What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-03 compared with 2022-11-03 · 131 added, 305 removed, 423 unchanged (51% of the section changed)

13 unchanged sentences

(a) statements about our plans, strategies, initiatives, and prospects;

(b) statements about the COVID-19 pandemic;

and (d) statements about our future results of operations, capital expenditures, and liquidity.

(b) statements about our underwritten incremental yields;

and (c) statements about our future results of operations, capital expenditures, and liquidity.

Such statements are subject to known and unknown risks and uncertainties, which could cause actual results to differ materially from those projected or anticipated, including, without limitation:

14 unchanged sentences

(xv) the concentration of our portfolio in a limited number of industries, geographies, or investments;

(xvi) the economic, political, and social impact of, and uncertainty relating to, the COVID-19 pandemic;

(xvi) the economic, political, and social impact of, and uncertainty relating to, pandemics or other health crises;

(xvii) our ability to re-lease our properties on the same or better terms, or at all, in the event of non-renewal or in the event we exercise our right to replace an existing tenant;

14 unchanged sentences

PHILLIPS EDISON & COMPANY

SEPTEMBER 30, 2022 FORM 10-Q

MARCH 31, 2023 FORM 10-Q

Our KPIs and terminology can be grouped into three key areas:

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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 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:

• Core Funds From Operations Attributable to Stockholders and OP Unit Holders (“Core FFO”)—To arrive at Core FFO, we adjust Nareit FFO, as defined below, to exclude certain recurring and non-recurring items including, but not limited to:

(i) depreciation and amortization of corporate assets;

15 unchanged sentences

PHILLIPS EDISON & COMPANY

SEPTEMBER 30, 2022 FORM 10-Q

MARCH 31, 2023 FORM 10-Q

• 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:

• Nareit FFO Attributable to Stockholders and OP Unit Holders (“Nareit FFO”) —Nareit defines Funds From Operations (“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;

15 unchanged sentences

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

As of September 30, 2022, we owned equity interests in 290 shopping centers, including 270 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.

As of March 31, 2023, we owned equity interests in 295 shopping centers, including 275 wholly-owned shopping centers and 20 shopping centers owned through one unconsolidated joint venture, which comprised approximately 33.7 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 the Managed Funds.

In May 2022, we sold the final property in our joint venture with NRP, in which we own a 20% interest.

We recognized no income during the three months ended September 30, 2022 and $2.7 million in income during the nine months ended September 30, 2022 related to NRP’s achievement of certain performance targets, which is included in Fees and Management Income in our consolidated statements of operations.

PORTFOLIO AND LEASING STATISTICS —Below are statistical highlights of our wholly-owned portfolio as of September 30, 2022 and 2021 (dollars and square feet in thousands):

September 30, 2022 September 30, 2021

In May 2022, we sold the final property in the NRP joint venture as a result of the planned expiration of the joint venture in 2023.

With the monetization of the joint venture, we exceeded the targeted return and as such were paid compensation of $0.1 million and $0.2 million during the three months ended March 31, 2023 and 2022, respectively, which is recorded in Fees and Management Income in our consolidated statements of operations.

PORTFOLIO AND LEASING STATISTICS —Below are statistical highlights of our wholly-owned portfolio as of March 31, 2023 and 2022 (dollars and square feet in thousands):

March 31, 2023 March 31, 2022

Number of properties 275 269

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PHILLIPS EDISON & COMPANY

SEPTEMBER 30, 2022 FORM 10-Q

The following table details information for our unconsolidated joint venture as of September 30, 2022, which is the basis for determining the prorated information included in the subsequent tables (dollars and square feet in thousands):

September 30, 2022

MARCH 31, 2023 FORM 10-Q

The following table details information for our unconsolidated joint venture as of March 31, 2023, which is the basis for determining the prorated information included in the subsequent tables (dollars and square feet in thousands):

March 31, 2023

Joint Venture Ownership Percentage Number of Properties ABR GLA

GRP I 14% 20 $ 30,996 2,213

LEASE EXPIRATIONS —The following chart shows the aggregate scheduled lease expirations, excluding our Neighbors who are occupying space on a temporary basis, after September 30, 2022 for each of the next ten years and thereafter for our wholly-owned properties and the prorated portion of those owned through our unconsolidated joint venture:

LEASE EXPIRATIONS —The following chart shows the aggregate scheduled lease expirations, excluding our Neighbors who are occupying space on a temporary basis, after March 31, 2023 for each of the next ten years and thereafter for our wholly-owned properties and the prorated portion of those owned through our unconsolidated joint venture:

