Phillips Edison & Company, Inc. · NASDAQ:PECO
Phillips Edison & — Q2 2021 Earnings Presentation
39 slides from Phillips Edison &'s earnings presentation, Aug 18, 2021
Slide 1: Q2 2021 Investor Presentation
Q2 2021 Investor Presentation Grocery Centered. Community Focused.
Slide 2: Disclaimer / Forward-Looking Disclosure
Disclaimer / Forward-Looking Disclosure Certain statements contained in this presentation of Phillips Edison & Company, Inc. (the “Company”) other than historical facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Secti
Slide 3: Key Stats as of August 11, 2021
Nasdaq: PECO Key Stats as of August 11, 2021 Market Capitalization $3.8B Total Enterprise Value $5.6B Total Shares Outstanding (Diluted) 126.6M shares Share Price $30.55 per share(1) Dividend | Yield $1.02 annualized dividend per share | 3.3% yield (1) Public Float 15.4% of TSO (19.55 M shares) Mana
Slide 4: Phillips Edison & Company: Our Mission Statement
Phillips Edison & Company: Our Mission Statement We Create Great Omni-Channel Grocery-Anchored Shopping Experiences and Improve Our Communities One Center at a Time Grocery Centered. Community Focused. We are an experienced owner and operator exclusively focused on grocery- anchored neighborhood sho
Slide 5: Why Phillips Edison?
Why Phillips Edison? DIFFERENTIATED FOCUSED STRATEGY: GROCERY-ANCHORED NEIGHBORHOOD SHOPPING CENTERS INTEGRATED OPERATING PLATFORM TARGETED PORTFOLIO SUPERIOR FINANCIAL AND OPERATIONAL PERFORMANCE Grocery Centered. Community Focused. 5
Slide 6: Our Differentiated Strategy
Our Differentiated Strategy Exclusively Focused on Omni-Channel Grocery-Anchored Neighborhood Shopping Centers Key Elements of Our Strategy A Typical PECO Center: MetroWest Village ✓ #1 or #2 Grocery Anchor by Sales (86% of ABR) ✓ 96% of ABR from Omni-Channel Grocery-Anchored Centers Format Drives R
Slide 7: Why Grocery-Anchored Centers?
Why Grocery-Anchored Centers? Necessity-Based High Traffic Omni-Channel • Consumer staple goods and • U.S. consumers visit grocery • PECO centers are a critical services that are indispensable stores 1.6 times per week (2) component of our Neighbors’ for day-to-day living omni-channel strategies and
Slide 8: Why Grocery-Anchored Centers? The Bright Spot in the U.S. Retail Landscape
Why Grocery-Anchored Centers? The Bright Spot in the U.S. Retail Landscape Grocery Demonstrated Strong Performance Both During COVID-19 and Throughout Years Before, Despite Upheaval Affecting Other Retail Segments U.S. Retail Sales – 2020 YoY Growth / (Decline) 11% 6% 3% (5%) (16%) (16%) (19%) (24%)
Slide 9: Why Grocery-Anchored Centers? Strongly Resistant to Ecommerce
Why Grocery-Anchored Centers? Strongly Resistant to Ecommerce Grocery Home Delivery Is Uneconomical Across a Wide Range of Strategies – Brick & Mortar Remains Critical In Store: Home Delivery: Profitable Unprofitable for Grocers 2 – 4% (2%) (5%) (7%) (8%) (11%) (15%) Centralized Micro- Grocer Grocer
Slide 10: Focus on Targeted Trade Areas Across a Broad National Footprint
Focus on Targeted Trade Areas Across a Broad National Footprint Substantial Scale with a Targeted Trade Area Focus; ~50% of ABR from Sun Belt (1) 294 Properties Across 31 States Top 10 Markets (2) 1. Atlanta 2. Chicago 3. Dallas 4. Minn. 63 / St. Paul 5. Denver 6. Sacramento 7. Tampa 8. Washington,
Slide 11: Targeted Trade Areas In Line with Leading Grocer Demographics
Targeted Trade Areas In Line with Leading Grocer Demographics Average 3-Mile Population (000s) 63 61 55 Publix PECO Kroger Median 3-Mile Household Income ($000s) $68 $68 $63 PECO Publix Kroger Source: Synergos Technologies, Inc. Grocery Centered. Community Focused. 11
Slide 12: Why Smaller Centers? Leasing Activity Concentrated in Smaller Spaces
Why Smaller Centers? Leasing Activity Concentrated in Smaller Spaces 65% of Leasing Activity for Small Shops < 2,500 SF – Well Suited for PECO’s Neighborhood and Community Centers U.S. Strip Center Leasing Activity by Lease Count (2019, New Leases) 65% 20% 8% 7% 2,500 - 5,000 - ≥ 10,000 <2,500 SF 4,
Slide 13: Why Smaller Centers? Strong Releasing Spreads, High Retention, and Lower Capex
