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Item 7. Management’s Discussion and Analysis

2022-02-16 compared with 2021-03-12 · 439 added, 521 removed, 260 unchanged (79% of the section changed)

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We use certain key performance indicators (“KPIs”), which include both financial and nonfinancial metrics, to measure the performance of our operations.

We believe these KPIs, as well as the core concepts and terms defined below, allow our Board, management, and investors to analyze trends around our business strategy, financial condition, and results of operations in a manner that is focused on items unique to the real estate industry.

We do not consider our non-GAAP measures included as KPIs to be alternatives to measures required in accordance with GAAP.

Certain non-GAAP measures should not be viewed as an alternative measure of our financial performance as they may not reflect the operations of our entire portfolio, and they may not reflect the impact of general and administrative expenses, depreciation and amortization, interest expense, other income (expense), or the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties that could materially impact our results from operations.

We do not consider our non-GAAP measures to be alternatives to measures required in accordance with accounting principles generally accepted in the United States (“GAAP”).

Certain non-GAAP measures should not be viewed as an alternative measure of our financial performance as they may not reflect the operations of our entire portfolio, and they may not reflect the impact of general and administrative expenses, depreciation and amortization, interest expense, other income (expense), or the level of capital expenditures and leasing costs necessary to maintain the operating performance of our shopping centers that could materially impact our results from operations.

Additionally, certain non-GAAP measures should not be considered as an indication of our liquidity, nor as an indication of funds available to cover our cash needs, including our ability to fund distributions, and may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate our business in the manner currently contemplated.

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• Anchor space—We define an anchor space as a space greater than or equal to 10,000 square feet of gross leasable area (“GLA”).

• Annualized Base Rent (“ABR”)—We use ABR to refer to the monthly contractual rent as of December 31, 2020, multiplied by twelve months.

• Annualized Base Rent (“ABR”)—We use ABR to refer to the monthly contractual base rent at the end of the period multiplied by twelve months.

• ABR per Square Foot (“PSF”)—This metric is calculated by dividing ABR by leased GLA.

Increases in ABR PSF can be an indication of our ability to create rental rate growth in our centers, as well as an indication of demand for our spaces, which generally provides us with greater leverage during lease negotiations.

• GLA—We use GLA to refer to the total occupied and unoccupied square footage of a building that is available for tenants (whom we refer to as a “Neighbor” or our “Neighbors”) or other retailers to lease.

• Inline space—We define an inline space as a space containing less than 10,000 square feet of GLA.

• GLA—We use GLA to refer to the total occupied and unoccupied square footage of a building that is available for tenants (whom we refer to as a “Neighbor” or our “Neighbors”) to lease.

• Leased Occupancy—This metric is calculated as the percentage of total GLA for which a lease has been signed regardless of whether the Neighbor has taken possession.

• Leased Occupancy—This metric is calculated as the percentage of total GLA for which a lease has been signed regardless of whether the lease has commenced or the Neighbor has taken possession.

High occupancy is an indicator of demand for our spaces, which generally provides us with greater leverage during lease negotiations.

• Underwritten incremental unlevered yield—This reflects the yield we target to generate from a project upon expected stabilization and is calculated as the estimated incremental net operating income (“NOI”) for a project at stabilization divided by its estimated net project investment.

The estimated incremental NOI is the difference between the estimated annualized NOI we target to generate by project upon stabilization and the estimated annualized NOI without the planned improvements.

Underwritten incremental unlevered yield does not include peripheral impacts, such as lease rollover risk or the impact on the long term value of the property upon sale or disposition.

Actual incremental unlevered yields may vary from our underwritten incremental unlevered yield range based on the actual total cost to complete a project and its actual incremental NOI at stabilization.

LEASING —Leasing is a key driver of growth for our company.

• Comparable lease—We use this term to refer to a lease that is executed for the exact same space (location and square feet) in which a Neighbor was previously located 365 days from the earlier of legal possession or the day the prior Neighbor physically vacated the space.

• Comparable rent spread—This metric is calculated as being the percentage increase or decrease in first-year ABR (excluding any free rent or escalations) on new or renewal leases (excluding options) as compared to the rent on an expiring lease with the same lease terms and for the same unit, if such unit was occupied within the past twelve months.

• Comparable lease—We use this term to refer to a lease with consistent terms that is executed for substantially the same space that has been vacant less than twelve months.

• Comparable rent spread—This metric is calculated as the percentage increase or decrease in first-year ABR (excluding any free rent or escalations) on new or renewal leases (excluding options) where the lease was considered a comparable lease.

This metric provides an indication of our ability to generate revenue growth through leasing activity.

• Cost of executing new leases—We use this term to refer to certain costs associated with new leasing, namely, leasing commissions, tenant improvement costs, landlord work, and tenant concessions.

The costs associated with landlord work are excluded for repositioning and redevelopment projects, if any.

• Portfolio retention rate—This metric is calculated by dividing (a) total square feet of retained Neighbors with current period lease expirations by (b) the square feet of leases expiring during the period.

The portfolio retention rate provides insight into our ability to retain Neighbors at our shopping centers as their leases approach expiration.

• Cost of executing new leases—We use this term to refer to certain costs associated with new leasing, namely, leasing commissions, tenant improvement costs, and tenant concessions.

• Portfolio retention rate—This metric is calculated by dividing (i) total square feet of retained Neighbors with current period lease expirations by (ii) the total square feet of leases expiring during the period.

The portfolio retention rate

PHILLIPS EDISON & COMPANY

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provides insight into our ability to retain Neighbors at our shopping centers as their leases approach expiration.

Generally, the costs to retain an existing Neighbor are lower than costs to replace with a new Neighbor.

• Recovery rate—This metric is calculated by dividing (a) total recovery income by (b) total recoverable expenses during the period.

• Recovery rate—This metric is calculated by dividing (i) total recovery income by (ii) total recoverable expenses during the period.

A high recovery rate is an indicator of our ability to recover certain property operating expenses and capital costs from our Neighbors.

FINANCIAL PERFORMANCE —In addition to financial metrics calculated in accordance with GAAP, such as net income or cash flows from operations, we utilize non-GAAP metrics to measure our operational and financial performance.

See the section within this Item 7 titled Management’s Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Measures for further discussion on the following metrics.

See “Non-GAAP Measures” below for further discussion on the following metrics.

• Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization for Real Estate (“Adjusted EBITDA re ”)—To arrive at Adjusted EBITDA re , we adjust EBITDA re , as defined below, to exclude certain recurring and non-recurring items including, but not limited to:

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(iii) amortization of basis differences in our investments in our unconsolidated joint ventures;

and (iv) transaction and acquisition expenses.

(iv) transaction and acquisition expenses;

and (v) realized performance income.

We use EBITDA re and Adjusted EBITDA re as additional measures of operating performance which allow us to compare earnings independent of capital structure and evaluate debt leverage and fixed cost coverage.

• Core FFO—To arrive at Core FFO, we adjust FFO attributable to stockholders and convertible noncontrolling interests, as defined below, to exclude certain recurring and non-recurring items including, but not limited to:

• Core Funds from Operations (“FFO”)—To arrive at Core FFO, we adjust Nareit FFO attributable to stockholders and OP unit holders, as defined below, to exclude certain recurring and non-recurring items including, but not limited to:

(i) depreciation and amortization of corporate assets;

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(iii) amortization of unconsolidated joint venture basis differences;

(iv) gains or losses on the extinguishment or modification of debt, (v) other impairment charges;

and (vi) transaction and acquisition expenses.

We believe FFO provides insight into our operating performance as it excludes certain items that are not indicative of such performance.

(iv) gains or losses on the extinguishment or modification of debt and other;

(v) other impairment charges;

(vi) transaction and acquisition expenses;

and (vii) realized performance income.

We believe Nareit FFO provides insight into our operating performance as it excludes certain items that are not indicative of such performance.

Core FFO provides further insight into the sustainability of our operating performance and provides an additional measure to compare our performance across reporting periods on a consistent basis by excluding items that may cause short-term fluctuations in net income (loss).

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Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect EBITDA re on the same basis.

• FFO—Nareit defines FFO as net income (loss) computed in accordance with GAAP, excluding:

• Equity Market Capitalization—We calculate equity market capitalization as the total dollar value of all outstanding shares using the closing price for the applicable date.

• Nareit FFO—Nareit defines FFO as net income (loss) computed in accordance with GAAP, excluding:

(i) gains (or losses) from sales of property and gains (or losses) from change in control;

(ii) depreciation and amortization;

(ii) depreciation and amortization related to real estate;

(iii) impairment losses on real estate and impairments of in-substance real estate investments in investees that are driven by measurable decreases in the fair value of the depreciable real estate held by the unconsolidated partnerships and joint ventures;

and (iv) adjustments for unconsolidated partnerships and joint ventures, calculated to reflect FFO on the same basis.

We calculate Nareit FFO in a manner consistent with the Nareit definition.

• Net Debt—We calculate net debt as total debt, excluding discounts, market adjustments, and deferred financing expenses, less cash and cash equivalents.

• Net Debt to Adjusted EBITDA re —This ratio is calculated by dividing net debt by Adjusted EBITDA re (included on an annualized basis within the calculation).

It provides insight into our leverage rate based on earnings and is not impacted by fluctuations in our equity price.

• Net Debt to Total Enterprise Value—This ratio is calculated by dividing net debt by total enterprise value.

• Net Debt to Total Enterprise Value—This ratio is calculated by dividing net debt by total enterprise value, as defined below.

It provides insight into our capital structure and usage of debt.

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• Same-Center—We use this term to refer to a property, or portfolio of properties, that have been owned and operational for the entirety of each reporting period (i.e., since January 1, 2020).

We are an internally-managed REIT and one of the nation’s largest owners and operators of grocery-anchored shopping centers.

The majority of our revenue is lease revenue derived from our real estate investments.

Additionally, we operate an investment management business providing property management and advisory services to over $515 million of third-party assets.

This business provides comprehensive real estate and asset management services to two institutional joint ventures, in which we retain an ownership interest, and one private fund (collectively, the “Managed Funds”).

On October 1, 2020, Grocery Retail Partners I LLC (“GRP I”), a joint venture with Northwestern Mutual Life Insurance Company (“Northwestern Mutual”) in which we own an equity interest, acquired Grocery Retail Partners II LLC (“GRP II”), an additional joint venture with Northwestern Mutual in which we owned an equity interest.

Our ownership in the combined entity was adjusted upon consummation of the transaction, and we own approximately a 14% interest in GRP I as a result of the acquisition.

Below are statistical highlights of our wholly-owned portfolio:

December 31, 2020 December 31, 2019

• Total Enterprise Value—We calculate total enterprise value as our net debt plus our equity market capitalization on a fully diluted basis.

We are a REIT and one of the nation’s largest owners and operators of omni-channel grocery-anchored shopping centers.

Our portfolio primarily consists of neighborhood centers anchored by the #1 or #2 grocer tenants by sales within their respective formats by trade area.

Our Neighbors are a mix of national, regional, and local retailers that primarily provide necessity-based goods and services.

As of December 31, 2021, we owned equity interests in 289 shopping centers, including 268 wholly-owned shopping centers and 21 shopping center properties owned through two unconsolidated joint ventures, which comprised approximately 33.0 million square feet in 31 states.

In addition to managing our shopping centers, our third-party investment management

PHILLIPS EDISON & COMPANY

DECEMBER 31, 2021 FORM 10-K

business provides comprehensive real estate management services to our unconsolidated joint ventures and one private fund (collectively, the “Managed Funds”).

UNDERWRITTEN INITIAL PUBLIC OFFERING —On July 19, 2021, we closed our underwritten IPO, through which we offered 17.0 million shares of our common stock, $0.01 par value per share, at an initial price to the public 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.

In connection with the underwritten IPO, the underwriters exercised a 30-day option to purchase additional shares of our common stock to cover overallotments, and, accordingly, on August 2, 2021, we settled the sale of an additional 2.6 million shares at a price of $28.00 per share.

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

The underwritten IPO, including the underwriters’ overallotment election, resulted in gross proceeds of $547.4 million.

Basis of Presentation —The basis of presentation of our shares of common stock is described as follows:

• Recapitalization —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-K gives effect to the Recapitalization and references to “shares” and per share metrics refer to our common stock and Class B common stock, collectively.

Our Class B common stock automatically converted into our publicly traded common stock on January 18, 2022 (see Note 12).

• Reverse Stock Split —On July 2, 2021, our Board approved an amendment to our charter to effect a one-for-three reverse stock split.

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

Unless otherwise indicated, the information in this Form 10-K gives effect to the reverse stock and OP unit splits (see Note 12).

• IPO —Following our underwritten IPO, we are presenting common stock and Class B common stock as separate classes within our consolidated balance sheets and consolidated statements of equity.

Any references to “common stock” in this Form 10-K refer to our Nasdaq-listed shares sold through the underwritten IPO, whereas Class B common stock refers to the newly-created class of Class B common stock that is not listed.

This applies to all historical periods presented herein.

2021 BOND OFFERING —On September 20, 2021, the SEC declared effective our bond offering registration statement as filed on Form S-3 (File Nos.

333-259059 and 333-259059-01) relating to the offer, from time to time, of an unspecified number of debt securities not to exceed a maximum aggregate offering of $1 billion (“Bond Registration”).

In October 2021, in connection with this Bond Registration, we settled $350 million aggregate principal amount of 2.625% senior notes (“2021 Bond Offering”) priced at 98.692% of the principal amount and maturing in November 2031.

The 2021 Bond Offering resulted in gross proceeds of $345.4 million.

The notes are fully and unconditionally guaranteed by us.

AT-THE-MARKET OFFERING (“ATM”) —On February 10, 2022, we and the Operating Partnership entered into a sales agreement relating to the potential sale of shares of common stock pursuant to a continuous offering program.

In accordance with the terms of the sales agreement, we may offer and sell shares of our common stock having an aggregate offering price of up to $250 million from time to time through our sales agents, or, if applicable, as forward sellers.

