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 June 30,
2024 and reaffirmed full year 2024 earnings guidance. For the three
and six months ended June 30, 2024, net income attributable to
stockholders was $15.3 million, or $0.12 per diluted share, and
$32.9 million, or $0.27 per diluted share, respectively.
Highlights for the Second
Quarter Ended June 30,
2024
- Reported Nareit FFO of $78.4
million, or $0.57 per diluted share
- Reported Core FFO of $80.0 million,
or $0.59 per diluted share
- Reaffirmed 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 1.9%
- Reaffirmed 2024 same-center NOI
guidance range of 3.25% to 4.25%
- The midpoint of full year 2024
same-center NOI guidance represents 3.75% year-over-year
growth
- Reported leased portfolio occupancy
of 97.5% and same-center leased portfolio occupancy of 97.8%
- Increased leased inline occupancy by
30 basis points year-over-year to a record-high 95.1%; increased
same-center leased inline occupancy by 20 basis points
year-over-year to a record-high 95.1%
- Executed portfolio comparable new
leases at a rent spread of 34.4% and inline comparable new leases
at a rent spread of 31.9% during the quarter
- Executed portfolio comparable
renewal leases at a record-high rent spread of 20.5% and inline
comparable renewal leases at a rent spread of 19.7% during the
quarter
- As previously announced, completed a
public debt offering of $350 million aggregate principal amount of
5.750% senior notes due in 2034, and 91.4% of total debt was
fixed-rate at quarter end
- Acquired two shopping centers and
one land parcel for a total of $59.5 million
- Subsequent to quarter end, acquired
one property and one land parcel for a total of $11.3 million
- As previously announced and
subsequent to quarter end, acquired one grocery-anchored shopping
center in partnership with Cohen & Steers Income Opportunities
REIT, launching a new joint venture targeting $300 million in
equity
Management Commentary
Jeff Edison, Chairman and Chief Executive Officer of PECO
stated: "The PECO team delivered another solid quarter of growth
and market-leading operating metrics. Year to date, same-center NOI
increased by 2.8%, Nareit FFO increased 4.1% and Core FFO increased
3.7%. The continued strength of our operating performance is
attributable to our differentiated and focused strategy of owning
right-sized, 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 reaffirm our full year 2024
earnings guidance for Nareit and Core FFO per share, which
represents year-over-year growth of 6.0% and 3.0% at the midpoints,
respectively. In addition, we reaffirmed our full year 2024
earnings guidance for same-center NOI, which represents
year-over-year growth of 3.75% at the midpoint.”
Financial Results for the
Second Quarter and Six Months
Ended June 30, 2024
Net Income
Second quarter 2024 net income attributable to stockholders
totaled $15.3 million, or $0.12 per diluted share, compared to
net income of $14.5 million, or $0.12 per diluted share,
during the second quarter of 2023.
For the six months ended June 30, 2024, net income
attributable to stockholders totaled $32.9 million, or $0.27 per
diluted share, compared to net income of $31.1 million, or $0.26
per diluted share, for the same period in 2023.
Nareit FFO
Second quarter 2024 funds from operations attributable to
stockholders and operating partnership (“OP”) unit holders as
defined by Nareit (“Nareit FFO”) increased 3.3% to $78.4 million,
or $0.57 per diluted share, compared to $75.9 million, or $0.58 per
diluted share, during the second quarter of 2023.
For the six months ended June 30, 2024, Nareit FFO
increased 4.1% to $158.4 million, or $1.16 per diluted share,
compared to $152.2 million, or $1.15 per diluted share, during the
same period a year ago.
Core FFO
Second quarter 2024 core funds from operations attributable to
stockholders and OP unit holders (“Core FFO”) increased 2.9% to
$80.0 million, or $0.59 per diluted share, compared to $77.7
million, or $0.59 per diluted share, during the second quarter of
2023.
For the six months ended June 30, 2024, Core FFO increased
3.7% to $161.6 million, or $1.18 per diluted share, compared to
$155.9 million, or $1.18 per diluted share, for the same period in
2023.
