UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~September 30, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File Number: 000-54691

PHILLIPS EDISON & COMPANY, INC.

(Exact name of registrant as specified in its charter)


Maryland						27-1106076
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


11501 Northlake Drive, Cincinnati, Ohio						45249
(Address of principal executive offices)						(Zip code)


(513) 554-1110
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

~~None~~Common stock, par value $0.01 per share

~~None~~PECO

~~None~~Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.	Yes	☑	No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).	Yes	☑	No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☑

Smaller reporting company

Emerging growth company

☐

☑

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

~~Emerging growth~~ ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes

☐

No ☑

~~Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑~~

~~As of April 15, 2021, there were 280.8~~registrant’s Common Stock, $0.01 par value per share, and 93.7 million ~~outstanding~~ shares of ~~common~~Class B stock, $0.01 par value per share, outstanding as of ~~the Registrant.~~October 29, 2021.

PHILLIPS EDISON & COMPANY, INC.

FORM 10-Q

~~TABLE OF CONTENTS~~


~~PART I. FINANCIAL INFORMATION~~TABLE OF CONTENTS

PART I.
ITEM 1.		FINANCIAL STATEMENTS (CONDENSED AND UNAUDITED)	2

	CONSOLIDATED BALANCE SHEETS AS OF ~~MARCH 31,~~SEPTEMBER 30, 2021 AND DECEMBER 31, 2020	2

	CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) FOR THE THREE AND NINE MONTHS ENDED ~~MARCH 31,~~SEPTEMBER 30, 2021 AND 2020	3

	CONSOLIDATED STATEMENTS OF EQUITY FOR THE THREE AND NINE MONTHS ENDED ~~MARCH 31,~~SEPTEMBER 30, 2021 AND 2020	4

	CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE ~~THREE~~NINE MONTHS ENDED ~~MARCH 31,~~SEPTEMBER 30, 2021 AND 2020	56

	NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021
	NOTE 1	7ORGANIZATION	8
	NOTE 2	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	8
	NOTE 3	LEASES	10
	NOTE 4	REAL ESTATE ACTIVITY	11
	NOTE 5	OTHER ASSETS, NET	12
	NOTE 6	DEBT OBLIGATIONS	13
	NOTE 7	DERIVATIVES AND HEDGING ACTIVITIES	13
	NOTE 8	COMMITMENTS AND CONTINGENCIES	14
	NOTE 9	EQUITY	15
	NOTE 10	EARNINGS PER SHARE	16
	NOTE 11	R ELATED PARTY TRANSACTIONS	17
	NOTE 12	FAIR VALUE MEASUREMENTS	17
	NOTE 13	SUBSEQUENT EVENTS	20
ITEM 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	1721

ITEM 3.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	3543

ITEM 4.		CONTROLS AND PROCEDURES	3644

PART II. ~~OTHER INFORMATION~~

ITEM 1.		LEGAL PROCEEDINGS	3644

ITEM 1A.		RISK FACTORS	3644
ITEM 2.
~~ITEM 2.~~	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	3944

~~ITEM 5.~~	~~OTHER INFORMATION~~ITEM 6.	39

~~ITEM 6.~~	EXHIBITS	4345

SIGNATURES	4446


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									1


w PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PHILLIPS EDISON & COMPANY, INC.

CONSOLIDATED BALANCE SHEETS

AS OF ~~MARCH 31,~~SEPTEMBER 30, 2021 AND DECEMBER 31, 2020

(Condensed and Unaudited)

(In thousands, except per share amounts)


		March 31, 2021		December 31, 2020			September 30, 2021		December 31, 2020
ASSETS	ASSETS					ASSETS
Investment in real estate:	Investment in real estate:					Investment in real estate:
Land and improvements	Land and improvements	$	1,549,667	$	1,549,362	Land and improvements	$	1,528,310	$	1,549,362
Building and improvements	Building and improvements	3,205,125		3,237,986		Building and improvements	3,191,637		3,237,986
In-place lease assets	In-place lease assets	440,009		441,683		In-place lease assets	434,373		441,683
Above-market lease assets	Above-market lease assets	65,212		66,106		Above-market lease assets	64,555		66,106
Total investment in real estate assets	Total investment in real estate assets	5,260,013		5,295,137		Total investment in real estate assets	5,218,875		5,295,137
Accumulated depreciation and amortization	Accumulated depreciation and amortization	(980,981)		(941,413)		Accumulated depreciation and amortization	(1,058,765)		(941,413)
Net investment in real estate assets	Net investment in real estate assets	4,279,032		4,353,724		Net investment in real estate assets	4,160,110		4,353,724
Investment in unconsolidated joint ventures	Investment in unconsolidated joint ventures	33,813		37,366		Investment in unconsolidated joint ventures	32,315		37,366
Total investment in real estate assets, net	Total investment in real estate assets, net	4,312,845		4,391,090		Total investment in real estate assets, net	4,192,425		4,391,090
Cash and cash equivalents	Cash and cash equivalents	20,258		104,296		Cash and cash equivalents	24,455		104,296
Restricted cash	Restricted cash	41,995		27,641		Restricted cash	89,760		27,641
Goodwill	Goodwill	29,066		29,066		Goodwill	29,066		29,066
Other assets, net	Other assets, net	138,068		126,470		Other assets, net	139,451		126,470
Real estate investment and other assets held for sale		24,369		0
Real estate investments and other assets held for sale						Real estate investments and other assets held for sale	16,464		—
Total assets	Total assets	$	4,566,601	$	4,678,563	Total assets	$	4,491,621	$	4,678,563

LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Liabilities:	Liabilities:					Liabilities:
Debt obligations, net	Debt obligations, net	$	2,276,972	$	2,292,605	Debt obligations, net	$	1,699,417	$	2,292,605
Below-market lease liabilities, net	Below-market lease liabilities, net	97,865		101,746		Below-market lease liabilities, net	96,298		101,746
Earn-out liability	Earn-out liability	38,000		22,000		Earn-out liability	45,000		22,000
Derivative liabilities	Derivative liabilities	42,970		54,759		Derivative liabilities	35,779		54,759
Deferred income	Deferred income	19,127		14,581		Deferred income	17,251		14,581
Accounts payable and other liabilities	Accounts payable and other liabilities	80,152		176,943		Accounts payable and other liabilities	99,488		176,943
Liabilities of real estate investment held for sale		2,109		0
Liabilities of real estate investments held for sale						Liabilities of real estate investments held for sale	640		—
Total liabilities	Total liabilities	2,557,195		2,662,634		Total liabilities	1,993,873		2,662,634
Commitments and contingencies (Note 8)	Commitments and contingencies (Note 8)	0		0		Commitments and contingencies (Note 8)	—		—
Equity:	Equity:					Equity:
Preferred stock, $0.01 par value per share, 10,000 shares authorized, 0 shares issued and
outstanding at March 31, 2021 and December 31, 2020		0		0
Common stock, $0.01 par value per share, 1,000,000 shares authorized, 280,746 and 279,836
shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively		2,807		2,798
Preferred stock, $0.01 par value per share, 10,000 shares authorized, zero shares issued and						Preferred stock, $0.01 par value per share, 10,000 shares authorized, zero shares issued and
outstanding at September 30, 2021 and December 31, 2020						outstanding at September 30, 2021 and December 31, 2020	—		—
Common stock, $0.01 par value per share, 650,000 shares authorized, 19,550 shares issued and						Common stock, $0.01 par value per share, 650,000 shares authorized, 19,550 shares issued and
outstanding at September 30, 2021; zero shares authorized, issued, and outstanding as of						outstanding at September 30, 2021; zero shares authorized, issued, and outstanding as of
December 31, 2020						December 31, 2020	196		—
Class B common stock, $0.01 par value per share, 350,000 shares authorized, 93,663 and						Class B common stock, $0.01 par value per share, 350,000 shares authorized, 93,663 and
93,279 shares issued and outstanding at September 30, 2021 and December 31, 2020,						93,279 shares issued and outstanding at September 30, 2021 and December 31, 2020,
respectively						respectively	936		2,798
Additional paid-in capital (“APIC”)	Additional paid-in capital (“APIC”)	2,746,891		2,739,358		Additional paid-in capital (“APIC”)	3,261,585		2,739,358
Accumulated other comprehensive loss (“AOCI”)	Accumulated other comprehensive loss (“AOCI”)	(41,695)		(52,306)		Accumulated other comprehensive loss (“AOCI”)	(34,806)		(52,306)
Accumulated deficit	Accumulated deficit	(1,023,155)		(999,491)		Accumulated deficit	(1,054,483)		(999,491)
Total stockholders’ equity	Total stockholders’ equity	1,684,848		1,690,359		Total stockholders’ equity	2,173,428		1,690,359
Noncontrolling interests	Noncontrolling interests	324,558		325,570		Noncontrolling interests	324,320		325,570
Total equity	Total equity	2,009,406		2,015,929		Total equity	2,497,748		2,015,929
Total liabilities and equity	Total liabilities and equity	$	4,566,601	$	4,678,563	Total liabilities and equity	$	4,491,621	$	4,678,563

See notes to consolidated financial statements.


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									2

PHILLIPS EDISON & COMPANY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

FOR THE THREE AND NINE MONTHS ENDED ~~MARCH 31,~~SEPTEMBER 30, 2021 AND 2020

(Condensed and Unaudited)

(In thousands, except per share amounts)


		Three Months Ended March 31,			Three Months Ended September 30,						Nine Months Ended September 30,
			2021			2020			2021		2020		2021		2020
Revenues:	Revenues:							Revenues:
Rental income	Rental income		$	127,623		$	128,466	Rental income	$	128,826	$	123,298	$	386,784	$	367,418
Fees and management income	Fees and management income		2,286			2,165		Fees and management income	2,435		2,581		7,095		7,506
Other property income	Other property income		472			892		Other property income	1,073		816		1,906		2,334
Total revenues	Total revenues		130,381			131,523		Total revenues	132,334		126,695		395,785		377,258
Operating Expenses:	Operating Expenses:							Operating Expenses:
Property operating	Property operating		22,202			21,762		Property operating	21,608		20,835		65,784		62,226
Real estate taxes	Real estate taxes		16,573			17,112		Real estate taxes	16,375		17,282		49,762		50,847
General and administrative	General and administrative		9,341			10,740		General and administrative	11,627		9,595		32,905		30,141
Depreciation and amortization	Depreciation and amortization		55,341			56,227		Depreciation and amortization	53,901		56,095		165,829		168,692
Impairment of real estate assets	Impairment of real estate assets		5,000			0		Impairment of real estate assets	698		—		6,754		—
Total operating expenses	Total operating expenses		108,457			105,841		Total operating expenses	104,209		103,807		321,034		311,906
Other:	Other:							Other:
Interest expense, net	Interest expense, net		(20,063)			(22,775)		Interest expense, net	(18,570)		(20,388)		(57,765)		(65,317)
Gain (loss) on disposal of property, net			13,841			(1,577)
Gain on disposal of property, net								Gain on disposal of property, net	14,093		10,734		31,678		8,616
Other (expense) income, net	Other (expense) income, net		(15,585)			9,869		Other (expense) income, net	(7,086)		196		(25,595)		9,565
Net income	Net income		117			11,199		Net income	16,562		13,430		23,069		18,216
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests		(14)			(1,430)		Net income attributable to noncontrolling interests	(1,929)		(1,646)		(2,739)		(2,251)
Net income attributable to stockholders	Net income attributable to stockholders		$	103		$	9,769	Net income attributable to stockholders	$	14,633	$	11,784	$	20,330	$	15,965
Earnings per common share:
Earnings per share of common stock:								Earnings per share of common stock:
Net income per share attributable to stockholders - basic and diluted (Note 10)	Net income per share attributable to stockholders - basic and diluted (Note 10)		$	0.00		$	0.03	Net income per share attributable to stockholders - basic and diluted (Note 10)	$	0.13	$	0.12	$	0.21	$	0.16

