Phillips Edison & Company Reports Third Quarter 2024 Results and Updates Full Year Earnings Guidance
CINCINNATI, Oct. 24, 2024 (GLOBE NEWSWIRE) -- Phillips Edison & Company, Inc. (NASDAQ:PECO) ("PECO" or the "Company"), one of the nation's largest owners and operators of high-quality grocery-anchored neighborhood shopping centers, today reported financial and operating results for the period ended September 30, 2024 and updated full year 2024 earnings guidance. For the three and nine months ended September 30, 2024, net income attributable to stockholders was $11.6 million, or $0.09 per diluted share, and $44.5 million, or $0.36 per diluted share, respectively.
Highlights for the Third Quarter Ended September 30, 2024
Reported Nareit FFO of $81.6 million, or $0.60 per diluted share
Reported Core FFO of $84.4 million, or $0.62 per diluted share
Updated 2024 Nareit FFO and Core FFO guidance ranges to $2.35 to $2.39 per diluted share and $2.40 to $2.44 per diluted share, respectively
The midpoint of full year 2024 Nareit FFO guidance represents 5.3% year-over-year growth
The midpoint of full year 2024 Core FFO guidance represents 3.4% year-over-year growth
Increased same-center NOI year-over-year by 3.2%
Updated 2024 same-center NOI guidance range to 3.50% to 4.00%
The midpoint of full year 2024 same-center NOI guidance represents 3.75% year-over-year growth
Reported strong leased portfolio occupancy of 97.8% and same-center leased portfolio occupancy of 97.9%
Increased leased inline occupancy by 10 basis points year-over-year to 95.0%; same-center leased inline occupancy remained strong at 94.9%
Executed portfolio comparable new leases at a record-high rent spread of 55.0% and inline comparable new leases at a rent spread of 28.3% during the quarter
Executed portfolio comparable renewal leases at a rent spread of 19.8% and inline comparable renewal leases at a rent spread of 19.6% during the quarter
As previously announced, completed a public debt offering of $350 million aggregate principal amount of 4.950% senior notes due in 2035, and 93.2% of total debt was fixed-rate at quarter end
Acquired five shopping centers and two land parcels for a total of $95.7 million
Updated full year 2024 acquisitions guidance to a range of $275 to $325 million
Management CommentaryJeff Edison, Chairman and Chief Executive Officer of PECO stated: "The ongoing strength of our performance is attributable to our differentiated and focused strategy of owning right-sized, high-quality, grocery-anchored neighborhood shopping centers anchored by the #1 or #2 grocer by sales in a market. Our results at the property level are driven by our integrated operating platform and our experienced and cycle-tested team. Based on the continued strong operating environment and health of our Neighbors, we are pleased to increase our full year 2024 earnings guidance for Core FFO per share. In addition, we are increasing our full year 2024 acquisitions guidance to $275 million to $325 million, net of dispositions. We continue to have the capabilities and leverage capacity to acquire more assets as attractive opportunities materialize."
Financial Results for the Third Quarter and Nine Months Ended September 30, 2024
Net IncomeThird quarter 2024 net income attributable to stockholders totaled $11.6 million, or $0.09 per diluted share, compared to net income of $12.2 million, or $0.10 per diluted share, during the third quarter of 2023.
For the nine months ended September 30, 2024, net income attributable to stockholders totaled $44.5 million, or $0.36 per diluted share, compared to net income of $43.3 million, or $0.37 per diluted share, for the same period in 2023.
Nareit FFOThird quarter 2024 funds from operations attributable to stockholders and operating partnership ("OP") unit holders as defined by Nareit ("Nareit FFO") increased 12.5% to $81.6 million, or $0.60 per diluted share, compared to $72.5 million, or $0.55 per diluted share, during the third quarter of 2023. Nareit FFO was impacted by a loss on extinguishment of debt of $1.2 million, which is primarily due to the repayment of the Company's term loans using proceeds from the 2024 senior notes issuances.
For the nine months ended September 30, 2024, Nareit FFO increased 6.8% to $240.0 million, or $1.76 per diluted share, compared to $224.7 million, or $1.70 per diluted share, during the same period a year ago.
