What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-08-02 compared with 2023-05-03 · 204 added, 89 removed, 465 unchanged (39% of the section changed)

48 unchanged sentences

PHILLIPS EDISON & COMPANY

MARCH 31, 2023 FORM 10-Q

JUNE 30, 2023 FORM 10-Q

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

49 unchanged sentences

PHILLIPS EDISON & COMPANY

MARCH 31, 2023 FORM 10-Q

JUNE 30, 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.

17 unchanged sentences

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

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.

As of June 30, 2023, we owned equity interests in 294 shopping centers, including 274 wholly-owned shopping centers and 20 shopping centers owned through one unconsolidated joint venture, which comprised approximately 33.6 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 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

In May 2022, we sold the final property in the NRP 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.

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

PORTFOLIO AND LEASING STATISTICS —Below are statistical highlights of our wholly-owned portfolio as of June 30, 2023 and 2022 (dollars and square feet in thousands):

June 30, 2023 June 30, 2022

Number of properties 274 269

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PHILLIPS EDISON & COMPANY

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

JUNE 30, 2023 FORM 10-Q

The following table details information for our unconsolidated joint venture as of June 30, 2023, which is the basis for determining the prorated information included in the subsequent tables (dollars and square feet in thousands):

June 30, 2023

Joint Venture Ownership Percentage Number of Properties ABR GLA

GRP I 14% 20 $ 31,350 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 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:

LEASE EXPIRATIONS —The following chart shows the aggregate scheduled lease expirations, excluding our Neighbors who are occupying space on a temporary basis, after June 30, 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

MARCH 31, 2023 FORM 10-Q

JUNE 30, 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 March 31, 2023:

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

The following charts present the composition of our portfolio by Neighbor industry as of June 30, 2023:

PHILLIPS EDISON & COMPANY

MARCH 31, 2023 FORM 10-Q

JUNE 30, 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 March 31, 2023 (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 June 30, 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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SUPERVALU 3,280 0.7 % 336 1.1 % 5

Subway Group 2,498 0.6 % 95 0.3 % 66

Starbucks Corporation 2,586 0.6 % 57 0.2 % 32

Lowe's 2,469 0.5 % 369 1.2 % 4

Subway Group 2,409 0.5 % 90 0.3 % 62

Anytime Fitness, Inc.

2,368 0.5 % 140 0.5 % 29

Starbucks Corporation 2,448 0.5 % 57 0.2 % 32

Food 4 Less (PAQ) 2,305 0.5 % 118 0.4 % 2

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

United Parcel Service 2,245 0.5 % 82 0.3 % 65

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

Office Depot 2,237 0.5 % 179 0.6 % 8

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

Total $ 152,105 33.5 % 14,870 48.2 % 502

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RESULTS OF OPERATIONS

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.

KNOWN TRENDS AND UNCERTAINTIES —The economy continues to face inflation risk, which may negatively impact some of our Neighbors and increase our operating and construction costs.

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

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

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

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

In addition to inflation, macroeconomic and geopolitical risks may create challenges that could negatively impact market conditions in the United States.

Additionally, 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

MARCH 31, 2023 FORM 10-Q

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

JUNE 30, 2023 FORM 10-Q

SUMMARY OF OPERATING ACTIVITIES FOR THE THREE MONTHS ENDED JUNE 30, 2023 AND 2022

Three Months Ended

March 31, Favorable (Unfavorable)

June 30, Favorable (Unfavorable)

(Dollars in thousands) 2023 2022 $ %

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We define our same-center portfolio as the 262 properties that were owned and operational prior to January 1, 2022.

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 March 31, 2023 and 2022:

We define our non-same-center portfolio as those properties that were not fully owned and operational in both periods owing primarily to real estate asset activity occurring after December 31, 2021, which includes five properties disposed of and eleven properties acquired.

Below are explanations of the significant fluctuations in the results of operations for the three months ended June 30, 2023 and 2022:

Rental Income increased $11.8 million primarily as follows:

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▪ $4.4 million increase primarily due to a $0.42 increase in average minimum rent PSF and a 1.1% 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;

▪ $3.5 million increase primarily due to an increase in recoverable income attributed to an increase in real estate taxes and common area maintenance spending as well as a 1.1% improvement in average occupancy.

• $4.6 million increase primarily related to our acquisition activity, net of dispositions.

Fees and Management Income:

• The $2.2 million decrease in fees and management income was primarily due to realized performance income received in 2022 for the achievement of certain performance targets related to our NRP joint venture.

