What changed in this filing

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Item 1A. Risk Factors

2024-02-12 compared with 2023-02-21 · 37 added, 49 removed, 588 unchanged (13% of the section changed)

12 unchanged sentences

• Our real estate assets may decline in value and be subject to significant impairment losses, which may reduce our net income.

PHILLIPS EDISON & COMPANY

DECEMBER 31, 2022 FORM 10-K

• We actively reinvest in our portfolio in the form of development and redevelopment projects, which have inherent risks that could adversely affect our financial condition, cash flows, and results of operations.

1 unchanged sentence

• Actual incremental unlevered yields for our development and redevelopment projects may vary from our underwritten incremental unlevered yield range.

• Pandemics, such as the COVID-19 pandemic, had, and may continue to have, a negative effect on our and our Neighbors’ businesses, financial condition, results of operations, cash flows, and liquidity.

• Pandemics, epidemics, or other health crises may have a negative effect on our and our Neighbors’ businesses, financial condition, results of operations, cash flows, and liquidity.

Risks Related to Our Indebtedness and Liquidity

6 unchanged sentences

federal income tax purposes, we would fail to qualify as a REIT and would suffer adverse consequences.

• Complying with REIT requirements may cause us to forego otherwise attractive opportunities or liquidate otherwise attractive investments.

• Complying with REIT requirements may cause us to forgo otherwise attractive opportunities or liquidate otherwise attractive investments.

Risks Related to Business Continuity

102 unchanged sentences

These subjective assessments have a direct effect on our net income because recording an impairment charge results in an immediate negative adjustment to net income, which may be material.

During the years ended December 31, 2022 and 2021, we incurred impairment charges of $0.3 million and $6.8 million, respectively, related to real estate assets that were under contract or actively being marketed for sale at a disposition price that was less than the carrying value.

We recorded such impairment charges as we sold assets with greater risk to improve the quality of our portfolio.

During the year ended December 31, 2023, we incurred no impairment charges.

We will continue to evaluate the risk profile of each asset and may potentially recognize impairments in future quarters.

Accordingly, there can be no assurance that we will not record additional impairment charges in the future related to our assets.

Accordingly, there can be no assurance that we will not record impairment charges in the future related to our assets.

We actively reinvest in our portfolio in the form of development and redevelopment projects, which have inherent risks that could adversely affect our financial condition, cash flows, and results of operations.

34 unchanged sentences

The continued shift in retail sales towards e-commerce may adversely affect our financial condition, cash flows, and results of operations.

Retailers are increasingly affected by e-commerce and changes in customer buying habits, which have been further accelerated as a result of the COVID-19 pandemic, including the delivery or curbside pick-up of items ordered online.

Retailers are increasingly affected by e-commerce and changes in customer buying habits, which were further accelerated as a result of the COVID-19 pandemic, including the delivery or curbside pick-up of items ordered online.

Retailers are considering these e-commerce trends when making decisions regarding their brick and mortar stores and how they will compete and innovate in a rapidly changing e-commerce environment.

Many retailers in our shopping centers provide services or sell goods that are unable to be performed online (such as haircuts, massages, and fitness centers) or that have historically been less likely to be purchased online (such as grocery stores, restaurants, and coffee shops);

however, the continuing increase in e-commerce sales in all retail categories (including online orders for immediate delivery or pickup in store) may cause retailers to adjust the size or number of retail locations in the future or close stores.

however, the continuing increase in e-commerce sales (including online orders for immediate delivery or pickup in store) may cause retailers to adjust the size or number of retail locations in the future or close stores.

Our grocer Neighbors are incorporating e-commerce concepts through home delivery or curbside pickup, which could reduce foot traffic at our centers and adversely affect our occupancy and rental rates.

8 unchanged sentences

Underwritten incremental unlevered yields are based solely on our estimates, using data available to us in our development and redevelopment underwriting processes.

The actual total cost to complete a development or redevelopment project may differ substantially from our estimates due to various factors, including unanticipated expenses, delays in the estimated start and/or completion date of planned development projects, effects of the COVID-19 pandemic, and other contingencies.

In addition, the actual incremental NOI from our planned development and redevelopment activities may differ substantially from our estimates based on numerous other factors, including delays and/or difficulties in leasing and stabilizing a development or redevelopment project, failure to obtain estimated occupancy and rental rates, inability to collect anticipated rental revenues, Neighbor bankruptcies, and unanticipated expenses that we cannot pass on to our Neighbors.

