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Item 1. Financial Statements

2023-08-02 compared with 2023-05-03 · 168 added, 124 removed, 447 unchanged (40% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2023 AND DECEMBER 31, 2022

AS OF JUNE 30, 2023 AND DECEMBER 31, 2022

(Condensed and Unaudited)

(In thousands, except per share amounts)

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Investment in real estate:

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Commitments and contingencies (see Note 8)

Preferred stock, $ 0.01 par value per share, 10,000 shares authorized, zero shares issued and outstanding at March 31, 2023 and December 31, 2022

Common stock, $ 0.01 par value per share, 1,000,000 shares authorized, 117,259 and 117,126 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

Preferred stock, $ 0.01 par value per share, 10,000 shares authorized, zero shares issued and outstanding at June 30, 2023 and December 31, 2022

Common stock, $ 0.01 par value per share, 1,000,000 shares authorized, 117,443 and 117,126 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

Additional paid-in capital (“APIC”) 3,387,764 3,383,978

8 unchanged sentences

PHILLIPS EDISON & COMPANY

MARCH 31, 2023 FORM 10-Q

JUNE 30, 2023 FORM 10-Q

PHILLIPS EDISON & COMPANY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023 AND 2022

(Condensed and Unaudited)

(In thousands, except per share amounts)

Three Months Ended March 31,

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

2023 2022 2023 2022

Rental income $ 148,980 $ 137,230 $ 296,708 $ 275,978

15 unchanged sentences

Earnings per share of common stock:

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

Net income per share attributable to stockholders - basic and

diluted (see Note 10)

$ 0.12 $ 0.12 $ 0.26 $ 0.21

1 unchanged sentence

Net income $ 16,209 $ 15,255 $ 34,845 $ 26,653

Other comprehensive (loss) income:

Other comprehensive income:

Change in unrealized value on interest rate swaps 6,562 9,834 63 37,407

2 unchanged sentences

Change in unrealized value on interest rate swaps attributable to noncontrolling interests ( 712 ) ( 1,535 ) ( 8 ) ( 4,237 )

Reallocation of comprehensive loss upon conversion of noncontrolling interests ( 27 ) ( 212 )

Reallocation of comprehensive income upon conversion of noncontrolling interests 28 432 1 220

Comprehensive income attributable to stockholders $ 20,329 $ 22,259 $ 31,126 $ 56,997

1 unchanged sentence

PHILLIPS EDISON & COMPANY

MARCH 31, 2023 FORM 10-Q

JUNE 30, 2023 FORM 10-Q

PHILLIPS EDISON & COMPANY, INC.

CONSOLIDATED STATEMENTS OF EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022

FOR THE THREE MONTHS ENDED JUNE 30, 2023 AND 2022

(Condensed and Unaudited)

(In thousands, except per share amounts)

Three Months Ended March 31, 2023 and 2022

Three Months Ended June 30, 2023 and 2022

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

Shares Amount

Balance at April 1, 2022 113,819 $ 1,138 $ 3,276,151 $ ( 160 ) $ ( 1,111,673 ) $ 2,165,456 $ 372,213 $ 2,537,669

Issuance of common stock, net 1,860 18 62,947 — — 62,965 — 62,965

Change in unrealized value on interest rate swaps — — — 8,299 — 8,299 1,535 9,834

Common distributions declared, $ 0.27 per share

— — — — ( 31,006 ) ( 31,006 ) — ( 31,006 )

Distributions to noncontrolling interests — — — — — — ( 4,113 ) ( 4,113 )

Share-based compensation 31 — 1,008 — — 1,008 3,033 4,041

Conversion of noncontrolling interests 72 1 1,540 432 — 1,973 ( 1,973 ) —

Net income — — — — 13,528 13,528 1,727 15,255

Balance at June 30, 2022 115,782 $ 1,157 $ 3,341,646 $ 8,571 $ ( 1,129,151 ) $ 2,222,223 $ 372,422 $ 2,594,645

Balance at April 1, 2023 117,259 $ 1,172 $ 3,382,368 $ 15,181 $ ( 1,186,074 ) $ 2,212,647 $ 360,294 $ 2,572,941

