Phillips Edison & Company, Inc. (Nasdaq: PECO) (“PECO” or the
“Company”), one of the nation’s largest owners and operators of
grocery-anchored neighborhood shopping centers, today reported
financial and operating results for the period ended December 31,
2023 and increased full year 2024 earnings guidance. For the fourth
quarter and year ended December 31, 2023, net income
attributable to stockholders was $13.5 million, or $0.11 per
diluted share, and $56.8 million, or $0.48 per diluted share,
respectively.
Highlights for the Fourth
Quarter Ended December 31,
2023
- Reported Nareit FFO of $74.8
million, or $0.56 per diluted share, representing 6.0%
year-over-year growth
- Reported Core FFO of $77.9 million,
or $0.58 per diluted share, representing 4.9% year-over-year
growth
- Increased full year 2024 Nareit FFO
and Core FFO guidance to a range of $2.34 to $2.41 per diluted
share and $2.37 to $2.45 per diluted share, respectively
- The midpoint of full year 2024 Core
FFO guidance represents 3.0% year-over-year growth
- Increased same-center NOI by
3.6%
- Reported leased portfolio occupancy
of 97.4% and leased inline occupancy of 94.7%
- Executed comparable renewal leases
during the quarter at a rent spread of 14.2%
- Executed comparable new leases
during the quarter at a rent spread of 21.9%
- Generated net proceeds of
$77.5 million through the issuance of 2.2 million common
shares at a gross weighted average price of $35.92 per common share
through the Company’s ATM program
- Acquired six shopping centers and
two outparcels for a total of $186.4 million
Highlights for the Year Ended
December 31, 2023
- Reported Nareit FFO of $299.5
million, or $2.25 per diluted share, representing 6.7%
year-over-year growth
- Reported Core FFO of $310.7 million,
or $2.34 per diluted share, representing 5.2% year-over-year
growth
- Increased same-center NOI by
4.2%
- Executed comparable renewal leases
during the year at a rent spread of 16.2%
- Executed comparable new leases
during the year at a rent spread of 25.2%
- Generated net proceeds of
$147.6 million through the issuance of 4.2 million common
shares at a gross weighted average price of $35.76 per common share
through the Company’s ATM program
- Acquired 11 shopping centers, two
outparcels and one land parcel for a total of $278.5 million, and
sold three assets for a total of $6.3 million, for net acquisitions
totaling $272.2 million
Management Commentary
Jeff Edison, Chairman and Chief Executive Officer of PECO
stated: “The PECO team continued our track record of delivering
strong growth with same-center NOI increasing by 4.2% in 2023. The
continued strong performance of our portfolio is driven by our high
occupancy, strong leasing spreads, high retention and the many
advantages of the suburban markets where we operate our
grocery-anchored neighborhood shopping centers. Based on the
continued strong operating environment and health of our Neighbors,
we are pleased to increase our full year 2024 earnings guidance for
Nareit and Core FFO.”
Financial Results for the
Fourth Quarter and Year
Ended December 31, 2023
Net Income
Fourth quarter 2023 net income attributable to stockholders
totaled $13.5 million, or $0.11 per diluted share, compared to
net income of $13.7 million, or $0.12 per diluted share,
during the fourth quarter of 2022.
For the year ended December 31, 2023, net income
attributable to stockholders totaled $56.8 million, or $0.48 per
diluted share, compared to $48.3 million, or $0.42 per diluted
share, during the year ended December 31, 2022.
Nareit FFO
Fourth quarter 2023 funds from operations attributable to
stockholders and operating partnership (“OP”) unit holders as
defined by Nareit (“Nareit FFO”) increased 6.0% to $74.8 million,
or $0.56 per diluted share, from $70.6 million, or $0.54 per
diluted share, during the fourth quarter of 2022.
For the year ended December 31, 2023, Nareit FFO increased
6.7% to $299.5 million, or $2.25 per diluted share, from $280.7
million, or $2.15 per diluted share, during the year ended
December 31, 2022.
Core FFO
Fourth quarter 2023 core funds from operations (“Core FFO”)
increased 4.9% to $77.9 million, or $0.58 per diluted share,
compared to $74.3 million, or $0.56 per diluted share, during the
fourth quarter of 2022.
For the year ended December 31, 2023, Core FFO increased
5.2% to $310.7 million, or $2.34 per diluted share, compared to
$295.3 million, or $2.27 per diluted share, during the year ended
December 31, 2022.
Same-Center NOI
Fourth quarter 2023 same-center net operating income (“NOI”)
increased 3.6% to $99.3 million, compared to $95.8 million during
the fourth quarter of 2022.
For the year ended December 31, 2023, same-center NOI
improved 4.2% to $396.6 million, compared to $380.5 million during
the year ended December 31, 2022.
Portfolio Overview for the
Fourth Quarter and Year
Ended December 31, 2023
Portfolio Statistics
As of December 31, 2023, PECO’s wholly-owned portfolio
consisted of 281 properties, totaling approximately
32.2 million square feet, located in 31 states. This compared
to 271 properties, totaling approximately 31.1 million square
feet, located in 31 states as of December 31, 2022.
Leased portfolio occupancy remained high at 97.4% at
December 31, 2023, compared to 97.4% at December 31,
2022.
Leased anchor occupancy totaled 98.9%, compared to 99.3% at
December 31, 2022, and leased inline occupancy increased to
94.7%, compared to 93.8% at December 31, 2022.