Actual incremental unlevered yields may vary from our underwritten incremental unlevered yield range based on the actual total cost to complete a project and its incremental NOI at stabilization.

Pandemics, such as the COVID-19 pandemic, had, and may continue to have, a negative effect on our and our Neighbors’ businesses, financial condition, results of operations, cash flows, and liquidity.

In March 2020, the World Health Organization declared COVID-19 a global pandemic.

The COVID-19 pandemic caused, and may continue to cause, significant disruptions to the United States and global economy and has contributed to significant volatility and negative pressure in financial markets.

Many countries, including the United States, as well as certain states and cities, including where our shopping centers are located, initially reacted by instituting quarantines, restrictions on travel, and/or mandatory closures of businesses, as well as other restrictions.

The COVID-19 pandemic impacted our historical business and financial performance.

While we believe our collections have returned to levels consistent with those prior to the onset of the pandemic, there are no assurances that the COVID-19 pandemic, or another pandemic, will not have a further negative impact on our business and financial performance in the future, especially if there is a negative impact to customers’ willingness or ability to frequent our Neighbors’ businesses.

We believe substantially all our Neighbors are contractually obligated to continue with their rent payments as documented in our lease agreements with them.

There is no guarantee that we will ultimately be able to collect on current and past due amounts, particularly if there are additional pandemics or tightening of restrictions in the future.

Moreover, in the event of any default by a Neighbor under its lease agreement or relief agreement, we may not be able to fully recover, and/or may experience delays in recovering and additional costs in enforcing our rights as landlord to recover, amounts due to us under the terms of the lease agreement and/ or relief agreement.

Moreover, a resurgence of the COVID-19 pandemic or another pandemic, and/or renewed restrictions intended to prevent and mitigate the spread of the disease, and resulting consumer behavior and economic slowdown or recession could have additional adverse effects on our business in the future, including but not limited to the heightening of many of the other risks and uncertainties described in this “Risk Factors” section.

While the unpredictable nature of pandemics precludes any prediction as to one’s ultimate adverse impact, a worsening of the economic, political, and social environment as a result presents material risks and uncertainties with respect to our and our Neighbors’ business, financial condition, results of operations, cash flows, liquidity, and ability to satisfy debt service obligations.

Pandemics, epidemics, or other health crises may have a negative effect on our and our Neighbors’ businesses, financial condition, results of operations, cash flows, and liquidity.

Our business, and the businesses of our Neighbors, could be materially and adversely affected by the risks, or the public perception of the risks, related to a pandemic, epidemic, or other health crisis, like the COVID-19 pandemic, especially if there is a negative impact to customers’ willingness or ability to frequent our Neighbors’ businesses.

As was experienced during the COVID-19 pandemic, such crises could cause significant disruptions to the United States and global economy and contribute to significant volatility and negative pressure in financial markets.

Government responses, including quarantines, restrictions on travel, mandatory closures of businesses, or other restrictions, as well as changes in consumer behavior, could negatively impact our tenants and their ability to operate their businesses, which could impact our ability to collect on current or past due rent payments or fully recover amounts due under the terms of a lease agreement in the event of a default by a Neighbor.

The unpredictable nature of pandemics, epidemics, and other health crises precludes any prediction as to one’s ultimate adverse impact.

A worsening of the economic, political, and social environment as a result presents material risks and uncertainties with respect to our and our Neighbors’ business, financial condition, results of operations, cash flows, liquidity, and ability to satisfy debt service obligations.

An increased focus on metrics and reporting related to ESG factors may impose additional costs and expose us to new risks.

Investors and other stakeholders have become more focused on understanding how companies address a variety of ESG factors.

When evaluating investment decisions, many investors and shareholders look not only at company ESG disclosures,

PHILLIPS EDISON & COMPANY

DECEMBER 31, 2022 FORM 10-K

but also to ESG rating systems that have been developed by third-party groups to allow comparisons between companies.

When evaluating investment decisions, many investors and shareholders look not only at company ESG disclosures, but also to ESG rating systems that have been developed by third-party groups to allow comparisons between companies.

Although we participate in a number of these ratings systems, and generally score relatively well in those in which we do participate, we do not participate in, and would not necessarily score as well in, all of the available rating systems.

2 unchanged sentences

In addition, the SEC is currently evaluating rulemaking that is likely to impose additional ESG disclosure and other requirements on us.