Core FFOThird quarter 2024 core funds from operations attributable to stockholders and OP unit holders ("Core FFO") increased 9.6% to $84.4 million, or $0.62 per diluted share, compared to $77.0 million, or $0.58 per diluted share, during the third quarter of 2023.
For the nine months ended September 30, 2024, Core FFO increased 5.7% to $246.0 million, or $1.80 per diluted share, compared to $232.8 million, or $1.76 per diluted share, for the same period in 2023.
Same-Center NOIThird quarter 2024 same-center net operating income ("NOI") increased 3.2% to $107.7 million, compared to $104.4 million during the third quarter of 2023.
For the nine months ended September 30, 2024, same-center NOI increased 2.9% to $320.0 million, compared to $310.9 million during the same period a year ago.
Portfolio Overview for the Third Quarter and Nine Months Ended September 30, 2024
Portfolio StatisticsAs of September 30, 2024, PECO's wholly-owned portfolio consisted of 290 properties, totaling approximately 32.9 million square feet, located in 31 states. This compared to 275 properties, totaling approximately 31.4 million square feet, located in 31 states as of September 30, 2023.
Leased portfolio occupancy was 97.8% as of September 30, 2024, compared to 97.8% as of September 30, 2023. Same-center leased portfolio occupancy was 97.9% as of September 30, 2024, compared to 97.8% as of September 30, 2023.
Leased anchor occupancy was 99.4% as of September 30, 2024, compared to 99.3% as of September 30, 2023. Leased inline occupancy increased 10 basis points to 95.0% as of September 30, 2024, compared to 94.9% as of September 30, 2023. Same-center leased anchor occupancy was 99.4% as of September 30, 2024, compared to 99.3% as of September 30, 2023. Same-center leased inline occupancy remained strong at 94.9% as of September 30, 2024, compared to 95.0% as of September 30, 2023.
Leasing ActivityDuring the third quarter of 2024, 268 leases were executed totaling approximately 1.6 million square feet. This compared to 231 leases executed totaling approximately 0.9 million square feet during the third quarter of 2023.
During the nine months ended September 30, 2024, 790 leases were executed totaling approximately 4.6 million square feet. This compared to 779 leases executed totaling approximately 3.6 million square feet during the same period in 2023.
Comparable rent spreads during the third quarter of 2024, which compare the percentage increase of new or renewal leases to the expiring lease of a unit that was occupied within the past twelve months, were 55.0% for new leases, 19.8% for renewal leases and 27.6% combined.
Comparable rent spreads during the nine months ended September 30, 2024 were 37.7% for new leases, 19.0% for renewal leases and 23.8% combined.
Transaction ActivityDuring the third quarter of 2024, the Company acquired five shopping centers and two land parcels for a total of $95.7 million. This includes the Company's prorated share of one shopping center purchased through Necessity Retail Venture LLC. The Company expects to drive value in these assets through occupancy increases and rent growth, as well as potential future development of ground-up outparcel retail spaces. There were no dispositions in the quarter. The third quarter 2024 acquisitions consisted of:
Ridgeview Marketplace, a 22,759 square foot shopping center anchored by King Soopers located in a Colorado Springs, Colorado suburb.
Lemont Plaza, a 119,013 square foot shopping center anchored by Pete's Fresh Market located in a Chicago, Illinois suburb.
Rue de France, a 63,331 square foot shopping center located in a Minneapolis, Minnesota suburb.
Bethel Shopping Center, a 101,205 square foot shopping center anchored by Big Y Foods located in a Bethel, Connecticut suburb.
During the nine months ended September 30, 2024, the Company acquired nine shopping centers and four land parcels for a total of $211.1 million. This includes the Company's prorated share of one shopping center purchased through Necessity Retail Venture LLC.
Joint Venture with Cohen & SteersAs previously announced, PECO acquired Des Peres Corners, a grocery-anchored shopping center located in a St. Louis, Missouri suburb, with Cohen & Steers Income Opportunities REIT, Inc. ("CNSREIT"). The acquisition was made through a programmatic joint venture targeting $300 million in equity and owned 80% by CNSREIT and 20% by PECO.