Leasing Activity
During the fourth quarter of 2023, 217 leases were executed
totaling 1.1 million square feet. This compared to 252 leases
executed totaling 1.2 million square feet during the fourth
quarter of 2022.
For the year ended December 31, 2023, 996 leases were
executed totaling 4.7 million square feet. This compared to
1,001 leases executed totaling 4.8 million square feet during
the same period in 2022.
Comparable rent spreads during the fourth quarter of 2023, which
compare the percentage increase (or decrease) of new or renewal
leases to the expiring lease of a unit that was occupied within the
past twelve months, were 21.9% for new leases, 14.2% for renewal
leases and 15.4% combined.
Comparable rent spreads during the year ended December 31,
2023 were 25.2% for new leases, 16.2% for renewal leases and 17.9%
combined.
Transaction Activity
During the fourth quarter ended December 31, 2023, the Company
acquired six grocery-anchored shopping centers and two outparcels
for a total of $186.4 million. The Company expects to drive growth
in these assets through occupancy increases and rent growth, as
well as potential future development of ground-up outparcel retail
spaces. There were no dispositions in the quarter. The fourth
quarter 2023 shopping center acquisitions consisted of:
- Mansell Village, an 89,688 square
foot shopping center anchored by Kroger located in an Atlanta,
Georgia suburb.
- Riverpark Shopping Center, a 317,331
square foot shopping center anchored by H-E-B located in a Houston,
Texas suburb.
- Apache Shoppes, a 60,665 square foot
shopping center anchored by Trader Joe’s located in Rochester,
Minnesota.
- Maple View, a 114,668 square foot
shopping center anchored by Jewel-Osco located in a Chicago,
Illinois suburb.
- Quail Pointe, a 98,366 square foot
shopping center anchored by Trader Joe’s located in Sacramento,
California.
- Glenbrook Marketplace, a 47,832
square foot shopping center located in a Chicago, Illinois
suburb.
During the year ended December 31, 2023, the Company
acquired eleven shopping centers, two outparcels and one land
parcel for a total of $278.5 million. During the same period, one
property and two outparcels were sold for a total of $6.3 million,
resulting in net acquisitions totaling $272.2 million.
Balance Sheet Highlights
As of December 31, 2023, the Company had approximately $615
million of total liquidity, comprised of $8.9 million of cash, cash
equivalents and restricted cash, plus $606.6 million of borrowing
capacity available on its $800.0 million revolving credit
facility.
As of December 31, 2023, the Company’s net debt to
annualized adjusted EBITDAre was 5.1x. This compared to 5.3x at
December 31, 2022.
As of December 31, 2023, the Company’s outstanding debt had
a weighted-average interest rate of 4.2% and a weighted-average
maturity of 4.1 years when including all extension options, and
77.6% of its total debt was fixed-rate debt.
During the year ended December 31, 2023, the Company generated
net proceeds of $147.6 million after commissions through the
issuance of 4.2 million common shares at a gross weighted average
price of $35.76 per common share through its ATM program.
As previously announced, on January 12, 2024, the Company’s
Operating Partnership entered into an interest rate swap pursuant
to an International Swaps and Derivatives Association Master
Agreement. The swap has a notional amount of $150.0 million and
swaps the daily Secured Overnight Financing Rate for a fixed rate
of approximately 3.45% effective September 25, 2024 and maturing
December 31, 2025.
2024 Guidance
The Company updated its full year 2024 earnings guidance from
its preliminary guidance provided in connection with its Investment
Community Day.
The following guidance is based upon PECO’s current view of
existing market conditions and assumptions for the year ending
December 31, 2024. The following statements are forward-looking and
actual results could differ materially depending on market
conditions and the factors set forth under "Forward-Looking
Statements" below.
|
|
Updated 2024 Guidance |
|
Previous 2024 Guidance |
(in thousands, except per
share amounts) |
|
|
|
|
Net income per share |
|
$0.53 - $0.58 |
|
$0.50 - $0.55 |
Nareit FFO per share |
|
$2.34 - $2.41 |
|
$2.33 - $2.40 |
Core FFO per share |
|
$2.37 - $2.45 |
|
$2.36 - $2.44 |
Same-Center NOI growth |
|
3.25% - 4.25% |
|
3.25% - 4.25% |
Portfolio
Activity: |
|
|
|
|
Acquisitions, net |
|
$200,000 - $300,000 |
|
$200,000 - $300,000 |
Other: |
|
|
|
|
Interest expense, net |
|
$95,000 - $105,000 |
|
$104,000 - $112,000 |
G&A expense |
|
$45,000 - $49,000 |
|
$45,000 - $49,000 |
Non-cash revenue items(1) |
|
$14,500 - $18,500 |
|
$14,500 - $18,500 |
Adjustments for
collectibility |
|
$4,000 - 5,000 |
|
$4,000 - 5,000 |
|
|
|
|
|
(1) Represents straight-line rental income and
net amortization of above- and below-market leases.
The Company does not provide a reconciliation for same-center
NOI estimates on a forward-looking basis because it is unable to
provide a meaningful or reasonably accurate calculation or
estimation of certain reconciling items which could be significant
to the Company’s results without unreasonable effort.