PORTFOLIO AND LEASING STATISTICS —Below are statistical highlights of our wholly-owned portfolio as of December 31, 2021 and 2020 (dollars and square feet in thousands):

Number of properties 268 283

Number of states 31 31

Total square feet (in thousands) 31,709 32,130

Leased % of rentable square feet:

Total square feet 30,691 31,709

ABR $ 405,281 $ 386,516

% ABR from omni-channel grocery-anchored shopping centers 96.7 % 97.3 %

Leased occupancy %:

Total portfolio spaces 96.3 % 94.7 %

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Average remaining lease term (in years) (1)

% ABR from grocery-anchored properties 97.3 % 97.0 %

(1) The average remaining lease term in years excludes future options to extend the term of the lease.

COVID-19 Strategy —During the first quarter of 2020, the COVID-19 pandemic began spreading globally, with the outbreak being classified as a pandemic by the World Health Organization on March 11, 2020.

As a result of the pandemic, many state governments issued “stay-at-home” mandates that generally limited travel and movement of the general public to essential activities only and required all non-essential businesses to close.

In response to the pandemic, we implemented the following initiatives:

• We suspended stockholder distributions after the March 2020 distribution, and resumed distributions beginning with the December 2020 distribution paid in January 2021 (see Note 13 for more detail);

• We suspended the SRP for DDI, which was reinstated in January 2021;

• Our Compensation Committee approved temporary reductions to compensation which remained in place through December 2020, including:

a 25% reduction to the base salary of our chief executive officer;

a 10% reduction to the base salaries of our president, chief operating officer, chief financial officer, and general counsel;

and a 10% reduction to board members’ base compensation for the 2020-2021 term;

• We have implemented expense reductions at the property and corporate levels which remained in place through December 2020, including reductions to our workforce and travel costs;

• Our capital investments were prioritized to support the reopening of our Neighbors and new leasing activity, or deferred if possible.

In May 2020, many state governments began lifting, in whole or in part, the “stay-at-home” mandates, effectively removing or lessening the limitations on travel and allowing many businesses to reopen in full or limited capacity.

The impact these measures and the resulting consumer behavior are having on our portfolio has evolved since May 2020, and we expect it to continue to do so.

Our management team has determined the following are key indicators of recovery for our portfolio and is executing a strategy to guide our Neighbors through these phases (all statistics are approximate and include the prorated portion attributable to properties owned through our joint ventures):

• Assisting Neighbors in Reopening —Our wholly-owned properties and those owned through our joint ventures contained approximately 5,500 occupied Neighbor spaces as of March 8, 2021.

At the peak of the pandemic-related closure activity in April 2020, temporary closures reached 37% of all Neighbor spaces, totaling 27% of our ABR and 22% of our GLA.

As of March 8, 2021, 98% of our occupied Neighbor spaces, totaling 99% of our ABR and GLA, are open for business.

Neighbors who remain temporarily closed generally retain this status as a result of government mandates, either through direct orders which prohibit reopening or because they have determined that operating restrictions as a result of such mandates make reopening unprofitable.

In order to facilitate communication with our Neighbors, we launched PECO Connect TM , a webpage designed to provide resources, information, and tools to assist our Neighbors in reopening as states lifted “stay-at-home” requirements and other restrictions.

• Returning to Monthly Payments —We continue to work with our Neighbors to resume normal monthly rent payments.

Our efforts have included raising awareness of the benefits available through the Coronavirus Aid, Relief, and Economic Security Act, including the Paycheck Protection Program and Health Care Enhancement Act (collectively, the “CARES Act”) and other small business programs.

As our Neighbors have reopened, we have seen our collections continue to improve from the second quarter.

The following table summarizes our collections by quarter, as they were originally reported as well as updated for payments received subsequent to the month billed:

Originally Reported Current (1)

Q4 2020 N/A 95 %

(1) Including collections received through March 8, 2021.

(2) As reported in our Current Report on Form 8-K filed with the SEC on August 12, 2020.

(3) As reported in our Quarterly Report on Form 10-Q filed with the SEC on November 9, 2020.

Further, as of March 8, 2021, our collections for January and February 2021 were approximately 94% in total.

Additionally, 57% of our Neighbors are paying their rent in full as of March 8, 2021.

• Recovering Missed Rent Charges —We believe substantially all Neighbors, 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.

Since April 2020, a portion of our Neighbors have missed making certain rent payments charged, and we are working with our Neighbors to collect such charges.

We believe that it is best to begin negotiation of relief only once a Neighbor has reopened, and we have continued to see payments made toward rent and recovery charges owed.

We have granted relief in the form of payment plans, and we may grant rent abatements or forgiveness to certain Neighbors based on an evaluation of characteristics such as their merchandising profile, role in the shopping center, and overall assessment of future financial health.

For active Neighbors as of March 8, 2021, these payment plans and rent abatements represented approximately 2% and 1% of portfolio ABR, respectively.

As of March 8, 2021, approximately 87% of payments are scheduled to be received through December 31, 2021 for all executed payment plans.

The weighted-average remaining term over which we expect to receive payment on executed payment plans is approximately twelve months.

As of March 8, 2021, 70% of our Neighbors with executed payment plans are current or have fully paid on their rent obligations.

COVID-19 Operational Update —While our management team has guided many of our Neighbors through the phases of reopening and resuming monthly payments, the COVID-19 pandemic has impacted our financial position and results from operations primarily as a result of reduced revenue, most notably from Neighbors that have been determined to be a credit risk, and from lower rent collections.

During the COVID-19 pandemic, we have been closely monitoring the status of our Neighbors to identify those who potentially pose a credit risk in order to appropriately account for the impact to revenue and in order to quickly take action when a Neighbor was ultimately unable to remain in a space.

The current economic environment has increased the uncertainty of collecting rents from a number of our Neighbors.

For Neighbors with a higher degree of uncertainty, we may not record revenue for amounts billed until the cash is received.

Based on our analysis, no individual Neighbor category was deemed to be entirely non-creditworthy as of December 31, 2020;

however, we continue to evaluate each Neighbor’s creditworthiness on an individual basis.

For the year ended December 31, 2020, inclusive of the prorated portion attributable to properties owned through our joint ventures, we had $28.5 million in monthly revenue that will not be recognized until cash is collected or the Neighbor resumes payment and is considered creditworthy.

As of December 31, 2020, our Neighbors deemed to be non-creditworthy represented approximately 12.8% of our total active Neighbors.

Additionally, certain of our Neighbors have entered into bankruptcy proceedings.

While some of these cases have already been resolved, with the assumption or rejection of the lease already reflected in our results, other claims have yet to be resolved, and as such, the potential fallout is not yet reflected in our occupancy rate or ABR metrics.

Neighbors in bankruptcy who continue to occupy space in our shopping centers represent an exposure of less than 1% of our total portfolio ABR as of December 31, 2020.

We have included our assessment of the impact of these bankruptcies in our estimate of rent collectibility, which impacted recorded revenue, as noted previously.

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

We will continue to work with Neighbors on establishing plans to repay past due amounts, and will monitor the impact of such payment plans on our results of operations in future quarters.

We cannot guarantee that we will ultimately be able to collect past due amounts.

For our entire portfolio, inclusive of our prorated share of properties owned through joint ventures, 56% of missed monthly charges in 2020 have been collected subsequent to the month billed and 9% have been waived, as of March 8, 2021.

Distributions and Equity Activity —On November 4, 2020, our Board reinstated monthly stockholder distributions beginning December 2020 to stockholders of record as of December 31, 2020, which was paid on January 12, 2021.

Distributions were paid for January and February 2021.

Additionally, our Board has approved distributions of $0.02833333 per share for March 2021.

Additionally, we executed the Tender Offer for 13.5 million shares of common stock at a price of $5.75 per share which resulted in a total value of $77.6 million.

This included the issuance of 2.8 million common shares in redemption of 2.8 million OP units converted at the time of repurchase.

This price was lower than the EVPS of $8.75, reflecting the Board’s acknowledgment that the share prices of our publicly-traded peers in the shopping center REIT sector had declined significantly below their respective estimated net asset values, primarily as a result of the ongoing market uncertainty caused by the COVID-19 pandemic.

Accordingly, the Board believed that if our shares were listed on a national securities exchange, the price of our shares of common stock might similarly trade at a discount to our EVPS.

On January 8, 2021, the Board adopted the Fourth Amended SRP.

Under the Fourth Amended SRP, share repurchases for DDI have been reinstated at $5.75 per share, and as of March 1, 2021, we have repurchased 0.1 million shares for a total value of $0.4 million (see Note 13 for more detail).

The SRP with respect to standard repurchases remains suspended.

The previously announced one-for-four reverse stock split has been delayed subject to market conditions.

Financial Highlights —Investing in grocery-anchored real estate is a core part of our business strategy, and as of December 31, 2020, 97.3% of our ABR was derived from grocery-anchored shopping centers.

As of December 31, 2020, total occupancy only declined 0.7% to 94.7%, and inline occupancy decreased 1.3% to 88.9% when compared to December 31, 2019.

We believe that our investment focus on grocery-anchored shopping centers that provide daily necessities, coupled with the execution of our capital recycling program in recent years, left our portfolio well-positioned to weather the economic downturn in 2020 resulting from the COVID-19 pandemic.

In turn, this allowed us to mitigate the negative impact on our financial results.

Despite the impact of COVID-19, financial performance highlights during 2020 are as follows:

• Net income of $5.5 million as compared to a net loss of $72.8 million a year ago, largely owing to lower impairments in 2020 due to the successful execution of our capital recycling program in recent years.

• Core FFO decreased by $10.5 million to $220.4 million, and declined by $0.04 to $0.66 per diluted share.

• Same-Center NOI decreased 4.1% to $328.0 million.

• Our Board reinstated monthly stockholder distributions beginning December 2020.

• Completed the Tender Offer which resulted in the repurchase of 13.5 million shares of common stock.

COVID-19 STRATEGY —During 2020, as a result of the coronavirus (“COVID-19”) pandemic, many state governments issued “stay-at-home” mandates that generally limited travel and movement of the general public to essential activities only and required all non-essential businesses to close.

All temporarily closed Neighbors have since been permitted to reopen;

however, a portion of our Neighbors have permanently closed, and we continually work to backfill any remaining vacant spaces.

We believe our collections have returned to levels consistent with those prior to the onset of the pandemic.

All statistics and financial results included in this COVID-19 Strategy section are approximate and include the prorated portion attributable to properties owned through our unconsolidated joint ventures.

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We believe substantially all Neighbors, 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 decided to negotiate relief for a small subset of our Neighbors, including rent deferrals.

As of January 20, 2022, we have $3.3 million of outstanding payment plans with our Neighbors of which approximately 84% are scheduled to be received by December 31, 2022.

As of January 20, 2022, the weighted-average term over which we expect to receive remaining amounts owed on executed payment plans is approximately ten months.

We cannot guarantee that we will ultimately be able to collect these amounts;

however, as of January 20, 2022, the collection rate on our payment plans executed during the COVID-19 pandemic exceeded 90%.

Despite seeing improvements in collections for current and past due amounts during 2021, the negative impact the pandemic has had on our Neighbors continues to be considered in our evaluation of Neighbors who potentially pose a credit risk.

For Neighbors with a higher degree of uncertainty as to their creditworthiness, we may not record revenue for amounts billed until the cash is received.

For the years ended December 31, 2021 and 2020, we had $3.6 million and $28.5 million, respectively, in net unfavorable monthly revenue adjustments for Neighbors who were being accounted for on a cash basis.

As of December 31, 2021, our Neighbors currently being accounted for on a cash basis represented approximately 7% of our total Neighbor spaces, or approximately 5.9% of portfolio ABR.

Further, many of our Neighbors who are on a cash basis of accounting are actively making payments toward their outstanding balances.

When considering the ABR associated with Neighbors who are currently on a cash basis of accounting, 84% of this ABR is represented by Neighbors who are actively making payments.

Certain of our Neighbors were unable to remain in their spaces as a result of the factors previously noted.

Despite this fallout, our leasing activity has been strong as demand for space in our centers remains high, which generally allows us to re-lease these spaces to Neighbors who may increase our concentration of necessity-based and omni-channel retailers.

For the year ended December 31, 2021, our wholly-owned portfolio retention rate was 87.8%.

Additionally, for the year ended December 31, 2021, for our wholly-owned portfolio, we executed 538 new leases, an increase as compared to both 2020 and 2019.

FINANCIAL HIGHLIGHTS —Owning, operating, and managing well-occupied omni-channel grocery-anchored real estate is a core part of our business strategy, and as of December 31, 2021, 96.7% of our ABR was derived from omni-channel grocery-anchored shopping centers.

As of December 31, 2021, total leased occupancy improved 1.6% to 96.3% and inline occupancy improved 3.8% to 92.7%, when compared to December 31, 2020.

We believe that our differentiated focused strategy, coupled with our responsible balance sheet management, left our portfolio well-positioned to recover from the economic downturn resulting from the COVID-19 pandemic.

Our financial performance highlights during 2021 are as follows:

• Net income of $17.2 million, an increase of $11.8 million from a year ago, primarily due to increased collections, higher gains on the disposal of property, and lower interest expense.

• We closed our underwritten IPO and settled the 2021 Bond Offering, which generated gross proceeds of $547.4 million and $345.4 million, respectively.

• Collections during the second half of the year reached 99% of our monthly billings;

returning to pre-COVID levels.

• Core FFO improved by $0.21 to $2.19 per diluted share primarily due to increased collections and lower interest expense.

• Same-Center NOI improved 8.2% to $346.8 million.

• Acquired $308.4 million and disposed of $206.4 million of assets, beginning our external growth strategy while improving portfolio quality with our dispositions.

• We paid monthly distributions of $0.085 per share, or $1.02 annualized, through the period of September 2021 and increased monthly distributions to $0.09 per share, or $1.08 annualized, for the remainder of the year.

• Net debt to Adjusted EBITDA re - annualized was 5.6x as compared to 7.3x during the same period a year ago.

Executing on our Strategy —Our performance for the year is linked to our key initiatives:

focus on core operations, strategic growth and portfolio management, and responsible balance sheet management.

We believe these initiatives will improve our position for a full-cycle liquidity event.

Focus on Core Operations —The COVID-19 pandemic had a significant impact on our operational focus during 2020 which required our operations team to make a shift towards the recovery of our portfolio, including assisting our Neighbors in reopening and returning to monthly rent payments.

Our leasing activity slowed compared to 2019, which was a record-setting leasing year for us.

Despite this decline, our diversity of Neighbors and concentration of necessity-based and internet-resistant retail has allowed us to maintain our high level of occupancy in 2020 as compared to 2019.

