solid quarter of growth
with same-center NOI increasing by 3.7%. Nareit FFO increased 4.9%,
and Core FFO increased 4.5%. The continued strength of our
operating performance is attributable to our differentiated and
focused strategy of owning grocery-anchored neighborhood shopping
centers anchored by the #1 or #2 grocer by sales in a market, the
PECO team’s ability to drive results at the property level and the
many advantages of the suburban markets where we operate our
centers. Based on the continued strong operating environment and
health of our Neighbors, we are pleased to affirm our full year
2024 earnings guidance for Nareit and Core FFO, which represents
year-over-year growth of 6% and 3% at the midpoints,
respectively.”
Financial Results for the First Quarter Ended
March 31, 2024
Net Income
First quarter 2024 net income attributable to stockholders
totaled $17.7 million, or $0.14 per diluted share, compared to
net income of $16.6 million, or $0.14 per diluted share,
during the first quarter of 2023.
Nareit FFO
First quarter 2024 funds from operations attributable to
stockholders and operating partnership (“OP”) unit holders as
defined by Nareit (“Nareit FFO”) increased 4.9% to $80.1 million,
or $0.59 per diluted share, compared to $76.3 million, or $0.58 per
diluted share, during the first quarter of 2023.
Core FFO
First quarter 2024 core funds from operations attributable to
stockholders and OP unit holders (“Core FFO”) increased 4.5% to
$81.7 million, or $0.60 per diluted share, compared to $78.2
million, or $0.59 per diluted share, during the first quarter of
2023.
Same-Center NOI
First quarter 2024 same-center net operating income (“NOI”)
increased 3.7% to $106.7 million, compared to $102.9 million during
the first quarter of 2023.
Portfolio Overview for the First Quarter Ended
March 31, 2024
Portfolio Statistics
As of March 31, 2024, PECO’s wholly-owned portfolio
consisted of 284 properties, totaling approximately 32.4 million
square feet, located in 31 states. This compares to 275 properties,
totaling approximately 31.5 million square feet, located in 31
states as of March 31, 2023.
Leased portfolio occupancy was 97.2% as of March 31, 2024,
compared to 97.5% as of March 31, 2023. Same-center leased
portfolio occupancy was 97.5% as of March 31, 2024, compared
to 97.6% as of March 31, 2023.
Leased anchor occupancy was 98.4% as of March 31, 2024,
compared to 99.3% as of March 31, 2023. Leased inline
occupancy increased 50 basis points to 94.8% as of March 31,
2024, compared to 94.3% as of March 31, 2023. Same-center
leased anchor occupancy was 98.8% as of March 31, 2024,
compared to 99.3% as of March 31, 2023. Same-center leased
inline occupancy increased 50 basis points to 94.9% as of
March 31, 2024, compared to 94.4% as of March 31,
2023.
Leasing Activity
During the first quarter of 2024, 245 leases were executed
totaling 1.3 million square feet. This compared to 263 leases
executed totaling 1.1 million square feet during the first quarter
of 2023.
Comparable rent spreads during the first quarter of 2024, which
compare the percentage increase of new or renewal leases to the
expiring lease of a unit that was occupied within the past twelve
months, were 29.1% for new leases, 16.9% for renewal leases and
20.0% combined.
Transaction Activity
During the three months ended March 31, 2024, the Company
acquired two shopping centers and one land parcel for a total of
$55.9 million. The Company expects to drive growth in these
assets through occupancy increases and rent growth, as well as
potential future development of ground-up outparcel retail spaces.
There were no dispositions in the quarter. The first quarter 2024
acquisitions consisted of:
- Shoppes at Lake Mary, a 74,234
square foot shopping center anchored by Publix located in an
Orlando, Florida suburb.
- Memorial at Kirkwood, a 104,887 square foot shopping center
located in a Houston, Texas suburb.
Balance Sheet Highlights
As of March 31, 2024, the company had approximately
$571 million of total liquidity, comprised of
$10.1 million of cash, cash equivalents and restricted cash,
plus $560.6 million of borrowing capacity available on its
$800 million revolving credit facility.
PECO’s net debt to annualized adjusted EBITDAre was unchanged
from 5.1x at December 31, 2023. As of March 31, 2024, the
Company’s outstanding debt had a weighted-average interest rate of
4.3% and a weighted-average maturity of 3.8 years when including
all extension options, and 75.8% of total debt was fixed-rate
debt.