The following table provides a reconciliation of the range of
the Company's 2024 estimated net income to estimated Nareit FFO and
Core FFO:
(Unaudited) |
Low End |
|
High End |
Net income per common share |
$ |
0.53 |
|
|
$ |
0.58 |
|
Depreciation and amortization of real estate assets |
|
1.79 |
|
|
|
1.81 |
|
Gain on sale of real estate assets |
|
— |
|
|
|
— |
|
Adjustments related to unconsolidated joint ventures |
|
0.02 |
|
|
|
0.02 |
|
Nareit FFO per common
share |
$ |
2.34 |
|
|
$ |
2.41 |
|
Depreciation and amortization of corporate assets |
|
0.01 |
|
|
|
0.01 |
|
Transaction costs and other |
|
0.02 |
|
|
|
0.03 |
|
Core FFO per common share |
$ |
2.37 |
|
|
$ |
2.45 |
|
|
|
|
|
|
|
|
|
Conference Call Details
PECO will host a conference call and webcast on Friday,
February 9, 2024 at 12:00 p.m. Eastern Time to discuss fourth
quarter and full year 2023 results and provide further business
updates. Chairman and Chief Executive Officer Jeff Edison,
President Bob Myers, Chief Financial Officer John Caulfield and
Managing Director of Investment Management Devin Murphy will host
the conference call and webcast. Dial-in and webcast information is
below.
Fourth Quarter and Full Year 2023 Earnings Conference
Call Details:
Date: Friday,
February 9, 2024Time: 12:00 p.m. Eastern
TimeToll-Free Dial-In Number: (888)
210-4659International Dial-In Number: (646)
960-0383Conference ID:
2035308Webcast: Fourth Quarter and
Full Year 2023 Webcast Link
An audio replay of the webcast will be available approximately
one hour after the conclusion of the conference call using the
webcast link above.
For more information on the Company’s financial results, please
refer to the Company’s 2023 Annual Report on Form 10-K, to be filed
with the SEC on or around February 12, 2024.
Connect with PECO
For additional information, please visit
https://www.phillipsedison.com/
Follow PECO on:
- Twitter at
https://twitter.com/PhillipsEdison
- Facebook at
https://www.facebook.com/phillipsedison.co
- Instagram at
https://www.instagram.com/phillips.edison/; and
- Find PECO on LinkedIn at
https://www.linkedin.com/company/phillipsedison&company
About Phillips Edison & Company
Phillips Edison & Company, Inc. (“PECO”) is one of the
nation’s largest owners and operators of omni-channel
grocery-anchored shopping centers. Founded in 1991, PECO has
generated strong results through its vertically-integrated
operating platform and national footprint of well-occupied shopping
centers. PECO’s centers feature a mix of national and regional
retailers providing necessity-based goods and services in
fundamentally strong markets throughout the United States. PECO’s
top grocery anchors include Kroger, Publix, Albertsons and Ahold
Delhaize. As of December 31, 2023, PECO managed 301 shopping
centers, including 281 wholly-owned centers comprising 32.2 million
square feet across 31 states and 20 shopping centers owned in one
institutional joint venture. PECO is exclusively focused on
creating great omni-channel, grocery-anchored shopping experiences
and improving communities, one neighborhood shopping center at a
time.
PECO uses, and intends to continue to use, its Investors
website, which can be found at
https://investors.phillipsedison.com, as a means of disclosing
material nonpublic information and for complying with its
disclosure obligations under Regulation FD.
|
PHILLIPS
EDISON & COMPANY, INC.CONSOLIDATED BALANCE
SHEETSAS OF DECEMBER
31, 2023 AND 2022(In
thousands, except per share amounts) |
|
|
|
|
|
|
|
|
|
2023 |
|
2022 |
ASSETS |
|
|
|
Investment in real estate: |
|
|
|
Land and improvements |
$ |
1,768,487 |
|
|
$ |
1,674,133 |
|
Building and improvements |
|
3,818,184 |
|
|
|
3,572,146 |
|
In-place lease assets |
|
495,525 |
|
|
|
471,507 |
|
Above-market lease assets |
|
74,446 |
|
|
|
71,954 |
|
Total investment in real estate assets |
|
6,156,642 |
|
|
|
5,789,740 |
|
Accumulated depreciation and amortization |
|
(1,540,551 |
) |
|
|
(1,316,743 |
) |
Net investment in real estate assets |
|
4,616,091 |
|
|
|
4,472,997 |
|
Investment in unconsolidated joint ventures |
|
25,220 |
|
|
|
27,201 |
|
Total investment in real estate assets, net |
|
4,641,311 |
|
|
|
4,500,198 |
|
Cash and cash equivalents |
|
4,872 |
|
|
|
5,478 |
|
Restricted cash |
|
4,006 |
|
|
|
11,871 |
|
Goodwill |
|
29,066 |
|
|
|
29,066 |
|
Other assets, net |
|
186,411 |
|
|
|
188,879 |
|
Total assets |
$ |
4,865,666 |
|
|
$ |
4,735,492 |
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
Liabilities: |
|
|
|
Debt obligations, net |
$ |
1,969,272 |
|
|
$ |
1,896,594 |