Our wholly-owned property leasing highlights are as follows:

• As of March 8, 2021, 98% of our occupied Neighbor spaces, totaling 99% of our ABR and GLA, are open for business.

• As of March 8, 2021, we have collected 94% of our rent and recovery billings originally charged from April to December 2020, with 56% of the missed charges being collected subsequent to the month in which they were billed.

• We executed 861 leases (new, renewal, and options) totaling 4.7 million square feet during the year ended December 31, 2020, which was a decline from a record 1,026 leases totaling 4.6 million square feet executed during the year ended December 31, 2019.

Demand for our well-located grocery-anchored retail space increased during the third and fourth quarters in 2020, approaching the 2019 leasing levels.

• Total ABR per leased square foot for new leases executed improved 8.0% to $16.14 and inline ABR per leased square foot for new leases executed improved 5.7% to $18.11 during the year ended December 31, 2020.

Strategic Growth and Portfolio Management —Our current development and redevelopment projects focus on outparcel development, anchor repositioning, and other initiatives to increase growth and NOI at our centers, while our investment management business is identifying opportunities for joint ventures with third parties, both of which will create additional revenue opportunities.

As a result of the COVID-19 pandemic, our capital investments during 2020 were prioritized to support the reopening of our Neighbors and new leasing activity, or deferred if possible.

Expansion of our investment management business has been delayed and disrupted as investors were cautious of new retail investments during a pandemic.

Highlights of our development and redevelopment projects, as well as our investment management business as of and for the year ended December 31, 2020 are as follows:

EXECUTING OUR STRATEGY —Our performance for the year is linked to our key initiatives:

differentiated and focused strategy, integrated operating platform, and responsible balance sheet management.

We believe these initiatives will result in long-term growth and value creation to all of our stakeholders.

Differentiated and Focused Strategy —We continually monitor the commercial real estate sector for shopping centers that meet our investment objectives.

During 2021, in the wake of the COVID-19 pandemic, our opportunities for investment in assets improved over 2020.

Further, capital raised through our underwritten IPO during the third quarter of 2021 has created liquidity that we intend to use, in part, to grow our portfolio of assets.

Highlights of our asset composition and acquisitions are as follows:

• 96.7% of our ABR was derived from omni-channel grocery-anchored shopping centers as of December 31, 2021.

• 71.6% of our ABR was derived from Neighbors providing Necessity-based goods and services.

• Acquired nine properties and five outparcels for a net cash outlay of $308.4 million, adding 1.1 million of GLA to our portfolio.

Internal Growth Through Our Integrated Operating Platform —During 2021, our leasing activity has increased as compared to both 2020 and 2019.

We have focused on improving our occupancy through leasing vacant spaces, increasing lease revenue through rent growth, and executing development and redevelopment opportunities.

Highlights of our wholly-owned operational activity as of and for the year ended December 31, 2021 are as follows:

• Leased occupancy for our wholly-owned portfolio improved to 96.3% as of December 31, 2021, compared to 94.7% as of December 31, 2020.

• We executed 1,135 leases (new, renewal, and options) totaling 5.6 million square feet during the year ended December 31, 2021, which was an increase from 861 leases totaling 4.7 million square feet executed during the year ended December 31, 2020.

PHILLIPS EDISON & COMPANY

DECEMBER 31, 2021 FORM 10-K

• Total ABR per leased square foot for executed new leases improved 6.0% to $17.11, and inline ABR per leased square foot for executed new leases improved 13.9% to $20.63 during the year ended December 31, 2021.

• As of and for the year ended December 31, 2021, we had 26 development and redevelopment projects completed or in process, which we estimate will comprise a total investment of $59.2 million.

• Created an additional $2.9 million of ABR in 2020 as a result of development and redevelopment projects completed in 2019.

• Recognized $5.7 million in fee and management income from GRP I and GRP II (prior to its acquisition by GRP I) and $1.6 million from NRP for the year ended December 31, 2020.

Responsible Balance Sheet Management —Our management team has executed strategies to create funds that will be used to reinvest into acquisitions, for development and redevelopment projects, and to repay outstanding debt.

This includes identifying mature properties where our growth potential has been maximized and properties at risk of future deterioration, and we are engaging in targeted dispositions of those properties.

Additionally, we have reinstated our distributions at a lower rate as compared to previous years to preserve and retain cash flow.

Due to the impact of COVID-19, our disposition activity was lower than anticipated during 2020 as the transaction market was sparse as a result of the COVID-19 pandemic.

• Created $1.0 million of incremental ABR in 2021 as a result of development and redevelopment projects completed in 2020.

Balance Sheet Management Positioned for External Growth —Our management team has executed strategies to improve the flexibility of our balance sheet, including gaining access to additional forms of liquidity and extending our debt maturity profile.

This execution well-positions us to preserve our investment grade rating, fund distributions to our stockholders, and invest in our targeted acquisitions.

As of December 31, 2021, we had $604.8 million of total liquidity, comprised of $115.5 million of cash, cash equivalents, and restricted cash, plus $489.3 million of borrowing capacity available on our $500.0 million revolving credit facility.

Our balance sheet management highlights as of and for the year ended December 31, 2021 are as follows:

• We realized $57.9 million of cash proceeds from the sale of seven properties and one outparcel.

• Our management team borrowed $200 million on our revolving line of credit in April 2020 to maximize our financial flexibility amid uncertainty related to the impact of the COVID-19 pandemic.

We were able to repay the full amount of this borrowing in June 2020, and did not borrow on our revolving line of credit for the remainder of 2020.

• We utilized cash accumulated throughout the year to repurchase 13.5 million shares under the Tender Offer, benefiting shareholders seeking liquidity while providing value accretion to our existing shareholders.

• Our ratio of debt to Adjusted EBITDA re was 7.3x as of December 31, 2020, as compared to 7.2x as of December 31, 2019 (see “Liquidity and Capital Resources - Debt” below for a discussion and calculation).

• We paid down $30.0 million in term loan debt maturing in 2021 as well as executed early repayments of $24.5 million in mortgage debt, reducing our net outstanding debt obligations by 2.6% from a year ago.

• Following our activity this year, our debt maturity profile as of December 31, 2020 is as follows (including the impact of derivatives on weighted-average interest rates):

Leasing Activity —Our decline in leasing activity as compared to 2019, a record leasing year, was primarily a result of the COVID-19 pandemic.

While we saw leasing activity slow in the second quarter of 2020, it has since recovered to activity levels comparable to those in prior periods.

The average rent per square foot and cost of executing leases fluctuates based on the Neighbor mix, size of the leased space, and lease term.

Leases with national and regional Neighbors generally require a higher cost per square foot to execute than those with local Neighbors.

However, generally such national and regional Neighbors will also pay higher rates for a longer term.

Below is a summary of leasing activity for our wholly-owned properties for the years ended December 31, 2020 and 2019:

Total Deals (1)

Inline Deals (1)

• Closed our underwritten IPO, in which we issued approximately 19.6 million shares of common stock at $28.00 per share, generating gross proceeds of $547.4 million.

• We were assigned investment grade ratings from Moody’s Investors Services (Baa3) and S&P Global Ratings (BBB-).

• We settled the 2021 Bond Offering, which resulted in gross proceeds of $345.4 million.

• 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”).

• We paid down or refinanced $1.1 billion in term loan debt in 2021 utilizing proceeds from the underwritten IPO, the Refinancing, the 2021 Bond Offering, and cash on hand.

Additionally, we executed early repayments of $55.2 million in mortgage debt.

In total, we reduced our net outstanding debt obligations by 17.5% from a year ago.

• Our ratio of net debt to Adjusted EBITDA re was 5.6x as of December 31, 2021, as compared to 7.3x as of December 31, 2020 (see “Liquidity and Capital Resources - Financial Leverage Ratios” below for a discussion and calculation).

• Following our activity this year, our debt maturity profile with the respective principal payment obligations as of December 31, 2021 is as follows (including the impact of derivatives on weighted-average interest rates):

PHILLIPS EDISON & COMPANY

DECEMBER 31, 2021 FORM 10-K

LEASING ACTIVITY —Below is a summary of leasing activity for our wholly-owned properties for the years ended December 31, 2021 and 2020 (1) :

Total Deals Inline Deals

2021 2020 2021 2020

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Cost per square foot of executing renewals and options (2)

$ 0.63 $ 0.80 $ 1.23 $ 1.13

Number of comparable leases (3)

496 365 475 349

Comparable rent spread (3)

8.1 % 6.7 % 10.2 % 8.0 %

Weighted average lease term (in years) 4.8 5.1 4.1 3.9

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(1) Per square foot amounts may not recalculate exactly based on other amounts presented within the table due to rounding.

(2) During the third quarter of 2021, we refined our calculation of cost per square foot of executing renewals and options to better align with actual costs incurred.

Prior period amounts have been adjusted to reflect costs on the same basis.

(3) Excludes exercise of options.

RESULTS OF OPERATIONS

Known Trends and Uncertainties of the COVID-19 Pandemic

The COVID-19 pandemic has impacted our results beginning with the second quarter largely in the form of reduced revenue, where our estimates around collectibility have created volatility in our earnings.

We anticipate these trends will continue into 2021, and the total impact on revenue in the future cannot be determined at this time.

The duration of the pandemic and mitigating measures, and the resulting economic impact, has caused some of our Neighbors to permanently vacate their spaces and/or not renew their leases.

Under such circumstances, we may have difficulty leasing these spaces on the same or better terms or at all, and/or incur additional costs to lease vacant spaces, which may reduce our occupancy rates in the future and ultimately reduce our revenue.

Extended periods of vacancy or reduced revenues may trigger impairments of our real estate assets.

Additionally, these factors may impact disposition activity by decreasing demand and negatively impacting capitalization rates.

Our disposition and acquisition activity has been reduced as a result of the pandemic during 2020.

The ongoing impact of the COVID-19 pandemic and the resulting economic downturn will likely continue to be significant to our results of operations into 2021 and potentially beyond as a result of a number of factors outside of our control.

These factors include, but are not limited to:

overall economic conditions on both a macro and micro level, including consumer demand as well as retailer demand for space within our shopping centers;

the impact of social distancing guidelines, recommendations from governmental authorities, and consumer shopping preferences;

the nature and effectiveness of any economic stimulus or relief measures;

the timing of availability and distribution of vaccines to the general public;

and the impact of all of the factors above, including other potentially unknown factors, on our Neighbors’ ability to continue paying rent and related charges on time or at all and Neighbors’ willingness to renew their leases on the same terms or at all.

These factors have impacted our results from operations, and may continue to do so into the future.

The primary impact to our results has been reduced revenue from Neighbor concessions, increased collectibility reserves, and decreased recovery rates on expenses.

Other unforeseen impacts may also arise in the course of operating during these circumstances.

See “Part II.

Management’s Discussion and Analysis of Financial Condition and Results of Operations - Overview” of this filing on Form 10-K for our observation of Neighbor impacts through March 8, 2021.

In December 2020, the United States Food and Drug Administration issued emergency use authorizations for two vaccines for the prevention of COVID-19.

The timeline for distribution of the vaccines to the public is determined at the state level, and consequently, the timeline for the removal of governmental mandates implemented to combat the spread of the virus may vary by state or locality.

At this time, we are unable to ascertain the timing of any such events, and thus are unable to predict with certainty the impact that the vaccines and their effect in mitigating the spread of COVID-19 may have on our financial results.

Overall, we believe that our investment focus on grocery-anchored shopping centers that provide daily necessities has helped, and will continue to help, lessen the negative effect of the COVID-19 pandemic on our business compared to non-grocery anchored shopping centers.

We are closely monitoring the occupancy, operating performance, and Neighbor sales results at our centers, including those Neighbors operating with reduced hours or under government-imposed restrictions.

Further, we have taken action to maximize our financial flexibility by implementing expense reductions at the property and corporate level;

prioritizing capital projects to support the reopening of our Neighbors and new leasing activity, or deferring if possible;

temporarily suspending monthly distributions;

and temporarily suspending share repurchases for DDI.

KNOWN TRENDS AND UNCERTAINTIES OF THE COVID-19 PANDEMIC —The COVID-19 pandemic resulted in reduced revenues beginning with the second quarter of 2020 and continuing through early 2021.

During the second half of 2021, we saw our collections return to pre-COVID levels, including increased rental income as a result of collections in 2021 related to rent amounts billed in 2020.

We believe our collections have likely stabilized, which will reduce volatility in our earnings.

PHILLIPS EDISON & COMPANY

DECEMBER 31, 2021 FORM 10-K

SUMMARY OF OPERATING ACTIVITIES FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020

Favorable (Unfavorable) Change

(dollars in thousands, except per share amounts) 2020 2019 $ % (1)

(Dollars in thousands) 2021 2020 $ % (1)

Rental income $ 519,495 $ 485,483 $ 34,012 7.0 %

Fee and management income 9,820 11,680 (1,860) (15.9) %

Fees and management income 10,335 9,820 515 5.2 %

Other property income 3,016 2,714 302 11.1 %

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Depreciation and amortization 221,433 224,679 3,246 1.4 %

Impairment of real estate assets 2,423 87,393 84,970 97.2 %

Impairment of real estate assets 6,754 2,423 (4,331) NM

Total operating expenses 435,302 422,991 (12,311) (2.9) %

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Gain on disposal of property, net

Other income (expense), net 9,245 (676) 9,921 NM

Net income (loss)

5,462 (72,826) 78,288 107.5 %

Net (income) loss attributable to noncontrolling interests

(690) 9,294 (9,984) (107.4) %

Net income (loss) attributable to stockholders

$ 4,772 $ (63,532) $ 68,304 107.5 %

30,421 6,494 23,927 NM

Other (expense) income, net

(34,361) 9,245 (43,606) NM

17,233 5,462 11,771 NM

Net income attributable to noncontrolling interests

(2,112) (690) (1,422) NM

Net income attributable to stockholders

$ 15,121 $ 4,772 $ 10,349 NM

(1) Line items that result in a percent change that exceed certain limitations are considered not meaningful (“NM”) and indicated as such.

Our basis for analyzing significant fluctuations in our results of operations generally includes review of the results of our same-center portfolio, non-same-center portfolio, and revenues and expenses from our management activities.

Our non-same-center portfolio includes 28 properties disposed of and seven properties acquired after December 31, 2018.

