What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-08-05 compared with 2021-05-04 · 293 added, 152 removed, 394 unchanged (53% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2021 AND DECEMBER 31, 2020

AS OF JUNE 30, 2021 AND DECEMBER 31, 2020

(Condensed and Unaudited)

(In thousands, except per share amounts)

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Investment in real estate:

12 unchanged sentences

Other assets, net 126,056 126,470

Real estate investment and other assets held for sale 24,369 —

Real estate investments and other assets held for sale 14,261 —

Total assets $ 4,505,772 $ 4,678,563

6 unchanged sentences

Accounts payable and other liabilities 88,436 176,943

Liabilities of real estate investment held for sale 2,109 —

Liabilities of real estate investments held for sale 860 —

Total liabilities 2,510,384 2,662,634

1 unchanged sentence

Preferred stock, $ 0.01 par value per share, 10,000 shares authorized, zero shares issued and

outstanding at March 31, 2021 and December 31, 2020

outstanding at June 30, 2021 and December 31, 2020

Common stock, $ 0.01 par value per share, 1,000,000 shares authorized, 93,640 and 93,279

shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

Additional paid-in capital (“APIC”) 2,749,680 2,739,358

7 unchanged sentences

See notes to consolidated financial statements.

PHILLIPS EDISON & COMPANY

JUNE 30, 2021 FORM 10-Q

PHILLIPS EDISON & COMPANY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(Condensed and Unaudited)

(In thousands, except per share amounts)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Rental income $ 130,335 $ 115,654 $ 257,958 $ 244,120

12 unchanged sentences

Other (expense) income, net ( 2,924 ) ( 500 ) ( 18,509 ) 9,369

Net income 117 11,199

Net income attributable to noncontrolling interests ( 14 ) ( 1,430 )

Net income attributable to stockholders $ 103 $ 9,769

Net income (loss) 6,390 ( 6,413 ) 6,507 4,786

Net (income) loss attributable to noncontrolling interests ( 796 ) 825 ( 810 ) ( 605 )

Net income (loss) attributable to stockholders $ 5,594 $ ( 5,588 ) $ 5,697 $ 4,181

Earnings per common share:

Net income per share attributable to stockholders - basic and diluted (Note 10)

Net income (loss) per share attributable to stockholders - basic and

diluted (Note 10)

$ 0.06 $ ( 0.06 ) $ 0.06 $ 0.04

Comprehensive income (loss):

Net income $ 117 $ 11,199

Net income (loss) $ 6,390 $ ( 6,413 ) $ 6,507 $ 4,786

Other comprehensive income (loss):

1 unchanged sentence

Comprehensive income (loss) 9,763 ( 8,160 ) 22,000 ( 40,325 )

Net income attributable to noncontrolling interests ( 14 ) ( 1,430 )

Change in unrealized value on interest rate swaps attributable to noncontrolling interests ( 1,509 ) 5,574

Net (income) loss attributable to noncontrolling interests ( 796 ) 825 ( 810 ) ( 605 )

Change in unrealized value on interest rate swaps attributable to

noncontrolling interests ( 400 ) 224 ( 1,909 ) 5,798

Reallocation of comprehensive loss upon conversion of noncontrolling

interests ( 10 ) — ( 10 ) —

Comprehensive income (loss) attributable to stockholders $ 8,557 $ ( 7,111 ) $ 19,271 $ ( 35,132 )

See notes to consolidated financial statements.

PHILLIPS EDISON & COMPANY

JUNE 30, 2021 FORM 10-Q

PHILLIPS EDISON & COMPANY, INC.

CONSOLIDATED STATEMENTS OF EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

FOR THE THREE MONTHS ENDED JUNE 30, 2021 AND 2020

(Condensed and Unaudited)

(In thousands, except per share amounts)

Three Months Ended March 31, 2021 and 2020

Three Months Ended June 30, 2021 and 2020

Common Stock APIC AOCI Accumulated Deficit Total Stockholders’ Equity Noncontrolling Interests Total Equity

Shares Amount

Balance at April 1, 2020 96,805 $ 2,903 $ 2,793,803 $ ( 58,552 ) $ ( 986,292 ) $ 1,751,862 $ 341,944 $ 2,093,806

Change in unrealized value on interest

rate swaps — — — ( 1,523 ) — ( 1,523 ) ( 224 ) ( 1,747 )

Share-based compensation 2 1 1,332 — — 1,333 808 2,141

Conversion of noncontrolling interests 17 1 555 — — 556 ( 556 ) —

Other ( 2 ) — ( 256 ) — ( 59 ) ( 315 ) ( 3 ) ( 318 )

Net loss — — — — ( 5,588 ) ( 5,588 ) ( 825 ) ( 6,413 )

Balance at June 30, 2020 96,822 $ 2,905 $ 2,795,434 $ ( 60,075 ) $ ( 991,939 ) $ 1,746,325 $ 341,144 $ 2,087,469

Balance at April 1, 2021 93,582 $ 2,807 $ 2,746,891 $ ( 41,695 ) $ ( 1,023,155 ) $ 1,684,848 $ 324,558 $ 2,009,406

Change in unrealized value on interest

rate swaps — — — 2,973 — 2,973 400 3,373

Common distributions declared, $ 0.255

— — — — ( 24,056 ) ( 24,056 ) — ( 24,056 )

Distributions to noncontrolling interests — — — — — — ( 3,460 ) ( 3,460 )

Share-based compensation 30 1 2,102 — — 2,103 1,632 3,735

Conversion of noncontrolling interests 28 — 743 — — 743 ( 743 ) —

Reallocation of operating partnership

interests — — ( 56 ) ( 10 ) — ( 66 ) 66 —

Net income — — — — 5,594 5,594 796 6,390

Balance at June 30, 2021 93,640 $ 2,808 $ 2,749,680 $ ( 38,732 ) $ ( 1,041,617 ) $ 1,672,139 $ 323,249 $ 1,995,388

PHILLIPS EDISON & COMPANY

JUNE 30, 2021 FORM 10-Q

PHILLIPS EDISON & COMPANY, INC.

CONSOLIDATED STATEMENTS OF EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(Condensed and Unaudited)

(In thousands, except per share amounts)

Six Months Ended June 30, 2021 and 2020

Common Stock APIC AOCI Accumulated Deficit Total Stockholders’ Equity Noncontrolling Interests Total Equity

Shares Amount

Balance at January 1, 2020 96,349 $ 2,890 $ 2,779,130 $ ( 20,762 ) $ ( 947,252 ) $ 1,814,006 $ 354,788 $ 2,168,794

DRIP 1,436 14 15,926 — — 15,940 — 15,940

Dividend Reinvestment Plan (“DRIP”) 479 14 15,926 — — 15,940 — 15,940

Share repurchases ( 96 ) ( 3 ) ( 2,697 ) — — ( 2,700 ) — ( 2,700 )

6 unchanged sentences

Conversion of noncontrolling interests 56 2 1,859 — — 1,861 ( 1,861 ) —

Other ( 2 ) — ( 256 ) ( 59 ) ( 315 ) ( 3 ) ( 318 )

Net income — — — — 4,181 4,181 605 4,786

Balance at March 31, 2020 290,416 $ 2,903 $ 2,793,803 $ ( 58,552 ) $ ( 986,292 ) $ 1,751,862 $ 341,944 $ 2,093,806