Change in unrealized value on interest rate swaps — — — 5,850 — 5,850 712 6,562

Common distributions declared, $ 0.2799 per share

— — — — ( 33,091 ) ( 33,091 ) — ( 33,091 )

Distributions to noncontrolling interests — — — — — — ( 4,107 ) ( 4,107 )

Share-based compensation 20 — 1,270 — — 1,270 1,964 3,234

Conversion of noncontrolling interests 164 2 4,126 28 — 4,156 ( 4,156 ) —

Net income — — — — 14,451 14,451 1,758 16,209

Balance at June 30, 2023 117,443 $ 1,174 $ 3,387,764 $ 21,059 $ ( 1,204,714 ) $ 2,205,283 $ 356,465 $ 2,561,748

See notes to consolidated financial statements.

PHILLIPS EDISON & COMPANY

JUNE 30, 2023 FORM 10-Q

PHILLIPS EDISON & COMPANY, INC.

CONSOLIDATED STATEMENTS OF EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022

(Condensed and Unaudited)

(In thousands, except per share amounts)

Six Months Ended June 30, 2023 and 2022

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

2 unchanged sentences

Conversion of Class B common stock 93,665 936 ( 93,665 ) ( 936 ) — — — — — —

Change in unrealized value on interest

rate swaps — — — — — 24,871 — 24,871 2,702 27,573

Common distributions declared, $ 0.27

Issuance of common stock, net 1,860 18 — — 62,947 — — 62,965 — 62,965

Change in unrealized value on interest rate swaps — — — — — 33,170 — 33,170 4,237 37,407

Common distributions declared, $ 0.54 per share

— — — — — — ( 61,921 ) ( 61,921 ) — ( 61,921 )

4 unchanged sentences

Net income — — — — — — 23,607 23,607 3,046 26,653

Balance at March 31, 2022 113,819 $ 1,138 — $ — $ 3,276,151 $ ( 160 ) $ ( 1,111,673 ) $ 2,165,456 $ 372,213 $ 2,537,669

Balance at June 30, 2022 115,782 $ 1,157 — $ — $ 3,341,646 $ 8,571 $ ( 1,129,151 ) $ 2,222,223 $ 372,422 $ 2,594,645

Balance at January 1, 2023 117,126 $ 1,171 — $ — $ 3,383,978 $ 21,003 $ ( 1,169,665 ) $ 2,236,487 $ 360,946 $ 2,597,433

Change in unrealized value on interest

rate swaps — — — — — ( 5,795 ) — ( 5,795 ) ( 704 ) ( 6,499 )

Common distributions declared, $ 0.2799

Change in unrealized value on interest rate swaps — — — — — 55 — 55 8 63

Common distributions declared, $ 0.5598 per share

— — — — — — ( 66,119 ) ( 66,119 ) — ( 66,119 )

3 unchanged sentences

Net income — — — — — — 31,070 31,070 3,775 34,845

Balance at March 31, 2023 117,259 $ 1,172 — $ — $ 3,382,368 $ 15,181 $ ( 1,186,074 ) $ 2,212,647 $ 360,294 $ 2,572,941

Balance at June 30, 2023 117,443 $ 1,174 — $ — $ 3,387,764 $ 21,059 $ ( 1,204,714 ) $ 2,205,283 $ 356,465 $ 2,561,748

See notes to consolidated financial statements.

PHILLIPS EDISON & COMPANY

MARCH 31, 2023 FORM 10-Q

JUNE 30, 2023 FORM 10-Q

PHILLIPS EDISON & COMPANY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022

FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022

(Condensed and Unaudited)

(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

24 unchanged sentences

Insurance proceeds for property damage claims 1,859 —

Investment in marketable securities — ( 3,000 )

Net cash used in investing activities

6 unchanged sentences

Distributions to noncontrolling interests ( 7,964 ) ( 8,877 )

Net cash provided by (used in) financing activities

Proceeds from issuance of common stock, net of costs — 62,965

Net cash used in financing activities

( 30,820 ) ( 28,448 )

9 unchanged sentences

PHILLIPS EDISON & COMPANY

MARCH 31, 2023 FORM 10-Q

JUNE 30, 2023 FORM 10-Q

PHILLIPS EDISON & COMPANY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022

FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022

(Condensed and Unaudited)

(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

10 unchanged sentences

PHILLIPS EDISON & COMPANY

MARCH 31, 2023 FORM 10-Q

JUNE 30, 2023 FORM 10-Q

Phillips Edison & Company, Inc.