Balance Sheet HighlightsAs of September 30, 2024, the Company had approximately $752 million of total liquidity, comprised of $9.3 million of cash, cash equivalents and restricted cash, plus $742.9 million of borrowing capacity available on its $800 million revolving credit facility.
As of September 30, 2024, the Company's net debt to annualized adjusted EBITDAre was unchanged from 5.1x at December 31, 2023. As of September 30, 2024, the Company's outstanding debt had a weighted-average interest rate of 4.4% and a weighted-average maturity of 6.0 years when including all extension options.
As previously announced, PECO completed in September 2024 a public debt offering of $350 million aggregate principal amount of 4.950% senior notes due 2035. The notes were priced at 98.458% of the principal amount and will mature January 2035.
As of September 30, 2024, 93.2% of the Company's total debt was fixed-rate debt.
2024 GuidancePECO has updated its 2024 earnings guidance, as summarized in the table below, which is based upon the Company's current view of existing market conditions and assumptions for the year ending December 31, 2024. The following statements are forward-looking and actual results could differ materially depending on market conditions and the factors set forth under "Forward-Looking Statements" below.
(in thousands, except per share amounts)
Q3 2024 YTD
Updated Full Year2024 Guidance
Previous Full Year2024 Guidance
Net income per share
$0.36
$0.48 - $0.50
$0.49 - $0.54
Nareit FFO per share
$1.76
$2.35 - $2.39
$2.34 - $2.41
Core FFO per share
$1.80
$2.40 - $2.44
$2.37 - $2.45
Same-Center NOI growth
2.9%
3.50% - 4.00%
3.25% - 4.25%
Portfolio Activity:
Acquisitions, net(1)
$211,082
$275,000 - $325,000
$200,000 - $300,000
Other:
Interest expense, net
$71,954
$96,000 - $99,000
$98,000 - $106,000
G&A expense
$34,060
$45,000 - $47,000
$45,000 - $49,000
Non-cash revenue items(2)
$11,320
$15,000 - $19,000
$14,500 - $18,500
Adjustments for collectibility
$4,050
$4,000 - $5,000
$4,000 - $5,000
(1) Includes the prorated portion owned through the Company's unconsolidated joint ventures.(2) Represents straight-line rental income and net amortization of above- and below-market leases.
The Company does not provide a reconciliation for same-center NOI estimates on a forward-looking basis because it is unable to provide a meaningful or reasonably accurate calculation or estimation of certain reconciling items which could be significant to the Company's results without unreasonable effort.
The following table provides a reconciliation of the range of the Company's 2024 estimated net income to estimated Nareit FFO and Core FFO:
(Unaudited)
Low End
High End
Net income per share
$
0.48
$
0.50
Depreciation and amortization of real estate assets
1.85
1.87
Adjustments related to unconsolidated joint ventures
0.02
0.02
Nareit FFO per share
$
2.35
$
2.39
Depreciation and amortization of corporate assets
0.01
0.01
Loss on extinguishment or modification of debt and other, net
0.01
0.01
Transaction costs and other
0.03
0.03
Core FFO per share
$
2.40
$
2.44
Conference Call DetailsPECO will host a conference call and webcast on Friday, October 25, 2024 at 12:00 p.m. Eastern Time to discuss third quarter 2024 results and provide further business updates. Chairman and Chief Executive Officer Jeff Edison, President Bob Myers and Chief Financial Officer John Caulfield will host the conference call and webcast. Dial-in and webcast information is below.
Third Quarter 2024 Earnings Conference Call Details:
Date: Friday, October 25, 2024Time: 12:00 p.m. ETToll-Free Dial-In Number: (800) 715-9871International Dial-In Number: (646) 307-1963Conference ID: 4551083Webcast: Third Quarter 2024 Webcast Link
An audio replay will be available approximately one hour after the conclusion of the conference call using the webcast link above.
For more information on the Company's financial results, please refer to the Company's Form 10-Q for the quarter ended September 30, 2024.
