What changed in this filing

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Item 2. Properties

2022-02-16 compared with 2021-03-12 · 38 added, 62 removed, 59 unchanged (63% of the section changed)

Real Estate Investments —The following table details information for our wholly-owned properties and those owned through our joint ventures as of December 31, 2020, which is the basis for determining the prorated information included in the subsequent tables (dollars and square feet in thousands):

REAL ESTATE INVESTMENTS —The following table details information for our wholly-owned properties and those owned through our unconsolidated joint ventures as of December 31, 2021, which is the basis for determining the prorated information included in the subsequent tables (dollars and square feet in thousands):

Ownership Percentage Number of Properties ABR GLA

Wholly-owned properties 100% 268 $ 405,281 30,691

Necessity Retail Partners 20% 5 $ 7,879 507

Grocery Retail Partners I 14% 20 29,516 2,211

14% 20 28,596 2,218

(1) On October 1, 2020, GRP I acquired GRP II, an additional joint venture in which we owned an equity interest.

Our ownership in the combined entity was adjusted upon consummation of the transaction.

The following table presents information regarding the geographic location of our properties, including wholly-owned and the prorated portion of those owned through our joint ventures, by ABR as of December 31, 2020.

Necessity Retail Partners 20% 1 2,268 116

The following table presents information regarding the geographic location of our properties, including wholly-owned and the prorated portion of those owned through our unconsolidated joint ventures, by ABR as of December 31, 2021.

For additional portfolio information, refer to “Schedule III - Real Estate Assets and Accumulated Depreciation” (dollars and square feet in thousands):

7 unchanged sentences

Ohio 25,873 6.3 % 10.33 2,602 8.4 % 96.2 % 21

Colorado 24,051 5.9 % 17.35 1,408 4.5 % 98.4 % 12

Illinois 23,408 5.7 % 15.16 1,635 5.3 % 94.5 % 14

Virginia 17,480 4.3 % 14.96 1,212 3.9 % 96.4 % 12

Colorado 17,693 4.5 % 15.79 1,162 3.6 % 96.4 % 10

Massachusetts 15,856 3.9 % 14.17 1,145 3.7 % 97.8 % 9

Pennsylvania 11,676 3.0 % 11.35 1,086 3.4 % 94.7 % 7

Minnesota 13,918 3.4 % 13.24 1,067 3.4 % 98.5 % 11

South Carolina 10,458 2.7 % 9.16 1,302 4.1 % 87.7 % 11

Arizona 9,824 2.5 % 12.51 845 2.6 % 92.9 % 7

Pennsylvania 11,846 2.9 % 12.16 1,004 3.2 % 97.0 % 6

Wisconsin 11,533 2.8 % 11.00 1,054 3.4 % 99.5 % 9

North Carolina 8,966 2.3 % 11.86 810 2.5 % 93.3 % 13

Arizona 9,740 2.4 % 13.71 736 2.4 % 96.5 % 6

Maryland 9,290 2.3 % 20.17 467 1.5 % 98.6 % 4

Indiana 6,663 1.7 % 8.14 832 2.6 % 98.4 % 5

South Carolina 9,166 2.2 % 10.87 941 3.0 % 89.6 % 9

Nevada 8,580 2.1 % 18.62 475 1.5 % 97.1 % 4

North Carolina 7,650 1.9 % 12.14 659 2.1 % 95.7 % 10

Michigan 6,783 1.7 % 9.44 724 2.3 % 99.4 % 5

Indiana 6,737 1.6 % 8.54 832 2.7 % 94.7 % 5

Tennessee 5,871 1.4 % 8.51 692 2.2 % 99.8 % 4

1 unchanged sentence

New Mexico 5,410 1.3 % 14.17 404 1.3 % 94.6 % 3

Oregon 5,195 1.3 % 14.56 374 1.2 % 95.5 % 5

Kentucky 4,915 1.2 % 10.05 502 1.6 % 97.5 % 3

New Jersey 4,659 1.2 % 17.32 276 0.9 % 97.3 % 2

Oregon 4,778 1.2 % 15.31 314 1.0 % 99.4 % 4

Kansas 4,376 1.1 % 11.99 376 1.2 % 97.0 % 3

Nevada 4,317 1.1 % 20.01 217 0.7 % 99.4 % 2

New Jersey 4,101 1.0 % 25.23 163 0.5 % 100.0 % 1

Iowa 2,885 0.7 % 9.05 359 1.2 % 88.9 % 3

4 unchanged sentences

Total $ 409,866 100.0 % $ 13.72 31,023 100.0 % 96.3 % 289

(1) We calculate ABR as monthly contractual rent as of December 31, 2020, multiplied by 12 months.