Same-Center NOI
Second quarter 2024 same-center net operating income (“NOI”)
increased 1.9% to $105.6 million, compared to $103.6 million during
the second quarter of 2023.
For the six months ended June 30, 2024, same-center NOI
increased 2.8% to $212.3 million, compared to $206.5 million
during the same period a year ago.
Portfolio Overview for the
Second Quarter and Six Months
Ended June 30, 2024
Portfolio Statistics
As of June 30, 2024, PECO’s wholly-owned portfolio
consisted of 286 properties, totaling approximately 32.6 million
square feet, located in 31 states. This compared to 274 properties,
totaling approximately 31.4 million square feet, located in 31
states as of June 30, 2023.
Leased portfolio occupancy was 97.5% as of June 30, 2024,
compared to 97.8% as of June 30, 2023. Same-center leased
portfolio occupancy was 97.8% as of June 30, 2024, compared to
97.9% as of June 30, 2023.
Leased anchor occupancy was 98.8% as of June 30, 2024,
compared to 99.4% as of June 30, 2023. Leased inline occupancy
increased 30 basis points to a record-high 95.1% as of
June 30, 2024, compared to 94.8% as of June 30, 2023.
Same-center leased anchor occupancy was 99.1% as of June 30,
2024, compared to 99.4% as of June 30, 2023. Same-center
leased inline occupancy increased 20 basis points to 95.1% as of
June 30, 2024, compared to 94.9% as of June 30, 2023.
Leasing Activity
During the second quarter of 2024, 277 leases were executed
totaling 1.7 million square feet. This compared to 285 leases
executed totaling 1.6 million square feet during the second quarter
of 2023.
During the six months ended June 30, 2024, 522 leases were
executed totaling 3.0 million square feet. This compared to 548
leases executed totaling 2.6 million square feet during the same
period in 2023.
Comparable rent spreads during the second 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 34.4% for new leases, 20.5% for renewal leases and
24.5% combined.
Comparable rent spreads during the six months ended
June 30, 2024 were 31.9% for new leases, 18.7% for renewal
leases and 22.3% combined.
Transaction Activity
During the second quarter of 2024, the Company acquired two
shopping centers and one land parcel for a total of
$59.5 million. The Company expects to drive value 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 second quarter 2024
acquisitions consisted of:
- Loganville Crossing, a 149,187
square foot shopping center anchored by Kroger located in an
Atlanta, Georgia suburb.
- Walden Park, a 91,049 square foot
shopping center anchored by Super Target located in an Austin,
Texas suburb.
During the six months ended June 30, 2024, the Company
acquired four properties and two land parcels for a total of $115.4
million.
Subsequent to quarter end, the Company acquired one property and
one land parcel for a total of $11.3 million. Acquisitions
completed subsequent to quarter end consisted of:
- Ridgeview Marketplace, a 22,759
square foot shopping center anchored by King Soopers located in a
Colorado Springs, Colorado suburb.
Joint Venture with Cohen & Steers
As previously announced and subsequent to quarter end, PECO
acquired Des Peres Corners, a grocery-anchored shopping center
located in a St. Louis, Missouri suburb, with Cohen & Steers
Income Opportunities REIT, Inc. (“CNSREIT”). The acquisition was
made through a programmatic joint venture targeting
$300 million in equity and owned 80% by CNSREIT and 20% by
PECO. The joint venture will focus on acquiring open-air,
grocery-anchored shopping centers and will leverage PECO’s deep
expertise.
Balance Sheet Highlights
As of June 30, 2024, the Company had approximately
$743 million of total liquidity, comprised of
$10.9 million of cash, cash equivalents and restricted cash,
plus $731.6 million of borrowing capacity available on its
$800 million revolving credit facility.
As of June 30, 2024, the Company’s net debt to annualized
adjusted EBITDAre was unchanged from 5.1x at December 31,
2023. As of June 30, 2024, the Company’s outstanding debt had
a weighted-average interest rate of 4.2% and a weighted-average
maturity of 4.9 years when including all extension options.