|
Below-market lease liabilities, net |
|
108,223 |
|
|
|
109,799 |
|
Accounts payable and other liabilities |
|
116,461 |
|
|
|
113,185 |
|
Deferred income |
|
18,359 |
|
|
|
18,481 |
|
Total liabilities |
|
2,212,315 |
|
|
|
2,138,059 |
|
Commitments and
contingencies |
|
— |
|
|
|
— |
|
Equity: |
|
|
|
Preferred stock, $0.01 par value per share, 10,000 shares
authorized, zero shares issued and outstanding at December 31, 2023
and 2022 |
|
— |
|
|
|
— |
|
Common stock, $0.01 par value per share, 1,000,000 shares
authorized, 122,024 and 117,126 shares issued and outstanding at
December 31, 2023 and 2022, respectively |
|
1,220 |
|
|
|
1,171 |
|
Additional paid-in capital |
|
3,546,838 |
|
|
|
3,383,978 |
|
Accumulated other comprehensive income |
|
10,523 |
|
|
|
21,003 |
|
Accumulated deficit |
|
(1,248,273 |
) |
|
|
(1,169,665 |
) |
Total stockholders’ equity |
|
2,310,308 |
|
|
|
2,236,487 |
|
Noncontrolling interests |
|
343,043 |
|
|
|
360,946 |
|
Total equity |
|
2,653,351 |
|
|
|
2,597,433 |
|
Total liabilities and
equity |
$ |
4,865,666 |
|
|
$ |
4,735,492 |
|
|
|
|
|
|
|
|
|
|
PHILLIPS
EDISON & COMPANY, INC.CONSOLIDATED STATEMENTS
OF OPERATIONSFOR THE THREE
MONTHS AND YEARS
ENDED DECEMBER 31,
2023 AND 2022(In
thousands, except per share amounts) |
|
|
|
|
|
Three Months EndedDecember
31, |
|
Year EndedDecember 31, |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Revenues: |
|
|
|
|
|
|
|
Rental income |
$ |
151,227 |
|
|
$ |
141,703 |
|
|
$ |
597,501 |
|
|
$ |
560,538 |
|
Fees and management income |
|
2,454 |
|
|
|
2,218 |
|
|
|
9,646 |
|
|
|
11,541 |
|
Other property income |
|
768 |
|
|
|
1,118 |
|
|
|
2,977 |
|
|
|
3,293 |
|
Total revenues |
|
154,449 |
|
|
|
145,039 |
|
|
|
610,124 |
|
|
|
575,372 |
|
Operating
Expenses: |
|
|
|
|
|
|
|
Property operating |
|
28,293 |
|
|
|
26,098 |
|
|
|
102,303 |
|
|
|
95,359 |
|
Real estate taxes |
|
17,335 |
|
|
|
15,859 |
|
|
|
72,816 |
|
|
|
67,864 |
|
General and administrative |
|
10,762 |
|
|
|
11,484 |
|
|
|
44,366 |
|
|
|
45,235 |
|
Depreciation and amortization |
|
59,572 |
|
|
|
58,216 |
|
|
|
236,443 |
|
|
|
236,224 |
|
Impairment of real estate assets |
|
— |
|
|
|
322 |
|
|
|
— |
|
|
|
322 |
|
Total operating expenses |
|
115,962 |
|
|
|
111,979 |
|
|
|
455,928 |
|
|
|
445,004 |
|
Other: |
|
|
|
|
|
|
|
Interest expense, net |
|
(22,569 |
) |
|
|
(18,301 |
) |
|
|
(84,232 |
) |
|
|
(71,196 |
) |
Gain on disposal of property, net |
|
40 |
|
|
|
3,366 |
|
|
|
1,110 |
|
|
|
7,517 |
|
Other expense, net |
|
(770 |
) |
|
|
(2,422 |
) |
|
|
(7,312 |
) |
|
|
(12,160 |
) |
Net income |
|
15,188 |
|
|
|
15,703 |
|
|
|
63,762 |
|
|
|
54,529 |
|
Net income attributable to
noncontrolling interests |
|
(1,655 |
) |
|
|
(2,025 |
) |
|
|
(6,914 |
) |
|
|
(6,206 |
) |
Net income attributable to
stockholders |
$ |
13,533 |
|
|
$ |
13,678 |
|
|
$ |
56,848 |
|
|
$ |
48,323 |
|
Earnings per share of
common stock: |
|
|
|
|
|
|
|
Net income per share attributable to stockholders - basic and
diluted |
$ |
0.11 |
|
|
$ |
0.12 |
|
|
$ |
0.48 |
|
|
$ |
0.42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discussion and Reconciliation of Non-GAAP
Measures
Same-Center Net Operating Income
The Company presents Same-Center NOI as a supplemental measure
of its performance. The Company defines NOI as total operating
revenues, adjusted to exclude non-cash revenue items, less property
operating expenses and real estate taxes. For the three months and
years ended December 31, 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. The Company believes Same-Center NOI provides useful
information to its investors about its financial and operating
performance because it provides a performance measure of the
revenues and expenses directly involved in owning and operating
real estate assets and provides a perspective not immediately
apparent from net income (loss). Because Same-Center NOI excludes
the change in NOI from properties acquired or disposed of after
December 31, 2021, it highlights operating trends such as
occupancy levels, rental rates, and operating costs on properties
that were operational for all comparable periods. Other REITs may
use different methodologies for calculating Same-Center NOI, and
accordingly, PECO’s Same-Center NOI may not be comparable to other
REITs.
Same-Center NOI should not be viewed as an alternative measure
of the Company’s financial performance as it does not reflect the
operations of its 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 the Company’s properties that
could materially impact its results from operations.