Comprehensive income (loss):	Comprehensive income (loss):							Comprehensive income (loss):
Net income	Net income		$	117		$	11,199	Net income	$	16,562	$	13,430	$	23,069	$	18,216
Other comprehensive income (loss):	Other comprehensive income (loss):							Other comprehensive income (loss):
Change in unrealized value on interest rate swaps	Change in unrealized value on interest rate swaps		12,120			(43,364)		Change in unrealized value on interest rate swaps	4,488		5,098		19,981		(40,013)
Comprehensive income (loss)	Comprehensive income (loss)		12,237			(32,165)		Comprehensive income (loss)	21,050		18,528		43,050		(21,797)
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests		(14)			(1,430)		Net income attributable to noncontrolling interests	(1,929)		(1,646)		(2,739)		(2,251)
Change in unrealized value on interest rate swaps attributable to noncontrolling interests	Change in unrealized value on interest rate swaps attributable to noncontrolling interests		(1,509)			5,574		Change in unrealized value on interest rate swaps attributable to noncontrolling interests	(562)		(653)		(2,471)		5,145
Reallocation of comprehensive loss upon conversion of noncontrolling interests								Reallocation of comprehensive loss upon conversion of noncontrolling interests	—		—		(10)		—
Comprehensive income (loss) attributable to stockholders	Comprehensive income (loss) attributable to stockholders		$	10,714		$	(28,021)	Comprehensive income (loss) attributable to stockholders	$	18,559	$	16,229	$	37,830	$	(18,903)

See notes to consolidated financial statements.


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									3

PHILLIPS EDISON & COMPANY, INC.

CONSOLIDATED STATEMENTS OF EQUITY

FOR THE THREE MONTHS ENDED ~~MARCH 31,~~SEPTEMBER 30, 2021 AND 2020

(Condensed and Unaudited)

(In thousands, except per share amounts)

Three Months Ended March 31, 2021 and 2020
   Common Stock APIC AOCI Accumulated Deficit Total Stockholders’ Equity Noncontrolling Interests Total Equity
   Shares Amount
Balance at January 1, 2020 289,047 $ 2,890 $ 2,779,130 $ (20,762) $ (947,252) $ 1,814,006 $ 354,788 $ 2,168,794
DRIP 1,436 14 15,926 — — 15,940 — 15,940
Share repurchases (288) (3) (2,697) — — (2,700) — (2,700)
Change in unrealized value on interest
    rate swaps — — — (37,790) — (37,790) (5,574) (43,364)
Common distributions declared, $0.17
    per share
— — — — (48,809) (48,809) — (48,809)
Distributions to noncontrolling interests — — — — — — (7,105) (7,105)
Share-based compensation 103 1 140 — — 141 (290) (149)
Conversion of noncontrolling interests 118 1 1,304 — — 1,305 (1,305) —
Net income — — — — 9,769 9,769 1,430 11,199
Balance at March 31, 2020 290,416 $ 2,903 $ 2,793,803 $ (58,552) $ (986,292) $ 1,751,862 $ 341,944 $ 2,093,806
Balance at January 1, 2021 279,836 $ 2,798 $ 2,739,358 $ (52,306) $ (999,491) $ 1,690,359 $ 325,570 $ 2,015,929
DRIP 842 8 7,360 — — 7,368 — 7,368
Share repurchases (73) 0 (123) — — (123) — (123)
Change in unrealized value on interest
    rate swaps — — — 10,611 — 10,611 1,509 12,120
Common distributions declared, $0.085
    per share
— — — — (23,767) (23,767) — (23,767)
Distributions to noncontrolling interests — — — — — — (3,319) (3,319)
Share-based compensation 141 1 325 — — 326 784 1,110
Other 0 — (29) — 0 (29) 0 (29)
Net income — — — — 103 103 14 117
Balance at March 31, 2021 280,746 $ 2,807 $ 2,746,891 $ (41,695) $ (1,023,155) $ 1,684,848 $ 324,558 $ 2,009,406


	Three Months Ended September 30, 2021 and 2020
	Common Stock			Class B Common Stock			APIC		AOCI		Accumulated Deficit		Total Stockholders’ Equity		Noncontrolling Interests		Total Equity
	Shares	Amount		Shares	Amount
Balance at July 1, 2020	—	$	—	96,822	$	2,905	$	2,795,434	$	(60,075)	$	(991,939)	$	1,746,325	$	341,144	$	2,087,469
Change in unrealized value on interest rate swaps	—	—		—	—		—		4,445		—		4,445		653		5,098
Share-based compensation	—	—		—	—		1,036		—		—		1,036		818		1,854
Other	—	—		—	—		185		—		(379)		(194)		(4)		(198)
Net income	—	—		—	—		—		—		11,784		11,784		1,646		13,430
Balance at September 30, 2020	—	$	—	96,822	$	2,905	$	2,796,655	$	(55,630)	$	(980,534)	$	1,763,396	$	344,257	$	2,107,653

Balance at July 1, 2021	—	$	—	93,640	$	2,808	$	2,749,680	$	(38,732)	$	(1,041,617)	$	1,672,139	$	323,249	$	1,995,388
Issuance of common stock	19,550	196		—	—		547,205		—		—		547,401		—		547,401
Offering costs, discounts, and commissions	—	—		—	—		(39,042)		—		—		(39,042)		—		(39,042)
Change in unrealized value on interest rate swaps	—	—		—	—		—		3,926		—		3,926		562		4,488
Common distributions declared, $0.255 per share	—	—		—	—		—		—		(27,499)		(27,499)		—		(27,499)
Distributions to noncontrolling interests	—	—		—	—		—		—		—		—		(3,536)		(3,536)
Share-based compensation	—	—		23	(1)		1,871		—		—		1,870		2,116		3,986
Impact of reverse stock split	—	—		—	(1,871)		1,871		—		—		—		—		—
Net income	—	—		—	—		—		—		14,633		14,633		1,929		16,562
Balance at September 30, 2021	19,550	$	196	93,663	$	936	$	3,261,585	$	(34,806)	$	(1,054,483)	$	2,173,428	$	324,320	$	2,497,748


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									4

PHILLIPS EDISON & COMPANY, INC.

CONSOLIDATED STATEMENTS OF EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020

(Condensed and Unaudited)

(In thousands, except per share amounts)


	Nine Months Ended September 30, 2021 and 2020
	Common Stock			Class B Common Stock			APIC		AOCI		Accumulated Deficit		Total Stockholders’ Equity		Noncontrolling Interests		Total Equity
	Shares	Amount		Shares	Amount
Balance at January 1, 2020	—	$	—	96,349	$	2,890	$	2,779,130	$	(20,762)	$	(947,252)	$	1,814,006	$	354,788	$	2,168,794
Dividend Reinvestment Plan (“DRIP”)	—	—		479	14		15,926		—		—		15,940		—		15,940
Share repurchases	—	—		(96)	(3)		(2,697)		—		—		(2,700)		—		(2,700)
Change in unrealized value on interest rate swaps	—	—		—	—		—		(34,868)		—		(34,868)		(5,145)		(40,013)
Common distributions declared, $0.503 per share	—	—		—	—		—		—		(48,809)		(48,809)		—		(48,809)
Distributions to noncontrolling interests	—	—		—	—		—		—		—		—		(7,105)		(7,105)
Share-based compensation	—	—		36	2		2,508		—		—		2,510		1,336		3,846
Conversion of noncontrolling interests	—	—		56	2		1,859		—		—		1,861		(1,861)		—
Other	—	—		(2)	—		(71)		—		(438)		(509)		(7)		(516)
Net income	—	—		—	—		—		—		15,965		15,965		2,251		18,216
Balance at September 30, 2020	—	$	—	96,822	$	2,905	$	2,796,655	$	(55,630)	$	(980,534)	$	1,763,396	$	344,257	$	2,107,653

Balance at January 1, 2021	—	$	—	93,279	$	2,798	$	2,739,358	$	(52,306)	$	(999,491)	$	1,690,359	$	325,570	$	2,015,929
Issuance of common stock	19,550	196		—	—		547,205		—		—		547,401		—		547,401
Offering costs, discounts, and commissions	—	—		—	—		(39,042)		—		—		(39,042)		—		(39,042)
DRIP	—	—		280	8		7,360		—		—		7,368		—		7,368
Share repurchases	—	—		(24)	—		(123)		—		—		(123)		—		(123)
Change in unrealized value on interest rate swaps	—	—		—	—		—		17,510		—		17,510		2,471		19,981
Common distributions declared, $0.765 per share	—	—		—	—		—		—		(75,322)		(75,322)		—		(75,322)
Distributions to noncontrolling interests	—	—		—	—		—		—		—		—		(10,315)		(10,315)
Share-based compensation	—	—		100	1		4,298		—		—		4,299		4,532		8,831
Conversion of noncontrolling interests	—	—		28	—		743		—		—		743		(743)		—
Reallocation of operating partnership interests	—	—		—	—		(56)		(10)		—		(66)		66		—
Impact of reverse stock split	—	—		—	(1,871)		1,871		—		—		—		—		—
Other	—	—		—	—		(29)		—		—		(29)		—		(29)
Net income	—	—		—	—		—		—		20,330		20,330		2,739		23,069
Balance at September 30, 2021	19,550	$	196	93,663	$	936	$	3,261,585	$	(34,806)	$	(1,054,483)	$	2,173,428	$	324,320	$	2,497,748

See notes to consolidated financial statements.


