Phillips Edison & Company(PECO) - 2024 Q4 - Annual Results

Introductory Notes Company Overview and Disclosures PECO, a major owner of grocery-anchored shopping centers, provides cautionary notes on forward-looking statements and non-GAAP financial measures - PECO is one of the largest US owners and operators of high-quality, grocery-anchored neighborhood shopping centers[5] - The report contains forward-looking statements concerning plans, strategies, and future results, which are subject to significant risks and uncertainties such as economic changes, tenant financial stability, and interest rate fluctuations[6] - The document utilizes non-GAAP financial measures, with reconciliations to GAAP measures provided on pages 16-20 and definitions in the Glossary[8] - The company may present consolidated financial information inclusive of its prorated portion from unconsolidated joint ventures, noting the limitations of this analytical tool[10] Financial Results Earnings Release Overview PECO reported strong 2024 growth and anticipates accelerated Core FFO per share growth in 2025 through internal growth and expanded acquisitions - Management highlights strong 2024 growth and anticipates accelerated Core FFO per share growth in 2025, driven by internal growth and an expanded acquisition strategy[15] Full Year 2024 Key Performance Highlights | Metric | FY 2024 Result | YoY Growth | | :--- | :--- | :--- | | Nareit FFO per share | $2.37 | 5.3% | | Core FFO per share | $2.43 | 3.8% | | Same-Center NOI | $430.4M | 3.8% | | Leased Portfolio Occupancy | 97.7% | +30 bps | - The company acquired 14 shopping centers and four land parcels for a total of $305.7 million during the full year 2024[16] - At year-end, 93.0% of the company's total debt was fixed-rate, and the revolving credit facility was extended to 2029 and upsized to $1.0 billion[16] Financial Performance Solid financial growth in Q4 and FY2024, with increases in net income, Nareit FFO, Core FFO, and Same-Center NOI Q4 2024 Financial Performance (vs. Q4 2023) | Metric | Q4 2024 | Q4 2023 | Change | | :--- | :--- | :--- | :--- | | Net Income Attributable to Stockholders | $18.1M | $13.5M | +34.0% | | Nareit FFO | $83.8M | $74.8M | +12.0% | | Core FFO | $85.8M | $77.9M | +10.2% | | Same-Center NOI | $110.4M | $103.7M | +6.5% | Full Year 2024 Financial Performance (vs. FY 2023) | Metric | FY 2024 | FY 2023 | Change | | :--- | :--- | :--- | :--- | | Net Income Attributable to Stockholders | $62.7M | $56.8M | +10.4% | | Nareit FFO | $323.8M | $299.5M | +8.1% | | Core FFO | $331.8M | $310.7M | +6.8% | | Same-Center NOI | $430.4M | $414.6M | +3.8% | Portfolio and Leasing Activity Portfolio expanded to 294 properties with high occupancy and strong comparable rent spreads, indicating significant pricing power - As of December 31, 2024, the wholly-owned portfolio consisted of 294 properties totaling 33.3 million square feet, up from 281 properties and 32.2 million square feet a year prior[22] - Portfolio occupancy remained strong with leased portfolio occupancy at 97.7% and same-center leased portfolio occupancy at 97.8%; leased inline occupancy increased to 95.0% from 94.7% YoY[23][24] Comparable Rent Spreads | Period | New Leases % | Renewal Leases % | Combined % | | :--- | :--- | :--- | :--- | | Q4 2024 | 30.2% | 20.8% | 23.5% | | FY 2024 | 35.7% | 19.4% | 23.7% | Transaction Activity & Balance Sheet Active acquisitions totaling $305.7 million for FY2024, supported by a strong balance sheet with $747.6 million liquidity and 93.0% fixed-rate debt - In Q4 2024, PECO acquired five shopping centers for $94.6 million; for the full year, acquisitions totaled fourteen shopping centers and four land parcels for $305.7 million[28][29] - Subsequent to year-end, the company sold a shopping center in Albuquerque, NM for $24.9 million, providing $17.4 million in secured financing for the sale[30] - As of December 31, 2024, total liquidity was $747.6 million, including $738.9 million available on its revolving credit facility[31] Key Balance Sheet Metrics (as of Dec 31, 2024) | Metric | Value | YoY Change | | :--- | :--- | :--- | | Net Debt to Annualized Adj. EBITDAre | 5.0x | from 5.1x | | Weighted-Average Interest Rate | 4.3% | N/A | | Weighted-Average Maturity (inc. extensions) | 5.8 years | N/A | | Fixed-Rate Debt Percentage | 93.0% | N/A | 2025 Guidance PECO projects continued growth in 2025, with Core FFO per share guidance of $2.52-$2.59 and Same-Center NOI growth of 3.00%-3.50% 2025 Full Year Guidance | Metric | 2025 Guidance Range | | :--- | :--- | | Net income per share | $0.54 - $0.59 | | Nareit FFO per share | $2.47 - $2.54 | | Core FFO per share | $2.52 - $2.59 | | Same-Center NOI growth | 3.00% - 3.50% | | Gross Acquisitions | $350M - $450M | - The midpoint of the 2025 Nareit FFO guidance ($2.505) represents 5.7% YoY growth, while the midpoint of Core FFO guidance ($2.555) represents 5.1% YoY growth over 2024 actuals[16][36] Financial Summary Consolidated Financial Statements Consolidated financial statements show increased total assets to $5.05 billion and total liabilities to $2.41 billion, with revenue and net income growth in FY2024 Consolidated Balance Sheet Highlights (as of Dec 31) | Account | 2024 ($M) | 2023 ($M) | | :--- | :--- | :--- | | Net Investment in Real Estate Assets | $4,781.5 | $4,616.1 | | Total Assets | $5,046.2 | $4,865.7 | | Debt Obligations, net | $2,109.5 | $1,969.3 | | Total Liabilities | $2,412.2 | $2,212.3 | | Total Stockholders' Equity | $2,319.9 | $2,310.3 | Consolidated Statement of Operations Highlights (Year Ended Dec 31) | Account | 2024 ($M) | 2023 ($M) | | :--- | :--- | :--- | | Total Revenues | $661.4 | $610.1 | | Total Operating Expenses | $488.9 | $455.9 | | Net Income | $69.7 | $63.8 | | Net Income Attributable to Stockholders | $62.7 | $56.8 | Non-GAAP Reconciliations Detailed reconciliations from GAAP Net Income to non-GAAP metrics, including Nareit FFO, Core FFO, and Adjusted EBITDAre for FY2024 Key Non-GAAP Metrics (Year Ended Dec 31, 2024) | Metric | FY 2024 ($M) | FY 2023 ($M) | YoY Growth | | :--- | :--- | :--- | :--- | | Nareit FFO | $323.8 | $299.5 | +8.1% | | Core FFO | $331.8 | $310.7 | +6.8% | | Adjusted FFO | $273.2 | $249.3 | +9.6% | EBITDAre Reconciliation (Year Ended Dec 31, 2024) | Metric | FY 2024 ($M) | FY 2023 ($M) | YoY Growth | | :--- | :--- | :--- | :--- | | EBITDAre | $425.6 | $387.5 | +9.8% | | Adjusted EBITDAre | $430.6 | $396.1 | +8.7% | - Same-Center NOI increased by 6.5% in Q4 2024 and 3.8% for the full year 2024, driven by a 6.2% and 3.7% increase in total same-center revenues for the respective periods[54] Capital Expenditures and Projects Capital expenditures for real estate totaled $86.1 million in 2024, with active development projects estimated at $41.3 million and yields of 9%-12% Capital Expenditures for Real Estate (Year Ended Dec 31) | Category | 2024 ($M) | 2023 ($M) | | :--- | :--- | :--- | | Capital improvements | $21.8 | $22.8 | | Tenant improvements | $25.2 | $26.7 | | Redevelopment and development | $39.1 | $38.2 | | Total | $86.1 | $87.6 | - The company has active ground-up expansion and redevelopment projects with total estimated costs of $18.2 million and $23.2 million, respectively[66][67] - The total active project pipeline has an estimated cost of $41.3 million, with $25.4 million incurred to date, and a weighted-average estimated project yield of 9%-12%[67] Capitalization and Debt PECO's total enterprise value was $7.3 billion at year-end 2024, maintaining a conservative leverage profile with 91.7% fixed-rate debt Financial Leverage Ratios (as of Dec 31) | Ratio | 2024 | 2023 | | :--- | :--- | :--- | | Net Debt to Adjusted EBITDAre - annualized | 5.0x | 5.1x | | Net Debt to Total Enterprise Value | 29.5% | 28.8% | - Total gross debt outstanding was $2.14 billion, comprised of 22% secured debt and 78% unsecured debt[70] - The company's debt portfolio is primarily fixed-rate (91.7%) with a weighted-average interest rate of 4.3% and a weighted-average maturity of 5.8 years, including extension options[72] - PECO was in compliance with all debt covenants for its unsecured credit facility and senior unsecured notes as of December 31, 2024[73] Transactional Summary Acquisition and Disposition Summary PECO acquired 18 properties for $305.7 million in 2024 at a 7.0% weighted-average cap rate, with no dispositions - During 2024, the company acquired 18 properties, including land parcels, for a total of $305.7 million[77] - The weighted-average cap rate