As previously announced, PECO completed in May 2024 a public
debt offering of $350 million aggregate principal amount of
5.750% senior notes due 2034. The notes were priced at 98.576% of
the principal amount and will mature July 2034. As of June 30,
2024, 91.4% of the Company’s 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) |
Q2 YTD |
|
Updated Full Year2024
Guidance |
|
Previous Full Year2024
Guidance |
Net income per share |
$0.27 |
|
$0.49 - $0.54 |
|
$0.51 - $0.55 |
Nareit FFO per share |
$1.16 |
|
$2.34 - $2.41 |
|
$2.34 - $2.41 |
Core FFO per share |
$1.18 |
|
$2.37 - $2.45 |
|
$2.37 - $2.45 |
Same-Center NOI growth |
2.8% |
|
3.25% - 4.25% |
|
3.25% - 4.25% |
Portfolio
Activity: |
|
|
|
|
|
Acquisitions, net |
$115,352 |
|
$200,000 - $300,000 |
|
$200,000 - $300,000 |
Other: |
|
|
|
|
|
Interest expense, net |
$46,956 |
|
$98,000 - $106,000 |
|
$98,000 - $106,000 |
G&A expense |
$22,946 |
|
$45,000 - $49,000 |
|
$45,000 - $49,000 |
Non-cash revenue items(1) |
$7,428 |
|
$14,500 - $18,500 |
|
$14,500 - $18,500 |
Adjustments for
collectibility |
$2,424 |
|
$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 |
$ |
0.49 |
|
|
$ |
0.54 |
|
Depreciation and amortization of real estate assets |
|
1.83 |
|
|
|
1.85 |
|
Gain on sale of real estate assets |
|
— |
|
|
|
— |
|
Adjustments related to unconsolidated joint ventures |
|
0.02 |
|
|
|
0.02 |
|
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 will host a conference call and webcast on Friday,
July 26, 2024 at 12:00 p.m. Eastern Time to discuss second
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.
Second Quarter
2024 Earnings Conference Call
Details:
Date: Friday,
July 26, 2024
Time: 12:00 p.m.
ET
Toll-Free Dial-In
Number: (800) 715-9871
International
Dial-In Number: (646) 307-1963
Conference ID:
4551083
Webcast: Second
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
June 30, 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 grocery-anchored
neighborhood 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 June 30,
2024, PECO managed 306 shopping centers, including 286 wholly-owned
centers comprising 32.6 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 JUNE 30, 2024 AND
DECEMBER 31, 2023 (Condensed and
Unaudited)(In thousands, except per share
amounts)
|
June 30, 2024 |
|
December 31, 2023 |
ASSETS |
|
|
|
Investment in real estate: |
|
|
|
Land and improvements |
$ |
1,813,970 |
|
|
$ |
1,768,487 |
|
Building and improvements |
|
3,907,875 |
|
|
|
3,818,184 |
|
In-place lease assets |
|
506,054 |
|
|
|
495,525 |
|
Above-market lease assets |
|
74,835 |
|
|
|
74,446 |
|
Total investment in real estate assets |
|
6,302,734 |
|
|
|
6,156,642 |
|
Accumulated depreciation and amortization |
|
(1,655,987 |
) |
|
|
(1,540,551 |
) |
Net investment in real estate assets |
|
4,646,747 |
|
|
|
4,616,091 |
|
Investment in unconsolidated joint ventures |
|
24,129 |
|
|
|
25,220 |
|
Total investment in real estate assets, net |
|
4,670,876 |
|
|
|
4,641,311 |
