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.

Financial Data and Key Metrics Changes - Third quarter NAIRI FFO increased to $89.3 million, or $0.64 per diluted share, reflecting year-over-year per share growth of 6.7% [12] - Third quarter Core FFO increased to $90.6 million, or $0.65 per diluted share, reflecting year-over-year per share growth of 4.8% [12] - The company has approximately $977 million of liquidity to support acquisition plans, with a net debt to trailing 12-month annualized adjusted EBITDA of 5.3 times as of September 30, 2025 [12][13] Business Line Data and Key Metrics Changes - Neighbor retention remained high at 94% in the third quarter, with record-high comparable renewal rent spreads of 23.2% [9] - Comparable new leasing rent spreads for the quarter were strong at 24.5%, with average annual rent bumps of 2.6% [9] - Portfolio occupancy remained high at 97.6% leased, with anchor occupancy at 99.2% and same-store inline occupancy at 95% [10] Market Data and Key Metrics Changes - The market for grocery-anchored shopping centers remains competitive, with the company being selective in acquisitions due to economic stability concerns [5][45] - The company has acquired 18 assets this year for $376 million, with plans to sell $50 million to $100 million of assets in 2025 [15][61] Company Strategy and Development Direction - The company is focused on recycling lower IRR properties into higher IRR properties to drive strong earnings growth [16] - The development and redevelopment pipeline includes 22 projects with an estimated total investment of $75.9 million, targeting average estimated yields between 9% and 12% [11] - The company plans to share more details on its long-term growth strategy during a business update on December 17 [6][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the grocery-anchored portfolio, noting that 70% of annual base rent comes from necessity-based goods and services, providing predictable cash flows [3][4] - The company expects same-center NOI growth between 3% and 4% annually on a long-term basis, with a forecast for the fourth quarter of 2025 reflecting same-center NOI growth between 1% and 2% [13][14] - Management remains optimistic about the resilience of grocers and their ability to pass on cost increases to consumers [53] Other Important Information - The company has a healthy pipeline for development and redevelopment, including a grocery-anchored retail development in Ocala, Florida [8] - The company is actively expanding its joint ventures, with a recent acquisition of a grocery-anchored shopping center in Columbia, South Carolina [7] Q&A Session Summary Question: Can you share more on acquiring development land at this point in the cycle? - Management highlighted a partnership with a national grocer interested in the growth aspects of Southern Ocala, with 10,000 new homes expected in the next five years [19][20] Question: Can you provide more detail on the current acquisition pipeline? - Management indicated they are comfortable being at the bottom end of their acquisition guidance range, with $376 million in acquisitions year-to-date and plans for more before year-end [21][22] Question: What is the upper level on leverage and how do you think about it as a funding source? - Management aims to maintain net debt to EBITDA at 5.5 times or below, with a willingness to adjust if clear opportunities arise [26][27] Question: What is your view on grocery-anchored cap rates? - Management noted that the supply-demand dynamic for grocery-anchored properties is stabilized, with no major compression in cap rates expected [78] Question: How do you think about funding your acquisition pipeline for next year? - Management emphasized maintaining a strong balance sheet and using a mix of free cash flow and dispositions to fund acquisitions [85]