Summary of Phillips Edison & Company (PECO) Update - December 17, 2025 Company Overview - **Company**: Phillips Edison & Company (NasdaqGS: PECO) - **Industry**: Grocery-anchored neighborhood shopping centers Key Points and Arguments 1. **Growth Strategy**: PECO is positioned as a growth company, targeting 3-4% same-center NOI growth and mid- to high single-digit core FFO per share growth annually, emphasizing long-term value creation and cash flow stability [2][4][5] 2. **Market Position**: PECO is one of the largest owners and operators of grocery-anchored shopping centers, with a goal to increase enterprise value to over $10 billion [3] 3. **Financial Performance**: The company has increased its 2025 earnings guidance, projecting a 7% growth in NAREIT and 6.8% growth in core FFO per share [4] 4. **Competitive Advantages**: PECO's expertise in necessity-based retail provides stability and quality cash flows, with a high retention rate of 93% for tenants [3][8] 5. **Incremental Growth Initiatives**: PECO plans to expand its portfolio with everyday retail centers, targeting $700 million to $1 billion in this segment over the next five years, which could represent 7%-10% of its total portfolio [9][10] 6. **Investment in Development**: The company is investing approximately $50 million annually in ground-up development projects, with an increase to about $70 million in 2025 and 2026 due to specific projects [11][25] 7. **Acquisition Strategy**: PECO aims to acquire $400-$500 million in assets in 2026, focusing on grocery-anchored centers and leveraging its strong market position [12][51] 8. **Financial Health**: PECO maintains a strong liquidity position and investment-grade ratings, with a long-term leverage target of low to mid-5 times net debt to adjusted EBITDA [17][18] 9. **Macroeconomic Outlook**: The company does not anticipate a recession in 2026, citing resilient consumer behavior and strong demand for necessity-based retail [19][20] 10. **Interest Rate Impact**: PECO expects some headwinds from interest rates but believes recent declines will positively affect real estate values [21] Additional Important Insights 1. **Rent Growth**: PECO has significant pricing power, with new and renewal leases showing rent spreads of 2%-3% and strong demand from retailers [7][40] 2. **Portfolio Quality**: The company emphasizes maintaining a high-quality portfolio through strategic asset recycling, selling lower-performing assets to fund acquisitions with higher returns [16] 3. **Long-term Guidance**: PECO projects same-center NOI growth of 3%-4% annually, driven by rent growth and occupancy levels, without needing additional occupancy increases [24][28] 4. **Everyday Retail Expansion**: The everyday retail segment is seen as a natural extension of PECO's core business, with high-quality demographics and strong initial returns [46][47] 5. **Market Dynamics**: The company is adapting to market conditions, including potential impacts from tariffs, but remains optimistic about its necessity-based retail focus [49][50] This summary encapsulates the key points from the PECO update, highlighting the company's growth strategies, financial performance, and market outlook.

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Financial Data and Key Metrics Changes - Whitestone REIT achieved a 94.2% occupancy rate, an increase of 30 basis points from Q2 2025, indicating strong leasing performance [5][34] - The company reported a 4.8% growth in same store net operating income (NOI) for the quarter, driven by increases in shop space leases across Texas and Arizona [5][12] - Average base rent rose to $25.59, reflecting an 8.2% increase year-over-year and a 26% increase compared to four years ago, translating to a 5.9% compound annual growth rate [7] - Core FFO per share was reported at $0.26, with expectations for a slight increase in Q4 due to new lease commencements [7][20] - Revenue for the quarter increased by 6%, with improved quality of revenue evidenced by a reduction in uncollectible accounts [22] Business Line Data and Key Metrics Changes - The company signed $29.1 million in total lease value, with new leases showing spreads of 22.5% and renewals at 18.6%, resulting in a combined straight-line leasing spread of 19.3% [12] - Foot traffic across the portfolio increased by 4% compared to Q3 2024, indicating healthy consumer engagement [12] Market Data and Key Metrics Changes - The markets in Texas and Arizona continue to show significant strength, supported by business-friendly environments and strong demographic trends [11] - The Houston metro area has added nearly 2 million people over the last 15 years, while the Phoenix metro area has added 1 million residents, contributing to demand for retail space [17] Company Strategy and Development Direction - The company aims to deliver consistent earnings growth and achieve a long-term core FFO per share growth target of 5% to 7% [6][9] - Whitestone REIT is focused on asset recycling, having disposed of one property this quarter and planning further acquisitions and dispositions to enhance portfolio value [10][47] - The company is actively redeveloping properties, with projects expected to contribute to same store NOI growth in 2026 [6][14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to maintain strong leasing demand and occupancy rates, with no signs of weakening in leasing spreads [24][30] - The company is optimistic about the fourth quarter, traditionally its strongest leasing period, and anticipates