What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-11-01 compared with 2023-08-02 · 111 added, 103 removed, 566 unchanged (27% of the section changed)

48 unchanged sentences

PHILLIPS EDISON & COMPANY

JUNE 30, 2023 FORM 10-Q

SEPTEMBER 30, 2023 FORM 10-Q

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

49 unchanged sentences

PHILLIPS EDISON & COMPANY

JUNE 30, 2023 FORM 10-Q

SEPTEMBER 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 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.

As of September 30, 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 33.6 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 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

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.

We received no compensation during the three months ended September 30, 2023 and 2022.

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

September 30, 2023 September 30, 2022

Number of properties 275 270

10 unchanged sentences

PHILLIPS EDISON & COMPANY

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

SEPTEMBER 30, 2023 FORM 10-Q

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

September 30, 2023

Joint Venture Ownership Percentage Number of Properties ABR GLA

GRP I 14% 20 $ 31,625 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 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:

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

2 unchanged sentences

PHILLIPS EDISON & COMPANY

JUNE 30, 2023 FORM 10-Q

SEPTEMBER 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 June 30, 2023:

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

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

PHILLIPS EDISON & COMPANY

JUNE 30, 2023 FORM 10-Q

SEPTEMBER 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 June 30, 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 September 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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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

United Parcel Service 2,237 0.5 % 80 0.3 % 64

Office Depot 2,237 0.5 % 179 0.6 % 8

10 unchanged sentences

PHILLIPS EDISON & COMPANY

JUNE 30, 2023 FORM 10-Q

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

SEPTEMBER 30, 2023 FORM 10-Q

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

Three Months Ended

June 30, Favorable (Unfavorable)

September 30, Favorable (Unfavorable)

(Dollars in thousands) 2023 2022 $ % (1)

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(21,522) (17,569) (3,953) (22.5) %

Gain on disposal of property, net 75 2,793 (2,718) (97.3) %

Gain (loss) on disposal of property, net 53 (10) 63 NM

Other expense, net

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$ 12,245 $ 11,038 $ 1,207 10.9 %

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

Our basis for analyzing significant fluctuations in our results of operations generally includes review of the results of our same-center portfolio, non-same-center portfolio, and revenues and expenses from our management activities.

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 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:

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

Rental Income increased $6.7 million primarily as follows:

1 unchanged sentence

▪ $3.3 million increase primarily due to a $0.40 increase in average minimum rent PSF and a 1.2% improvement in average occupancy;

▪ $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.

▪ $1.6 million increase primarily due to an increase in recoverable income attributed to an increase in insurance costs, common area maintenance spending, and real estate taxes as well as a 1.2% improvement in average occupancy;

partially offset by

▪ $1.9 million decrease primarily due to collections in 2022 of amounts previously reserved.

Collections continue to be stable in 2023 as we have fewer Neighbors identified as a credit risk in 2023 as compared to 2022.

• $3.7 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 $1.2 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 from our same-center portfolio and corporate operating activities primarily due to higher insurance costs;

• $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.

• The $1.0 million increase in real estate tax expenses is primarily due to higher 2023 tax assessments and our acquisition activity, net of dispositions.

PHILLIPS EDISON & COMPANY

JUNE 30, 2023 FORM 10-Q

SEPTEMBER 30, 2023 FORM 10-Q

Interest Expense, Net:

1 unchanged sentence

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

Three Months Ended June 30,

Three Months Ended September 30,

Interest on unsecured term loans and senior notes, net $ 12,216 $ 10,492

2 unchanged sentences

Non-cash amortization and other 2,183 1,558

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

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

Interest expense, net

3 unchanged sentences

(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,

Three Months Ended September 30,

Transaction and acquisition expenses $ (580) $ (3,740)

Impairment of investment in third parties (see Note 11) (3,000) —

Federal, state, and local income tax expense (120) (179)

4 unchanged sentences

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)

SEPTEMBER 30, 2023 FORM 10-Q

SUMMARY OF OPERATING ACTIVITIES FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

Nine Months Ended

September 30, Favorable (Unfavorable)

(Dollars in thousands) 2023 2022 $ %

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$ 43,315 $ 34,645 $ 8,670 25.0 %

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:

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

Rental Income increased $27.4 million as follows:

1 unchanged sentence

▪ $12.6 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;

▪ $5.9 million increase primarily due to an increase in recoverable income attributed to an increase in real estate taxes, common area maintenance spending, and insurance costs as well as a 1.1% improvement in average occupancy;

partially offset by

▪ $1.9 million decrease primarily due to collections in 2022 of amounts previously reserved.

