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 September 30,
2023 and provided updated full year 2023 earnings guidance. For the
three and nine months ended September 30, 2023, net income
attributable to stockholders was $12.2 million, or $0.10 per
diluted share, and $43.3 million, or $0.37 per diluted share,
respectively.
Highlights for the Third
Quarter Ended September 30,
2023
- Reported Nareit FFO of $72.5
million, or $0.55 per diluted share
- Reported Core FFO of $77.0 million,
or $0.58 per diluted share
- Updated 2023 Nareit FFO and Core FFO
guidance to a range of $2.23 to $2.27 per diluted share and $2.31
to $2.35 per diluted share, respectively
- The midpoint of 2023 Core FFO
guidance represents 2.6% year-over-year growth
- Increased same-center NOI
year-over-year by 3.2%
- Increased leased portfolio occupancy
by 70 basis points year-over-year to 97.8%
- Executed comparable renewal leases
during the quarter at a rent spread of 16.9%
- Executed comparable new leases
during the quarter at a rent spread of 26.3%
- As previously announced, closed on
amendments to extend the maturities on its 2024 term loans, leaving
no meaningful maturities until 2025
- Generated net proceeds of $70.1
million through the issuance of 2.0 million common shares at a
gross weighted average price of $35.59 per common share through the
Company’s ATM program
- Acquired one grocery-anchored
neighborhood shopping center and one land parcel for a total of
$13.4 million
- Subsequent to quarter end, acquired
one property and one outparcel for $19.4 million
Management Commentary
Jeff Edison, Chairman and Chief Executive Officer of PECO
stated: “The PECO team delivered another solid quarter of growth
with same-center NOI increasing by 3.2% and continued strength in
occupancy and rent spreads. The continued strength of our operating
performance is attributed to our differentiated and focused
strategy of exclusively owning grocery-anchored neighborhood
shopping centers and our ability to drive results at the property
level through our integrated and cycle-tested operating platform,
as evidenced by our Neighbor retention rate of 93% during the third
quarter. Based on the current pipeline of assets that we expect to
acquire during the fourth quarter of 2023, we are confident in our
ability to close on $250 to $300 million in net acquisitions this
year. We continue to see a resilient consumer and strong retailer
demand, and we believe we will end the year with positive earnings
growth despite interest expense headwinds.”
Financial Results for the
Third Quarter and Nine Months
Ended September 30, 2023
Net Income
Third quarter 2023 net income attributable to stockholders
totaled $12.2 million, or $0.10 per diluted share, which
included a non-cash impairment charge of $3.0 million related to a
third-party investment. This compared to net income of $11.0
million, or $0.09 per diluted share, during the third quarter of
2022.
For the nine months ended September 30, 2023, net income
attributable to stockholders totaled $43.3 million, or $0.37 per
diluted share, compared to net income of $34.6 million, or $0.30
per diluted share, for the same period in 2022.
Nareit FFO
Third quarter 2023 funds from operations attributable to
stockholders and operating partnership (“OP”) unit holders as
defined by Nareit (“Nareit FFO”) increased 0.7% to $72.5 million,
or $0.55 per diluted share, which included a non-cash impairment
charge of $3.0 million related to a third-party investment. This
compared to $72.0 million, or $0.55 per diluted share, during the
third quarter of 2022.
For the nine months ended September 30, 2023, Nareit FFO
increased 6.9% to $224.7 million, or $1.70 per diluted share,
compared to $210.2 million, or $1.62 per diluted share, during the
same period a year ago.
Core FFO
Third quarter 2023 core funds from operations attributable to
stockholders and OP unit holders (“Core FFO”) increased 0.5% to
$77.0 million, or $0.58 per diluted share, compared to $76.6
million, or $0.58 per diluted share, during the third quarter of
2022.
For the nine months ended September 30, 2023, Core FFO increased
5.4% to $232.8 million, or $1.76 per diluted share, compared to
$221.0 million, or $1.70 per diluted share, for the same period in
2022.