2024 Guidance
PECO has updated its 2024 earnings guidance, as summarized in
the table below, which is based upon the Company’s current view of
existing market conditions and assumptions for the year ending
December 31, 2024. The following statements are forward-looking and
actual results could differ materially depending on market
conditions and the factors set forth under "Forward-Looking
Statements" below.
(in thousands, except per share amounts) |
Q1 YTD |
|
Updated Full Year2024
Guidance |
|
Previous Full Year2024
Guidance |
Net income per share |
$0.14 |
|
$0.51 - $0.55 |
|
$0.53 - $0.58 |
Nareit FFO per share |
$0.59 |
|
$2.34 - $2.41 |
|
$2.34 - $2.41 |
Core FFO per share |
$0.60 |
|
$2.37 - $2.45 |
|
$2.37 - $2.45 |
Same-Center NOI growth |
3.7% |
|
3.25% - 4.25% |
|
3.25% - 4.25% |
Portfolio
Activity: |
|
|
|
|
|
Acquisitions, net |
$55,902 |
|
$200,000 - $300,000 |
|
$200,000 - $300,000 |
Other: |
|
|
|
|
|
Interest expense, net |
$23,335 |
|
$98,000 - $106,000 |
|
$95,000 - $105,000 |
G&A expense |
$11,813 |
|
$45,000 - $49,000 |
|
$45,000 - $49,000 |
Non-cash revenue items(1) |
$3,785 |
|
$14,500 - $18,500 |
|
$14,500 - $18,500 |
Adjustments for
collectibility |
$1,837 |
|
$4,000 - 5,000 |
|
$4,000 - 5,000 |
|
|
|
|
|
|
(1) Represents straight-line rental income and net
amortization of above- and below-market leases.
The Company does not provide a reconciliation for same-center
NOI estimates on a forward-looking basis because it is unable to
provide a meaningful or reasonably accurate calculation or
estimation of certain reconciling items which could be significant
to the Company’s results without unreasonable effort.
The following table provides a reconciliation of the range of
the Company's 2024 estimated net income to estimated Nareit FFO and
Core FFO:
(Unaudited) |
Low End |
|
High End |
Net income per share |
$ |
0.51 |
|
$ |
0.55 |
Depreciation and amortization of real estate assets |
|
1.81 |
|
|
1.83 |
Gain on sale of real estate assets |
|
— |
|
|
— |
Adjustments related to unconsolidated joint ventures |
|
0.02 |
|
|
0.03 |
Nareit FFO per share |
$ |
2.34 |
|
$ |
2.41 |
Depreciation and amortization of corporate assets |
|
0.01 |
|
|
0.01 |
Transaction costs and other |
|
0.02 |
|
|
0.03 |
Core FFO per share |
$ |
2.37 |
|
$ |
2.45 |
|
|
|
|
|
|
Conference Call Details
PECO plans to host a conference call and webcast on Friday,
April 26, 2024 at 12:00 p.m. Eastern Time to discuss first
quarter 2024 results and provide further business updates. Chairman
and Chief Executive Officer Jeff Edison, President Bob Myers and
Chief Financial Officer John Caulfield will host the conference
call and webcast. Dial-in and webcast information is below.
First Quarter
2024 Earnings Conference Call
Details:
Date: Friday, April 26, 2024
Time: 12:00 p.m. ET
Toll-Free Dial-In Number: (888) 210-4659
International Dial-In Number: (646)
960-0383
Conference ID: 2035308
Webcast: First Quarter 2024 Webcast Link
An audio replay will be available approximately one hour after
the conclusion of the conference call using the webcast link
above.
For more information on the Company’s financial results, please
refer to the Company’s Form 10-Q for the quarter ended
March 31, 2024.
