Phillips Edison & Co. Inc.

10/24/2025 | Press release | Distributed by Public on 10/24/2025 14:14

Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our accompanying consolidated financial statements and notes thereto and the more detailed information contained in our 2024 Annual Report on Form 10-K, filed with the SEC on February 11, 2025. All references to "Notes" throughout this document refer to the footnotes to the consolidated financial statements in "Item 1. Financial Statements". See also "Cautionary Note Regarding Forward-Looking Statements" below.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Quarterly Report on Form 10-Q of Phillips Edison & Company, Inc. ("we," the "Company," "our," or "us") other than historical facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Private Securities Litigation Reform Act of 1995 (collectively with the Securities Act and the Exchange Act, the "Acts"). These forward-looking statements are based on current expectations, estimates, and projections about the industry and markets in which we operate, and beliefs of, and assumptions made by, management of our company and involve uncertainties that could significantly affect our financial results. We intend for all such forward-looking statements to be covered by the applicable safe harbor provisions for forward-looking statements contained in the Acts. Such forward-looking statements generally can be identified by the use of forward-looking terminology such as "may," "will," "expect," "intend," "anticipate," "estimate," "believe," "continue," "seek," "objective," "goal," "strategy," "plan," "focus," "priority," "should," "could," "potential," "possible," "look forward," "optimistic" or other similar words. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this report is filed with the SEC. Such statements include, but are not limited to: (a) statements about our plans, strategies, initiatives, and prospects; (b) statements about our underwritten incremental yields; and (c) statements about our future results of operations, capital expenditures, and liquidity. Such statements are subject to known and unknown risks and uncertainties, which could cause actual results to differ materially from those projected or anticipated, including, without limitation: (i) changes in national, regional, or local economic climates; (ii) local market conditions, including an oversupply of space in, or a reduction in demand for, properties similar to those in our portfolio; (iii) vacancies, changes in market rental rates, and the need to periodically repair, renovate, and re-let space; (iv) competition from other available shopping centers and the attractiveness of properties in our portfolio to our tenants; (v) the financial stability of our tenants, including, without limitation, their ability to pay rent; (vi) our ability to pay down, refinance, restructure, or extend our indebtedness as it becomes due; (vii) increases in our borrowing costs as a result of changes in interest rates and other factors; (viii) potential liability for environmental matters; (ix) damage to our properties from catastrophic weather and other natural events, and the physical effects of climate change; (x) our ability and willingness to maintain our qualification as a REIT in light of economic, market, legal, tax, and other considerations; (xi) changes in tax, real estate, environmental, and zoning laws; (xii) information technology security breaches; (xiii) our corporate responsibility initiatives; (xiv) loss of key executives; (xv) the concentration of our portfolio in a limited number of industries, geographies, or investments; (xvi) the economic, political, and social impact of, and uncertainty relating to, pandemics or other health crises; (xvii) our ability to re-lease our properties on the same or better terms, or at all, in the event of non-renewal or in the event we exercise our right to replace an existing tenant; (xviii) the loss or bankruptcy of our tenants; (xix) to the extent we are seeking to dispose of properties, our ability to do so at attractive prices or at all; (xx) the effects of the U.S. government shutdown on financial markets and macroeconomic conditions; and (xxi) the impact of tariffs and global trade disruptions on us, our tenants, and consumers, including the impact on inflation, supply chains, and consumer sentiment. Additional important factors that could cause actual results to differ are described in the filings made from time to time by the Company with the SEC and include the risk factors and other risks and uncertainties described in our 2024 Annual Report on Form 10-K, filed with the SEC on February 11, 2025, as updated from time to time in our periodic and/or current reports filed with the SEC, which are accessible on the SEC's website at www.sec.gov. Therefore, such statements are not intended to be a guarantee of our performance in future periods.
Except as required by law, we do not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.
KEY PERFORMANCE INDICATORS AND DEFINED TERMS
We use certain key performance indicators ("KPIs"), which include both financial and nonfinancial metrics, to measure the performance of our operations. We believe these KPIs, as well as the core concepts and terms defined below, allow our Board, management, and investors to analyze trends around our business strategy, financial condition, and results of operations in a manner that is focused on items unique to the retail real estate industry.
We do not consider our non-GAAP measures to be alternatives to measures required in accordance with GAAP. Certain non-GAAP measures should not be viewed as an alternative measure of our financial performance as they may not reflect the operations of our entire portfolio, and they may not reflect the impact of general and administrative expenses, depreciation and amortization, interest expense, other income (expense), or the level of capital expenditures and leasing costs necessary to maintain the operating performance of our shopping centers that could materially impact our results from operations. Additionally, certain non-GAAP measures should not be considered as an indication of our liquidity, nor as an indication of funds available to cover our cash needs, including our ability to fund distributions, and may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate our business in the manner currently contemplated. Accordingly, non-GAAP measures should be reviewed in connection with other GAAP measurements and should not be viewed as more prominent measures of performance than net income (loss) or cash flows from operations prepared in accordance with GAAP. Other REITs may use different methodologies for calculating similar non-GAAP measures, and accordingly, our non-GAAP measures may not be comparable to other REITs.
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Our KPIs and terminology can be grouped into three key areas:
PORTFOLIO-Portfolio metrics help management to gauge the health of our centers overall and individually.
•Anchor space-We define an anchor space as a space greater than or equal to 10,000 square feet of gross leasable area ("GLA").
•ABR-We use ABR to refer to the monthly contractual base rent at the end of the period multiplied by twelve months.
•ABR Per Square Foot ("PSF")-This metric is calculated by dividing ABR by leased GLA. Increases in ABR PSF can be an indication of our ability to create rental rate growth in our centers, as well as an indication of demand for our spaces, which generally provides us with greater leverage during lease negotiations.
•GLA-We use GLA to refer to the total occupied and unoccupied square footage of a building that is available for tenants (whom we refer to as a "Neighbor" or our "Neighbors") or other retailers to lease.
•Inline space-We define an inline space as a space containing less than 10,000 square feet of GLA.
•Leased Occupancy-This metric is calculated as the percentage of total GLA for which a lease has been signed regardless of whether the lease has commenced or the Neighbor has taken possession. High occupancy is an indicator of demand for our spaces, which generally provides us with greater leverage during lease negotiations.
•Underwritten incremental unlevered yield-This reflects the yield we target to generate from a project upon expected stabilization and is calculated as the estimated incremental NOI for a project at stabilization divided by its estimated net project investment. The estimated incremental NOI is the difference between the estimated annualized NOI we target to generate by a project upon stabilization and the estimated annualized NOI without the planned improvements. Underwritten incremental unlevered yield does not include peripheral impacts, such as lease rollover risk or the impact on the long-term value of the property upon sale or disposition. Actual incremental unlevered yields may vary from our underwritten incremental unlevered yield range based on the actual total cost to complete a project and its actual incremental NOI at stabilization.
LEASING-Leasing is a key driver of growth for our company.
•Comparable lease-We use this term to refer to a lease with consistent terms that is executed for substantially the same space that has been vacant less than twelve months.
•Comparable rent spread-This metric is calculated as the percentage increase or decrease in first-year ABR (excluding any free rent or escalations) on new or renewal leases (excluding options) where the lease was considered a comparable lease. This metric provides an indication of our ability to generate revenue growth through leasing activity.
•Cost of executing new leases-We use this term to refer to certain costs associated with new leasing, namely, leasing commissions, tenant improvement costs, and tenant concessions.
•Portfolio retention rate-This metric is calculated by dividing (i) the total square feet of retained Neighbors with current period lease expirations by (ii) the total square feet of leases expiring during the period. The portfolio retention rate provides insight into our ability to retain Neighbors at our shopping centers as their leases approach expiration. Generally, the costs to retain an existing Neighbor are lower than costs to replace with a new Neighbor.
•Recovery rate-This metric is calculated by dividing (i) total recovery income by (ii) total recoverable expenses during the period. A high recovery rate is an indicator of our ability to recover certain property operating expenses and capital costs from our Neighbors.
FINANCIAL PERFORMANCE-In addition to financial metrics calculated in accordance with GAAP, such as net income or cash flows from operations, we utilize non-GAAP metrics to measure our operational and financial performance. See "Non-GAAP Measures" below for further discussion on the following metrics.
•Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization for Real Estate ("Adjusted EBITDAre")-To arrive at Adjusted EBITDAre, we adjust EBITDAre, as defined below, to exclude certain recurring and non-recurring items including, but not limited to: (i) changes in the fair value of the earn-out liability; (ii) other impairment charges; (iii) adjustments related to our investments in unconsolidated joint ventures; (iv) transaction and acquisition expenses; and (v) realized performance income. We use EBITDAreand Adjusted EBITDAre as additional measures of operating performance which allow us to compare earnings independent of capital structure and evaluate debt leverage and fixed cost coverage.
•Core Funds From Operations Attributable to Stockholders and OP Unit Holders ("Core FFO")-To arrive at Core FFO, we adjust Nareit FFO, as defined below, to exclude certain recurring and non-recurring items including, but not limited to: (i) depreciation and amortization of corporate assets; (ii) changes in the fair value of the earn-out liability; (iii) adjustments related to our investments in unconsolidated joint ventures; (iv) gains or losses on the extinguishment or modification of debt and other; (v) other impairment charges; (vi) transaction and acquisition expenses; and (vii) realized performance income. We believe Nareit FFO provides insight into our operating performance as it excludes certain items that are not indicative of such performance. Core FFO provides further insight into the sustainability of our operating performance and provides an additional measure to compare our performance across reporting periods on a consistent basis by excluding items that may cause short-term fluctuations in net income (loss).
•EBITDAre-The National Association of Real Estate Investment Trusts ("Nareit") defines EBITDAre as net income (loss) computed in accordance with GAAP before: (i) interest expense; (ii) income tax expense; (iii) depreciation and amortization; (iv) gains or losses from disposition of depreciable property; and (v) impairment write-downs of
PHILLIPS EDISON & COMPANY
SEPTEMBER 30, 2025 FORM 10-Q
depreciable property. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect EBITDAreon the same basis.
•Equity Market Capitalization-We calculate equity market capitalization as the total dollar value of all outstanding shares and OP Units using the closing price for the applicable date.
•Nareit FFO Attributable to Stockholders and OP Unit Holders ("Nareit FFO")-Nareit defines Funds From Operations ("FFO") as net income (loss) computed in accordance with GAAP, excluding: (i) gains (or losses) from sales of property and gains (or losses) from change in control; (ii) depreciation and amortization related to real estate; (iii) impairment losses on real estate and impairments of in-substance real estate investments in investees that are driven by measurable decreases in the fair value of the depreciable real estate held by the unconsolidated partnerships and joint ventures; and (iv) adjustments for unconsolidated partnerships and joint ventures, calculated to reflect FFO on the same basis. We calculate Nareit FFO in a manner consistent with the Nareit definition.
•Net Debt-We calculate net debt as total debt, excluding discounts, market adjustments, and deferred financing expenses, less cash and cash equivalents.
•Net Debt to Adjusted EBITDAre-This ratio is calculated by dividing net debt by Adjusted EBITDAre(included on an annualized basis within the calculation). It provides insight into our leverage rate based on earnings and is not impacted by fluctuations in our equity price.
•Net Debt to Total Enterprise Value-This ratio is calculated by dividing net debt by total enterprise value, as defined below. It provides insight into our capital structure and usage of debt.
•NOI-We calculate NOI as total operating revenues, adjusted to exclude non-cash revenue items, less property operating expenses and real estate taxes. NOI provides insight about our financial and operating performance because it provides a performance measure of the revenues and expenses directly involved in owning and operating real estate assets and provides a perspective not immediately apparent from net income (loss).
•Same-Center-We use this term to refer to a property, or portfolio of properties, owned and operational for the entirety of both calendar year periods being compared.
•Total Enterprise Value-We calculate total enterprise value as our net debt plus our equity market capitalization on a fully diluted basis.
OVERVIEW
We are a REIT and one of the nation's largest owners and operators of omni-channel grocery-anchored shopping centers. Our portfolio primarily consists of neighborhood centers anchored by the #1 or #2 grocer tenants by sales within their respective formats by trade area. Our Neighbors are a mix of national, regional, and local retailers that primarily provide necessity-based goods and services.
As of September 30, 2025, we owned equity interests in 328 shopping centers, including 303 wholly-owned shopping centers and 25 shopping centers owned through three unconsolidated joint ventures, which comprised approximately 36.7 million square feet in 31 states. In addition to managing our shopping centers, our third-party investment management business provides comprehensive real estate management services to the Managed Funds.
2025 SENIOR NOTE ISSUANCE-In June 2025, we issued $350 million of 5.250% senior notes due 2032 at an issue price of 99.832% in an underwritten offering.
The 2025 senior note issuance is fully and unconditionally guaranteed by us.
PORTFOLIO AND LEASING STATISTICS-Below are statistical highlights of our wholly-owned portfolio as of September 30, 2025 and 2024 (dollars and square feet in thousands):
September 30, 2025 September 30, 2024
Number of properties 303 290
Number of states 31 31
Total square feet 34,035 32,902
ABR $ 537,067 $ 497,082
% ABR from omni-channel grocery-anchored shopping centers 95.1 % 96.6 %
Leased occupancy %:
Total portfolio spaces 97.6 % 97.8 %
Anchor spaces 99.2 % 99.4 %
Inline spaces 94.8 % 95.0 %
Average remaining lease term (in years)(1)
4.5 4.4
(1)The average remaining lease term in years excludes future options to extend the term of the lease.
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SEPTEMBER 30, 2025 FORM 10-Q
The following table details information for our unconsolidated joint ventures as of September 30, 2025, which is the basis for determining the prorated information included in the subsequent tables (dollars and square feet in thousands):
September 30, 2025
Joint Venture Ownership Percentage Number of Properties ABR GLA
GRP I 14% 20 $ 32,951 2,214
NRV 20% 2 6,105 263
NGCF 31% 3 4,265 225
LEASE EXPIRATIONS-The following chart shows the aggregate scheduled lease expirations for our over 3,500 unique Neighbors, excluding our Neighbors who are occupying space on a temporary basis, after September 30, 2025 for each of the next ten years and thereafter for our wholly-owned properties and the prorated portion of those owned through our unconsolidated joint ventures:
Our ability to create rental rate growth generally depends on our leverage during new and renewal lease negotiations with prospective and existing Neighbors, which typically occurs when occupancy at our centers is high or during periods of economic growth and recovery. Conversely, we may experience rental rate decline when occupancy at our centers is low or during periods of economic recession, as the leverage during new and renewal lease negotiations may shift to prospective and existing Neighbors.
See "Results of Operations - Leasing Activity" below for further discussion of leasing activity.
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SEPTEMBER 30, 2025 FORM 10-Q
PORTFOLIO TENANCY-We define national Neighbors as those Neighbors that operate in at least three states. Regional Neighbors are defined as those Neighbors that have at least three locations in fewer than three states. The following charts present the composition of our portfolio, including our wholly-owned properties and the prorated portion of those owned through our unconsolidated joint ventures, by Neighbor type as of September 30, 2025:
The following charts present the composition of our portfolio by Neighbor industry as of September 30, 2025:
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SEPTEMBER 30, 2025 FORM 10-Q
NECESSITY-BASED GOODS AND SERVICES-We define "necessity-based goods and services" as goods and services that are indispensable, necessary, or common for day-to-day living, or that tend to be inelastic (i.e., those for which the demand does not change based on a consumer's income level). We estimate that approximately 70% of our ABR, including the pro rata portion attributable to properties owned through our unconsolidated joint ventures, is generated from Neighbors providing necessity-based goods and services.
TOP 20 NEIGHBORS-The following table presents our top 20 Neighbors by ABR, including our wholly-owned properties and the prorated portion of those owned through our unconsolidated joint ventures, as of September 30, 2025 (dollars and square feet in thousands):
Neighbor(1)
ABR % of ABR Leased Square Feet % of Leased Square Feet
Number of Locations(2)
Kroger $ 29,998 5.5 % 3,627 10.8 % 65
Publix 27,367 5.0 % 2,531 7.5 % 62
Albertsons 19,856 3.7 % 1,780 5.3 % 32
Ahold Delhaize 17,972 3.3 % 1,249 3.7 % 23
Walmart 8,483 1.6 % 1,733 5.2 % 12
Giant Eagle 7,419 1.4 % 759 2.3 % 10
TJX Companies 7,316 1.3 % 603 1.8 % 21
Sprouts Farmers Market 6,205 1.1 % 390 1.2 % 13
Raley's 4,701 0.9 % 288 0.9 % 5
Dollar Tree 4,092 0.8 % 358 1.1 % 37
Starbucks Corporation 3,890 0.7 % 82 0.2 % 42
Planet Fitness 3,671 0.7 % 292 0.9 % 14
Big Y 3,487 0.6 % 167 0.5 % 3
UNFI (SuperValu) 3,476 0.6 % 336 1.0 % 5
United Parcel Service 3,044 0.6 % 102 0.3 % 81
Subway Group 3,036 0.6 % 100 0.3 % 69
Pet Supplies Plus 2,861 0.5 % 180 0.5 % 23
Trader Joe's 2,860 0.5 % 122 0.4 % 9
Great Clips, Inc. 2,808 0.5 % 93 0.3 % 82
H&R Block, Inc. 2,745 0.5 % 98 0.3 % 59
Total $ 165,287 30.4 % 14,890 44.5 % 667
(1)Neighbors are grouped by parent company and may represent multiple subsidiaries and banners.
(2)Number of locations excludes auxiliary leases with grocery anchors such as fuel stations, pharmacies, and liquor stores. Additionally, if a parent company has multiple subsidiaries or banners in a single shopping center, those subsidiaries are included as one location.
RESULTS OF OPERATIONS
KNOWN TRENDS AND UNCERTAINTIES-Adverse economic conditions, including slower economic growth and the potential for a recession, could have an adverse effect on us and our Neighbors, including a negative impact on consumer sentiment and the consumer's willingness to spend. Although certain indicators have suggested that inflation has made downward progress, the economy continues to be impacted by elevated inflation rates and faces further inflation risk. Substantially all of our leases contain provisions designed to mitigate the adverse effect of inflation, including requirements for Neighbors to pay their allocable share of operating expenses that includes common area maintenance, utilities, real estate taxes, insurance, and certain capital expenditures. Additionally, many of our leases are for terms of less than ten years, which allows us to target increased rents to current market rates upon renewal. However, elevated inflation rates, including their impact on operating and construction costs, may nevertheless negatively impact us and some of our Neighbors. Our business and financial results, as well as the results of our Neighbors, could also be adversely impacted by elevated interest rate levels arising from the Federal Reserve's response to inflation. Additionally, rapid changes in trade policy, new or increased tariffs, retaliatory tariffs, and global trade disruptions could negatively affect us and our Neighbors, including by further aggravating inflation, increasing costs, and disrupting supply chains.
PHILLIPS EDISON & COMPANY
SEPTEMBER 30, 2025 FORM 10-Q
SUMMARY OF OPERATING ACTIVITIES FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
Three Months Ended
September 30, 		Favorable (Unfavorable)
Change
(Dollars in thousands) 2025 2024 $
%(1)
Revenues:
Rental income $ 178,293 $ 161,780 $ 16,513 10.2 %
Fees and management income 3,274 2,856 418 14.6 %
Other property income 1,102 891 211 23.7 %
Total revenues 182,669 165,527 17,142 10.4 %
Operating Expenses:
Property operating 30,197 27,528 (2,669) (9.7) %
Real estate taxes 22,226 19,569 (2,657) (13.6) %
General and administrative 12,752 11,114 (1,638) (14.7) %
Depreciation and amortization 65,603 68,328 2,725 4.0 %
Total operating expenses 130,778 126,539 (4,239) (3.3) %
Other:
Interest expense, net
(28,544) (24,998) (3,546) (14.2) %
Gain (loss) on disposal of property, net
4,255 (19) 4,274 NM
Other expense, net
(374) (1,068) 694 65.0 %
Net income
27,228 12,903 14,325 111.0 %
Net income attributable to noncontrolling interests
(2,543) (1,301) (1,242) (95.5) %
Net income attributable to stockholders
$ 24,685 $ 11,602 $ 13,083 112.8 %
(1)Line items that result in a percent change that exceed certain limitations are considered not meaningful ("NM") and indicated as such.
Our basis for analyzing significant fluctuations in our results of operations generally includes review of the results of our same-center portfolio, non-same-center portfolio, and revenues and expenses from our management activities. We define our same-center portfolio as the 279 properties that were owned and operational for the entirety of both calendar year periods being compared. We define our non-same-center portfolio as those properties that were not fully owned and operational in both calendar year periods being compared owing primarily to real estate asset activity occurring after December 31, 2023, which includes two properties disposed of and 24 properties acquired. Below are explanations of the significant fluctuations in the results of operations for the three months ended September 30, 2025 and 2024:
Rental Income increased $16.5 million primarily as follows:
•$5.5 million increase primarily related to our same-center portfolio as follows:
▪$3.3 million increase primarily due to a $0.48 increase in average minimum rent PSF, partially offset by a 0.3% decline in average occupancy;
▪$1.7 million increase primarily due to an increase in recoverable income attributed to an increase in real estate taxes; and
▪$0.4 million increase primarily due to a decrease in amounts reserved for Neighbors identified as credit risks.
•$11.0 million increase primarily related to our net acquisition activity.
Fees and Management Income:
•The $0.4 million increase in fees and management income was primarily due to higher insurance premium income from our captive insurance company and an increase in fees from our unconsolidated joint ventures.
Property Operating Expenses increased $2.7 million primarily as follows:
•$0.9 million increase from our same-center portfolio and corporate operating activities primarily due to an increase in common area maintenance spending and higher compensation costs; and
•$1.8 million increase primarily due to our net acquisition activity.
Real Estate Tax Expenses:
•The $2.7 million increase in real estate tax expenses is primarily due to our net acquisition activity.
General and Administrative Expenses:
•The $1.6 million increase in general and administrative expenses is primarily due to our growth initiatives resulting in increased compensation expense, owing largely to increased headcount, higher performance-based compensation, and increased overhead attributed to technology-related costs.
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SEPTEMBER 30, 2025 FORM 10-Q
Depreciation and Amortization Expenses:
•The $2.7 million decrease in depreciation and amortization was primarily due to the impact of our prior year tear down and redevelopment of certain Publix locations partially offset by our net acquisition activity.
Interest Expense, Net:
•The $3.5 million increase was primarily due to increased debt outstanding in 2025. Interest Expense, Net was comprised of the following (dollars in thousands):
Three Months Ended September 30,
2025 2024
Interest on senior notes $ 15,798 $ 8,212
Interest on unsecured term loans, net 6,701 7,796
Interest on secured debt 3,644 4,252
Interest on revolving credit facility, net 468 1,255
Non-cash amortization and other 1,933 2,252
Loss on extinguishment or modification of debt and other, net - 1,231
Interest expense, net
$ 28,544 $ 24,998
Weighted-average interest rate as of end of period 4.4 % 4.4 %
Weighted-average term (in years) as of end of period 5.3 5.9
Other Expense, Net:
•Other Expense, Net was comprised of the following (in thousands):
Three Months Ended September 30,
2025 2024
Transaction and acquisition expenses $ (893) $ (1,181)
Federal, state, and local income tax expense (219) (446)
Equity in net loss of unconsolidated investments
(48) (10)
Other income
786 569
Other expense, net
$ (374) $ (1,068)
PHILLIPS EDISON & COMPANY
SEPTEMBER 30, 2025 FORM 10-Q
SUMMARY OF OPERATING ACTIVITIES FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2025 AND 2024
Nine Months Ended
September 30, 		Favorable (Unfavorable)
Change
(Dollars in thousands) 2025 2024 $
%(1)
Revenues:
Rental income $ 525,943 $ 478,134 $ 47,809 10.0 %
Fees and management income 9,373 7,943 1,430 18.0 %
Other property income 3,417 2,267 1,150 50.7 %
Total revenues 538,733 488,344 50,389 10.3 %
Operating Expenses:
Property operating 89,455 81,461 (7,994) (9.8) %
Real estate taxes 64,584 57,897 (6,687) (11.5) %
General and administrative 37,760 34,060 (3,700) (10.9) %
Depreciation and amortization 202,080 189,706 (12,374) (6.5) %
Total operating expenses 393,879 363,124 (30,755) (8.5) %
Other:
Interest expense, net
(81,935) (71,954) (9,981) (13.9) %
Gain (loss) on disposal of property, net
9,798 (34) 9,832 NM
Other expense, net
(2,344) (3,717) 1,373 36.9 %
Net income
70,373 49,515 20,858 42.1 %
Net income attributable to noncontrolling interests
(6,595) (4,972) (1,623) (32.6) %
Net income attributable to stockholders
$ 63,778 $ 44,543 $ 19,235 43.2 %
(1)Line items that result in a percent change that exceed certain limitations are considered not meaningful ("NM") and indicated as such.
For details surrounding our basis for analyzing significant fluctuations in our results of operations as well as definitions related to our portfolio of real estate assets, please see "Summary of Operating Activities for the Three Months Ended September 30, 2025 and 2024" above. Below are explanations of the significant fluctuations in the results of operations for the nine months ended September 30, 2025 and 2024:
Rental Income increased $47.8 million as follows:
•$17.2 million increase related to our same-center portfolio primarily as follows:
▪$10.4 million increase primarily due to a $0.45 increase in average minimum rent PSF, partially offset by a 0.2% decline in average occupancy;
▪$4.6 million increase primarily due to an increase in recoverable income attributed to an increase in real estate taxes and common area maintenance spending; and
▪$1.1 million increase primarily due to lease buyout income.
•$30.6 million increase primarily related to our net acquisition activity.
Fees and Management Income:
•The $1.4 million increase in fees and management income was primarily due to higher insurance premium income and an increase in fees from our unconsolidated joint ventures.
Property Operating Expenses increased $8.0 million primarily as follows:
•$3.4 million increase from our same-center portfolio and corporate operating activities primarily due to higher compensation costs; and
•$4.6 million increase primarily due to our net acquisition activity.
Real Estate Tax Expenses:
•The $6.7 million increase in real estate tax expenses was primarily due to our net acquisition activity.
General and Administrative Expenses:
•The $3.7 million increase in general and administrative expenses is primarily due to our growth initiatives resulting in increased compensation expense owing largely to higher performance-based compensation and increased headcount.
PHILLIPS EDISON & COMPANY
SEPTEMBER 30, 2025 FORM 10-Q
Depreciation and Amortization Expenses:
•The $12.4 million increase in depreciation and amortization was primarily due to our net acquisition activity and the impact of our tear down and redevelopment of certain Publix locations.
Interest Expense, Net:
•The $10.0 million increase was primarily due to increased debt outstanding in 2025. Interest Expense, Net was comprised of the following (dollars in thousands):
Nine Months Ended September 30,
2025 2024
Interest on senior notes $ 39,163 $ 15,520
Interest on unsecured term loans, net 19,918 29,280
Interest on secured debt 11,275 13,252
Interest on revolving credit facility, net 5,770 6,302
Non-cash amortization and other 5,808 6,370
Loss on extinguishment or modification of debt and other, net 1 1,230
Interest expense, net
$ 81,935 $ 71,954
Weighted-average interest rate as of end of period 4.4 % 4.4 %
Weighted-average term (in years) as of end of period 5.3 5.9
Other Expense, Net:
•Other Expense, Net was comprised of the following (in thousands):
Nine Months Ended September 30,
2025 2024
Transaction and acquisition expenses $ (4,004) $ (3,501)
Federal, state, and local income tax expense (599) (1,047)
Equity in net income (loss) of unconsolidated investments
242 (7)
Other income 2,017 838
Other expense, net
$ (2,344) $ (3,717)
PHILLIPS EDISON & COMPANY
SEPTEMBER 30, 2025 FORM 10-Q
LEASING ACTIVITY-Below is a summary of leasing activity for our wholly-owned properties for the three months ended September 30, 2025 and 2024(1):
Total Deals Inline Deals
2025 2024 2025 2024
New leases:
Number of leases 89 78 85 70
Square footage (in thousands) 276 334 178 157
ABR (in thousands) $ 6,650 $ 7,437 $ 5,599 $ 4,251
ABR PSF $ 24.12 $ 22.27 $ 31.44 $ 27.05
Cost PSF of executing new leases $ 34.08 $ 34.79 $ 41.35 $ 41.52
Number of comparable leases 42 32 42 28
Comparable rent spread 24.5 % 55.0 % 24.5 % 28.3 %
Weighted-average lease term (in years) 8.8 10.4 8.2 7.4
Renewals and options:
Number of leases 181 190 155 168
Square footage (in thousands) 1,388 1,241 355 390
ABR (in thousands) $ 20,869 $ 18,219 $ 10,253 $ 10,514
ABR PSF (all leases) $ 15.04 $ 14.68 $ 28.90 $ 26.93
ABR PSF prior to renewals (all leases) $ 13.44 $ 13.28 $ 24.15 $ 23.21
Percentage increase in ABR PSF (comparable leases only) 11.4 % 10.5 % 19.0 % 16.0 %
Cost PSF of executing renewals and options $ 0.66 $ 0.70 $ 0.88 $ 0.68
Number of comparable leases(2)
124 136 123 134
Comparable rent spread(2)
23.2 % 19.8 % 23.4 % 19.6 %
Weighted-average lease term (in years) 5.8 5.2 4.6 4.6
Portfolio retention rate 93.9 % 91.9 % 82.8 % 81.2 %
(1)PSF amounts may not recalculate exactly based on other amounts presented within the table due to rounding.
(2)Excludes exercise of options.
PHILLIPS EDISON & COMPANY
SEPTEMBER 30, 2025 FORM 10-Q
Below is a summary of leasing activity for our wholly-owned properties for the nine months ended September 30, 2025 and 2024(1):
Total Deals Inline Deals
2025 2024 2025 2024
New leases:
Number of leases 261 255 245 233
Square footage (in thousands) 906 1,001 539 539
ABR (in thousands) $ 19,592 $ 22,629 $ 15,272 $ 15,481
ABR PSF $ 21.62 $ 22.60 $ 28.31 $ 28.72
Cost PSF of executing new leases $ 29.60 $ 33.89 $ 37.40 $ 43.02
Number of comparable leases 117 116 112 105
Comparable rent spread 29.5 % 37.7 % 26.6 % 32.9 %
Weighted-average lease term (in years) 8.5 9.3 7.8 8.1
Renewals and options:
Number of leases 519 535 459 474
Square footage (in thousands) 3,702 3,580 1,035 1,026
ABR (in thousands) $ 56,227 $ 54,308 $ 30,059 $ 28,584
ABR PSF (all leases) $ 15.19 $ 15.17 $ 29.03 $ 27.86
ABR PSF prior to renewals (all leases) $ 13.60 $ 13.71 $ 24.50 $ 23.92
Percentage increase in ABR PSF (comparable leases only) 11.4 % 11.1 % 18.1 % 16.4 %
Cost PSF of executing renewals and options $ 0.37 $ 0.38 $ 0.72 $ 0.71
Number of comparable leases(2)
375 400 366 387
Comparable rent spread(2)
20.9 % 19.0 % 21.9 % 19.5 %
Weighted-average lease term (in years) 5.1 5.3 4.4 4.6
Portfolio retention rate 92.8 % 89.3 % 82.4 % 83.2 %
(1)PSF amounts may not recalculate exactly based on other amounts presented within the table due to rounding.
(2)Excludes exercise of options.
NON-GAAP MEASURES
See "Key Performance Indicators and Defined Terms" above for additional information related to the following non-GAAP measures.
SAME-CENTER NOI-Same-Center NOI is presented as a supplemental measure of our performance, as it highlights operating trends such as occupancy levels, rental rates, and operating costs for our same-center portfolio. Other REITs may use different methodologies for calculating Same-Center NOI, and accordingly, our Same-Center NOI may not be comparable to other REITs. For the three and nine months ended September 30, 2025 and 2024, Same-Center NOI represents the NOI for the 279 properties that were wholly-owned and operational for the entirety of both calendar year periods being compared.
Same-Center NOI should not be viewed as an alternative measure of our financial performance as it does not reflect the operations of our entire portfolio, nor does it reflect the impact of general and administrative expenses, depreciation and amortization, interest expense, other income (expense), or the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties that could materially impact our results from operations.
PHILLIPS EDISON & COMPANY
SEPTEMBER 30, 2025 FORM 10-Q
The table below presents our Same-Center NOI (dollars in thousands):
Three Months Ended September 30, Favorable (Unfavorable) Nine Months Ended September 30, Favorable (Unfavorable)
2025 2024 $
Change 		%
Change 		2025 2024 $ Change % Change
Revenues:
Rental income(1)
$ 120,982 $ 117,679 $ 3,303 $ 361,630 $ 351,128 $ 10,502
Tenant recovery income 38,619 37,123 1,496 115,582 110,651 4,931
Reserves for uncollectibility(2)
(1,144) (1,514) 370 (3,494) (3,949) 455
Other property income 896 768 128 2,711 2,130 581
Total revenues 159,353 154,056 5,297 3.4 % 476,429 459,960 16,469 3.6 %
Operating expenses:
Property operating expenses
23,779 23,172 (607) 72,680 70,703 (1,977)
Real estate taxes
20,096 19,102 (994) 58,943 57,153 (1,790)
Total operating expenses 43,875 42,274 (1,601) (3.8) % 131,623 127,856 (3,767) (2.9) %
Total Same-Center NOI $ 115,478 $ 111,782 $ 3,696 3.3 % $ 344,806 $ 332,104 $ 12,702 3.8 %
(1)Excludes straight-line rental income, net amortization of above- and below-market leases, and lease buyout income.
(2)Includes billings that will not be recognized as revenue until cash is collected or the Neighbor resumes regular payments and/or we deem it appropriate to resume recording revenue on an accrual basis, rather than on a cash basis.
Same-Center NOI Reconciliation-Below is a reconciliation of Net Income to NOI and Same-Center NOI (in thousands):
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
Net income
$ 27,228 $ 12,903 $ 70,373 $ 49,515
Adjusted to exclude:
Fees and management income
(3,274) (2,856) (9,373) (7,943)
Straight-line rental income(1)
(2,899) (2,148) (7,853) (6,585)
Net amortization of above- and below-market leases
(2,204) (1,743) (6,276) (4,732)
Lease buyout income
(144) (393) (2,062) (844)
General and administrative expenses
12,752 11,114 37,760 34,060
Depreciation and amortization
65,603 68,328 202,080 189,706
Interest expense, net 28,544 24,998 81,935 71,954
(Gain) loss on disposal of property, net
(4,255) 19 (9,798) 34
Other expense, net
374 1,068 2,344 3,717
Property operating expenses related to fees and management income 989 983 2,892 2,328
NOI for real estate investments 122,714 112,273 362,022 331,210
Less: Non-same-center NOI(2)
(7,236) (491) (17,216) 894
Total Same-Center NOI $ 115,478 $ 111,782 $ 344,806 $ 332,104
Period-end Same-Center Leased Occupancy % 97.9 % 97.8 %
(1)Includes straight-line rent adjustments for Neighbors for whom revenue is being recorded on a cash basis.
(2)Includes operating revenues and expenses from non-same-center properties, which includes properties acquired or sold, and corporate activities.
NAREIT FFO AND CORE FFO-Nareit FFO is a non-GAAP financial performance measure that is widely recognized as a measure of REIT operating performance. Core FFO is an additional financial performance measure used by us as Nareit FFO includes certain non-comparable items that affect our performance over time. We believe that Core FFO is helpful in assisting management and investors with assessing the sustainability of our operating performance in future periods.
Nareit FFO and Core FFO should not be considered alternatives to net income (loss) under GAAP, as an indication of our liquidity, nor as an indication of funds available to cover our cash needs, including our ability to fund distributions. Core FFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate our business plan in the manner currently contemplated.
Accordingly, Nareit FFO and Core FFO should be reviewed in connection with other GAAP measurements, and should not be viewed as more prominent measures of performance than net income (loss) or cash flows from operations prepared in accordance with GAAP. Our Nareit FFO and Core FFO, as presented, may not be comparable to amounts calculated by other REITs.
PHILLIPS EDISON & COMPANY
SEPTEMBER 30, 2025 FORM 10-Q
The following table presents our calculation of Nareit FFO and Core FFO (in thousands, except per share amounts):
Three Months Ended September 30, Nine Months Ended September 30,
2025 2024 2025 2024
Calculation of Nareit FFO Attributable to Stockholders and OP Unit Holders
Net income
$ 27,228 $ 12,903 $ 70,373 $ 49,515
Adjustments:
Depreciation and amortization of real estate assets 65,205 67,887 200,908 188,374
(Gain) loss on disposal of property, net
(4,255) 19 (9,798) 34
Adjustments related to unconsolidated joint ventures 1,075 745 2,834 2,055
Nareit FFO attributable to stockholders and OP unit holders $ 89,253 $ 81,554 $ 264,317 $ 239,978
Calculation of Core FFO Attributable to Stockholders and OP Unit Holders
Nareit FFO attributable to stockholders and OP unit holders $ 89,253 $ 81,554 $ 264,317 $ 239,978
Adjustments:
Depreciation and amortization of corporate assets 398 441 1,172 1,332
Transaction and acquisition expenses 893 1,181 4,004 3,501
Loss on extinguishment or modification of debt and other, net - 1,231 1 1,230
Adjustments related to unconsolidated joint ventures 13 3 45 8
Core FFO attributable to stockholders and OP unit holders $ 90,557 $ 84,410 $ 269,539 $ 246,049
Nareit FFO/Core FFO Attributable to Stockholders and OP Unit Holders per diluted share
Weighted-average shares of common stock outstanding - diluted 138,860 136,578 138,927 136,458
Nareit FFO attributable to stockholders and OP unit holders per share - diluted $ 0.64 $ 0.60 $ 1.90 $ 1.76
Core FFO attributable to stockholders and OP unit holders per share - diluted $ 0.65 $ 0.62 $ 1.94 $ 1.80
PHILLIPS EDISON & COMPANY
SEPTEMBER 30, 2025 FORM 10-Q
EBITDAreAND ADJUSTED EBITDAre-We use EBITDAreand Adjusted EBITDAre as additional measures of operating performance which allow us to compare earnings independent of capital structure, determine debt service and fixed cost coverage, and measure enterprise value. Additionally, we believe they are a useful indicator of our ability to support our debt obligations.
EBITDAreand Adjusted EBITDAre should not be considered as alternatives to net income (loss), as an indication of our liquidity, nor as an indication of funds available to cover our cash needs, including our ability to fund distributions. Accordingly, EBITDAreand Adjusted EBITDAreshould be reviewed in connection with other GAAP measurements, and should not be viewed as more prominent measures of performance than net income (loss) or cash flows from operations prepared in accordance with GAAP. Our EBITDAreand Adjusted EBITDAre, as presented, may not be comparable to amounts calculated by other REITs.
The following table presents our calculation of EBITDAreand Adjusted EBITDAre(in thousands):
Three Months Ended September 30, Nine Months Ended September 30, Year Ended December 31,
2025 2024 2025 2024 2024
Calculation of EBITDAre
Net income
$ 27,228 $ 12,903 $ 70,373 $ 49,515 $ 69,696
Adjustments:
Depreciation and amortization 65,603 68,328 202,080 189,706 253,016
Interest expense, net 28,544 24,998 81,935 71,954 96,990
(Gain) loss on disposal of property, net
(4,255) 19 (9,798) 34 30
Federal, state, and local tax expense 219 446 599 1,047 1,821
Adjustments related to unconsolidated joint ventures 1,652 1,075 4,296 2,937 4,025
EBITDAre
$ 118,991 $ 107,769 $ 349,485 $ 315,193 $ 425,578
Calculation of Adjusted EBITDAre
EBITDAre
$ 118,991 $ 107,769 $ 349,485 $ 315,193 $ 425,578
Adjustments:
Transaction and acquisition expenses 893 1,181 4,004 3,501 4,993
Adjustments related to unconsolidated joint ventures 13 3 45 8 13
Adjusted EBITDAre
$ 119,897 $ 108,953 $ 353,534 $ 318,702 $ 430,584
LIQUIDITY AND CAPITAL RESOURCES
GENERAL-Aside from standard operating expenses, we expect our principal cash demands to be for:
•investments in real estate;
•cash distributions to stockholders;
•redevelopment and repositioning projects;
•capital expenditures and leasing costs; and
•principal and interest payments on our outstanding indebtedness.
We expect our primary sources of liquidity to be:
•operating cash flows;
•borrowings from our unsecured revolving credit facility and proceeds from debt financings;
•proceeds from any equity offering activities;
•proceeds received from the disposition of properties; and
•available, unrestricted cash and cash equivalents.
At this time, we believe our current sources of liquidity are sufficient to meet our short- and long-term cash demands.
ATM Program-In February 2022, we entered into a sales agreement relating to the potential sale of shares of common stock pursuant to a continuous offering program, allowing up to $250 million in offerings. During the nine months ended September 30, 2024, prior to the entry into the new program described below, we issued approximately 46,000 shares of our
PHILLIPS EDISON & COMPANY
SEPTEMBER 30, 2025 FORM 10-Q
common stock at a gross weighted average price of $37.05 per share under this ATM program for net proceeds of $1.7 million, after approximately $17,000 in commissions.
In February 2024, we entered into a new sales agreement relating to the potential sale of shares of common stock pursuant to a continuous offering program, which replaced the previous agreement. In accordance with the terms of the sales agreement, we may offer and sell shares of our common stock having an aggregate offering price of up to $250 million from time to time through our sales agents, or, if applicable, as forward sellers. We issued no shares of our common stock under this ATM program during the three and nine months ended September 30, 2025 and 2024. As of September 30, 2025, approximately $177 million of common stock remained available for issuance under the current ATM program.
DEBT-The following table summarizes information about our debt as of September 30, 2025 and December 31, 2024 (dollars in thousands):
September 30, 2025 December 31, 2024
Total debt obligations, gross $ 2,413,653 $ 2,137,336
Weighted-average interest rate 4.4 % 4.3 %
Weighted-average term (in years) 5.3 5.6
Revolving credit facility capacity(1)
$ 1,000,000 $ 800,000
Revolving credit facility availability(2)
970,771 738,904
(1)The revolving credit facility matures in January 2029, with options to extend the maturity for two additional six-month periods.
(2)Net of any outstanding balance and letters of credit.
In June 2025, we issued $350 million of 5.250% senior notes due 2032 at an issue price of 99.832% in an underwritten offering.
The 2025 senior note issuance is fully and unconditionally guaranteed by us.
Revolving Credit Facility-In January 2025, we amended our senior unsecured revolving credit facility. The amendment increased the aggregate borrowing capacity of the facility to $1 billion and extended the maturity date to January 2029, with options to extend the maturity for two additional six-month periods.
Debt Obligation Guarantees-At September 30, 2025, the Operating Partnership had issued and outstanding its unsecured senior notes due 2031, 2032, 2034, and 2035, all issued under effective registration statements. The obligations of the Operating Partnership to pay principal, premiums, if any, and interest on the unsecured senior notes due 2031, 2032, 2034, and 2035 are, and on any future debt securities of the Operating Partnership registered under an effective registration statement will be, fully and unconditionally guaranteed by us on a senior basis. As a result of the amendments to SEC Rule 3-10 of Regulation S-X, subsidiary issuers of obligations guaranteed by the parent are not required to provide separate financial statements, provided that: (i) the subsidiary obligor is consolidated into the parent company's consolidated financial statements; (ii) the parent guarantee is "full and unconditional"; and (iii) subject to certain exceptions as set forth below, the alternative disclosure required by Rule 13-01 of Regulation S-X is provided, which includes narrative disclosure and summarized financial information. We meet the conditions of this requirement and thus, are not presenting separate financial statements. Furthermore, as permitted under Rule 13-01(a)(4)(vi) of Regulation S-X, we have excluded the summarized financial information for the Operating Partnership because the assets, liabilities, and results of operations of the Operating Partnership are not materially different than the corresponding in our consolidated financial statements, and management believes such summarized financial information would be repetitive and would not provide incremental value to investors.
PHILLIPS EDISON & COMPANY
SEPTEMBER 30, 2025 FORM 10-Q
FINANCIAL LEVERAGE RATIOS-We believe our net debt to Adjusted EBITDAre, net debt to total enterprise value, and debt covenant compliance as of September 30, 2025 allow us access to future borrowings as needed in the near term. The following table presents our calculation of net debt and total enterprise value, inclusive of our prorated portion of net debt and cash and cash equivalents owned through our unconsolidated joint ventures, as of September 30, 2025 and December 31, 2024 (in thousands):
September 30, 2025 December 31, 2024
Net debt:
Total debt, excluding discounts, market adjustments, and deferred financing expenses $ 2,457,419 $ 2,166,326
Less: Cash and cash equivalents 5,723 5,470
Total net debt $ 2,451,696 $ 2,160,856
Enterprise value:
Net debt $ 2,451,696 $ 2,160,856
Total equity market capitalization(1)(2)
4,752,062 5,175,286
Total enterprise value $ 7,203,758 $ 7,336,142
(1)Total equity market capitalization is calculated as diluted shares multiplied by the closing market price per share, which includes 138.4 million and 138.2 million diluted shares as of September 30, 2025 and December 31, 2024, respectively, and the closing market price per share of $34.33 and $37.46 as of September 30, 2025 and December 31, 2024, respectively.
(2)Fully diluted shares include common stock and OP units.
Pursuant to the terms of our credit agreements, we are subject to, among other things, the maintenance of various financial covenants. We were in compliance with these covenants as of September 30, 2025.
The following table presents our calculation of net debt to Adjusted EBITDAreand net debt to total enterprise value as of September 30, 2025 and December 31, 2024 (dollars in thousands):
September 30, 2025 December 31, 2024
Net debt to Adjusted EBITDAre - annualized:
Net debt $ 2,451,696 $ 2,160,856
Adjusted EBITDAre- annualized(1)
465,416 430,584
Net debt to Adjusted EBITDAre- annualized
5.3x 5.0x
Net debt to total enterprise value:
Net debt $ 2,451,696 $ 2,160,856
Total enterprise value 7,203,758 7,336,142
Net debt to total enterprise value 34.0% 29.5%
(1)Adjusted EBITDAreis based on a trailing twelve month period. See "Non-GAAP Measures - EBITDAre and Adjusted EBITDAre" above for a reconciliation to Net Income.
CAPITAL EXPENDITURES AND REDEVELOPMENT ACTIVITY-We make capital expenditures during the course of normal operations, including maintenance capital expenditures and tenant improvements, as well as value-enhancing anchor space repositioning and redevelopment, ground-up outparcel development, and other accretive projects.
PHILLIPS EDISON & COMPANY
SEPTEMBER 30, 2025 FORM 10-Q
During the nine months ended September 30, 2025 and 2024, we had gross capital spend of $95.7 million and $55.6 million, respectively. Below is a summary of our capital spending activity, excluding leasing commissions, on a cash basis (in thousands):
Nine Months Ended September 30,
2025 2024
Capital expenditures for real estate:
Capital improvements $ 17,012 $ 11,833
Tenant improvements 22,653 18,723
Development and redevelopment 49,614 18,182
Total capital expenditures for real estate 89,279 48,738
Corporate asset capital expenditures 1,001 690
Capitalized indirect costs(1)
4,779 3,052
Total capital spending activity(2)
$ 95,059 $ 52,480
(1)Amount includes internal salaries and related benefits of personnel who work directly on capital projects as well as capitalized interest and other external expenses.
(2)Amounts reported are net of insurance proceeds of $0.7 million and $3.2 million for property damage claims for the nine months ended September 30, 2025 and 2024, respectively.
We anticipate that obligations related to capital improvements, as well as redevelopment and development, in 2025 can be met with cash flows from operations, cash flows from dispositions, or borrowings on our unsecured revolving credit facility.
Generally, we expect our development and redevelopment projects to stabilize within 24 months. Our underwritten incremental unlevered yields on development and redevelopment projects are expected to range between 9%-12%. Our current in process projects represent an estimated total investment of $76.0 million. Actual incremental unlevered yields may vary from our underwritten incremental unlevered yield range based on the actual total cost to complete a project and its actual incremental annual NOI at stabilization. See "Key Performance Indicators and Defined Terms" above for further information.
PHILLIPS EDISON & COMPANY
SEPTEMBER 30, 2025 FORM 10-Q
REAL ESTATE ACQUISITION ACTIVITY-We actively monitor the commercial real estate market for properties that have future growth potential, are located in attractive demographic markets, and support our business objectives. The following table highlights our property acquisitions (dollars in thousands):
Nine Months Ended September 30,
2025 2024
Number of properties acquired 11 8
Number of outparcels and land for future development acquired(1)(2)
2 4
Contract price $ 280,784 $ 203,402
Total price of acquisitions(3)
282,038 205,002
(1)Outparcels acquired are adjacent to shopping centers that we own.
(2)During the nine months ended September 30, 2024, we acquired an outparcel adjacent to a property that is owned by our unconsolidated joint venture, GRP I. Therefore, the outparcel was an addition to our total property count.
(3)Total price of acquisitions includes closing costs less credits and assumed liabilities.
Subsequent to September 30, 2025, we acquired two properties and one parcel of land for future development for $74.2 million. The land is intended for a future grocery-anchored development opportunity.
REAL ESTATE DISPOSITION ACTIVITY-We continually evaluate our portfolio of assets for opportunities to make strategic dispositions of assets that no longer meet our growth and investment objectives or assets that have stabilized in order to capture their value. The following table summarizes our real estate disposition activity for the nine months ended September 30, 2025 and 2024 (dollars in thousands):
Nine Months Ended September 30,
2025 2024
Number of properties sold 2 -
Number of outparcels sold 1 -
Contract price $ 34,080 $ -
Proceeds (payments) from sale of real estate, net(1)(2)(3)
15,154 (26)
Gain (loss) on disposal of property, net(2)
9,798 (34)
(1)Total proceeds from sale of real estate, net includes closing costs less credits and secured loans received.
(2)We sold no properties during the nine months ended September 30, 2024, but we recognized a minimal loss on disposal of property due to miscellaneous write-off activity and expenses related to previous and future potential dispositions.
(3)During the nine months ended September 30, 2025, one of our property sales included a seller financing component. We sold the property for $24.9 million and provided secured financing, receiving a note receivable of $17.4 million.
Subsequent to September 30, 2025, we sold one property for $9.6 million.
DISTRIBUTIONS-For each month beginning January 2025 through August 2025, we declared and paid monthly distributions of $0.1025 per common share and OP unit. In September 2025, the Board authorized a 5.7% increase of our monthly distribution rate to $0.1083 per common share and OP unit, and we declared a monthly distribution of $0.1083 per common share and OP unit for September 2025.
To maintain our qualification as a REIT, we must make aggregate annual distributions to our stockholders of at least 90% of our REIT taxable income (which is computed without regard to the dividends paid deduction or net capital gain, and which does not necessarily equal net income or loss as calculated in accordance with GAAP). We generally will not be subject to U.S. federal income tax on the income that we distribute to our stockholders each year due to meeting the REIT qualification requirements. However, we may be subject to certain state and local taxes on our income, property, or net worth and to federal income and excise taxes on our undistributed income.
We have not established a minimum distribution level, and our charter does not require that we make distributions to our stockholders.
PHILLIPS EDISON & COMPANY
SEPTEMBER 30, 2025 FORM 10-Q
CASH FLOW ACTIVITIES-As of September 30, 2025, we had cash and cash equivalents and restricted cash of $5.8 million, a net cash decrease of $2.8 million during the nine months ended September 30, 2025.
Below is a summary of our cash flow activity (dollars in thousands):
Nine Months Ended September 30,
2025 2024 $ Change
% Change(1)
Net cash provided by operating activities
$ 252,085 $ 250,707 $ 1,378 0.5 %
Net cash used in investing activities
(375,310) (259,621) (115,689) (44.6) %
Net cash provided by financing activities
120,387 9,369 111,018 NM
(1)Line items that result in a percent change that exceed certain limitations are considered not meaningful ("NM") and indicated as such.
OPERATING ACTIVITIES-Our net cash provided by operating activities was primarily impacted by the following:
•Property operations-Most of our operating cash comes from rental and tenant recovery income received less property operating expenses, real estate taxes, and general and administrative costs paid. Property operations during the nine months ended September 30, 2025 were positively impacted by a $12.7 million, or 3.8%, improvement in Same-Center NOI as compared to the same period in 2024. During the nine months ended September 30, 2025, we had a net cash outlay of $10.4 million from changes in working capital as compared to a net cash inflow of $8.9 million during the same period in 2024. This change was primarily driven by the timing of interest payments in the prior year resulting from our 2024 senior notes.
INVESTING ACTIVITIES-Our net cash used in investing activities was primarily impacted by the following:
•Real estate acquisitions-During the nine months ended September 30, 2025, our acquisitions resulted in a total cash outlay of $282.0 million, as compared to a total cash outlay of $205.0 million during the same period in 2024.
•Capital expenditures-We invest capital into leasing and developing our properties and maintaining or improving the condition of our properties. During the nine months ended September 30, 2025, we paid $95.7 million, an increase of $40.1 million over the same period in 2024, primarily related to development and redevelopment activity.
•Real estate dispositions-During the nine months ended September 30, 2025, we sold two properties and one outparcel resulting in a net cash inflow of $15.2 million. During the nine months ended September 30, 2024, we sold no properties, but we had minimal net cash outflows for expenses related to previous and future potential dispositions.
•Investment in marketable securities-During the nine months ended September 30, 2025, we invested $8.2 million in marketable securities through our captive insurance company.
•Investment in unconsolidated joint ventures-During the nine months ended September 30, 2025, we invested $7.0 million in our unconsolidated joint ventures, as compared to $3.6 million during the same period in 2024.
FINANCING ACTIVITIES-Our net cash provided by financing activities was primarily impacted by the following:
•Debt borrowings and payments-During the nine months ended September 30, 2025, we had $264.1 million in net borrowings primarily as a result of our 2025 senior note issuance, payments on our mortgage loans, and net repayments under our revolving credit facility. During the nine months ended September 30, 2024, we had $130.4 million in net borrowings of debt primarily as a result of our May and September 2024 senior note issuances, payments on our term loans, and net repayments under our revolving credit facility.
•Distributions to stockholders and OP unit holders-Cash used for distributions to common stockholders and OP unit holders increased $22.7 million for the nine months ended September 30, 2025 as compared to the same period in 2024, primarily due to the timing of the funding of our December 2024 distribution payment combined with an increase in shares of common stock outstanding and our distribution rate increase.
CRITICAL ACCOUNTING ESTIMATES
"Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates" of our 2024 Annual Report on Form 10-K, filed with the SEC on February 11, 2025, contains a description of our critical accounting estimates, including those relating to the valuation of real estate assets and rental income. There have been no significant changes to our critical accounting estimates during 2025.
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