Why Smaller Centers? Strong Releasing Spreads, High Retention, and Lower Capex PECO’s Strong NOI Growth is Driven by Strong Lease Renewal Spreads, Impressive Neighbor Retention Rates, and Low Capex Spending Defensive Position of • High retention rates of 87% from 2017-2020: Grocery-Anchored Centers
Slide 14: Why Smaller Centers? Limited Exposure to High-Risk Retailer Categories
Why Smaller Centers? Limited Exposure to High-Risk Retailer Categories PECO’s Portfolio Mix Ensures Ecommerce Resiliency and Limited Impact from Store Closures • Grocery store COVID-19 U.S. Retailer Bankruptcies by Retail Sector (1) bankruptcies 35% were only 4% of COVID-era retailer bankruptcies an
Slide 15: Why Retailers Succeed in PECO Shopping Centers
Why Retailers Succeed in PECO Shopping Centers How the PECO Platform Drives Success for Our Neighbors Scaled for superior service to Neighbors: ✓ ✓ Innovating the physical shopping experience experienced service providers, for omni-channel retailers: Front Row to Go, responsiveness, marketing tools,
Slide 16: PECO's Strong Performance
PECO’s Strong Performance PECO’s Differentiated Strategy Has Driven Its Strong Financial and Operational Performance Leased Portfolio Occupancy(1) Same-Center NOI Growth(2) 95.4% 4.6% 94.7% 94.7% 93.9% 3.7% 3.7% 93.2% 3.5% 2017 2018 2019 2020 YTD 2021 2017 2018 2019 2020 Q2 -4.1% 2021 • PECO’s high
Slide 17: Portfolio Snapshot at June 30, 2021
Portfolio Snapshot at June 30, 2021 ABR by Neighbor Composition (1) 96% 94.7% < 7% of ABR 63 63 63 of ABR from 72.5% Grocery-Anchored Leased Top Neighbor Occupancy Exposure Necessity-Based Centers Goods and Services 35.3% 2.4% $609 63 63 63 Grocer ABR of Grocer Avg. Annual Grocer Total ABR Health Ra
Slide 18: Investment Grade Balance Sheet
Investment Grade Balance Sheet Key Highlights (1) Liquidity (2) • Investment Grade Balance Sheet $153M • Moody’s: Baa3 (stable); S&P: BBB- (stable) • Significant post-IPO liquidity position of $642M (2) • Pro forma post-IPO net debt / adj. EBITDAre of 5.5x $489M • Pro forma credit profile: • Approxi
Slide 19: Key Growth Drivers
Key Growth Drivers 1 Re-Lease at Higher Rents 2 Lease-up Vacant Space 3 Built-in Rent Bumps 4 Redevelopment Opportunities (Targeting 9% – 11% Unlevered Yield (1)) 5 Robust Acquisition Strategy 6 Platform Scaled for Growth 7 Investment Grade Balance Sheet Positioned for Growth 8 Demographic and Econo
Slide 20: Track Record of Successful Acquisitions
Track Record of Successful Acquisitions Strong Track Record of Acquiring Material Volume of Strategically Aligned Centers • 280 total acquisitions closed for $4.7B of value from 2012-2018 – Equated to an annual acquisition pace of 40 centers valued at $670M • More recently, ranked #1 as the largest
Slide 21: Large Addressable Market Provides Opportunity for External Growth
Large Addressable Market Provides Opportunity for External Growth Complete Database of Identified Target Properties Identified 5,800+ centers across the country that meet PECO’s acquisition criteria Grocery Centered. Community Focused. 21
Slide 22: Format Drives Results: Generating Superior Risk Adjusted Returns
Format Drives Results: Generating Superior Risk Adjusted Returns Higher Going-in Yields SUPERIOR Produce Stronger Growth INVESTMENT RETURNS Lower Capex Required Grocery Centered. Community Focused. 22
Slide 23: Key Takeaways: Format Drives Results
Key Takeaways: Format Drives Results 1 We own small format centers anchored by the #1 or #2 grocer in a given market Our 294 centers are located in areas close to the end consumer; 2 where America’s leading grocers make money 3 Experienced, cycle-tested management team; owning 7% of the Company 4 Gr
Slide 24: Additional Materials
• SECTION 2 1 APPENDIX Additional Materials
Slide 25: Experienced Leadership Team
Experienced Leadership Team Deep Management Team with an Average of 29 Years of Experience Executive Team Jeff Edison Devin Murphy Robert Myers John Caulfield Tanya Brady Chairman and President Chief Operating Chief Financial General Counsel Chief Executive Officer Officer and Secretary Officer 28 Y
Slide 26: Corporate Governance
Corporate Governance Experienced Board of Directors Governance Highlights Jeff Edison • Co-founded Phillips Edison & Company in 1991 ✓ Seasoned 10+ year SEC filer with a Chairman • Previous roles at NationsBank’s South Charles Realty, Morgan Stanley, and Taubman Centers well-established corporate go
