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Item 1. Financial Statements

2023-11-01 compared with 2023-08-02 · 129 added, 116 removed, 499 unchanged (33% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2023 AND DECEMBER 31, 2022

AS OF SEPTEMBER 30, 2023 AND DECEMBER 31, 2022

(Condensed and Unaudited)

(In thousands, except per share amounts)

June 30, 2023 December 31, 2022

September 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 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

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

Common stock, $ 0.01 par value per share, 1,000,000 shares authorized, 119,578 and 117,126 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

Additional paid-in capital (“APIC”) 3,461,981 3,383,978

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PHILLIPS EDISON & COMPANY

JUNE 30, 2023 FORM 10-Q

SEPTEMBER 30, 2023 FORM 10-Q

PHILLIPS EDISON & COMPANY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

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

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

(Condensed and Unaudited)

(In thousands, except per share amounts)

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

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

2023 2022 2023 2022

10 unchanged sentences

Interest expense, net ( 21,522 ) ( 17,569 ) ( 61,663 ) ( 52,895 )

Gain on disposal of property, net 75 2,793 1,017 4,161

Gain (loss) on disposal of property, net 53 ( 10 ) 1,070 4,151

Other expense, net ( 4,883 ) ( 3,916 ) ( 6,542 ) ( 9,738 )

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PHILLIPS EDISON & COMPANY

JUNE 30, 2023 FORM 10-Q

SEPTEMBER 30, 2023 FORM 10-Q

PHILLIPS EDISON & COMPANY, INC.

CONSOLIDATED STATEMENTS OF EQUITY

FOR THE THREE MONTHS ENDED JUNE 30, 2023 AND 2022

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

(Condensed and Unaudited)

(In thousands, except per share amounts)

Three Months Ended June 30, 2023 and 2022

Three Months Ended September 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

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

Issuance of common stock 773 8 26,409 — — 26,417 — 26,417

Offering costs, discounts, and commissions — — ( 348 ) — — ( 348 ) — ( 348 )

Change in unrealized value on interest rate swaps — — — 12,495 — 12,495 1,513 14,008

5 unchanged sentences

Net income — — — — 11,038 11,038 1,135 12,173

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

Balance at September 30, 2022 117,084 $ 1,170 $ 3,381,638 $ 21,123 $ ( 1,150,337 ) $ 2,253,594 $ 361,313 $ 2,614,907

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

Issuance of common stock 1,991 20 70,833 — — $ 70,853 — $ 70,853

Offering costs, discounts, and commissions — — ( 854 ) — — $ ( 854 ) — $ ( 854 )

Change in unrealized value on interest rate swaps — — — ( 1,269 ) — $ ( 1,269 ) ( 155 ) ( 1,424 )

5 unchanged sentences

Net income — — — — 12,245 12,245 1,484 13,729

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

Balance at September 30, 2023 119,578 $ 1,195 $ 3,461,981 $ 19,846 $ ( 1,226,379 ) $ 2,256,643 $ 350,849 $ 2,607,492

See notes to consolidated financial statements.

PHILLIPS EDISON & COMPANY

JUNE 30, 2023 FORM 10-Q

SEPTEMBER 30, 2023 FORM 10-Q

PHILLIPS EDISON & COMPANY, INC.

CONSOLIDATED STATEMENTS OF EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

(Condensed and Unaudited)

(In thousands, except per share amounts)

Six Months Ended June 30, 2023 and 2022

Nine Months Ended September 30, 2023 and 2022

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

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

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

Issuance of common stock 2,633 26 — — 90,098 — — 90,124 — 90,124

Offering costs, discounts, and commissions — — — — ( 1,090 ) — — ( 1,090 ) — ( 1,090 )

Change in unrealized value on interest rate swaps — — — — — 45,665 — 45,665 5,750 51,415

6 unchanged sentences

Net income — — — — — — 34,645 34,645 4,181 38,826

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 September 30, 2022 117,084 $ 1,170 — $ — $ 3,381,638 $ 21,123 $ ( 1,150,337 ) $ 2,253,594 $ 361,313 $ 2,614,907

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

Issuance of common stock 1,991 20 — — 70,833 — — $ 70,853 — $ 70,853

Offering costs, discounts, and commissions — — — — ( 854 ) — — $ ( 854 ) — $ ( 854 )

Change in unrealized value on interest rate swaps — — — — — ( 1,214 ) — ( 1,214 ) ( 147 ) ( 1,361 )

5 unchanged sentences

Net income — — — — — — 43,315 43,315 5,259 48,574

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

Balance at September 30, 2023 119,578 $ 1,195 — $ — $ 3,461,981 $ 19,846 $ ( 1,226,379 ) $ 2,256,643 $ 350,849 $ 2,607,492

See notes to consolidated financial statements.

