Phillips Edison & Company(US:PECO)2022-02-11 23:55Financial Data and Key Metrics Changes - Fourth quarter 2021 NAREIT FFO increased 7.3% to $49.4 million or $0.39 per diluted share, while core FFO increased 24.5% to $60.8 million or $0.47 per diluted share [31][34] - Same-center NOI improved to $88.8 million, up 15.2% from a year ago, driven by a 2.4% increase in average base rent per square foot and stronger collections [37][41] - As of December 31, 2021, net debt to adjusted EBITDAre was 5.6x, improved from 7.3x at December 31, 2020 [38] Business Line Data and Key Metrics Changes - Leased occupancy reached an all-time high of 96.3%, with anchor leased occupancy at 98.1% and in-line leased occupancy at 92.7% [21][22] - Comparable new lease rent spreads were 18.3%, and comparable renewal lease rent spreads were 7.8% [23][24] - Retention rate for the quarter was 86%, slightly below the full year retention rate of 88% [25] Market Data and Key Metrics Changes - The operating environment remains strong, with rent collections at pre-pandemic levels [17] - Demand for retail space in well-located small format centers continues to be high, with significant interest from national retailers [24] Company Strategy and Development Direction - The company focuses on owning centers with the number one or number two grocer in the market, emphasizing necessity-based goods and services [13][10] - Plans to execute $1 billion of acquisitions net of dispositions over three years, with a goal of acquiring approximately 15 assets per year [14][47] - The company aims to invest approximately $45 million to $50 million in ground-up and redevelopment opportunities in 2022 [29] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the operating environment and the ability to achieve internal and external growth plans [19][41] - The company anticipates same-center NOI growth guidance of 3% to 4% for 2022, consistent with historical growth [41][98] - Management is closely monitoring inflation and its potential impact on consumer behavior, noting that necessity-based retailers are performing well [73][75] Other Important Information - The company has a healthy acquisition pipeline, having acquired $350 million of assets since its IPO and guiding to acquire between $300 million and $400 million in 2022 [44][46] - The company disposed of 11 wholly-owned centers and two outparcels for $91.7 million since the IPO [48] Q&A Session Summary Question: What differentiates the company's portfolio compared to peers? - Management believes the format of grocery-anchored centers with necessity-based goods has performed well during the pandemic and will continue to do so [52][53] Question: What are the expectations for occupancy increases in 2022? - Management expects in-line occupancy to reach 95% over the next two years, with a meaningful component of that increase likely occurring in 2022 [60][61] Question: What are the trends in development and redevelopment projects? - Management noted that while there are some delays in permitting and cost increases, they remain confident in the returns from their redevelopment projects [62][63] Question: How is the company addressing the competitive transaction market? - Management acknowledged increased competition but remains optimistic about finding assets that meet their investment criteria [66][67] Question: What are the expectations for store closures in 2022? - Management is optimistic about store closures remaining low, with many retailers stabilizing [68][69] Question: How is inflation affecting consumer behavior? - Management reports strong customer traffic and sales in necessity-based retail, indicating resilience against inflationary pressures [73][75] Question: What is the company's approach to leverage and acquisitions? - Management remains committed to acquiring assets that meet their unlevered IRR target while maintaining an investment-grade balance sheet [77][78] Question: What are the expectations for leasing spreads moving forward? - Management has not assumed higher leasing spreads in their guidance but sees potential for improvement given the strong operating environment [100][101]