(1) We calculate ABR as monthly contractual base rent as of December 31, 2021, multiplied by twelve months.

(2) GLA is defined as the total occupied and unoccupied square footage of a building that is available for Neighbors to lease.

Lease Expirations —The following chart shows the aggregate scheduled lease expirations, excluding our Neighbors who are occupying space on a temporary basis, after December 31, 2020 for each of the next ten years and thereafter for our wholly-owned properties and the prorated portion of those owned through our joint ventures:

PHILLIPS EDISON & COMPANY

DECEMBER 31, 2021 FORM 10-K

LEASE EXPIRATIONS —The following chart shows the aggregate scheduled lease expirations, excluding our Neighbors who are occupying space on a temporary basis, after December 31, 2021 for each of the next ten years and thereafter for our wholly-owned properties and the prorated portion of those owned through our unconsolidated joint ventures:

Our ability to create rental rate growth generally depends on our leverage during new and renewal lease negotiations with prospective and existing Neighbors, which typically occurs when occupancy at our centers is high or during periods of economic growth and recovery.

Conversely, we may experience rental rate decline when occupancy at our centers is low or during periods of economic recession, as the leverage during new and renewal lease negotiations may shift to prospective and existing Neighbors.

Most of our grocery Neighbors have remained open throughout the COVID-19 pandemic, though their sales may have been impacted by social distancing and “stay-at-home” mandates.

The number of our Neighbor spaces that temporarily closed as a result of the COVID-19 pandemic peaked in April 2020 and has significantly decreased as states began to lift in full or in part “stay-at-home” mandates in May 2020.

Certain Neighbors 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.

For our wholly-owned properties, our average rental rates on new and renewal leases have exceeded the average rental rates on comparable expiring leases as of December 31, 2020;

however, our occupancy declined 0.7% to 94.7% as compared to December 31, 2019, owing largely to the economic impact of COVID-19, and we anticipate our occupancy may decline further in early 2021 .

We will likely continue to experience pressure in new and renewal rental rates until the business environment becomes more stable, but new leasing volume in early 2021 remains strong.

For our wholly-owned portfolio, during the 2021 fiscal year, we have a total of 585 leases expiring, representing 2.7 million square feet of GLA.

These expiring leases have an ABR of $12.43 per square foot.

While we cannot predict what rental rates we will achieve in 2021 as we renew or replace these expiring leases, the comparable rent spread of new leases signed during 2020 was 8.2%, and the comparable rent spread for lease renewals and options executed in 2020 was 6.7%.

Subsequent to December 31, 2020, we renewed approximately 0.3 million total square feet and $5.5 million of total ABR of future expiring leases.

This includes seven anchor lease renewals, five of which were pursuant to the exercise of an option to extend the lease.

For our wholly-owned properties and those owned through our unconsolidated joint ventures, during the 2022 fiscal year, we have a total of 639 leases expiring, representing 2.3 million square feet of GLA.

For our wholly-owned properties, during the 2022 fiscal year, we have 592 leases expiring, representing 2.3 million square feet of GLA.

For our wholly-owned properties, the expiring leases have an ABR of $13.90 per square foot.

While we cannot predict what rental rates we will achieve in 2022 as we renew or replace these expiring leases, the comparable rent spread of new leases signed during 2021 was 15.7%, and the comparable rent spread for lease renewals executed in 2021 was 8.1%.

Further, during the fiscal year 2021, our occupancy improved 1.6% to 96.3%, indicating continued demand for leasing spaces at our centers.

See “Part II, Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations - Overview - Leasing Activity” of this filing on Form 10-K for further discussion of leasing activity.

PHILLIPS EDISON & COMPANY

DECEMBER 31, 2021 FORM 10-K

PORTFOLIO TENANCY —We define national Neighbors as those Neighbors that operate in at least three states.

Regional Neighbors are defined as those Neighbors that have at least three locations in fewer than three states.

The following charts present the composition of our portfolio, including our wholly-owned properties and the prorated portion of those owned through our joint ventures, by Neighbor type as of December 31, 2020:

The following charts present the composition of our portfolio, including our wholly-owned properties and the prorated portion of those owned through our unconsolidated joint ventures, by Neighbor type as of December 31, 2021:

The following charts present the composition of our portfolio by neighbor industry as of December 31, 2021:

We estimate that approximately 51% of our ABR, including the pro rata portion attributable to our properties owned through our joint ventures, is from retail and service businesses generally deemed essential under most state and local mandates issued in response to the COVID-19 pandemic.