PHILLIPS EDISON & COMPANY

JUNE 30, 2023 FORM 10-Q

SEPTEMBER 30, 2023 FORM 10-Q

PHILLIPS EDISON & COMPANY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

(Condensed and Unaudited)

(In thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

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( 1,070 ) ( 4,151 )

Impairment of investment in third parties 3,000 —

Change in fair value of earn-out liability — 1,809

2 unchanged sentences

Return on investment in unconsolidated joint ventures 197 1,247

Other ( 654 ) ( 100 )

Changes in operating assets and liabilities:

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Payments on mortgages and loans payable ( 100,479 ) ( 80,628 )

Proceeds from loans payable 58,000 —

Distributions paid ( 100,341 ) ( 94,118 )

Distributions to noncontrolling interests ( 11,938 ) ( 12,859 )

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

Proceeds from issuance of common stock 70,853 90,124

Payment of offering costs ( 854 ) ( 1,090 )

Net cash used in financing activities

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PHILLIPS EDISON & COMPANY

JUNE 30, 2023 FORM 10-Q

SEPTEMBER 30, 2023 FORM 10-Q

PHILLIPS EDISON & COMPANY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

FOR THE SIX MONTHS ENDED JUNE 30, 2023 AND 2022

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

(Condensed and Unaudited)

(In thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

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PHILLIPS EDISON & COMPANY

JUNE 30, 2023 FORM 10-Q

SEPTEMBER 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 June 30, 2023.

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

As of September 30, 2023, we wholly-owned 275 real estate properties.

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

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

NRP —As of September 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.

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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.

With the monetization of the joint venture, we exceeded the targeted return and as such were paid compensation of $ 0.1 million and $ 2.7 million during the nine months ended September 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 September 30, 2023 and 2022.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

There were no changes to our significant accounting policies during the nine months ended September 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.

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

Our results of operations for the three and nine months ended September 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).

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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 and six months ended June 30, 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 nine months ended September 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 six months ended June 30, 2023 that impacted the Company.

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

PHILLIPS EDISON & COMPANY

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.

There was no impact to the Company’s financial position as a result of this reclassification.

SEPTEMBER 30, 2023 FORM 10-Q

Lessor —The majority of our leases are largely similar in that the leased asset is retail space within our properties, and the lease agreements generally contain similar provisions and features, without substantial variations.

1 unchanged sentence

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

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

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

2023 2022 2023 2022

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(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 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):

Approximate future fixed contractual lease payments to be received under non-cancelable operating leases in effect as of September 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 $ 106,535

1 unchanged sentence

Total $ 2,151,586

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.

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

As of September 30, 2023, our wholly-owned real estate investments in Florida and California represented 12.3 % and 10.7 % 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

JUNE 30, 2023 FORM 10-Q

SEPTEMBER 30, 2023 FORM 10-Q

REAL ESTATE ACTIVITY

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

Six Months Ended June 30,

Nine Months Ended September 30,

Number of properties acquired 5 5

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

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

Subsequent to September 30, 2023, we acquired one property and one outparcel for $ 19.4 million

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

September 30, 2023 September 30, 2022

Land and improvements $ 29,084 $ 71,564

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Net assets acquired $ 83,073 $ 229,895

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

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

September 30, 2023 September 30, 2022

Acquired in-place leases 11 11

3 unchanged sentences

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

Six Months Ended June 30,

Nine Months Ended September 30,

Number of properties sold 1 3

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

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

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

PHILLIPS EDISON & COMPANY

JUNE 30, 2023 FORM 10-Q

SEPTEMBER 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.

1 unchanged sentence

OTHER ASSETS, NET

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

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

September 30, 2023 December 31, 2022

Other assets, net:

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(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 $ 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.

(2) Net of $ 2.7 million and $ 3.0 million of general reserves for uncollectible amounts as of September 30, 2023 and December 31, 2022, respectively.

Receivables that were removed for tenants considered to be non-creditworthy were $ 6.7 million and $ 6.2 million as of September 30, 2023 and December 31, 2022, respectively.

(3) Net of $ 4.4 million and $ 4.2 million of receivables removed as of September 30, 2023 and December 31, 2022, respectively, related to straight-line rent for tenants previously or currently considered to be non-creditworthy.

(4) We recorded an impairment of our investment in a third-party company of $ 3.0 million in Other Expense, Net on our consolidated statements of operations for the three and nine months ended September 30, 2023 (see Note 11).

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

Interest Rate (1)

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Revolving credit facility SOFR + 1.1 %

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Weighted-average interest rate (3)

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

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

PHILLIPS EDISON & COMPANY

SEPTEMBER 30, 2023 FORM 10-Q

(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.

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.