6 unchanged sentences

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

In addition to managing our own shopping centers, our third-party investment management business provides comprehensive real estate and asset management services to two unconsolidated institutional joint ventures, Grocery Retail Partners I LLC (“GRP I”) and Necessity Retail Partners (“NRP”), in which we have partial ownership interests, and one private fund (collectively, the “Managed Funds”) as of March 31, 2023.

As of March 31, 2023, we wholly-owned 275 real estate properties.

As of June 30, 2023, we wholly-owned 274 real estate properties.

Additionally, we owned a 14 % interest in GRP I, which owned 20 properties.

NRP —As of March 31, 2023, we owned a 20 % equity interest in NRP.

NRP was initially formed in March 2016 pursuant to the terms of a joint venture agreement between Phillips Edison Grocery Center REIT II, Inc.

and an affiliate of TPG Real Estate and is set to expire seven years after the date of the joint venture contribution agreement unless otherwise extended by the members.

In May 2022, we sold the final property in the joint venture as a result of the planned expiration 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 and comprehensive income (“consolidated statements of operations”).

NRP —As of June 30, 2023, we owned a 20 % equity interest in NRP.

NRP was initially formed in March 2016 pursuant to the terms of the joint venture agreement, as amended, between Phillips Edison Grocery Center REIT II, Inc.

and an affiliate of TPG Real Estate and is set to expire in 2024 unless otherwise extended by the members.

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

With the monetization of the joint venture, we exceeded the targeted return and as such were paid compensation of $ 2.5 million during the three months ended June 30, 2022 and $ 0.1 million and $ 2.7 million during the six months ended June 30, 2023 and 2022, respectively, which is recorded in Fees and Management Income in our consolidated statements of operations and comprehensive income (“consolidated statements of operations”).

We received no compensation during the three months ended June 30, 2023.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 unchanged sentences

As a result, these estimates are subject to a degree of uncertainty.

There were no changes to our significant accounting policies during the three months ended March 31, 2023, except for those discussed below.

There were no changes to our significant accounting policies during the six months ended June 30, 2023, except for those discussed below.

For a full summary of our significant accounting policies, refer to our 2022 Annual Report on Form 10-K, filed with the U.S.

4 unchanged sentences

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

Our results of operations for the three months ended March 31, 2023 are not necessarily indicative of the operating results expected for the full year.

Our results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the operating results expected for the full year.

The accompanying consolidated financial statements include our accounts and the accounts of the Operating Partnership and its wholly-owned subsidiaries (over which we exercise financial and operating control).

3 unchanged sentences

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

We recognized an insignificant amount of federal, state, and local income tax expense for the three months ended March 31, 2023 and 2022, and we retain a full valuation allowance for our net deferred tax asset.

We recognized an insignificant amount of federal, state, and local income tax expense for the three and six months ended June 30, 2023 and 2022, and we retain a full valuation allowance for our net deferred tax asset.

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

Newly Adopted Accounting Pronouncements —There were no newly adopted accounting pronouncements during the three months ended March 31, 2023 that impacted the Company.

Newly Adopted Accounting Pronouncements —There were no newly adopted accounting pronouncements during the six months ended June 30, 2023 that impacted the Company.

PHILLIPS EDISON & COMPANY

MARCH 31, 2023 FORM 10-Q

Reclassifications —Certain prior period amounts have been reclassified to conform to current year presentation in the consolidated statements of equity.

JUNE 30, 2023 FORM 10-Q

Reclassifications —Certain prior period amounts have been reclassified to conform to the current year presentation in the consolidated statements of equity.

The reallocation of operating partnership interests is now reflected within Conversion of Noncontrolling Interests, as opposed to being presented as a separate financial statement line item.