Same-Center NOI
Third quarter 2023 same-center net operating income (“NOI”)
increased 3.2% to $99.9 million, compared to $96.8 million during
the third quarter of 2022.
For the nine months ended September 30, 2023, same-center NOI
increased 4.5% to $297.4 million, compared to $284.7 million during
the same period a year ago.
Portfolio Overview for the
Third Quarter and Nine Months
Ended September 30, 2023
Portfolio Statistics
As of September 30, 2023, PECO’s wholly-owned portfolio
consisted of 275 properties, totaling approximately 31.4 million
square feet, located in 31 states. This compared to 270 properties,
totaling approximately 31.1 million square feet, located in 31
states as of September 30, 2022.
Leased portfolio occupancy increased to 97.8% at
September 30, 2023, compared to 97.1% at September 30,
2022.
Anchor occupancy increased to 99.3% at September 30, 2023,
compared to 98.9% at September 30, 2022, and inline occupancy
increased to 94.9% at September 30, 2023, compared to 93.6% at
September 30, 2022.
Leasing Activity
During the third quarter of 2023, 231 leases were executed
totaling 0.9 million square feet. This compared to 240 leases
executed totaling 1.2 million square feet during the third quarter
of 2022.
During the nine months ended September 30, 2023, 779 leases were
executed totaling 3.6 million square feet. This compared to 749
leases executed totaling 3.6 million square feet during the same
period in 2022.
Comparable rent spreads during the third 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 26.3% for new leases, 16.9% for renewal
leases and 19.6% combined.
Comparable rent spreads during the nine months ended
September 30, 2023 were 26.2% for new leases, 17.0% for
renewal leases and 18.8% combined.
Transaction Activity
During the three months ended September 30, 2023, the Company
acquired one property and one land parcel for a total of
$13.4 million. No properties were sold during the quarter.
Third quarter 2023 acquisitions consisted of:
- Lake Pointe Market, a 40,600 square
foot shopping center anchored by Tom Thumb located in a Dallas, TX
suburb. The center is located in an area with strong median
household income and a growing population. The Company expects to
drive growth in the asset through occupancy increases and rent
growth, as well as potential future development of ground up
outparcel retail spaces.
- Land parcel adjacent to the Market Place at Pabst Farms, a
PECO-owned center anchored by Metro Market located in a Milwaukee,
WI suburb. The center is located in an area with strong median
household income. The Company expects to drive growth through
ground up expansion development opportunities.
During the nine months ended September 30, 2023, the
Company acquired five properties and one land parcel for a total of
$92.1 million. During the same period, one property and two
outparcels were sold for $6.3 million.
Subsequent to quarter end, the company acquired one property and
one outparcel for $19.4 million. Acquisitions completed subsequent
to quarter end consisted of:
- Mansell Village, an 89,600 square foot shopping center anchored
by Kroger in an Atlanta, GA suburb. The center is located in an
area with strong median household income and a growing population.
The Company expects to drive growth in the asset through occupancy
increases and rent growth.
Balance Sheet Highlights
As of September 30, 2023, PECO had $713.8 million of
total liquidity, comprised of $8.2 million of cash, cash
equivalents and restricted cash, plus $705.6 million of
borrowing capacity available on its $800 million revolving credit
facility.
As of September 30, 2023, PECO’s net debt to annualized
adjusted EBITDAre was 4.9x. This compared to 5.3x at
December 31, 2022.
As of September 30, 2023, PECO’s outstanding debt had a
weighted-average interest rate of 4.1% and a weighted-average
maturity of 4.4 years when including all extension options, and
81.6% of total debt was fixed-rate debt.
During the three and nine months ended September 30, 2023, PECO
generated net proceeds of $70.1 million after commissions through
the issuance of 2.0 million common shares at a gross
weighted-average price of $35.59 per common share through the
Company’s ATM program.