Balance at June 30, 2020 96,822 $ 2,905 $ 2,795,434 $ ( 60,075 ) $ ( 991,939 ) $ 1,746,325 $ 341,144 $ 2,087,469

Balance at January 1, 2021 93,279 $ 2,798 $ 2,739,358 $ ( 52,306 ) $ ( 999,491 ) $ 1,690,359 $ 325,570 $ 2,015,929

7 unchanged sentences

Share-based compensation 77 2 2,427 — — 2,429 2,416 4,845

Conversion of noncontrolling interests 28 — 743 — — 743 ( 743 ) —

Reallocation of operating partnership

interests — — ( 56 ) ( 10 ) — ( 66 ) 66 —

Other — — ( 29 ) — — ( 29 ) — ( 29 )

Net income — — — — 5,697 5,697 810 6,507

Balance at March 31, 2021 280,746 $ 2,807 $ 2,746,891 $ ( 41,695 ) $ ( 1,023,155 ) $ 1,684,848 $ 324,558 $ 2,009,406

Balance at June 30, 2021 93,640 $ 2,808 $ 2,749,680 $ ( 38,732 ) $ ( 1,041,617 ) $ 1,672,139 $ 323,249 $ 1,995,388

See notes to consolidated financial statements.

PHILLIPS EDISON & COMPANY

JUNE 30, 2021 FORM 10-Q

PHILLIPS EDISON & COMPANY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(Condensed and Unaudited)

(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

41 unchanged sentences

Cash, cash equivalents, and restricted cash at end of period $ 111,401 $ 79,330

PHILLIPS EDISON & COMPANY

JUNE 30, 2021 FORM 10-Q

PHILLIPS EDISON & COMPANY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(Condensed and Unaudited)

(In thousands)

Six Months Ended June 30,

SUPPLEMENTAL CASH FLOW DISCLOSURE, INCLUDING NON-CASH INVESTING AND FINANCING ACTIVITIES:

7 unchanged sentences

See notes to consolidated financial statements.

PHILLIPS EDISON & COMPANY

JUNE 30, 2021 FORM 10-Q

Phillips Edison & Company, Inc.

1 unchanged sentence

(Condensed and Unaudited)

March 31, 2021

As of and for the period ended June 30, 2021

Phillips Edison & Company, Inc.

2 unchanged sentences

We are a limited partner of the Operating Partnership, and our wholly-owned subsidiary, Phillips Edison Grocery Center OP GP I LLC, is the sole general partner of the Operating Partnership.

We are a real estate investment trust (“REIT”) that invests primarily in well-occupied, grocery-anchored, neighborhood and community shopping centers that have a mix of creditworthy national, regional, and local retailers that sell necessity-based goods and services in strong demographic markets throughout the United States.

In addition to managing our own shopping centers, our third-party investment management business provides comprehensive real estate and asset management services to two institutional joint ventures, in which we have a partial ownership interest, and one private fund (collectively, the “Managed Funds”) as of March 31, 2021.

As of March 31, 2021, we wholly-owned 278 real estate properties.

Additionally, we owned a 20 % equity interest in Necessity Retail Partners (“NRP”), a joint venture that owned two properties, and a 14 % interest in Grocery Retail Partners I LLC (“GRP I”), a joint venture that owned 20 properties.

We are a real estate investment trust (“REIT”) that invests primarily in omni-channel grocery-anchored neighborhood and community shopping centers that have a mix of creditworthy national, regional, and local retailers that sell necessity-based goods and services in strong demographic markets throughout the United States.

In addition to managing our own shopping centers, our third-party investment management business provides comprehensive real estate and asset management services to two unconsolidated institutional joint ventures, in which we have a partial ownership interest, and one private fund (collectively, the “Managed Funds”) as of June 30, 2021.

As of June 30, 2021, we wholly-owned 272 real estate properties.

Additionally, we owned a 14 % interest in Grocery Retail Partners I LLC (“GRP I”), a joint venture that owned 20 properties, and a 20 % equity interest in Necessity Retail Partners (“NRP”), a joint venture that owned two properties.

On June 18, 2021, our stockholders approved an amendment to our charter (the “Articles of Amendment”) that effected a change of each share of our common stock outstanding at the time the amendment became effective into one share of a newly created class of Class B common stock (the “Recapitalization”).

The Articles of Amendment became effective upon filing with, and acceptance by, the State Department of Assessments and Taxation of Maryland on July 2, 2021.

Unless otherwise indicated, all information in this Form 10-Q disclosure gives effect to the Recapitalization and references to “shares” and per share metrics refer to our common stock and Class B common stock, collectively.

On July 2, 2021, our board of directors (the “Board”) approved an amendment to our articles of incorporation to effect a one-for-three reverse stock split.

Concurrent with the reverse split, the Operating Partnership enacted a one-for-three reverse split of its outstanding Operating Partnership units (“OP units”).

Unless otherwise indicated, the information in this Form 10-Q gives effect to the reverse stock and OP unit splits (Note 9).

On July 19, 2021, we closed our underwritten initial public offering (“underwritten IPO”), through which we offered 17.0 million shares of a new class of common stock, $ 0.01 par value per share, at an initial price of $ 28.00 per share, pursuant to a registration statement filed with the U.S.

Securities and Exchange Commission (“SEC”) on Form S-11 (File No.

333-255846), as amended.

These shares are listed on the Nasdaq Global Select Market under the trading symbol “PECO”.

The underwriters have since exercised a 30-day option to purchase additional shares of common stock to cover overallotments, and, accordingly, on August 2, 2021 we settled the sale of an additional 2.55 million shares, with gross proceeds to us of $ 71.4 million.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

5 unchanged sentences

All temporarily closed tenants have since been permitted to reopen;

Some may be limiting the number of customers allowed in their stores, or have modified their operations in other ways that may impact their profitability, either as a result of government mandates or self-elected efforts to reduce the spread of COVID-19.

These actions, as well as the continuing economic impacts of the COVID-19 pandemic, could result in increased permanent store closures.

In addition to the permanent closures that have occurred in our portfolio, this could reduce the demand for leasing space in our shopping centers and result in a decline in occupancy and rental revenues in our real estate portfolio.

Because of the adverse economic conditions that have occurred as a result of the impacts of the COVID-19 pandemic and the ongoing uncertainty related to the pandemic, it is possible that the estimates and assumptions that have been utilized in the preparation of the consolidated financial statements could change significantly.

however, certain of our tenants have permanently closed.

We have backfilled a number of these spaces, and continue to work on backfilling any remaining vacancies.

The continuing economic impacts of the COVID-19 pandemic could result in increased permanent store closures, reduce the demand for leasing space in our shopping centers, and/or result in a decline in occupancy and rental revenues in our real estate portfolio.

Because of the adverse economic conditions that have occurred as a result of the impacts of the COVID-19 pandemic and any remaining uncertainty related to the pandemic, it is possible that the estimates and assumptions that have been utilized in the preparation of the consolidated financial statements could change significantly.

All of this activity impacts our estimates around the collectibility of revenue and valuation of real estate assets, goodwill and other intangible assets, and certain liabilities, among others.

There were no changes to our significant accounting policies during the three months ended March 31, 2021.

For a full summary of our accounting policies, refer to our 2020 Annual Report on Form 10-K filed with the U.S.

Securities and Exchange Commission (“SEC”) on March 12, 2021.