3 unchanged sentences

Lease income related to our operating leases was as follows (in thousands):

Three Months Ended March 31,

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

2023 2022 2023 2022

Rental income related to fixed lease payments (1)

3 unchanged sentences

Straight-line rent amortization (3)

3,148 3,170 5,591 4,865

Amortization of lease assets 1,249 1,062 2,465 2,054

7 unchanged sentences

(4) Includes general reserves as well as adjustments for tenants considered non-creditworthy for which we are recording revenue on a cash basis, per Accounting Standards Codification (“ASC”) Topic 842, Leases .

Approximate future fixed contractual lease payments to be received under non-cancelable operating leases in effect as of March 31, 2023, assuming no new or renegotiated leases or option extensions on lease agreements, and including the impact of rent abatements and tenants who have been moved to the cash basis of accounting for revenue recognition purposes, are as follows (in thousands):

Approximate future fixed contractual lease payments to be received under non-cancelable operating leases in effect as of June 30, 2023, assuming no new or renegotiated leases or option extensions on lease agreements, and including the impact of rent abatements and tenants who have been moved to the cash basis of accounting for revenue recognition purposes, are as follows (in thousands):

Remaining 2023 $ 218,277

1 unchanged sentence

Total $ 2,154,195

No single tenant comprised 10% or more of our aggregate annualized base rent (“ABR”) as of March 31, 2023.

As of March 31, 2023, our wholly-owned real estate investments in Florida and California represented 12.2 % and 10.9 % of our ABR, respectively.

No single tenant comprised 10% or more of our aggregate annualized base rent (“ABR”) as of June 30, 2023.

As of June 30, 2023, our wholly-owned real estate investments in Florida and California represented 12.3 % and 10.9 % of our ABR, respectively.

As a result, the geographic concentration of our portfolio makes it particularly susceptible to adverse weather or economic events in the Florida (see “Hurricane Ian” in Note 4) and California real estate markets.

PHILLIPS EDISON & COMPANY

MARCH 31, 2023 FORM 10-Q

JUNE 30, 2023 FORM 10-Q

REAL ESTATE ACTIVITY

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

Three Months Ended March 31,

Six Months Ended June 30,

Number of properties acquired 4 4

Number of outparcels acquired (1)

Contract price $ 78,650 $ 169,342

1 unchanged sentence

69,464 170,186

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

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

The aggregate purchase price of the assets acquired during the three months ended March 31, 2023 and 2022 were allocated as follows (in thousands):

March 31, 2023 March 31, 2022

The aggregate purchase price of the assets acquired during the six months ended June 30, 2023 and 2022 were allocated as follows (in thousands):

June 30, 2023 June 30, 2022

Land and improvements $ 25,084 $ 44,191

8 unchanged sentences

Net assets acquired $ 69,464 $ 170,186

The weighted-average amortization periods for in-place, above-market, and below-market lease intangibles and below-market debt acquired during the three months ended March 31, 2023 and 2022 are as follows (in years):

March 31, 2023 March 31, 2022

The weighted-average amortization periods for in-place, above-market, and below-market lease intangibles and below-market debt acquired during the six months ended June 30, 2023 and 2022 are as follows (in years):

June 30, 2023 June 30, 2022

Acquired in-place leases 12 15

3 unchanged sentences

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

Three Months Ended March 31,

Six Months Ended June 30,

Number of properties sold 1 3

Number of outparcels sold 2 2

Contract price $ 6,250 $ 28,342

2 unchanged sentences

(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.

(2) Activity for the six months ended June 30, 2023 includes land acquired from us by local authorities.

PHILLIPS EDISON & COMPANY

MARCH 31, 2023 FORM 10-Q

JUNE 30, 2023 FORM 10-Q

Hurricane Ian - On September 28, 2022, Hurricane Ian struck the southeast United States and caused various amounts of damage to our properties located in the region.

Based on our estimates at March 31, 2023, we expect to collect insurance proceeds of $ 1.0 million (net of deductibles and self-insurance of $ 1.7 million) equal to the replacement cost of the damaged properties.

During 2022, we recorded gross cumulative accelerated depreciation of $ 2.7 million, which was reduced by expected insurance recoveries, for damages sustained to the properties.

We also recognized a receivable for estimated insurance recoveries in excess of the deductible.

As of March 31, 2023, we have received no insurance recoveries and have a receivable balance of $ 1.0 million, which is recorded in Other Assets, Net on our consolidated balance sheets.