Extension of Term Loans
As previously announced, on July 31, 2023, PECO 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 scheduled to
mature on January 31, 2026, extendable with two one-year options to
2028, subject to certain terms and conditions. The $158.0 million
and $165.0 million unsecured term loans are scheduled to mature on
January 31, 2027. Based on PECO’s current investment grade credit
ratings, the term loans are priced at SOFR plus 1.35%, representing
no change in pricing from the previous term loan tranches.
2023 Guidance
PECO has updated its 2023 earnings guidance, as summarized in
the table below, which is based upon the Company’s current view of
existing market conditions and assumptions for the year ending
December 31, 2023. 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.
(in thousands, except per
share amounts) |
Q3 YTD |
|
Updated Full Year2023
Guidance |
|
Previous Full Year2023
Guidance |
Results: |
|
|
|
|
|
Net income per share |
$0.37 |
|
$0.46 - $0.50 |
|
$0.51 - $0.55 |
Nareit FFO per share |
$1.70 |
|
$2.23 - $2.27 |
|
$2.27 - $2.32 |
Core FFO per share |
$1.76 |
|
$2.31 - $2.35 |
|
$2.30 - $2.36 |
Same-Center NOI growth |
4.5% |
|
3.75% - 4.50% |
|
3.75% - 4.50% |
Portfolio
Activity: |
|
|
|
|
|
Acquisitions (net of
dispositions) |
$85,810 |
|
$250,000 - $300,000 |
|
$200,000 - $300,000 |
Development and redevelopment
spend |
$29,276 |
|
$35,000 - $45,000 |
|
$35,000 - $45,000 |
Other: |
|
|
|
|
|
Interest expense, net |
$61,663 |
|
$85,000 - $88,000 |
|
$85,000 - $90,000 |
G&A expense |
$33,604 |
|
$44,000 - $47,000 |
|
$44,000 - $48,000 |
Non-cash revenue items(1) |
$11,873 |
|
$15,500 - $18,500 |
|
$16,000 - $19,000 |
Adjustments for
collectibility |
$2,174 |
|
$3,000 - $4,000 |
|
$3,000 - $4,000 |
(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 our results without unreasonable effort.
The following table provides a reconciliation of the range of
the Company's 2023 estimated net income to estimated Nareit FFO and
Core FFO:
(Unaudited) |
Low End |
|
High End |
Net income per share |
$ |
0.46 |
|
|
$ |
0.50 |
|
Depreciation and amortization of real estate assets |
|
1.76 |
|
|
|
1.76 |
|
Gain on sale of real estate assets |
|
(0.01 |
) |
|
|
(0.01 |
) |
Adjustments related to unconsolidated joint ventures |
|
0.02 |
|
|
|
0.02 |
|
Nareit FFO per share |
$ |
2.23 |
|
|
$ |
2.27 |
|
Depreciation and amortization of corporate assets |
|
0.02 |
|
|
|
0.02 |
|
Transaction costs and other |
|
0.06 |
|
|
|
0.06 |
|
Core FFO per share |
$ |
2.31 |
|
|
$ |
2.35 |
|
|
|
|
|
|
|
|
|
Conference Call Details
PECO plans to host a conference call and webcast on Wednesday,
November 1, 2023 at 12:00 p.m. Eastern Time to discuss third
quarter 2023 results and provide further business updates. Chairman
and Chief Executive Officer Jeff Edison, President Devin Murphy and
Chief Financial Officer John Caulfield will host the conference
call and webcast. Dial-in and webcast information is below.
Third Quarter 2023 Earnings Conference Call
Details:
Date: Wednesday,
November 1, 2023
Time: 12:00 p.m.
ET
Toll-Free Dial-In
Number: (888) 210-4659
International Dial-In
Number: (646) 960-0383
Conference ID:
2035308
Webcast: Third
Quarter 2023 Webcast Link
An audio replay 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 Form 10-Q for the quarter ended
September 30, 2023.