PHILLIPS EDISON & COMPANY

JUNE 30, 2021 FORM 10-Q

There were no changes to our significant accounting policies during the six months ended June 30, 2021, except for those discussed below.

For a full summary of our accounting policies, refer to our 2020 Annual Report on Form 10-K as originally filed with the SEC on March 12, 2021.

Basis of Presentation and Principles of Consolidation —The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X.

2 unchanged sentences

In the opinion of management, all normal and recurring adjustments necessary for the fair presentation of the unaudited consolidated financial statements for the periods presented have been included in this Quarterly Report.

Our results of operations for the three months ended March 31, 2021 are not necessarily indicative of the operating results expected for the full year.

Our results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the operating results expected for the full year.

The accompanying consolidated financial statements include our accounts and those of our majority-owned subsidiaries.

All intercompany balances and transactions are eliminated upon consolidation.

Certain amounts in prior periods have been reclassified to conform to current presentation.

Underwritten IPO Costs —Deferred underwritten IPO costs are currently recorded as Other Assets, Net on our consolidated balance sheets as of June 30, 2021, and will be offset against underwritten IPO proceeds and reclassified as a component of APIC on the consolidated balance sheets upon the consummation of the offering.

Costs incurred that were related to our underwritten IPO activities but were not directly related to our equity raise were not capitalized and are included as transaction costs, currently in Other (Expense) Income, Net on our consolidated statements of operations and comprehensive income (loss) (“consolidated statements of operations”).

Income Taxes —Our consolidated financial statements include the operations of wholly-owned subsidiaries that have jointly elected to be treated as Taxable REIT Subsidiaries and are subject to U.S.

federal, state, and local income taxes at regular corporate tax rates.

We recognized an insignificant amount of federal, state, and local income tax expense for the three months ended March 31, 2021 and 2020, and we retain a full valuation allowance for our deferred tax asset.

All income tax

amounts are included in Other (Expense) Income, Net on the consolidated statements of operations and comprehensive income (loss) (“consolidated statements of operations”).

We recognized an insignificant amount of federal, state, and local income tax expense for the three and six months ended June 30, 2021 and 2020, and we retain a full valuation allowance for our deferred tax asset.

All income tax amounts are included in Other (Expense) Income, Net on our consolidated statements of operations.

Recently Issued Accounting Pronouncements —On January 7, 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-01 to amend the scope of the guidance in ASU 2020-04 on facilitation of the effects of reference rate reform on financial reporting.

1 unchanged sentence

We adopted ASU 2021-01 upon its issuance and the adoption of this standard did not have a material impact on our consolidated financial statements.

Reclassifications —The following line items on our consolidated statement of cash flows for the three months ended March 31, 2020 were reclassified to conform to current year presentation:

Reclassifications —The following line items on our consolidated statement of cash flows for the six months ended June 30, 2020 were reclassified to conform to current year presentation:

• Return on Investment in Unconsolidated Joint Ventures was listed on a separate line from Other Assets, Net;

• Net Change in Credit Facility was separated into two lines, Proceeds from Revolving Credit Facility and Payments on Revolving Credit Facility.

PHILLIPS EDISON & COMPANY

JUNE 30, 2021 FORM 10-Q

Lessor — The majority of our leases are largely similar in that the leased asset is retail space within our properties, and the lease agreements generally contain similar provisions and features, without substantial variations.

All of our leases are currently classified as operating leases.

Lease income related to our operating leases was as follows for the three months ended March 31, 2021 and 2020 (in thousands):

March 31, 2021 March 31, 2020

Rental income related to fixed lease payments (1)

Lease income related to our operating leases was as follows for the three and six months ended June 30, 2021 and 2020 (in thousands):

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Rental income related to variable lease payments (1)

Rental income related to fixed lease

$ 94,485 $ 95,036 $ 189,451 $ 191,063

Rental income related to variable

lease payments (1)(2)

27,454 30,659 58,855 62,497

Straight-line rent amortization (3)

2,893 ( 978 ) 4,262 1,331

Amortization of lease assets 877 786 1,704 1,565

4 unchanged sentences

(1) Includes rental income related to lease payments before assessing for collectibility.

(2) Includes revenue adjustments for non-creditworthy tenants.

(3) Contains general reserves;

excludes reserves for straight-line rent amortization.

Approximate future fixed contractual lease payments to be received under non-cancelable operating leases in effect as of March 31, 2021, assuming no new or renegotiated leases or option extensions on lease agreements, and including the impact of rent abatements, payment plans, and tenants who have been moved to the cash basis of accounting for revenue recognition purposes are as follows (in thousands):

(2) Variable payments are primarily related to tenant recovery income.

(3) Includes favorable revenue adjustments to straight-line rent for tenants previously considered non-creditworthy during the three months ended June 30, 2021 of $ 0.4 million, and unfavorable adjustments for non-creditworthy tenants during the six months ended June 30, 2021 of $ 0.4 million.

Includes unfavorable adjustments for the three and six months ended June 30, 2020 of $ 3.2 million, and $ 3.1 million, respectively.

(4) Includes general reserves as well as adjustments for tenants not considered creditworthy and thus for which we are recording revenue on a cash basis, per ASC Topic 842, Leases (“ASC 842”).

For the three and six months ended June 30, 2021, we had net favorable changes to general reserves of $ 1.9 million and $ 4.1 million, respectively.

Additionally, we had $ 1.0 million in net collections on receivables that were previously deemed unlikely to be collected for tenants not considered creditworthy for the three months ended June 30, 2021, and $ 3.0 million in net unfavorable revenue adjustments for non-creditworthy tenants for the six months ended June 30, 2021.

For the three and six months ended June 30, 2020, we had net general reserve increases of $ 1.3 million and $ 0.9 million, respectively.

Additionally, we had net unfavorable adjustments of $ 8.8 million and $ 11.7 million, respectively, related to monthly revenue for tenants that we deemed non-creditworthy and for which we were recording revenue on a cash basis.

Approximate future fixed contractual lease payments to be received under non-cancelable operating leases in effect as of June 30, 2021, assuming no new or renegotiated leases or option extensions on lease agreements, and including the impact of rent abatements, payment plans, and tenants who have been moved to the cash basis of accounting for revenue recognition purposes are as follows (in thousands):

Remaining 2021 $ 191,000

2 unchanged sentences

In response to the COVID-19 pandemic, we executed payment plans with our tenants.

As of April 20, 2021, we have $ 5.2 million of outstanding payment plans with our tenants, and we had recorded rent abatements totaling approximately $ 4.4 million during 2021.

These payment plans and rent abatements represented approximately 1.4 % and 1.1 % of our wholly-owned portfolio’s annualized base rent (“ABR”), respectively.

As of April 20, 2021, approximately 85 % of payments are scheduled to be received by December 31, 2021 for all executed payment plans, and the weighted-average remaining term over which we expect to receive payment on executed payment plans is approximately twelve months.

For the three months ended March 31, 2021 and 2020, we had $ 4.8 million and $ 2.8 million, respectively, in unfavorable monthly revenue adjustments for tenants not considered creditworthy.

These amounts include the estimated impact of tenants who have filed for bankruptcy.

Revenue for tenants deemed non-creditworthy is only recorded as cash is received.

No single tenant comprised 10% or more of our aggregate ABR as of March 31, 2021.