During 2022, we recorded gross cumulative accelerated depreciation of $ 2.7 million for damages sustained to the properties, which was reduced by insurance recoveries of $ 1.0 million (net of deductibles and self-insurance of $ 1.7 million) collected in 2023.

OTHER ASSETS, NET

The following is a summary of Other Assets, Net outstanding as of March 31, 2023 and December 31, 2022, excluding amounts related to assets classified as held for sale (in thousands):

March 31, 2023 December 31, 2022

The following is a summary of Other Assets, Net outstanding as of June 30, 2023 and December 31, 2022, excluding amounts related to assets classified as held for sale (in thousands):

June 30, 2023 December 31, 2022

Other assets, net:

17 unchanged sentences

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

(2) Net of $ 2.8 million and $ 3.0 million of general reserves for uncollectible amounts as of March 31, 2023 and December 31, 2022, respectively.

Receivables that were removed for tenants considered to be non-creditworthy were $ 5.9 million and $ 6.2 million as of March 31, 2023 and December 31, 2022, respectively.

(3) Net of $ 4.0 million and $ 4.2 million of receivables removed as of March 31, 2023 and December 31, 2022, respectively, related to straight-line rent for tenants previously or currently considered to be non-creditworthy.

PHILLIPS EDISON & COMPANY

MARCH 31, 2023 FORM 10-Q

(2) Net of $ 3.2 million and $ 3.0 million of general reserves for uncollectible amounts as of June 30, 2023 and December 31, 2022, respectively.

Receivables that were removed for tenants considered to be non-creditworthy were $ 6.5 million and $ 6.2 million as of June 30, 2023 and December 31, 2022, respectively.

(3) Net of $ 4.1 million and $ 4.2 million of receivables removed as of June 30, 2023 and December 31, 2022, respectively, related to straight-line rent for tenants previously or currently considered to be non-creditworthy.

DEBT OBLIGATIONS

The following is a summary of the outstanding principal balances and interest rates, which includes the effect of derivative financial instruments, for our debt obligations as of March 31, 2023 and December 31, 2022 (dollars in thousands):

The following is a summary of the outstanding principal balances and interest rates, which includes the effect of derivative financial instruments, for our debt obligations as of June 30, 2023 and December 31, 2022 (dollars in thousands):

Interest Rate (1)

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Revolving credit facility SOFR + 1.1 %

14 unchanged sentences

Weighted-average interest rate (3)

(1) Interest rates are as of March 31, 2023.

(1) Interest rates are as of June 30, 2023.

(2) Our term loans carry an interest rate of the Secured Overnight Financing Rate (“SOFR”) plus a spread.

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

(3) Includes the effects of derivative financial instruments that were effective as of March 31, 2023 and December 31, 2022 (see Notes 7 and 12).

2023 Debt Activity— During the three months ended March 31, 2023, we repaid $ 25.4 million in mortgage debt.

Debt Allocation — The allocation of total debt between fixed-rate and variable-rate as well as between secured and unsecured, excluding market debt adjustments, discount on senior notes, and deferred financing expenses, net, and including the effects of derivative financial instruments as of March 31, 2023 and December 31, 2022 is summarized below (in thousands):

March 31, 2023 December 31, 2022

PHILLIPS EDISON & COMPANY

JUNE 30, 2023 FORM 10-Q

(3) Includes the effects of derivative financial instruments that were effective as of June 30, 2023 and December 31, 2022 (see Notes 7 and 12).

2023 Debt Activity— During the six months ended June 30, 2023, we repaid $ 45.4 million in mortgage debt.

On July 31, 2023, we amended three senior unsecured term loans with a total notional amount of $ 475.0 million scheduled to mature during 2024.

The amended three senior unsecured term loans have a total notional amount of $ 484.8 million.

The $ 161.8 million unsecured term loan is priced at SOFR plus 1.35 % and is scheduled to mature on January 31, 2026 extendable with two one -year options to 2028.

The $ 158.0 million and $ 165.0 million unsecured term loans are priced at SOFR plus 1.35 % and mature on January 31, 2027.