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									5

PHILLIPS EDISON & COMPANY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE ~~THREE~~NINE MONTHS ENDED ~~MARCH 31,~~SEPTEMBER 30, 2021 AND 2020

(Condensed and Unaudited)

(In thousands)


		Three Months Ended March 31,					Nine Months Ended September 30,
		2021		2020			2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES:	CASH FLOWS FROM OPERATING ACTIVITIES:					CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	Net income	$	117	$	11,199	Net income	$	23,069	$	18,216
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of real estate assets	Depreciation and amortization of real estate assets	54,341		54,817		Depreciation and amortization of real estate assets	162,979		164,288
Impairment of real estate assets	Impairment of real estate assets	5,000		0		Impairment of real estate assets	6,754		—
Depreciation and amortization of corporate assets	Depreciation and amortization of corporate assets	1,000		1,410		Depreciation and amortization of corporate assets	2,850		4,404
Net amortization of above- and below-market leases	Net amortization of above- and below-market leases	(838)		(788)		Net amortization of above- and below-market leases	(2,633)		(2,394)
Amortization of deferred financing expenses	Amortization of deferred financing expenses	1,227		1,251		Amortization of deferred financing expenses	3,581		3,739
Amortization of debt and derivative adjustments	Amortization of debt and derivative adjustments	354		1,061		Amortization of debt and derivative adjustments	1,133		2,154
(Gain) loss on disposal of property, net		(13,841)		1,577
Gain on disposal of property, net						Gain on disposal of property, net	(31,678)		(8,616)
Change in fair value of earn-out liability	Change in fair value of earn-out liability	16,000		(10,000)		Change in fair value of earn-out liability	23,000		(10,000)
Straight-line rent	Straight-line rent	(1,424)		(2,288)		Straight-line rent	(6,884)		(3,131)
Share-based compensation	Share-based compensation	1,110		(149)		Share-based compensation	8,831		3,846
Return on investment in unconsolidated joint ventures	Return on investment in unconsolidated joint ventures	1,546		246		Return on investment in unconsolidated joint ventures	1,520		825
Other	Other	(567)		707		Other	1,213		1,497
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Other assets, net	Other assets, net	(10,787)		(15,117)		Other assets, net	(7,470)		(11,914)
Accounts payable and other liabilities	Accounts payable and other liabilities	(4,487)		(8,313)		Accounts payable and other liabilities	12,048		(5,669)
Net cash provided by operating activities	Net cash provided by operating activities	48,751		35,613		Net cash provided by operating activities	198,313		157,245
CASH FLOWS FROM INVESTING ACTIVITIES:	CASH FLOWS FROM INVESTING ACTIVITIES:					CASH FLOWS FROM INVESTING ACTIVITIES:
Real estate acquisitions	Real estate acquisitions	(39,850)		(4,319)		Real estate acquisitions	(88,954)		(23,014)
Capital expenditures	Capital expenditures	(13,537)		(15,965)		Capital expenditures	(49,315)		(40,772)
Proceeds from sale of real estate	Proceeds from sale of real estate	58,356		17,447		Proceeds from sale of real estate	180,340		48,276
Investment in third parties	Investment in third parties	(3,000)		0		Investment in third parties	(3,000)		—
Return of investment in unconsolidated joint ventures	Return of investment in unconsolidated joint ventures	2,721		424		Return of investment in unconsolidated joint ventures	4,278		1,949
Investment in marketable securities						Investment in marketable securities	(5,514)		—
Net cash provided by (used in) investing activities	Net cash provided by (used in) investing activities	4,690		(2,413)		Net cash provided by (used in) investing activities	37,835		(13,561)
CASH FLOWS FROM FINANCING ACTIVITIES:	CASH FLOWS FROM FINANCING ACTIVITIES:					CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of common stock						Proceeds from the issuance of common stock	547,401		—
Payment of offering costs						Payment of offering costs	(39,042)		—
Repurchases of Class B stock						Repurchases of Class B stock	(77,765)		(5,211)
Proceeds from revolving credit facility	Proceeds from revolving credit facility	0		55,000		Proceeds from revolving credit facility	9,000		255,000
Payments on revolving credit facility	Payments on revolving credit facility	0		(21,000)		Payments on revolving credit facility	(9,000)		(255,000)
Proceeds from loans payable						Proceeds from loans payable	480,000		—
Payments on mortgages and loans payable	Payments on mortgages and loans payable	(16,505)		(32,657)		Payments on mortgages and loans payable	(1,077,422)		(37,778)
Distributions paid, net of DRIP	Distributions paid, net of DRIP	(24,296)		(32,792)		Distributions paid, net of DRIP	(75,669)		(49,083)
Distributions to noncontrolling interests	Distributions to noncontrolling interests	(4,530)		(7,108)		Distributions to noncontrolling interests	(11,344)		(9,406)
Repurchases of common stock		(77,765)		(5,176)
Other	Other	(29)		0		Other	(29)		(516)
Net cash used in financing activities	Net cash used in financing activities	(123,125)		(43,733)		Net cash used in financing activities	(253,870)		(101,994)
NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH		(69,684)		(10,533)
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH						NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	(17,722)		41,690
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH:	CASH, CASH EQUIVALENTS, AND RESTRICTED CASH:					CASH, CASH EQUIVALENTS, AND RESTRICTED CASH:
Beginning of period	Beginning of period	131,937		95,108		Beginning of period	131,937		95,108
End of period	End of period	$	62,253	$	84,575	End of period	$	114,215	$	136,798

RECONCILIATION TO CONSOLIDATED BALANCE SHEETS:	RECONCILIATION TO CONSOLIDATED BALANCE SHEETS:					RECONCILIATION TO CONSOLIDATED BALANCE SHEETS:
Cash and cash equivalents	Cash and cash equivalents	$	20,258	$	36,532	Cash and cash equivalents	$	24,455	$	103,910
Restricted cash	Restricted cash	41,995		48,043		Restricted cash	89,760		32,888
Cash, cash equivalents, and restricted cash at end of period	Cash, cash equivalents, and restricted cash at end of period	$	62,253	$	84,575	Cash, cash equivalents, and restricted cash at end of period	$	114,215	$	136,798


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									6

PHILLIPS EDISON & COMPANY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

FOR THE ~~THREE~~NINE MONTHS ENDED ~~MARCH 31,~~SEPTEMBER 30, 2021 AND 2020

(Condensed and Unaudited)

(In thousands)


							Nine Months Ended September 30,
		2021		2020			2021		2020
SUPPLEMENTAL CASH FLOW DISCLOSURE, INCLUDING NON-CASH INVESTING AND FINANCING ACTIVITIES:	SUPPLEMENTAL CASH FLOW DISCLOSURE, INCLUDING NON-CASH INVESTING AND FINANCING ACTIVITIES:					SUPPLEMENTAL CASH FLOW DISCLOSURE, INCLUDING NON-CASH INVESTING AND FINANCING ACTIVITIES:
Cash paid for interest	Cash paid for interest	$	18,891	$	20,329	Cash paid for interest	$	53,463	$	59,906
Right-of-use (“ROU”) assets obtained in exchange for new lease liabilities	Right-of-use (“ROU”) assets obtained in exchange for new lease liabilities	194		551		Right-of-use (“ROU”) assets obtained in exchange for new lease liabilities	239		551
Accrued capital expenditures	Accrued capital expenditures	3,442		3,392		Accrued capital expenditures	4,075		3,587
Change in distributions payable	Change in distributions payable	(7,897)		77		Change in distributions payable	(7,715)		(16,214)
Change in distributions payable - noncontrolling interests	Change in distributions payable - noncontrolling interests	(1,211)		(3)		Change in distributions payable - noncontrolling interests	(1,029)		(2,301)
Change in accrued share repurchase obligation	Change in accrued share repurchase obligation	(77,642)		(2,476)		Change in accrued share repurchase obligation	(77,642)		(2,511)
Distributions reinvested	Distributions reinvested	7,368		15,940		Distributions reinvested	7,368		15,940

See notes to consolidated financial statements.


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									7

Phillips Edison & Company, Inc.

Notes to Consolidated Financial Statements

(Condensed and Unaudited)

~~March 31,~~
As of and for the periods ended September 30, 2021


1. ORGANIZATION

Phillips Edison & Company, Inc. (“we,” the “Company,” “PECO,” “our,” or “us”) was formed as a Maryland corporation in October 2009. Substantially all of our business is conducted through Phillips Edison Grocery Center Operating Partnership I, L.P., (the “Operating Partnership”), a Delaware limited partnership formed in December 2009. We are a limited partner of the Operating Partnership, and our wholly-owned subsidiary, Phillips Edison Grocery Center OP GP I LLC, is the sole general partner of the Operating Partnership.

We are a real estate investment trust (“REIT”) that invests primarily in ~~well-occupied,~~omni-channel grocery-anchored neighborhood and community shopping centers that have a mix of creditworthy national, regional, and local retailers that sell necessity-based goods and services in strong demographic markets throughout the United States. In addition to managing our own shopping centers, our third-party investment management business provides comprehensive real estate and asset management services to two unconsolidated institutional joint ventures, in which we have a partial ownership interest, and one private fund (collectively, the “Managed Funds”) as of ~~March 31,~~September 30, 2021.

As of ~~March 31,~~September 30, 2021, we wholly-owned ~~278~~267 real estate properties. Additionally, we owned ~~a 20% equity interest in Necessity Retail Partners (“NRP”), a joint venture that owned 2 properties, and~~ a 14% interest in Grocery Retail Partners I LLC (“GRP I”), a joint venture that owned 20 properties, and a 20% equity interest in Necessity Retail Partners (“NRP”), a joint venture that owned 2 properties.

On June 18, 2021, our stockholders approved an amendment to our charter (the “Articles of Amendment”) that effected a change of each share of our common stock outstanding at the time the amendment became effective into one share of a newly created class of Class B common stock (the “Recapitalization”). The Articles of Amendment became effective upon filing with, and acceptance by, the State Department of Assessments and Taxation of Maryland on July 2, 2021. Unless otherwise indicated, all information in this Form 10-Q gives effect to the Recapitalization and references to “shares” and per share metrics refer to our common stock and Class B common stock, collectively.

On July 2, 2021, our board of directors (the “Board”) approved an amendment to our articles of incorporation to effect a one-for-three reverse stock split. Concurrent with the reverse split, the Operating Partnership enacted a one-for-three reverse split of its outstanding Operating Partnership units (“OP units”). Unless otherwise indicated, the information in this Form 10-Q gives effect to the reverse stock and OP unit splits (Note 9).

On July 19, 2021, we closed our underwritten initial public offering (“underwritten IPO”), through which we offered 17.0 million shares of a new class of common stock, $0.01 par value per share, at an initial price to the public of $28.00 per share, pursuant to a registration statement filed with the U.S. Securities and Exchange Commission (“SEC”) on Form S-11 (File No. 333-255846), as amended. In connection with the underwritten IPO, the underwriters exercised a 30-day option to purchase additional shares of common stock to cover overallotments, and, accordingly, on August 2, 2021, we settled the sale of an additional 2.6 million shares at a price of $28.00 per share. These shares are listed on the Nasdaq Global Select Market (“NASDAQ”) under the trading symbol “PECO”. The underwritten IPO, including the underwriters overallotment election, resulted in gross proceeds of $547.4 million.

On September 20, 2021, the SEC declared effective our bond offering registration as filed on Form S-3 (File Nos. 333-259059 and 333-259059-01) relating to the offer, from time to time, of an unspecified number of debt securities not to exceed a maximum aggregate offering of $1 billion (“Bond Registration”). In October 2021, in connection with this registration, we settled $350 million aggregate principal amount of 2.625% senior notes (“2021 Bond Offering”) priced at 98.692% of the principal amount and maturing in November 2031. The notes are fully and unconditionally guaranteed by us.