Collections continue to be stable in 2023 as we have fewer Neighbors identified as a credit risk in 2023 as compared to 2022;

▪ $1.3 million decrease primarily due to lower lease buyout income.

3 unchanged sentences

Property Operating Expenses increased $4.7 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;

• $2.9 million increase from our same-center portfolio and corporate operating activities primarily due to increases in recoverable expenses attributed to higher common area maintenance spending, along with higher insurance costs;

• $1.8 million increase primarily due to our acquisition activity, net of dispositions.

2 unchanged sentences

PHILLIPS EDISON & COMPANY

JUNE 30, 2023 FORM 10-Q

SEPTEMBER 30, 2023 FORM 10-Q

Interest Expense, Net:

1 unchanged sentence

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

Six Months Ended June 30,

Nine Months Ended September 30,

Interest on unsecured term loans and senior notes, net $ 35,046 $ 29,920

2 unchanged sentences

Non-cash amortization and other 5,625 4,981

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

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

Interest expense, net

4 unchanged sentences

Gain on Disposal of Property, Net:

• 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).

• 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 $1.1 million during the nine months ended September 30, 2023, as compared to the sale of three properties and three outparcels with a net gain of $4.2 million during the nine months ended September 30, 2022 (see Note 4).

Other Expense, Net:

• 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):

Six Months Ended June 30,

Nine Months Ended September 30,

Transaction and acquisition expenses $ (3,179) $ (7,820)

Impairment of investment in third parties (see Note 11) (3,000) —

Federal, state, and local income tax expense (357) (373)

5 unchanged sentences

PHILLIPS EDISON & COMPANY

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) :

SEPTEMBER 30, 2023 FORM 10-Q

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

Total Deals Inline Deals

25 unchanged sentences

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) :

SEPTEMBER 30, 2023 FORM 10-Q

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

Total Deals Inline Deals

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Other REITs may use different methodologies for calculating Same-Center NOI, and accordingly, our Same-Center NOI may not be comparable to other REITs.

For the three and 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.

For the three and nine months ended September 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

JUNE 30, 2023 FORM 10-Q

SEPTEMBER 30, 2023 FORM 10-Q

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

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

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

Change 2023 2022 $ Change % Change

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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 June 30, Six Months Ended June 30,

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

2023 2022 2023 2022

14 unchanged sentences

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

Gain on disposal of property, net

(Gain) loss on disposal of property, net

(53) 10 (1,070) (4,151)

16 unchanged sentences

PHILLIPS EDISON & COMPANY

JUNE 30, 2023 FORM 10-Q

SEPTEMBER 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 June 30, Six Months Ended June 30,

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

2023 2022 2023 2022

2 unchanged sentences

Depreciation and amortization of real estate assets 58,144 59,136 175,212 175,305

Gain on disposal of property, net

(Gain) loss on disposal of property, net

(53) 10 (1,070) (4,151)

5 unchanged sentences

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

Impairment of investment in third parties 3,000 — 3,000 —

Transaction and acquisition expenses 580 3,740 3,179 7,820

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

(9) 129 (9) 1,029

Loss (gain) on extinguishment or modification of debt and

other, net 375 (4) 366 1,025

Amortization of unconsolidated joint venture basis differences 4 1 12 220

8 unchanged sentences

PHILLIPS EDISON & COMPANY

JUNE 30, 2023 FORM 10-Q

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

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

2023 2022 2023 2022 2022

3 unchanged sentences

Interest expense, net 21,522 17,569 61,663 52,895 71,196

Gain on disposal of property, net (75) (2,793) (1,017) (4,161) (7,517)

(Gain) loss on disposal of property, net (53) 10 (1,070) (4,151) (7,517)

Impairment of real estate assets — — — — 322

4 unchanged sentences

$ 94,942 $ 90,871 $ 289,197 $ 267,012 $ 357,547

Impairment of investment in third parties 3,000 — 3,000 — —

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

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At this time, we believe our current sources of liquidity are sufficient to meet our short- and long-term cash demands.