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 September 30, 2023, PECO managed 295 shopping
centers, including 275 wholly-owned centers comprising 31.4 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 SEPTEMBER 30,
2023 AND DECEMBER 31,
2022 (Condensed and
Unaudited)(In thousands, except per share
amounts) |
|
|
|
|
September 30, 2023 |
|
December 31, 2022 |
ASSETS |
|
|
|
Investment in real estate: |
|
|
|
Land and improvements |
$ |
1,714,136 |
|
|
$ |
1,674,133 |
|
Building and improvements |
|
3,679,549 |
|
|
|
3,572,146 |
|
In-place lease assets |
|
477,859 |
|
|
|
471,507 |
|
Above-market lease assets |
|
72,398 |
|
|
|
71,954 |
|
Total investment in real estate assets |
|
5,943,942 |
|
|
|
5,789,740 |
|
Accumulated depreciation and amortization |
|
(1,484,658 |
) |
|
|
(1,316,743 |
) |
Net investment in real estate assets |
|
4,459,284 |
|
|
|
4,472,997 |
|
Investment in unconsolidated joint ventures |
|
25,609 |
|
|
|
27,201 |
|
Total investment in real estate assets, net |
|
4,484,893 |
|
|
|
4,500,198 |
|
Cash and cash equivalents |
|
3,777 |
|
|
|
5,478 |
|
Restricted cash |
|
4,462 |
|
|
|
11,871 |
|
Goodwill |
|
29,066 |
|
|
|
29,066 |
|
Other assets, net |
|
196,263 |
|
|
|
188,879 |
|
Total assets |
$ |
4,718,461 |
|
|
$ |
4,735,492 |
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
Liabilities: |
|
|
|
Debt obligations, net |
$ |
1,869,984 |
|
|
$ |
1,896,594 |
|
Below-market lease liabilities, net |
|
105,302 |
|
|
|
109,799 |
|
Accounts payable and other liabilities |
|
117,783 |
|
|
|
113,185 |
|
Deferred income |
|
17,900 |
|
|
|
18,481 |
|
Total liabilities |
|
2,110,969 |
|
|
|
2,138,059 |
|
Equity: |
|
|
|
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 |
|
1,195 |
|
|
|
1,171 |
|
Additional paid-in capital |
|
3,461,981 |
|
|
|
3,383,978 |
|
Accumulated other comprehensive income |
|
19,846 |
|
|
|
21,003 |
|
Accumulated deficit |
|
(1,226,379 |
) |
|
|
(1,169,665 |
) |
Total stockholders’ equity |
|
2,256,643 |
|
|
|
2,236,487 |
|
Noncontrolling interests |
|
350,849 |
|
|
|
360,946 |
|
Total equity |
|
2,607,492 |
|
|
|
2,597,433 |
|
Total liabilities and
equity |
$ |
4,718,461 |
|
|
$ |
4,735,492 |
|
|
|
|
|
|
|
|
|
PHILLIPS
EDISON & COMPANY, INC.CONSOLIDATED STATEMENTS
OF OPERATIONSFOR THE THREE AND
NINE MONTHS ENDED SEPTEMBER 30, 2023
AND 2022 (Condensed and
Unaudited)(In thousands, except per share
amounts) |
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Revenues: |
|
|
|
|
|
|
|
Rental income |
$ |
149,566 |
|
|
$ |
142,857 |
|
|
$ |
446,274 |
|
|
$ |
418,835 |
|
Fees and management income |
|
2,168 |
|
|
|
2,081 |
|
|
|
7,192 |
|
|
|
9,323 |
|
Other property income |
|
740 |
|
|
|
716 |
|
|
|
2,209 |
|
|
|
2,175 |
|
Total revenues |
|
152,474 |