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

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PHILLIPS EDISON & COMPANY

SEPTEMBER 30, 2022 FORM 10-Q

MARCH 31, 2023 FORM 10-Q

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

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

The following charts present the composition of our portfolio, including our wholly-owned properties and the prorated portion of those owned through our unconsolidated joint venture, by Neighbor type as of September 30, 2022:

The following charts present the composition of our portfolio by Neighbor industry as of September 30, 2022:

The following charts present the composition of our portfolio by Neighbor industry as of March 31, 2023:

PHILLIPS EDISON & COMPANY

SEPTEMBER 30, 2022 FORM 10-Q

MARCH 31, 2023 FORM 10-Q

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

We estimate that approximately 71% of our ABR, including the pro rata portion attributable to properties owned through our unconsolidated joint venture, is generated from Neighbors providing necessity-based goods and services.

TOP 20 NEIGHBORS —The following table presents our top 20 Neighbors by ABR, including our wholly-owned properties and the prorated portion of those owned through our unconsolidated joint venture, as of September 30, 2022 (dollars and square feet in thousands):

TOP 20 NEIGHBORS —The following table presents our top 20 Neighbors by ABR, including our wholly-owned properties and the prorated portion of those owned through our unconsolidated joint venture, as of March 31, 2023 (dollars and square feet in thousands):

ABR % of ABR Leased Square Feet % of Leased Square Feet Number of Locations (2)

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TJX Companies 6,137 1.4 % 516 1.7 % 18

Dollar Tree 3,711 0.9 % 352 1.2 % 37

Raley's 4,592 1.0 % 288 0.9 % 5

Dollar Tree 3,641 0.8 % 343 1.1 % 36

SUPERVALU 3,280 0.7 % 336 1.1 % 5

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Starbucks Corporation 2,448 0.5 % 57 0.2 % 32

Food 4 Less (PAQ) 2,305 0.5 % 119 0.4 % 2

Pet Supplies Plus 2,253 0.5 % 148 0.5 % 19

Kohl's Corporation 2,241 0.5 % 365 1.2 % 4

Office Depot 2,237 0.5 % 179 0.6 % 8

Food 4 Less (PAQ) 2,215 0.5 % 119 0.4 % 2

Save Mart 2,174 0.5 % 258 0.8 % 5

Petco Animal Supplies, Inc.

2,136 0.5 % 127 0.4 % 11

United Parcel Service 2,230 0.5 % 83 0.3 % 65

Total $ 151,590 33.6 % 14,874 48.1 % 508

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

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

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

RESULTS OF OPERATIONS

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

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

As of September 30, 2022, our Neighbors currently being accounted for on a cash basis represented approximately 4% of portfolio ABR.

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

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

KNOWN TRENDS AND UNCERTAINTIES —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.

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

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

SEPTEMBER 30, 2022 FORM 10-Q

SUMMARY OF OPERATING ACTIVITIES FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021

MARCH 31, 2023 FORM 10-Q

SUMMARY OF OPERATING ACTIVITIES FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022

Three Months Ended

September 30, Favorable (Unfavorable)

March 31, Favorable (Unfavorable)

(Dollars in thousands) 2023 2022 $ %

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Depreciation and amortization 58,498 57,226 (1,272) (2.2) %

Impairment of real estate assets — 698 698 NM

Total operating expenses 113,149 109,569 (3,580) (3.3) %

1 unchanged sentence

(19,466) (18,199) (1,267) (7.0) %

(Loss) gain on disposal of property, net (10) 14,093 (14,103) (100.1) %

Gain on disposal of property, net 942 1,368 (426) (31.1) %

Other expense, net

5 unchanged sentences

$ 16,619 $ 10,079 $ 6,540 64.9 %

(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.

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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, 2021, which includes 4 properties disposed of and 11 properties acquired.

Below are explanations of the significant fluctuations in the results of operations for the three months ended September 30, 2022 and 2021:

Below are explanations of the significant fluctuations in the results of operations for the three months ended March 31, 2023 and 2022:

Rental Income increased $9.0 million primarily as follows:

• $6.8 million increase related to our same-center portfolio as follows:

• $4.7 million increase primarily related to our same-center portfolio as follows:

▪ $4.9 million increase primarily due to a $0.39 increase in average minimum rent PSF and a 1.0% improvement in average occupancy;

▪ $0.9 million increase owing largely to an increase in recoverable income attributable to an increase in common area maintenance spending and the 1.6% improvement in average occupancy;

▪ $1.2 million increase primarily due to lower reserves as a result of a decrease in Neighbors we have identified as a credit risk;

• $7.3 million increase primarily related to our acquisition and disposition activity.