Failure to participate in certain of the third-party ratings systems, failure to score well in those ratings systems, or failure to provide certain ESG disclosures could result in reputational harm when investors or others compare us against similar companies in our industry, could result in investor engagement on our ESG initiatives and disclosures or increased costs relating to ESG initiatives, and could cause certain investors to be unwilling to invest in our stock, which could adversely impact our ability to raise capital.

Failure to participate in certain of the third-party ratings systems, failure to score well in those ratings systems, failure to provide certain ESG disclosures, or unfavorable comparisons in these areas to other companies, could result in reputational harm when investors or others compare us against similar companies in our industry, could result in investor engagement on our ESG initiatives and

PHILLIPS EDISON & COMPANY

DECEMBER 31, 2023 FORM 10-K

disclosures or increased costs relating to ESG initiatives, and could cause certain investors to be unwilling to invest in our stock, which could adversely impact our ability to raise capital.

Risks Related to Our Indebtedness and Liquidity

35 unchanged sentences

Edison, to continue serving as a member of management and/or the Board or require certain levels of senior management and/or Board continuity following a change of control or other fundamental transaction.

If such individuals were to depart from the Company within a

PHILLIPS EDISON & COMPANY

DECEMBER 31, 2022 FORM 10-K

specified time prior to such transaction or within such specified time after such a transaction, we may be required to negotiate waivers of such covenants or obtain replacement financing, which we may not be able to do on satisfactory terms or at all.

If such individuals were to depart from the Company within a specified time prior to such transaction or within such specified time after such a transaction, we may be required to negotiate waivers of such covenants or obtain replacement financing, which we may not be able to do on satisfactory terms or at all.

Higher market capitalization rates and lower NOI for our shopping centers may adversely impact our ability to sell shopping centers and fund developments and acquisitions, and may dilute earnings.

1 unchanged sentence

Sales proceeds are then used to fund the construction of developments, redevelopments, expansions, and acquisitions, and to repay debt.

An increase in market capitalization rates or a decline in NOI may cause a reduction in the value of shopping centers identified for sale, which would have an adverse effect on the amount of cash generated.

An increase in market capitalization rates or a decline in NOI may cause a reduction in the value of shopping centers identified for sale, which would have an adverse effect on the

PHILLIPS EDISON & COMPANY

DECEMBER 31, 2023 FORM 10-K

amount of cash generated.

Additionally, the sale of shopping centers resulting in significant tax gains may require higher distributions to our stockholders in order to maintain our REIT status or payment of additional income taxes.

17 unchanged sentences

For purposes of any such vote, we will be deemed to vote the OP units held by us and our subsidiaries in proportion to the manner in which all of our outstanding shares of common stock were voted at a stockholders meeting relating to such transaction.

As of January 31, 2023, we would have directly or indirectly controlled approximately 89.2% of the OP units.

Furthermore, as of January 31, 2023, Mr.

As of December 31, 2023, we would have directly or indirectly controlled approximately 89.3% of the OP units.

Furthermore, as of December 31, 2023, Mr.

Edison had voting control over approximately 6.9% of the OP units (considering OP units owned by us), and therefore could have influence over votes on change of control transactions.

33 unchanged sentences

Our Board may amend or revise these and other policies without the vote of our stockholders.

Under the MGCL and our charter, our stockholders have a right to vote only on limited matters.

Under the Maryland General Corporation Law, as amended (“MGCL”) and our charter, our stockholders have a right to vote only on limited matters.

Our Board’s broad discretion in setting policies and our stockholders’ inability to exert control over those policies increases the uncertainty and risks our stockholders face.

95 unchanged sentences

These alternatives could increase our costs or reduce our equity.

Complying with REIT requirements may cause us to forego otherwise attractive opportunities or liquidate otherwise attractive investments.

Complying with REIT requirements may cause us to forgo otherwise attractive opportunities or liquidate otherwise attractive investments.

To continue to qualify as a REIT for U.S.

51 unchanged sentences

federal income tax law, regulation, or administrative interpretation.

In addition, the COVID-19 pandemic has left many state and local governments with reduced tax revenue, which may lead such governments to increase taxes or otherwise make significant changes to their state and local tax laws.

If such changes occur, we may be required to pay additional taxes on our assets or income.

If our assets are deemed to be plan assets, we may be exposed to liabilities under Title I of the Employee Retirement Income Security Act of 1974 (“ERISA”) and the IRC.