As of March 31, 2021, our wholly-owned real estate investments in Florida and California represented 12.4 % and 10.4 % of our ABR, respectively.

As of June 30, 2021, we had $ 5.4 million of outstanding payment plans with our tenants, which represented approximately 2.1 % of rental income during the six months ended June 30, 2021.

During the three months ended June 30, 2021, we had recorded an immaterial amount of rent abatements related to 2021 missed charges.

During the six months ended June 30, 2021, we recorded approximately $ 0.5 million of rent abatements related to missed 2021 charges, which represented less than 1 % of rental income for the six months ended June 30, 2021.

No single tenant comprised 7% or more of our aggregate annualized base rent (“ABR”) as of June 30, 2021.

As of June 30, 2021, our wholly-owned real estate investments in Florida and California represented 12.6 % and 10.1 % of our ABR, respectively.

As a result, the geographic concentration of our portfolio makes it particularly susceptible to adverse weather or economic events, including the impact of the COVID-19 pandemic, in the Florida and California real estate markets.

Lessee — Lease assets and liabilities, grouped by balance sheet line where they are recorded, consisted of the following as of March 31, 2021 and December 31, 2020 (in thousands):

Balance Sheet Information Balance Sheet Location March 31, 2021 December 31, 2020

PHILLIPS EDISON & COMPANY

JUNE 30, 2021 FORM 10-Q

Lessee — Lease assets and liabilities, grouped by balance sheet line where they are recorded, consisted of the following as of June 30, 2021 and December 31, 2020 (in thousands):

Balance Sheet Information Balance Sheet Location June 30, 2021 December 31, 2020

ROU assets, net - operating leases Investment in Real Estate $ 4,003 $ 3,867

4 unchanged sentences

Property Sales — The following table summarizes our real estate disposition activity (dollars in thousands):

Three Months Ended March 31,

Six Months Ended June 30,

Number of properties sold (1)

3 unchanged sentences

18,713 ( 1,436 )

(1) The outparcel sold in the first quarter of 2021 was the only remaining portion of one of our properties, and therefore the sale resulted in a reduction in our total property count.

(1) We retained an outparcel for one property sold during the six months ended June 30, 2021, and therefore the sale did not result in a reduction in our total property count.

(2) One outparcel sold during the six months ended June 30, 2021 was the only remaining portion of one of our properties, and therefore the sale resulted in a reduction in our total property count.

(3) In addition to the one outparcel sold during the six months ended June 30, 2021, a tenant at one of our properties exercised a bargain purchase option to acquire a parcel of land that we previously owned.

This generated minimal proceeds for us.

(4) The gain (loss) on sale of properties, net does not include miscellaneous write-off activity, which is also recorded in Gain (Loss) on Disposal of Property, Net on the consolidated statements of operations.

Subsequent to March 31, 2021, we sold two properties for $ 20.2 million.

Subsequent to June 30, 2021, we sold two properties for $ 16.0 million.

Acquisitions — The following table summarizes our real estate acquisition activity (dollars in thousands):

Three Months Ended March 31,

Six Months Ended June 30,

Number of properties acquired 2 —

3 unchanged sentences

The fair value and weighted-average useful life at acquisition for lease intangibles acquired are as follows (dollars in thousands, weighted-average useful life in years):

Three Months Ended March 31, 2021

Six Months Ended June 30, 2021

Fair Value Weighted-Average Useful Life

2 unchanged sentences

Below-market leases ( 1,652 ) 6

Property Held for Sale —As of March 31, 2021, two properties were classified as held for sale.

PHILLIPS EDISON & COMPANY

JUNE 30, 2021 FORM 10-Q

Property Held for Sale —As of June 30, 2021, two properties were classified as held for sale.

As of December 31, 2020, no properties were classified as held for sale.

Properties classified as held for sale as of March 31, 2021 were under contract to sell, with no substantive contingencies, and the prospective buyers had significant funds at risk as of the reporting date.

Subsequent to March 31, 2021, one of our held for sale properties was sold.

A summary of assets and liabilities for the properties held for sale as of March 31, 2021 is below (in thousands):

March 31, 2021

Properties classified as held for sale as of June 30, 2021 were under contract to sell, with no substantive contingencies, and the prospective buyers had significant funds at risk as of the reporting date.

Subsequent to June 30, 2021, both of our held for sale properties were sold.

A summary of assets and liabilities for the properties held for sale as of June 30, 2021 is below (in thousands):

June 30, 2021

Total investment in real estate assets, net $ 13,807

5 unchanged sentences

OTHER ASSETS, NET

The following is a summary of Other Assets, Net outstanding as of March 31, 2021 and December 31, 2020, excluding amounts related to assets held for sale (in thousands):

March 31, 2021 December 31, 2020

The following is a summary of Other Assets, Net outstanding as of June 30, 2021 and December 31, 2020, excluding amounts related to assets held for sale (in thousands):

June 30, 2021 December 31, 2020

Other assets, net:

16 unchanged sentences

(1) Deferred financing expenses per the above table are related to our revolving line of credit and as such we have elected to classify them as an asset rather than as a contra-liability.

(2) Net of $ 7.2 million and $ 8.9 million of general reserves for uncollectible amounts as of March 31, 2021 and December 31, 2020, respectively.

Receivables that were removed for tenants considered to be non-creditworthy were $ 19.6 million and $ 22.8 million as of March 31, 2021 and December 31, 2020, respectively.

(3) Net of $ 5.1 million and $ 4.4 million of adjustments as of March 31, 2021 and December 31, 2020, respectively, for straight-line rent removed for tenants considered to be non-creditworthy.

(2) Net of $ 7.4 million and $ 8.9 million of general reserves for uncollectible amounts as of June 30, 2021 and December 31, 2020, respectively.

Receivables that were removed for tenants considered to be non-creditworthy were $ 16.2 million and $ 22.8 million as of June 30, 2021 and December 31, 2020, respectively.

(3) Net of $ 4.7 million and $ 4.4 million of adjustments as of June 30, 2021 and December 31, 2020, respectively, related to straight-line rent for tenants previously or currently considered to be non-creditworthy.

PHILLIPS EDISON & COMPANY

JUNE 30, 2021 FORM 10-Q

DEBT OBLIGATIONS

The following is a summary of the outstanding principal balances and interest rates, which include the effect of derivative financial instruments, for our debt obligations as of March 31, 2021 and December 31, 2020 (dollars in thousands):

The following is a summary of the outstanding principal balances and interest rates, which include the effect of derivative financial instruments, for our debt obligations as of June 30, 2021 and December 31, 2020 (dollars in thousands):

Interest Rate (1)

March 31, 2021 December 31, 2020

June 30, 2021 December 31, 2020

Revolving credit facility LIBOR + 1.4 %

11 unchanged sentences

Weighted-average interest rate 2.9 % 3.1 %

(1) Interest rates are as of March 31, 2021.

(1) Interest rates are as of June 30, 2021.

(2) Our term loans carry an interest rate of LIBOR plus a spread.

While most of the rates are fixed through the use of swaps, there is a portion of these loans that are not subject to a swap, and thus are still indexed to LIBOR.

In April 2021, we repaid $ 25.1 million in mortgage loans ahead of their scheduled maturities.

