What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-02-21 compared with 2022-02-16 · 203 added, 269 removed, 430 unchanged (52% of the section changed)

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• 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.

The estimated incremental NOI is the difference between the estimated annualized NOI we target to generate by a 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.

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• 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

• Portfolio retention rate—This metric is calculated by dividing (i) the 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 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.

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DECEMBER 31, 2022 FORM 10-K

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 (i) total recovery income by (ii) total recoverable expenses during the period.

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NOI provides insight 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).

• 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).

• 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 the last two reporting periods (i.e., since January 1, 2021).

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

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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

As of December 31, 2022, we owned equity interests in 291 shopping centers, including 271 wholly-owned shopping centers and 20 shopping centers owned through one unconsolidated joint venture, which comprised approximately 33.3 million square feet in 31 states.

In addition to managing our shopping centers, our third-party investment management business provides comprehensive real estate management services to our unconsolidated joint ventures and one private fund (collectively, the “Managed Funds”).

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DECEMBER 31, 2022 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.

In May 2022, we sold the final property in our joint venture with Necessity Retail Partners (“NRP”), in which we own a 20% interest.

For the years ended December 31, 2022 and 2021, we recognized income of $2.7 million and $0.7 million, respectively, related to NRP’s achievement of certain performance targets, which is included in Fees and Management Income in our consolidated statements of operations and comprehensive income (loss) (“consolidated statements of operations”).

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

As a result of the underwritten IPO, we received gross proceeds of $547.4 million.

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

• 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 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).

• 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”).

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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.

Prior to the conversion, we have presented common stock and Class B common stock as separate classes within our consolidated balance sheets and consolidated statements of equity.

On May 5, 2022, we filed Articles Supplementary to our charter with the Maryland State Department of Assessments and Taxation in order to reclassify and designate all of the 350 million authorized shares of our Class B common stock, $0.01 par value per share, all of which were unissued at such time, as shares of our common stock, $0.01 par value per share.

We no longer have Class B common stock authorized for issue.

2021 BOND OFFERING —In October 2021, the Operating Partnership completed the registered offering of $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.

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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.

No shares were issued under the ATM program during the fourth quarter of 2022.

During the year ended December 31, 2022, we issued 2.6 million shares of our common stock under the ATM program for net proceeds of $89.2 million, after approximately $0.9 million in commissions.

As of December 31, 2022, $159.9 million of common stock remained available for issuance under the ATM program.

PORTFOLIO AND LEASING STATISTICS —Below are statistical highlights of our wholly-owned portfolio as of December 31, 2022 and 2021 (dollars and square feet in thousands):

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

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, 2022, 97.2% of our ABR was derived from omni-channel grocery-anchored shopping centers.

As of December 31, 2022, total leased occupancy improved 1.1% to 97.4% and inline occupancy improved 1.1% to 93.8%, when compared to December 31, 2021.

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 2022 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.

• Net income of $54.5 million, an increase of $37.3 million from a year ago, primarily due to positive operating results attributable to our Same-Center portfolio, the net impact of our 2022 acquisition and disposition activity, and the final settlement of the earn-out liability with the issuance of 1.6 million OP units in January 2022.

PHILLIPS EDISON & COMPANY

DECEMBER 31, 2022 FORM 10-K

• Core FFO per diluted share improved by $0.08 to $2.27, primarily due to increased rental income and lower interest expense.

• Same-Center NOI improved 4.5% to $361.2 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.

• Acquired $282.0 million and disposed of $52.0 million of assets, executing our external growth strategy while improving portfolio quality with our dispositions.

• Declared and paid monthly distributions of $0.09 per share, or $1.08 annualized, through August 2022, and increased monthly distributions to $0.0933 per share, or $1.12 annualized, for the remainder of 2022.

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

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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.

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

Capital raised through our underwritten IPO combined with our effective shelf registration statement and ATM program allow us to access equity and debt capital that we intend to use, in part, to grow our portfolio of assets.

Highlights of our asset composition and acquisitions are as follows:

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• 71.1% 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.

• Acquired seven properties and four outparcels for a net cash outlay of $282.0 million, adding 0.8 million of GLA to our portfolio.