We define our same-center portfolio as the 256 properties that were owned and operational prior to January 1, 2020.

We define our non-same-center portfolio as those properties that were not fully owned and operational in both periods owing to real estate asset activity occurring after December 31, 2019, which includes 31 properties disposed of and eleven properties acquired.

Below are explanations of the significant fluctuations in the results of operations for the years ended December 31, 2021 and 2020:

Rental Income decreased $36.8 million as follows:

• $20.7 million decrease related to our same-center portfolio primarily as follows:

▪ $26.8 million decrease largely due to the COVID-19 pandemic and its economic impact.

This includes an increased number of Neighbors we have identified as a credit risk which resulted in a decrease to rental income of $24.4 million, including a $3.1 million reduction in revenues due to reserves on straight-line rent adjustments for the related leases.

Additionally, we saw a $2.4 million decrease due to rent abatement;

▪ $2.8 million decrease primarily due to non-cash straight-line rent amortization;

▪ $7.1 million increase primarily due to a $0.23 increase in average minimum rent per square foot and a 0.8% improvement in average occupancy;

▪ $2.0 million increase in recovery income primarily due to a $3.1 million increase owing largely to higher recoverable insurance expenses and higher same-center occupancy, partially offset by a $1.1 million decrease in recoverable utilities.

Rental Income increased $34.0 million as follows:

• $37.3 million increase related to our same-center portfolio as follows:

▪ $30.9 million increase primarily due to stronger collections in 2021 as compared with lower collections in 2020, the increase owing largely to the ongoing recovery of our portfolio in the wake of the COVID-19 pandemic and its economic impact, including a decrease in Neighbors we have identified as a credit risk, as well as collections on charges that were uncollected in 2020;

▪ $7.6 million increase primarily due to a $0.29 increase in average minimum rent per square foot, partially offset by a 0.4% decline in average occupancy;

▪ $2.9 million increase primarily due to straight-line rent adjustments;

▪ $4.1 million decrease owing largely to lower recoverable income resulting from lower real estate taxes and decline in average occupancy.

• $3.3 million decrease related to our net disposition of 20 properties.

Fee and Management Income:

• The $1.9 million decrease in fee and management income is primarily due to fees no longer received from REIT III following its acquisition by us in October 2019;

a decrease in fees received from NRP, primarily due to property dispositions;

and lower rent and recovery collections for our unconsolidated joint ventures as a result of the COVID-19 pandemic, which resulted in lower management fees paid to us.

This offsets improvements in fees received from GRP I and GRP II (prior its acquisition by GRP I).

Property Operating Expenses decreased $3.4 million as follows:

• $0.3 million decrease related to our same-center portfolio and corporate operating activities:

▪ $1.4 million decrease primarily due to reduced performance compensation;

▪ $1.2 million decrease primarily in connection with our expense reduction initiatives, including $0.8 million largely owing to lower maintenance and utility costs, and $0.4 million largely owing to lower travel expenses;

▪ $2.3 million increase in insurance expenses owing to a higher volume of claims and higher market rates.

Property Operating Expenses increased $5.4 million primarily as follows:

• $6.0 million increase related to our same-center portfolio and corporate operating activities primarily as follows:

▪ $5.1 million increase owing largely to lower expense for performance-based compensation in 2020 as a result of the COVID-19 pandemic, as compared to 2021;

▪ $0.8 million increase primarily due to higher insurance expenses attributed to higher market rates and an increase in claims and claim development.

• $0.5 million decrease related to our net disposition of 20 properties.

Real Estate Taxes decreased $3.1 million as follows:

• $1.1 million decrease related to our same-center portfolio primarily as a result of successful real estate tax appeals;

Real Estate Tax Expenses decreased $1.6 million primarily as follows:

• $1.3 million decrease related to our same-center portfolio primarily due to successful tax appeals and favorable assessments at our centers;

• $0.4 million decrease related to our net disposition of 20 properties.

General and Administrative Expenses:

• The $7.1 million decrease in general and administrative expenses was primarily related to expense reductions taken to reduce the impact of the COVID-19 pandemic, with the majority of these decreases related to compensation.

PHILLIPS EDISON & COMPANY

DECEMBER 31, 2021 FORM 10-K

General and Administrative Expenses increased $7.4 million primarily as follows:

• $8.7 million increase owing largely to lower expense for performance-based compensation in 2020 as a result of the COVID-19 pandemic, as compared to 2021;

• $1.2 million increase due to an increase in directors and officers insurance as a result of our underwritten IPO;

• $2.3 million decrease primarily due to lower transfer agent costs and information technology costs.

Depreciation and Amortization decreased $3.2 million as follows:

• $1.8 million decrease related to our same-center portfolio and corporate operating activities primarily as follows:

▪ $5.0 million decrease primarily due to intangible assets becoming fully amortized;

▪ $3.1 million increase primarily due to an increase in tenant improvements and leasing commissions as a result of our recent leasing activity.

• $1.4 million decrease related to our net disposition of 20 properties.

• $4.6 million decrease related to our same-center portfolio and corporate operating activities, primarily due to intangible assets becoming fully amortized by December 31, 2019.

Impairment of Real Estate Assets:

• Our decrease in impairment of real estate assets of $85.0 million was due to a lower volume of assets under contract or actively marketed for sale at a disposition price that was less than the carrying value in 2020 as compared to 2019, the proceeds from which were used to fund tax-efficient acquisitions, to fund redevelopment opportunities in owned centers, and for general corporate purposes.

We continue to sell non-core assets and may potentially recognize impairments in future quarters, but our anticipated disposition activity was reduced due to market conditions as a result of the COVID-19 pandemic.

• The $4.3 million increase in impairment of real estate assets was due to assets that were sold during 2021 at a disposition price that was less than the carrying value.

Interest Expense, Net:

• The $17.9 million decrease during the year ended December 31, 2020 as compared to the same period in 2019 was largely due to the decrease in LIBOR and expiring interest rate swaps in 2020 as well as repricing activities that occurred in 2019.

• The $8.9 million decrease during the year ended December 31, 2021 as compared to the same period in 2020 was due to:

(i) lower debt balances outstanding as a result of early repayments of debt;

(ii) minimal borrowings on our revolving credit facility in 2021 as compared to 2020;

and (iii) lower average interest rates during 2021 primarily due to the Refinancing;

partially offset by (iv) the 2021 Bond Offering.

Interest Expense, Net was comprised of the following (dollars in thousands):

Year Ended December 31,

Interest on revolving credit facility, net $ 1,668 $ 1,827

Interest on term loans, net 46,798 62,745

Interest on unsecured term loans and senior notes, net $ 40,107 $ 46,798

Interest on secured debt 25,044 29,001

Loss on extinguishment or modification of debt, net 4 2,238

Interest on revolving credit facility, net 870 1,668

Non-cash amortization and other 6,758 7,832

Loss on extinguishment or modification of debt and other, net

Interest expense, net $ 76,371 $ 85,303

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Gain on Disposal of Property, Net:

• The $21.7 million decrease was primarily related to the sale of seven properties (plus other miscellaneous disposals and write-offs) with a net gain of $6.5 million during the year ended December 31, 2020, as compared to the sale of 21 properties with net gain of $28.2 million during the year ended December 31, 2019 (see Note 5).

Other Income (Expense), Net:

• The $9.9 million change was largely due to other impairment charges of $9.7 million in connection with the REIT III public offering during the year ended December 31, 2019, which included $7.8 million of impairment charges related

to our corporate intangible asset and $1.9 million of impairment charges related to organization and offering costs.

Other Income (Expense), Net was comprised of the following (dollars in thousands):

• The $23.9 million increase was primarily related to the sale of 24 properties and four outparcels (in addition to other property-related miscellaneous disposals and write-offs) with a net gain of $30.4 million during the year ended December 31, 2021, as compared to the sale of seven properties and one outparcel (in addition to other property-related miscellaneous disposals and write-offs) with a net gain of $6.5 million during the year ended December 31, 2020 (see Note 4).

Other (Expense) Income, Net:

• The $43.6 million change was largely due to:

(i) the change in the fair value of our earn-out liability as a result of the commencement of our underwritten IPO as well as improved market conditions in 2021;

(ii) an increase in transaction and acquisition expenses in connection with our underwritten IPO, including restricted stock units awarded;

partially offset by (iii) an increase from equity in income of our unconsolidated joint ventures primarily due

PHILLIPS EDISON & COMPANY

DECEMBER 31, 2021 FORM 10-K

to Necessity Retail Partners (“NRP”) property dispositions.

Other (Expense) Income, Net was comprised of the following (dollars in thousands):

Year Ended December 31,

Change in fair value of earn-out liability $ 10,000 $ 7,500

Equity in (loss) income of unconsolidated joint ventures

Change in fair value of earn-out liability (see Note 16)

$ (30,436) $ 10,000

Equity in net income (loss) of unconsolidated joint ventures

Transaction and acquisition expenses (5,363) (539)

Federal, state, and local income tax expense (327) (491)

Other impairment charges (359) (9,661)

Settlement of property acquisition-related liabilities 510 1,360

Other 155 439

Other income (expense), net $ 9,245 $ (676)

Other (expense) income, net

$ (34,361) $ 9,245

SUMMARY OF OPERATING ACTIVITIES FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

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NON-GAAP MEASURES

Same-Center Net Operating Income —We present Same-Center NOI as a supplemental measure of our performance.

We define NOI as total operating revenues, adjusted to exclude non-cash revenue items, less property operating expenses and real estate taxes.

For the three months and years ended December 31, 2020 and 2019, Same-Center NOI represents the NOI for the 275 properties that were wholly-owned and operational for the entire portion of both comparable reporting periods.

We believe Same-Center NOI provides useful information to our investors about our financial and operating performance because it provides a performance measure of the revenues and expenses directly involved in owning and operating real estate assets and provides a perspective not immediately apparent from net income (loss).

Because Same-Center NOI excludes the change in NOI from properties acquired or disposed of after December 31, 2018, it highlights operating trends such as occupancy levels, rental rates, and operating costs on properties that were operational for both comparable periods.

See “Key Performance Indicators and Defined Terms” above for additional information related to the following non-GAAP measures.

SAME-CENTER NET OPERATING INCOME —Same-Center NOI is presented as a supplemental measure of our performance, as it highlights operating trends such as occupancy levels, rental rates, and operating costs for our Same-Center portfolio.

Other REITs may use different methodologies for calculating Same-Center NOI, and accordingly, our Same-Center NOI may not be comparable to other REITs.

For the years ended December 31, 2021 and 2020, Same-Center NOI represents the NOI for the 256 properties that were wholly-owned and operational for the entire portion of both comparable reporting periods.

Same-Center NOI should not be viewed as an alternative measure of our financial performance as it does not reflect the operations of our entire portfolio, nor does it reflect the impact of general and administrative expenses, depreciation and amortization, interest expense, other income (expense), or the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties that could materially impact our results from operations.

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(1) Excludes straight-line rental income, net amortization of above- and below-market leases, and lease buyout income.

(2) Includes billings that will not be recognized as revenue until cash is collected or the Neighbor resumes regular payments and/or is considered creditworthy.

Same-Center Net Operating Income Reconciliation —Below is a reconciliation of Net Income (Loss) for the years ended December 31, 2020 and 2019 (in thousands):

Net income (loss) $ 5,462 $ (72,826)

(2) Includes billings that will not be recognized as revenue until cash is collected or the Neighbor resumes regular payments and/or we deem it appropriate to resume recording revenue on an accrual basis, rather than on a cash basis.

PHILLIPS EDISON & COMPANY

DECEMBER 31, 2021 FORM 10-K

Same-Center Net Operating Income Reconciliation —Below is a reconciliation of Net Income to NOI and Same-Center NOI for the years ended December 31, 2021 and 2020 (in thousands):

$ 17,233 $ 5,462

Adjusted to exclude:

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(9,404) (3,356)

Net amortization of above- and below-

market leases

(3,173) (4,185)

Net amortization of above- and below-market leases (3,581) (3,173)

Lease buyout income

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Gain on disposal of property, net

Other (income) expense, net (9,245) 676

(30,421) (6,494)

Other expense (income), net

34,361 (9,245)

Property operating expenses related to fees and management income 4,855 6,098

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Total Same-Center NOI $ 346,768 $ 320,377

(1) Includes straight-line rent adjustments for Neighbors deemed to be non-creditworthy.

(1) Includes straight-line rent adjustments for Neighbors for whom revenue is being recorded on a cash basis.

(2) Includes operating revenues and expenses from non-same-center properties which includes properties acquired or sold and corporate activities.

Funds from Operations and Core Funds from Operations —FFO is a non-GAAP performance financial measure that is widely recognized as a measure of REIT operating performance.

The National Association of Real Estate Investment Trusts (“Nareit”) defines FFO as net income (loss) computed in accordance with GAAP, excluding gains (or losses) from sales of property and gains (or losses) from change in control, plus depreciation and amortization, and after adjustments for impairment losses on real estate and impairments of in-substance real estate investments in investees that are driven by measurable decreases in the fair value of the depreciable real estate held by the unconsolidated partnerships and joint ventures.

Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO on the same basis.

We calculate FFO Attributable to Stockholders and Convertible Noncontrolling Interests in a manner consistent with the Nareit definition, with an additional adjustment made for noncontrolling interests that are not convertible into common stock.

Core FFO is an additional performance financial measure used by us as FFO includes certain non-comparable items that affect our performance over time.

We believe that Core FFO is helpful in assisting management and investors with the assessment of the sustainability of operating performance in future periods.

We believe it is more reflective of our core operating performance and provides an additional measure to compare our performance across reporting periods on a consistent basis by excluding items that may cause short-term fluctuations in net income (loss).

To arrive at Core FFO, we adjust FFO attributable to stockholders and convertible noncontrolling interests to exclude certain recurring and non-recurring items including, but not limited to, depreciation and amortization of corporate assets, changes in the fair value of the earn-out liability, amortization of unconsolidated joint venture basis differences, gains or losses on the extinguishment or modification of debt, other impairment charges, and transaction and acquisition expenses.

FFO, FFO Attributable to Stockholders and Convertible Noncontrolling Interests, and Core FFO should not be considered alternatives to net income (loss) under GAAP, as an indication of our liquidity, nor as an indication of funds available to cover our cash needs, including our ability to fund distributions.