Property Operating Expenses increased $1.8 million primarily as follows:

• $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, along with compensation expense;

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

Real Estate Tax Expenses:

• The $1.9 million increase in real estate tax expenses is primarily due to our acquisition activity, net of dispositions, and less appeal settlement income than 2022.

PHILLIPS EDISON & COMPANY

JUNE 30, 2023 FORM 10-Q

Interest Expense, Net:

• The $3.5 million increase was primarily due to higher interest rates in 2023.

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

Three Months Ended June 30,

Interest on unsecured term loans and senior notes, net $ 11,538 $ 9,512

Interest on secured debt 4,666 5,147

Interest on revolving credit facility, net 2,756 521

Non-cash amortization and other 1,724 1,818

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

Interest expense, net

$ 20,675 $ 17,127

Weighted-average interest rate as of end of period 3.9 % 3.2 %

Weighted-average term (in years) as of end of period 3.9 4.9

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

Gain on Disposal of Property, Net:

• The $2.7 million decrease was primarily related to the sale of one property and two outparcels with a net gain of $0.1 million during the three months ended June 30, 2023, as compared to the sale of one property and two outparcels with a net gain of $2.8 million during the three months ended June 30, 2022 (see Note 4).

Other Expense, Net:

• The $0.6 million decrease was primarily related to an increase in the value of our marketable securities and a decrease in transaction and acquisition expenses, partially offset by a decrease in the equity in net income of our unconsolidated joint ventures.

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

Three Months Ended June 30,

Transaction and acquisition expenses $ (1,261) $ (2,035)

Federal, state, and local income tax expense (119) (97)

Equity in net income of unconsolidated joint ventures

Other 371 (553)

Other expense, net

$ (904) $ (1,457)

PHILLIPS EDISON & COMPANY

JUNE 30, 2023 FORM 10-Q

SUMMARY OF OPERATING ACTIVITIES FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022

Six Months Ended

June 30, Favorable (Unfavorable)

(Dollars in thousands) 2023 2022 $ %

Rental income $ 296,708 $ 275,978 $ 20,730 7.5 %

Fees and management income 5,024 7,242 (2,218) (30.6) %

Other property income 1,469 1,459 10 0.7 %

Total revenues 303,201 284,679 18,522 6.5 %

Operating Expenses:

Property operating 49,736 46,172 (3,564) (7.7) %

Real estate taxes 36,453 33,964 (2,489) (7.3) %

General and administrative 23,219 22,908 (311) (1.4) %

Depreciation and amortization 118,165 117,995 (170) (0.1) %

Total operating expenses 227,573 221,039 (6,534) (3.0) %

Interest expense, net

(40,141) (35,326) (4,815) (13.6) %

Gain on disposal of property, net

1,017 4,161 (3,144) (75.6) %

Other expense, net

(1,659) (5,822) 4,163 71.5 %

34,845 26,653 8,192 30.7 %

Net income attributable to noncontrolling interests

(3,775) (3,046) (729) (23.9) %

Net income attributable to stockholders

$ 31,070 $ 23,607 $ 7,463 31.6 %

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 June 30, 2023 and 2022” above.

Below are explanations of the significant fluctuations in the results of operations for the six months ended June 30, 2023 and 2022:

Rental Income increased $20.7 million as follows:

• $11.8 million increase related to our same-center portfolio primarily as follows:

▪ $9.3 million increase primarily due to a $0.40 increase in average minimum rent PSF and a 1.1% improvement in average occupancy;

▪ $4.3 million increase primarily due to an increase in recoverable income attributed to an increase in real estate taxes and common area maintenance spending as well as a 1.1% improvement in average occupancy;

partially offset by

▪ $1.7 million decrease primarily due to lower lease buyout income.

• $8.9 million increase primarily related to our acquisition activity, net of dispositions.

Fees and Management Income:

• The $2.2 million decrease in fees and management income was primarily due to $0.1 million realized performance income in 2023 as compared to $2.7 million in 2022 for the achievement of certain performance targets related to our NRP joint venture.

Property Operating Expenses increased $3.6 million primarily as follows:

• $2.4 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, along with compensation expense;

• $1.2 million increase primarily due to our acquisition activity, net of dispositions.

Real Estate Tax Expenses:

• 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.

• The $2.5 million increase in real estate tax expenses is primarily due to our acquisition activity, net of dispositions, and less appeal settlement income than 2022.

PHILLIPS EDISON & COMPANY

MARCH 31, 2023 FORM 10-Q

JUNE 30, 2023 FORM 10-Q

Interest Expense, Net:

• 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.