Connect with PECO
For additional information, please visit
https://www.phillipsedison.com/
Follow PECO on:
- Twitter at
https://twitter.com/PhillipsEdison
- Facebook at
https://www.facebook.com/phillipsedison.co
- Instagram at
https://www.instagram.com/phillips.edison/; and
- Find PECO on LinkedIn at
https://www.linkedin.com/company/phillipsedison&company
About Phillips Edison & Company
Phillips Edison & Company, Inc. (“PECO”) is one of the
nation’s largest owners and operators of omni-channel
grocery-anchored shopping centers. Founded in 1991, PECO has
generated strong results through its vertically-integrated
operating platform and national footprint of well-occupied shopping
centers. PECO’s centers feature a mix of national and regional
retailers providing necessity-based goods and services in
fundamentally strong markets throughout the United States. PECO’s
top grocery anchors include Kroger, Publix, Albertsons and Ahold
Delhaize. As of March 31, 2024, PECO managed 304 shopping
centers, including 284 wholly-owned centers comprising 32.4 million
square feet across 31 states and 20 shopping centers owned in one
institutional joint venture. PECO is focused on creating great
omni-channel, grocery-anchored shopping experiences and improving
communities, one neighborhood shopping center at a time.
PECO uses, and intends to continue to use, its Investors
website, which can be found at
https://investors.phillipsedison.com, as a means of disclosing
material nonpublic information and for complying with its
disclosure obligations under Regulation FD.
PHILLIPS EDISON & COMPANY,
INC.CONSOLIDATED BALANCE SHEETSAS
OF MARCH 31, 2024 AND
DECEMBER 31, 2023 (Condensed and
Unaudited)(In thousands, except per share
amounts)
|
March 31, 2024 |
|
December 31, 2023 |
ASSETS |
|
|
|
Investment in real estate: |
|
|
|
Land and improvements |
$ |
1,789,539 |
|
|
$ |
1,768,487 |
|
Building and improvements |
|
3,860,003 |
|
|
|
3,818,184 |
|
In-place lease assets |
|
500,918 |
|
|
|
495,525 |
|
Above-market lease assets |
|
74,499 |
|
|
|
74,446 |
|
Total investment in real estate assets |
|
6,224,959 |
|
|
|
6,156,642 |
|
Accumulated depreciation and amortization |
|
(1,598,743 |
) |
|
|
(1,540,551 |
) |
Net investment in real estate assets |
|
4,626,216 |
|
|
|
4,616,091 |
|
Investment in unconsolidated joint ventures |
|
24,656 |
|
|
|
25,220 |
|
Total investment in real estate assets, net |
|
4,650,872 |
|
|
|
4,641,311 |
|
Cash and cash equivalents |
|
5,631 |
|
|
|
4,872 |
|
Restricted cash |
|
4,466 |
|
|
|
4,006 |
|
Goodwill |
|
29,066 |
|
|
|
29,066 |
|
Other assets, net |
|
196,474 |
|
|
|
186,411 |
|
Total assets |
$ |
4,886,509 |
|
|
$ |
4,865,666 |
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
Liabilities: |
|
|
|
Debt obligations, net |
$ |
2,015,554 |
|
|
$ |
1,969,272 |
|
Below-market lease liabilities, net |
|
110,774 |
|
|
|
108,223 |
|
Accounts payable and other liabilities |
|
102,162 |
|
|
|
116,461 |
|
Deferred income |
|
20,621 |
|
|
|
18,359 |
|
Total liabilities |
|
2,249,111 |
|
|
|
2,212,315 |
|
Equity: |
|
|
|
Preferred stock, $0.01 par value per share, 10,000 shares
authorized, zero shares issued and outstanding at March 31,
2024 and December 31, 2023 |
|
— |
|
|
|
— |
|
Common stock, $0.01 par value per share, 1,000,000 shares
authorized, 122,323 and 122,024 shares issued and outstanding at
March 31, 2024 and December 31, 2023, respectively |
|
1,223 |
|
|
|
1,220 |
|
Additional paid-in capital |
|
3,551,678 |
|
|
|
3,546,838 |
|
Accumulated other comprehensive income |
|
13,144 |
|
|
|
10,523 |
|
Accumulated deficit |
|
(1,266,541 |
) |
|
|
(1,248,273 |
) |
Total stockholders’ equity |
|
2,299,504 |
|
|
|
2,310,308 |
|
Noncontrolling interests |
|
337,894 |
|
|
|
343,043 |
|
Total equity |
|
2,637,398 |
|
|
|
2,653,351 |
|
Total liabilities and
equity |
$ |
4,886,509 |
|
|
$ |
4,865,666 |
|
|
|
|
|
|
|
|
|
PHILLIPS EDISON & COMPANY,
INC.CONSOLIDATED STATEMENTS OF
OPERATIONSFOR THE THREE MONTHS