Debt Allocation — The allocation of total debt between fixed-rate and variable-rate as well as between secured and unsecured, excluding market debt adjustments, discount on senior notes, and deferred financing expenses, net, and including the effects of derivative financial instruments as of June 30, 2023 and December 31, 2022 is summarized below (in thousands):

June 30, 2023 December 31, 2022

As to interest rate:

8 unchanged sentences

(1) Fixed-rate debt includes, and variable-rate debt excludes, the portion of such debt that has been hedged by interest rate derivatives.

As of March 31, 2023, $ 755 million in variable-rate debt is hedged to a fixed rate for a weighted-average period of 1.3 years (see Notes 7 and 12).

As of June 30, 2023, $ 755 million in variable-rate debt is hedged to a fixed rate for a weighted-average period of 1.1 years (see Notes 7 and 12).

DERIVATIVES AND HEDGING ACTIVITIES

4 unchanged sentences

Our derivative financial instruments are used to manage differences in the amount, timing, and duration of our known or expected cash receipts and our known or expected cash payments principally related to our investments and borrowings.

PHILLIPS EDISON & COMPANY

MARCH 31, 2023 FORM 10-Q

Cash Flow Hedges of Interest Rate Risk —Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for our making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

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

During the three months ended March 31, 2023 and 2022, such derivatives were used to hedge the variable cash flows associated with certain variable-rate debt.

During the six months ended June 30, 2023 and 2022, such derivatives were used to hedge the variable cash flows associated with certain variable-rate debt.

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

1 unchanged sentence

On March 15, 2023, we entered into an interest rate swap which has a notional amount of $ 200 million and swaps SOFR for a fixed rate of approximately 3.36 % effective September 15, 2023 and maturing September 1, 2026.

The following is a summary of our interest rate swaps that were designated as cash flow hedges of interest rate risk as of March 31, 2023 and December 31, 2022 (dollars in thousands):

March 31, 2023 December 31, 2022

PHILLIPS EDISON & COMPANY

JUNE 30, 2023 FORM 10-Q

The following is a summary of our interest rate swaps that were designated as cash flow hedges of interest rate risk as of June 30, 2023 and December 31, 2022 (dollars in thousands):

June 30, 2023 December 31, 2022

Notional amount (1)

4 unchanged sentences

Weighted-average term (in years) 1.9 1.6

(1) Notional amount includes only interest rate swaps that were effective as of March 31, 2023 and December 31, 2022.

(1) Notional amount includes only interest rate swaps that were effective as of June 30, 2023 and December 31, 2022.

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

Three Months Ended March 31,

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

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

2023 2022 2023 2022

Amount of gain recognized in Other Comprehensive Income

$ 12,062 $ 7,080 $ 10,110 $ 29,979

Amount of (gain) loss reclassified from AOCI into Interest Expense, Net

1 unchanged sentence

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

As of March 31, 2023, the fair value of our derivatives in a net liability position, which included accrued interest but excluded any adjustment for nonperformance risk related to these agreements and approximated $ 0.2 million, are recorded in Accounts Payable and Other Liabilities on our consolidated balance sheets.

As of March 31, 2023, we had not posted any collateral related to these agreements and were not in breach of any agreement provisions.

If we had breached any of these provisions, we could have been required to settle our obligations under the agreements at their termination value of $ 0.2 million.

As of June 30, 2023, there were no derivatives with a fair value in a net liability position, which would include accrued interest but exclude any adjustment for nonperformance risk related to these agreements.

COMMITMENTS AND CONTINGENCIES

14 unchanged sentences

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

PHILLIPS EDISON & COMPANY

MARCH 31, 2023 FORM 10-Q

As of March 31, 2023, we had four letters of credit outstanding totaling approximately $ 12.5 million to provide security for our obligations under Silver Rock’s insurance and reinsurance contracts.

As of June 30, 2023, we had four letters of credit outstanding totaling approximately $ 12.5 million to provide security for our obligations under Silver Rock’s insurance and reinsurance contracts.

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

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

PHILLIPS EDISON & COMPANY

JUNE 30, 2023 FORM 10-Q

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

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

During the three months ended March 31, 2023 and 2022, no shares of our common stock 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.

During the three and six months ended June 30, 2023, we issued no shares of our common stock under the ATM program.