• The $4.8 million increase was primarily due to higher 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):

Three Months Ended March 31,

Six Months Ended June 30,

Interest on unsecured term loans and senior notes, net $ 22,830 $ 19,428

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Non-cash amortization and other 3,442 3,423

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

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

Interest expense, net

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Gain on Disposal of Property, Net:

• 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).

• The $3.1 million decrease was primarily related to the sale of land acquired by local authorities, as well as the sale of one property and two outparcels with a net gain of $1.0 million during the six months ended June 30, 2023, as compared to the sale of three properties and two outparcels with a net gain of $4.2 million during the six months ended June 30, 2022 (see Note 4).

Other Expense, Net:

• 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.

• The $4.2 million decrease was primarily related to the settlement of the earn-out liability in January 2022, an increase in the value of our marketable securities, and a decrease in transaction and acquisition expenses, partially offset by a decrease from equity in income of our unconsolidated joint ventures.

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

Three Months Ended March 31,

Six Months Ended June 30,

Transaction and acquisition expenses $ (2,599) $ (4,080)

Federal, state, and local income tax expense (237) (194)

Equity in net income (loss) of unconsolidated joint ventures

Equity in net income of unconsolidated joint ventures

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

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PHILLIPS EDISON & COMPANY

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) :

JUNE 30, 2023 FORM 10-Q

LEASING ACTIVITY —Below is a summary of leasing activity for our wholly-owned properties for the three months ended June 30, 2023 and 2022 (1) :

Total Deals Inline Deals

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(2) Excludes exercise of options.

PHILLIPS EDISON & COMPANY

JUNE 30, 2023 FORM 10-Q

Below is a summary of leasing activity for our wholly-owned properties for the six months ended June 30, 2023 and 2022 (1) :

Total Deals Inline Deals

2023 2022 2023 2022

Number of leases 192 197 186 186

Square footage (in thousands) 550 661 424 411

ABR (in thousands) $ 11,858 $ 12,421 $ 10,349 $ 9,800

ABR PSF $ 21.56 $ 18.80 $ 24.42 $ 23.86

Cost PSF of executing new leases $ 31.22 $ 32.69 $ 35.62 $ 34.37

Number of comparable leases 63 72 62 70

Comparable rent spread 26.1 % 36.6 % 26.2 % 25.8 %

Weighted-average lease term (in years) 8.1 8.1 7.1 7.5

Renewals and options:

Number of leases 356 312 324 287

Square footage (in thousands) 2,083 1,744 707 613

ABR (in thousands) $ 32,362 $ 24,379 $ 18,131 $ 14,592

ABR PSF $ 15.53 $ 13.98 $ 25.64 $ 23.81

ABR PSF prior to renewals $ 14.07 $ 12.84 $ 22.10 $ 21.14

Percentage increase in ABR PSF 10.4 % 8.8 % 16.0 % 12.7 %

Cost PSF of executing renewals and options $ 0.48 $ 0.58 $ 1.22 $ 0.81

Number of comparable leases (2)

269 248 263 244

Comparable rent spread (2)

17.0 % 14.6 % 18.1 % 14.0 %

Weighted-average lease term (in years) 5.0 5.1 4.4 4.0

Portfolio retention rate 94.4 % 90.6 % 84.7 % 81.6 %

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

(2) Excludes exercise of options.

NON-GAAP MEASURES

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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 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.

For the three and six months ended June 30, 2023 and 2022, Same-Center NOI represents the NOI for the 262 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

MARCH 31, 2023 FORM 10-Q

JUNE 30, 2023 FORM 10-Q

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

Three Months Ended March 31, Favorable (Unfavorable)

2023 2022 $ Change % Change

Three Months Ended June 30, Favorable (Unfavorable) Six Months Ended June 30, Favorable (Unfavorable)

Change 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 March 31,

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

2023 2022 2023 2022

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

Adjusted to exclude:

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Other expense, net

904 1,457 1,659 5,822

Property operating expenses related to fees and management income 711 1,287 1,026 2,357

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PHILLIPS EDISON & COMPANY

MARCH 31, 2023 FORM 10-Q

JUNE 30, 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,

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

2023 2022 2023 2022

Calculation of Nareit FFO Attributable to Stockholders and OP Unit Holders

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Transaction and acquisition expenses 1,261 2,035 2,599 4,080

Loss on extinguishment or modification of debt and other, net

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

(9) 129 (9) 1,029

Amortization of unconsolidated joint venture basis differences 7 175 8 219

Realized performance income (1)

— (2,546) (75) (2,742)

Core FFO attributable to stockholders and OP unit holders $ 77,705 $ 71,838 $ 155,859 $ 144,401

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PHILLIPS EDISON & COMPANY

MARCH 31, 2023 FORM 10-Q

JUNE 30, 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 March 31, Year Ended December 31,

Three Months Ended June 30, Six Months Ended June 30, Year Ended December 31,

2023 2022 2023 2022 2022

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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

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

PHILLIPS EDISON & COMPANY

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

JUNE 30, 2023 FORM 10-Q

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.