ENDED MARCH 31, 2024
AND 2023 (Condensed and
Unaudited)(In thousands, except per share
amounts)
|
Three Months Ended March 31, |
|
|
2024 |
|
|
|
2023 |
|
Revenues: |
|
|
|
Rental income |
$ |
158,068 |
|
|
$ |
147,728 |
|
Fees and management income |
|
2,565 |
|
|
|
2,478 |
|
Other property income |
|
669 |
|
|
|
858 |
|
Total revenues |
|
161,302 |
|
|
|
151,064 |
|
Operating
Expenses: |
|
|
|
Property operating |
|
26,534 |
|
|
|
25,062 |
|
Real estate taxes |
|
18,854 |
|
|
|
18,056 |
|
General and administrative |
|
11,813 |
|
|
|
11,533 |
|
Depreciation and amortization |
|
60,206 |
|
|
|
58,498 |
|
Total operating expenses |
|
117,407 |
|
|
|
113,149 |
|
Other: |
|
|
|
Interest expense, net |
|
(23,335 |
) |
|
|
(19,466 |
) |
(Loss) gain on disposal of property, net |
|
(5 |
) |
|
|
942 |
|
Other expense, net |
|
(929 |
) |
|
|
(755 |
) |
Net income |
|
19,626 |
|
|
|
18,636 |
|
Net income attributable to
noncontrolling interests |
|
(1,956 |
) |
|
|
(2,017 |
) |
Net income attributable to
stockholders |
$ |
17,670 |
|
|
$ |
16,619 |
|
Earnings per share of
common stock: |
|
|
|
Net income per share attributable to stockholders - basic and
diluted |
$ |
0.14 |
|
|
$ |
0.14 |
|
|
|
|
|
|
|
|
|
Discussion and Reconciliation of Non-GAAP
Measures
Same-Center Net Operating Income
The Company presents Same-Center NOI as a supplemental measure
of its performance. The Company defines NOI as total operating
revenues, adjusted to exclude non-cash revenue items, less property
operating expenses and real estate taxes. For the three months
ended March 31, 2024 and 2023, Same-Center NOI represents the
NOI for the 270 properties that were wholly-owned and operational
for the entire portion of all comparable reporting periods. The
Company believes Same-Center NOI provides useful information to its
investors about its financial and operating performance because it
provides a performance measure of the revenues and expenses
directly involved in owning and operating real estate assets and
provides a perspective not immediately apparent from net income
(loss). Because Same-Center NOI excludes the change in NOI from
properties acquired or disposed of after December 31, 2022, it
highlights operating trends such as occupancy levels, rental rates,
and operating costs on properties that were operational for all
comparable periods. Other REITs may use different methodologies for
calculating Same-Center NOI, and accordingly, PECO’s Same-Center
NOI may not be comparable to other REITs.
Same-Center NOI should not be viewed as an alternative measure
of the Company’s financial performance as it does not reflect the
operations of its entire portfolio, nor does it reflect the impact
of general and administrative expenses, depreciation and
amortization, interest expense, other income (expense), or the
level of capital expenditures and leasing costs necessary to
maintain the operating performance of the Company’s properties that
could materially impact its results from operations.
Nareit Funds from Operations and Core Funds from
Operations
Nareit FFO is a non-GAAP financial performance measure that is
widely recognized as a measure of REIT operating performance. The
National Association of Real Estate Investment Trusts (“Nareit”)
defines FFO as net income (loss) computed in accordance with GAAP,
excluding: (i) gains (or losses) from sales of property and gains
(or losses) from change in control; (ii) depreciation and
amortization related to real estate; and (iii) impairment losses on
real estate and impairments of in-substance real estate investments
in investees that are driven by measurable decreases in the fair
value of the depreciable real estate held by the unconsolidated
partnerships and joint ventures. Adjustments for unconsolidated
partnerships and joint ventures are calculated to reflect Nareit
FFO on the same basis. The Company calculates Nareit FFO in a
manner consistent with the Nareit definition.