During the three and six months ended June 30, 2022, we issued 1.9 million shares of our common stock under the ATM program for net proceeds of $ 63.0 million, after approximately $ 0.6 million in commissions.

As of June 30, 2023, $ 159.9 million of common stock remained available for issuance under the ATM program.

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

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

Distributions —We declared 2023 monthly distributions of $ 0.0933 per common share and Operating Partnership unit (“OP unit”) for each month beginning January 2023 through April 2023.

Distributions paid to stockholders and OP unit holders of record subsequent to March 31, 2023 were as follows (dollars in thousands, excluding per share amounts):

Distributions —We declared and paid 2023 monthly distributions of $ 0.0933 per common share and Operating Partnership unit (“OP unit”) for each month beginning January 2023 through July 2023.

Distributions paid to stockholders and OP unit holders of record subsequent to June 30, 2023 were as follows (dollars in thousands, excluding per share amounts):

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

March 3/15/2023 4/3/2023 $ 0.0933 $ 12,226

April 4/17/2023 5/1/2023 0.0933 12,226

Convertible Noncontrolling Interests —As of March 31, 2023 and December 31, 2022, we had approximately 14.3 million and 14.1 million outstanding non-voting OP units, respectively.

June 6/15/2023 7/3/2023 $ 0.0933 $ 12,228

July 7/17/2023 8/1/2023 0.0933 12,229

Convertible Noncontrolling Interests —As of June 30, 2023 and December 31, 2022, we had approximately 14.1 million outstanding non-voting OP units.

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

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

As the form of redemption for OP units is within our control, the OP units outstanding as of March 31, 2023 and December 31, 2022 are classified as Noncontrolling Interests within permanent equity on our consolidated balance sheets.

As the form of redemption for OP units is within our control, the OP units outstanding as of June 30, 2023 and December 31, 2022 are classified as Noncontrolling Interests within permanent equity on our consolidated balance sheets.

On January 18, 2022, we issued approximately 1.6 million OP units in full settlement of the earn-out liability (see note 12).

The table below is a summary of our OP unit activity for the three months ended March 31, 2023 and 2022 (dollars and shares in thousands):

Three Months Ended March 31,

The table below is a summary of our OP unit activity for the three and six months ended June 30, 2023 and 2022 (dollars and shares in thousands):

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

2023 2022 2023 2022

OP units converted into shares of common stock (1)

164 72 164 605

Distributions declared on OP units (2)

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

PHILLIPS EDISON & COMPANY

MARCH 31, 2023 FORM 10-Q

EARNINGS PER SHARE

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

PHILLIPS EDISON & COMPANY

JUNE 30, 2023 FORM 10-Q

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

Three Months Ended March 31,

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

2023 2022 2023 2022

Net income attributable to stockholders - basic

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Net income attributable to convertible OP units (1)

1,758 1,727 3,775 3,046

Net income - diluted

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

Three Months Ended March 31,

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

2023 2022 2023 2022

Recurring fees (1)

1 unchanged sentence

Realized performance income (2)

— 2,546 75 2,742

Transactional revenue and reimbursements (3)

724 447 1,266 841

Insurance premiums (4)

848 793 1,697 1,589

Total fees and management income $ 2,546 $ 4,781 $ 5,024 $ 7,242

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

PHILLIPS EDISON & COMPANY

MARCH 31, 2023 FORM 10-Q

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

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

As of March 31, 2023, the potential “make-whole amount” on the estimated aggregate amount of built-in gain subject to protection under the agreements is approximately $ 147.8 million.

As of June 30, 2023, the potential “make-whole amount” on the estimated aggregate amount of built-in gain subject to protection under the agreements is approximately $ 125.8 million.

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

We have not recorded any liability related to the 2017 TPA or the 2021 TPA on our consolidated balance sheets for any periods presented, nor recognized any expense since the inception of the 2017 TPA, owing to the fact that any potential liability under the agreements is controlled by us and we believe we will either (i) continue to own and operate the protected properties or (ii) be able to successfully complete tax-deferred exchanges under Section 1031 of the Internal Revenue Code of 1986, as amended (unless there is a change in applicable law) or complete other tax-efficient transactions to avoid any liability under the agreements.