|
Cash and cash equivalents |
|
7,058 |
|
|
|
4,872 |
|
Restricted cash |
|
3,890 |
|
|
|
4,006 |
|
Goodwill |
|
29,066 |
|
|
|
29,066 |
|
Other assets, net |
|
196,041 |
|
|
|
186,411 |
|
Total assets |
$ |
4,906,931 |
|
|
$ |
4,865,666 |
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
Liabilities: |
|
|
|
Debt obligations, net |
$ |
2,042,483 |
|
|
$ |
1,969,272 |
|
Below-market lease liabilities, net |
|
112,770 |
|
|
|
108,223 |
|
Accounts payable and other liabilities |
|
118,120 |
|
|
|
116,461 |
|
Deferred income |
|
18,158 |
|
|
|
18,359 |
|
Total liabilities |
|
2,291,531 |
|
|
|
2,212,315 |
|
Equity: |
|
|
|
Preferred stock, $0.01 par value per share, 10,000 shares
authorized, zero shares issued and outstanding at June 30,
2024 and December 31, 2023 |
|
— |
|
|
|
— |
|
Common stock, $0.01 par value per share, 1,000,000 shares
authorized, 122,408 and 122,024 shares issued and outstanding at
June 30, 2024 and December 31, 2023, respectively |
|
1,224 |
|
|
|
1,220 |
|
Additional paid-in capital |
|
3,554,309 |
|
|
|
3,546,838 |
|
Accumulated other comprehensive income |
|
11,356 |
|
|
|
10,523 |
|
Accumulated deficit |
|
(1,287,271 |
) |
|
|
(1,248,273 |
) |
Total stockholders’ equity |
|
2,279,618 |
|
|
|
2,310,308 |
|
Noncontrolling interests |
|
335,782 |
|
|
|
343,043 |
|
Total equity |
|
2,615,400 |
|
|
|
2,653,351 |
|
Total liabilities and
equity |
$ |
4,906,931 |
|
|
$ |
4,865,666 |
|
|
|
|
|
|
|
|
|
PHILLIPS EDISON & COMPANY,
INC.CONSOLIDATED STATEMENTS OF
OPERATIONSFOR THE THREE AND SIX
MONTHS ENDED JUNE 30, 2024
AND 2023 (Condensed and
Unaudited)(In thousands, except per share
amounts)
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
Revenues: |
|
|
|
|
|
|
|
Rental income |
$ |
158,286 |
|
|
$ |
148,980 |
|
|
$ |
316,354 |
|
|
$ |
296,708 |
|
Fees and management income |
|
2,522 |
|
|
|
2,546 |
|
|
|
5,087 |
|
|
|
5,024 |
|
Other property income |
|
707 |
|
|
|
611 |
|
|
|
1,376 |
|
|
|
1,469 |
|
Total revenues |
|
161,515 |
|
|
|
152,137 |
|
|
|
322,817 |
|
|
|
303,201 |
|
Operating
Expenses: |
|
|
|
|
|
|
|
Property operating |
|
27,399 |
|
|
|
24,674 |
|
|
|
53,933 |
|
|
|
49,736 |
|
Real estate taxes |
|
19,474 |
|
|
|
18,397 |
|
|
|
38,328 |
|
|
|
36,453 |
|
General and administrative |
|
11,133 |
|
|
|
11,686 |
|
|
|
22,946 |
|
|
|
23,219 |
|
Depreciation and amortization |
|
61,172 |
|
|
|
59,667 |
|
|
|
121,378 |
|
|
|
118,165 |
|
Total operating expenses |
|
119,178 |
|
|
|
114,424 |
|
|
|
236,585 |
|
|
|
227,573 |
|
Other: |
|
|
|
|
|
|
|
Interest expense, net |
|
(23,621 |
) |
|
|
(20,675 |
) |
|
|
(46,956 |
) |
|
|
(40,141 |
) |
(Loss) gain on disposal of property, net |
|
(10 |
) |
|
|
75 |
|
|
|
(15 |
) |
|
|
1,017 |
|
Other expense, net |
|
(1,720 |
) |
|
|
(904 |
) |
|
|
(2,649 |
) |
|
|
(1,659 |
) |
Net income |
|
16,986 |
|
|
|
16,209 |
|
|
|
36,612 |
|
|
|
34,845 |
|
Net income attributable to
noncontrolling interests |
|
(1,715 |
) |
|
|
(1,758 |
) |
|
|
(3,671 |
) |
|
|
(3,775 |
) |