Core FFO is an additional financial performance measure used by
the Company as Nareit FFO includes certain non-comparable items
that affect its performance over time. The Company believes that
Core FFO is helpful in assisting management and investors with the
assessment of the sustainability of operating performance in future
periods, and that it is more reflective of its core operating
performance and provides an additional measure to compare PECO’s
performance across reporting periods on a consistent basis by
excluding items that may cause short-term fluctuations in net
income (loss). To arrive at Core FFO, the Company adjusts Nareit
FFO to exclude certain recurring and non-recurring items including,
but not limited to: (i) depreciation and amortization of corporate
assets; (ii) changes in the fair value of the earn-out liability;
(iii) amortization of unconsolidated joint venture basis
differences; (iv) gains or losses on the extinguishment or
modification of debt and other; (v) other impairment charges; (vi)
transaction and acquisition expenses; and (vii) realized
performance income.
Nareit FFO and Core FFO should not be considered alternatives to
net income (loss) under GAAP, as an indication of the Company’s
liquidity, nor as an indication of funds available to cover its
cash needs, including its ability to fund distributions. Core FFO
may not be a useful measure of the impact of long-term operating
performance on value if the Company does not continue to operate
its business plan in the manner currently contemplated.
Accordingly, Nareit FFO and Core FFO should be reviewed in
connection with other GAAP measurements, and should not be viewed
as more prominent measures of performance than net income (loss) or
cash flows from operations prepared in accordance with GAAP. The
Company’s Nareit FFO and Core FFO, as presented, may not be
comparable to amounts calculated by other REITs.
Earnings Before Interest, Taxes, Depreciation, and
Amortization for Real Estate and Adjusted EBITDAre
Nareit defines Earnings Before Interest, Taxes, Depreciation,
and Amortization for Real Estate (“EBITDAre”) as net income (loss)
computed in accordance with GAAP before: (i) interest expense; (ii)
income tax expense; (iii) depreciation and amortization; (iv) gains
or losses from disposition of depreciable property; and (v)
impairment write-downs of depreciable property. Adjustments for
unconsolidated partnerships and joint ventures are calculated to
reflect EBITDAre on the same basis.
Adjusted EBITDAre is an additional performance measure used by
the Company as EBITDAre includes certain non-comparable items that
affect the Company’s performance over time. To arrive at Adjusted
EBITDAre, the Company excludes certain recurring and non-recurring
items from EBITDAre, including, but not limited to: (i) changes in
the fair value of the earn-out liability; (ii) other impairment
charges; (iii) amortization of basis differences in the Company’s
investments in its unconsolidated joint ventures; (iv) transaction
and acquisition expenses; and (v) realized performance income.
The Company uses EBITDAre and Adjusted EBITDAre as additional
measures of operating performance which allow it to compare
earnings independent of capital structure, determine debt service
and fixed cost coverage, and measure enterprise value.
Additionally, the Company believes they are a useful indicator of
its ability to support its debt obligations. EBITDAre and Adjusted
EBITDAre should not be considered as alternatives to net income
(loss), as an indication of the Company’s liquidity, nor as an
indication of funds available to cover its cash needs, including
its ability to fund distributions. Accordingly, EBITDAre and
Adjusted EBITDAre should be reviewed in connection with other GAAP
measurements, and should not be viewed as more prominent measures
of performance than net income (loss) or cash flows from operations
prepared in accordance with GAAP. The Company’s EBITDAre and
Adjusted EBITDAre, as presented, may not be comparable to amounts
calculated by other REITs.
Same-Center Net Operating Income—The table
below compares Same-Center NOI (dollars in thousands):
|
Three Months Ended March 31, |
|
Favorable (Unfavorable) |
|
|
2024 |
|
|
|
2023 |
|
|
$ Change |
|
% Change |
Revenues: |
|
|
|
|
|
|
|
Rental income(1) |
$ |
112,756 |
|
|
$ |
108,122 |
|
|
$ |
4,634 |
|
|
|
Tenant recovery income |
|
36,097 |
|
|
|
35,486 |
|
|
|
611 |
|
|
|
Reserves for uncollectibility(2) |
|
(1,772 |
) |
|
|
(906 |
) |
|
|
(866 |
) |
|
|
Other property income |
|
603 |
|
|
|
848 |
|
|
|
(245 |
) |
|
|
Total revenues |
|
147,684 |
|
|
|
143,550 |
|
|
|
4,134 |
|
|
2.9 |
% |
Operating expenses: |
|
|
|
|
|
|
|
Property operating expenses |
|
23,188 |
|
|
|
22,421 |
|
|
|
(767 |
) |
|
|
Real estate taxes |
|
17,753 |
|
|
|
18,241 |
|
|
|
488 |
|
|
|
Total operating expenses |
|
40,941 |
|
|
|
40,662 |
|
|
|
(279 |
) |
|
(0.7)% |
Total Same-Center NOI |
$ |
106,743 |
|
|
$ |
102,888 |
|
|
$ |
3,855 |
|
|
3.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Excludes straight-line rental income, net
amortization of above- and below-market leases, and lease buyout
income.