NAREIT FFO AND CORE FFO —Nareit FFO is a non-GAAP financial performance measure that is widely recognized as a measure of REIT operating performance.

Core FFO is an additional financial performance measure used by us as Nareit FFO includes certain non-comparable items that affect our performance over time.

We believe that Core FFO is helpful in assisting management and investors with assessing the sustainability of our operating performance in future periods.

Nareit FFO, Nareit FFO Attributable to Stockholders and OP Unit Holders, and Core FFO should not be considered alternatives to net income (loss) under GAAP, as an indication of our liquidity, nor as an indication of funds available to cover our cash needs, including our ability to fund distributions.

Core FFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate our business plan in the manner currently contemplated.

Accordingly, FFO, FFO Attributable to Stockholders and Convertible Noncontrolling Interests, and Core FFO should be reviewed in connection with other GAAP measurements, and should not be viewed as more prominent measures of performance than net income (loss) or cash flows from operations prepared in accordance with GAAP.

Our FFO, FFO Attributable to Stockholders and Convertible Noncontrolling Interests, and Core FFO, as presented, may not be comparable to amounts calculated by other REITs.

The following table presents our calculation of FFO, FFO Attributable to Stockholders and Convertible Noncontrolling Interests, and Core FFO and provides additional information related to our operations for the years ended December 31, 2020, 2019, and 2018 (in thousands, except per share amounts):

Accordingly, Nareit FFO, Nareit FFO Attributable to Stockholders and OP Unit Holders, and Core FFO should be reviewed in connection with other GAAP measurements, and should not be viewed as more prominent measures of performance than net income (loss) or cash flows from operations prepared in accordance with GAAP.

Our Nareit FFO, Nareit FFO Attributable to Stockholders and OP Unit Holders, and Core FFO, as presented, may not be comparable to amounts calculated by other REITs.

PHILLIPS EDISON & COMPANY

DECEMBER 31, 2021 FORM 10-K

The following table presents our calculation of Nareit FFO, Nareit FFO Attributable to Stockholders and OP Unit Holders, and Core FFO for the years ended December 31, 2021, 2020, and 2019 (in thousands, except per share amounts):

2021 2020 2019

Calculation of FFO Attributable to Stockholders and

Convertible Noncontrolling Interests

Calculation of Nareit FFO Attributable to Stockholders and

OP Unit Holders

Net income (loss)

$ 17,233 $ 5,462 $ (72,826)

Depreciation and amortization of real estate assets 217,564 218,738 231,023

Impairment of real estate assets 6,754 2,423 87,393

Gain on the disposal of property, net (6,494) (28,170) (109,300)

Gain on disposal of property, net

(30,421) (6,494) (28,170)

Adjustments related to unconsolidated joint ventures 72 1,552 (128)

FFO attributable to the Company 221,681 217,292 156,521

Adjustments attributable to noncontrolling interests

not convertible into common stock — (282) (299)

FFO attributable to stockholders and convertible

noncontrolling interests $ 221,681 $ 217,010 $ 156,222

Nareit FFO attributable to the Company 211,202 221,681 217,292

Adjustments attributable to noncontrolling interests not

convertible into common stock — — (282)

Nareit FFO attributable to stockholders and OP unit holders $ 211,202 $ 221,681 $ 217,010

Calculation of Core FFO

FFO attributable to stockholders and convertible

noncontrolling interests $ 221,681 $ 217,010 $ 156,222

Nareit FFO attributable to stockholders and OP unit holders $ 211,202 $ 221,681 $ 217,010

Depreciation and amortization of corporate assets 3,869 5,941 5,847

Change in fair value of earn-out liability and derivatives (10,000) (7,500) 2,393

Other impairment charges 359 9,661 —

Change in fair value of earn-out liability 30,436 (10,000) (7,500)

Transaction and acquisition expenses 5,363 539 598

Loss on extinguishment or modification of debt and other, net

3,592 4 2,238

Amortization of unconsolidated joint venture

basis differences 1,167 1,883 2,854

Loss (gain) on extinguishment or modification of debt, net

Transaction and acquisition expenses 539 598 3,426

Realized performance income (675) — —

Other impairment charges — 359 9,661

Other — — 158

Core FFO $ 254,954 $ 220,407 $ 230,866

FFO Attributable to Stockholders and Convertible

Noncontrolling Interests/Core FFO per share

Weighted-average common shares outstanding - diluted (1)

Nareit FFO Attributable to Stockholders and OP Unit

Holders/Core FFO per diluted share

Weighted-average shares of common stock outstanding -

116,672 111,156 109,170

FFO attributable to stockholders and convertible

noncontrolling interests per share - diluted $ 0.66 $ 0.66 $ 0.65

Nareit FFO attributable to stockholders and OP unit holders

per share - diluted $ 1.81 $ 1.99 $ 1.99

Core FFO per share - diluted $ 2.19 $ 1.98 $ 2.11

(1) Restricted stock awards were dilutive to FFO Attributable to Stockholders and Convertible Noncontrolling Interests per share and Core FFO per share for the years ended December 31, 2020, 2019, and 2018, and, accordingly, their impact was included in the weighted-average common shares used in their respective per share calculations.

(1) Restricted stock awards were dilutive to Nareit FFO attributable to stockholders and OP unit holders per share and Core FFO per share for the years ended December 31, 2021, 2020, and 2019, and, accordingly, their impact was included in the weighted-average shares of common stock used in their respective per share calculations.

For the year ended December 31, 2019, restricted stock units had an anti-dilutive effect upon the calculation of earnings per share and thus were excluded.

For details related to the calculation of earnings per share, see Note 14.

Earnings Before Interest, Taxes, Depreciation, and Amortization for Real Estate (“EBITDAre”) and Adjusted EBITDAre —Nareit defines EBITDA re as net income (loss) computed in accordance with GAAP before (i) interest expense, (ii) income tax expense, (iii) depreciation and amortization, (iv) gains or losses from disposition of depreciable property, and (v) impairment write-downs of depreciable property.

Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect EBITDA re on the same basis.

Adjusted EBITDA re is an additional performance measure used by us as EBITDA re includes certain non-comparable items that affect our performance over time.

To arrive at Adjusted EBITDA re, we exclude certain recurring and non-recurring items from EBITDA re , including, but not limited to:

(i) changes in the fair value of the earn-out liability;

(ii) other impairment charges;

(iii) amortization of basis differences in our investments in our unconsolidated joint ventures;

and (iv) transaction and acquisition expenses.

We have included the calculation of EBITDA re to better align with publicly traded REITs.

We use EBITDA re and Adjusted EBITDA re as additional measures of operating performance which allow us to compare earnings independent of capital structure, determine debt service and fixed cost coverage, and measure enterprise value.

EBITDA re and ADJUSTED EBITDA re —We use EBITDA re and Adjusted EBITDA re as additional measures of operating performance which allow us to compare earnings independent of capital structure, determine debt service and fixed cost coverage, and measure enterprise value.

Additionally, we believe they are a useful indicator of our ability to support our debt obligations.

EBITDA re and Adjusted EBITDA re should not be considered as alternatives to net income (loss), as an indication of our liquidity, nor as an indication of funds available to cover our cash needs, including our ability to fund distributions.

Accordingly, EBITDA re and Adjusted EBITDA re should be reviewed in connection with other GAAP measurements, and should not be viewed as more prominent measures of performance than net

income (loss) or cash flows from operations prepared in accordance with GAAP.

Accordingly, EBITDA re and Adjusted EBITDA re should be reviewed in connection with other GAAP measurements, and should not be viewed as more prominent measures of performance than net income (loss) or cash flows from operations prepared in accordance with GAAP.

Our EBITDA re and Adjusted EBITDA re , as presented, may not be comparable to amounts calculated by other REITs.

PHILLIPS EDISON & COMPANY

DECEMBER 31, 2021 FORM 10-K

The following table presents our calculation of EBITDA re and Adjusted EBITDA re for the years ended December 31, 2021, 2020, and 2019 (in thousands):

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Federal, state, and local tax expense 327 491 785

Adjustments related to unconsolidated

joint ventures 3,355 2,571 446

Adjustments related to unconsolidated joint ventures 1,431 3,355 2,571

$ 293,128 $ 315,219 $ 329,797

1 unchanged sentence

$ 293,128 $ 315,219 $ 329,797

Change in fair value of earn-out liability and derivatives (10,000) (7,500) 2,393

Other impairment charges 359 9,661 —

Amortization of unconsolidated joint

venture basis differences 1,883 2,854 167

Change in fair value of earn-out liability 30,436 (10,000) (7,500)

Transaction and acquisition expenses 5,363 539 598

Amortization of unconsolidated joint venture basis differences 1,167 1,883 2,854

Realized performance income (675) — —

Other impairment charges — 359 9,661

Adjusted EBITDA re

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GENERAL —Aside from standard operating expenses, we expect our principal cash demands to be for:

• cash distributions to stockholders;

• investments in real estate;

• capital expenditures and leasing costs;

• cash distributions to stockholders;

• redevelopment and repositioning projects;

• repurchases of common stock;

• capital expenditures and leasing costs;

• principal and interest payments on our outstanding indebtedness.

2 unchanged sentences

• proceeds received from the disposition of properties;

• reinvested distributions;

• proceeds from debt financings, including borrowings under our unsecured revolving credit facility;

• distributions received from joint ventures;

• proceeds from any ATM offering activities;

• proceeds from debt financings, including borrowings in connection with our Bond Registration and those under our unsecured revolving credit facility;

• distributions received from unconsolidated joint ventures;

• available, unrestricted cash and cash equivalents.

Our cash from operations has been reduced, and we anticipate that it may continue to be negatively impacted, at least in the near term, as a result of the COVID-19 pandemic as we temporarily experience reduced or delayed cash payments and/or revenue from Neighbors.

Additionally, our cash from financing activities has been impacted by actions taken to preserve liquidity, such as the suspension of our distributions and the DRIP beginning in April 2020 and continuing through November 2020, and the suspension of the SRP for DDI beginning in March 2020 and continuing through December 2020.

The cash on hand resulting from these actions allowed us to execute the Tender Offer as well as reinstate distributions, including the DRIP, beginning in December 2020.

Further, the SRP for DDI was reinstated effective January 2021.

We are monitoring events closely and managing our cash usage, which also includes prioritizing our capital spending and redevelopment to support the reopening of our Neighbors and new leasing activity, or deferring if possible, as well as reducing other property and corporate expenses.

At this time, we believe our current sources of liquidity, most significantly our operating cash flows and borrowing availability on our revolving credit facility, are sufficient to meet our short- and long-term cash demands.

At this time, we believe our current sources of liquidity are sufficient to meet our short- and long-term cash demands.

UNDERWRITTEN IPO —On July 19, 2021, we closed our underwritten IPO, through which we issued 19.6 million shares, including the underwriters’ overallotment election, of our common stock, $0.01 par value per share, at an initial price to the public of $28.00 per share.

The underwritten IPO, including the underwriters’ overallotment election, resulted in gross proceeds of $547.4 million.

See “Overview” above for more details.

PHILLIPS EDISON & COMPANY

DECEMBER 31, 2021 FORM 10-K

DEBT —The following table summarizes information about our debt as of December 31, 2021 and 2020 (dollars in thousands):

3 unchanged sentences

Revolving credit facility capacity (1)

$ 500,000 $ 500,000

Revolving credit facility availability (2)

489,329 490,404

Revolving credit facility maturity (2)

October 2021 October 2021

(1) In July 2021, we refinanced the revolving credit facility and exercised our option to extend its maturity as noted below.

(2) Net of any outstanding balance and letters of credit.

(2) The revolving credit facility matures in October 2021 and includes an option to extend the maturity to October 2022, with its execution being subject to compliance with certain terms included in the loan agreement, including the absence of any defaults and the payment of relevant fees.

We intend to either exercise our option to extend the maturity or to negotiate under new terms.

During the years ended December 31, 2020 and 2019, we took steps to reduce our leverage, lower our cost of debt, and appropriately ladder our debt maturities.

Bond Registration —On September 20, 2021, the SEC declared effective our Bond Registration.

We intend to use net proceeds from any sale of offered securities to repay outstanding indebtedness and for general corporate purposes, including funding future investment activity.

Debt Activity —During the years ended December 31, 2021 and 2020, we took steps to reduce our leverage and appropriately ladder our debt maturities.

Our debt activity during the year ended December 31, 2021 was as follows:

• In July 2021, we completed the Refinancing.

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

Additionally, we used proceeds from the underwritten IPO to retire a $375.0 million term loan that was set to mature in April 2022.

• In August 2021, we executed a $150 million partial pay down on a term loan that was set to mature in November 2023 utilizing cash on hand.

• In October 2021, we settled the 2021 Bond Offering priced at 98.692% of the principal amount and maturing in November 2031.

The 2021 Bond Offering resulted in gross proceeds of $345.4 million.

In October 2021, net proceeds from the bond settlement were used, in part, to pay down the remaining $150 million balance of the term loan that was set to mature in November 2023.

The notes are fully and unconditionally guaranteed by us.

• During 2021, we executed early repayments of $55.2 million in mortgage debt.

Our debt activity during the year ended December 31, 2020 was as follows:

• In January 2020, we paid down $30 million of term loan debt maturing in 2021 using proceeds from property dispositions in 2019.

Following this repayment, our next term loan maturity is in April 2022 and includes an option to extend the maturity to October 2022, with its execution being subject to compliance with certain terms included in the loan agreement, including the absence of any defaults and the payment of relevant fees.

We intend to either exercise our option to extend the maturity or to negotiate under new terms.

• In April 2020, we borrowed $200 million on our revolving credit facility to meet our operating needs for a sustained period due to the COVID-19 pandemic.

2 unchanged sentences

• In the fourth quarter, we executed early repayments of $24.5 million in mortgage debt.

Our debt activity during the year ended December 31, 2019, which we expect will save approximately $1.9 million in interest annually, was as follows:

• In September 2019, we repriced a $200 million term loan, lowering the interest rate spread from 1.75% over LIBOR to 1.25% over LIBOR, while maintaining the current maturity of September 2024.

• In October 2019, we repriced a $175 million term loan from a spread of 1.75% over LIBOR to 1.25% over LIBOR, while maintaining the current maturity of October 2024.