Following our underwritten IPO, we are presenting common stock and Class B common stock as separate classes within our consolidated balance sheets and consolidated statements of equity. Any references to “common stock” in this 10-Q refer to our Nasdaq-listed shares sold through the underwritten IPO, whereas Class B common stock refers to the newly-created class of common stock that is not listed. This applies to all historical periods presented herein.


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Set forth below is a summary of the significant accounting estimates and policies that management believes are important to the preparation of our condensed consolidated interim financial statements. Certain of our accounting estimates are particularly important for an understanding of our financial position and results of operations and require the application of significant judgment by management. For example, significant estimates and assumptions have been made with respect to the useful lives of assets, remaining hold period of assets, recoverable amounts of receivables, and other fair value measurement assessments required for the preparation of the consolidated interim financial statements. As a result, these estimates are subject to a degree of uncertainty.

Beginning in 2020, the coronavirus (“COVID-19”) pandemic has caused significant disruption to our operations. All temporarily closed tenants have since been permitted to ~~reopen. Some may be limiting the~~reopen; however, certain of our tenants have permanently closed. We have


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									8

backfilled a number of ~~customers allowed in their stores, or have modified their operations in other ways that may impact their profitability, either as a result of government mandates or self-elected efforts~~these spaces and continue to ~~reduce the spread of COVID-19. These actions, as well as the~~work on backfilling any remaining vacancies. The continuing economic impacts of the COVID-19 pandemic could result in increased permanent store ~~closures. In addition to the permanent~~ closures, ~~that have occurred in our portfolio, this could~~ reduce the demand for leasing space in our shopping centers, ~~and~~and/or result in a decline in occupancy and rental revenues in our real estate portfolio. Because of the adverse economic conditions that have occurred as a result of the impacts of the COVID-19 pandemic and ~~the ongoing~~any remaining uncertainty related to the pandemic, it is possible that the estimates and assumptions that have been utilized in the preparation of the consolidated financial statements could change significantly. All of this activity impacts our estimates around the collectibility of revenue and valuation of real estate assets, goodwill and other intangible assets, and certain liabilities, among others.

There were no changes to our significant accounting policies during the ~~three~~nine months ended ~~March 31, 2021.~~September 30, 2021, except for those discussed below. For a full summary of our accounting policies, refer to our 2020 Annual Report on Form 10-K as originally filed with the ~~U.S. Securities and Exchange Commission (“SEC”)~~SEC on March 12, 2021.

Basis of Presentation and Principles of Consolidation—The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. Readers of this Quarterly Report on Form 10-Q should refer to our audited consolidated financial statements for the year ended December 31, 2020, which are included in our 2020 Annual Report on Form 10-K. In the opinion of management, all normal and recurring adjustments necessary for the fair presentation of the unaudited consolidated financial statements for the periods presented have been included in this Quarterly Report. Our results of operations for the three and nine months ended ~~March 31,~~September 30, 2021 are not necessarily indicative of the operating results expected for the full year.

The accompanying consolidated financial statements include our accounts and those of our majority-owned subsidiaries. All intercompany balances and transactions are eliminated upon consolidation.

~~Certain amounts~~Underwritten IPO Costs—Underwritten IPO costs are offset against underwritten IPO proceeds and included as a component of APIC on the consolidated balance sheets. Costs incurred that were related to our underwritten IPO activities but were not directly related to our equity raise were not capitalized and are included as transaction costs, currently in ~~prior periods have been reclassified~~Other (Expense) Income, Net on our consolidated statements of operations and comprehensive income (loss) (“consolidated statements of operations”). As of September 30, 2021, we had underwritten IPO costs of approximately $39.0 million, and we incurred costs related to ~~conform~~our underwritten IPO but not directly related to ~~current presentation.~~our equity raise of approximately $1.0 million.

Income Taxes—Our consolidated financial statements include the operations of wholly-owned subsidiaries that have jointly elected to be treated as Taxable REIT Subsidiaries and are subject to U.S. federal, state, and local income taxes at regular corporate tax rates. We recognized an insignificant amount of federal, state, and local income tax expense for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020, and we retain a full valuation allowance for our deferred tax asset. All income tax

amounts are included in Other (Expense) Income, Net on ~~the~~our consolidated statements of ~~operations and comprehensive income (loss) (“consolidated statements of operations”).~~operations.

Recently Issued Accounting Pronouncements—On January 7, 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2021-01 to amend the scope of the guidance in ASU 2020-04 on facilitation of the effects of reference rate reform on financial reporting. Specifically, the amendments in ASU 2021-01 clarify that certain optional expedients and exceptions in Accounting Standards Codification (“ASC”) Topic 848, Reference Rate Reform for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. We adopted ASU 2021-01 upon its issuance and the adoption of this standard did not have a material impact on our consolidated financial statements.

Reclassifications—The following line items on our consolidated statement of cash flows for the ~~three~~nine months ended ~~March 31,~~September 30, 2020 were reclassified to conform to current year presentation:

•Return on Investment in Unconsolidated Joint Ventures was listed on a separate line from Other Assets, Net; and

•Net Change in Credit Facility was separated into two lines, Proceeds from Revolving Credit Facility and Payments on Revolving Credit Facility.


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									9


3. LEASES

Lessor—The majority of our leases are largely similar in that the leased asset is retail space within our properties, and the lease agreements generally contain similar provisions and features, without substantial variations. All of our leases are currently classified as operating leases. Lease income related to our operating leases was as follows for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020 (in thousands):


		Three Months Ended September 30,						Nine Months Ended September 30,
			March 31, 2021		March 31, 2020			2021		2020		2021		2020
Rental income related to fixed lease payments(1)	Rental income related to fixed lease payments(1)		$	94,966	$	96,027	Rental income related to fixed lease payments(1)	$	95,080	$	94,511	$	284,531	$	285,572
Rental income related to variable lease payments(1)			31,401		31,838
Rental income related to variable lease payments(1)(2)							Rental income related to variable lease payments(1)(2)	29,919		31,781		88,774		94,278
Straight-line rent amortization~~(2)~~(3)	Straight-line rent amortization~~(2)~~(3)		1,369		2,309		Straight-line rent amortization~~(2)~~(3)	2,365		1,772		6,627		3,103
Amortization of lease assets	Amortization of lease assets		827		779		Amortization of lease assets	898		802		2,602		2,367
Lease buyout income	Lease buyout income		797		94		Lease buyout income	560		664		3,138		972
Adjustments for collectibility~~(3)~~(4)	Adjustments for collectibility~~(3)~~(4)		(1,737)		(2,581)		Adjustments for collectibility~~(3)~~(4)	4		(6,232)		1,112		(18,874)
Total rental income	Total rental income		$	127,623	$	128,466	Total rental income	$	128,826	$	123,298	$	386,784	$	367,418

(1)Includes rental income related to lease payments before assessing for collectibility.

(2)~~Includes revenue adjustments for non-creditworthy tenants.~~Variable payments are primarily related to tenant recovery income.

(3)~~Contains general reserves; excludes reserves for~~For the three and nine months ended September 30, 2021, includes unfavorable revenue adjustments to straight-line rent ~~amortization.~~for tenants considered non-creditworthy of $0.2 million and $0.6 million, respectively. Includes favorable adjustments for the three months ended September 30, 2020 of $0.3 million, and unfavorable adjustments of $2.9 million for the nine months ended September 30, 2020.

(4)Includes general reserves as well as adjustments for tenants not considered creditworthy for which we are recording revenue on a cash basis, per ASC Topic 842, Leases (“ASC 842”).

For the three and nine months ended September 30, 2021, we had net favorable changes to general reserves of $0.5 million and $4.6 million, respectively. Additionally, we had net unfavorable adjustments of $0.5 million and $3.5 million, respectively, related to monthly revenue for tenants that we deemed non-creditworthy and for which we were recording revenue on a cash basis.

For the three and nine months ended September 30, 2020, we had net unfavorable adjustments of $0.8 million and $1.7 million, respectively, related to general reserve collections. Additionally, we had net unfavorable adjustments of $5.5 million and $17.2 million, respectively, related to monthly revenue for tenants that we deemed non-creditworthy and for which we were recording revenue on a cash basis.

Approximate future fixed contractual lease payments to be received under non-cancelable operating leases in effect as of ~~March 31,~~September 30, 2021, assuming no new or renegotiated leases or option extensions on lease agreements, and including the impact of rent abatements, payment plans, and tenants who have been moved to the cash basis of accounting for revenue recognition purposes are as follows (in thousands):


Year	Year	Amount		Year	Amount
Remaining 2021	Remaining 2021	$	284,609	Remaining 2021	$	95,360
2022	2022	351,031		2022	375,318
2023	2023	303,854		2023	332,359
2024	2024	248,929		2024	279,403
2025	2025	193,599		2025	225,293
Thereafter	Thereafter	470,135		Thereafter	568,425
Total	Total	$	1,852,157	Total	$	1,876,158

In response to the COVID-19 pandemic, we executed payment plans with our tenants. As of ~~April 20,~~September 30, 2021, we ~~have $5.2~~had $4.1 million of outstanding payment plans with our tenants and we ~~had recorded rent abatements totaling~~expect to receive remaining amounts owed to us from these plans over a weighted-average term of approximately ~~$4.4 million during 2021. These payment plans and rent abatements represented approximately 1.4% and 1.1%~~11 months.

No single tenant comprised 7% or more of our ~~wholly-owned portfolio’s~~aggregate annualized base rent (“ABR”), respectively. As of April 20, 2021, approximately 85% of payments are scheduled to be received by December 31, 2021 for all executed payment plans, and the weighted-average remaining term over which we expect to receive payment on executed payment plans is approximately twelve months. For the three months ended March 31, 2021 and 2020, we had $4.8 million and $2.8 million, respectively, in unfavorable monthly revenue adjustments for tenants not considered creditworthy. These amounts include the estimated impact of tenants who have filed for bankruptcy. Revenue for tenants deemed non-creditworthy is only recorded as cash is received.

~~No single tenant comprised 10% or more of our aggregate ABR~~ as of ~~March 31,~~September 30, 2021. As of ~~March 31,~~September 30, 2021, our wholly-owned real estate investments in Florida and California represented 12.4% and ~~10.4%~~10.1% of our ABR, respectively. As a result, the geographic concentration of our portfolio makes it particularly susceptible to adverse weather or economic events, including the impact of the COVID-19 pandemic, in the Florida and California real estate markets.