ATM Program —In 2022, we commenced the ATM program through which we may offer and sell shares of our common stock having an aggregate offering price of up to $250 million.

During the three 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

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

SEPTEMBER 30, 2023 FORM 10-Q

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 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.

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

September 30, 2023 December 31, 2022

Total debt obligations, gross $ 1,888,762 $ 1,912,784

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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 June 30, 2023, the Operating Partnership had issued and outstanding its 2.625% senior notes.

At September 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 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

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

September 30, 2023 December 31, 2022

Total debt, excluding discounts, market adjustments, and deferred financing expenses $ 1,913,120 $ 1,937,142

6 unchanged sentences

Total enterprise value $ 6,389,385 $ 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 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.

(1) Total equity market capitalization is calculated as diluted shares multiplied by the closing market price per share, which includes 133.6 million and 131.2 million diluted shares as of September 30, 2023 and December 31, 2022, respectively, and the closing market price per share of $33.54 and $31.84 as of September 30, 2023 and December 31, 2022, respectively.

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

PHILLIPS EDISON & COMPANY

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

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

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

During the nine months ended September 30, 2023 and 2022, we had capital spend of $74.3 million.

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

Six Months Ended June 30,

Nine Months Ended September 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 six months ended June 30, 2023.

(2) Amounts reported are net of insurance proceeds of $2.3 million for property damage claims for the nine months ended September 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.

6 unchanged sentences

The following table highlights our property acquisitions (dollars in thousands):

Six Months Ended June 30,

Nine Months Ended September 30,

Number of properties acquired 5 5

5 unchanged sentences

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

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

PHILLIPS EDISON & COMPANY

JUNE 30, 2023 FORM 10-Q

SEPTEMBER 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):

Six Months Ended June 30,

Nine Months Ended September 30,

Number of properties sold 1 3

4 unchanged sentences

(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.

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.

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

DISTRIBUTIONS —We declared and paid 2023 monthly distributions of $0.0933 per common share and OP unit, or $1.12 annualized, 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, or $1.17 annualized, for September 2023 and October 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).

3 unchanged sentences

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 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.

CASH FLOW ACTIVITIES —As of September 30, 2023, we had cash and cash equivalents and restricted cash of $8.2 million, a net cash decrease of $9.1 million during the nine months ended September 30, 2023.

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

Six Months Ended June 30,

Nine Months Ended September 30,

2023 2022 $ Change % Change

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• 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.

Property operations during the nine months ended September 30, 2023 were positively impacted by a $12.7 million, or 4.5%, improvement in Same-Center NOI as compared to the same period in 2022.

During the nine months ended September 30, 2023, we had a net cash outlay of $7.0 million from changes in working capital as compared to a net cash inflow of $9.3 million during the same period in 2022.

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

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

• 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.

• Real estate acquisitions —During the nine months ended September 30, 2023, our acquisitions resulted in a total cash outlay of $83.1 million, as compared to a total cash outlay of $229.9 million during the same period in 2022.

• Real estate dispositions —During the nine months ended September 30, 2023, our dispositions resulted in a net cash inflow of $7.1 million, as compared to a net cash inflow of $27.3 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 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.

During the nine months ended September 30, 2023 and 2022, we paid $74.3 million for capital expenditures.

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.

• Debt borrowings and payments —During the nine months ended September 30, 2023, we had $39.5 million in net repayment of debt primarily as a result of early repayments of mortgage loans.

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

PHILLIPS EDISON & COMPANY

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.

SEPTEMBER 30, 2023 FORM 10-Q

• Issuance of common stock— During the 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.

• Distributions to stockholders and OP unit holders —Cash used for distributions to common stockholders and OP unit holders increased $5.3 million for the nine months ended September 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