Connect with PECOFor additional information, please visit https://www.phillipsedison.com/
Follow PECO on:
Twitter at https://twitter.com/PhillipsEdison
Facebook at https://www.facebook.com/phillipsedison.co
Instagram at https://www.instagram.com/phillips.edison/; and
Find PECO on LinkedIn at https://www.linkedin.com/company/phillipsedison&company
About Phillips Edison & CompanyPhillips Edison & Company, Inc. ("PECO") is one of the nation's largest owners and operators of high-quality, grocery-anchored neighborhood shopping centers. Founded in 1991, PECO has generated strong results through its vertically-integrated operating platform and national footprint of well-occupied shopping centers. PECO's centers feature a mix of national and regional retailers providing necessity-based goods and services in fundamentally strong markets throughout the United States. PECO's top grocery anchors include Kroger, Publix, Albertsons and Ahold Delhaize. As of September 30, 2024, PECO managed 311 shopping centers, including 290 wholly-owned centers comprising 32.9 million square feet across 31 states and 21 shopping centers owned in two institutional joint ventures. PECO is focused on creating great omni-channel, grocery-anchored shopping experiences and improving communities, one neighborhood shopping center at a time.
PECO uses, and intends to continue to use, its Investors website, which can be found at https://investors.phillipsedison.com, as a means of disclosing material nonpublic information and for complying with its disclosure obligations under Regulation FD.
PHILLIPS EDISON & COMPANY, INC.CONSOLIDATED BALANCE SHEETSAS OF SEPTEMBER 30, 2024 AND DECEMBER 31, 2023 (Condensed and Unaudited)(In thousands, except per share amounts)
September 30, 2024
December 31, 2023
ASSETS
Investment in real estate:
Land and improvements
$
1,842,671
$
1,768,487
Building and improvements
3,977,380
3,818,184
In-place lease assets
515,014
495,525
Above-market lease assets
75,500
74,446
Total investment in real estate assets
6,410,565
6,156,642
Accumulated depreciation and amortization
(1,713,033
)
(1,540,551
)
Net investment in real estate assets
4,697,532
4,616,091
Investment in unconsolidated joint ventures
27,294
25,220
Total investment in real estate assets, net
4,724,826
4,641,311
Cash and cash equivalents
6,446
4,872
Restricted cash
2,887
4,006
Goodwill
29,066
29,066
Other assets, net
187,033
186,411
Total assets
$
4,950,258
$
4,865,666
LIABILITIES AND EQUITY
Liabilities:
Debt obligations, net
$
2,104,788
$
1,969,272
Below-market lease liabilities, net
114,796
108,223
Accounts payable and other liabilities
129,517
116,461
Deferred income
22,099
18,359
Total liabilities
2,371,200
2,212,315
Equity:
Preferred stock, $0.01 par value per share, 10,000 shares authorized, zero shares issued and outstanding at September 30, 2024 and December 31, 2023
—
—
Common stock, $0.01 par value per share, 1,000,000 shares authorized, 122,615 and 122,024 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively
1,226
1,220
Additional paid-in capital
3,558,407
3,546,838
Accumulated other comprehensive income
1,907
10,523
Accumulated deficit
(1,312,303
)
(1,248,273
)
Total stockholders' equity
2,249,237
2,310,308
Noncontrolling interests
329,821
343,043
Total equity
2,579,058
2,653,351
Total liabilities and equity
$
4,950,258
$
4,865,666
PHILLIPS EDISON & COMPANY, INC.CONSOLIDATED STATEMENTS OF OPERATIONSFOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 (Condensed and Unaudited)(In thousands, except per share amounts)
Three Months Ended September 30,
Nine Months Ended September 30,
2024
2023
2024
2023
Revenues:
Rental income
$
161,780
$
149,566
$
478,134
$
446,274
Fees and management income
2,856
2,168
7,943
7,192
Other property income
891
740
2,267
2,209
Total revenues
165,527
152,474
488,344
455,675
Operating Expenses:
Property operating
27,528
24,274
81,461
74,010
Real estate taxes
19,569
19,028
57,897
55,481
General and administrative
11,114
10,385
34,060
33,604
Depreciation and amortization
68,328
58,706
189,706
176,871
Total operating expenses
126,539
112,393
363,124