Net income attributable to
stockholders |
$ |
15,271 |
|
|
$ |
14,451 |
|
|
$ |
32,941 |
|
|
$ |
31,070 |
|
Earnings per share of
common stock: |
|
|
|
|
|
|
|
Net income per share attributable to stockholders - basic and
diluted |
$ |
0.12 |
|
|
$ |
0.12 |
|
|
$ |
0.27 |
|
|
$ |
0.26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 and six
months ended June 30, 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 June 30, |
|
Favorable (Unfavorable) |
|
Six Months Ended June 30, |
|
Favorable (Unfavorable) |
|
|
2024 |
|
|
|
2023 |
|
|
$ Change |
|
% Change |
|
|
2024 |
|
|
|
2023 |
|
|
$ Change |
|
% Change |
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income(1) |
$ |
112,161 |
|
|
$ |
107,542 |
|
|
$ |
4,619 |
|
|
|
|
$ |
224,917 |
|
|
$ |
215,665 |
|
|
$ |
9,252 |
|
|
|
Tenant recovery income |
|
34,384 |
|
|
|
35,196 |
|
|
|
(812 |
) |
|
|
|
|
70,482 |
|
|
|
70,682 |
|
|
|
(200 |
) |
|
|
Reserves for uncollectibility(2) |
|
(629 |
) |
|
|
(370 |
) |
|
|
(259 |
) |
|
|
|
|
(2,401 |
) |
|
|
(1,276 |
) |
|
|
(1,125 |
) |
|
|
Other property income |
|
694 |
|
|
|
595 |
|
|
|
99 |
|
|
|
|
|
1,297 |
|
|
|
1,443 |
|
|
|
(146 |
) |
|
|
Total revenues |
|
146,610 |
|
|
|
142,963 |
|
|
|
3,647 |
|
|
|
2.6 |
% |
|
|
294,295 |
|
|
|
286,514 |
|
|
|
7,781 |
|
|
|
2.7 |
% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating expenses |
|
22,584 |
|
|
|
21,142 |
|
|
|
(1,442 |
) |
|
|
|
|
45,774 |
|
|
|
43,562 |
|
|
|
(2,212 |
) |
|
|
Real estate taxes |
|
18,461 |
|
|
|
18,183 |
|
|
|
(278 |
) |
|
|
|
|
36,214 |
|
|
|
36,424 |
|
|
|
210 |
|
|
|
Total operating expenses |
|
41,045 |
|
|
|
39,325 |
|
|
|
(1,720 |
) |
|
|
(4.4 |
)% |
|
|
81,988 |
|
|
|
79,986 |
|
|
|
(2,002 |
) |
|
|
(2.5 |
)% |
Total Same-Center NOI |
$ |
105,565 |
|
|
$ |
103,638 |
|
|
$ |
1,927 |
|
|
|
1.9 |
% |
|
$ |
212,307 |
|
|
$ |
206,528 |
|
|
$ |
5,779 |
|
|
|
2.8 |
% |
(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 June 30, |
Six Months Ended June 30, |
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
Net income |
$ |
16,986 |
|
|
$ |
16,209 |
|
|
$ |
36,612 |
|
|
$ |
34,845 |
|
Adjusted to exclude: |
|
|
|
|
|
|
|
Fees and management income |
|
(2,522 |
) |
|
|
(2,546 |
) |
|
|
(5,087 |
) |
|
|
(5,024 |
) |
Straight-line rental income(1) |
|
(2,072 |
) |
|
|
(3,284 |
) |
|
|
(4,437 |
) |
|
|
(5,864 |
) |
Net amortization of above- and below-market leases |
|
(1,570 |
) |
|
|
(1,262 |
) |
|
|
(2,989 |
) |
|
|
(2,490 |
) |
Lease buyout income |
|
(205 |
) |
|
|
(74 |
) |
|
|
(451 |
) |
|
|
(429 |
) |
General and administrative expenses |
|
11,133 |
|
|
|
11,686 |
|
|
|
22,946 |
|
|
|
23,219 |
|
Depreciation and amortization |
|
61,172 |
|
|
|
59,667 |
|
|
|
121,378 |
|
|
|
118,165 |
|
Interest expense, net |
|
23,621 |
|
|
|
20,675 |
|
|
|
46,956 |
|
|
|
40,141 |
|
Loss (gain) on disposal of property, net |
|
10 |
|
|
|
(75 |
) |
|
|
15 |
|
|
|
(1,017 |
) |
Other expense, net |
|
1,720 |
|
|
|
904 |
|
|
|
2,649 |
|
|
|
1,659 |
|