Property Operating Expenses increased $1.5 million primarily as follows:

• $0.6 million increase from our same-center portfolio and corporate operating activities primarily due to an increase in recoverable expenses attributed to higher common area maintenance costs, as compared to 2021;

• $0.9 million increase primarily due to our acquisition activity.

Real Estate Tax Expenses:

• The $1.7 million increase in real estate tax expenses is primarily due to our acquisition activity.

General and Administrative Expenses decreased $0.8 million primarily as follows:

• $0.4 million decrease primarily due to lower third-party consultant and custodial costs;

• $0.4 million decrease primarily related to savings in premiums for directors and officers insurance.

Depreciation and Amortization:

PHILLIPS EDISON & COMPANY

SEPTEMBER 30, 2022 FORM 10-Q

• The $6.1 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.

Interest Expense, Net:

• The $1.0 million decrease was primarily due to lower loss on extinguishment or modification of debt, partially offset by increased debt outstanding in 2022.

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

Three Months Ended September 30,

Interest on unsecured term loans and senior notes, net $ 10,492 $ 8,913

Interest on secured debt 5,080 6,049

Interest on revolving credit facility, net 443 237

Non-cash amortization and other 1,558 1,697

(Gain) loss on extinguishment or modification of debt and other, net (1)

Interest expense, net

$ 17,569 $ 18,570

Weighted-average interest rate as of end of period 3.3 % 3.3 %

Weighted-average term (in years) as of end of period 4.6 4.2

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

(Loss) Gain on Disposal of Property, Net:

• The $14.1 million decrease was primarily related to the sale of one outparcel with an insignificant net loss during the three months ended September 30, 2022, as compared to the sale of seven properties and two outparcels (in addition to other property-related miscellaneous disposals and write-offs) with a net gain of $14.1 million during the three months ended September 30, 2021 (see Note 4).

Other Expense, Net:

• The $3.2 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 activities related to the execution of our growth strategy.

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

Three Months Ended September 30,

Increase in fair value of earn-out liability (see Note 12) $ — $ (5,000)

Equity in net income (loss) of unconsolidated joint ventures

Transaction and acquisition expenses (3,740) (1,775)

Federal, state, and local income tax expense (179) (165)

Other (26) (92)

Other expense, net

$ (3,916) $ (7,086)

PHILLIPS EDISON & COMPANY

SEPTEMBER 30, 2022 FORM 10-Q

SUMMARY OF OPERATING ACTIVITIES FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021

Nine Months Ended

September 30, Favorable (Unfavorable)

(Dollars in thousands) 2022 2021 $ % (1)

Rental income $ 418,835 $ 386,784 $ 32,051 8.3 %

Fees and management income 9,323 7,095 2,228 31.4 %

Other property income 2,175 1,906 269 14.1 %

Total revenues 430,333 395,785 34,548 8.7 %

Operating Expenses:

Property operating 69,261 65,784 (3,477) (5.3) %

Real estate taxes 52,005 49,762 (2,243) (4.5) %

General and administrative 33,751 32,905 (846) (2.6) %

Depreciation and amortization 178,008 165,829 (12,179) (7.3) %

Impairment of real estate assets — 6,754 6,754 NM

Total operating expenses 333,025 321,034 (11,991) (3.7) %

Interest expense, net

(52,895) (57,765) 4,870 8.4 %

Gain on disposal of property, net

4,151 31,678 (27,527) (86.9) %

Other expense, net

(9,738) (25,595) 15,857 62.0 %

38,826 23,069 15,757 68.3 %

Net income attributable to noncontrolling interests

(4,181) (2,739) (1,442) (52.6) %

Net income attributable to stockholders

$ 34,645 $ 20,330 $ 14,315 70.4 %

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

For details surrounding our basis for analyzing significant fluctuations in our results of operations as well as definitions related to our portfolio of real estate assets, please see “Summary of Operating Activities for the Three Months Ended September 30, 2022 and 2021” above.

Below are explanations of the significant fluctuations in the results of operations for the nine months ended September 30, 2022 and 2021:

Rental Income increased $32.1 million as follows:

• $17.2 million increase related to our same-center portfolio primarily as follows:

▪ $13.8 million increase primarily due to a $0.37 increase in average minimum rent per square foot and a 1.5% improvement in average occupancy;

▪ $4.1 million increase owing largely to an increase in recoverable income attributed to an increase in common area maintenance spending and lower reserves for common area maintenance, as compared to 2021, and the 1.5% improvement in average occupancy;

▪ $0.6 million decrease primarily due to the stabilization of collections in 2022 compared 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.

