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Item 1. Financial Statements

2024-04-26 compared with 2023-11-01 · 126 added, 220 removed, 408 unchanged (46% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2023 AND DECEMBER 31, 2022

AS OF MARCH 31, 2024 AND DECEMBER 31, 2023

(Condensed and Unaudited)

(In thousands, except per share amounts)

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Investment in real estate:

20 unchanged sentences

Commitments and contingencies (see Note 8)

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

Preferred stock, $ 0.01 par value per share, 10,000 shares authorized, zero shares issued and outstanding at March 31, 2024 and December 31, 2023

Common stock, $ 0.01 par value per share, 1,000,000 shares authorized, 122,323 and 122,024 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

Additional paid-in capital (“APIC”) 3,551,678 3,546,838

8 unchanged sentences

PHILLIPS EDISON & COMPANY

SEPTEMBER 30, 2023 FORM 10-Q

MARCH 31, 2024 FORM 10-Q

PHILLIPS EDISON & COMPANY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

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

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

(Condensed and Unaudited)

(In thousands, except per share amounts)

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

2023 2022 2023 2022

Three Months Ended March 31,

Rental income $ 158,068 $ 147,728

9 unchanged sentences

Interest expense, net ( 23,335 ) ( 19,466 )

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

(Loss) gain on disposal of property, net ( 5 ) 942

Other expense, net ( 929 ) ( 755 )

3 unchanged sentences

Earnings per share of common stock:

Net income per share attributable to stockholders - basic and

diluted (see Note 10)

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

$ 0.14 $ 0.14

1 unchanged sentence

Net income $ 19,626 $ 18,636

Other comprehensive income:

Other comprehensive income (loss):

Change in unrealized value on interest rate swaps 2,905 ( 6,499 )

2 unchanged sentences

Change in unrealized value on interest rate swaps attributable to noncontrolling interests ( 294 ) 704

Reallocation of comprehensive income upon conversion of noncontrolling interests 56 57 57 277

Reallocation of comprehensive income (loss) upon conversion of noncontrolling interests 10 ( 27 )

Comprehensive income attributable to stockholders $ 20,291 $ 10,797

1 unchanged sentence

PHILLIPS EDISON & COMPANY

SEPTEMBER 30, 2023 FORM 10-Q

MARCH 31, 2024 FORM 10-Q

PHILLIPS EDISON & COMPANY, INC.

CONSOLIDATED STATEMENTS OF EQUITY

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

(Condensed and Unaudited)

(In thousands, except per share amounts)

Three Months Ended September 30, 2023 and 2022

Three Months Ended March 31, 2024 and 2023

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

Shares Amount

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

Common distributions declared, $ 0.2733 per share

— — — — ( 32,224 ) ( 32,224 ) — ( 32,224 )

Distributions to noncontrolling interests — — — — — — ( 3,932 ) ( 3,932 )

Share-based compensation 1 — 2,384 — — 2,384 1,784 4,168

Conversion of noncontrolling interests 528 5 11,547 57 — 11,609 ( 11,609 ) —

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

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 )

Common distributions declared, $ 0.2841 per share

— — — — ( 33,910 ) ( 33,910 ) — ( 33,910 )

Distributions to noncontrolling interests — — — — — — ( 3,954 ) ( 3,954 )

Share-based compensation 14 — 993 — — 993 311 1,304

Conversion of noncontrolling interests 130 1 3,245 56 — 3,302 ( 3,302 ) —

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

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

SEPTEMBER 30, 2023 FORM 10-Q

PHILLIPS EDISON & COMPANY, INC.

CONSOLIDATED STATEMENTS OF EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

(Condensed and Unaudited)

(In thousands, except per share amounts)

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

Shares Amount Shares Amount

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

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

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

4 unchanged sentences

Conversion of noncontrolling interests — — — ( 27 ) — ( 27 ) 27 —

Settlement of earn-out liability — — — — — — — — 54,245 54,245

Net income — — — — 16,619 16,619 2,017 18,636

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

Balance at January 1, 2024 122,024 $ 1,220 $ 3,546,838 $ 10,523 $ ( 1,248,273 ) $ 2,310,308 $ 343,043 $ 2,653,351

Issuance of common stock 46 — — — — — — —

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

Change in unrealized value on interest rate swaps — — — 2,611 — 2,611 294 2,905

5 unchanged sentences

Net income — — — — 17,670 17,670 1,956 19,626

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

Balance at March 31, 2024 122,323 $ 1,223 $ 3,551,678 $ 13,144 $ ( 1,266,541 ) $ 2,299,504 $ 337,894 $ 2,637,398

See notes to consolidated financial statements.

PHILLIPS EDISON & COMPANY

SEPTEMBER 30, 2023 FORM 10-Q

MARCH 31, 2024 FORM 10-Q

PHILLIPS EDISON & COMPANY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

(Condensed and Unaudited)

(In thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

6 unchanged sentences

Amortization of debt and derivative adjustments 710 667

Gain on disposal of property, net

( 1,070 ) ( 4,151 )

Impairment of investment in third parties 3,000 —

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

Loss (gain) on disposal of property, net 5 ( 942 )

Straight-line rent ( 2,366 ) ( 2,566 )

1 unchanged sentence

Return on investment in unconsolidated joint ventures 70 11

Other ( 298 ) ( 350 )

Changes in operating assets and liabilities:

6 unchanged sentences

Capital expenditures ( 12,931 ) ( 23,878 )

Proceeds from sale of real estate, net 7,143 27,286

(Payments) proceeds from sale of real estate, net ( 4 ) 1,091

Return of investment in unconsolidated joint ventures 560 606

Insurance proceeds for property damage claims 1,924 194

Investment in marketable securities — ( 3,000 )

Net cash used in investing activities

4 unchanged sentences

Payments on mortgages and loans payable ( 1,040 ) ( 25,477 )

Proceeds from loans payable 58,000 —

Distributions paid ( 35,976 ) ( 33,276 )

Distributions to noncontrolling interests ( 4,266 ) ( 3,977 )

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

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

Net cash used in financing activities

( 81,759 ) ( 43,571 )

NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

Net cash provided by financing activities

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

1,219 ( 5,385 )

7 unchanged sentences

PHILLIPS EDISON & COMPANY

SEPTEMBER 30, 2023 FORM 10-Q

MARCH 31, 2024 FORM 10-Q

PHILLIPS EDISON & COMPANY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

(Condensed and Unaudited)

(In thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

1 unchanged sentence

SUPPLEMENTAL SCHEDULE OF NON-CASH ACTIVITIES:

Settlement of earn-out liability — 54,245

Right-of-use (“ROU”) assets obtained in exchange for new lease liabilities — 888

Accrued capital expenditures 5,263 7,570

Assumed other liabilities 225 —

Assumed debt obligations, net — 9,619

4 unchanged sentences

PHILLIPS EDISON & COMPANY

SEPTEMBER 30, 2023 FORM 10-Q

MARCH 31, 2024 FORM 10-Q

Phillips Edison & Company, Inc.

3 unchanged sentences

(“we,” the “Company,” “PECO,” “our,” or “us”) was formed as a Maryland corporation in October 2009.

Substantially all of our business is conducted through Phillips Edison Grocery Center Operating Partnership I, L.P., (the “Operating Partnership”), a Delaware limited partnership formed in December 2009.

Substantially all of our business is conducted through Phillips Edison Grocery Center Operating Partnership I, L.P.

(the “Operating Partnership”), a Delaware limited partnership formed in December 2009.

We are a limited partner of the Operating Partnership, and our wholly-owned subsidiary, Phillips Edison Grocery Center OP GP I LLC, is the sole general partner of the Operating Partnership.

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 September 30, 2023.

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

As of March 31, 2024, we wholly-owned 284 real estate properties.

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

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.

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

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

With the monetization of the joint venture, we exceeded the targeted return and as such were paid compensation of $ 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

3 unchanged sentences

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

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

There were no changes to our significant accounting policies during the three months ended March 31, 2024, except for those discussed below.

For a full summary of our significant accounting policies, refer to our 2023 Annual Report on Form 10-K, filed with the U.S.

4 unchanged sentences

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

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

Our results of operations for the three months ended March 31, 2024 are not necessarily indicative of the operating results expected for the full year.

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

3 unchanged sentences

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

We recognized an insignificant amount of federal, state, and local income tax expense for the three 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 nine months ended September 30, 2023 that impacted the Company.

We recognized an insignificant amount of federal, state, and local income tax expense for the three months ended March 31, 2024 and 2023, 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 and comprehensive income (“consolidated statements of operations”).

Recently Issued or Adopted Accounting Pronouncements —There were no recently issued or adopted accounting pronouncements during the three months ended March 31, 2024 that impacted the Company.

PHILLIPS EDISON & COMPANY

SEPTEMBER 30, 2023 FORM 10-Q

MARCH 31, 2024 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 September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

Rental income related to fixed lease payments (1)

3 unchanged sentences

Straight-line rent amortization (3)

2,095 3,752 7,686 8,617

Amortization of lease assets 1,406 1,216

7 unchanged sentences

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

Approximate future fixed contractual lease payments to be received under non-cancelable operating leases in effect as of 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):

Approximate future fixed contractual lease payments to be received under non-cancelable operating leases in effect as of March 31, 2024, 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 2024 $ 350,899

1 unchanged sentence

Total $ 2,265,985

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.

No single tenant comprised 10% or more of our aggregate annualized base rent (“ABR”) as of March 31, 2024.

As of March 31, 2024, our wholly-owned real estate investments in Florida and California represented 12.4 % and 11.0 % 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 and California real estate markets.

PHILLIPS EDISON & COMPANY

SEPTEMBER 30, 2023 FORM 10-Q

MARCH 31, 2024 FORM 10-Q

REAL ESTATE ACTIVITY

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

Nine Months Ended September 30,

Three Months Ended March 31,

Number of properties acquired 2 4

4 unchanged sentences

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

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

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

(2) During the three months ended March 31, 2024, we acquired an outparcel adjacent to a property that is owned by our unconsolidated joint venture, GRP I.

Therefore, the outparcel is an addition to our total property count.

(3) Total price of acquisitions includes closing costs less credits and assumed liabilities.

The aggregate purchase price of the assets acquired during the three months ended March 31, 2024 and 2023 were allocated as follows (in thousands):

March 31, 2024 March 31, 2023

Land and improvements $ 19,903 $ 25,079

6 unchanged sentences

Below-market lease liabilities 5,374 4,028

Other liabilities assumed 225 —

Total liabilities 5,599 13,647

Net assets acquired $ 56,186 $ 69,431

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

The weighted-average amortization periods for in-place, above-market, and below-market lease intangibles and below-market debt acquired during the three months ended March 31, 2024 and 2023 are as follows (in years):

March 31, 2024 March 31, 2023

Acquired in-place leases 10 12

2 unchanged sentences

Assumed below-market debt — 2

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

Nine Months Ended September 30,

Number of properties sold 1 3

Number of outparcels sold 2 3

Contract price $ 6,250 $ 28,737

Proceeds from sale of real estate, net (1)(2)

Gain on disposal of property, net (2)

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

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

Property Dispositions —We sold no properties during the three months ended March 31, 2024 and 2023.

During the three months ended March 31, 2024, we recognized a minimal loss on disposal of property due to miscellaneous write-off activity and expenses related to previous and future potential dispositions.

During the three months ended March 31, 2023, we recognized a gain on disposal of property of $ 0.9 million related to land acquired from us by local authorities.

PHILLIPS EDISON & COMPANY

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.

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

MARCH 31, 2024 FORM 10-Q

OTHER ASSETS, NET

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

The following is a summary of Other Assets, Net outstanding as of March 31, 2024 and December 31, 2023 (in thousands):

March 31, 2024 December 31, 2023

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 $ 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).

(2) Net of $ 2.4 million and $ 1.9 million of general reserves for uncollectible amounts as of March 31, 2024 and December 31, 2023, respectively.

Receivables that were removed for tenants considered to be non-creditworthy were $ 6.3 million and $ 6.0 million as of March 31, 2024 and December 31, 2023, respectively.

(3) Net of $ 4.9 million and $ 4.6 million of receivables removed as of March 31, 2024 and December 31, 2023, respectively, related to straight-line rent for tenants previously or currently considered to be non-creditworthy.

DEBT OBLIGATIONS

The following is a summary of the outstanding principal balances and interest rates, which includes the effect of derivative financial instruments, for our debt obligations as of September 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 March 31, 2024 and December 31, 2023 (dollars in thousands):

Interest Rate (1)

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Revolving credit facility SOFR + 1.1 %

14 unchanged sentences

Weighted-average interest rate (3)

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

PHILLIPS EDISON & COMPANY

SEPTEMBER 30, 2023 FORM 10-Q

(1) Interest rates are as of March 31, 2024.

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

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

(3) Includes the effects of derivative financial instruments that were effective as of 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.

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

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

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

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

September 30, 2023 December 31, 2022

(3) Includes the effects of derivative financial instruments that were effective as of March 31, 2024 and December 31, 2023 (see Notes 7 and 12).

PHILLIPS EDISON & COMPANY

MARCH 31, 2024 FORM 10-Q

Debt Allocation — The allocation of total debt between fixed-rate and variable-rate as well as between secured and unsecured, excluding market debt adjustments, discount on senior notes, and deferred financing expenses, net, and including the effects of derivative financial instruments as of March 31, 2024 and December 31, 2023 is summarized below (in thousands):

March 31, 2024 December 31, 2023

As to interest rate (1) :

Fixed-rate debt $ 1,539,951 $ 1,540,985

$ 1,542,012 $ 1,633,784

Variable-rate debt 491,750 445,750

5 unchanged sentences

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

As of 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).

As of March 31, 2024, $ 700 million in variable-rate debt is hedged to a fixed rate for a weighted-average period of 1.3 years (see Notes 7 and 12).

DERIVATIVES AND HEDGING ACTIVITIES

6 unchanged sentences

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

During the three months ended March 31, 2024 and 2023, 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.

During the next twelve months, we estimate that an additional $ 11.6 million will be reclassified from AOCI as a decrease to Interest Expense, Net.

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

PHILLIPS EDISON & COMPANY

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

In January 2024, we entered into an interest rate swap which has a notional amount of $ 150 million and swaps SOFR for a fixed rate of approximately 3.45 % effective September 2024 and maturing December 2025.

The following is a summary of our interest rate swaps that were designated as cash flow hedges of interest rate risk as of March 31, 2024 and December 31, 2023 (dollars in thousands):

March 31, 2024 December 31, 2023

Notional amount (1)

$ 700,000 $ 700,000

Fixed SOFR 2.1 % - 3.4 %

2 unchanged sentences

Weighted-average term (in years) 1.3 1.5

(1) Notional amount excludes interest rate swaps that were not effective as of March 31, 2024 and December 31, 2023.

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 September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Amount of gain recognized in Other Comprehensive Income

$ 4,367 $ 14,084 $ 14,477 $ 44,063

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

Three Months Ended March 31,

Amount of gain (loss) recognized in Other Comprehensive Income

$ 7,454 $ ( 1,952 )

Amount of gain reclassified from AOCI into Interest Expense, Net ( 4,549 ) ( 4,547 )

PHILLIPS EDISON & COMPANY

MARCH 31, 2024 FORM 10-Q

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 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.

As of March 31, 2024, 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 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.

As of March 31, 2024, we had four letters of credit outstanding totaling approximately $ 12.5 million to provide security for our obligations under Silver Rock’s insurance and reinsurance contracts.

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

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

PHILLIPS EDISON & COMPANY

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.

At-the-Market Offering (“ATM”) —In February 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 could offer and sell shares of our common stock having an aggregate offering price of up to $ 250 million from time to time through our sales agents, or, if applicable, as forward sellers.

During the three months ended March 31, 2024, we issued approximately 46,000 shares of our common stock at a gross weighted average price of $ 37.05 per share under this ATM program for net proceeds of $ 1.7 million, after approximately $ 17,000 in commissions.

During the three months ended March 31, 2023, no shares of our common stock were issued under this ATM program.

In February 2024, we and the Operating Partnership entered into a new sales agreement relating to the potential sale of shares of common stock pursuant to a continuous offering program, which replaced the previous agreement.

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 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”).

Per the terms of the Recapitalization, on January 18, 2022, each share of our Class B common stock automatically converted into one share of our listed common stock.

On May 5, 2022, we filed Articles Supplementary to our charter with the Maryland State Department of Assessments and Taxation in order to reclassify and designate all of the 350 million authorized shares of our Class B common stock, $ 0.01 par value per share, all of which were unissued at such time, as shares of our common stock, $ 0.01 par value per share.

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 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):

No shares were issued under the current ATM program during the three months ended March 31, 2024.

As of March 31, 2024, approximately $ 250 million of common stock remained available for issuance under the current ATM program.

Distributions —In 2024, we declared and paid monthly distributions of $ 0.0975 per common share and Operating Partnership unit (“OP unit”), or $ 1.17 annualized, for each month beginning January 2024 through March 2024.

Distributions paid to stockholders and OP unit holders of record subsequent to March 31, 2024 were as follows (dollars in thousands, excluding per share amounts):

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

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.

March 3/15/2024 4/1/2024 $ 0.0975 $ 13,234

Convertible Noncontrolling Interests —As of March 31, 2024 and December 31, 2023, we had approximately 13.7 million and 13.8 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.

PHILLIPS EDISON & COMPANY

MARCH 31, 2024 FORM 10-Q

Under the terms of the Fourth Amended and Restated Agreement of Limited Partnership, OP unit holders may elect to cause the Operating Partnership to redeem their OP units.

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 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 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

As the form of redemption for OP units is within our control, the OP units outstanding as of March 31, 2024 and December 31, 2023 are classified as Noncontrolling Interests within permanent equity on our consolidated balance sheets.

The table below is a summary of our OP unit activity for the three months ended March 31, 2024 and 2023 (dollars and shares in thousands):

Three Months Ended March 31,

OP units converted into shares of common stock (1)

130 528 294 1,133

Distributions declared on OP units (2)

$ 4,143 $ 4,073

(1) Prior to the Recapitalization, OP units were converted to shares of common stock at a 1 :1 ratio.

From the Recapitalization through January 18, 2022, OP units were converted into shares of our Class B common stock at a 1 :1 ratio.

On January 18, 2022, each share of our Class B common stock automatically converted into one share of our listed common stock, and going forward, OP units will be converted into shares of our common stock at a 1 :1 ratio.

(1) OP units convert into shares of our common stock at a 1 :1 ratio.

(2) Distributions declared on OP units are included in Distributions to Noncontrolling Interests on the consolidated statements of equity.

Share Repurchase Program —On August 3, 2022, our Board approved a new share repurchase program of up to $ 250 million of common stock.

Share Repurchase Program —In August 2022, our Board approved a new share repurchase program of up to $ 250 million of common stock.

The program may be suspended or discontinued at any time, and does not obligate us to repurchase any dollar amount or particular number of shares.

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

PHILLIPS EDISON & COMPANY

SEPTEMBER 30, 2023 FORM 10-Q

EARNINGS PER SHARE

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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 September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

Net income attributable to stockholders - basic

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Net income attributable to convertible OP units (1)

1,484 1,135 5,259 4,181

Net income - diluted

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OP units are allocated income on a consistent basis with the common stockholder and therefore have no dilutive impact to earnings per share of common stock.

PHILLIPS EDISON & COMPANY

MARCH 31, 2024 FORM 10-Q

RELATED PARTY TRANSACTIONS

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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 September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

Recurring fees (1)

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Transactional revenue and reimbursements (3)

381 306 1,647 1,147

Insurance premiums (4)

856 832 2,553 2,421

Total fees and management income $ 2,565 $ 2,478

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(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.

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

As of 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.

As of March 31, 2024, the potential “make-whole amount” on the estimated aggregate amount of built-in gain subject to protection under the agreements is approximately $ 122.2 million.

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

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

Other Related Party Matters — As of September 30, 2023, we were the limited guarantor of a $ 175 million mortgage loan secured by GRP I properties.

Other Related Party Matters — As of March 31, 2024, 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 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.

We have no liability recorded on our consolidated balance sheets for the guaranty as of March 31, 2024 and December 31, 2023.

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

September 30, 2023 December 31, 2022

PHILLIPS EDISON & COMPANY

MARCH 31, 2024 FORM 10-Q

The following is a summary of borrowings as of March 31, 2024 and December 31, 2023 (in thousands):

March 31, 2024 December 31, 2023

Recorded Principal Balance (1)

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Total $ 2,015,554 $ 1,930,296 $ 1,969,272 $ 1,883,122

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

(1) As of March 31, 2024 and December 31, 2023, respectively, recorded principal balances include:

(i) net deferred financing fees of $ 9.4 million and $ 10.3 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 nine months ended September 30, 2023 and the year ended December 31, 2022 were as follows (in thousands):

September 30, 2023 December 31, 2022

Fair value measurements that occurred as of and during the three months ended March 31, 2024 and the year ended December 31, 2023 were as follows (in thousands):

March 31, 2024 December 31, 2023

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

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— 15,271 — — 12,669 —

Impaired real estate assets, net (2)

$ — $ — $ — $ — $ 5,225 $ —

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

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

(2) The fair values of the derivative assets exclude associated accrued interest receivable of $ 1.7 million as of March 31, 2024 and December 31, 2023.

Marketable Securities— We estimate the fair value of marketable securities using Level 1 inputs.

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

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.

Derivative Instruments— As of March 31, 2024 and December 31, 2023, 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.

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

However, as of 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.

However, as of March 31, 2024 and December 31, 2023, 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 nine months ended September 30, 2023 and September 30, 2022.

There were no impairment charges recorded during the three months ended March 31, 2024 and March 31, 2023.

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.

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If we observe any of these indicators for a shopping center, we then perform an additional screen test consisting of a years-to-recover analysis to determine if we will recover the net book value of the property over its remaining economic life based upon net operating income (“NOI”) as forecasted for the current year.

In the event that the results of this first step indicate a triggering event for a center, we proceed to the second step, utilizing an undiscounted cash flow model for the center to identify potential impairment.

In the event that the results of this first step indicate a triggering event for a center, we proceed to the second step,

PHILLIPS EDISON & COMPANY

MARCH 31, 2024 FORM 10-Q

utilizing an undiscounted cash flow model for the center to identify potential impairment.

If the undiscounted cash flows are less than the net book value of the center as of the balance sheet date, we record an impairment charge based on the fair value determined in the third step.

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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.

On January 11, 2022, we finalized the fair value of the earn-out liability based on our share price and issued approximately 1.6 million OP units in full settlement of the liability with a value of $ 54.2 million.

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 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

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PHILLIPS EDISON & COMPANY

SEPTEMBER 30, 2023 FORM 10-Q

MARCH 31, 2024 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