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									10

Lessee—Lease assets and liabilities, grouped by balance sheet line where they are recorded, consisted of the following as of ~~March 31,~~September 30, 2021 and December 31, 2020 (in thousands):


Balance Sheet Information	Balance Sheet Information	Balance Sheet Location	March 31, 2021		December 31, 2020		Balance Sheet Information	Balance Sheet Location	September 30, 2021		December 31, 2020
ROU assets, net - operating leases	ROU assets, net - operating leases	Investment in Real Estate	$	4,032	$	3,867	ROU assets, net - operating leases	Investment in Real Estate	$	3,975	$	3,867
ROU assets, net - operating and finance leases	ROU assets, net - operating and finance leases	Other Assets, Net	1,260		1,438		ROU assets, net - operating and finance leases	Other Assets, Net	1,080		1,438
Operating lease liability	Operating lease liability	Accounts Payable and Other Liabilities	5,774		5,731		Operating lease liability	Accounts Payable and Other Liabilities	5,468		5,731
Finance lease liability	Finance lease liability	Debt Obligations, Net	91		164		Finance lease liability	Debt Obligations, Net	117		164


4. REAL ESTATE ACTIVITY

Property Sales—The following table summarizes our real estate disposition activity (dollars in thousands):


		Three Months Ended March 31,					Nine Months Ended September 30,
		2021		2020			2021		2020
Number of properties sold(1)	Number of properties sold(1)	6		3		Number of properties sold(1)	20		6
Number of outparcels sold~~(1)~~(3)	Number of outparcels sold~~(1)~~(3)	1		0		Number of outparcels sold~~(1)~~(3)	3		—
Proceeds from sale of real estate	Proceeds from sale of real estate	$	58,356	$	17,447	Proceeds from sale of real estate	$	180,340	$	48,276
Gain (loss) on sale of properties, net(2)		14,355		(826)
Gain on sale of properties, net(4)						Gain on sale of properties, net(4)	33,121		9,915

(1)~~The~~We retained an outparcel for one property sold during the nine months ended September 30, 2021, and therefore the sale did not result in a reduction in our total property count.

(2)During the ~~first quarter of~~nine months ended September 30, 2021, ~~was~~our outparcel sales included: (i) the only remaining portion of one of our ~~properties,~~properties; therefore, resulting in a reduction in our total property count; and ~~therefore the sale~~(ii) an undeveloped parcel of land, as well as an outparcel adjacent to one of our centers, neither of which resulted in a reduction in our total property count.

~~(2)~~(3)In addition to the three outparcels sold during the nine months ended September 30, 2021, a tenant at one of our properties exercised a bargain purchase option to acquire a parcel of land that we previously owned. This generated minimal proceeds for us.

(4)The gain ~~(loss)~~ on sale of properties, net does not include miscellaneous write-off activity, which is also recorded in Gain ~~(Loss)~~ on Disposal of Property, Net on the consolidated statements of operations.

Subsequent to ~~March 31,~~September 30, 2021, we sold ~~2 properties~~1 property for ~~$20.2~~$4.4 million.

Acquisitions—The following table summarizes our real estate acquisition activity (dollars in thousands):


		Three Months Ended March 31,					Nine Months Ended September 30,
		2021		2020			2021		2020
Number of properties acquired	Number of properties acquired	2		0		Number of properties acquired	4		1
Number of outparcels acquired(1)	Number of outparcels acquired(1)	2		2		Number of outparcels acquired(1)	3		2
Total acquisition price	Total acquisition price	$	39,850	$	4,319	Total acquisition price	$	88,954	$	23,014

(1)Outparcels acquired are adjacent to shopping centers that we own.

The fair value and weighted-average useful life at acquisition for lease intangibles acquired are as follows (dollars in thousands, weighted-average useful life in years):


				Nine Months Ended
		Three Months Ended March 31, 2021				September 30, 2021				September 30, 2020
		Fair Value			Weighted-Average Useful Life			Fair Value		Weighted-Average Useful Life	Fair Value		Weighted-Average Useful Life
In-place leases	In-place leases	$	4,155		7		In-place leases	$	8,728	10	$	1,682	16
Above-market leases	Above-market leases	52			5		Above-market leases	198		5	120		5
Below-market leases	Below-market leases	(1,652)			6		Below-market leases	(7,250)		17	(1,882)		26

Subsequent to September 30, 2021, we purchased 2 properties for $91.2 million.


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									11

Property Held for Sale—As of ~~March 31,~~September 30, 2021, 23 properties were classified as held for sale. As of December 31, 2020, no properties were classified as held for sale. Properties classified as held for sale as of ~~March 31,~~September 30, 2021 were under contract to sell, with no substantive contingencies, and the prospective buyers had significant funds at risk as of the reporting date. Subsequent to ~~March 31,~~September 30, 2021, ~~one~~we sold 1 of our held for sale ~~properties was sold.~~properties. A summary of assets and liabilities for the properties held for sale as of ~~March 31,~~September 30, 2021 is below (in thousands):


	~~March 31,~~September 30, 2021
ASSETS
Total investment in real estate assets, net	$	~~23,852~~16,109
Other assets, net	~~517~~355
Total assets	$	~~24,369~~16,464
LIABILITIES
Below-market lease liabilities, net	$	~~1,866~~323
Accounts payable and other liabilities	~~243~~317
Total liabilities	$	~~2,109~~640


5. OTHER ASSETS, NET

The following is a summary of Other Assets, Net outstanding as of ~~March 31,~~September 30, 2021 and December 31, 2020, excluding amounts related to assets held for sale (in thousands):


		March 31, 2021		December 31, 2020			September 30, 2021		December 31, 2020
Other assets, net:	Other assets, net:					Other assets, net:
Deferred leasing commissions and costs	Deferred leasing commissions and costs	$	42,946	$	41,664	Deferred leasing commissions and costs	$	46,732	$	41,664
Deferred financing expenses(1)	Deferred financing expenses(1)	13,971		13,971		Deferred financing expenses(1)	4,898		13,971
Office equipment, ROU assets, and other	Office equipment, ROU assets, and other	22,045		21,578		Office equipment, ROU assets, and other	23,418		21,578
Corporate intangible assets	Corporate intangible assets	6,804		6,804		Corporate intangible assets	6,706		6,804
Total depreciable and amortizable assets	Total depreciable and amortizable assets	85,766		84,017		Total depreciable and amortizable assets	81,754		84,017
Accumulated depreciation and amortization	Accumulated depreciation and amortization	(47,819)		(45,975)		Accumulated depreciation and amortization	(43,204)		(45,975)
Net depreciable and amortizable assets	Net depreciable and amortizable assets	37,947		38,042		Net depreciable and amortizable assets	38,550		38,042
Accounts receivable, net(2)	Accounts receivable, net(2)	47,659		46,893		Accounts receivable, net(2)	35,683		46,893
Accounts receivable - affiliates	Accounts receivable - affiliates	1,073		543		Accounts receivable - affiliates	417		543
Deferred rent receivable, net(3)	Deferred rent receivable, net(3)	33,257		32,298		Deferred rent receivable, net(3)	37,821		32,298
Prepaid expenses and other	Prepaid expenses and other	15,132		8,694		Prepaid expenses and other	18,623		8,694
Investment in third parties	Investment in third parties	3,000		0		Investment in third parties	3,000		—
Investment in marketable securities						Investment in marketable securities	5,357		—
Total other assets, net	Total other assets, net	$	138,068	$	126,470	Total other assets, net	$	139,451	$	126,470

(1)Deferred financing expenses per the above table are related to our revolving line of credit, and as such we have elected to classify them as an asset rather than as a contra-liability.

(2)Net of ~~$7.2~~$6.3 million and $8.9 million of general reserves for uncollectible amounts as of ~~March 31,~~September 30, 2021 and December 31, 2020, respectively. Receivables that were removed for tenants considered to be non-creditworthy were ~~$19.6~~$12.5 million and $22.8 million as of ~~March 31,~~September 30, 2021 and December 31, 2020, respectively.

(3)Net of ~~$5.1~~$4.8 million and $4.4 million of ~~adjustments~~receivables removed as of ~~March 31,~~September 30, 2021 and December 31, 2020, respectively, ~~for~~related to straight-line rent ~~removed~~ for tenants previously or currently considered to be non-creditworthy.


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									12


6. DEBT OBLIGATIONS

The following is a summary of the outstanding principal balances and interest rates, which include the effect of derivative financial instruments, for our debt obligations as of ~~March 31,~~September 30, 2021 and December 31, 2020 (dollars in thousands):


		Interest Rate(1)	March 31, 2021			December 31, 2020				Interest Rate(1)	September 30, 2021			December 31, 2020
Revolving credit facility	Revolving credit facility	LIBOR + 1.4%	$	0		$	0		Revolving credit facility	LIBOR + 1.1%	$	—		$	—
Term loans(2)	Term loans(2)	1.4% - 4.6%	1,622,500			1,622,500			Term loans(2)	1.3% - 4.3%	1,105,000			1,622,500
Secured loan facilities	Secured loan facilities	3.4% - 3.5%	395,000			395,000			Secured loan facilities	3.4% - 3.5%	395,000			395,000
Mortgages	Mortgages	3.5% - 7.2%	273,590			290,022			Mortgages	3.5% - 7.2%	215,597			290,022
Finance lease liability	Finance lease liability		91			164			Finance lease liability		117			164
Assumed market debt adjustments, net	Assumed market debt adjustments, net		(1,587)			(1,543)			Assumed market debt adjustments, net		(1,568)			(1,543)
Deferred financing expenses, net	Deferred financing expenses, net		(12,622)			(13,538)			Deferred financing expenses, net		(14,729)			(13,538)
Total	Total		$	2,276,972		$	2,292,605		Total		$	1,699,417		$	2,292,605

Weighted-average interest rate	Weighted-average interest rate		3.0		%	3.1		%	Weighted-average interest rate		3.3		%	3.1		%

(1)Interest rates are as of ~~March 31,~~September 30, 2021.

(2)Our term loans carry an interest rate of LIBOR plus a spread. While most of the rates are fixed through the use of swaps, there is a portion of these loans that are not subject to a swap, and thus are still indexed to LIBOR.

Debt Activity—In ~~April~~July 2021, we ~~repaid $25.1~~entered into a new $980 million credit facility comprised of a $500 million senior unsecured revolving credit facility and two $240 million senior unsecured term loan tranches (the “Refinancing”). In connection with the Refinancing, we paid off a $472.5 million term loan due in ~~mortgage loans ahead~~November 2025. The revolving credit facility will mature in January 2026, and the two senior unsecured term loan tranches will mature in November 2025 and July 2026, respectively. Additionally, we used proceeds from the underwritten IPO to retire a $375 million term loan that was set to mature in April 2022.

In August 2021, we paid down $150 million of ~~their scheduled maturities.~~our $300 million term loan that was set to mature in November 2023.

In October 2021, in connection with our Bond Registration, we settled $350 million aggregate principal amount of 2.625% senior notes priced at 98.692% of the principal amount, resulting in gross proceeds of $345.4 million and maturing in November 2031. The notes are fully and unconditionally guaranteed by us. In October 2021, we paid down the remaining $150 million outstanding balance of our $300 million term loan that was set to mature in November 2023, as described above.

