Summary of Phillips Edison & Company (PECO) 2025 Conference Call Company Overview - **Company**: Phillips Edison & Company (PECO) - **Industry**: Real Estate Investment Trusts (REITs), specifically focused on necessity-based retail properties Key Points and Arguments Market Environment - The market has experienced significant volatility, particularly influenced by tariff updates [3][4] - PECO emphasizes a long-term business approach, focusing on stability rather than short-term fluctuations [5][6] Portfolio and Business Strategy - PECO operates in the necessity-based retail sector, which is less volatile compared to discretionary retail [6][7] - The company has a strong position due to its focus on essential services, such as grocery stores and health and beauty retailers [6][14] - PECO's strategy includes maintaining relationships with top grocers to drive foot traffic and support tenant success [14][20] Retailer Sentiment and Demand - At the recent ICSC conference, 85% of PECO's retailers reported low to minimal impact from tariffs, leading to a generally positive outlook [11][12] - The company had over 400 meetings at ICSC, indicating strong engagement with retailers and a positive sentiment towards expansion [9][10] Leasing Environment - New leasing spreads were reported at 28.1%, with renewal spreads at 20% and retention rates around 90% [16][17] - The occupancy rate is at its highest level, driven by strong demand and a lack of new construction in the sector [20][21] - PECO anticipates continued growth in occupancy and leasing activity, with a strong pipeline for the remainder of the year [17][22] Financial Metrics - Foot traffic in April increased by 6% year-over-year, indicating strong consumer engagement [28] - Renewal spreads are among the highest in the industry, with potential for further growth in rental rates [29][31] Challenges and Opportunities - PECO has limited exposure to larger box retailers, focusing instead on necessity-based retail [33][34] - The company is actively managing its portfolio to address potential headwinds from specific retailers like Party City and Big Lots, with plans for replacement and reopening [32][35] Acquisition Strategy - PECO aims for $350 million to $450 million in acquisitions, targeting properties with a 9% unlevered IRR [51][53] - The company has already closed on approximately $267 million in acquisitions this year, with a focus on grocery-anchored projects [53][54] Redevelopment Initiatives - PECO invests $40 million to $50 million annually in redevelopment, focusing on smaller buildings in existing shopping centers [60][61] - The company has a strong partnership with Publix for store rebuilds, enhancing its portfolio's value [62] Financial Health and Future Outlook - PECO maintains a strong balance sheet and flexibility in accessing debt and equity markets [57][58] - The company is optimistic about achieving 3% to 4% same-center NOI growth in the coming years [55] Conclusion - PECO is well-positioned to navigate market uncertainties due to its focus on necessity-based retail, strong tenant relationships, and strategic acquisition and redevelopment plans [65][66]

Financial Data and Key Metrics Changes - Same-center NOI increased by 3.9% in Q1 2025 [7][35] - Nareit FFO rose to $89 million or $0.64 per diluted share, reflecting year-over-year share growth of 8.5% [33] - Core FFO increased to $90.8 million or $0.65 per diluted share, showing year-over-year per share growth of 8.3% [33] Business Line Data and Key Metrics Changes - Comparable renewal rent spreads were 20.8%, with in-line renewal rent spreads reaching a record high of 21.7% [19] - Comparable new leasing rent spreads for Q1 were 28.1%, with in-line new rent spreads at 27.5% [19] - Portfolio occupancy ended the quarter at 97.1% leased, with anchor occupancy at 98.4% [21] Market Data and Key Metrics Changes - 71% of the company's ABR comes from necessity-based goods and services, providing insulation from potential tariff disruptions [10] - The average population in PECO's 3-mile trade area is 68,000, with a median household income of $92,000, which is 12% higher than the U.S. median [24] Company Strategy and Development Direction - The company aims for gross acquisitions in the range of $350 million to $450 million for the year, targeting an unlevered IRR of 9% [13][14] - PECO's strategy focuses on grocery-anchored and necessity-based formats, which have historically outperformed during economic uncertainty [14][15] Management's Comments on Operating Environment and Future Outlook - Management remains confident in the current environment, citing strong cash flows and retailer demand [15][39] - The company does not anticipate a recession but is prepared for potential economic challenges [132][146] Other Important Information - The company has approximately $760 million of liquidity to support its acquisition plans and no meaningful debt maturity until 2027 [35] - 86% of PECO's total debt is fixed rate, aligning with the company's target of 90% [37] Q&A Session Summary Question: Can you provide insights on leasing seasonality and expectations for May ICSC? - Management noted that while there is typical first-quarter seasonality, leasing activity remains strong with more leases out for signature than last year [50][52] Question: What factors could lead to higher or lower FFO guidance? - Management indicated that improvements in capital markets could push FFO to the higher end of the range, while uncertainty may lead to a conservative outlook [58] Question: How is the company managing variable rate exposure? - The company is comfortable with its current variable rate exposure and plans to maintain a fixed balance sheet [66] Question: Are there any changes in tenant demand or bankruptcy-related activity? - Management reported no significant changes in tenant demand and noted strong interest from retailers despite some bankruptcy activity in the market [110][128] Question: What is the company's approach to acquisitions in the current market? - The company remains focused on acquiring high-quality assets with a target unlevered IRR of over 9%, despite tighter initial investment spreads [99][100]