Slide 27: Our Commitment to ESG
Our Commitment to ESG We Are Committed to Making a Difference in Our Communities Environmentally-Friendly Numerous Social Programs for Asset Management Our Communities and Our Associates Reducing energy consumption through LED lighting retrofits both internally and externally • LED retrofits at 195
Slide 28: Strong and Diversified Neighbor Mix
Strong and Diversified Neighbor Mix Top 20 Neighbors Dominated by Grocers and Other Necessity and Service-Based Businesses Neighbor Location Count % ABR (1) Neighbor Location Count % ABR (1) 59 6.6% 5 0.8% 56 5.7% 79 0.7% 23 4.4% 35 0.7% 29 4.3% 4 0.7% 13 2.3% 7 0.6% 11 1.9% 4 0.6% 15 1.3% 4 0.6% 11
Slide 29: Non-GAAP Reconciliations
Non-GAAP Reconciliations • SECTION 2 APPENDIX Non-GAAP Reconciliations
Slide 30: Non-GAAP Measures
Non-GAAP Measures We present Same-Center NOI as a supplemental measure of our performance. We define NOI as total operating revenues, adjusted to exclude non-cash revenue items, less property operating expenses and real estate taxes. We believe Same-Center NOI provides useful information to our inve
Slide 31: Non-GAAP Measures (Cont'd)
Non-GAAP Measures (Cont’d) Below is a reconciliation of Net (Loss) Income to NOI for real estate investments and Same-Center NOI (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2019 2021 2020 Net income $ 6,390 $ (6,413) $ (42,172) $ 6,507 $ 4,786 Adjusted to exclude:
Slide 32: Non-GAAP Measures (Cont'd)
Non-GAAP Measures (Cont’d) Below is a reconciliation of Net (Loss) Income to NOI for real estate investments and Same-Center NOI (in thousands): Year Ended December 31, 2020 2019 $ $ Net income 5,462 (72,826) Adjusted to exclude: Fees and management income (9,820) (11,680) Straight-line rental incom
Slide 33: Non-GAAP Measures (Cont'd)
Non-GAAP Measures (Cont’d) Below is a reconciliation of Net (Loss) Income to NOI for real estate investments and Same-Center NOI (in thousands): Year Ended December 31, 2019 2018 $ $ Net (loss) income (72,826) 46,975 Adjusted to exclude: Fees and management income (11,680) (32,926) Straight-line ren
Slide 34: Non-GAAP Measures (Cont'd)
Non-GAAP Measures (Cont’d) Below is a reconciliation of Net (Loss) Income to NOI for real estate investments and Same-Center NOI (in thousands): Year Ended December 31, 2018 2017 $ $ Net income (loss) 46,975 (41,718) Adjusted to exclude: Fees and management income (32,926) (8,156) Straight-line rent
Slide 35: Non-GAAP Measures (Cont'd)
Non-GAAP Measures (Cont’d) Below is a reconciliation of Net (Loss) Income to NOI for real estate investments and Same-Center NOI (in thousands): Year Ended December 31, 2017 2016 $ $ Net (loss) income (41,718) 9,043 Adjusted to exclude: Fees and management income (8,156) – Straight-line rental incom
Slide 36: Non-GAAP Measures (Cont'd)
Non-GAAP Measures (Cont’d) Earnings Before Interest, Taxes, Depreciation, and Amortization for Real Estate ("EBITDAre") and Adjusted EBITDAre Nareit defines EBITDAre as net income (loss) computed in accordance with GAAP before (i) interest expense, (ii) income tax expense, (iii) depreciation and amo
Slide 37: Non-GAAP Measures (Cont'd)
Non-GAAP Measures (Cont’d) The following table presents the Company's calculation of EBITDAre and Adjusted EBITDAre and provides additional information related to its operations (in thousands): Year Ended Three Months Ended June 30, Six Months Ended June 30, December 31, 2021 2020 2021 2020 2020 Cal
Slide 38: Non-GAAP Measures (Cont'd)
Non-GAAP Measures (Cont’d) Financial Leverage Ratios The Company’s net debt to Adjusted EBITDAre, net debt to total enterprise value, and debt covenant compliance as of June 30, 2021 allows the Company access to future borrowings as needed in the near term. The following table presents the Company’s
Slide 39: Non-GAAP Measures (Cont'd)
Non-GAAP Measures (Cont’d) The following table presents the calculation of net debt to Adjusted EBITDAre and net debt to total enterprise value as of June 30, 2021 and December 31, 2020 (dollars in thousands): June 30, 2021 June 30, 2021 December 31, 2020 (As Adjusted)(2) Net debt to Adjusted EBITDA
Phillips Edison & Company — Q2 2021 Earnings Presentation on 6ix