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

2023 Debt Activity— During the nine months ended September 30, 2023, we repaid $ 46.3 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.

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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

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 September 30, 2023 and December 31, 2022 is summarized below (in thousands):

September 30, 2023 December 31, 2022

As to interest rate:

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(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 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).

As of September 30, 2023, $ 700 million in variable-rate debt is hedged to a fixed rate for a weighted-average period of 1.8 years (see Notes 7 and 12).

DERIVATIVES AND HEDGING ACTIVITIES

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

During the nine months ended September 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.

2 unchanged sentences

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

SEPTEMBER 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 September 30, 2023 and December 31, 2022 (dollars in thousands):

September 30, 2023 December 31, 2022

Notional amount $ 700,000 $ 755,000

$ 755,000 $ 755,000

Fixed SOFR 2.1 % - 3.4 %

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Weighted-average term (in years) 1.8 1.6

(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 June 30, Six Months Ended June 30,

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

2023 2022 2023 2022

4 unchanged sentences

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 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.

As of September 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

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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.

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.

As of September 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”).

1 unchanged sentence

PHILLIPS EDISON & COMPANY

JUNE 30, 2023 FORM 10-Q

SEPTEMBER 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 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.

During the three and nine months ended September 30, 2023, we issued 2.0 million shares of our common stock under the ATM program for net proceeds of $ 70.1 million, after approximately $ 0.7 million in commissions.

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, 2023, approximately $ 89.0 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”).

2 unchanged sentences

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

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):

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 August 2023.

On September 1, 2023, the Board authorized a 4.5 % increase of our monthly distribution rate to $ 0.0975 per common share and OP unit.

We declared and paid 2023 monthly distributions of $ 0.0975 per common share and OP unit for September 2023 and October 2023.

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

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

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.

September 9/15/2023 10/2/2023 $ 0.0975 $ 12,948

October 10/16/2023 11/1/2023 0.0975 12,978

Convertible Noncontrolling Interests —As of September 30, 2023 and December 31, 2022, we had approximately 14.0 million and 14.1 million outstanding non-voting OP units, respectively.

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

1 unchanged sentence

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 June 30, 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 September 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 and six months ended June 30, 2023 and 2022 (dollars and shares in thousands):

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

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

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

2023 2022 2023 2022

10 unchanged sentences

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

PHILLIPS EDISON & COMPANY

SEPTEMBER 30, 2023 FORM 10-Q

EARNINGS PER SHARE

1 unchanged sentence

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 June 30, Six Months Ended June 30,

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

2023 2022 2023 2022

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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 June 30, Six Months Ended June 30,

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

2023 2022 2023 2022

2 unchanged sentences

Realized performance income (2)

— 2,546 75 2,742

Transactional revenue and reimbursements (3)

7 unchanged sentences

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

PHILLIPS EDISON & COMPANY

SEPTEMBER 30, 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.

3 unchanged sentences

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

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.

As of September 30, 2023, the potential “make-whole amount” on the estimated aggregate amount of built-in gain subject to protection under the agreements is approximately $ 122.7 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.

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.

Other Related Party Matters — As of September 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 June 30, 2023 and December 31, 2022.

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

During 2021, we made a cash investment of $ 3.0 million into a third-party company in exchange for preferred shares of their stock.

As part of the investment agreement, the third-party company entered into leases at two of our properties.

During the quarter ended September 30, 2023, we determined that the investment in the third-party company was fully impaired due to the value of the investment being significantly reduced, which is not deemed to be temporary, indicated by the company’s inability to pay rent.

As a result, we recorded impairment expense of $ 3.0 million in Other Expense, Net on our consolidated statements of operations for the three and nine months ended September 30, 2023 and reserved tenant receivables of $ 0.2 million as of September 30, 2023 as the company is considered to be non-creditworthy.

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

June 30, 2023 December 31, 2022

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

September 30, 2023 December 31, 2022

Recorded Principal Balance (1)

7 unchanged sentences

Total $ 1,869,984 $ 1,753,104 $ 1,896,594 $ 1,772,548

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

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

(i) net deferred financing fees of $ 11.2 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

SEPTEMBER 30, 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 six months ended June 30, 2023 and the year ended December 31, 2022 were as follows (in thousands):

June 30, 2023 December 31, 2022

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

September 30, 2023 December 31, 2022

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

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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 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

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

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

6 unchanged sentences

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 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.

However, as of September 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 and six months ended June 30, 2023 and June 30, 2022.

There were no impairment charges recorded during the three and nine months ended September 30, 2023 and September 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

SEPTEMBER 30, 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 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.

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

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

SUBSEQUENT EVENTS

2 unchanged sentences

PHILLIPS EDISON & COMPANY

JUNE 30, 2023 FORM 10-Q

SEPTEMBER 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