(2) Includes billings that will not be recognized as
revenue until cash is collected or the Neighbor resumes regular
payments and/or the Company deems it appropriate to resume
recording revenue on an accrual basis, rather than on a cash
basis.
Same-Center Net Operating Income
Reconciliation—Below is a reconciliation of Net Income to
NOI and Same-Center NOI (in thousands):
|
Three Months Ended March 31, |
|
|
2024 |
|
|
|
2023 |
|
Net income |
$ |
19,626 |
|
|
$ |
18,636 |
|
Adjusted to exclude: |
|
|
|
Fees and management income |
|
(2,565 |
) |
|
|
(2,478 |
) |
Straight-line rental income(1) |
|
(2,365 |
) |
|
|
(2,580 |
) |
Net amortization of above- and below- market leases |
|
(1,419 |
) |
|
|
(1,228 |
) |
Lease buyout income |
|
(246 |
) |
|
|
(355 |
) |
General and administrative expenses |
|
11,813 |
|
|
|
11,533 |
|
Depreciation and amortization |
|
60,206 |
|
|
|
58,498 |
|
Interest expense, net |
|
23,335 |
|
|
|
19,466 |
|
Loss (gain) on disposal of property, net |
|
5 |
|
|
|
(942 |
) |
Other expense, net |
|
929 |
|
|
|
755 |
|
Property operating expenses related to fees and management
income |
|
1,026 |
|
|
|
315 |
|
NOI for real estate
investments |
|
110,345 |
|
|
|
101,620 |
|
Less: Non-same-center
NOI(2) |
|
(3,602 |
) |
|
|
1,268 |
|
Total Same-Center NOI |
$ |
106,743 |
|
|
$ |
102,888 |
|
|
|
|
|
Period-end Same-Center Leased
Occupancy % |
|
97.5 |
% |
|
|
97.6 |
% |
(1) Includes straight-line rent adjustments for
Neighbors for whom revenue is being recorded on a cash basis.
(2) Includes operating revenues and expenses from
non-same-center properties which includes properties acquired or
sold and corporate activities.
Nareit FFO and Core FFO—The following table
presents the Company’s calculation of Nareit FFO and Core FFO and
provides additional information related to its operations (in
thousands, except per share amounts):
|
Three Months Ended March 31, |
|
|
2024 |
|
|
2023 |
|
Calculation of Nareit
FFO Attributable to Stockholders and OP Unit Holders |
|
|
|
Net income |
$ |
19,626 |
|
$ |
18,636 |
|
Adjustments: |
|
|
|
Depreciation and amortization of real estate assets |
|
59,776 |
|
|
57,953 |
|
Loss (gain) on disposal of property, net |
|
5 |
|
|
(942 |
) |
Adjustments related to unconsolidated joint ventures |
|
649 |
|
|
698 |
|
Nareit FFO attributable to
stockholders and OP unit holders |
$ |
80,056 |
|
$ |
76,345 |
|
Calculation of Core
FFO Attributable to Stockholders and OP Unit Holders |
|
|
|
Nareit FFO attributable to
stockholders and OP unit holders |
$ |
80,056 |
|
$ |
76,345 |
|
Adjustments: |
|
|
|
Depreciation and amortization of corporate assets |
|
430 |
|
|
545 |
|
Transaction and acquisition expenses |
|
1,174 |
|
|
1,338 |
|
Amortization of unconsolidated joint venture basis differences |
|
3 |
|
|
1 |
|
Realized performance income(1) |
|
— |
|
|
(75 |
) |
Core FFO attributable to
stockholders and OP unit holders |
$ |
81,663 |
|
$ |
78,154 |
|
|
|
|
|
Nareit FFO/Core FFO
Attributable to Stockholders and OP Unit Holders per Diluted
Share |
|
|
|
Weighted-average shares of common stock outstanding - diluted |
|
136,404 |
|
|
131,943 |
|
Nareit FFO attributable to stockholders and OP unit holders per
share - diluted |
$ |
0.59 |
|
$ |
0.58 |
|
Core FFO attributable to stockholders and OP unit holders per share
- diluted |
$ |
0.60 |
|
$ |
0.59 |
|
|
|
|
|
|
|
|
(1) Realized performance income includes fees
received related to the achievement of certain performance targets
in the Company’s NRP joint venture.