• $14.8 million increase primarily related to our acquisition and disposition activity.

Fees and management income:

• The $2.2 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.

▪ $1.6 million decrease primarily due to lower lease buyout income.

• $4.3 million increase primarily related to our acquisition activity, net of dispositions.

Property Operating Expenses increased $1.7 million primarily as follows:

• $2.2 million increase related to our same-center portfolio and corporate operating activities primarily due to $2.9 million increase attributable to higher common area maintenance costs, as compared to 2021;

• $1.3 million increase primarily due to our acquisition activity.

• $1.2 million increase from our same-center portfolio and corporate operating activities primarily due to increases in recoverable expenses attributed to higher common area maintenance costs and compensation expense, as compared to 2022;

• $0.6 million increase primarily due to our acquisition activity, net of dispositions.

Real Estate Tax Expenses:

• The $2.2 million increase in real estate tax expenses was primarily due to our acquisition activity.

General and Administrative Expenses increased $0.8 million primarily as follows:

• $0.8 million increase primarily due to an increase in directors and officers insurance as a result of our becoming a publicly traded company;

• The $0.6 million increase in real estate tax expenses is primarily due to our acquisition activity, net of dispositions.

General and Administrative Expenses were consistent from 2022 to 2023, with the exception of:

• a $0.5 million increase primarily due to travel and conference expense;

• a $0.4 million decrease primarily related to savings in premiums for directors and officers insurance.

PHILLIPS EDISON & COMPANY

SEPTEMBER 30, 2022 FORM 10-Q

• $0.9 million increase primarily due to increases in overhead attributed to technology-related costs and travel and conference expenses;

• $0.5 million decrease in compensation expense owing largely to lower performance-based compensation;

• $0.4 million decrease primarily due to lower third-party consultant and custodial costs.

Depreciation and Amortization:

• The $12.2 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 $6.8 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.

MARCH 31, 2023 FORM 10-Q

Interest Expense, Net:

• The $4.9 million decrease was primarily due to net repayments of debt outstanding in 2021, partially offset by higher average interest rates in 2022.

• The $1.3 million increase was primarily due to increased debt outstanding and interest rates in 2023 partially offset by lower loss on extinguishment or modification of debt.

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

Nine Months Ended September 30,

Three Months Ended March 31,

Interest on unsecured term loans and senior notes, net $ 11,292 $ 9,916

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Gain on Disposal of Property, Net:

• The $27.5 million decrease was primarily related to the sale of three properties and three outparcels with a net gain of $4.2 million during the nine months ended September 30, 2022, as compared to the sale of 20 properties and three outparcels (as well as other property-related miscellaneous disposals and write-offs) with a net gain of $31.7 million during the nine months ended September 30, 2021 (see Note 4).

PHILLIPS EDISON & COMPANY

SEPTEMBER 30, 2022 FORM 10-Q

• The $0.4 million decrease was primarily related to land acquired by local authorities with a net gain of $0.9 million during the three months ended March 31, 2023, as compared to the sale of two properties with a net gain of $1.4 million during the three months ended March 31, 2022 (see Note 4).

Other Expense, Net:

• The $15.9 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, combined with an increase from equity in income of our unconsolidated joint ventures, 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 and a decrease in the value of our investment in marketable securities.

• The $3.6 million decrease was primarily related to the settlement of the earn-out liability in January 2022, an increase in the value in our marketable securities, and a decrease in transaction and acquisition expenses.

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

Nine Months Ended September 30,

Increase in fair value of earn-out liability (see Note 12) $ (1,809) $ (23,000)

Equity in net income of unconsolidated joint ventures

Three Months Ended March 31,

Transaction and acquisition expenses $ (1,338) $ (2,045)

Federal, state, and local income tax expense (118) (97)

Equity in net income (loss) of unconsolidated joint ventures

Increase in fair value of earn-out liability (see Note 12) — (1,809)

Other 611 (360)

1 unchanged sentence

$ (755) $ (4,365)

LEASING ACTIVITY —Below is a summary of leasing activity for our wholly-owned properties for the three months ended September 30, 2022 and 2021 (1) :

