RE: Phillips Edison & Company, Inc. (“PECO”) Liquidity and Share Repurchase Program (“SRP”) Update – September 2019


Dear Fellow Stockholder,

Thank you for your continued support of Phillips Edison & Company. With the growth we have experienced over the past several years, we have become one of the nation’s largest internally-managed REITs focused exclusively on necessity-based, internet-resilient, grocery-anchored neighborhood shopping centers. I would like to take this opportunity to provide you with an update on our year-to-date performance and PECO’s long-term strategic plan.

First Six Months of 2019 - Recap

As of June 30, 2019, our nation-wide portfolio included 298 wholly-owned properties across 32 states anchored by 36 different leading grocers. We have also co-invested alongside institutional investors through our existing joint ventures with Northwestern Mutual Life Insurance Company and TPG Real Estate for an additional 30 grocery-anchored shopping centers. All in, the total enterprise value (“TEV”) of our portfolio is approximately $6.1 billion.

In May of 2019, our board established a new estimated value per share (“EVPS”) of $11.10 (as of March 31, 2019), which marks a $0.05 increase from the previous EVPS of $11.05 (as of March 31, 2018). This is the fourth time we have increased our EVPS since we completed the equity raise of our first non-traded REIT in 2014. Shares of that first non-traded REIT were initially valued at $10.00 per share.

During the first six months of 2019, leased portfolio occupancy improved to 94.6%, an increase from 93.2% at December 31, 2018, which illustrates robust tenant demand for our well-located grocery-anchored real estate. Our debt to TEV ratio is approximately 40.7%; our outstanding debt is 86.4% fixed-rate with a weighted-average interest rate of 3.5% and a weighted average term of 4.7 years.

Recently, the PECO Board of Directors authorized distributions for the upcoming quarter at an annualized rate of $0.67 per share, maintaining our distribution rate of 6.7% (on PECO’s original offering price of $10.00 per share). We are pleased to report that we have made over 100 consecutive months of distributions and have paid over $1.1 billion of capital to our stockholders through our monthly distributions.

Liquidity and Market Commentary

Since PECO was founded, we have been strictly focused on owning and operating grocery-anchored neighborhood shopping centers. Our centers, which typically have a trade area of 3 miles and average approximately 110,000 square feet, are likely very similar to where you and your family go grocery shopping. Because of the necessity-based nature of the products and services offered by our tenants, and the fact that the average family makes 1.5 trips per week to the grocery store, our centers have proven to be resilient through many market cycles and shifting consumer preferences. Based on our experience, we maintain that we can continue to produce meaningful returns for our stockholders, as we have done over our 28-year history.

Over the past few years, we have seen the retail real estate market go through some transformational changes and as a result, our expectations around the timing of a full-cycle liquidity event have evolved. Looking at the broader retail real estate sector, it’s no secret that malls and large power centers (250,000 sq. ft. with at least three big-box anchors) have been significantly impacted by consumers’ shifting preferences toward online shopping. Thankfully, these are not the type of centers that we own.

Because of the discretionary nature of products offered at malls and power centers and the convenience of online shopping, many retailers, and particularly soft goods retailers, have struggled and closed their doors. This has resulted in the declining value of these assets and led to negative headlines broadly across retail real estate. Our smaller, neighborhood grocery-anchored centers have been resilient to these store closures; however, the general concern over retail real estate from institutional investors has, unfortunately, limited our liquidity options at this time.

As a result of this concern, and upon analysis of our publicly traded peers, we believe listing on a national stock exchange at the present time would result in a meaningful trading discount in our share price relative to our estimated value per share. Thus, we are focused on the execution of our strategic plans while the REIT market improves before we look to execute a potential listing.

We continue to be hard at work positioning PECO for a full-cycle liquidity event. In 2017, we internalized our asset manager through the acquisition of Phillips Edison Limited Partnership, thereby eliminating the asset management fee paid by the REIT and removing a potential headwind in the public markets of being externally managed. Then, in 2018, we merged with Phillips Edison Grocery Center REIT II, Inc. (“REIT II”), creating one of the nation’s largest internally-managed REITs exclusively focused on grocery-anchored neighborhood shopping centers. Again, the asset management fees paid by REIT II were eliminated by the merger. We continue to evaluate our options and are committed to executing a successful liquidity event as soon as possible – however, we want to ensure this is done at a value in the best interest of our long-term stockholders.

Balance Sheet

Further analysis of our peers has led us to conclude that we must improve our leverage ratios in order to achieve the maximum value per share upon a potential liquidity event through a public listing.