Internal Growth Through Our Integrated Operating Platform —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, 2022 are as follows:

• Leased occupancy for our wholly-owned portfolio improved to 97.4% as of December 31, 2022, compared to 96.3% as of December 31, 2021.

• 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.

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• Total ABR per leased square foot for executed new leases improved 12.9% to $19.31, and inline ABR per leased square foot for executed new leases improved 17.9% to $24.33 during the year ended December 31, 2022.

• 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.

• For the year ended December 31, 2022, we completed 17 development and redevelopment projects with a total investment of $37.3 million.

• As of December 31, 2022, we have 14 development and redevelopment projects in process, which we estimate will have a total investment of $50.3 million.

• Created $0.9 million of incremental ABR in 2022 as a result of development and redevelopment projects completed in 2021.

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.

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

As of December 31, 2022, we had $726.7 million of total liquidity, comprised of $17.3 million of cash, cash equivalents, and restricted cash, plus $709.4 million of borrowing capacity available on our $800 million revolving credit facility.

Our balance sheet management highlights as of and for the year ended December 31, 2022 are as follows:

• 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.

• We issued 2.6 million shares of our common stock under the ATM program for net proceeds of $89.2 million.

• Our investment grade ratings were reaffirmed by Moody’s Investors Services (Baa3) and S&P Global Ratings (BBB-).

• We amended our credit facility to increase the total amount available under our unsecured revolving credit facility from $500 million to $800 million.

• Our ratio of net debt to Adjusted EBITDA re was 5.3x as of December 31, 2022, as compared to 5.6x as of December 31, 2021 (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):

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DECEMBER 31, 2022 FORM 10-K

• As of December 31, 2022, our debt maturity profile with the respective principal payment obligations is as follows (including the impact of derivatives on weighted-average interest rates):

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LEASING ACTIVITY —Below is a summary of leasing activity for our wholly-owned properties for the years ended December 31, 2022 and 2021 (1) :

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ABR (in thousands) $ 23,750 $ 30,889 $ 19,919 $ 24,622

ABR per square foot $ 17.11 $ 16.14 $ 20.63 $ 18.11

Cost per square foot of executing new leases $ 28.44 $ 26.14 $ 29.55 $ 28.58

ABR PSF $ 19.31 $ 17.11 $ 24.33 $ 20.63

Cost PSF of executing new leases $ 36.25 $ 28.44 $ 39.56 $ 29.55

Number of comparable leases 145 228 143 224

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ABR (in thousands) $ 49,625 $ 47,603 $ 29,172 $ 25,891

ABR per square foot $ 12.42 $ 12.07 $ 22.92 $ 21.27

ABR per square foot prior to renewals $ 11.68 $ 11.49 $ 20.86 $ 19.77

Percentage increase in ABR per square foot 6.3 % 5.1 % 9.9 % 7.6 %

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

$ 0.63 $ 0.80 $ 1.23 $ 1.13

ABR PSF $ 13.96 $ 12.42 $ 24.04 $ 22.92

ABR PSF prior to renewals $ 12.77 $ 11.68 $ 21.18 $ 20.86

Percentage increase in ABR PSF 9.3 % 6.3 % 13.4 % 9.9 %

Cost PSF of executing renewals and options $ 1.89 $ 0.63 $ 1.10 $ 1.23

Number of comparable leases (2)

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Portfolio retention rate 90.7 % 87.8 % 77.5 % 79.4 %

(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.

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

(2) Excludes exercise of options.

RESULTS OF OPERATIONS

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.

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

Our collections returned to pre-COVID levels during the second half of 2021 and have remained strong throughout 2022.

As of December 31, 2022, our Neighbors currently being accounted for on a cash basis represented approximately 4% of portfolio ABR.

We believe our collections have stabilized, which has reduced volatility in our earnings during 2022 as compared to 2021.

Due to changing economic conditions, rising interest rates, labor shortages, and supply chain limitations, there has been an increase in wages and costs for materials.

The resulting increased inflation may negatively impact some of our Neighbors and increase our operating and construction costs.

Substantially all of our leases contain provisions designed to mitigate the adverse effect of inflation, including requirements for Neighbors to pay their allocable share of operating expenses that includes 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.

In addition to inflation, macroeconomic and geopolitical risks may create challenges that cause current market conditions in the United States to worsen.