Total Deals Inline Deals

2022 2021 2022 2021

Number of leases 99 140 97 133

Square footage (in thousands) 240 551 201 312

ABR (in thousands) $ 5,417 $ 9,172 $ 4,990 $ 6,749

ABR PSF $ 22.57 $ 16.63 $ 24.78 $ 21.64

Cost PSF of executing new leases $ 41.02 $ 24.11 $ 43.30 $ 31.15

Number of comparable leases 41 57 41 56

Comparable rent spread 21.3 % 14.1 % 21.3 % 14.1 %

Weighted-average lease term (in years) 7.5 8.6 7.0 6.2

Renewals and options:

Number of leases 141 128 124 110

Square footage (in thousands) 921 854 307 211

ABR (in thousands) $ 13,591 $ 11,082 $ 7,408 $ 5,377

ABR PSF $ 14.76 $ 12.98 $ 24.12 $ 25.53

ABR PSF prior to renewals $ 13.55 $ 12.30 $ 21.26 $ 22.85

Percentage increase in ABR PSF 9.0 % 5.5 % 13.4 % 11.7 %

Cost PSF of executing renewals and options $ 0.56 $ 0.22 $ 1.66 $ 0.86

Number of comparable leases (2)

104 97 102 91

Comparable rent spread (2)

15.5 % 8.9 % 15.3 % 13.1 %

Weighted-average lease term (in years) 4.2 5.4 4.5 4.6

Portfolio retention rate 88.5 % 91.2 % 79.9 % 80.4 %

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

(2) Excludes exercise of options.

PHILLIPS EDISON & COMPANY

SEPTEMBER 30, 2022 FORM 10-Q

Below is a summary of leasing activity for our wholly-owned properties for the nine months ended September 30, 2022 and 2021 (1) :

MARCH 31, 2023 FORM 10-Q

LEASING ACTIVITY —Below is a summary of leasing activity for our wholly-owned properties for the three months ended March 31, 2023 and 2022 (1) :

Total Deals Inline Deals

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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 three and nine months ended September 30, 2022 and 2021, Same-Center NOI represents the NOI for the 255 properties that were wholly-owned and operational for the entire portion of all comparable reporting periods.

For the three months ended March 31, 2023 and 2022, Same-Center NOI represents the NOI for the 263 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.

PHILLIPS EDISON & COMPANY

SEPTEMBER 30, 2022 FORM 10-Q

MARCH 31, 2023 FORM 10-Q

The table below presents our Same-Center NOI (dollars in thousands):

Three Months Ended September 30, Favorable (Unfavorable) Nine Months Ended September 30, Favorable (Unfavorable)

Change 2022 2021 $ Change % Change

Three Months Ended March 31, Favorable (Unfavorable)

2023 2022 $ Change % Change

Rental income (1)

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Same-Center NOI Reconciliation —Below is a reconciliation of Net Income to NOI and Same-Center NOI (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Three Months Ended March 31,

$ 18,636 $ 11,398

12 unchanged sentences

58,498 57,226

Impairment of real estate assets — 698 — 6,754

Interest expense, net 19,466 18,199

Loss (gain) on disposal of property, net

Gain on disposal of property, net

(942) (1,368)

Other expense, net

3,916 7,086 9,738 25,595

Property operating expenses related to fees and

management income 704 1,489 3,061 3,611

Property operating expenses related to fees and management income 315 1,070

NOI for real estate investments 101,620 95,185

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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.

Nareit FFO 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, 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.

Accordingly, Nareit FFO 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 and Core FFO, as presented, may not be comparable to amounts calculated by other REITs.

PHILLIPS EDISON & COMPANY

SEPTEMBER 30, 2022 FORM 10-Q

The following table presents our calculation of Nareit FFO Attributable to Stockholders and OP Unit Holders and Core FFO (in thousands, except per share amounts):

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

MARCH 31, 2023 FORM 10-Q

The following table presents our calculation of Nareit FFO and Core FFO (in thousands, except per share amounts):

Three Months Ended March 31,

Calculation of Nareit FFO Attributable to Stockholders and OP Unit Holders

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Depreciation and amortization of real estate assets 57,953 56,320

Impairment of real estate assets — 698 — 6,754

Loss (gain) on disposal of property, net

Gain on disposal of property, net

(942) (1,368)

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Nareit FFO attributable to stockholders and OP unit holders $ 76,345 $ 67,055

Calculation of Core FFO

Calculation of Core FFO Attributable to Stockholders and OP Unit Holders

Nareit FFO attributable to stockholders and OP unit holders $ 76,345 $ 67,055

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Transaction and acquisition expenses 1,338 2,045

(Gain) loss on extinguishment or modification of debt and other, net

(4) 1,674 1,025 2,784

Amortization of unconsolidated joint venture basis

differences 1 80 220 905

Loss on extinguishment or modification of debt and other, net

Amortization of unconsolidated joint venture basis differences 1 44

Realized performance income (1)