The allocation of total debt between fixed-rate and variable-rate as well as between secured and unsecured, excluding market debt adjustments and deferred financing expenses, net, and including the effects of derivative financial instruments (see Notes 7 and 12) as of March 31, 2021 and December 31, 2020, is summarized below (in thousands):

March 31, 2021 December 31, 2020

Debt Activity —On July 2, 2021, we entered into a new $ 980 million credit facility comprised of a $ 500 million senior unsecured revolving credit facility and two $ 240 million senior unsecured term loan tranches (the “Refinancing”).

In connection with the Refinancing, we paid off the $ 472.5 million term loan due in 2025.

The revolving credit facility will mature in January 2026, and the two senior unsecured term loan tranches will mature in November 2025 and July 2026, respectively.

On July 20, 2021, we used proceeds from the underwritten IPO to retire our $ 375 million term loan maturing in 2022.

Debt Allocation — The allocation of total debt between fixed-rate and variable-rate as well as between secured and unsecured, excluding market debt adjustments and deferred financing expenses, net, and including the effects of derivative financial instruments (see Notes 7 and 12) as of June 30, 2021 and December 31, 2020 is summarized below (in thousands):

June 30, 2021 December 31, 2020

As to interest rate:

14 unchanged sentences

The changes in the fair value of derivatives designated, and that qualify, as cash flow hedges are recorded in AOCI and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.

During the three months ended March 31, 2021 and 2020, such derivatives were used to hedge the variable cash flows associated with certain variable-rate debt.

During the six months ended June 30, 2021 and 2020, such derivatives were used to hedge the variable cash flows associated with certain variable-rate debt.

Amounts reported in AOCI related to these derivatives will be reclassified to Interest Expense, Net as interest payments are made on the variable-rate debt.

During the next twelve months, we estimate that an additional $ 18.2 million will be reclassified from AOCI as an increase to Interest Expense, Net.

The following is a summary of our interest rate swaps that were designated as cash flow hedges of interest rate risk as of March 31, 2021 and December 31, 2020 (dollars in thousands):

March 31, 2021 December 31, 2020

PHILLIPS EDISON & COMPANY

JUNE 30, 2021 FORM 10-Q

The following is a summary of our interest rate swaps that were designated as cash flow hedges of interest rate risk as of June 30, 2021 and December 31, 2020 (dollars in thousands):

June 30, 2021 December 31, 2020

Notional amount $ 930,000 $ 1,042,000

4 unchanged sentences

The fair value of the five hedges assumed was $ 14.7 million and is amortized over the remaining lives of the respective hedges and recorded in Interest Expense, Net in the consolidated statements of operations.

The net unamortized amount remaining as of March 31, 2021 and December 31, 2020 was $ 4.7 million and $ 5.0 million, respectively.

The net unamortized amount remaining as of June 30, 2021 and December 31, 2020 was $ 4.3 million and $ 5.0 million, respectively.

The table below details the nature of the gain and loss recognized on interest rate derivatives designated as cash flow hedges in the consolidated statements of operations (in thousands):

Three Months Ended March 31,

Amount of gain (loss) recognized in Other Comprehensive Income (Loss)

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Amount of loss reclassified from AOCI into interest expense

Amount of (loss) gain recognized in

Other Comprehensive Income (Loss)

$ ( 1,451 ) $ ( 6,614 ) $ 5,814 $ ( 51,530 )

Amount of loss reclassified from AOCI

into interest expense

4,824 4,867 9,679 6,419

Credit-risk-related Contingent Features —We have agreements with our derivative counterparties that contain provisions where, if we default, or are capable of being declared in default, on any of our indebtedness, we could also be declared to be in default on our derivative obligations.

As of March 31, 2021, the fair value of our derivatives in a net liability position, which included accrued interest but excluded any adjustment for nonperformance risk related to these agreements, was approximately $ 43.0 million.

As of March 31, 2021, we had not posted any collateral related to these agreements and were not in breach of any agreement provisions.

As of June 30, 2021, the fair value of our derivatives in a net liability position, which included accrued interest but excluded any adjustment for nonperformance risk related to these agreements, was approximately $ 39.9 million.

As of June 30, 2021, we had not posted any collateral related to these agreements and were not in breach of any agreement provisions.

If we had breached any of these provisions, we could have been required to settle our obligations under the agreements at their termination value of $ 39.9 million.

15 unchanged sentences

Premiums paid to Silver Rock may be adjusted based on these estimates, and such premiums may be reimbursed by tenants pursuant to specific lease terms.

As of March 31, 2021, we had four letters of credit outstanding totaling approximately $ 8.0 million to provide security for our obligations under Silver Rock’s insurance and reinsurance contracts.

As of June 30, 2021, we had four letters of credit outstanding totaling approximately $ 9.0 million to provide security for our obligations under Silver Rock’s insurance and reinsurance contracts.

General —The holders of common stock are entitled to one vote per share on all matters voted on by stockholders, including one vote per nominee in the election of the Board.

Our charter does not provide for cumulative voting in the election of directors.

On April 29, 2021, our board of directors (“Board”) increased the estimated value per share (“EVPS”) of our common stock to $ 10.55 based substantially on the estimated market value of our portfolio of real estate properties and our third-party investment management business as of March 31, 2021.

We engaged a third-party valuation firm to provide a calculation of the range in EVPS of our common stock as of March 31, 2021, which reflected certain balance sheet assets and liabilities as of that date.

Previously, our EVPS was $8.75, based substantially on the estimated market value of our portfolio of real estate properties and our third-party investment management business as of March 31, 2020.

Dividend Reinvestment Plan —The DRIP allows stockholders to invest distributions in additional shares of our common stock, subject to certain limits.

Stockholders who elect to participate in the DRIP may choose to invest all or a portion of their cash distributions in shares of our common stock at a price equal to our most recent EVPS.

Stockholders who elect to participate in the DRIP, and who are subject to U.S.

federal income taxation laws, will incur a tax liability on an amount equal to the fair value on the relevant distribution date of the shares of our common stock purchased with reinvested distributions, even though such stockholders have elected not to receive the distributions in cash.

The Third Amended and Restated Dividend Reinvestment Plan has been suspended, beginning with the distribution payable on April 1, 2021.

Stockholders will receive their full monthly distribution of $0.02833333 per share in cash until further notice.

Distributions —Distributions paid to stockholders and Operating Partnership unit (“OP unit”) holders of record subsequent to March 31, 2021 were as follows (dollars in thousands, excluding per share amounts):

Month Date of Record Monthly Distribution Rate Date Distribution Paid Gross Amount of Distribution Paid Net Cash Distribution

March 3/19/2021 $ 0.02833333 4/1/2021 $ 9,059 $ 9,059

April 4/19/2021 0.02833333 5/3/2021 9,059 9,059

On April 29, 2021, our Board authorized distributions for May 2021 to the stockholders of record at the close of business on May 17, 2021 equal to a monthly amount of $0.02833333 per share of common stock.

PHILLIPS EDISON & COMPANY

JUNE 30, 2021 FORM 10-Q

Reverse Stock Split —On July 2, 2021, we effected a one-for-three reverse stock split.

Concurrent with the reverse split, the Operating Partnership enacted a one-for-three reverse split of its outstanding OP units.

Neither the number of authorized shares nor the par value of the common stock were impacted.

As a result of the reverse split, every three shares of our common stock or OP units were automatically combined and converted into one issued and outstanding share of common stock or OP unit rounded to the nearest 1/100th share.