EBITDAre and Adjusted EBITDAre—The following
table presents the Company’s calculation of EBITDAre and Adjusted
EBITDAre (in thousands):
|
Three Months Ended March 31, |
|
Year Ended December 31, |
|
|
2024 |
|
|
2023 |
|
|
|
2023 |
|
Calculation of
EBITDAre |
|
|
|
|
|
Net income |
$ |
19,626 |
|
$ |
18,636 |
|
|
$ |
63,762 |
|
Adjustments: |
|
|
|
|
|
Depreciation and amortization |
|
60,206 |
|
|
58,498 |
|
|
|
236,443 |
|
Interest expense, net |
|
23,335 |
|
|
19,466 |
|
|
|
84,232 |
|
Loss (gain) on disposal of property, net |
|
5 |
|
|
(942 |
) |
|
|
(1,110 |
) |
Federal, state, and local tax expense |
|
137 |
|
|
118 |
|
|
|
438 |
|
Adjustments related to unconsolidated joint ventures |
|
928 |
|
|
966 |
|
|
|
3,721 |
|
EBITDAre |
$ |
104,237 |
|
$ |
96,742 |
|
|
$ |
387,486 |
|
Calculation of
Adjusted EBITDAre |
|
|
|
|
|
EBITDAre |
$ |
104,237 |
|
$ |
96,742 |
|
|
$ |
387,486 |
|
Adjustments: |
|
|
|
|
|
Impairment of investment in third parties |
|
— |
|
|
— |
|
|
|
3,000 |
|
Transaction and acquisition expenses |
|
1,174 |
|
|
1,338 |
|
|
|
5,675 |
|
Amortization of unconsolidated joint venture basis differences |
|
3 |
|
|
1 |
|
|
|
17 |
|
Realized performance income(1) |
|
— |
|
|
(75 |
) |
|
|
(75 |
) |
Adjusted EBITDAre |
$ |
105,414 |
|
$ |
98,006 |
|
|
$ |
396,103 |
|
|
|
|
|
|
|
|
|
|
|
|
(1) Realized performance income includes fees
received related to the achievement of certain performance targets
in the Company’s NRP joint venture.
Financial Leverage Ratios—The Company believes
its net debt to Adjusted EBITDAre, net debt to total enterprise
value, and debt covenant compliance as of March 31, 2024 allow
it access to future borrowings as needed in the near term. The
following table presents the Company’s calculation of net debt and
total enterprise value, inclusive of its prorated portion of net
debt and cash and cash equivalents owned through its unconsolidated
joint ventures, as of March 31, 2024 and December 31,
2023 (in thousands):
|
March 31, 2024 |
|
December 31, 2023 |
Net debt: |
|
|
|
Total debt, excluding discounts, market adjustments, and deferred
financing expenses |
$ |
2,056,059 |
|
$ |
2,011,093 |
Less: Cash and cash equivalents |
|
5,813 |
|
|
5,074 |
Total net debt |
$ |
2,050,246 |
|
$ |
2,006,019 |
|
|
|
|
Enterprise value: |
|
|
|
Net debt |
$ |
2,050,246 |
|
$ |
2,006,019 |
Total equity market capitalization(1)(2) |
|
4,880,652 |
|
|
4,955,480 |
Total enterprise value |
$ |
6,930,898 |
|
$ |
6,961,499 |
|
|
|
|
|
|
(1) Total equity market capitalization is calculated
as diluted shares multiplied by the closing market price per share,
which includes 136.1 million and 135.8 million diluted shares as of
March 31, 2024 and December 31, 2023, respectively, and
the closing market price per share of $35.87 and $36.48 as of
March 31, 2024 and December 31, 2023, respectively.
(2) Fully diluted shares include common stock and OP
units.