|
|
|
145,654 |
|
|
|
455,675 |
|
|
|
430,333 |
|
Operating
Expenses: |
|
|
|
|
|
|
|
Property operating |
|
24,274 |
|
|
|
23,089 |
|
|
|
74,010 |
|
|
|
69,261 |
|
Real estate taxes |
|
19,028 |
|
|
|
18,041 |
|
|
|
55,481 |
|
|
|
52,005 |
|
General and administrative |
|
10,385 |
|
|
|
10,843 |
|
|
|
33,604 |
|
|
|
33,751 |
|
Depreciation and amortization |
|
58,706 |
|
|
|
60,013 |
|
|
|
176,871 |
|
|
|
178,008 |
|
Total operating expenses |
|
112,393 |
|
|
|
111,986 |
|
|
|
339,966 |
|
|
|
333,025 |
|
Other: |
|
|
|
|
|
|
|
Interest expense, net |
|
(21,522 |
) |
|
|
(17,569 |
) |
|
|
(61,663 |
) |
|
|
(52,895 |
) |
Gain (loss) on disposal of property, net |
|
53 |
|
|
|
(10 |
) |
|
|
1,070 |
|
|
|
4,151 |
|
Other expense, net |
|
(4,883 |
) |
|
|
(3,916 |
) |
|
|
(6,542 |
) |
|
|
(9,738 |
) |
Net income |
|
13,729 |
|
|
|
12,173 |
|
|
|
48,574 |
|
|
|
38,826 |
|
Net income attributable to
noncontrolling interests |
|
(1,484 |
) |
|
|
(1,135 |
) |
|
|
(5,259 |
) |
|
|
(4,181 |
) |
Net income attributable to
stockholders |
$ |
12,245 |
|
|
$ |
11,038 |
|
|
$ |
43,315 |
|
|
$ |
34,645 |
|
Earnings per share of
common stock: |
|
|
|
|
|
|
|
Net income per share attributable to stockholders - basic and
diluted |
$ |
0.10 |
|
|
$ |
0.09 |
|
|
$ |
0.37 |
|
|
$ |
0.30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 and nine
months ended September 30, 2023 and 2022, Same-Center NOI
represents the NOI for the 262 properties that were wholly-owned
and operational for the entire portion of all comparable reporting
periods. 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 Ended September 30, |
|
Favorable (Unfavorable) |
|
Nine Months Ended September 30, |
|
Favorable (Unfavorable) |
|
|
2023 |
|
|
|
2022 |
|
$ Change |
|
% Change |
|
|
2023 |
|
|
|
2022 |
|
|
$ Change |
|
% Change |
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income(1) |
$103,770 |
|
|
$100,490 |
|
$3,280 |
|
|
|
|
$310,278 |
|
|
$297,673 |
|
|
$12,605 |
|
|
|
Tenant recovery income |
|
33,965 |
|
|
|
32,362 |
|
|
1,603 |
|
|
|
|
|
101,426 |
|
|
|
95,571 |
|
|
|
5,855 |
|
|
|
Reserves for uncollectibility(2) |
|
(789 |
) |
|
|
70 |
|
|
(859 |
) |
|
|
|
|
(2,058 |
) |
|
|
(591 |
) |
|
|
(1,467 |
) |
|
|
Other property income |
|
638 |
|
|
|
684 |
|
|
(46 |
) |
|
|
|
|
2,006 |
|
|
|
2,050 |
|
|
|
(44 |
) |
|
|
Total revenues |
|
137,584 |
|
|
|
133,606 |
|
|
3,978 |
|
|
3.0% |
|
|
411,652 |
|
|
|
394,703 |
|
|
|
16,949 |
|
|
4.3% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating expenses |
|
19,692 |
|
|
|
19,413 |
|
|
(279 |
) |
|
|
|
|
61,628 |
|
|
|
59,279 |
|
|
|
(2,349 |
) |
|
|
Real estate taxes |
|
17,991 |
|
|
|
17,399 |
|
|
(592 |
) |
|
|
|
|
52,661 |
|
|
|
50,732 |
|
|
|
(1,929 |
) |
|
|
Total operating expenses |