Debt Allocation—The allocation of total debt between fixed-rate and variable-rate as well as between secured and unsecured, excluding market debt adjustments and deferred financing expenses, net, and including the effects of derivative financial instruments (see Notes 7 and 12) as of ~~March 31,~~September 30, 2021 and December 31, 2020 is summarized below (in thousands):


		March 31, 2021		December 31, 2020			September 30, 2021		December 31, 2020
As to interest rate:	As to interest rate:					As to interest rate:
Fixed-rate debt	Fixed-rate debt	$	1,598,681	$	1,727,186	Fixed-rate debt	$	1,540,714	$	1,727,186
Variable-rate debt	Variable-rate debt	692,500		580,500		Variable-rate debt	175,000		580,500
Total	Total	$	2,291,181	$	2,307,686	Total	$	1,715,714	$	2,307,686
As to collateralization:	As to collateralization:					As to collateralization:
Unsecured debt	Unsecured debt	$	1,622,500	$	1,622,500	Unsecured debt	$	1,105,000	$	1,622,500
Secured debt	Secured debt	668,681		685,186		Secured debt	610,714		685,186
Total	Total	$	2,291,181	$	2,307,686	Total	$	1,715,714	$	2,307,686


7. DERIVATIVES AND HEDGING ACTIVITIES

Risk Management Objective of Using Derivatives—We are exposed to certain risks arising from both our business operations and economic conditions. We principally manage our exposure to a wide variety of business and operational risks through management of our core business activities. We manage economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of our debt funding, and through the use of derivative financial instruments. Specifically, we enter into interest rate swaps to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. Our derivative financial instruments are used to manage differences in the amount, timing, and duration of our known or expected cash receipts and our known or expected cash payments principally related to our investments and borrowings.


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									13

Cash Flow Hedges of Interest Rate Risk—Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for our making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

The changes in the fair value of derivatives designated, and that qualify, as cash flow hedges are recorded in AOCI and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020, such derivatives were used to hedge the variable cash flows associated with certain variable-rate debt. Amounts reported in AOCI related to these derivatives will be reclassified to Interest Expense, Net as interest payments are made on the variable-rate debt. During the next twelve months, we estimate that an additional ~~$18.9~~$17.5 million will be reclassified from AOCI as an increase to Interest Expense, Net.

The following is a summary of our interest rate swaps that were designated as cash flow hedges of interest rate risk as of ~~March 31,~~September 30, 2021 and December 31, 2020 (dollars in thousands):


		March 31, 2021		December 31, 2020			September 30, 2021		December 31, 2020
Count	Count	5		6		Count	5		6
Notional amount	Notional amount	$	930,000	$	1,042,000	Notional amount	$	930,000	$	1,042,000
Fixed LIBOR	Fixed LIBOR	1.3% - 2.9%		1.3% - 2.9%		Fixed LIBOR	1.3% - 2.9%		1.3% - 2.9%
Maturity date	Maturity date	2022 - 2025		2021 - 2025		Maturity date	2022 - 2025		2021 - 2025
Weighted-average term (in years)						Weighted-average term (in years)	2.4		2.8

We assumed 5 hedges with a notional amount of $570 million as a part of a ~~merger.~~merger in 2018. The fair value of the five hedges assumed was $14.7 million and is amortized over the remaining lives of the respective hedges and recorded in Interest Expense, Net in the consolidated statements of operations. ~~The net unamortized amount remaining as~~As of ~~March 31,~~September 30, 2021 and December 31, 2020 there was ~~$4.7~~1 remaining hedge with a net unamortized amount remaining of $4.0 million and $5.0 million, respectively.

The table below details the nature of the gain and loss recognized on interest rate derivatives designated as cash flow hedges in the consolidated statements of operations (in thousands):

Three Months Ended March 31,
2021 2020
Amount of gain (loss) recognized in Other Comprehensive Income (Loss) $ 7,265 $ (44,916)
Amount of loss reclassified from AOCI into interest expense 4,855 1,552


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Amount of (loss) gain recognized in Other Comprehensive Income (Loss)	$	(417)	$	(45)	$	5,397	$	(51,575)
Amount of loss reclassified from AOCI into Interest Expense, Net	4,905		5,143		14,584		11,562

Credit-risk-related Contingent Features—We have agreements with our derivative counterparties that contain provisions where, if we default, or are capable of being declared in default, on any of our indebtedness, we could also be declared to be in default on our derivative obligations. As of ~~March 31,~~September 30, 2021, the fair value of our derivatives in a net liability position, which included accrued interest but excluded any adjustment for nonperformance risk related to these agreements, was approximately ~~$43.0~~$35.8 million. As of ~~March 31,~~September 30, 2021, we had not posted any collateral related to these agreements and were not in breach of any agreement provisions. If we had breached any of these provisions, we could have been required to settle our obligations under the agreements at their termination value of ~~$43.0~~$35.8 million.


8. COMMITMENTS AND CONTINGENCIES

Litigation—We are involved in various claims and litigation matters arising in the ordinary course of business, some of which involve claims for damages. Many of these matters are covered by insurance, although, they may nevertheless be subject to deductibles or retentions. Although the ultimate liability for these matters cannot be determined, based upon information currently available, we believe the resolution of such claims and litigation will not have a material adverse effect on our consolidated financial statements.

Environmental Matters—In connection with the ownership and operation of real estate, we may potentially be liable for costs and damages related to environmental matters. In addition, we may own or acquire certain properties that are subject to environmental remediation. Depending on the nature of the environmental matter, the seller of the property, a tenant of the property, and/or another third party may be responsible for environmental remediation costs related to a property. Additionally, in connection with the purchase of certain properties, the respective sellers and/or tenants may agree to indemnify us against future remediation costs. We also carry environmental liability insurance on our properties that provides limited coverage for any remediation liability and/or pollution liability for third-party bodily injury and/or property damage claims for which we may be liable. We are not aware of any environmental matters which we believe are reasonably likely to have a material effect on our consolidated financial statements.

Captive Insurance—Our captive insurance company, Silver Rock Insurance, Inc. (“Silver Rock”) provides general liability insurance, wind, reinsurance, and other coverage to us and our related-party joint ventures. We capitalize Silver Rock in accordance with applicable regulatory requirements.

Silver Rock established annual premiums based on the past loss experience of the insured properties. An independent third party was engaged to perform an actuarial estimate of projected future claims, related deductibles, and projected future expenses necessary to fund associated risk management programs. Premiums paid to Silver Rock may be adjusted based on these estimates, and such premiums may be reimbursed by tenants pursuant to specific lease terms.


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									14

As of ~~March 31,~~September 30, 2021, we had ~~four~~4 letters of credit outstanding totaling approximately ~~$8.0~~$9.0 million to provide security for our obligations under Silver Rock’s insurance and reinsurance contracts.


9. EQUITY

General—The holders of common stock are entitled to one vote per share on all matters voted on by stockholders, including one vote per nominee in the election of the Board. Our charter does not provide for cumulative voting in the election of directors.

Reverse Stock Split—On ~~April 29,~~July 2, 2021, ~~our board~~we effected a one-for-three reverse stock split. Concurrent with the reverse split, the Operating Partnership enacted a one-for-three reverse split of ~~directors (“Board”) increased~~its outstanding OP units. Neither the ~~estimated~~number of authorized shares nor the par value ~~per share (“EVPS”)~~ of ~~our~~the common stock ~~to $10.55 based substantially on the estimated market value of our portfolio of real estate properties and our third-party investment management business as of March 31, 2021. We engaged~~were impacted. As a ~~third-party valuation firm to provide a calculation~~result of the range in EVPS of our common stock as of March 31, 2021, which reflected certain balance sheet assets and liabilities as of that date. Previously, our EVPS was $8.75, based substantially on the estimated market value of our portfolio of real estate properties and our third-party investment management business as of March 31, 2020.

~~Dividend Reinvestment Plan—The DRIP allows stockholders to invest distributions in additional~~reverse split, every three shares of our common stock ~~subject~~or OP units were automatically combined and converted into one issued and outstanding share of common stock or OP unit rounded to ~~certain limits. Stockholders who elect~~the nearest 1/100th share. The reverse stock split impacts all common stock and OP units proportionately and had no impact on any stockholder’s percentage ownership of common stock.

In connection with the reverse stock split, the number of shares of common stock and OP units underlying the outstanding share-based awards was also proportionately reduced. All references to ~~participate~~shares of common stock, number of OP units, and per share data for all periods presented in our consolidated financial statements and notes have been adjusted to reflect the ~~DRIP may choose to invest all or~~reverse split on a ~~portion~~retroactive basis.

Class B Common Stock—On June 18, 2021, our stockholders approved Articles of ~~their cash distributions in shares~~Amendment that effected the Recapitalization, wherein each share of our common stock outstanding at the time the amendment became effective was converted into one share of a ~~price equal~~newly created class of Class B common stock.

Our Class B common stock is identical to our ~~most recent EVPS.~~

~~Stockholders who elect to participate in~~common stock, except that (i) our Class B common stock is not listed on a national securities exchange, and (ii) upon the ~~DRIP, and who are subject to U.S. federal income taxation laws, will incur a tax liability on an amount equal to the fair value on the relevant distribution date~~six month anniversary of the ~~shares~~listing of our common stock ~~purchased~~for trading on a national securities exchange, or January 15, 2022 (or such earlier date or dates as may be approved by our Board in certain circumstances with ~~reinvested distributions, even though such stockholders have elected not~~respect to ~~receive~~all or any portion of the ~~distributions~~outstanding shares of our Class B common stock), each share of our Class B common stock will automatically, and without any stockholder action, convert into one share of our listed common stock.

Underwritten IPO—On July 19, 2021, we completed an underwritten IPO and issued 17.0 million shares of common stock at an offering price to the public of $28.00 per share. We used a portion of the net proceeds to reduce our leverage and expect to use the remaining amount to fund external growth with property acquisitions and for other general corporate uses. As part of the underwritten IPO, underwriters were granted an option exercisable within 30 days from July 14, 2021 to purchase up to an additional 2.55 million shares of common stock at the underwritten IPO price, less underwriting discounts and commissions. On July 29, 2021, the underwriters exercised their option. The underwritten IPO, including the underwriters overallotment election, resulted in ~~cash.~~

~~The Third Amended and Restated Dividend Reinvestment Plan has been suspended, beginning with the distribution payable on April 1, 2021. Stockholders will receive their full monthly distribution~~gross proceeds of ~~$0.02833333 per share in cash until further notice.~~$547.4 million.