Nareit Funds from Operations and Core Funds from
Operations
Nareit FFO is a non-GAAP financial performance measure that is
widely recognized as a measure of REIT operating performance. The
National Association of Real Estate Investment Trusts (“Nareit”)
defines FFO as net income (loss) computed in accordance with GAAP,
excluding: (i) gains (or losses) from sales of property and gains
(or losses) from change in control; (ii) depreciation and
amortization related to real estate; and (iii) impairment losses on
real estate and impairments of in-substance real estate investments
in investees that are driven by measurable decreases in the fair
value of the depreciable real estate held by the unconsolidated
partnerships and joint ventures. Adjustments for unconsolidated
partnerships and joint ventures are calculated to reflect Nareit
FFO on the same basis. The Company calculates Nareit FFO in a
manner consistent with the Nareit definition.
Core FFO is an additional financial performance measure used by
the Company as Nareit FFO includes certain non-comparable items
that affect its performance over time. The Company believes that
Core FFO is helpful in assisting management and investors with the
assessment of the sustainability of operating performance in future
periods, and that it is more reflective of its core operating
performance and provides an additional measure to compare PECO’s
performance across reporting periods on a consistent basis by
excluding items that may cause short-term fluctuations in net
income (loss). To arrive at Core FFO, the Company adjusts Nareit
FFO to exclude certain recurring and non-recurring items including,
but not limited to: (i) depreciation and amortization of corporate
assets; (ii) changes in the fair value of the earn-out liability;
(iii) amortization of unconsolidated joint venture basis
differences; (iv) gains or losses on the extinguishment or
modification of debt and other; (v) other impairment charges; (vi)
transaction and acquisition expenses; and (vii) realized
performance income.
Nareit FFO and Core FFO should not be considered alternatives to
net income (loss) under GAAP, as an indication of the Company’s
liquidity, nor as an indication of funds available to cover its
cash needs, including its ability to fund distributions. Core FFO
may not be a useful measure of the impact of long-term operating
performance on value if the Company does not continue to operate
its business plan in the manner currently contemplated.
Accordingly, Nareit FFO and Core FFO should be reviewed in
connection with other GAAP measurements, and should not be viewed
as more prominent measures of performance than net income (loss) or
cash flows from operations prepared in accordance with GAAP. The
Company’s Nareit FFO and Core FFO, as presented, may not be
comparable to amounts calculated by other REITs.
Earnings Before Interest, Taxes, Depreciation, and
Amortization for Real Estate and Adjusted EBITDAre
Nareit defines Earnings Before Interest, Taxes, Depreciation,
and Amortization for Real Estate (“EBITDAre”) as net income (loss)
computed in accordance with GAAP before: (i) interest expense; (ii)
income tax expense; (iii) depreciation and amortization; (iv) gains
or losses from disposition of depreciable property; and (v)
impairment write-downs of depreciable property. Adjustments for
unconsolidated partnerships and joint ventures are calculated to
reflect EBITDAre on the same basis.
Adjusted EBITDAre is an additional performance measure used by
the Company as EBITDAre includes certain non-comparable items that
affect the Company’s performance over time. To arrive at Adjusted
EBITDAre, the Company excludes certain recurring and non-recurring
items from EBITDAre, including, but not limited to: (i) changes in
the fair value of the earn-out liability; (ii) other impairment
charges; (iii) amortization of basis differences in the Company’s
investments in its unconsolidated joint ventures; (iv) transaction
and acquisition expenses; and (v) realized performance income.
The Company uses EBITDAre and Adjusted EBITDAre as additional
measures of operating performance which allow it to compare
earnings independent of capital structure, determine debt service
and fixed cost coverage, and measure enterprise value.
Additionally, the Company believes they are a useful indicator of
its ability to support its debt obligations. EBITDAre and Adjusted
EBITDAre should not be considered as alternatives to net income
(loss), as an indication of the Company’s liquidity, nor as an
indication of funds available to cover its cash needs, including
its ability to fund distributions. Accordingly, EBITDAre and
Adjusted EBITDAre should be reviewed in connection with other GAAP
measurements, and should not be viewed as more prominent measures
of performance than net income (loss) or cash flows from operations
prepared in accordance with GAAP. The Company’s EBITDAre and
Adjusted EBITDAre, as presented, may not be comparable to amounts
calculated by other REITs.
Same-Center Net Operating Income—The table
below compares Same-Center NOI (dollars in thousands):
|
Three Months EndedDecember
31, |
|
Favorable (Unfavorable) |
|
Year EndedDecember 31, |
|
Favorable (Unfavorable) |
|
2023 |
|
2022 |
|
$ Change |
|
% Change |
|
2023 |
|
2022 |
|
$ Change |
|
% Change |
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income(1) |
$ |
104,874 |
|
|
$ |
100,834 |
|
|
$ |
4,040 |
|
|
|
|
$ |
415,152 |
|
|
$ |
398,507 |
|
|
$ |
16,645 |
|
|
|
Tenant recovery income |
|
33,434 |
|
|
|
32,205 |
|
|
|
1,229 |
|
|
|
|
|
134,860 |
|
|
|
127,776 |
|
|
|
7,084 |
|
|
|
Reserves for uncollectibility(2) |
|
(1,351 |
) |
|
|
(1,328 |
) |
|
|
(23 |
) |
|
|
|
|
(3,409 |
) |
|
|
(1,918 |
) |
|
|
(1,491 |
) |
|
|
Other property income |
|
711 |
|
|
|
917 |
|
|
|
(206 |
) |
|
|
|
|
2,717 |
|
|
|
2,967 |
|
|
|
(250 |
) |
|
|
Total revenues |
|
137,668 |
|
|
|
132,628 |
|
|
|
5,040 |
|
|
3.8 |
% |
|
|
549,320 |
|
|
|
527,332 |
|
|
|
21,988 |
|
|
4.2 |
% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating expenses |
|
22,041 |
|
|
|
21,407 |
|
|
|
(634 |
) |
|
|
|
|
83,669 |
|
|
|
80,683 |
|
|
|
(2,986 |
) |
|
|
Real estate taxes |
|
16,374 |
|
|
|
15,451 |
|
|
|
(923 |
) |
|
|
|
|
69,035 |
|
|
|
66,184 |
|
|
|
(2,851 |
) |
|
|
Total operating expenses |
|
38,415 |
|
|
|
36,858 |
|
|
|
(1,557 |
) |
|
(4.2 |
)% |
|
|
152,704 |
|
|
|
146,867 |
|
|
|
(5,837 |
) |
|
(4.0 |
)% |
Total Same-Center NOI |
$ |
99,253 |
|
|
$ |
95,770 |
|
|
$ |
3,483 |
|
|
3.6 |
% |
|
$ |
396,616 |
|
|
$ |
380,465 |
|
|
$ |
16,151 |
|
|
4.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Excludes straight-line rental income, net
amortization of above- and below-market leases, and lease buyout
income.