The reverse stock split impacts all common stock and OP units proportionately and had no impact on any stockholder’s percentage ownership of common stock.

In connection with the reverse stock split, the number of shares of common stock and OP units underlying the outstanding share-based awards was also proportionately reduced.

All references to shares of common stock, number of OP units, and per share data for all periods presented in our consolidated financial statements and notes have been adjusted to reflect the reverse split on a retroactive basis.

Class B Common Stock —Our stockholders approved Articles of Amendment that effected a change of each share of our common stock outstanding at the time the amendment became effective into one share of a newly-created class of Class B common stock (the “Recapitalization”).

The Articles of Amendment became effective upon filing with, and acceptance by, the State Department of Assessments and Taxation of Maryland on July 2, 2021.

Our Class B common stock is identical to our common stock, except that (i) we do not intend to list our Class B common stock on a national securities exchange, and (ii) upon the six month anniversary of the listing of our common stock for trading on a national securities exchange, or January 15, 2022 (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.

Underwritten IPO —On July 19, 2021, we completed an underwritten IPO and issued 17.0 million shares of common stock at an offering price of $ 28.00 per share.

We used a portion of the net proceeds to reduce our leverage and expect to use the remaining amount to fund external growth with property acquisitions and for other general corporate uses.

As part of the underwritten IPO, underwriters were granted an option exercisable within 30 days from July 14, 2021 to purchase up to an additional 2.55 million shares of common stock at the underwritten IPO price, less underwriting discounts and commissions.

On July 29, 2021, the underwriters exercised their option.

Distributions —Distributions paid to stockholders and OP unit holders of record subsequent to June 30, 2021 were as follows (dollars in thousands, excluding per share amounts):

Month Date of Record Monthly Distribution Rate Date Distribution Paid Cash Distribution

June 2021 6/15/2021 $ 0.085 7/1/2021 $ 9,063

July 2021 7/15/2021 0.085 8/2/2021 9,065

On August 4, 2021, our Board authorized distributions to the stockholders of record at the close of business on August 16, 2021, equal to a monthly amount of $0.085 per share of common stock.

OP unit holders will receive distributions at the same rate as common stockholders.

We pay distributions to stockholders and OP unit holders based on monthly record dates, and we expect to pay the May 2021 distributions on June 1, 2021.

Share Repurchase Program (“SRP”) —The SRP provides an opportunity for stockholders to have shares of common stock repurchased, subject to certain restrictions and limitations.

The Board reserves the right, in its sole discretion, at any time and from time to time, to reject any request for repurchase.

The Fourth Amended and Restated Share Repurchase Program (the “Fourth Amended SRP”), which is currently limited to repurchases resulting from the death, qualifying disability, or the declaration of incompetence (“DDI”) of stockholders, has been suspended, and the March 31, 2021 repurchases related to stockholder DDI were not executed.

The SRP for both standard and DDI requests will remain suspended until further notice.

Convertible Noncontrolling Interests —As of March 31, 2021 and December 31, 2020, we had approximately 40.1 million and 39.8 million outstanding OP units, respectively.

Convertible Noncontrolling Interests —As of June 30, 2021 and December 31, 2020, we had approximately 13.4 million and 13.3 million outstanding OP units, respectively.

Additionally, certain of our outstanding restricted share and performance share awards will result in the issuance of OP units upon vesting in future periods.

1 unchanged sentence

The Operating Partnership controls the form of the redemption, and may elect to exchange OP units either for shares of our common stock, provided that the OP units have been outstanding for at least one year, or for cash.

As the form of redemption for OP units is within our control, the OP units outstanding as of March 31, 2021 and December 31, 2020 are classified as Noncontrolling Interests within permanent equity on our consolidated balance sheets.

During the three months ended March 31, 2020, 0.1 million OP units were converted into shares of our common stock at a 1:1 ratio.

There were no OP units converted into shares of our common stock for the three months ended March 31, 2021.

The $ 3.3 million and $ 7.1 million of distributions for the three months ended March 31, 2021 and 2020, respectively, that have been paid on OP units are included in Distributions to Noncontrolling Interests on the consolidated statements of equity.

As the form of redemption for OP units is within our control, the OP units outstanding as of June 30, 2021 and December 31, 2020 are classified as Noncontrolling Interests within permanent equity on our consolidated balance sheets.

The table below is a summary of our OP unit activity for the three and six months ended June 30, 2021 and 2020 (dollars and shares in thousands):

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

OP units converted into shares of our

common stock (1)

Distributions paid on OP units (2)

$ 3,460 $ — $ 6,779 $ 7,105

(1) OP units are converted into shares of our common stock at a 1:1 ratio.

(2) Distributions paid on OP units are included in Distributions to Noncontrolling Interests on the consolidated statements of equity.

PHILLIPS EDISON & COMPANY

JUNE 30, 2021 FORM 10-Q

Underwritten IPO Grants —In connection with our underwritten IPO, we issued a total of 0.5 million RSUs and restricted stock awards in the form of time-based stock compensation awards.

The shares have a grant price of $ 28.00 per share and, with the exception of one individual whose award is subject to accelerated vesting provisions, 50% of the shares will vest after 18 months and the remaining 50% will vest after 36 months.

Estimated Value per Share —Prior to our underwritten IPO, on April 29, 2021, our Board increased the estimated value per share (“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.

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.

Dividend Reinvestment Plan and Share Repurchase Program (“SRP”) —On August 4, 2021, as a result of our underwritten IPO, our Board approved the termination of the DRIP and the SRP.

The DRIP has been suspended since April 2021.

The SRP, which was limited to repurchases resulting from the death, qualifying disability, or the declaration of incompetence (“DDI”) of stockholders, has been suspended since March 2021, and the SRP for standard repurchases had been suspended since August 2019.

EARNINGS PER SHARE

We use the two-class method of computing earnings per share (“EPS”), which is an earnings allocation formula that determines EPS for common stock and any participating securities according to dividends declared (whether paid or unpaid).

Under the two-class method, basic EPS is computed by dividing Net Income Attributable to Stockholders by the weighted-average number of shares of common stock outstanding for the period.

Under the two-class method, basic EPS is computed by dividing Net Income (Loss) Attributable to Stockholders by the weighted-average number of shares of common stock outstanding for the period.

Diluted EPS reflects the potential dilution that could occur from share equivalent activity.

EPS reflects earnings per common share prior to the Recapitalization.

OP units held by limited partners other than us are considered to be participating securities because they contain non-forfeitable rights to dividends or dividend equivalents, and have the potential to be exchanged for an equal number of shares of our common stock in accordance with the terms of the Partnership Agreement.

The impact of these outstanding OP units on basic and diluted EPS has been calculated using the two-class method whereby earnings are allocated to the OP units based on dividends declared and the OP units’ participation rights in undistributed earnings.

The effects of the two-class method on basic and diluted EPS were immaterial to the consolidated financial statements during the three months ended March 31, 2021 and 2020.

The following table provides a reconciliation of the numerator and denominator of the earnings per share calculations (in thousands, except per share amounts):

Three Months Ended

Net income attributable to stockholders - basic

The effects of the two-class method on basic and diluted EPS were immaterial to the consolidated financial statements during the three and six months ended June 30, 2021 and 2020.

The following table provides a reconciliation of the numerator and denominator of the earnings per share calculations, restated for prior periods to display the effect of the reverse split, and excluding the effects of the Recapitalization as it occurred after June 30, 2021 (in thousands, except per share amounts):

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Net income attributable to convertible OP units (1)

Net income - diluted $ 117 $ 11,199

Net income (loss) attributable to stockholders - basic

$ 5,594 $ ( 5,588 ) $ 5,697 $ 4,181

Net income (loss) attributable to convertible OP units (1)

796 ( 825 ) 810 605

Net income (loss) - diluted $ 6,390 $ ( 6,413 ) $ 6,507 $ 4,786

Weighted-average shares - basic 93,625 96,821 93,558 96,736

3 unchanged sentences

Earnings per common share:

Basic and diluted income per share

Basic and diluted income (loss) per share

$ 0.06 $ ( 0.06 ) $ 0.06 $ 0.04

(1) OP units include units that are convertible into common stock or cash, at the Operating Partnership’s option.

The Operating Partnership income or loss attributable to these OP units, which is included as a component of Net Income Attributable to Noncontrolling Interests on the consolidated statements of operations, has been added back in the numerator as these OP units were included in the denominator for all periods presented.

The Operating Partnership income or loss attributable to these OP units, which is included as a component of Net (Income) Loss Attributable to Noncontrolling Interests on the consolidated statements of operations, has been added back in the numerator as these OP units were included in the denominator for all periods presented.

Approximately 0.4 million time-based and 0.9 million performance-based unvested stock awards were outstanding as of June 30, 2020.

These securities were anti-dilutive for the three months ended June 30, 2020.

As a result, their impact was excluded from the weighted-average common shares used to calculate diluted EPS for that period.

PHILLIPS EDISON & COMPANY

JUNE 30, 2021 FORM 10-Q

REVENUE RECOGNITION AND RELATED PARTY TRANSACTIONS

2 unchanged sentences

The revenue includes the fees and reimbursements earned by us from the Managed Funds, and other revenues that are not in the scope of ASC Topic 606, Revenue from Contracts with Customers, but that are included in this table for the purpose of disclosing all related party revenues (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Recurring fees (1)

$ 1,103 $ 1,182 $ 2,228 $ 2,398

Transactional revenue and reimbursements (2)

Transactional revenue and

reimbursements (2)

461 960 929 1,390

Insurance premiums (3)

810 618 1,503 1,137

Total fees and management income $ 2,374 $ 2,760 $ 4,660 $ 4,925

2 unchanged sentences

(3) Insurance premium income includes amounts for reinsurance from third parties not affiliated with us.

Tax Protection Agreement —Through our Operating Partnership, we are currently party to a tax protection agreement (the “2017 TPA”) with certain partners that contributed property to our Operating Partnership on October 4, 2017, among them certain of our executive officers, including Jeffrey S.

Edison, our Chairman and Chief Executive Officer, under which the Operating Partnership has agreed to indemnify such partners for tax liabilities that could accrue to them personally related to our potential disposition of certain properties within our portfolio.

The 2017 TPA will expire on October 4, 2027.

On July 19, 2021, we entered into an additional tax protection agreement (the “2021 TPA”) with certain of our executive officers, including Mr.

The 2021 TPA carries a term of four years and will become effective upon the expiration of the 2017 TPA.

As of June 30, 2021, the potential “make-whole amount” on the estimated aggregate amount of built-in gain subject to protection under the agreements is approximately $ 152.6 million .

The protection provided under the terms of the 2021 TPA will expire in 2031.

We have not recorded any liability related to the 2017 TPA or the 2021 TPA on our consolidated balance sheets for any periods presented, nor recognized any expense since the inception of the 2017 TPA, owing to the fact that any potential liability under the agreements is controlled by us and we will either (i) continue to own and operate the protected properties or (ii) be able to successfully complete Section 1031 Exchanges (unless there is a change in applicable law) or complete other tax-efficient transactions to avoid any liability under the agreements.

Other Related Party Matters —We are the limited guarantor for up to $ 190 million, capped at $ 50 million in most instances, of debt for our NRP joint venture.

As of March 31, 2021, the outstanding loan balance related to our NRP joint venture was $ 32.1 million.

As of March 31, 2021, we were also the limited guarantor of a $ 175 million mortgage loan for GRP I.

Our guaranty in both cases is limited to being the non-recourse carveout guarantor and the environmental indemnitor.

Further, in both cases, we are also party to an agreement with our joint venture partners in which any potential liability under such guarantees will be apportioned between us and our applicable joint venture partner based on our respective ownership percentages in the applicable joint venture.

We have no liability recorded on our consolidated balance sheets for either guaranty as of March 31, 2021 and December 31, 2020.

As of June 30, 2021, the outstanding loan balance related to our NRP joint venture was $ 32.1 million.

As of June 30, 2021, we were also the limited guarantor of a $ 175 million mortgage loan secured by GRP I properties.

Our guaranty for both the NRP and GRP I debt is limited to being the non-recourse carveout guarantor and the environmental indemnitor.

Further, in both cases, we are also party to an agreement with our institutional joint venture partners in which any potential liability under such guarantees will be apportioned between us and our applicable joint venture partner based on our respective ownership percentages in the applicable joint venture.

We have no liability recorded on our consolidated balance sheets for either guaranty as of June 30, 2021 and December 31, 2020.

Additionally, during 2021, we made a cash investment of $ 3.0 million into a third-party company in exchange for preferred shares of their stock.

As part of the investment agreement, the third-party company committed to enter into leases at two of our properties.

As of August 5, 2021, we had entered into two leases under the terms of the investment agreement, both of which carry a term of 10 years, over which period we expect to receive contractual rents of $ 2.6 million in total for both leases.

FAIR VALUE MEASUREMENTS

5 unchanged sentences

We have utilized market information, as available, or present value techniques to estimate the amounts required to be disclosed.

The following is a summary of borrowings as of March 31, 2021 and December 31, 2020 (in thousands):

March 31, 2021 December 31, 2020

PHILLIPS EDISON & COMPANY

JUNE 30, 2021 FORM 10-Q

The following is a summary of borrowings as of June 30, 2021 and December 31, 2020 (in thousands):

June 30, 2021 December 31, 2020

Recorded Principal Balance (1)

5 unchanged sentences

Total $ 2,228,232 $ 2,277,063 $ 2,292,605 $ 2,330,264

(1) Recorded principal balances include net deferred financing expenses of $ 12.6 million and $ 13.5 million as of March 31, 2021 and December 31, 2020, respectively.

Recorded principal balances also include assumed market debt adjustments of $ 1.6 million and $ 1.5 million as of March 31, 2021 and December 31, 2020, respectively.

(1) Recorded principal balances include net deferred financing expenses of $ 11.7 million and $ 13.5 million as of June 30, 2021 and December 31, 2020, respectively.

Recorded principal balances also include assumed market debt adjustments of $ 1.6 million and $ 1.5 million as of June 30, 2021 and December 31, 2020, respectively.

We have recorded deferred financing expenses related to our revolving credit facility, which are not included in these balances, in Other Assets, Net on our consolidated balance sheets.

1 unchanged sentence

Recurring and Nonrecurring Fair Value Measurements —Our earn-out liability and interest rate swaps are measured and recognized at fair value on a recurring basis, while certain real estate assets and liabilities are measured and recognized at fair value as needed.