— — (2,742) —

Core FFO $ 76,595 $ 66,373 $ 220,996 $ 194,189

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

Weighted-average shares of common stock outstanding -

diluted 131,593 122,573 129,805 112,317

Nareit FFO attributable to stockholders and OP unit holders

per share - diluted $ 0.55 $ 0.46 $ 1.62 $ 1.44

Core FFO per share - diluted $ 0.58 $ 0.54 $ 1.70 $ 1.73

Core FFO attributable to stockholders and OP unit holders $ 78,154 $ 72,563

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

Weighted-average shares of common stock outstanding - diluted 131,943 128,503

Nareit FFO attributable to stockholders and OP unit holders per share - diluted $ 0.58 $ 0.52

Core FFO attributable to stockholders and OP unit holders per share - diluted $ 0.59 $ 0.56

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

PHILLIPS EDISON & COMPANY

SEPTEMBER 30, 2022 FORM 10-Q

MARCH 31, 2023 FORM 10-Q

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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The following table presents our calculation of EBITDA re and Adjusted EBITDA re (in thousands):

Three Months Ended September 30, Nine Months Ended September 30, Year Ended December 31,

Three Months Ended March 31, Year Ended December 31,

2023 2022 2022

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Interest expense, net 19,466 18,199 71,196

Loss (gain) on disposal of property, net

10 (14,093) (4,151) (31,678) (30,421)

Gain on disposal of property, net (942) (1,368) (7,517)

Impairment of real estate assets — — 322

Federal, state, and local tax expense 118 97 806

Adjustments related to unconsolidated

joint ventures 927 1,107 1,061 1,704 1,431

Adjustments related to unconsolidated joint ventures 966 1,019 1,987

$ 96,742 $ 86,571 $ 357,547

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Transaction and acquisition expenses 1,338 2,045 10,551

Amortization of unconsolidated joint

venture basis differences 1 80 220 905 1,167

Amortization of unconsolidated joint venture basis differences 1 44 220

Realized performance income (1)

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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;

• distributions received from our 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.

ATM Program —In 2022, 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.

During the three months ended March 31, 2023 and 2022, no shares

PHILLIPS EDISON & COMPANY

SEPTEMBER 30, 2022 FORM 10-Q

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

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

• In October 2021, we settled 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, right, 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.

During the three months ended September 30, 2022, we issued 0.8 million shares of our common stock under the ATM program for net proceeds of $26.2 million, after approximately $0.3 million in commissions.

During the nine months ended September 30, 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 September 30, 2022, $159.9 million of common stock remained available for issuance under the ATM program.

DEBT —The following table summarizes information about our debt as of September 30, 2022 and December 31, 2021 (dollars in thousands):

September 30, 2022 December 31, 2021

MARCH 31, 2023 FORM 10-Q

were issued under the ATM program.

As of March 31, 2023, $159.9 million of common stock remained available for issuance under the ATM program.

DEBT —The following table summarizes information about our debt as of March 31, 2023 and December 31, 2022 (dollars in thousands):

March 31, 2023 December 31, 2022

Total debt obligations, gross $ 1,983,078 $ 1,912,784

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

In May 2022, we amended our credit facility agreement 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.

In addition to expanding the borrowing capacity, the Amendment replaces LIBOR with SOFR as the benchmark interest rate for the unsecured revolving credit facility and the two $240 million senior unsecured term loan tranches, maturing in November 2025 and July 2026.

In August 2022, we amended two of our interest rate swaps with a total notional amount of $430 million to replace LIBOR with SOFR as the benchmark interest rate in conjunction with the Amendment.

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 September 30, 2022, the Operating Partnership had issued and outstanding its 2.625% senior notes.

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 March 31, 2023, 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.

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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.

PHILLIPS EDISON & COMPANY

SEPTEMBER 30, 2022 FORM 10-Q

FINANCIAL LEVERAGE RATIOS —We believe our net debt to Adjusted EBITDA re , net debt to total enterprise value, and debt covenant compliance as of September 30, 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 September 30, 2022 and December 31, 2021 (in thousands):

September 30, 2022 December 31, 2021

Total debt, excluding discounts, market adjustments, and deferred

financing expenses $ 1,914,397 $ 1,941,504

FINANCIAL LEVERAGE RATIOS —We believe our net debt to Adjusted EBITDA re , net debt to total enterprise value, and debt covenant compliance as of March 31, 2023 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 March 31, 2023 and December 31, 2022 (in thousands):

March 31, 2023 December 31, 2022

Total debt, excluding discounts, market adjustments, and deferred financing expenses $ 2,007,436 $ 1,937,142

Cash and cash equivalents 6,784 5,740

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Total enterprise value $ 6,292,041 $ 6,109,606

(1) Total equity market capitalization is calculated as diluted shares multiplied by the closing market price per share, which includes 131.1 million and 126.6 million diluted shares as of September 30, 2022 and December 31, 2021, respectively, and the closing market price per share of $28.05 and $33.04 as of September 30, 2022 and December 31, 2021, respectively.