The policies implemented to address these risks, including raising interest rates, could result in adverse impacts on the United States economy, including a slowing of growth or potentially a recession.

PHILLIPS EDISON & COMPANY

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Operating Expenses:

Property operating expenses 92,914 87,490 (5,424) (6.2) %

Real estate tax expenses 65,381 67,016 1,635 2.4 %

General and administrative expenses 48,820 41,383 (7,437) (18.0) %

Property operating 95,359 92,914 (2,445) (2.6) %

Real estate taxes 67,864 65,381 (2,483) (3.8) %

General and administrative 45,235 48,820 3,585 7.3 %

Depreciation and amortization 236,224 221,433 (14,791) (6.7) %

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

Impairment of real estate assets 322 6,754 6,432 95.2 %

Total operating expenses 445,004 435,302 (9,702) (2.2) %

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Gain on disposal of property, net

30,421 6,494 23,927 NM

Other (expense) income, net

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

7,517 30,421 (22,904) (75.3) %

Other expense, net

(12,160) (34,361) 22,201 64.6 %

54,529 17,233 37,296 NM

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We define our same-center portfolio as the 254 properties that were owned and operational prior to January 1, 2021.

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.

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, 2020, which includes 27 properties disposed of and 16 properties acquired.

Below are explanations of the significant fluctuations in the results of operations for the years ended December 31, 2022 and 2021:

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• $20.2 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.

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 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.

▪ $17.9 million increase primarily due to a $0.39 increase in average minimum rent per square foot due to a 1.3% improvement in average occupancy;

▪ $4.5 million increase owing largely to an increase in recoverable income attributed to an increase in common area maintenance spending and lower collection reserves as compared to 2021 and the 1.3% improvement in average occupancy;

▪ $2.1 million decrease primarily due to the recovery of prior year income in 2021 and the reversal of reserves for uncollectibility from 2020 in 2021 resulting from the recovery of our portfolio in the wake of the COVID-19 pandemic.

• $20.8 million increase primarily related to our acquisition activity, net of dispositions.

Fees and Management Income:

• The $1.2 million increase in fees and management income was primarily due to the achievement of certain performance targets related to our joint venture with NRP, partially offset by the reduction in revenue as result of our joint venture with NRP fully liquidating its assets.

Property Operating Expenses:

• The $2.4 million increase is primarily due to our acquisition activity, net of dispositions.

Real Estate Tax Expenses:

• The $2.5 million increase in real estate tax expenses was primarily due to our acquisition activity, net of dispositions.

General and Administrative Expenses decreased $3.6 million primarily as follows:

• $2.6 million decrease in compensation expense owing largely to lower performance-based compensation;

• $1.3 million decrease primarily due to lower third-party consultant and custodial costs;

partially offset by

PHILLIPS EDISON & COMPANY

DECEMBER 31, 2022 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.

• $0.4 million increase due to an increase in directors and officers insurance as a result of our becoming a publicly traded company in July 2021.

Depreciation and Amortization:

• The $14.8 million increase in depreciation and amortization is primarily due to the execution of our acquisition strategy, investment in improvements to our Neighbor spaces, and accelerated depreciation related to damage sustained at our properties as a result of Hurricane Ian.

Impairment of Real Estate Assets:

• 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.

• The $6.4 million decrease 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 as compared to minimal impairment charges recorded during 2022.

Interest Expense, Net:

• 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.

• The $5.2 million decrease during the year ended December 31, 2022 as compared to the same period in 2021 was primarily due to net repayments of debt outstanding in 2021, partially offset by higher average interest rates in 2022.

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

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Weighted-average term (in years) as of end of year 4.4 5.2

(1) Includes defeasance fees related to early repayments of debt.

Gain on Disposal of Property, Net:

• 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):

• The $22.9 million decrease was primarily related to the sale of four properties and four outparcels with a net gain of $7.5 million during the year ended December 31, 2022, as compared 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 (see Note 4).

Other Expense, Net:

• The $22.2 million decrease was primarily related to a 2021 charge in connection with the change in the fair value of our earn-out liability, which was settled in January 2022, partially offset by an increase in transaction and acquisition expenses owing largely to the amortization of the restricted stock units awarded at the time of our underwritten IPO combined with costs for activities related to the execution of our growth strategy.