(2) Includes billings that will not be
recognized as revenue until cash is collected or the Neighbor
resumes regular payments and/or the Company deems it appropriate to
resume recording revenue on an accrual basis, rather than on a cash
basis.
Same-Center Net Operating Income
Reconciliation—Below is a reconciliation of Net Income to
NOI and Same-Center NOI (in thousands):
|
Three Months Ended December 31, |
|
Year Ended December 31, |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Net income |
$ |
15,188 |
|
|
$ |
15,703 |
|
|
$ |
63,762 |
|
|
$ |
54,529 |
|
Adjusted to exclude: |
|
|
|
|
|
|
|
Fees and management income |
|
(2,454 |
) |
|
|
(2,218 |
) |
|
|
(9,646 |
) |
|
|
(11,541 |
) |
Straight-line rental income(1) |
|
(2,056 |
) |
|
|
(3,205 |
) |
|
|
(10,185 |
) |
|
|
(12,265 |
) |
Net amortization of above- and below-market leases |
|
(1,394 |
) |
|
|
(1,163 |
) |
|
|
(5,178 |
) |
|
|
(4,324 |
) |
Lease buyout income |
|
(206 |
) |
|
|
(52 |
) |
|
|
(1,222 |
) |
|
|
(2,414 |
) |
General and administrative expenses |
|
10,762 |
|
|
|
11,484 |
|
|
|
44,366 |
|
|
|
45,235 |
|
Depreciation and amortization |
|
59,572 |
|
|
|
58,216 |
|
|
|
236,443 |
|
|
|
236,224 |
|
Impairment of real estate assets |
|
— |
|
|
|
322 |
|
|
|
— |
|
|
|
322 |
|
Interest expense, net |
|
22,569 |
|
|
|
18,301 |
|
|
|
84,232 |
|
|
|
71,196 |
|
Gain on disposal of property, net |
|
(40 |
) |
|
|
(3,366 |
) |
|
|
(1,110 |
) |
|
|
(7,517 |
) |
Other expense, net |
|
770 |
|
|
|
2,422 |
|
|
|
7,312 |
|
|
|
12,160 |
|
Property operating expenses (income) related to fees and management
income |
|
384 |
|
|
|
(15 |
) |
|
|
2,059 |
|
|
|
3,046 |
|
NOI for real estate
investments |
|
103,095 |
|
|
|
96,429 |
|
|
|
410,833 |
|
|
|
384,651 |
|
Less: Non-same-center
NOI(2) |
|
(3,842 |
) |
|
|
(659 |
) |
|
|
(14,217 |
) |
|
|
(4,186 |
) |
Total Same-Center NOI |
$ |
99,253 |
|
|
$ |
95,770 |
|
|
$ |
396,616 |
|
|
$ |
380,465 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes straight-line rent adjustments for
Neighbors for whom revenue is being recorded on a cash basis.
(2) Includes operating revenues and expenses
from non-same-center properties which includes properties acquired
or sold and corporate activities.