(2) Fully diluted shares include common stock and OP units as of September 30, 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 September 30, 2022 and December 31, 2021 (dollars in thousands):

September 30, 2022 December 31, 2021

(1) Total equity market capitalization is calculated as diluted shares multiplied by the closing market price per share, which includes 131.6 million and 131.2 million diluted shares as of March 31, 2023 and December 31, 2022, respectively, and the closing market price per share of $32.62 and $31.84 as of March 31, 2023 and December 31, 2022, respectively.

(2) Fully diluted shares include common stock and OP units.

PHILLIPS EDISON & COMPANY

MARCH 31, 2023 FORM 10-Q

The following table presents our calculation of net debt to Adjusted EBITDA re and net debt to total enterprise value as of March 31, 2023 and December 31, 2022 (dollars in thousands):

March 31, 2023 December 31, 2022

Net debt to Adjusted EBITDA re - annualized :

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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

SEPTEMBER 30, 2022 FORM 10-Q

During the nine months ended September 30, 2022 and 2021, we had capital spend of $74.3 million and $49.3 million, respectively.

During the three months ended March 31, 2023 and 2022, we had capital spend of $23.9 million and $18.6 million, respectively.

Below is a summary of our capital spending activity, excluding leasing commissions, on a cash basis (in thousands):

Nine Months Ended September 30,

Three Months Ended March 31,

Capital expenditures for real estate:

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Total capital spending activity (2)

$ 23,684 $ 18,608

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

(2) Amounts reported are net of insurance proceeds for property damage claims for the three months ended March 31, 2023.

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.

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

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

We expect to continue to make strategic acquisitions during the remainder of 2022.

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 (dollars in thousands):

Nine Months Ended September 30,

Three Months Ended March 31,

Number of properties acquired 4 3

Number of outparcels acquired (1)

Contract price $ 78,650 $ 100,400

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69,431 101,440

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

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

(1) Total price of acquisitions includes closing costs less credits and assumed debt obligations.

PHILLIPS EDISON & COMPANY

SEPTEMBER 30, 2022 FORM 10-Q

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.

MARCH 31, 2023 FORM 10-Q

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 (dollars in thousands):

Nine Months Ended September 30,

Three Months Ended March 31,

Number of properties sold — 2

Number of outparcels sold (2)(3)

Contract price $ — $ 13,325

Proceeds from sale of real estate, net (1)(2)

27,286 180,340

Gain on sale of property, net (5)

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

(2) During the nine months ended September 30, 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 an outparcel adjacent to one of our centers, neither of which resulted in a reduction in our total property count.

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

This generated minimal proceeds for us.

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

(5) During the nine months ended September 30, 2021, (Loss) 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.

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

On August 31, 2022, our Board authorized an increase of 3.7% on the September 2022 and October 2022 distributions to an amount of $0.0933 per share, or $1.12 annualized, which were paid on October 3, 2022 and November 1, 2022, respectively.

On November 2, 2022, our Board authorized a distribution for November and December 2022, as well as January 2023, of $0.0933 per share to the stockholders of record at the close of business on November 15, 2022, December 15, 2022, and January 17, 2023, respectively.

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

Gain on disposal of property, net (2)

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

(2) Activity for the three months ended March 31, 2023 was primarily related to land acquired from us by local authorities.

DISTRIBUTIONS —We declared and paid 2023 monthly distributions of $0.0933 per share, or $1.12 annualized, for each month beginning January 2023 through April 2023.

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.

PHILLIPS EDISON & COMPANY

SEPTEMBER 30, 2022 FORM 10-Q

CASH FLOW ACTIVITIES —As of September 30, 2022, we had cash and cash equivalents and restricted cash of $24.4 million, a net cash decrease of $91.1 million during the nine months ended September 30, 2022.

CASH FLOW ACTIVITIES —As of March 31, 2023, we had cash and cash equivalents and restricted cash of $12.0 million, a net cash decrease of $5.4 million during the three months ended March 31, 2023.