The composition of our portfolio as a percentage of ABR is as follows:

December 31, 2020

Essential Retail and Services:

Grocery 35.9 %

Dollar stores 2.2 %

Pet supply 2.1 %

Medical 1.8 %

Hardware/automotive 1.7 %

Wine, beer, and liquor 1.4 %

Pharmacy 1.0 %

Other essential 2.8 %

Total essential retail and services (1)

Quick service 9.6 %

Full service 6.0 %

Total restaurants 15.6 %

Other Retail and Services:

Services 16.3 %

Soft goods 12.3 %

Fitness 3.2 %

Entertainment 1.3 %

Total other retail and services 33.1 %

Total ABR 100.0 %

(1) Includes Neighbors that we believe are considered to be essential retail and service businesses but that may have temporarily closed due to decreases in foot traffic and customer patronage as a result of “stay-at-home” mandates and social distancing guidelines implemented in response to the COVID-19 pandemic.

The following table presents our top twenty Neighbors by ABR, including our wholly-owned properties and the prorated portion of those owned through our joint ventures, as of December 31, 2020 (dollars and square feet in thousands):

PHILLIPS EDISON & COMPANY

DECEMBER 31, 2021 FORM 10-K

NECESSITY-BASED GOODS AND SERVICES —We define “Necessity-based goods and services” as goods and services that are indispensable, necessary, or common for day-to-day living, or that tend to be inelastic (i.e., those for which the demand does not change based on a consumer’s income level).

We estimate that approximately 72% of our ABR, including the pro rata portion attributable to properties owned through our unconsolidated joint ventures, is generated from Neighbors providing necessity-based goods and services.

Additionally, within Necessity-based goods and services, we estimate that approximately 49% of our ABR is generated from retail and service businesses generally deemed essential under most state and local mandates issued in response to the COVID-19 pandemic, including those that may have temporarily closed at various points during the pandemic due to decreases in foot traffic and customer patronage as a result of “stay-at-home” mandates and social distancing guidelines implemented in response to the pandemic.

TOP TWENTY NEIGHBORS —The following table presents our top twenty Neighbors by ABR, including our wholly-owned properties and the prorated portion of those owned through our unconsolidated joint ventures, as of December 31, 2021 (dollars and square feet in thousands):

ABR % of ABR Leased

2 unchanged sentences

Publix 22,994 5.6 % 2,269 7.6 % 56

Ahold Delhaize 17,514 4.5 % 1,264 4.2 % 24

Albertsons-Safeway 17,253 4.2 % 1,648 5.5 % 30

Ahold Delhaize 17,241 4.2 % 1,204 4.0 % 22

Walmart 8,933 2.2 % 1,770 5.9 % 13

Giant Eagle 7,732 1.9 % 828 2.8 % 12

TJX Companies 4,984 1.3 % 428 1.4 % 15

Sprouts Farmers Market 6,494 1.6 % 421 1.4 % 14

Dollar Tree 4,048 1.0 % 423 1.4 % 44

TJX Companies 5,498 1.3 % 465 1.6 % 17

Raley's 3,884 0.9 % 253 0.8 % 4

Dollar Tree 3,389 0.8 % 341 1.1 % 36

SUPERVALU 3,244 0.8 % 336 1.1 % 5

Subway Group 2,631 0.6 % 105 0.4 % 74

Schnuck's 3,025 0.8 % 329 1.1 % 5

Anytime Fitness, Inc.

2,602 0.6 % 166 0.6 % 34

Southeastern Grocers 2,626 0.7 % 291 1.0 % 8

Save Mart 2,619 0.7 % 309 1.0 % 6

Schnucks 2,571 0.6 % 249 0.8 % 4

Lowe's 2,469 0.6 % 369 1.2 % 4

1 unchanged sentence

Food 4 Less (PAQ) 2,215 0.6 % 118 0.4 % 2

Save Mart 2,174 0.6 % 258 0.9 % 5

Petco Animal Supplies, Inc.

2,136 0.5 % 127 0.4 % 11

Franchise Group, Inc.

2,057 0.5 % 146 0.6 % 24

Total $ 144,629 35.3 % 14,748 49.4 % 431

1 unchanged sentence

(2) Number of locations excludes auxiliary leases with grocery anchors such as fuel stations, pharmacies, and liquor stores.

Additionally, in the event that a parent company has multiple subsidiaries or banners serving as Neighbors in a shopping center, those subsidiaries are included as one location.

Additionally, in the event that a parent company has multiple subsidiaries or banners in a shopping center, those subsidiaries are included as one location.

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-K

Item 2. Properties