10 unchanged sentences

As a result, our operating results may be adversely affected.

There are some types of losses, generally catastrophic in nature, such as losses due to wars, acts of terrorism, earthquakes, floods, hurricanes, pollution, or environmental matters, that are uninsurable or not economically insurable, or may be insured subject to limitations, such as large deductibles or sublimits.

Terrorist activities or violence occurring at our properties also

PHILLIPS EDISON & COMPANY

DECEMBER 31, 2023 FORM 10-K

There are some types of losses, generally catastrophic in nature, such as losses due to wars, acts of terrorism, earthquakes, floods, hurricanes, pollution or environmental matters, that are uninsurable or not economically insurable, or may be insured subject to limitations, such as large deductibles or sublimits.

Terrorist activities or violence occurring at our properties also may directly affect their value through damage, destruction, or loss.

may directly affect their value through damage, destruction, or loss.

Insurance for such acts may be unavailable or cost more, which could result in an increase to our operating expenses and adversely affect our results of operations.

35 unchanged sentences

The techniques and sophistication used to conduct cyber attacks and breaches of IT systems, as well as the sources and targets of these attacks, change frequently and are often not recognized until such attacks are launched or have been in place for a period of time.

Our IT networks and related systems are essential to the operation of our business and our ability to perform day-to-day operations and, in some cases, may be critical to the operations of certain of our Neighbors.

In addition to our own IT

PHILLIPS EDISON & COMPANY

DECEMBER 31, 2023 FORM 10-K

In addition to our own IT systems, we also depend on third parties to provide IT services relating to several key business functions, such as administration, accounting, communications, document management and storage, human resources, payroll, tax, investor relations, and certain finance functions.

systems, we also depend on third parties to provide IT services relating to several key business functions, such as administration, accounting, communications, document management and storage, human resources, payroll, tax, investor relations, and certain finance functions.

Our IT systems and those provided by third parties may contain personal, financial, or other information that is entrusted to us by our Neighbors and associates, as well as proprietary PECO information and other confidential information related to our business.

We and such third parties employ a number of measures to prevent, detect, and mitigate these threats, including password protection, firewalls, backup servers, malware detection, intrusion sensors, threat monitoring, user training, and periodic penetration testing;

however, there is no guarantee that such efforts will be successful in preventing a cybersecurity attack.

As our reliance on technology has increased, so have the risks posed to our systems, both internal and those we have outsourced.

however, there is no guarantee that such cybersecurity risk management programs and processes, including our and their policies, controls, and procedures, will be fully implemented, complied with or effective in protecting our and their systems and information.

As have many companies, we and our third party vendors have been impacted by security incidents in the past, and will likely continue to experience security incidents of varying degrees.

While we do not believe these incidents have had a material impact to date, as our reliance on technology has increased, so have the risks posed to our systems, both internal and those we have outsourced.

The primary risks that could directly result from the occurrence of a cyber incident include operational interruption, damage to our relationship with our Neighbors, and private data exposure.

14 unchanged sentences

An interruption in the business operations of our Neighbors or a deterioration in their reputation resulting from a cybersecurity attack, including unauthorized access to customers’ credit card data and other confidential information, could indirectly negatively affect our business and cause lost revenues.

As of December 31, 2022, we have not had any material incidents involving cybersecurity attacks.

Regulatory and Legal Risks

81 unchanged sentences

If we cannot provide reliable financial reports or prevent fraud, our reputation and operating results would be harmed.

We are currently required to perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting, and as of December 31, 2022, we are required to have our independent registered public accounting firm attest to the same, as required by Section 404 of the Sarbanes-Oxley Act of 2002.

We are required to perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting, and are required to have our independent registered public accounting firm attest to the same, as required by Section 404 of the Sarbanes-Oxley Act of 2002.

If a material weakness or significant deficiency was to be identified in our internal control over financial reporting, we may also identify deficiencies in some of our disclosure controls and procedures that we believe require remediation.

3 unchanged sentences

Ineffective internal control over financial reporting and disclosure controls could also cause investors to lose confidence in our reported financial information, which would likely have a negative effect on the per share trading price of our common stock.

UNRESOLVED STAFF COMMENTS

Not applicable.

PHILLIPS EDISON & COMPANY

DECEMBER 31, 2022 FORM 10-K

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-K

Item 1A. Risk Factors