Below is a summary of our cash flow activity (dollars in thousands):

Nine Months Ended September 30,

Three Months Ended March 31,

2023 2022 $ Change % Change

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$ 62,763 $ 60,221 $ 2,542 4.2 %

Net cash (used in) provided by investing activities

(276,275) 37,835 (314,110) NM

Net cash used in financing activities

Net cash used in investing activities

(91,418) (106,497) 15,079 (14.2) %

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

Net cash provided by (used in) financing activities

23,270 (51,784) 75,054 144.9 %

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.

The increase in property operations was primarily due to a $13.2 million, or 5.1%, improvement in same center NOI as compared to the same period in 2021, and the execution of our acquisition strategy.

During the nine months ended September 30, 2022, we had a net cash inflow of $9.3 million from changes in working capital as compared to a net cash inflow of $4.6 million during the same period in 2021.

This was primarily driven by higher real estate tax liabilities related to acquisition activity, partially offset by higher performance-based compensation payments in 2022.

• 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 $9.3 million for the nine months ended September 30, 2022, an increase of $2.2 million as compared to the same period in 2021.

The increase in fees and management income was primarily due to our joint venture with NRP from which we recognized income of $2.7 million related to NRP’s achievement of certain performance targets.

• Cash paid for interest —During the nine months ended September 30, 2022, we paid $47.4 million for interest, a decrease of $6.1 million over the same period in 2021, primarily due to our debt repayments in 2021.

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

• Real estate acquisitions —During the nine months ended September 30, 2022, our acquisitions resulted in a total cash outlay of $229.9 million, as compared to a total cash outlay of $89.0 million during the same period in 2021.

• Real estate dispositions —During the nine months ended September 30, 2022, our dispositions resulted in a net cash inflow of $27.3 million, as compared to a net cash inflow of $180.3 million during the same period in 2021.

• Property operations —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 $4.6 million, or 4.9%, improvement in Same-Center NOI as compared to the same period in 2022.

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

• Real estate acquisitions —During the three months ended March 31, 2023, our acquisitions resulted in a total cash outlay of $69.4 million, as compared to a total cash outlay of $101.4 million during the same period in 2022.

• Real estate dispositions —During the three months ended March 31, 2023, our dispositions resulted in a net cash inflow of $1.1 million, as compared to a net cash inflow of $12.8 million during the same period in 2022.

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

During the nine months ended September 30, 2022, we paid $74.3 million for capital expenditures, an increase of $25.0 million over the same period in 2021, primarily due to an increase in tenant improvements owing largely to our leasing volume during 2022 and 2021.

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

• Debt borrowings and payments —During the nine months ended September 30, 2022, we had $25.6 million in net repayment of debt primarily as a result of early repayments of mortgage loans, partially offset by our net borrowings under our revolving credit facility.

During the nine months ended September 30, 2021, we had net payments of $597.4 million primarily as a result of:

(i) a pay down in July 2021 of a $375 million term loan set to mature in 2022 using proceeds from our underwritten IPO;

(ii) a partial pay down in August 2021 of a $150 million term loan set to mature in 2023 utilizing cash on hand;

and (iii) early repayments of mortgage loans.

• Distributions to stockholders and OP unit holders —Cash used for distributions to common stockholders and OP unit holders increased $20.0 million for the nine months ended September 30, 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 nine months ended September 30, 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.

During the nine months ended September 30, 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 nine months ended September 30, 2022 as compared to the same period in 2021, primarily as a result of a tender offer which was settled in January 2021.

During the three months ended March 31, 2023, we paid $23.9 million for capital expenditures, an increase of $5.3 million over the same period in 2022, primarily due to an increase in redevelopment and development activities.

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

• Debt borrowings and payments —During the three months ended March 31, 2023, we had $60.5 million in net borrowings primarily as a result of our borrowings under our revolving credit facility.

During the three months ended March 31, 2022, we had net payments of $16.5 million primarily as a result of early repayments of mortgage loans from cash on hand, partially offset by borrowings on our revolving credit facility.

PHILLIPS EDISON & COMPANY

SEPTEMBER 30, 2022 FORM 10-Q

MARCH 31, 2023 FORM 10-Q

CRITICAL ACCOUNTING ESTIMATES

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Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates” of our 2022 Annual Report on Form 10-K, filed with the SEC on February 21, 2023, contains a description of our critical accounting estimates, including those relating to the valuation of real estate assets and rental income.

There have been no significant changes to our critical accounting policies during 2022.

There have been no significant changes to our critical accounting estimates during 2023.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis