What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2020-11-09 compared with 2020-08-13 · 17 added, 47 removed, 35 unchanged (65% of the section changed)

The following risk factors supplement the risk factors set forth in our 2019 Annual Report on Form 10-K filed with the U.S.

The following risk factor supplements the risk factors set forth in our 2019 Annual Report on Form 10-K filed with the U.S.

Securities and Exchange Commission (“SEC”) on March 12, 2020.

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 properties and other assets, and our stockholders’ overall returns may be reduced.

Our organizational documents permit us to pay distributions from any source without limitation (other than those limitations 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, we may need to borrow funds to pay distributions, which could increase our operating costs.

Furthermore, if we cannot cover our distributions with cash flows from operations, we may be unable to sustain our distribution rate.

On March 27, 2020, our Board temporarily suspended stockholder distributions, which became effective after the payment of the March 2020 dividend on April 1, 2020.

For the six months ended June 30, 2020 , we paid gross distributions to our common stockholders and noncontrolling interests of $74.4 million , including distributions reinvested through the dividend reinvestment plan (“DRIP”) of $15.9 million .

For the six months ended June 30, 2020 , our net cash provided by operating activities was $89.9 million , which represents an excess of $15.5 million , or 20.8% , of our distributions paid, while our core funds from operations (“Core FFO”) was $111.9 million , which represents an excess of $37.5 million , or 50.4% , of the distributions paid.

For the six months ended June 30, 2019 , we paid distributions of $109.6 million , including distributions reinvested through the DRIP of $35.0 million .

For the six months ended June 30, 2019 , our net cash provided by operating activities was $100.1 million , which represents a shortfall of $9.5 million , or 8.7% , of our distributions paid, while our Core FFO was $110.7 million , which represents an excess of $1.1 million , or 1.0% , of our distributions paid.

The shortfall was funded by proceeds from borrowings.

Management’s Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Measures - Funds from Operations and Core Funds from Operations for the definition of Core FFO, for information regarding why we present Core FFO, as well as for a reconciliation of this non-GAAP financial measure to Net Income (Loss).

Except to the extent updated below or previously updated, or to the extent additional factual information disclosed elsewhere in our Quarterly Reports on Form 10-Q relates to such risk factors (including, without limitation, the matters discussed in Part I, “Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations”), there were no material changes to the risk factors disclosed in Part I, “Item 1A.

Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2019.

The outbreak of the COVID-19 pandemic has had, and could continue to have, a material adverse effect on our and our tenants’ businesses, financial condition, results of operations, cash flow, liquidity, and ability to satisfy debt service obligations.

5 unchanged sentences

Some states and localities have temporarily reinstated certain mandates in response to increasing reported cases of COVID-19.

The impact these measures and the resulting consumer behavior are having on our portfolio evolved throughout the second quarter, and we expect that it will continue to do so.

The impact these measures and the resulting consumer behavior are having on our portfolio evolved throughout the second and third quarters, and we expect that it will continue to do so.

The COVID-19 pandemic has impacted our business and financial performance, and we expect this impact to continue.

2 unchanged sentences

We have a higher concentration of annualized base rent (“ABR”) from tenants in certain states significantly impacted by the pandemic, such as Florida, Texas, California, Georgia, and Illinois.

Our wholly-owned properties and those owned through our joint ventures contained approximately 5,600 occupied tenant spaces as of August 10, 2020 .

Our wholly-owned properties and those owned through our joint ventures contained approximately 5,600 occupied tenant spaces as of November 4, 2020.

At the peak of the pandemic-related closure activity, our temporary closures reached approximately 2,100, or 37% of all tenant spaces, totaling 27% of our ABR and 22% of our gross leasable area (“GLA”).

of the tenant spaces that temporarily closed, 88% , totaling 89% of our ABR and 90% of our GLA, have since reopened.

Certain tenants remain temporarily closed, have since closed after reopening, are limiting the number of customers allowed in their locations, 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.

As of November 4, 2020, 98% of our occupied tenant spaces, totaling 99% of our ABR and GLA, are open for business.

Certain tenants remain temporarily closed, have since closed after reopening, are 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 could result in increased permanent store closings and could reduce the demand for leasing space in our shopping centers and result in a decline in average rental rates on expiring leases.

1 unchanged sentence

We believe substantially all tenants, 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 tenant has reopened, and we received payments made toward rent and recovery charges owed during the second quarter.

As of August 10, 2020 , we have executed relief agreements for approximately 240 tenant spaces, primarily in the form of short-term payment plans without a reduction in amounts owed to us.

These relief agreements totaled approximately $3.8 million , or 1.0% of portfolio ABR, and the weighted-average term over which we expect to receive payment on executed payment plans is less than twelve months.

However, we believe it is best to begin negotiation of relief only once a tenant has reopened, and we have received payments made toward rent and recovery charges owed during the second and third quarter.

As of November 4, 2020, we have executed payment plans with our tenants agreeing to defer approximately $4.3 million in rent and related charges, and we had granted rent abatements totaling approximately $2.0 million.

These payment plans and rent abatements represented 1.1% and 0.5% of portfolio ABR, respectively, and the weighted-average term over which we expect to receive payment on executed payment plans is approximately eight months.

We are in negotiations with additional tenants, which we believe will lead to more tenants repaying their past due charges.

As of August 10, 2020 , we have collected approximately 84% , 86% , 89% , and 90% of rent and recoveries billed for the months of April, May, June, and July 2020, respectively.

In the event of any default by a tenant under its lease agreement or relief agreement, we might 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.

We currently anticipate the above circumstances to negatively impact our revenues for the third quarter of 2020 and potentially for the remainder of the year.

As of November 4, 2020, we have collected approximately 90% of rent and recoveries billed during the second quarter of 2020,

and approximately 94% of rent and recoveries billed during the third quarter.

Further, our collections for October 2020 were 94%.

In the event of any default by a tenant 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.

We currently anticipate the above circumstances to negatively impact our revenues at least for the remainder of the year.

Additionally, certain tenants have declared bankruptcy as a result of the effects of the pandemic.

As of June 30, 2020, we have received notification of entry into bankruptcy proceedings from several of our neighbors, representing an exposure of only 1.1% of our total ABR.

As of September 30, 2020, we have several tenants in bankruptcy proceedings where we have not yet received notice that the lease has been assumed or rejected, representing an exposure of 1.2% of our total ABR.

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:

14 unchanged sentences

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 tenants’ business, financial condition, results of operations, cash flows, liquidity, and ability to satisfy debt service obligations.

Moreover, to the extent any of these risks and uncertainties adversely impact us in the ways described above or otherwise,

they may also have the effect of heightening many of the other risks described under the section entitled “Item 1A.

Moreover, to the extent any of these risks and uncertainties adversely impact us in the ways described above or otherwise, they may also have the effect of heightening many of the other risks described under the section entitled “Item 1A.

Risk Factors” in our most recent annual report on Form 10-K for the year ended December 31, 2019.

2020 Omnibus Incentive Plan (incorporated by reference to Appendix A to the Company’s 2020 Proxy Statement filed on Schedule 14A filed on March 27, 2020)

Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*

Certification of Principal Executive Officer pursuant to 18 U.S.C.

1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002*

Certification of Principal Financial Officer pursuant to 18 U.S.C.

1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002*

The following information from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, formatted in XBRL (eXtensible Business Reporting Language):

(i) Consolidated Balance Sheets;

(ii) Consolidated Statements of Operations and Comprehensive Loss;

(iii) Consolidated Statements of Equity;

and (iv) Consolidated Statements of Cash Flows*

*Filed herewith

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

PHILLIPS EDISON & COMPANY, INC.

August 13, 2020

/s/ Jeffrey S.

Chairman of the Board and Chief Executive Officer (Principal Executive Officer)

August 13, 2020

Chief Financial Officer, Senior Vice President and Treasurer (Principal Financial Officer)

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors