Phillips Edison & Company(PECO) - 2025 Q1 - Earnings Call Transcript

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, with 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%, and in-line new rent spreads remained strong 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 $450 million for the year, targeting an unlevered IRR of 9% [13][14] - PECO's strategy focuses on grocery-anchored and necessity-based formats, which have historically outperformed during economic uncertainty [14][15] Management's Comments on Operating Environment and Future Outlook - Management remains confident in the company's ability to deliver long-term growth despite macroeconomic uncertainties [15] - The company does not anticipate a recession but is prepared for potential impacts on discretionary spending [132][146] Other Important Information - The company has approximately$ 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][51] Question: What factors could lead to higher or lower FFO guidance? - Management indicated that improvements in capital markets could push FFO towards the higher end of guidance, while uncertainty may necessitate a conservative approach [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 with a long-term goal of 90% fixed rate [66] Question: Are there any signs of slowing rent payments from retailers? - Management reported a decline in bad debt year-over-year and noted consistent rent payment receipts across categories [92] Question: What is the company's approach to acquisitions in the current market? - The company remains focused on acquiring assets with a target unlevered IRR of 9% and is optimistic about the acquisition pipeline despite market volatility [99][100]