|
37,683 |
|
|
|
36,812 |
|
|
(871 |
) |
|
(2.4)% |
|
|
114,289 |
|
|
|
110,011 |
|
|
|
(4,278 |
) |
|
(3.9)% |
Total Same-Center NOI |
$99,901 |
|
|
$96,794 |
|
$3,107 |
|
|
3.2% |
|
$297,363 |
|
|
$284,692 |
|
|
$12,671 |
|
|
4.5% |
(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 September 30, |
|
Nine Months Ended September 30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
|
2023 |
|
|
|
2022 |
|
Net income |
$ |
13,729 |
|
|
$ |
12,173 |
|
|
|
$ |
48,574 |
|
|
$ |
38,826 |
|
Adjusted to exclude: |
|
|
|
|
|
|
|
|
Fees and management income |
|
(2,168 |
) |
|
|
(2,081 |
) |
|
|
|
(7,192 |
) |
|
|
(9,323 |
) |
Straight-line rental income(1) |
|
(2,265 |
) |
|
|
(3,932 |
) |
|
|
|
(8,129 |
) |
|
|
(9,060 |
) |
Net amortization of above- and below- market leases |
|
(1,294 |
) |
|
|
(1,081 |
) |
|
|
|
(3,784 |
) |
|
|
(3,161 |
) |
Lease buyout income |
|
(587 |
) |
|
|
(221 |
) |
|
|
|
(1,016 |
) |
|
|
(2,362 |
) |
General and administrative expenses |
|
10,385 |
|
|
|
10,843 |
|
|
|
|
33,604 |
|
|
|
33,751 |
|
Depreciation and amortization |
|
58,706 |
|
|
|
60,013 |
|
|
|
|
176,871 |
|
|
|
178,008 |
|
Interest expense, net |
|
21,522 |
|
|
|
17,569 |
|
|
|
|
61,663 |
|
|
|
52,895 |
|
(Gain) loss on disposal of property, net |
|
(53 |
) |
|
|
10 |
|
|
|
|
(1,070 |
) |
|
|
(4,151 |
) |
Other expense, net |
|
4,883 |
|
|
|
3,916 |
|
|
|
|
6,542 |
|
|
|
9,738 |
|
Property operating expenses related to fees and management
income |
|
649 |
|
|
|
704 |
|
|
|
|
1,675 |
|
|
|
3,061 |
|
NOI for real estate
investments |
|
103,507 |
|
|
|
97,913 |
|
|
|
|
307,738 |
|
|
|
288,222 |
|
Less: Non-same-center
NOI(2) |
|
(3,606 |
) |
|
|
(1,119 |
) |
|
|
|
(10,375 |
) |
|
|
(3,530 |
) |
Total Same-Center NOI |
$ |
99,901 |
|
|
$ |
96,794 |
|
|
|
$ |
297,363 |
|
|
$ |
284,692 |
|
(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 September 30, |
|
Nine Months Ended September 30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Calculation of Nareit FFO Attributable to Stockholders and
OP Unit Holders |
|
|
|
|
|
|
|
Net income |
$ |
13,729 |
|
|
$ |
12,173 |
|
|
$ |
48,574 |
|
|
$ |
38,826 |
|
Adjustments: |
|
|
|
|
|
|
|
Depreciation and amortization of real estate assets |
|
58,144 |
|
|
|
59,136 |
|
|
|
175,212 |
|
|
|
175,305 |
|
(Gain) loss on disposal of property, net |
|
(53 |
) |
|
|
10 |
|
|
|
(1,070 |
) |
|
|
(4,151 |
) |
Adjustments related to unconsolidated joint ventures |
|
646 |
|
|
|
662 |
|
|
|
1,989 |
|
|
|
181 |
|
Nareit FFO attributable to
stockholders and OP unit holders |
$ |
72,466 |
|
|
$ |
71,981 |
|
|
$ |
224,705 |
|
|
$ |
210,161 |
|
Calculation of Core
FFO Attributable to Stockholders and OP Unit Holders |
|
|
|
|
|
|
|
Nareit FFO attributable to
stockholders and OP unit holders |