Other Related Party Matters — As of March 31, 2023, we were the limited guarantor of a $ 175 million mortgage loan secured by GRP I properties.

PHILLIPS EDISON & COMPANY

JUNE 30, 2023 FORM 10-Q

Other Related Party Matters — As of June 30, 2023, we were the limited guarantor of a $ 175 million mortgage loan secured by 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 GRP I in which any potential liability under such guarantee will be apportioned between us and GRP I based on our respective ownership percentages in the joint venture.

We have no liability recorded on our consolidated balance sheets for the guaranty as of March 31, 2023 and December 31, 2022.

We have no liability recorded on our consolidated balance sheets for the guaranty as of June 30, 2023 and December 31, 2022.

FAIR VALUE MEASUREMENTS

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We estimate the fair value of our senior unsecured notes by using quoted prices in active markets, which are considered Level 1 inputs.

The following is a summary of borrowings as of March 31, 2023 and December 31, 2022 (in thousands):

March 31, 2023 December 31, 2022

The following is a summary of borrowings as of June 30, 2023 and December 31, 2022 (in thousands):

June 30, 2023 December 31, 2022

Recorded Principal Balance (1)

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Total $ 1,951,186 $ 1,822,682 $ 1,896,594 $ 1,772,548

(1) As of March 31, 2023 and December 31, 2022, respectively, recorded principal balances include:

(1) As of June 30, 2023 and December 31, 2022, respectively, recorded principal balances include:

(i) net deferred financing fees of $ 6.9 million and $ 8.0 million;

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(2) Our finance lease liability is included in the mortgages line item, as presented .

PHILLIPS EDISON & COMPANY

MARCH 31, 2023 FORM 10-Q

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

Fair value measurements that occurred as of and during the three months ended March 31, 2023 and the year ended December 31, 2022 were as follows (in thousands):

March 31, 2023 December 31, 2022

Fair value measurements that occurred as of and during the six months ended June 30, 2023 and the year ended December 31, 2022 were as follows (in thousands):

June 30, 2023 December 31, 2022

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

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— 25,231 — — 25,853 —

Derivative liabilities (2)

— 184 — — — —

Impaired real estate assets, net (2)

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(1) We record marketable securities and derivative assets in Other Assets, Net on our consolidated balance sheets.

(2) We record derivative liabilities in Accounts Payable and Other Liabilities on our consolidated balance sheets.

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

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We utilize unadjusted quoted prices for identical assets in active markets that we have the ability to access.

Derivative Instruments— As of March 31, 2023 and December 31, 2022, we had interest rate swaps that fixed SOFR on portions of our unsecured term loan facilities.

Derivative Instruments— As of June 30, 2023 and December 31, 2022, we had interest rate swaps that fixed SOFR on portions of our unsecured term loan facilities.

PHILLIPS EDISON & COMPANY

JUNE 30, 2023 FORM 10-Q

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

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

However, as of March 31, 2023 and December 31, 2022, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives.

However, as of June 30, 2023 and December 31, 2022, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives.

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

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

There were no impairment charges recorded during the three months ended March 31, 2023 and March 31, 2022.

There were no impairment charges recorded during the three and six months ended June 30, 2023 and June 30, 2022.

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

7 unchanged sentences

Primary impairment triggers for these land parcels are changes to our plans or intentions with regards to such properties, or planned dispositions at prices that are less than the current carrying values.

PHILLIPS EDISON & COMPANY

MARCH 31, 2023 FORM 10-Q

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

1 unchanged sentence

Changes in the fair value of the earn-out liability were recorded to Other Expense, Net in the consolidated statements of operations.

We recorded no expense for the three months ended March 31, 2023 and $ 1.8 million in expense for the three months ended March 31, 2022.

We recorded no expense for the three months ended June 30, 2023 and June 30, 2022.

We recorded no expense for the six months ended June 30, 2023 and $ 1.8 million in expense for the six months ended June 30, 2022.

SUBSEQUENT EVENTS

2 unchanged sentences

PHILLIPS EDISON & COMPANY

MARCH 31, 2023 FORM 10-Q

JUNE 30, 2023 FORM 10-Q

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

What changed 10-Q

Item 1. Financial Statements