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

Year Ended December 31,

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$ (1,809) $ (30,436)

Equity in net income (loss) of unconsolidated joint ventures

Equity in net income of unconsolidated joint ventures

Transaction and acquisition expenses (10,551) (5,363)

Federal, state, and local income tax expense (806) (327)

Other (expense) income, net

Other (274) 70

Other expense, net

$ (12,160) $ (34,361)

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For a discussion of the year-to-year comparisons in the results of operations for the years ended December 31, 2021 and 2020, see “ Part II, Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations ” of our 2020 Annual Report on Form 10-K, filed with the SEC on March 12, 2021.

Management’s Discussion and Analysis of Financial Condition and Results of Operations ” of our 2021 Annual Report on Form 10-K, filed with the SEC on February 16, 2022.

PHILLIPS EDISON & COMPANY

DECEMBER 31, 2022 FORM 10-K

NON-GAAP MEASURES

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.

SAME-CENTER NOI —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.

For the years ended December 31, 2022 and 2021, Same-Center NOI represents the NOI for the 254 properties that were wholly-owned and operational for the entire portion of all 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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(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):

Same-Center NOI Reconciliation —Below is a reconciliation of Net Income to NOI and Same-Center NOI for the years ended December 31, 2022 and 2021 (in thousands):

$ 54,529 $ 17,233

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(7,517) (30,421)

Other expense (income), net

Other expense, net

12,160 34,361

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

PHILLIPS EDISON & COMPANY

DECEMBER 31, 2022 FORM 10-K

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.

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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):

The following table presents our calculation of Nareit FFO Attributable to Stockholders and OP Unit Holders and Core FFO for the years ended December 31, 2022, 2021, and 2020 (in thousands, except per share amounts):

2022 2021 2020

Calculation of Nareit FFO Attributable to Stockholders and

OP Unit Holders

Net income (loss)

Calculation of Nareit FFO Attributable to Stockholders and OP Unit Holders

$ 54,529 $ 17,233 $ 5,462

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Adjustments related to unconsolidated joint ventures 842 72 1,552

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 $ 280,747 $ 211,202 $ 221,681

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1,025 3,592 4

Amortization of unconsolidated joint venture

basis differences 1,167 1,883 2,854

Amortization of unconsolidated joint venture basis differences 220 1,167 1,883

Realized performance income (1)

(2,742) (675) —

Other impairment charges — — 359

Other — — 158

Core FFO $ 295,263 $ 254,954 $ 220,407

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

Nareit FFO attributable to stockholders and OP unit holders

per share - diluted $ 1.81 $ 1.99 $ 1.99

Nareit FFO Attributable to Stockholders and OP Unit Holders/Core FFO per diluted share

Weighted-average shares of common stock outstanding - diluted 130,332 116,672 111,156

Nareit FFO attributable to stockholders and OP unit holders per share - diluted $ 2.15 $ 1.81 $ 1.99

Core FFO per share - diluted $ 2.27 $ 2.19 $ 1.98

(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.

(1) Realized performance income includes fees received related to the achievement of certain performance targets in our NRP joint venture.

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.

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Calculation of EBITDA re

Net income (loss) $ 17,233 $ 5,462 $ (72,826)

Net income $ 54,529 $ 17,233 $ 5,462

Depreciation and amortization 236,224 221,433 224,679

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Realized performance income (1)

(2,742) (675) —

Other impairment charges — — 359

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$ 367,385 $ 329,419 $ 308,000

(1) Realized performance income includes fees received related to the achievement of certain performance targets in our NRP joint venture.

LIQUIDITY AND CAPITAL RESOURCES

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• operating cash flows;

• proceeds received from the disposition of properties;

• borrowings from our unsecured revolving credit facility and proceeds from debt financings;

• 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;

• proceeds received from the disposition of properties;

• available, unrestricted cash and cash equivalents.

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.

IMPACT OF THE UNDERWRITTEN IPO —On July 19, 2021, we closed our underwritten IPO, from which we received gross proceeds of $547.4 million.

See “Overview” above for more details.