While we believe our current debt to total enterprise value ratio of 40.7% is conservative, it is higher than our publicly traded shopping center REIT peers. We are currently executing a plan to lower our leverage by paying down existing debt and growing our income through several initiatives, including, but not limited to the following:

  • Remaining strictly focused on operations and expense management;

  • Recycling capital through the disposition of non-core assets, and redeploying capital into accretive-growth opportunities such as:

    • the acquisition of higher-growth centers, and

    • the development and redevelopment projects at our current centers; and lastly,

  • Expanding our investment management business, including joint ventures, to generate additional cash flows without incurring additional debt.

Management and the PECO Board of Directors are committed to executing a successful liquidity event when we optimize our leverage profile and the public equity markets improve.

Share Repurchase Program - Updates

Because of our commitment to strictly manage our use of cash flow to improve our leverage ratios, we have recently implemented changes to our SRP.

We believe these changes are in the best interests of our stockholders that remain invested with us for the long term. Instead of spending millions of dollars to repurchase shares, we will deploy that capital, including proceeds from our distribution reinvestment program, to invest in additional properties, redevelopment and development projects, and to pay down debt. We believe that this strategy, coupled with our strategies mentioned earlier, will help us achieve an appropriate leverage ratio more quickly and help maximize our value upon a potential listing event.

Below is an overview of changes to the SRP:

  • Death, disability, and incompetence (“DDI”)

    • PECO will continue to make qualifying repurchases on a monthly basis; and

    • Shares will be repurchased at the original Phillips Edison & Company offering price of $10.00 per share or the most recent EVPS, whichever is lower.

  • Standard repurchase requests

    • PECO has suspended repurchases for standard SRP requests and all standard requests currently on file have been cancelled.

    • PECO will provide an update on the standard SRP during the spring of 2020.

Please see the full amendment in our second quarter 10-Q filed with the SEC at and posted to our website at

Committed to our Stockholders

Please understand that our goals remain the same as when we founded the company. We will continue to work hard to improve the value of your investment in our grocery-anchored shopping center portfolio as we provide regular monthly distributions to our stockholders. We have a path for liquidity and while our timing has been impacted by the overall markets, we remain committed to executing a strategic liquidity event for all our stockholders at an acceptable share price – as quickly as possible.

Collectively, our management and employees are the largest stockholders of PECO, and every decision we make and dollar we spend reflects our commitment to PECO’s long-term success. As illustrated by our strong occupancy and increase in our net operating income, we are executing on our plan and believe the value of our portfolio continues to improve.

We are steadfast in our focus on creating stockholder value and look forward to providing you regular updates along our path to liquidity. Thank you for your continued support.


/s/ Jeffrey S. Edison

Chairman and Chief Executive Officer

Phillips Edison & Company, Inc.


Forward-Looking Statements

Certain statements contained in this communication by 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”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We intend for all such forward-looking statements to be covered by the applicable safe harbor provisions for forward-looking statements contained in those acts. Such forward-looking statements can generally be identified by our use of forward-looking  terminology such as “may,” “maintain,” “will,” “expect,” “intend,” “estimate,” “believe,” “continue,” “look,” “likely,” “priority,” “goal,” “range,” “strategies,” “plan,” 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 communication was first made available. Such statements include, in particular, statements about our growth plans, capital strategies, and liquidity, and are subject to certain risks and uncertainties, including known and unknown risks, which could cause actual results to differ materially from those projected or anticipated. These risks include, 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) changes in interest rates and the availability of permanent mortgage financing; (v) competition from other available properties and the attractiveness of properties in our portfolio to our tenants; (vi) the financial stability of tenants, including the ability of tenants to pay rent; (vii) changes in tax, real estate, environmental, and zoning laws; (viii) the concentration of our portfolio in a limited number of industries, geographies, or investments; and (ix) any of the other risks included in the Company’s SEC filings. Therefore, such statements are not intended to be a guarantee of our performance in future periods. See Part I, Item 1A. Risk Factors of our 2018 Annual Report on Form 10-K, filed with the SEC on March 13, 2019, and Part II, Item 1A. Risk Factors of our Quarterly Report on Form 10-Q, filed with the SEC on August 12, 2019, for a discussion of some of the risks and uncertainties, although not all of the risks and uncertainties, that could cause actual results to differ materially from those presented in our forward-looking statements. Except as required by law, we do not undertake any obligation to update or revise any forward-looking statements contained in this presentation.


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