Property operating expenses related to fees and management
income |
|
319 |
|
|
|
711 |
|
|
|
1,345 |
|
|
|
1,026 |
|
NOI for real estate
investments |
|
108,592 |
|
|
|
102,611 |
|
|
|
218,937 |
|
|
|
204,231 |
|
Less: Non-same-center
NOI(2) |
|
(3,027 |
) |
|
|
1,027 |
|
|
|
(6,630 |
) |
|
|
2,297 |
|
Total Same-Center NOI |
$ |
105,565 |
|
|
$ |
103,638 |
|
|
$ |
212,307 |
|
|
$ |
206,528 |
|
|
|
|
|
|
|
|
|
Period-end Same-Center Leased
Occupancy % |
|
|
|
|
|
97.8 |
% |
|
|
97.9 |
% |
(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 June 30, |
|
Six Months Ended June 30, |
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
Calculation of Nareit
FFO Attributable to Stockholders and OP Unit Holders |
|
|
|
|
|
|
|
Net income |
$ |
16,986 |
|
|
$ |
16,209 |
|
|
$ |
36,612 |
|
|
$ |
34,845 |
|
Adjustments: |
|
|
|
|
|
|
|
Depreciation and amortization of real estate assets |
|
60,711 |
|
|
|
59,115 |
|
|
|
120,487 |
|
|
|
117,068 |
|
Loss (gain) on disposal of property, net |
|
10 |
|
|
|
(75 |
) |
|
|
15 |
|
|
|
(1,017 |
) |
Adjustments related to unconsolidated joint ventures |
|
661 |
|
|
|
645 |
|
|
|
1,310 |
|
|
|
1,343 |
|
Nareit FFO attributable to
stockholders and OP unit holders |
$ |
78,368 |
|
|
$ |
75,894 |
|
|
$ |
158,424 |
|
|
$ |
152,239 |
|
Calculation of Core
FFO Attributable to Stockholders and OP Unit Holders |
|
|
|
|
|
|
|
Nareit FFO attributable to
stockholders and OP unit holders |
$ |
78,368 |
|
|
$ |
75,894 |
|
|
$ |
158,424 |
|
|
$ |
152,239 |
|
Adjustments: |
|
|
|
|
|
|
|
Depreciation and amortization of corporate assets |
|
461 |
|
|
|
552 |
|
|
|
891 |
|
|
|
1,097 |
|
Transaction and acquisition expenses |
|
1,146 |
|
|
|
1,261 |
|
|
|
2,320 |
|
|
|
2,599 |
|
Gain on extinguishment or modification of debt and other, net |
|
(1 |
) |
|
|
(9 |
) |
|
|
(1 |
) |
|
|
(9 |
) |
Amortization of unconsolidated joint venture basis differences |
|
2 |
|
|
|
7 |
|
|
|
5 |
|
|
|
8 |
|
Realized performance income(1) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(75 |
) |
Core FFO attributable to
stockholders and OP unit holders |
$ |
79,976 |
|
|
$ |
77,705 |
|
|
$ |
161,639 |
|
|
$ |
155,859 |
|
|
|
|
|
|
|
|
|
Nareit FFO/Core FFO
Attributable to Stockholders and OP Unit Holders per Diluted
Share |
|
|
|
|
|
|
|
Weighted-average shares of common stock outstanding - diluted |
|
136,439 |
|
|
|
131,887 |
|
|
|
136,456 |
|
|
|
132,004 |
|
Nareit FFO attributable to stockholders and OP unit holders per
share - diluted |
$ |
0.57 |
|
|
$ |
0.58 |
|
|
$ |
1.16 |
|
|
$ |
1.15 |
|
Core FFO attributable to stockholders and OP unit holders per share
- diluted |
$ |
0.59 |
|
|
$ |
0.59 |
|
|
$ |
1.18 |
|
|
$ |
1.18 |
|
(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 June 30, |
|
Six Months Ended June 30, |
|
Year EndedDecember 31, |
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
|
|
2023 |
|
Calculation of
EBITDAre |
|
|
|
|
|
|
|
|
|
Net income |
$ |
16,986 |
|
|
$ |
16,209 |
|
|
$ |
36,612 |
|
|
$ |
34,845 |
|
|