The underwritten IPO has allowed us access to forms of capital not previously available to us, as follows:

• In October 2021, we completed the registered offering of $350 million aggregate principal amount of 2.625% senior notes, which resulted in gross proceeds of $345.4 million.

• In February 2022, we filed an automatically effective shelf registration statement on Form S-3 providing for the public offering and sale, from time to time, by us of our preferred stock, common stock, debt securities, depository shares, warrants, rights, units, and guarantees of debt securities and by the Operating Partnership of its debt securities, in each case in unlimited amounts.

• In connection with our February 2022 Form S-3 filing, we commenced the ATM program through which we may offer and sell shares of our common stock having an aggregate offering price of up to $250 million.

No shares were issued under the ATM program during the fourth quarter of 2022.

During the year ended December 31, 2022, we issued 2.6 million shares of our common stock under the ATM program for net proceeds of $89.2 million.

As of December 31, 2022, $159.9 million of common stock remained available for issuance under the ATM program.

PHILLIPS EDISON & COMPANY

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709,385 489,329

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

(1) The revolving credit facility matures in January 2026, extendable at our option to January 2027.

In addition, the revolving credit facility also includes an accordion feature that permits us to increase our aggregate borrowing capacity thereunder to up to $1 billion, subject to the satisfaction of certain conditions.

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

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.

Debt Activity —During the years ended December 31, 2022 and 2021, we took steps to increase debt amounts available to us for future investment activity.

Our debt activity during the year ended December 31, 2022 was as follows:

• In July 2021, we completed the Refinancing.

• In May 2022, we amended our credit facility agreement (the “Amendment”) to, among other things, increase the total amount available under our unsecured revolving credit facility from $500 million to $800 million.

The unsecured revolving credit facility also includes an accordion feature that permits us to increase our aggregate borrowing capacity thereunder to up to $1 billion, subject to the satisfaction of certain conditions.

The unsecured revolving credit facility is scheduled to mature in January 2026, extendable at our option to January 2027.

• During 2022, we repaid $80.1 million in mortgage debt.

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

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

In connection with the Refinancing, we paid off 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 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.

• In October 2021, we completed 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.

In October 2021, net proceeds 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.

• 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.

• In June 2020, we fully repaid the outstanding balance on our revolving credit facility as our rent and recovery collections during the second quarter, combined with our COVID-19 expense reduction initiatives, sufficiently funded our operating needs and provided enough stability to allow for this repayment.

Further, we did not borrow on our revolving credit facility during the remainder of 2020.

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

Future Debt Obligations —As of December 31, 2022, including the impact of our swap agreements, our future contractual debt obligations were $115.2 million of debt principal and interest payments during 2023, and $2.1 billion of debt principal and interest payments thereafter (see Note 8).

Debt Obligation Guarantees —The 2.625% senior notes issued by the Operating Partnership pursuant to an effective registration statement in October 2021 were, and debt securities of the Operating Partnership registered under our automatically effective shelf registration statement on Form S-3 filed in February 2022 will be, fully and unconditionally guaranteed by us.

At December 31, 2022, the Operating Partnership had issued and outstanding its 2.625% senior notes.

The obligations of the Operating Partnership to pay principal, premiums, if any, and interest on the 2.625% senior notes are fully and unconditionally guaranteed by us on a senior basis.

As a result of the amendments to SEC Rule 3-10 of Regulation S-X, subsidiary issuers of obligations guaranteed by the parent are not required to provide separate financial statements, provided that:

(i) the subsidiary obligor is consolidated into the parent company’s consolidated financial statements;

(ii) the parent guarantee is “full and unconditional”;

and (iii) subject to certain exceptions as set forth below, the alternative disclosure required by Rule 13-01 of Regulation S-X is provided, which includes narrative disclosure and summarized financial information.

We meet the conditions of this requirement and thus, are not presenting separate financial statements.

Furthermore, as permitted under Rule 13-01(a)(4)(vi) of Regulation S-X, we have excluded the summarized financial information for the Operating Partnership because the assets, liabilities, and results of operations of the Operating Partnership are not materially different than the corresponding in our consolidated financial statements, and management believes such summarized financial information would be repetitive and would not provide incremental value to investors.

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.

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As of December 31, 2022, 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.