Nareit FFO and Core FFO—The following table
presents the Company’s calculation of Nareit FFO and Core FFO and
provides additional information related to its operations (in
thousands, except per share amounts):
|
Three Months Ended December 31, |
|
Year Ended December 31, |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Calculation of Nareit
FFO Attributable to Stockholders and OP Unit Holders |
|
|
|
|
|
|
|
Net income |
$ |
15,188 |
|
|
$ |
15,703 |
|
|
$ |
63,762 |
|
|
$ |
54,529 |
|
Adjustments: |
|
|
|
|
|
|
|
Depreciation and amortization of real estate assets |
|
59,048 |
|
|
|
57,266 |
|
|
|
234,260 |
|
|
|
232,571 |
|
Impairment of real estate assets |
|
— |
|
|
|
322 |
|
|
|
— |
|
|
|
322 |
|
Gain on disposal of property, net |
|
(40 |
) |
|
|
(3,366 |
) |
|
|
(1,110 |
) |
|
|
(7,517 |
) |
Adjustments related to unconsolidated joint ventures |
|
647 |
|
|
|
661 |
|
|
|
2,636 |
|
|
|
842 |
|
Nareit FFO attributable to
stockholders and OP unit holders |
$ |
74,843 |
|
|
$ |
70,586 |
|
|
$ |
299,548 |
|
|
$ |
280,747 |
|
Calculation of Core
FFO Attributable to Stockholders and OP Unit Holders |
|
|
|
|
|
|
|
Nareit FFO attributable to
stockholders and OP unit holders |
$ |
74,843 |
|
|
$ |
70,586 |
|
|
$ |
299,548 |
|
|
$ |
280,747 |
|
Adjustments: |
|
|
|
|
|
|
|
Depreciation and amortization of corporate assets |
|
524 |
|
|
|
950 |
|
|
|
2,183 |
|
|
|
3,653 |
|
Change in fair value of earn-out liability |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,809 |
|
Impairment of investment in third parties |
|
— |
|
|
|
— |
|
|
|
3,000 |
|
|
|
— |
|
Transaction and acquisition expenses |
|
2,496 |
|
|
|
2,731 |
|
|
|
5,675 |
|
|
|
10,551 |
|
Loss on extinguishment or modification of debt and other, net |
|
2 |
|
|
|
— |
|
|
|
368 |
|
|
|
1,025 |
|
Amortization of unconsolidated joint venture basis differences |
|
5 |
|
|
|
— |
|
|
|
17 |
|
|
|
220 |
|
Realized performance income(1) |
|
— |
|
|
|
— |
|
|
|
(75 |
) |
|
|
(2,742 |
) |
Core FFO attributable to
stockholders and UP unit holders |
$ |
77,870 |
|
|
$ |
74,267 |
|
|
$ |
310,716 |
|
|
$ |
295,263 |
|
|
|
|
|
|
|
|
|
Nareit FFO/Core FFO
Attributable to Stockholders and OP Unit Holders per diluted
share |
|
|
|
|
|
|
|
Weighted-average shares of
common stock outstanding - diluted |
|
134,667 |
|
|
|
131,781 |
|
|
|
132,970 |
|
|
|
130,332 |
|
Nareit FFO attributable to
stockholders and OP unit holders per share - diluted |
$ |
0.56 |
|
|
$ |
0.54 |
|
|
$ |
2.25 |
|
|
$ |
2.15 |
|
Core FFO attributable to
stockholders and OP unit holders per share - diluted |
$ |
0.58 |
|
|
$ |
0.56 |
|
|
$ |
2.34 |
|
|
$ |
2.27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Realized performance income includes fees
received related to the achievement of certain performance targets
in the Company’s NRP joint venture.
EBITDAre and Adjusted EBITDAre—The following
table presents the Company’s calculation of EBITDAre and Adjusted
EBITDAre (in thousands):
|
Three Months EndedDecember
31, |
|
Year EndedDecember 31, |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
Calculation of
EBITDAre |
|
|
|
|
|
|
|
Net income |
$ |
15,188 |
|
|
$ |
15,703 |
|
|
$ |
63,762 |
|
|
$ |
54,529 |
|
Adjustments: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
59,572 |
|
|
|
58,216 |
|
|
|
236,443 |
|
|
|
236,224 |
|
Interest expense, net |
|
22,569 |
|
|
|
18,301 |
|
|
|
84,232 |
|
|
|
71,196 |
|
Gain on disposal of property, net |
|
(40 |
) |
|
|
(3,366 |
) |
|
|
(1,110 |
) |
|
|
(7,517 |
) |
Impairment of real estate assets |
|
— |
|
|
|
322 |
|
|
|
— |
|
|
|
322 |
|
Federal, state, and local tax expense |
|
81 |
|
|
|
433 |
|
|
|
438 |
|
|
|
806 |
|
Adjustments related to unconsolidated joint ventures |
|
919 |
|
|
|
926 |
|
|
|
3,721 |
|
|
|
1,987 |
|
EBITDAre |
$ |
98,289 |
|
|
$ |
90,535 |
|
|
$ |
387,486 |
|
|
$ |
357,547 |
|
Calculation of
Adjusted EBITDAre |
|
|
|
|
|
|
|
EBITDAre |
$ |
98,289 |
|
|
$ |
90,535 |
|
|
$ |
387,486 |
|
|
$ |
357,547 |
|
Adjustments: |
|
|
|
|
|
|
|
Impairment of investment in third parties |
|
— |
|
|
|
— |
|
|
|
3,000 |
|
|
|
— |
|
Change in fair value of earn-out liability |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,809 |
|
Transaction and acquisition expenses |
|
2,496 |
|
|
|
2,731 |
|
|
|
5,675 |
|
|
|
10,551 |
|
Amortization of unconsolidated joint venture basis differences |
|
5 |
|
|
|
— |
|
|
|
17 |
|
|
|
220 |
|
Realized performance income(1) |
|
— |
|
|
|
— |
|
|
|
(75 |
) |
|
|
(2,742 |
) |
Adjusted EBITDAre |
$ |
100,790 |
|
|
$ |
93,266 |
|
|
$ |
396,103 |
|
|
$ |
367,385 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Realized performance income includes fees
received related to the achievement of certain performance targets
in the Company’s NRP joint venture.
Financial Leverage Ratios—The Company believes
its net debt to Adjusted EBITDAre, net debt to total enterprise
value, and debt covenant compliance as of December 31, 2023
allow it access to future borrowings as needed in the near term.