• In December 2019, we executed a $200 million fixed-rate secured loan maturing in January 2030.

The proceeds from this loan, along with proceeds from property dispositions, were used to pay down $265.9 million of term loan debt maturing in 2020 and 2021.

Our debt is subject to certain covenants, and as of December 31, 2020, we were in compliance with the restrictive covenants of our outstanding debt obligations.

We expect to continue to meet the requirements of our debt covenants over the next twelve months.

Financial Leverage Ratios —We believe our debt to Adjusted EBITDA re , debt to total enterprise value, and debt covenant compliance as of December 31, 2020 allow us access to future borrowings as needed in the near term.

The following table presents our calculation of net debt and total enterprise value, inclusive of our prorated portion of net debt and cash and cash equivalents owned through our joint ventures, as of December 31, 2020 and 2019 (dollars in thousands):

Total debt, excluding market adjustments and deferred financing expenses $ 2,345,620 $ 2,421,520

Future Debt Obligations —As of December 31, 2021, including the impact of our swap agreements, our future contractual debt obligations were $123.5 million of debt principal and interest payments during 2022, and $2.1 billion of debt principal and interest payments thereafter (see Note 8).

Covenants —Credit agreements for our unsecured revolving credit facility and unsecured term loans contain customary financial covenants, including a leverage ratio of 60% or less, with a surge to 65% or less following a material acquisition, and require the fixed-charge ratio to be 1.5:1 or greater.

Our unsecured senior notes due 2031 are also subject to customary financial covenants, including a leverage ratio of 65% or less, and require the fixed-charge ratio to be 150% or greater.

As of December 31, 2021, we were in compliance with the restrictive covenants of our outstanding debt obligations and we expect to continue to meet the requirements of these covenants over the next twelve months.

OTHER CONTRACTUAL COMMITMENTS AND CONTINGENCIES AND OFF BALANCE SHEET ARRANGEMENTS —We enter into leases as a lessee as part of our real estate operations in the form of ground leases of land for certain properties, and as part of our corporate operations in the form of office space and office equipment leases.

Currently, neither our operating leases nor our finance leases have residual value guarantees or other restrictions or covenants.

We expect to fund these obligations through existing financing or cash flows from operations.

As of December 31, 2021, our future contractual obligations as a lessee included operating lease obligations of $0.8 million during 2022, and $7.5 million thereafter.

As of December 31, 2021, our future contractual finance lease obligations included $0.2 million during 2022, and $0.6 million thereafter.

We have an off-balance sheet arrangement that includes being the limited guarantor for up to $190 million, capped at $50 million in most instances, of debt for our NRP joint venture.

Additionally, we are the limited guarantor of a $175 million mortgage loan secured by Grocery Retail Partners I LLC (“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.

As of December 31, 2021, NRP and GRP I had outstanding debt balances of $15.3 million and $174.0 million, respectively.

PHILLIPS EDISON & COMPANY

DECEMBER 31, 2021 FORM 10-K

Additionally, our off-balance sheet arrangements include the notional amount of our interest rate swaps which we use to hedge a portion of our exposure to interest rate fluctuations.

Currently, all of our interest rate swaps fix the variable rate interest on our term loan debt.

We intend to fund our interest rate swap payments utilizing cash flows from operations.

As of December 31, 2021, the notional amount of our interest rate swaps was $0.9 billion.

As of December 31, 2021, our future interest rate swap obligations are $17.8 million during 2022 and $32.6 million thereafter.

FINANCIAL LEVERAGE RATIOS —We believe our net debt to Adjusted EBITDA re , net debt to total enterprise value, and debt covenant compliance as of December 31, 2021 allow us access to future borrowings as needed in the near term.

The following table presents our calculation of net debt and total enterprise value, inclusive of our prorated portion of net debt and cash and cash equivalents owned through our unconsolidated joint ventures, as of December 31, 2021 and 2020 (in thousands):

Total debt, excluding discounts, market adjustments, and deferred

financing expenses $ 1,941,504 $ 2,345,620

Cash and cash equivalents 93,109 104,952

1 unchanged sentence

Enterprise value:

Total Net debt $ 2,240,668 $ 2,403,144

Total equity value (1)

Net debt $ 1,848,395 $ 2,240,668

Total equity market capitalization (1)

4,182,996 2,797,234

Total enterprise value $ 6,031,391 $ 5,037,902

(1) Total equity value is calculated as the number of common shares and OP units outstanding multiplied by the EVPS at the end of the period.

There were 319.7 million diluted shares outstanding with an EVPS of $8.75 as of December 31, 2020 and 331.7 million diluted shares outstanding with an EVPS of $11.10 as of December 31, 2019.

(1) As of December 31, 2021, total equity market capitalization was calculated as the 126.6 million diluted shares multiplied by the closing market price per share of $33.04.

As of December 31, 2020, prior to the underwritten IPO, total equity value was calculated as 106.6 million diluted shares multiplied by the EVPS of $26.25.

Fully diluted shares include Class B common stock, common stock, and OP units.

The following table presents our calculation of net debt to Adjusted EBITDA re and net debt to total enterprise value as of December 31, 2021 and 2020 (dollars in thousands):

December 31, 2020 December 31, 2019

Net debt to Adjusted EBITDA re - annualized:

8 unchanged sentences

(1) Adjusted EBITDA re is based on a trailing twelve months.

See “Part II, Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Measures - EBITDA re and Adjusted EBITDA re” of this filing on Form 10-K for a reconciliation to Net Income (Loss).

See “Non-GAAP Measures - EBITDA re and Adjusted EBITDA re” above for a reconciliation to Net Income (Loss).

CAPITAL EXPENDITURES AND REDEVELOPMENT ACTIVITY —We make capital expenditures during the course of normal operations, including maintenance capital expenditures and tenant improvements, as well as value-enhancing anchor space repositioning and redevelopment, ground-up outparcel development, and other accretive projects.

In response to the COVID-19 pandemic, our capital investments have been prioritized to support the reopening of our Neighbors and new leasing activity, or deferred if possible.

During the years ended December 31, 2020 and 2019, we had capital expenditures of $64.0 million and $75.5 million, respectively.

We expect our capital expenditures to reach $85 million - $95 million in 2021, which includes $54.5 million related to development and redevelopment projects.

As of December 31, 2020, our redevelopment projects in process include a demolition and rebuild of a Publix anchor at one of our centers for a total investment of approximately $7.6 million, with the remaining spend of $6.1 million expected to be completed in 2021.

We expect our development and redevelopment projects to stabilize within 24 months.

We anticipate that obligations related to capital improvements as well as redevelopment and development in 2020 can be met with cash flows from operations, cash flows from dispositions, or borrowings on our

unsecured revolving line of credit.

Below is a summary of our capital spending activity for the years ended December 31, 2020 and 2019 (in thousands):

During the years ended December 31, 2021 and 2020, we had capital spend of $75.0 million and $64.0 million, respectively.

Below is a summary of our capital spending activity, excluding leasing commissions, on a cash basis for the years ended December 31, 2021 and 2020 (in thousands):

2021 2020 (1)

Capital expenditures for real estate:

Maintenance capital and tenant improvements $ 27,747 $ 33,842

Capital improvements $ 15,862 $ 13,443

Tenant improvements 23,485 14,304

Redevelopment and development 31,579 30,521

3 unchanged sentences

Total capital spending activity $ 75,035 $ 63,965

(1) Certain prior period amounts have been reclassified to conform with current year presentation.

PHILLIPS EDISON & COMPANY

DECEMBER 31, 2021 FORM 10-K

(2) Amount includes internal salaries and related benefits of personnel who work directly on capital projects as well as capitalized interest expense.

We target an average incremental yield of 8% to 11% for development and redevelopment projects.

Incremental yield reflects the incremental NOI generated by each project upon expected stabilization and is calculated as incremental NOI divided by net project investment.

Incremental NOI is the difference between the NOI expected to be generated by the stabilized project and the forecasted NOI without the planned improvements.

Incremental yield does not include peripheral impacts, such as lease rollover risk or the impact on the long term value of the property upon sale or disposition.

Merger and Acquisition Activity —We continually monitor the commercial real estate market for properties that have future growth potential, are located in attractive demographic markets, and support our business objectives.

Due to the COVID-19 pandemic, as well as the resulting market conditions, our acquisition activity was lower than anticipated during 2020, and we anticipate that acquisition activity may remain low throughout 2021.

Below is a summary of our merger and acquisition activity for the years ended December 31, 2020 and 2019 (dollars and square feet in thousands):

Third-Party Acquisitions REIT III Merger (1)

Third-Party Acquisitions

Number of properties purchased 2 3 2

Number of outparcels purchased (2)

Total square footage acquired 216 251 213

We expect our capital expenditures to reach $95 million - $105 million in 2022, which includes $45 million - $55 million related to development and redevelopment projects.

We anticipate that obligations related to capital improvements in 2022 can be met with cash flows from operations, cash flows from dispositions, or borrowings on our unsecured revolving credit facility.

Generally, we expect our development and redevelopment projects to stabilize within 24 months.

Our underwritten incremental unlevered yields on development and redevelopment projects are expected to average between 10%-12%.

Our current in process projects represent an estimated total investment of $45.4 million.

See “Key Performance Indicators and Defined Terms” above for further information.

ACQUISITION ACTIVITY —We continually monitor the commercial real estate market for properties that have future growth potential, are located in attractive demographic markets, and support our business objectives.

The following table highlights our property acquisitions during the years ended December 31, 2021 and 2020 (dollars in thousands):

Number of properties acquired 9 2

Number of outparcels acquired (1)

Total price of acquisitions $ 308,358 $ 41,482

(1) Number of properties and outparcels excludes those owned through our investment in GRP II, which we acquired through the merger with REIT III in 2019.

GRP II was subsequently acquired by GRP I in October 2020.

(2) Outparcels purchased in 2020 and 2019 are parcels of land adjacent to shopping centers that we own.

(1) Outparcels acquired are adjacent to shopping centers that we own.

Subsequent to December 31, 2021, we acquired three properties for $100.4 million.

DISPOSITION ACTIVITY —We are actively evaluating our portfolio of assets for opportunities to make strategic dispositions of assets that no longer meet our growth and investment objectives or assets that have stabilized in order to capture their value.

Seeding joint venture portfolios is another desirable growth strategy as we retain ownership interests in the seeded properties while simultaneously increasing our high-margin fee revenue earned through the provision of management services to those properties.

We expect to continue to make strategic dispositions during 2021.

The following table highlights our property dispositions during the years ended December 31, 2020 and 2019 (dollars and square feet in thousands):

The following table highlights our property dispositions during the years ended December 31, 2021 and 2020 (dollars in thousands):

Number of properties sold (1)

Number of outparcels sold (2)(3)

Total square footage sold 678 2,564

Proceeds from sale of real estate $ 57,902 $ 223,083

Gain on sale of properties, net (2)

Proceeds from sale of real estate, net $ 206,377 $ 57,902

Gain on sale of property, net (4)

34,309 10,117

(1) We retained certain outparcels of land associated with one of our property dispositions during the year ended December 31, 2020, and as a result, this property is still included in our total property count.

(2) The gain on sale of property, net does not include miscellaneous write-off activity, which is also recorded in Gain on Sale or Contribution of Property, Net on the consolidated statements of operations and comprehensive income (loss).

Distributions —Distributions to our common stockholders and OP unit holders, including key financial metrics for comparison purposes, for the years ended December 31, 2020 and 2019, are as follows (in thousands):

Cash distributions to OP unit holders Net cash provided by operating activities

Cash distributions to common stockholders Core FFO (1)

Distributions reinvested through the DRIP

(1) See “Part II, Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Measures - Funds from Operations and Core Funds from Operations” of this filing on Form 10-K for the definition of Core FFO, or information regarding why we present Core FFO, and for a reconciliation of this non-GAAP financial measure to Net Income (Loss).

During 2020, we paid distributions of $0.05583344 per share, or $0.67 annualized, for the months of December 2019 and January, February, and March 2020 until the suspension of stockholder distributions by the Board.

During the year ended December 31, 2019, we paid monthly distributions of $0.05583344 per share.

The timing and amount of distributions is determined by our Board and is influenced in part by our intention to comply with REIT requirements of the Internal Revenue Code.

On March 27, 2020, as a result of the uncertainty surrounding the COVID-19 pandemic, our Board suspended stockholder distributions, effective after the payment of the March 2020 distribution on April 1, 2020.

The DRIP was also suspended, and the March 2020 distribution was paid in all cash on April 1, 2020.

The suspension of stockholder distributions and the DRIP did not impact our qualification as a REIT.

On November 4, 2020, our Board reinstated monthly stockholder distributions beginning December 2020 equal to $0.02833333 per share, or $0.34 annualized.

Additionally, the DRIP was reinstated with this distribution.

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

The distribution and DRIP for December 2020 became effective for stockholders of record at the close of business on December 31, 2020, and this distribution was paid on January 12, 2021.

Distributions were paid for January and February 2021.

Additionally, our Board has approved distributions of $0.02833333 per share for March 2021.

Our Board intends to evaluate distributions on a monthly basis throughout 2021.

To maintain our qualification as a REIT, we must make aggregate annual distributions to our stockholders of at least 90% of our REIT taxable income (which is computed without regard to the dividends paid deduction or net capital gain, and which does not equal net income (loss) as calculated in accordance with GAAP).

(1) We retained one outparcel related to property sales during each of the years ended December 31, 2021 and 2020;

therefore, the sales did not result in reductions in our total property count.

(2) During the year ended December 31, 2021, one of our outparcel sales included the only remaining portion of a property we previously owned;

therefore, the sale resulted in a reduction in our total property count.

(3) In addition to the four outparcels sold during the year ended December 31, 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 on sale of property, net does not include miscellaneous write-off activity, which is also recorded in Gain on Disposal of Property, Net on the consolidated statements of operations and comprehensive income (loss).

Subsequent to December 31, 2021, we sold one property for $1.4 million.