PHILLIPS EDISON & COMPANY

DECEMBER 31, 2022 FORM 10-K

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.

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As of December 31, 2022, our future contractual finance lease obligations included $0.3 million during 2023, and $0.3 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

We have an off-balance sheet arrangement that includes being the limited guarantor of a $175 million mortgage loan secured by Grocery Retail Partners I LLC (“GRP I”) properties.

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

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

As of December 31, 2022, GRP I had an outstanding debt balance of $174.0 million.

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.

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As of December 31, 2022, the notional amount of our interest rate swaps was $0.8 billion.

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

As of December 31, 2022, our future interest rate swap recoverables are $15.9 million during 2023 and $11.2 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, 2022 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, 2022 and 2021 (in thousands):

Total debt, excluding discounts, market adjustments, and deferred

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

Total debt, excluding discounts, market adjustments, and deferred financing expenses $ 1,937,142 $ 1,941,504

Cash and cash equivalents 5,740 93,109

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Total enterprise value $ 6,109,606 $ 6,031,391

(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.

(1) Total equity market capitalization is calculated as diluted shares multiplied by the closing market price per share, which includes 131.2 million and 126.6 million diluted shares as of December 31, 2022 and 2021, respectively, and the closing market price per share of $31.84 and $33.04 as of December 31, 2022 and 2021, respectively.

(2) Fully diluted shares include common stock and OP units as of December 31, 2022 and Class B common stock, common stock, and OP units as of December 31, 2021.

The following table presents our calculation of net debt to Adjusted EBITDA re and net debt to total enterprise value as of December 31, 2022 and 2021 (dollars in thousands):

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Net debt to total enterprise value 31.6% 30.6%

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

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

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

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

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.

PHILLIPS EDISON & COMPANY

DECEMBER 31, 2022 FORM 10-K

During the years ended December 31, 2022 and 2021, we had capital spend of $102.4 million and $75.0 million, respectively.

Below is a summary of our capital spending activity, excluding leasing commissions, on a cash basis for the years ended December 31, 2022 and 2021 (in thousands):

2021 2020 (1)

Capital expenditures for real estate:

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Total capital spending activity (2)

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

PHILLIPS EDISON & COMPANY

DECEMBER 31, 2021 FORM 10-K

$ 102,415 $ 75,035

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

(2) For the year ended December 31, 2022, amounts reported are net of insurance proceeds for property damage claims.

We expect our capital expenditures to reach $105 million - $115 million in 2023, which includes $50 million - $60 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.

We anticipate that obligations related to capital improvements, as well as redevelopment and development, in 2023 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.

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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.

REAL ESTATE ACQUISITION ACTIVITY —We actively 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, 2022 and 2021 (dollars in thousands):

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Number of outparcels acquired (1)

Contract price $ 280,515 $ 307,551

Total price of acquisitions (2)

282,000 308,358

(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.

(2) Total price of acquisitions includes closing costs and credits.

Subsequent to December 31, 2022, we acquired one property for $27.1 million.

REAL ESTATE DISPOSITION ACTIVITY —We continually evaluate 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.

The following table highlights our property dispositions during the years ended December 31, 2022 and 2021 (dollars in thousands):

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Number of outparcels sold (2)(3)

Contract price $ 53,987 $ 216,052

Proceeds from sale of real estate, net (4)

Gain on sale of property, net (4)

52,019 206,377

(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.

Gain on sale of property, net (5)

(1) We retained an outparcel for one property sold during the year ended December 31, 2021, and therefore the sale did not result in a reduction in our total property count.

(2) During the year ended December 31, 2021, our outparcel sales included:

(i) the only remaining portion of one of our properties, which resulted in a reduction in our total property count;

and (ii) an undeveloped parcel of land, as well as two outparcels adjacent to two of our centers, none of which 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.

(4) Total proceeds from sale of real estate, net includes closing costs and credits.

(5) During the year ended December 31, 2021, Gain on Disposal of Property, Net on the consolidated statements of operations includes miscellaneous write-off activity, which is not included in gain on sale of property, net, presented above.

PHILLIPS EDISON & COMPANY

DECEMBER 31, 2022 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.

DISTRIBUTIONS —We elected to be taxed as a REIT for federal income tax purposes commencing with our taxable year ended December 31, 2010.