The following table presents the Company’s calculation of net
debt to Adjusted EBITDAre and net debt to total enterprise value as
of March 31, 2024 and December 31, 2023 (dollars in
thousands):
|
March 31, 2024 |
|
December 31, 2023 |
Net debt to Adjusted EBITDAre
- annualized: |
|
|
|
Net debt |
$ |
2,050,246 |
|
|
$ |
2,006,019 |
|
Adjusted EBITDAre - annualized(1) |
|
403,511 |
|
|
|
396,103 |
|
Net debt to Adjusted EBITDAre
- annualized |
5.1x |
|
5.1x |
|
|
|
|
Net debt to total enterprise
value: |
|
|
|
Net debt |
$ |
2,050,246 |
|
|
$ |
2,006,019 |
|
Total enterprise value |
|
6,930,898 |
|
|
|
6,961,499 |
|
Net debt to total enterprise
value |
|
29.6 |
% |
|
|
28.8 |
% |
(1) Adjusted EBITDAre is based on a trailing twelve
month period.
Forward-Looking Statements
This press release contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Phillips Edison & Company, Inc. (the “Company”)
intends such forward-looking statements to be covered by the safe
harbor provisions for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995 and includes this
statement for purposes of complying with the safe harbor
provisions. Such forward-looking statements can generally be
identified by the Company’s use of forward-looking terminology such
as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,”
“believe,” “continue,” “seek,” “objective,” “goal,” “strategy,”
“plan,” “focus,” “priority,” “should,” “could,” “potential,”
“possible,” “look forward,” “optimistic,” or other similar words.
Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this
earnings release. Such statements include, but are not limited to:
(a) statements about the Company’s plans, strategies, initiatives,
and prospects; (b) statements about the Company’s underwritten
incremental yields; and (c) statements about the Company’s future
results of operations, capital expenditures, and liquidity. Such
statements are subject to known and unknown risks and
uncertainties, which could cause actual results to differ
materially from those projected or anticipated, including, without
limitation: (i) changes in national, regional, or local
economic climates; (ii) local market conditions, including an
oversupply of space in, or a reduction in demand for, properties
similar to those in the Company’s portfolio; (iii) vacancies,
changes in market rental rates, and the need to periodically
repair, renovate, and re-let space; (iv) competition from
other available shopping centers and the attractiveness of
properties in the Company’s portfolio to its tenants; (v) the
financial stability of the Company’s tenants, including, without
limitation, their ability to pay rent; (vi) the Company’s
ability to pay down, refinance, restructure, or extend its
indebtedness as it becomes due; (vii) increases in the Company’s
borrowing costs as a result of changes in interest rates and other
factors; (viii) potential liability for environmental matters; (ix)
damage to the Company’s properties from catastrophic weather and
other natural events, and the physical effects of climate change;
(x) the Company’s ability and willingness to maintain its
qualification as a REIT in light of economic, market, legal, tax,
and other considerations; (xi) changes in tax, real estate,
environmental, and zoning laws; (xii) information technology
security breaches; (xiii) the Company’s corporate responsibility
initiatives; (xiv) loss of key executives; (xv) the concentration
of the Company’s portfolio in a limited number of industries,
geographies, or investments; (xvi) the economic, political, and
social impact of, and uncertainty relating to, pandemics or other
health crises; (xvii) the Company’s ability to re-lease its
properties on the same or better terms, or at all, in the event of
non-renewal or in the event the Company exercises its right to
replace an existing tenant; (xviii) the loss or bankruptcy of the
Company’s tenants; (xix) to the extent the Company is seeking to
dispose of properties, the Company’s ability to do so at attractive
prices or at all; and (xx) the impact of inflation on the Company
and on its tenants. Additional important factors that could cause
actual results to differ are described in the filings made from
time to time by the Company with the SEC and include the risk
factors and other risks and uncertainties described in the
Company’s 2023 Annual Report on Form 10-K, filed with the SEC on
February 12, 2024, as updated from time to time in the
Company’s periodic and/or current reports filed with the SEC, which
are accessible on the SEC’s website at www.sec.gov. Therefore, such
statements are not intended to be a guarantee of the Company’s
performance in future periods.
Except as required by law, the Company does not undertake any
obligation to update or revise any forward-looking statement,
whether as a result of new information, future events, or
otherwise.
Investors:
Kimberly Green, Head of Investor Relations(513)
692-3399kgreen@phillipsedison.com
Hannah Harper, Manager of Investor Relations(513)
824-7122hharper@phillipsedison.com
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