DEBT —The following table summarizes information about our debt as of June 30, 2023 and December 31, 2022 (dollars in thousands):

June 30, 2023 December 31, 2022

Total debt obligations, gross $ 1,966,020 $ 1,912,784

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

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

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

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

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 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.

At June 30, 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.

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

FINANCIAL LEVERAGE RATIOS —We believe our net debt to Adjusted EBITDA re , net debt to total enterprise value, and debt covenant compliance as of June 30, 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 June 30, 2023 and December 31, 2022 (in thousands):

June 30, 2023 December 31, 2022

Total debt, excluding discounts, market adjustments, and deferred financing expenses $ 1,990,378 $ 1,937,142

6 unchanged sentences

Total enterprise value $ 6,468,659 $ 6,109,606

(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.

(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 June 30, 2023 and December 31, 2022, respectively, and the closing market price per share of $34.08 and $31.84 as of June 30, 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

JUNE 30, 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 June 30, 2023 and December 31, 2022 (dollars in thousands):

June 30, 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.

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

During the six months ended June 30, 2023 and 2022, we had capital spend of $47.6 million and $42.9 million, respectively.

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

Three Months Ended March 31,

Six Months Ended June 30,

Capital expenditures for real estate:

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(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.

(2) Amounts reported are net of insurance proceeds for property damage claims for the six months ended June 30, 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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The following table highlights our property acquisitions (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

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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.

PHILLIPS EDISON & COMPANY

MARCH 31, 2023 FORM 10-Q

JUNE 30, 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):

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

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(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.

(2) Activity for the six months ended June 30, 2023 includes 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 July 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.

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.

CASH FLOW ACTIVITIES —As of June 30, 2023, we had cash and cash equivalents and restricted cash of $9.9 million, a net cash decrease of $7.4 million during the six months ended June 30, 2023.

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

Three Months Ended March 31,

Six Months Ended June 30,

2023 2022 $ Change % Change

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(107,003) (185,893) 78,890 42.4 %

Net cash provided by (used in) financing activities

Net cash used in financing activities

(30,820) (28,448) (2,372) (8.3) %

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

• 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.

• Property operations —Most of our operating cash comes from rental and tenant recovery income received less property operating expenses, real estate taxes, and general and administrative costs paid.

Property operations during the six months ended June 30, 2023 were positively impacted by a $9.6 million, or 5.1%, improvement in Same-Center NOI as compared to the same period in 2022.

During the six months ended June 30, 2023, we had a net cash outlay of $19.6 million from changes in working capital as compared to a net cash outlay of $3.7 million during the same period in 2022.

This change was primarily driven by an increase in real estate tax payments and higher receivables due to reimbursable Neighbor costs.

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.

• Real estate acquisitions —During the six months ended June 30, 2023, our acquisitions resulted in a total cash outlay of $69.5 million, as compared to a total cash outlay of $170.2 million during the same period in 2022.

• Real estate dispositions —During the six months ended June 30, 2023, our dispositions resulted in a net cash inflow of $7.1 million, as compared to a net cash inflow of $27.1 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 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.

During the six months ended June 30, 2023, we paid $47.6 million for capital expenditures, an increase of $4.7 million over the same period in 2022, primarily due to an increase in capital improvements due to timing.

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

• Debt borrowings and payments —During the six months ended June 30, 2023, we had $43.5 million in net borrowings primarily as a result of our borrowings under our revolving credit facility.

During the six months ended June 30, 2022, we had net payments of $20.6 million primarily as a result of early repayments of mortgage loans from cash on hand, partially offset by borrowings on our revolving credit facility.

• Issuance of common stock— During the six months ended June 30, 2023, we issued no shares of our common stock under the ATM program compared to issuing 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, during the six months ended June 30, 2022.

PHILLIPS EDISON & COMPANY

MARCH 31, 2023 FORM 10-Q

JUNE 30, 2023 FORM 10-Q

• Distributions to stockholders and OP unit holders —Cash used for distributions to common stockholders and OP unit holders increased $3.4 million for the six months ended June 30, 2023 as compared to the same period in 2022, primarily due to an increase in distribution rates and an increase in shares of common stock outstanding.

CRITICAL ACCOUNTING ESTIMATES

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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