PHILLIPS EDISON & COMPANY

DECEMBER 31, 2021 FORM 10-K

DISTRIBUTIONS —The following table details distributions to our common stockholders and OP unit holders on a cash basis during the years ended December 31, 2021 and 2020:

Date of Record Monthly Distribution Rate Annual Distribution Rate Date Distribution Paid

December 2020 12/31/2020 $0.085 $1.02 1/12/2021

January 2021 1/15/2021 $0.085 $1.02 2/1/2021

February 2021 2/15/2021 $0.085 $1.02 3/1/2021

March 2021 3/19/2021 $0.085 $1.02 4/1/2021

April 2021 4/19/2021 $0.085 $1.02 5/3/2021

May 2021 5/17/2021 $0.085 $1.02 6/1/2021

June 2021 6/15/2021 $0.085 $1.02 7/1/2021

July 2021 7/15/2021 $0.085 $1.02 8/2/2021

August 2021 8/16/2021 $0.085 $1.02 9/1/2021

September 2021 9/15/2021 $0.085 $1.02 10/1/2021

October 2021 10/15/2021 $0.09 $1.08 11/1/2021

November 2021 11/15/2021 $0.09 $1.08 12/1/2021

December 2021 12/15/2021 $0.09 $1.08 1/3/2022

December 2019 12/16/2019 $0.168 $2.02 1/2/2020

January 2020 1/15/2020 $0.168 $2.02 2/3/2020

February 2020 2/17/2020 $0.168 $2.02 3/2/2020

March 2020 3/16/2020 $0.168 $2.02 4/1/2020

(1) Due to the uncertainty of the COVID-19 pandemic, our Board suspended stockholder distributions effective after the payment of the March 2020 distribution on April 1, 2020 and continuing through November 2020.

Our Board reinstated monthly stockholder distributions beginning December 2020.

The January 2022 distributions of $0.09 per share were paid on February 1, 2022.

On February 9, 2022, our Board authorized 2022 distributions for February, March, and April of $0.09 per share to the stockholders of record at the close of business on February 15, 2022, March 15, 2022, and April 15, 2022, respectively.

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

The timing and amount of distributions is determined by our Board and is influenced in part by our intention to comply with REIT requirements of the IRC.

To maintain our qualification as a REIT, we must make aggregate annual distributions to our stockholders of at least 90% of our REIT taxable income (which is computed without regard to the dividends paid deduction or net capital gain, and which does not necessarily equal net income or loss as calculated in accordance with GAAP).

We generally will not be subject to U.S.

federal income tax on the income that we distribute to our stockholders each year due to meeting the REIT qualification requirements.

However, we may be subject to certain state and local taxes on any income, property, or net worth and to federal income and excise taxes on our undistributed income.

However, we may be subject to certain state and local taxes on our income, property, or net worth and to federal income and excise taxes on our undistributed income.

We have not established a minimum distribution level, and our charter does not require that we make distributions to our stockholders.

Cash Flow Activities —As of December 31, 2020, we had cash and cash equivalents and restricted cash of $131.9 million , a net cash increase of $36.8 million d uring the year ended December 31, 2020.

DRIP AND THE SRP —On August 4, 2021, as a result of our underwritten IPO, our Board approved the termination of the DRIP and the SRP.

CASH FLOW ACTIVITIES —As of December 31, 2021, we had cash and cash equivalents and restricted cash of $115.5 million , a net cash decrease of $16.4 million d uring the year ended December 31, 2021.

Below is a summary of our cash flow activity for the years ended December 31, 2021 and 2020 (dollars in thousands):

1 unchanged sentence

Net cash provided by operating activities

Net cash (used in) provided by investing activities (44,092) 64,183 (108,275) NM

$ 262,902 $ 210,576 $ 52,326 24.8 %

Net cash used in investing activities

(180,491) (44,092) (136,399) NM

Net cash used in financing activities

(98,819) (129,655) 30,836 23.8 %

OPERATING ACTIVITIES —Our net cash provided by operating activities was primarily impacted by the following:

• Property operations and working capital — Most of our operating cash comes from rental and tenant recovery income and is offset by property operating expenses, real estate taxes, and general and administrative costs.

Our change in cash flows from property operations is primarily due to reduced revenue and collections as a result of the COVID-19 pandemic, partially mitigated by expense reduction measures at the property and corporate levels.

The increase in property operations was primarily due to a $26.4 million, or 8.2%, improvement in same-center NOI as

PHILLIPS EDISON & COMPANY

DECEMBER 31, 2021 FORM 10-K

compared to 2020.

During the year ended December 31, 2021, we had a net cash inflow of $4.0 million from changes in working capital as compared to a net cash outlay of $15.9 million during the same period in 2020.

This change was primarily driven by improved collections on amounts due from Neighbors as well as expense reduction initiatives, and was partially offset by higher leasing commissions and prepaid expenses.

• Fee and management income — We also generate operating cash from our third-party investment management business, pursuant to various management and advisory agreements between us and the Managed Funds.

Our fee and management income was $9.8 million for the year ended December 31, 2020, a decrease of $1.9 million as compared to the same period in 2019, primarily due to fee and management income no longer received from REIT III following its acquisition by us in October 2019;

a decrease in fees received from NRP largely due to property dispositions;

and lower rent and recovery collections for our unconsolidated joint ventures, which resulted in lower management fees paid to us, as a result of the COVID-19 pandemic.

This offsets improvements in fees received from GRP I and GRP II (prior its acquisition by GRP I).

• Cash paid for interest —During the year ended December 31, 2020, we paid $78.5 million for interest, a decrease of $10.9 million over the same period in 2019, largely due to a decrease in LIBOR and expiring interest rate swaps in 2020, as well as repricing activities occurring in 2019.

Investing Activities —Our net cash (used in) provided by investing activities was primarily impacted by the following:

• Real estate acquisitions —During the year ended December 31, 2020, our third party acquisitions resulted in a total cash outlay of $41.5 million, as compared to a total cash outlay of $71.7 million during the same period in 2019.

Additionally, our Merger with REIT III, which included a 10% equity interest in GRP II (prior to its acquisition by GRP I in October 2020), resulted in a total cash outlay of $17.0 million during the year ended December 31, 2019.

Our fee and management income was $10.3 million for the year ended December 31, 2021, an increase of $0.5 million as compared to the same period in 2020.

• Cash paid for interest — During the year ended December 31, 2021, we paid $68.1 million for interest, a decrease of $10.4 million over the same period in 2020, largely due to:

(i) lower debt balances outstanding as a result of early repayments of debt;

(ii) minimal borrowings on our revolving credit facility in 2021 as compared to 2020;

and (iii) lower average interest rates during 2021 primarily due to the Refinancing.

INVESTING ACTIVITIES —Our net cash used in investing activities was primarily impacted by the following:

• Real estate acquisitions — During the year ended December 31, 2021, our acquisitions resulted in a total cash outlay of $308.4 million, as compared to a total cash outlay of $41.5 million during the same period in 2020.

• Real estate dispositions — During the year ended December 31, 2021, our dispositions resulted in a net cash inflow of $206.4 million, as compared to a net cash inflow of $57.9 million during the same period in 2020.

• Capital expenditures — We invest capital into leasing our properties and maintaining or improving the condition of our properties.

During the year ended December 31, 2020, we paid $64.0 million for capital expenditures, a decrease of $11.5 million over the same period in 2019.

This decrease was primarily driven by reduced capital expenditures since the first quarter of 2020, as our capital investments were prioritized to support the reopening of our Neighbors and new leasing activity, or deferred if possible.

During the year ended December 31, 2021, we paid $75.0 million for capital expenditures, an increase of $11.1 million over the same period in 2020, primarily due to an increase in tenant improvements owing largely to an increase in leasing volume as compared to the same period a year ago.

• Return of investment in unconsolidated joint ventures —During the year ended December 31, 2021, we had a return of investment in unconsolidated joint ventures of $5.0 million, including $2.4 million in connection with NRP primarily as a result of property dispositions.

During the year ended December 31, 2020, we had a return of investment in unconsolidated joint ventures of $3.5 million.

• Investment in marketable securities —During the the year ended December 31, 2021, we made an investment in marketable securities resulting in a net cash outflow of $5.5 million.

• Investment in third parties —During the year ended December 31, 2021, we made an investment into a third party company that resulted in a net cash outflow of $3.0 million.

FINANCING ACTIVITIES —Our net cash used in financing activities was primarily impacted by the following:

• Debt borrowings and payments —Cash from financing activities is primarily affected by inflows from borrowings and outflows from payments on debt.

During the year ended December 31, 2020, we had $64.8 million in net repayment of debt primarily as a result of early repayments of debt utilizing cash from the disposition of properties and cash on hand.

During the year ended December 31, 2019, we had $89.1 million in net repayment of debt, primarily using cash received from the disposition of properties.

• Distributions to stockholders and OP unit holders —Cash used for distributions to common stockholders and OP unit holders decreased by $94.0 million during the year ended December 31, 2020 as compared to the same period in 2019, primarily due to the temporary suspension of stockholder distributions.

• Share repurchases —Cash outflows for share repurchases decreased by $29.4 million for the year ended December 31, 2020 as compared to the year ended December 31, 2019, primarily due to the suspension of the SRP.

In connection with the Tender Offer, $77.6 million due to shareholders who tendered their shares was not yet paid as of December 31, 2020, and is recorded as Accounts Payable and Other Liabilities on our consolidated balance sheets.

The amount was subsequently paid on January 5, 2021 (see Note 13 for more detail).

Off-Balance Sheet Arrangements

We are the limited guarantor for up to $190 million, capped at $50 million in most instances, of NRP’s debt.

Our guarantee is limited to being the non-recourse carveout guarantor and the environmental indemnitor.

Additionally, we are the limited

guarantor of a $175 million mortgage loan secured by GRP I properties.

Our guarantee is limited to being the non-recourse carveout guarantor and the environmental indemnitor.

We entered into a separate agreement with Northwestern Mutual in which we agreed to apportion any potential liability under this guaranty between us and them based on our ownership percentage.

Contractual Commitments and Contingencies

We have debt obligations related to both our secured and unsecured debt.

In addition, we have operating leases pertaining to office equipment for our business as well as ground leases at certain of our shopping centers.

The table below excludes obligations related to tenant allowances and improvements because such amounts are not fixed or determinable.

However, we believe we currently have sufficient financing in place to fund any such amounts as they arise through cash from operations or borrowings.

The following table details our contractual obligations as of December 31, 2020 (in thousands):

Payments Due by Period

Total 2021 2022 2023 2024 2025 Thereafter

Debt obligations - principal payments (1)

$ 2,307,522 $ 62,589 $ 436,898 $ 379,569 $ 503,162 $ 500,381 $ 424,923

Debt obligations - interest payments (2)

285,788 68,710 58,768 50,785 38,767 25,457 43,301

Operating lease obligations 8,896 831 805 654 528 297 5,781

Finance lease obligations 171 102 29 24 16 — —

Total $ 2,602,377 $ 132,232 $ 496,500 $ 431,032 $ 542,473 $ 526,135 $ 474,005

(1) The revolving credit facility matures in October 2021 and includes an option to extend the maturity to October 2022, with its execution being subject to compliance with certain terms included in the loan agreement, including the absence of any defaults and the payment of relevant fees.

We intend to either exercise our option to extend the maturity or to negotiate under new terms.

As of December 31, 2020, we have no outstanding balance on our revolving credit facility.

(2) Future variable-rate interest payments are based on interest rates as of December 31, 2020, including the impact of our swap agreements.

Our portfolio debt instruments and the unsecured revolving credit facility contain certain covenants and restrictions.

The following is a list of certain restrictive covenants specific to the unsecured revolving credit facility and unsecured term loans that were deemed significant:

• limits the ratio of total debt to total asset value, as defined, to 60% or less with a surge to 65% following a material acquisition;

• limits the ratio of secured debt to total asset value, as defined, to 40% or less with a surge to 45% following a material acquisition;

• requires the fixed-charge ratio, as defined, to be 1.5:1 or greater, or 1.4:1 following a material acquisition;

• limits the ratio of cash dividend payments to FFO, as defined, to 95%;

• requires the current tangible net worth to exceed the minimum tangible net worth, as defined;

• limits the ratio of unsecured debt to unencumbered total asset value, as defined, to 60% or less with a surge to 65% following a material acquisition;

• requires the unencumbered NOI to interest expense ratio, as defined, to 1.75:1 or greater, or 1.7:1 following a material acquisition.

Inflation has been low historically and has had minimal impact on the operating performance of our shopping centers;

however, inflation can increase in the future.

Certain of our leases contain provisions designed to mitigate the adverse effect of inflation, including rent escalations and requirements for Neighbors to pay their allocable share of operating expenses, including common area maintenance, utilities, real estate taxes, insurance, and certain capital expenditures.

• Underwritten IPO —Upon consummation of our underwritten IPO in July 2021, including the over-allotment option exercised in full by the underwriters, we had gross proceeds from the issuance of common stock of $547.4 million, offset by a cash outflow of $39.0 million for offering costs, discounts, and commissions during the year ended December 31, 2021.

We did not issue any shares of common stock during the year ended December 31, 2020, other than in connection with redemptions of OP units as set forth in our consolidated balance sheets under Noncontrolling Interests (see Note 12).

• Debt borrowings and payments — During the year ended December 31, 2021, we had $402.3 million in net repayment of debt as compared to $64.8 million in net repayment of debt during the same period a year ago.

See “Debt Activity” above for more details.

• Distributions to stockholders and OP unit holders — Cash used for distributions to common stockholders and OP unit holders increased by $62.9 million during the year ended December 31, 2021 as compared to the same period in 2020, due to the suspension of our distributions from April 2020 through November 2020 and an increase in common shares outstanding as a result of our underwritten IPO.

• Share repurchases — Cash outflows for share repurchases increased by $72.5 million for the year ended December 31, 2021 as compared to the year ended December 31, 2020, primarily as a result of a tender offer, which was settled in January 2021.

Although inflation has been historically low and has had a minimal impact on the operating performance of our shopping centers, inflation has recently increased in the United States.

Changes in economic conditions and supply chain constraints have driven a rise in wages and increased costs for materials.

Further, monetary policy and stimulus measures implemented by the federal government and the Federal Reserve could lead to higher inflation rates or lengthen the period of inflation, which may negatively impact our Neighbors, our operating costs, and our construction costs.

Substantially all of our leases contain provisions designed to mitigate the adverse effect of inflation, including rent escalations and requirements for Neighbors to pay their allocable share of operating expenses, including common area maintenance, utilities, real estate taxes, insurance, and certain capital expenditures.

Additionally, many of our leases are for terms of less than ten years, which allows us to target increased rents to current market rates upon renewal.