a strong finish to the year [5][35] - Management highlighted the importance of understanding consumer behavior and adapting to changes in the market to sustain growth [15][18] Other Important Information - The company amended and extended its credit facility, improving its valuation cap rate to 6.75% and enhancing its financial flexibility [20][21] - The dividend is well-covered with a healthy payout ratio, and the company expects to grow the dividend in line with earnings growth [22] Q&A Session Summary Question: What are the expectations for rent expirations in 2026? - Management indicated that there is strong leasing demand and no unique factors affecting next year's rental rates, expecting similar leasing spreads as in recent quarters [23][24] Question: Can you provide details on the change in occupancy? - Management explained that the decrease in occupancy in smaller centers is due to taking back space to attract higher revenue and stronger quality tenants [30][31] Question: Any updates on the Pillarstone JV? - Management confirmed nearing the end of the collection phase, with a settlement agreement filed with the court expected to be approved, leading to a distribution of proceeds in December [36][37] Question: What are the assumptions driving leverage lower in Q4? - Management noted improvements in operations and expected strong performance in Q4, which typically sees sales break points hit [44][46] Question: What is the strategy for site developments? - Management stated that decisions on whether to hold or sell pad sites are made on a case-by-case basis, focusing on maximizing shareholder value [91][92]

Financial Data and Key Metrics Changes - Same center NOI increased by 4.2% and core FFO per share increased by 8.5% year-over-year [5][26] - NAREIT FFO for the second quarter increased to $86 million or $0.62 per diluted share, reflecting year-over-year per share growth of 8.8% [26] - Core FFO for the second quarter increased to $88.2 million or $0.64 per diluted share, reflecting year-over-year per share growth of 8.5% [26] - The company raised its full-year 2025 earnings guidance for same center NOI, core FFO per share, and NAREIT FFO per share [5][29] Business Line Data and Key Metrics Changes - The company reported strong leasing momentum with comparable renewal rent spreads of 19.1% and comparable new leasing rent spreads of 34.6% for the second quarter [18][19] - Portfolio occupancy remained high at 97.4% leased, with anchor occupancy at 98.9% [19][20] - Bad debt increased from a year ago but remained within guidance range, indicating strong retailer demand [21] Market Data and Key Metrics Changes - Approximately 70% of the company's ABR comes from necessity-based goods and services, providing predictable cash flows [10] - The average population in the three-mile trade area is 68,000 with a median household income of $92,000, which is 15% above the US median [22] - The company has limited exposure to distressed retailers, with the top 10 neighbors on the watch list representing about 2% of ABR [23] Company Strategy and Development Direction - The company focuses on a grocery-anchored portfolio and necessity-based neighbor mix to drive growth and stability [6][17] - The acquisition strategy emphasizes disciplined buying and targeting high-quality centers below replacement costs [14][30] - The company aims for mid to high single-digit core FFO per share growth annually on a long-term basis [9][31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the consumer and the portfolio's ability to outperform despite potential tariff impacts [15][72] - The company anticipates continued strong demand from retailers, particularly in grocery-anchored centers [12][99] - Management noted that while consumer sentiment appears negative, sales continue to grow, indicating strong foot traffic at their centers [99][100] Other Important Information - The company has approximately $972 million of liquidity to support acquisition plans and no meaningful debt maturities until 2027 [27] - The weighted average interest rate on debt is 4.4%, with 95% of total debt being fixed rate [28] - The company completed a bond offering of 5.25% senior notes due in 2032 to replenish liquidity [28] Q&A Session Summary Question: What has allowed the company to win transactions in a competitive market? - The company has been active in multiple markets, acquiring properties one at a time, which has contributed to strong acquisition volume [33][34] Question: When will the headwinds from tenant turnover be resolved? - The company has backfilled about 70% of vacancies and expects continued strong leasing demand, with rent coming online in 2026 [36][39] Question: What is the outlook for same store NOI growth in the second half? - The company projects consistent growth for the remainder of the year, with expectations for sequential improvement from Q2 [44][46] Question: How is the company managing variable rate debt? - The company maintains a target of 90% fixed rate debt and is cautious about increasing variable rate exposure [58][61] Question: What is the impact of tariffs on the company's portfolio? - The company has limited exposure to tariffs, with most tenants able to pass costs onto suppliers, resulting in minimal impact on leasing [72] Question: Are there any grocers expanding in the company's markets? - Grocers such as Sprouts, Kroger, Publix, Whole Foods, and Walmart are actively expanding, with Kroger's store closures being managed effectively [107][108]