$ |
63,762 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
61,172 |
|
|
|
59,667 |
|
|
|
121,378 |
|
|
|
118,165 |
|
|
|
236,443 |
|
Interest expense, net |
|
23,621 |
|
|
|
20,675 |
|
|
|
46,956 |
|
|
|
40,141 |
|
|
|
84,232 |
|
Loss (gain) on disposal of property, net |
|
10 |
|
|
|
(75 |
) |
|
|
15 |
|
|
|
(1,017 |
) |
|
|
(1,110 |
) |
Federal, state, and local tax expense |
|
464 |
|
|
|
119 |
|
|
|
601 |
|
|
|
237 |
|
|
|
438 |
|
Adjustments related to unconsolidated joint ventures |
|
934 |
|
|
|
918 |
|
|
|
1,862 |
|
|
|
1,884 |
|
|
|
3,721 |
|
EBITDAre |
$ |
103,187 |
|
|
$ |
97,513 |
|
|
$ |
207,424 |
|
|
$ |
194,255 |
|
|
$ |
387,486 |
|
Calculation of
Adjusted EBITDAre |
|
|
|
|
|
|
|
|
|
EBITDAre |
$ |
103,187 |
|
|
$ |
97,513 |
|
|
$ |
207,424 |
|
|
$ |
194,255 |
|
|
$ |
387,486 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
Impairment of investment in third parties |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,000 |
|
Transaction and acquisition expenses |
|
1,146 |
|
|
|
1,261 |
|
|
|
2,320 |
|
|
|
2,599 |
|
|
|
5,675 |
|
Amortization of unconsolidated joint venture basis differences |
|
2 |
|
|
|
7 |
|
|
|
5 |
|
|
|
8 |
|
|
|
17 |
|
Realized performance income(1) |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(75 |
) |
|
|
(75 |
) |
Adjusted EBITDAre |
$ |
104,335 |
|
|
$ |
98,781 |
|
|
$ |
209,749 |
|
|
$ |
196,787 |
|
|
$ |
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 June 30, 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 June 30, 2024 and December 31, 2023
(in thousands):
|
June 30, 2024 |
|
December 31, 2023 |
Net debt: |
|
|
|
Total debt, excluding discounts, market adjustments, and deferred
financing expenses |
$ |
2,090,144 |
|
|
$ |
2,011,093 |
|
Less: Cash and cash equivalents |
|
7,267 |
|
|
|
5,074 |
|
Total net debt |
$ |
2,082,877 |
|
|
$ |
2,006,019 |
|
|
|
|
|
Enterprise value: |
|
|
|
Net debt |
$ |
2,082,877 |
|
|
$ |
2,006,019 |
|
Total equity market capitalization(1)(2) |
|
4,451,504 |
|
|
|
4,955,480 |
|
Total enterprise value |
$ |
6,534,381 |
|
|
$ |
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
June 30, 2024 and December 31, 2023, respectively, and
the closing market price per share of $32.71 and $36.48 as of
June 30, 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 June 30, 2024 and December 31, 2023 (dollars in
thousands):
|
June 30, 2024 |
|
December 31, 2023 |
Net debt to Adjusted EBITDAre
- annualized: |
|
|
|
Net debt |
$ |
2,082,877 |
|
|
$ |
2,006,019 |
|
Adjusted EBITDAre - annualized(1) |
|
409,065 |
|
|
|
396,103 |
|
Net debt to Adjusted EBITDAre
- annualized |
|
5.1x |
|
|
|
5.1x |
|
|
|
|
|
Net debt to total enterprise
value: |
|
|
|
Net debt |
$ |
2,082,877 |
|
|
$ |
2,006,019 |
|
Total enterprise value |
|
6,534,381 |
|
|
|
6,961,499 |
|
Net debt to total enterprise
value |
|
31.9 |
% |
|
|
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
Phillips Edison (NASDAQ:PECO)
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