Phillips Edison & Company(US:PECO)2026-02-06 18:00Financial Data and Key Metrics Changes - The company reported Nareit FFO per share growth of 7.2% and core FFO per share growth of 7% for 2025, with same-center NOI growth of 3.8% [3][11] - For 2026, guidance indicates mid-single digit growth rates for Nareit FFO and core FFO per share [3][12] - Fourth quarter Nareit FFO increased to $88.8 million or $0.64 per diluted share, while Core FFO increased to $91.1 million or $0.66 per diluted share [11] Business Line Data and Key Metrics Changes - The core business remains focused on grocery-anchored shopping centers, with a strong operating platform driving rent and NOI growth [5] - The company executed 1,026 leases totaling approximately 6 million square feet in 2025, with portfolio occupancy ending the year at 97.3% leased [7][9] - Comparable renewal rent spreads were 20% in Q4, and new leasing rent spreads were strong at 34.3% [8] Market Data and Key Metrics Changes - The company noted high demand for necessity-based retail with no signs of slowing, contributing to strong leasing activity [6] - The portfolio retention rate remained high at 93% at year-end, indicating strong tenant stability [8] - The company expects bad debt in 2026 to be in line with 2025, which was approximately 78 basis points of revenue [9] Company Strategy and Development Direction - The company aims to deliver gross acquisitions guidance of $400-$500 million in 2026, focusing on grocery-anchored opportunities and under-managed retail centers [4][10] - The company is committed to maintaining a disciplined acquisition strategy with targeted unlevered IRR of 9% for grocery-anchored acquisitions and above 10% for everyday retail centers [4][10] - Development and redevelopment projects are a key growth driver, with 20 projects under active construction and an estimated investment of $70 million [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the consumer and the strength of the grocery-anchored portfolio despite market uncertainties [3][12] - The company anticipates continued solid earnings growth, projecting net income guidance for 2026 in the range of $0.74-$0.77 per share [12][14] - Management believes that the company can consistently deliver 3%-4% same-center NOI growth and achieve mid to high single-digit core FFO per share growth on a long-term basis [14] Other Important Information - The company has approximately $925 million of liquidity to support acquisition plans as of December 31, 2025 [11] - The company sold approximately $145 million of assets in 2025 and plans to sell between $100 and $200 million in 2026 [13] - The company is focused on maintaining a high-quality portfolio while improving long-term growth profiles through strategic dispositions [14] Q&A Session Summary Question: Expectations for acquisition volume and competition for grocery-anchored assets - Management noted increased competition but also a high level of product on the market, maintaining confidence in reaching acquisition targets [16][17] Question: Update on the Ocala development parcel and other strategic land acquisitions - Management highlighted the growth in the Ocala market and the potential for strong returns on the project, with ongoing discussions for larger grocery-scale developments [20][21] Question: Insights on portfolio occupancy and leverage in renewal negotiations - Management indicated that high occupancy levels provide leverage in negotiations, with expectations for continued demand and potential for further increases in inline occupancy [24][25] Question: Capital deployment strategies beyond acquisitions - Management discussed the potential for ground-up development and share buybacks, emphasizing a focus on acquisitions and dispositions to manage capital effectively [35][38] Question: Impact of Amazon's store closures on grocery demand - Management acknowledged Amazon's challenges in brick-and-mortar retail but emphasized the strength of traditional grocers in the market [40][41] Question: Discussion on bad debt and expectations for 2026 - Management confirmed that bad debt levels are consistent with previous expectations, with no significant concerns noted [47][49] Question: Credit rating and cost of debt considerations - Management believes they are an underrated credit and is focused on increasing scale to improve credit ratings and reduce borrowing costs [52][54] Question: Insights on disposition strategy and market conditions - Management outlined a strategy focused on trading out stabilized assets for higher-return opportunities, with expectations for continued strong pricing in the disposition market [63][64]