Critical Accounting Policies and Estimates

Below is a discussion of our critical accounting policies and estimates.

PHILLIPS EDISON & COMPANY

DECEMBER 31, 2021 FORM 10-K

CRITICAL ACCOUNTING ESTIMATES

Below is a discussion of our critical accounting estimates.

Our accounting policies have been established to conform with GAAP.

We consider these policies critical because they involve significant management judgments and assumptions, require estimates about matters that are inherently uncertain, and are important for understanding and evaluating our reported financial results.

These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the consolidated financial statements, as well as the reported amounts of revenue and expenses during the reporting periods.

These judgments affect the reported amounts of assets at the dates of the consolidated financial statements, as well as the reported amounts of revenue during the reporting periods.

With different estimates or assumptions, materially different amounts could be reported in our consolidated financial statements.

Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses.

Because of the adverse economic conditions and uncertainty regarding the impacts of the COVID-19 pandemic, it is possible that the estimates and assumptions that have been utilized in the preparation of the consolidated financial statements could change or vary significantly from actual results.

Please refer to Notes 2 and 17 for additional discussion on the potential impact that the COVID-19 pandemic could have on significant accounting estimates as employed per our critical accounting policies.

Real Estate Acquisition Accounting —Most of our real estate acquisition activity does not meet the definition of a business combination and is instead classified as an asset acquisition.

As a result, most acquisition-related costs are capitalized and amortized over the life of the related assets, and there is no recognition of goodwill.

Costs incurred related to properties that were not ultimately acquired were expensed and recorded in Other (Expense) Income on the consolidated statements of operations.

Regardless of whether an acquisition is considered a business combination or an asset acquisition, we record the costs of the business or assets acquired as tangible and intangible assets and liabilities based upon their estimated fair values as of the acquisition date.

We assess the acquisition-date fair values of all tangible assets, identifiable intangibles, and assumed liabilities using methods similar to those used by independent appraisers (e.g., discounted cash flow analysis and replacement cost) and that utilize appropriate discount and/or capitalization rates and available market information.

Estimates of future cash flows are based on a number of factors including historical operating results, known and anticipated trends, and market and economic conditions.

The fair value of tangible assets of an acquired property considers the value of the property as if it were vacant.

We generally determine the value of construction in progress based upon the replacement cost.

However, for certain acquired properties that are part of a new development, we determine fair value by using the same valuation approach as for all other properties and deducting the estimated cost to complete the development.

During the remaining construction period, we capitalize interest expense until the development has reached substantial completion.

Construction in progress, including capitalized interest, is not depreciated until the development has reached substantial completion.

We record above-market and below-market lease values for acquired properties based on the present value (using a discount rate that reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease.

We amortize any recorded above-market or below-market lease values as a reduction or increase, respectively, to rental income over the remaining non-cancelable terms of the respective lease.

We also consider fixed-rate renewal options in our calculation of the fair value of below-market leases and the periods over which such leases are amortized.

If a tenant has a unilateral option to renew a below-market lease, we include such an option in the calculation of the fair value of such lease and the period over which the lease is amortized if we determine that the Neighbor has a financial incentive and wherewithal to exercise such option.

Intangible assets also include the value of in-place leases, which represents the estimated value of the net cash flows of the in-place leases to be realized, as compared to the net cash flows that would have occurred had the property been vacant at the time of acquisition and subject to lease-up.

Acquired in-place lease value is amortized to depreciation and amortization expense over the average remaining non-cancelable terms of the respective in-place leases.

We estimate the value of Neighbor origination and absorption costs by considering the estimated carrying costs during hypothetical expected lease-up periods, considering current market conditions.

In estimating carrying costs, management includes real estate taxes, insurance and other operating expenses, and estimates of lost rentals at market rates during the expected lease-up periods.

Estimates of the fair values of the tangible assets, identifiable intangibles, and assumed liabilities require us to estimate market lease rates, property operating expenses, carrying costs during lease-up periods, discount rates, market absorption periods, and the number of years the property will be held for investment.

The use of inappropriate estimates would result in an incorrect valuation of our acquired tangible assets, identifiable intangibles and assumed liabilities, which would impact the amount of our net income.

We calculate the fair value of assumed long-term debt by discounting the remaining contractual cash flows on each instrument at the current market rate for those borrowings, which we approximate based on the rate at which we would expect to incur a replacement instrument on the date of acquisition, and recognize any fair value adjustments related to long-term debt as effective yield adjustments over the remaining term of the instrument.

Valuation of Real Estate Assets —We review our owned real estate properties for evidence of impairment quarterly.

Particular examples of events and changes in circumstances that could indicate potential impairments are significant decreases in occupancy, operating income, and market values or planned dispositions in which a published or contract price is less than the current carrying value of the assets being targeted for disposition.

When indicators of potential impairment suggest that the carrying value of our real estate may be greater than fair value, we will assess the recoverability, considering recent operating results, expected net operating cash flow, estimated sales price, and plans for future operations.

If, based on this analysis of undiscounted cash flows, we do not believe that we will be able to recover the carrying value of these assets, we would record an impairment loss to the extent that the carrying value exceeds the estimated fair value of the real estate assets as defined by Accounting Standards Codification (“ASC”) Topic 360, Property, Plant, and Equipment .

During the year ended December 31, 2020, we recorded $2.4 million in impairment of real estate assets.

Properties classified as real estate held for sale represent properties that are under contract for sale and where the applicable pre-sale due diligence period has expired prior to the end of the reporting period.

When a property is identified as held-for-sale, we compare the contract sales price of the property, net of estimated selling costs, to the net book value of the property.

If the estimated net sales price of the property is less than the net book value, an adjustment to the carrying value would be recorded to reflect the estimated fair value of the property.

In accounting for our investment in real estate assets, we have to employ a significant amount of judgment in the inputs that we select for impairment testing and other analyses.

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 or vary significantly from actual results.

Please refer to Notes 2 and 16 for additional discussion on the potential impact that the COVID-19 pandemic could have on these significant accounting estimates.

Real Estate Valuation —We assess the fair value of acquired real estate and allocate the purchase price of real estate assets and liabilities acquired based upon their estimated fair values as of the acquisition date.

The allocation requires the use of market based estimates and assumptions including estimated market lease rates and comparable acquisitions, historical operating results, carrying costs during lease-up periods, discount and capitalization rates, market absorption periods, and the number of years the property will be held for investment.

Quarterly, we review our owned real estate properties, including those classified as real estate held for sale, for evidence of impairment, which requires us, at times, to estimate the fair value of our real estate assets.

Valuing our investment in real estate assets requires us to utilize a significant amount of judgment in the inputs that we select for impairment testing and other analyses.

We select these inputs based on all available evidence and using techniques that are commonly employed by other real estate companies.

Some examples of these inputs are projected

revenue and expense growth rates, estimates of future cash flows, capitalization rates, general economic conditions and trends, or other available market data.

Our ability to accurately predict future operating results and cash flows, as well as to estimate and determine fair values, impacts the timing and recognition of impairments.

While we believe our assumptions are reasonable, changes in these assumptions may have a material impact on our financial results.

Rental Income —A majority of our revenue is lease revenue derived from our real estate assets, for which we are the lessor.

On January, 1 2019, we adopted ASC Topic 842, Leases (“ASC 842”) using a modified-retrospective approach.

As such, beginning January 1, 2019, we evaluate whether a lease is an operating, sales-type, or direct financing lease using the criteria established in ASC 842.

Leases will be considered either sales-type or direct financing leases if any of the following criteria are met:

• if the lease transfers ownership of the underlying asset to the lessee by the end of the term;

• if the lease grants the lessee an option to purchase the underlying asset that is reasonably certain to be exercised;

• if the lease term is for the major part of the remaining economic life of the underlying asset;

• if the present value of the sum of the lease payments and any residual value guaranteed by the lessee equals or exceeds substantially all of the fair value of the underlying asset.

We utilize substantial judgment in determining the fair value of the leased asset, the economic life of the leased asset, and the relevant borrowing rate in performing our lease classification analysis.

If none of the criteria listed above are met, the lease is classified as an operating lease.

Currently, all of our leases are classified as operating leases, and we expect that the majority, if not all, of our leases will continue to be classified as operating leases based upon our typical lease terms.

We record property operating expense reimbursements due from Neighbors for common area maintenance, real estate taxes, and other recoverable costs in the period the related expenses are incurred.

A portion of our Neighbors reimburse operating costs on a fixed-rate basis, and in those circumstances, operating expense reimbursements due to us are recorded on a straight-line basis.

We make certain assumptions and judgments in estimating the reimbursements at the end of each reporting period.

We do not expect the actual results to differ materially from the estimated reimbursement.

We commence revenue recognition on our leases based on a number of factors.

In most cases, revenue recognition under a lease begins when the lessee takes possession of or controls the physical use of the leased asset.

The determination of when revenue recognition under a lease begins, as well as the nature of the leased asset, is dependent upon our assessment of who is the owner, for accounting purposes, of any related tenant improvements.

If we are the owner, for accounting purposes, of the tenant improvements, then the leased asset is the finished space, and revenue recognition begins when the lessee takes possession of the finished space, typically when the improvements are substantially complete.

If we conclude that we are not the owner, for accounting purposes, of the tenant improvements (i.e., the lessee is the owner), then the leased asset is the unimproved space and any tenant allowances funded under the lease are treated as lease incentives, which reduce revenue recognized over the term of the lease.

In these circumstances, we begin revenue recognition when the lessee takes possession of the unimproved space to construct their own improvements.

We consider a number of different factors in evaluating whether the lessee or we are the owner of the tenant improvements for accounting purposes.

These factors include:

• whether the lease stipulates how and on what a tenant improvement allowance may be spent;

• whether the tenant or landlord retains legal title to the improvements;

• the uniqueness of the improvements;

• the expected economic life of the tenant improvements relative to the length of the lease;

• who constructs or directs the construction of the improvements.

Historically, we periodically reviewed the collectibility of outstanding receivables.

Following the adoption of ASC 842, lease receivables are reviewed continually to determine whether or not it is probable that we will realize substantially all remaining lease payments for each of our Neighbors (i.e., whether a Neighbor is deemed to be a credit risk).

Additionally, we record a general reserve based on our review of operating lease receivables at a company level to ensure they are properly valued based on analysis of historical bad debt, outstanding balances, and the current economic climate.

If we determine it is not probable that we will collect substantially all of the remaining lease payments from a Neighbor, revenue for that Neighbor is recorded on a cash basis (“cash-basis Neighbor”), including any amounts relating to straight-line rent receivables and/or receivables for recoverable expenses.

We will resume recording lease income on an accrual basis for cash-basis Neighbors once we believe the collection of rent for the remaining lease term is probable, which will generally be after a period of regular payments.

The aforementioned adjustments as well as any reserve for disputed charges are recorded as a reduction of Rental Income rather than in Property Operating, where our reserves were previously recorded, on the consolidated statements of operations.

Impact of Recently Issued Accounting Pronouncements —In response to the COVID-19 pandemic, the Financial Accounting Standards Board (“FASB”) issued interpretive guidance addressing the accounting treatment for lease concessions attributable to the pandemic.

Under this guidance, entities may elect to account for such lease concessions consistent with how they would be accounted for under ASC 842 if the enforceable rights and obligations for the lease concessions already existed within the lease agreement, regardless of whether such enforceable rights and obligations are explicitly outlined within the lease.

This accounting treatment may only be applied if (1) the lease concessions were granted as a direct result of the pandemic, and (2) the total cash flows under the modified lease are less than or substantially the same as the cash flows under the original lease agreement.

As a result, entities that make this election will not have to analyze each lease to determine whether enforceable rights and obligations for concessions exist within the contract, and may elect not to account for these concessions as lease modifications within the scope of ASC 842.

Some concessions will provide a deferral of payments, which may affect the timing of cash receipts without substantively impacting the total consideration per the original lease agreement.

The FASB has stated that there are multiple acceptable methods to account for deferrals under the interpretive guidance:

• Account for the concession as if no changes to the lease contract were made, increasing the lease receivable as payments accrue and continuing to recognize income;

• Account for deferred lease payments as variable lease payments.

We have elected not to account for any qualifying lease concessions granted as a result of the COVID-19 pandemic as lease modifications and will account for any qualifying concessions granted as if no changes to the lease contract were made.

This will result in an increase to the related lease receivable as payments accrue while we continue to recognize rental income.

We will, however, assess the impact of any such concessions on estimated collectibility of the related lease payments and will reflect any adjustments as necessary as an offset to Rental Income on the consolidated statements of operations.

Refer to Note 2 for discussion of the impact of other recently issued accounting pronouncements.

Examples of these inputs include projected revenue and expense growth rates, estimates of future cash flows, anticipated holding periods, capitalization rates, general economic conditions and trends, and other available market data.

We believe that our real estate valuation estimates are based on reasonable assumptions.

However, the use of inappropriate estimates could result in an incorrect valuation of our real estate properties, at acquisition or during our ownership period, which could result in material impairment losses in the future.

Rental Income —The majority of our revenue is lease revenue derived from our real estate assets, for which we are the lessor.

Lease receivables are reviewed continually to determine whether or not it is probable that we will realize substantially all remaining lease payments for each of our Neighbors (i.e., whether a Neighbor is deemed to be a credit risk).

If we determine it is not probable that we will collect substantially all of the remaining lease payments from a Neighbor, revenue for that Neighbor is recorded on a cash basis (“cash-basis Neighbor”), including no longer recognizing straight-line rent receivables and/or receivables for recoverable expenses.

Additionally, we record a general reserve based on our review of operating lease receivables at a company level to ensure they are properly valued based on analysis of historical uncollectible tenant receivables, outstanding balances, and the current economic climate.

The aforementioned adjustments, as well as any reserve for disputed charges, are recorded as a reduction of Rental Income on the consolidated statements of operations and comprehensive income (loss).

Our revenue collectibility estimates are made based on historical experience, the current economic climate, and other Neighbor-specific factors.

While we do not believe there is a reasonable likelihood of a material change in the estimates or assumptions that we use to recognize revenue, if actual payment levels were to vary significantly from estimates, we may be exposed to decreases in rental income that could be material or increases of non-cash straight-line income when a cash-basis Neighbor moves back to accrual accounting in accordance with GAAP.

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 7. Management’s Discussion and Analysis