The following table presents the Company’s calculation of net debt
and total enterprise value, inclusive of its prorated portion of
net debt and cash and cash equivalents owned through its
unconsolidated joint ventures, as of December 31, 2023 and
2022 (in thousands):
|
2023 |
|
2022 |
Net debt: |
|
|
|
Total debt, excluding discounts, market adjustments, and deferred
financing expenses |
$ |
2,011,093 |
|
|
$ |
1,937,142 |
|
Less: Cash and cash equivalents |
|
5,074 |
|
|
|
5,740 |
|
Total net debt |
$ |
2,006,019 |
|
|
$ |
1,931,402 |
|
|
|
|
|
Enterprise value: |
|
|
|
Net debt |
$ |
2,006,019 |
|
|
$ |
1,931,402 |
|
Total equity market capitalization(1)(2) |
|
4,955,480 |
|
|
|
4,178,204 |
|
Total enterprise value |
$ |
6,961,499 |
|
|
$ |
6,109,606 |
|
|
|
|
|
|
|
|
|
(1) Total equity market capitalization is
calculated as diluted shares multiplied by the closing market price
per share, which includes 135.8 million and 131.2 million diluted
shares as of December 31, 2023 and 2022, respectively, and the
closing market price per share of $36.48 and $31.84 as of December
31, 2023 and 2022, respectively. (2) Fully diluted
shares include common stock and OP units.
The following table presents the Company’s calculation of net
debt to Adjusted EBITDAre and net debt to total enterprise value as
of December 31, 2023 and 2022 (dollars in thousands):
|
2023 |
|
2022 |
Net debt to Adjusted EBITDAre-
annualized: |
|
|
|
Net debt |
$ |
2,006,019 |
|
|
$ |
1,931,402 |
|
Adjusted EBITDAre- annualized(1) |
|
396,103 |
|
|
|
367,385 |
|
Net debt to Adjusted EBITDAre-
annualized |
5.1x |
|
|
5.3x |
|
|
|
|
|
Net debt to total enterprise
value: |
|
|
|
Net debt |
$ |
2,006,019 |
|
|
$ |
1,931,402 |
|
Total enterprise value |
|
6,961,499 |
|
|
|
6,109,606 |
|
Net debt to total enterprise
value |
|
28.8% |
|
|
|
31.6% |
|
|
|
|
|
|
|
|
|
(1) Adjusted EBITDAre is based on a trailing
twelve month period.
Forward-Looking Statements
This press release contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Phillips Edison & Company, Inc. (the “Company”)
intends such forward-looking statements to be covered by the safe
harbor provisions for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995 and includes this
statement for purposes of complying with the safe harbor
provisions. Such forward-looking statements can generally be
identified by the Company’s use of forward-looking terminology such
as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,”
“believe,” “continue,” “seek,” “objective,” “goal,” “strategy,”
“plan,” “focus,” “priority,” “should,” “could,” “potential,”
“possible,” “look forward,” “optimistic,” or other similar words.
Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this
earnings release. Such statements include, but are not limited to:
(a) statements about the Company’s plans, strategies, initiatives,
and prospects; (b) statements about the Company’s underwritten
incremental yields; and (c) statements about the Company’s future
results of operations, capital expenditures, and liquidity. Such
statements are subject to known and unknown risks and
uncertainties, which could cause actual results to differ
materially from those projected or anticipated, including, without
limitation: (i) changes in national, regional, or local
economic climates; (ii) local market conditions, including an
oversupply of space in, or a reduction in demand for, properties
similar to those in the Company’s portfolio; (iii) vacancies,
changes in market rental rates, and the need to periodically
repair, renovate, and re-let space; (iv) competition from
other available shopping centers and the attractiveness of
properties in the Company’s portfolio to its tenants; (v) the
financial stability of the Company’s tenants, including, without
limitation, their ability to pay rent; (vi) the Company’s
ability to pay down, refinance, restructure, or extend its
indebtedness as it becomes due; (vii) increases in the Company’s
borrowing costs as a result of changes in interest rates and other
factors; (viii) potential liability for environmental matters; (ix)
damage to the Company’s properties from catastrophic weather and
other natural events, and the physical effects of climate change;
(x) the Company’s ability and willingness to maintain its
qualification as a REIT in light of economic, market, legal, tax,
and other considerations; (xi) changes in tax, real estate,
environmental, and zoning laws; (xii) information technology
security breaches; (xiii) the Company’s corporate responsibility
initiatives; (xiv) loss of key executives; (xv) the concentration
of the Company’s portfolio in a limited number of industries,
geographies, or investments; (xvi) the economic, political, and
social impact of, and uncertainty relating to, pandemics or other
health crises; (xvii) the Company’s ability to re-lease its
properties on the same or better terms, or at all, in the event of
non-renewal or in the event the Company exercises its right to
replace an existing tenant; (xviii) the loss or bankruptcy of the
Company’s tenants; (xix) to the extent the Company is seeking to
dispose of properties, the Company’s ability to do so at attractive
prices or at all; and (xx) the impact of inflation on the Company
and on its tenants. Additional important factors that could cause
actual results to differ are described in the filings made from
time to time by the Company with the SEC and include the risk
factors and other risks and uncertainties described in the
Company’s 2023 Annual Report on Form 10-K, filed with the SEC on or
around February 12, 2024, as updated from time to time in the
Company’s periodic and/or current reports filed with the SEC, which
are accessible on the SEC’s website at www.sec.gov. Therefore, such
statements are not intended to be a guarantee of the Company’s
performance in future periods.
Except as required by law, the Company does not undertake any
obligation to update or revise any forward-looking statement,
whether as a result of new information, future events, or
otherwise.
Investors:
Kimberly Green, Head of Investor Relations(513)
692-3399kgreen@phillipsedison.com
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