$ |
72,466 |
|
|
$ |
71,981 |
|
|
$ |
224,705 |
|
|
$ |
210,161 |
|
Adjustments: |
|
|
|
|
|
|
|
Depreciation and amortization of corporate assets |
|
562 |
|
|
|
877 |
|
|
|
1,659 |
|
|
|
2,703 |
|
Change in fair value of earn-out liability |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,809 |
|
Impairment of investment in third parties |
|
3,000 |
|
|
|
— |
|
|
|
3,000 |
|
|
|
— |
|
Transaction and acquisition expenses |
|
580 |
|
|
|
3,740 |
|
|
|
3,179 |
|
|
|
7,820 |
|
Loss (gain) on extinguishment or modification of debt and other,
net |
|
375 |
|
|
|
(4 |
) |
|
|
366 |
|
|
|
1,025 |
|
Amortization of unconsolidated joint venture basis differences |
|
4 |
|
|
|
1 |
|
|
|
12 |
|
|
|
220 |
|
Realized performance income(1) |
|
— |
|
|
|
— |
|
|
|
(75 |
) |
|
|
(2,742 |
) |
Core FFO attributable to
stockholders and OP unit holders |
$ |
76,987 |
|
|
$ |
76,595 |
|
|
$ |
232,846 |
|
|
$ |
220,996 |
|
|
|
|
|
|
|
|
|
Nareit FFO/Core FFO
Attributable to Stockholders and OP Unit Holders per Diluted
Share |
|
|
|
|
|
|
|
Weighted-average shares of common stock outstanding - diluted |
|
132,800 |
|
|
|
131,593 |
|
|
|
132,335 |
|
|
|
129,805 |
|
Nareit FFO attributable to stockholders and OP unit holders per
share - diluted |
$ |
0.55 |
|
|
$ |
0.55 |
|
|
$ |
1.70 |
|
|
$ |
1.62 |
|
Core FFO attributable to stockholders and OP unit holders per share
- diluted |
$ |
0.58 |
|
|
$ |
0.58 |
|
|
$ |
1.76 |
|
|
$ |
1.70 |
|
(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 Ended September
30, |
|
Nine Months Ended September
30, |
|
Year Ended December 31, |
|
|
2023 |
|
|
|
2022 |
|
|
2023 |
|
|
|
2022 |
|
|
|
2022 |
|
Calculation of
EBITDAre |
|
|
|
|
|
|
|
|
|
Net income |
$ |
13,729 |
|
|
$ |
12,173 |
|
$ |
48,574 |
|
|
$ |
38,826 |
|
|
$ |
54,529 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
58,706 |
|
|
|
60,013 |
|
|
176,871 |
|
|
|
178,008 |
|
|
|
236,224 |
|
Interest expense, net |
|
21,522 |
|
|
|
17,569 |
|
|
61,663 |
|
|
|
52,895 |
|
|
|
71,196 |
|
(Gain) loss on disposal of property, net |
|
(53 |
) |
|
|
10 |
|
|
(1,070 |
) |
|
|
(4,151 |
) |
|
|
(7,517 |
) |
Impairment of real estate assets |
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
322 |
|
Federal, state, and local tax expense |
|
120 |
|
|
|
179 |
|
|
357 |
|
|
|
373 |
|
|
|
806 |
|
Adjustments related to unconsolidated joint ventures |
|
918 |
|
|
|
927 |
|
|
2,802 |
|
|
|
1,061 |
|
|
|
1,987 |
|
EBITDAre |
$ |
94,942 |
|
|
$ |
90,871 |
|
$ |
289,197 |
|
|
$ |
267,012 |
|
|
$ |
357,547 |
|
Calculation of
Adjusted EBITDAre |
|
|
|
|
|
|
|
|
|
EBITDAre |
$ |
94,942 |
|
|
$ |
90,871 |
|
$ |
289,197 |
|
|
$ |
267,012 |
|
|
$ |
357,547 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