As a REIT, we have made, and intend to continue to make, distributions each taxable year equal to at least 90% of our taxable income (excluding capital gains and computed without regard to the dividends paid deduction).

We declared and paid 2022 monthly distributions of $0.09 per share, or $1.08 annualized, for each month beginning January 2022 through August 2022.

We declared and paid 2022 monthly distributions of $0.0933 per share, or $1.12 annualized, an increase of 3.7%, for each month beginning September 2022 through December 2022.

The December 2022 and January 2023 distributions of $0.0933 per share were paid on January 3, 2023 and February 1, 2023, respectively.

On February 8, 2023, our Board authorized 2023 distributions for February, March, and April of $0.0933 per share to the stockholders of record at the close of business on February 21, 2023, March 15, 2023, and April 17, 2023, respectively.

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

OP unit holders will receive distributions at the same rate as common stockholders, subject to certain withholdings.

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.

We declared and paid 2021 monthly distributions of $0.085 per share, or $1.02 annualized, for each month beginning January 2021 through September 2021.

We declared and paid 2021 monthly distributions of $0.09 per share, or $1.08 annualized, for October 2021 through December 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 necessarily equal net income or loss as calculated in accordance with GAAP).

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

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.

DIVIDEND REINVESTMENT PLAN AND SHARE REPURCHASE PROGRAMS —On August 4, 2021, as a result of our underwritten IPO, our Board approved the termination of the DRIP and the original share repurchase program.

On August 3, 2022, our Board approved a new share repurchase program of up to $250 million of common stock.

The program may be suspended or discontinued at any time, and does not obligate us to repurchase any dollar amount or particular number of shares.

No share repurchases have been made to date under this program.

CASH FLOW ACTIVITIES —As of December 31, 2022, we had cash and cash equivalents and restricted cash of $17.3 million , a net cash decrease of $98.2 million d uring the year ended December 31, 2022.

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Net cash used in investing activities

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

(331,245) (180,491) (150,754) (83.5) %

Net cash used in financing activities

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• 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.

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

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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.

The increase in property operations was primarily due to a $15.6 million, or 4.5%, improvement in Same-Center NOI as compared to 2021, and the execution of our acquisition strategy.

During the year ended December 31, 2022, we had a net cash outlay of $0.2 million from changes in working capital as compared to a net cash inflow of $4.0 million during the same period in 2021.

This change was primarily driven by the timing of receivables and lower performance-based compensation accruals, partially offset by higher real estate tax accruals.

• 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 $11.5 million for the year ended December 31, 2022, an increase of $1.2 million as compared to the same period in 2021.

• 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.

The increase in fees and management income was primarily due to our joint venture with NRP from which we recognized income related to NRP’s achievement of certain performance targets of $2.7 million for the year ended December 31, 2022, compared to income of $0.7 million in 2021.

• Cash paid for interest — During the year ended December 31, 2022, we paid $65.1 million for interest, a decrease of $3.0 million over the same period in 2021, largely due to net repayments of debt outstanding in 2021, partially offset by higher average interest rates in 2022.

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

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During the year ended December 31, 2022, we paid $104.5 million for capital expenditures, an increase of $29.5 million over the same period in 2021, 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:

• 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, 2022, we had $1.3 million in net repayment of debt as compared to $402.3 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.

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• Distributions to stockholders and OP unit holders — Cash used for distributions to common stockholders and OP unit holders increased by $22.3 million during the year ended December 31, 2022 as compared to the same period in 2021, primarily due to an increase in shares of common stock outstanding as a result of our underwritten IPO.

• Issuance of common stock— During the year ended December 31, 2022, we issued 2.6 million shares of our common stock under the ATM program for net proceeds of $89.2 million.

During the year ended December 31, 2021, we had net proceeds from the issuance of common stock of $508.4 million from our underwritten IPO.

• Share repurchases — Cash outflows for share repurchases decreased by $77.8 million for the year ended December 31, 2022 as compared to the same period in 2021, primarily as a result of a tender offer which was settled in January 2021.

CRITICAL ACCOUNTING ESTIMATES

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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 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.

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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).

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.

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.

While we do not believe there is a reasonable likelihood of a material change in the estimates or

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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