for the 2024 acquisitions was 7.0%, excluding non-income producing assets[78] - There were no property dispositions during the twelve months ended December 31, 2024[78] Portfolio Summary Portfolio Overview PECO's portfolio includes 294 shopping centers across 31 states, with 33.3 million square feet GLA, high occupancy, and a focus on necessity-based retail - The portfolio consists of 294 shopping centers with 33.3 million square feet of GLA[81] - Necessity-based goods and services tenants account for 69.4% of total ABR, with grocery tenants alone contributing 29.9%[81] - 84.0% of ABR comes from centers with grocery anchors that rank 1 or 2 by sales in their respective markets[81] Portfolio Occupancy and Lease Term | Metric | Total Portfolio | Anchor Spaces | Inline Spaces | | :--- | :--- | :--- | :--- | | Leased Occupancy | 97.7% | 99.1% | 95.0% | | Avg. Remaining Lease Term (Yrs) | 4.4 | 4.4 (Grocery) | 4.0 | Neighbor (Tenant) Analysis Tenant base is diversified and dominated by necessity-based retailers, with grocery as the largest category and top tenants providing a stable income stream - The top 5 neighbor categories by ABR are Grocery (29.9%), Quick Service Restaurants (11.3%), Medical (6.6%), Beauty & Hair Care (5.3%), and Banks/Insurance/Government (3.7%)[82] - The top 3 tenants by ABR are Kroger (5.7%), Publix (5.2%), and Albertsons (3.8%)[86] - National tenants represent 70% of the portfolio's ABR, while regional and local tenants account for 16% and 14%, respectively[87][88] Occupancy and Leasing Metrics High and stable occupancy at 97.7% in 2024, with strong comparable rent spreads and well-laddered lease expirations - Total leased occupancy was 97.7% as of Q4 2024, a slight increase from 97.4% in Q4 2023; same-center leased occupancy remained stable at 97.8%[85] Q4 2024 Comparable Rent Spreads | Lease Type | Rent Spread % | | :--- | :--- | | New Leases | 30.2% | | Renewal Leases | 20.8% | | Option Leases | 5.3% | - Lease expirations are manageable, with 8.7% of GLA (8.2% of ABR) expiring in 2025 and 13.7% of GLA (14.0% of ABR) expiring in 2026[92] Geographic Diversification and Property List Portfolio is geographically diversified across 31 states, with top concentrations in Florida, California, and Texas, and a detailed property list provided - The portfolio has significant concentration in Florida (12.2% of ABR), California (10.6%), Texas (10.1%), and Georgia (8.7%)[89] - The report provides a comprehensive list of 316 properties, including wholly-owned and joint venture assets, with details on GLA, occupancy, ABR, and anchor tenants for each[94][109] Additional Disclosures Earnings Guidance and NAV Components Reiterates 2025 earnings guidance with FFO reconciliations and provides key components for Net Asset Value (NAV) calculation as of Q4 2024 2025 Guidance Reconciliation (per share) | Metric | Low End | High End | | :--- | :--- | :--- | | Net income | $0.54 | $0.59 | | Nareit FFO | $2.47 | $2.54 | | Core FFO | $2.52 | $2.59 | - Key data points for NAV calculation as of Q4 2024 include: NOI for real estate investments ($115.4M), total debt obligations ($2.14B), and total common shares and OP units outstanding (138.2M)[114] Glossary of Terms Provides definitions for key financial and operational terms, including non-GAAP measures like FFO, EBITDAre, NOI, and portfolio metrics - Defines Nareit FFO as net income excluding gains/losses from property sales and real estate depreciation[116] - Defines Core FFO by adjusting Nareit FFO for items like corporate asset depreciation, transaction costs, and other non-recurring items to provide a measure of sustainable operating performance[116] - Defines Same-Center as properties owned and operational for the entirety of all comparable reporting periods (since January 1, 2023)[116] Investor Information Analyst Coverage and Contacts Lists investment banks and analysts providing research coverage on PECO, along with contact information for Investor Relations - The company is covered by analysts from major firms including BofA Securities, Goldman Sachs, JPMorgan, Morgan Stanley, and Wells Fargo[120] - Contact information for the Head of Investor Relations, Kimberly Green, and the Manager of Investor Relations, Hannah Harper, is provided[121]