Impairment of investment in third parties |
|
3,000 |
|
|
|
— |
|
|
3,000 |
|
|
|
— |
|
|
|
— |
|
Change in fair value of earn-out liability |
|
— |
|
|
|
— |
|
|
— |
|
|
|
1,809 |
|
|
|
1,809 |
|
Transaction and acquisition expenses |
|
580 |
|
|
|
3,740 |
|
|
3,179 |
|
|
|
7,820 |
|
|
|
10,551 |
|
Amortization of unconsolidated joint venture basis differences |
|
4 |
|
|
|
1 |
|
|
12 |
|
|
|
220 |
|
|
|
220 |
|
Realized performance income(1) |
|
— |
|
|
|
— |
|
|
(75 |
) |
|
|
(2,742 |
) |
|
|
(2,742 |
) |
Adjusted EBITDAre |
$ |
98,526 |
|
|
$ |
94,612 |
|
$ |
295,313 |
|
|
$ |
274,119 |
|
|
$ |
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 September 30, 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 September 30, 2023 and
December 31, 2022 (in thousands):
|
September 30, 2023 |
|
December 31, 2022 |
Net debt: |
|
|
|
Total debt, excluding discounts, market adjustments, and deferred
financing expenses |
$ |
1,913,120 |
|
$ |
1,937,142 |
Less: Cash and cash equivalents |
|
4,075 |
|
|
5,740 |
Total net debt |
$ |
1,909,045 |
|
$ |
1,931,402 |
|
|
|
|
Enterprise value: |
|
|
|
Net debt |
$ |
1,909,045 |
|
$ |
1,931,402 |
Total equity market capitalization(1)(2) |
|
4,480,340 |
|
|
4,178,204 |
Total enterprise value |
$ |
6,389,385 |
|
$ |
6,109,606 |
(1) Total equity market capitalization is
calculated as diluted shares multiplied by the closing market price
per share, which includes 133.6 million and 131.2 million diluted
shares as of September 30, 2023 and December 31, 2022,
respectively, and the closing market price per share of $33.54 and
$31.84 as of September 30, 2023 and December 31, 2022,
respectively.
(2) Fully diluted shares include common stock
and OP units.
The following table presents the Company’s calculation of net
debt to Adjusted EBITDAre and net debt to total enterprise value as
of September 30, 2023 and December 31, 2022 (dollars in
thousands):
|
September 30, 2023 |
|
December 31, 2022 |
Net debt to Adjusted EBITDAre
- annualized: |
|
|
|
Net debt |
$ |
1,909,045 |
|
$ |
1,931,402 |
Adjusted EBITDAre - annualized(1) |
|
388,579 |
|
|
367,385 |
Net debt to Adjusted EBITDAre
- annualized |
4.9x |
|
5.3x |
|
|
|
|
Net debt to total enterprise
value: |
|
|
|
Net debt |
$ |
1,909,045 |
|
$ |
1,931,402 |
Total enterprise value |
|
6,389,385 |
|
|
6,109,606 |
Net debt to total enterprise
value |
|
29.9% |
|
|
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 2022 Annual Report on Form 10-K, filed with the SEC on
February 21, 2023, 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
Curt Siegmeyer, Director of Investor Relations (513)
338-2751csiegmeyer@phillipsedison.com
Phillips Edison (NASDAQ:PECO)
過去 株価チャート
から 4 2024 まで 5 2024
Phillips Edison (NASDAQ:PECO)
過去 株価チャート
から 5 2023 まで 5 2024