Fair value measurements that occurred as of and during the three months ended March 31, 2021 and the year ended December 31, 2020, were as follows (in thousands):

March 31, 2021 December 31, 2020

Fair value measurements that occurred as of and during the six months ended June 30, 2021 and the year ended December 31, 2020, were as follows (in thousands):

June 30, 2021 December 31, 2020

Level 1 Level 2 Level 3 Level 1 Level 2 Level 3

7 unchanged sentences

(2) The carrying value of impaired real estate assets may have subsequently increased or decreased after the measurement date due to capital improvements, depreciation, or sale.

Derivative Instruments— As of March 31, 2021 and December 31, 2020, we had interest rate swaps that fixed LIBOR on portions of our unsecured term loan facilities.

Derivative Instruments— As of June 30, 2021 and December 31, 2020, we had interest rate swaps that fixed LIBOR on portions of our unsecured term loan facilities.

All interest rate swap agreements are measured at fair value on a recurring basis.

6 unchanged sentences

Although we determined that the significant inputs used to value our derivatives fell within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our counterparties and our own credit risk utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by us and our counterparties.

However, as of March 31, 2021 and December 31, 2020, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives.

However, as of June 30, 2021 and December 31, 2020, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives.

As a result, we have determined that our derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

Earn-out —As part of our acquisition of Phillips Edison Limited Partnership (“PELP”) in 2017, an earn-out structure was established which gave PELP the opportunity to earn additional OP units based upon the potential achievement of certain performance targets subsequent to the acquisition.

After the expiration of certain provisions in 2019, PELP is now eligible to earn up to five million OP units based on the timing and valuation of a liquidity event for PECO.

The liquidity event can occur no later than December 31, 2021 for the maximum shares to be awarded, but can occur as late as December 31, 2023.

We estimate the fair value of this liability on a quarterly basis using the Monte Carlo method.

This method requires us to make assumptions about future dividend yields, volatility, and timing and pricing of liquidity events, which are unobservable and are considered Level 3 inputs in the fair value hierarchy.

A change in these inputs to a different amount might result in a significantly higher or lower fair value measurement at the reporting date.

In calculating the fair value of this liability as of March 31, 2021, we have determined that the most likely range of potential outcomes includes a possibility of one million additional OP units issued as well as up to a maximum of five million units being issued.

We recorded expense of $ 16.0 million and income of $ 10.0 million, respectively, for the three months ended March 31, 2021 and March 31, 2020 related to changes in the fair value of the earn-out liability.

The increase in the fair value of the liability during the three months ended March 31, 2021 was attributable to an increase in the EVPS of our common stock (as compared with a decrease in EVPS in the comparable prior year period), as described in Note 9, as well as improved market conditions in the first quarter of 2021.

The change in fair value for both periods has been recognized in Other (Expense) Income, Net in the consolidated statements of operations.

Earn-out —As part of our acquisition of PELP in 2017, an earn-out structure was established which gave PELP the opportunity to earn additional OP units based upon the potential achievement of certain performance targets subsequent to the acquisition.

After the expiration of certain provisions in 2019, PELP is now eligible to earn a minimum of 1.0 million and a maximum of approximately 1.7 million OP units as contingent consideration based upon the timing and valuation of a liquidity event for PECO.

Certain of these performance targets are tied to the post-underwritten IPO trading price of our common stock.

The number of OP units awarded will vary based on the highest volume weighted average price per share of our common stock over any 30 consecutive trading day period during the 180 days following the underwritten IPO commencement (the “liquidity event price per share”):

• if the liquidity event price per share is greater than or equal to $ 33.60 , PELP will receive approximately 1.7 million OP units;

PHILLIPS EDISON & COMPANY

JUNE 30, 2021 FORM 10-Q

• if the liquidity event price per share is less than $ 33.60 but greater than or equal to $ 26.40 , PELP will receive a number of OP units equal to (i) 1.0 million plus (ii) the product of (A) approximately 0.7 million and (B) the quotient obtained by dividing the liquidity event price per share in excess of $ 26.40 by $7.20;

• if the liquidity event price per share is less than $ 26.40 , PELP will receive 1.0 million OP units.

Prior to the second quarter of 2021, we estimated the fair value of the earn-out liability on a quarterly basis using the Monte Carlo method.

As of June 30, 2021, our underwritten IPO process had commenced and thus the only remaining variable for calculating final amounts to be paid under the earn-out agreement was the liquidity event price per share.

Therefore, we estimated the fair value of the liability related to the earn-out using a probability-weighted model to estimate the liquidity event price per share.

In calculating the fair value of this liability as of June 30, 2021, we have determined that 1.0 million OP units have been earned and the most likely range of potential outcomes includes a possibility of no additional OP units issued as well as up to a maximum of approximately 0.667 million units being issued.

For the three months ended June 30, 2021, we recorded expense of $ 2.0 million related to the change in fair value of the earn-out liability.

There was no change to the fair value of our earn-out liability for the three months ended June 30, 2020.

We recorded expense of $ 18.0 million and income of $ 10.0 million, respectively, for the six months ended June 30, 2021 and June 30, 2020 related to changes in the fair value of the earn-out liability.

The increase in the fair value of the liability as of June 30, 2021 was attributable to the commencement of our underwritten IPO as well as improved market conditions in 2021.

The change in fair value for each period has been recognized in Other (Expense) Income, Net in the consolidated statements of operations.

Real Estate Asset Impairment —Our real estate assets are measured and recognized at fair value, less costs to sell for held-for-sale properties, on a nonrecurring basis dependent upon when we determine an impairment has occurred.

During the three months ended March 31, 2021, we impaired an asset that was under contract at a disposition price that was less than carrying value, or that had other operational impairment indicators.

During the three and six months ended June 30, 2021, we impaired assets that were under contract at a disposition price that was less than carrying value, or that had other operational impairment indicators.

The valuation technique used for the fair value of all impaired real estate assets was the expected net sales proceeds, which we consider to be a Level 2 input in the fair value hierarchy.

There were no impairment charges recorded during the three months ended March 31, 2020.

There were no impairment charges recorded during the three and six months ended June 30, 2020.

On a quarterly basis, we employ a multi-step approach to assess our real estate assets for possible impairment and record any impairment charges identified.

9 unchanged sentences

Our quarterly impairment procedures have not been altered by the COVID-19 pandemic, as we believe key impairment indicators such as temporary store closings and large dark or vacant spaces will continue to be identified in our review.

We have utilized forecasts that incorporate estimated decreases in NOI and cash flows as a result of the COVID-19 pandemic in performing our review procedures for the three months ended March 31, 2021 and 2020.

We have utilized forecasts that incorporate estimated decreases in NOI and cash flows as a result of the COVID-19 pandemic in performing our review procedures for the three and six months ended June 30, 2021 and 2020.

However, it is possible that we could experience unanticipated changes in assumptions that are employed in our impairment review which could impact our cash flows and fair value conclusions.

2 unchanged sentences

We recorded the following expense upon impairment of real estate assets (in thousands):

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2021 2020 2021 2020

Impairment of real estate assets $ 1,056 $ — $ 6,056 $ —

2 unchanged sentences

Based on this evaluation, we have determined that there were no events that have occurred that require recognition or disclosure, other than certain events and transactions that have been disclosed elsewhere in these consolidated financial statements.

PHILLIPS EDISON & COMPANY

JUNE 30, 2021 FORM 10-Q

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 1. Financial Statements