Distributions—Distributions paid to stockholders and ~~Operating Partnership~~OP unit ~~(“OP unit”)~~ holders of record subsequent to ~~March 31,~~September 30, 2021 were as follows (dollars in thousands, excluding per share amounts):

Month Date of Record Monthly Distribution Rate Date Distribution Paid Gross Amount of Distribution Paid Net Cash Distribution
March 3/19/2021 $ 0.02833333 4/1/2021 $ 9,059 $ 9,059
April 4/19/2021 0.02833333 5/3/2021 9,059 9,059

Month

Date of Record

Monthly Distribution Rate

Date Distribution Paid

Cash Distribution

September 2021

9/15/2021

0.085

10/1/2021

9,623

October 2021

10/15/2021

0.090

11/1/2021

10,189

On ~~April 29,~~November 3, 2021, our Board authorized distributions for ~~May~~November and December 2021, as well as January 2022, to the stockholders of record at the close of business on ~~May 17,~~November 15, 2021, December 15, 2021, and January 19, 2022, respectively, equal to a monthly amount of ~~$0.02833333~~$0.09 per share of common stock. OP unit holders will receive distributions at the same rate as common stockholders. ~~We pay distributions to stockholders and OP unit holders based on monthly record dates, and we expect to pay the May 2021 distributions on June 1, 2021.~~

~~Share Repurchase Program (“SRP”)~~—The SRP provides an opportunity for stockholders to have shares of common stock repurchased, subject to certain restrictions and limitations. The Board reserves the right, in its sole discretion, at any time and from time to time, to reject any request for repurchase. The Fourth Amended and Restated Share Repurchase Program (the “Fourth Amended SRP”), which is currently limited to repurchases resulting from the death, qualifying disability, or the declaration of incompetence (“DDI”) of stockholders, has been suspended, and the March 31, 2021 repurchases related to stockholder DDI were not executed. The SRP for both standard and DDI requests will remain suspended until further notice.

Convertible Noncontrolling Interests—As of ~~March 31,~~September 30, 2021 and December 31, 2020, we had approximately ~~40.1~~13.4 million and ~~39.8~~13.3 million outstanding OP units, respectively. Additionally, certain of our outstanding restricted share and performance share awards will result in the issuance of OP units upon vesting in future periods.

Under the terms of the Fourth Amended and Restated Agreement of Limited Partnership (the “Partnership Agreement”), OP unit holders may elect to exchange their OP units. The Operating Partnership controls the form of the redemption, and may elect to exchange OP units either for shares of our Class B common stock, provided that the OP units have been outstanding for at least one year, or for cash. As the form of redemption for OP units is within our control, the OP units outstanding as of ~~March 31,~~September 30, 2021 and December 31, 2020 are classified as Noncontrolling Interests within permanent equity on our consolidated balance sheets.

~~During~~


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									15

The table below is a summary of our OP unit activity for the three and nine months ended ~~March 31,~~September 30, 2021 and 2020 ~~0.1 million~~ (dollars and shares in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
OP units converted into shares of Class B common stock(1)	—		—		28		56
Distributions paid on OP units(2)	$	3,536	$	—	$	10,315	$	7,105

(1)OP units ~~were~~are converted into shares of our Class B common stock at a 1:1 ratio. There were no OP units converted into shares of our common stock for the three months ended March 31, 2021. The $3.3 million and $7.1 million of distributions for the three months ended March 31, 2021 and 2020, respectively, that have been

(2)Distributions paid on OP units are included in Distributions to Noncontrolling Interests on the consolidated statements of equity.

Underwritten IPO Grants—In connection with our underwritten IPO, we issued a total of 0.5 million restricted stock units (“RSUs”), inclusive of 0.3 million OP units, and restricted stock awards in the form of time-based stock compensation awards with expenses included within Other (Expense) Income, Net. The shares have a grant price of $28.00 per share and, with the exception of one individual whose award is subject to accelerated vesting provisions, 50% of the shares will vest after 18 months and the remaining 50% will vest after 36 months.

Estimated Value per Share—Prior to our underwritten IPO, on April 29, 2021, our Board increased the estimated value per share (“EVPS”) of our common stock to $31.65 based substantially on the estimated market value of our portfolio of real estate properties and our third-party investment management business as of March 31, 2021. We engaged a third-party valuation firm to provide a calculation of the range in EVPS of our common stock as of March 31, 2021, which reflected certain balance sheet assets and liabilities as of that date. Previously, our EVPS was $26.25, based substantially on the estimated market value of our portfolio of real estate properties and our third-party investment management business as of March 31, 2020.

Dividend Reinvestment Plan and Share Repurchase Program (“SRP”)—On August 4, 2021, as a result of our underwritten IPO, our Board approved the termination of the DRIP and the SRP.


10. EARNINGS PER SHARE

We use the two-class method of computing earnings per share (“EPS”), which is an earnings allocation formula that determines EPS for common stock and any participating securities according to dividends declared (whether paid or unpaid). Under the two-class method, basic EPS is computed by dividing Net Income Attributable to Stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted EPS reflects the potential dilution that could occur from share equivalent activity.

OP units held by limited partners other than us are considered to be participating securities because they contain non-forfeitable rights to dividends or dividend equivalents, and have the potential to be exchanged for an equal number of shares of our common stock in accordance with the terms of the Partnership Agreement.

The impact of these outstanding OP units on basic and diluted EPS has been calculated using the two-class method whereby earnings are allocated to the OP units based on dividends declared and the OP units’ participation rights in undistributed earnings. The effects of the two-class method on basic and diluted EPS were immaterial to the consolidated financial statements during the three and nine months ended ~~March 31,~~September 30, 2021 and 2020.

The following table provides a reconciliation of the numerator and denominator of the earnings per share calculations, restated for prior periods to display the effect of the reverse split (in thousands, except per share amounts):


		Three Months Ended March 31,			Three Months Ended September 30,						Nine Months Ended September 30,
			2021			2020			2021		2020		2021		2020
Numerator:	Numerator:							Numerator:
Net income attributable to stockholders - basic	Net income attributable to stockholders - basic		$	103		$	9,769	Net income attributable to stockholders - basic	$	14,633	$	11,784	$	20,330	$	15,965
Net income attributable to convertible OP units(1)	Net income attributable to convertible OP units(1)		14			1,430		Net income attributable to convertible OP units(1)	1,929		1,646		2,739		2,251
Net income - diluted	Net income - diluted		$	117		$	11,199	Net income - diluted	$	16,562	$	13,430	$	23,069	$	18,216
Denominator:	Denominator:							Denominator:
Weighted-average shares - basic(2)	Weighted-average shares - basic(2)		280,469			289,955		Weighted-average shares - basic(2)	108,997		96,822		98,761		96,765
OP units(1)	OP units(1)		40,063			42,848		OP units(1)	13,388		14,247		13,371		14,264
Dilutive restricted stock awards	Dilutive restricted stock awards		453			425		Dilutive restricted stock awards	188		119		185		131
Adjusted weighted-average shares - diluted	Adjusted weighted-average shares - diluted		320,985			333,228		Adjusted weighted-average shares - diluted	122,573		111,188		112,317		111,160
Earnings per common share:
Earnings per share of common stock:								Earnings per share of common stock:
Basic and diluted income per share	Basic and diluted income per share		$	0.00		$	0.03	Basic and diluted income per share	$	0.13	$	0.12	$	0.21	$	0.16

(1)OP units include units that are convertible into Class B common stock or cash, at the Operating Partnership’s option. The Operating Partnership income or loss attributable to these OP units, which is included as a component of Net Income Attributable to Noncontrolling Interests on the consolidated statements of operations, has been added back in the numerator as these OP units were included in the


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									16

denominator for all periods presented. OP units are allocated income on a consistent basis with the common stockholder and therefore have no dilutive impact to earnings per share of common stock.

(2)Includes 93.7 million weighted-average shares of Class B common stock and 15.3 million weighted-average shares of common stock.


11. ~~REVENUE RECOGNITION AND~~ RELATED PARTY TRANSACTIONS

Revenue—We have entered into agreements with the Managed Funds related to certain advisory, management, and administrative services we provide to their real estate assets in exchange for fees and reimbursement of certain expenses. Summarized below are amounts included in Fees and Management Income. The revenue includes the fees and reimbursements earned by us from the Managed Funds, and other revenues that are not in the scope of ASC Topic 606, Revenue from Contracts with Customers, but that are included in this table for the purpose of disclosing all related party revenues (in thousands):


		Three Months Ended March 31,			Three Months Ended September 30,						Nine Months Ended September 30,
			2021			2020			2021		2020		2021		2020
Recurring fees(1)	Recurring fees(1)		$	1,125		$	1,216	Recurring fees(1)	$	1,040	$	1,233	$	3,268	$	3,631
Transactional revenue and reimbursements(2)	Transactional revenue and reimbursements(2)		468			430		Transactional revenue and reimbursements(2)	573		719		1,502		2,109
Insurance premiums(3)	Insurance premiums(3)		693			519		Insurance premiums(3)	822		629		2,325		1,766
Total fees and management income	Total fees and management income		$	2,286		$	2,165	Total fees and management income	$	2,435	$	2,581	$	7,095	$	7,506

(1)Recurring fees include asset management fees and property management fees.

(2)Transactional revenue includes items such as leasing commissions, construction management fees, and acquisition fees.

(3)Insurance premium income includes amounts for reinsurance from third parties not affiliated with us.

Tax Protection Agreement—Through our Operating Partnership, we are currently party to a tax protection agreement (the “2017 TPA”) with certain partners that contributed property to our Operating Partnership on October 4, 2017, among them certain of our executive officers, including Jeffrey S. Edison, our Chairman and Chief Executive Officer, under which the Operating Partnership has agreed to indemnify such partners for tax liabilities that could accrue to them personally related to our potential disposition of certain properties within our portfolio. The 2017 TPA will expire on October 4, 2027. On July 19, 2021, we entered into an additional tax protection agreement (the “2021 TPA”) with certain of our executive officers, including Mr. Edison. The 2021 TPA carries a term of four years and will become effective upon the expiration of the 2017 TPA. As of September 30, 2021, the potential “make-whole amount” on the estimated aggregate amount of built-in gain subject to protection under the agreements is approximately $150 million. The protection provided under the terms of the 2021 TPA will expire in 2031. We have not recorded any liability related to the 2017 TPA or the 2021 TPA on our consolidated balance sheets for any periods presented, nor recognized any expense since the inception of the 2017 TPA, owing to the fact that any potential liability under the agreements is controlled by us and we will either (i) continue to own and operate the protected properties or (ii) be able to successfully complete Section 1031 Exchanges (unless there is a change in applicable law) or complete other tax-efficient transactions to avoid any liability under the agreements.

Other Related Party Matters—We are the limited guarantor for up to $190 million, capped at $50 million in most instances, of debt for our NRP joint venture. As of ~~March 31,~~September 30, 2021, the outstanding loan balance related to our NRP joint venture was $32.1 million. As of ~~March 31,~~September 30, 2021, we were also the limited guarantor of a $175 million mortgage loan ~~for~~secured by GRP I.I properties. Our guaranty infor both ~~cases~~the NRP and GRP I debt is limited to being the non-recourse carveout guarantor and the environmental indemnitor. Further, in both cases, we are also party to an agreement with our institutional joint venture partners in which any potential liability under such guarantees will be apportioned between us and our applicable joint venture partner based on our respective ownership percentages in the applicable joint venture. We have no liability recorded on our consolidated balance sheets for either guaranty as of ~~March 31,~~September 30, 2021 and December 31, 2020.

Additionally, during 2021, we made a cash investment of $3.0 million into a third-party company in exchange for preferred shares of their stock. As part of the investment agreement, the third-party company committed to enter into leases at two of our properties. As of September 30, 2021, we had entered into 2 leases under the terms of the investment agreement, both of which carry a term of ten years, over which period we expect to receive contractual rents of $2.6 million in total for both leases.


12. FAIR VALUE MEASUREMENTS

The following describes the methods we use to estimate the fair value of our financial and nonfinancial assets and liabilities:

Cash and Cash Equivalents, Restricted Cash, Accounts Receivable, and Accounts Payable—We consider the carrying values of these financial instruments to approximate fair value because of the short period of time between origination of the instruments and their expected realization.

Real Estate Investments—The purchase prices of the investment properties, including related lease intangible assets and liabilities, were allocated at estimated fair value based on Level 3 inputs, such as discount rates, capitalization rates, comparable sales, replacement costs, income and expense growth rates, and current market rents and allowances as determined by management.


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									17

Debt Obligations—We estimate the fair value of our debt by discounting the future cash flows of each instrument at rates currently offered for similar debt instruments of comparable maturities by our lenders using Level 3 inputs. The discount rates used approximate current lending rates for loans or groups of loans with similar maturities and credit quality, assuming the debt is outstanding through maturity and considering the debt’s collateral (if applicable). We have utilized market information, as available, or present value techniques to estimate the amounts required to be disclosed.

The following is a summary of borrowings as of ~~March 31,~~September 30, 2021 and December 31, 2020 (in thousands):


		March 31, 2021				December 31, 2020					September 30, 2021				December 31, 2020
		Recorded Principal Balance(1)		Fair Value		Recorded Principal Balance(1)		Fair Value			Recorded Principal Balance(1)		Fair Value		Recorded Principal Balance(1)		Fair Value

Term loans	Term loans	$	1,611,119	$	1,621,987	$	1,610,204	$	1,621,902	Term loans	$	1,091,518	$	1,106,176	$	1,610,204	$	1,621,902
Secured portfolio loan facilities	Secured portfolio loan facilities	391,251		391,391		391,131		404,715		Secured portfolio loan facilities	391,492		404,132		391,131		404,715
Mortgages(2)	Mortgages(2)	274,602		282,497		291,270		303,647		Mortgages(2)	216,407		223,976		291,270		303,647
Total	Total	$	2,276,972	$	2,295,875	$	2,292,605	$	2,330,264	Total	$	1,699,417	$	1,734,284	$	2,292,605	$	2,330,264

(1)Recorded principal balances include net deferred financing expenses of ~~$12.6~~$14.7 million and $13.5 million as of ~~March 31,~~September 30, 2021 and December 31, 2020, respectively. Recorded principal balances also include assumed market debt adjustments of $1.6 million and $1.5 million as of ~~March 31,~~September 30, 2021 and December 31, 2020, respectively. We have recorded deferred financing expenses related to our revolving credit facility, which are not included in these balances, but included in Other Assets, Net on our consolidated balance sheets.

(2)Our finance lease liability is included in the mortgages line item, as presented.

Recurring and Nonrecurring Fair Value Measurements—Our marketable securities, earn-out liability, and interest rate swaps are measured and recognized at fair value on a recurring basis, while certain real estate assets and liabilities are measured and recognized at fair value as needed. Fair value measurements that occurred as of and during the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and the year ended December 31, 2020, were as follows (in thousands):


		March 31, 2021						December 31, 2020							September 30, 2021						December 31, 2020
		Level 1		Level 2		Level 3		Level 1		Level 2		Level 3			Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Recurring	Recurring													Recurring
Marketable securities														Marketable securities	$	5,357	$	—	$	—	$	—	$	—	$	—
Derivative liabilities(1)	Derivative liabilities(1)	$	—	$	(42,970)	$	—	$	—	$	(54,759)	$	—	Derivative liabilities(1)	—		(35,779)		—		—		(54,759)		—
Earn-out liability	Earn-out liability	—		—		(38,000)		—		—		(22,000)		Earn-out liability	—		—		(45,000)		—		—		(22,000)
Nonrecurring	Nonrecurring													Nonrecurring
Impaired real estate assets, net(2)	Impaired real estate assets, net(2)	—		7,150		—		—		19,350		—		Impaired real estate assets, net(2)	$	—	$	24,000	$	—	$	—	$	19,350	$	—
Impaired corporate ROU asset, net	Impaired corporate ROU asset, net	—		—		—		—		537		—		Impaired corporate ROU asset, net	—		—		—		—		537		—

(1)We record derivative liabilities in Derivative Liabilities on our consolidated balance sheets.

(2)The carrying value of impaired real estate assets may have subsequently increased or decreased after the measurement date due to capital improvements, depreciation, or sale.

Marketable Securities—We estimate the fair value of marketable securities using Level 1 inputs. We utilize unadjusted quoted prices for identical assets in active markets that we have the ability to access.

Derivative Instruments—As of ~~March 31,~~September 30, 2021 and December 31, 2020, we had interest rate swaps that fixed LIBOR on portions of our unsecured term loan facilities.

All interest rate swap agreements are measured at fair value on a recurring basis. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves.

To comply with the provisions of ASC Topic 820, Fair Value Measurement, we incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

Although we determined that the significant inputs used to value our derivatives fell within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our counterparties and our own credit risk utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by us and our counterparties. However, as of ~~March 31,~~September 30, 2021 and December 31, 2020, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we have determined that our derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									18

Earn-out—As part of our acquisition of Phillips Edison Limited Partnership (“PELP”) in 2017, an earn-out structure was established which gave PELP the opportunity to earn additional OP units based upon the potential achievement of certain performance targets subsequent to the acquisition. After the expiration of certain provisions in 2019, PELP is now eligible to earn ~~up to 5~~a minimum of 1.0 million and a maximum of approximately 1.7 million OP units as contingent consideration based onupon the timing and valuation of a liquidity event for PECO. Certain of these performance targets are tied to the post-underwritten IPO trading price of our common stock. The number of OP units awarded will vary based on the highest volume weighted average price per share of our common stock over any 30 consecutive trading day period during the 180 days following the underwritten IPO commencement (the “liquidity event price per share”):

•if the liquidity event ~~can occur no later~~price per share is greater than ~~December 31,~~or equal to $33.60, PELP will receive approximately 1.7 million OP units;

•if the liquidity event price per share is less than $33.60 but greater than or equal to $26.40, PELP will receive a number of OP units equal to (i) 1.0 million plus (ii) the product of (A) approximately 0.7 million and (B) the quotient obtained by dividing the liquidity event price per share in excess of $26.40 by $7.20; or

•if the liquidity event price per share is less than $26.40, PELP will receive 1.0 million OP units.

Prior to the second quarter of 2021, ~~for the maximum shares to be awarded, but can occur as late as December 31, 2023.~~

~~We estimate~~we estimated the fair value of ~~this~~the earn-out liability on a quarterly basis using the Monte Carlo method. ~~This method requires us~~Following our underwritten IPO, the only remaining variable for calculating final amounts to ~~make assumptions about future dividend yields, volatility, and timing and pricing~~be paid under the earn-out agreement was the liquidity event price per share. Therefore, as of ~~liquidity events, which are unobservable and are considered Level 3 inputs in~~September 30, 2021, we estimated the fair value ~~hierarchy. A change in these inputs~~of the liability related to the earn-out using a ~~different amount might result in a significantly higher or lower fair value measurement at~~probability-weighted model to estimate the ~~reporting date.~~liquidity event price per share. In calculating the fair value of this liability as of ~~March 31,~~September 30, 2021, we have determined that 1.4 million OP units have been earned with the ~~most likely range of potential outcomes includes a~~ possibility of ~~1000000 additional OP units issued as well as~~ up to ~~a maximum of five~~an additional 0.3 million units being issued.

For the three months ended September 30, 2021, we recorded expense of $5.0 million related to the change in fair value of the earn-out liability. There was no change to the fair value of our earn-out liability for the three months ended September 30, 2020. We recorded expense of ~~$16.0~~$23.0 million and income of $10.0 million, respectively, for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and ~~March 31,~~September 30, 2020 related to changes in the fair value of the earn-out liability. The increase in the fair value of the liability ~~during the three months ended March 31,~~as of September 30, 2021 was attributable to ~~an increase in~~ the ~~EVPS~~commencement of our ~~common stock (as compared with a decrease in EVPS in the comparable prior year period), as described in Note 9,~~underwritten IPO as well as improved market conditions in ~~the first quarter of~~ 2021. The change in fair value for ~~both periods~~each period has been recognized in Other (Expense) Income, Net in the consolidated statements of operations.

Real Estate Asset Impairment—Our real estate assets are measured and recognized at fair value, less costs to sell for held-for-sale properties, on a nonrecurring basis dependent upon when we determine an impairment has occurred. During the three and nine months ended ~~March 31,~~September 30, 2021, we impaired ~~an asset~~assets that ~~was~~were under contract at a disposition price that was less than carrying value, or that had other operational impairment indicators. The valuation technique used for the fair value of all impaired real estate assets was the expected net sales proceeds, which we consider to be a Level 2 input in the fair value hierarchy. There were no impairment charges recorded during the three and nine months ended ~~March 31,~~September 30, 2020.

On a quarterly basis, we employ a multi-step approach to assess our real estate assets for possible impairment and record any impairment charges identified. The first step is the identification of potential triggering events, such as significant decreases in occupancy or the presence of large dark or vacant spaces. If we observe any of these indicators for a shopping center, we then perform an additional screen test consisting of a years-to-recover analysis to determine if we will recover the net carrying value of the property over its remaining economic life based upon net operating income (“NOI”) as forecasted for the current year. In the event that the results of this first step indicate a triggering event for a center, we proceed to the second step, utilizing an undiscounted cash flow model for the center to identify potential impairment. If the undiscounted cash flows are less than the net book value of the center as of the balance sheet date, we proceed to the third step. In performing the third step, we utilize market data such as capitalization rates and sales price per square foot on comparable recent real estate transactions to estimate fair value of the real estate assets. We also utilize expected net sales proceeds to estimate the fair value of any centers that are actively being marketed for sale. If the estimated fair value of the property is less than the recorded net book value at the balance sheet date, we record an impairment charge.

In addition to these procedures, we also review undeveloped or unimproved land parcels that we own for evidence of impairment and record any impairment charges as necessary. Primary impairment triggers for these land parcels are changes to our plans or intentions with regards to such properties, or planned dispositions at prices that are less than the current carrying values.

Our quarterly impairment procedures have not been altered by the COVID-19 pandemic, as we believe key impairment indicators such as temporary store closings and large dark or vacant spaces will continue to be identified in our review. We have utilized forecasts that incorporate estimated decreases in NOI and cash flows as a result of the COVID-19 pandemic in performing our review procedures for the three months ended March 31, 2021 and 2020. However, itIt is possible that we could experience unanticipated changes in assumptions that are employed in our impairment review which could impact our cash flows and fair value conclusions. Such unanticipated changes relative to our expectations may include but are not limited to: increases or decreases in the duration or permanence of tenant closures, increases or decreases in collectibility reserves and write-offs, additional capital required to fill vacancies, extended lease-up periods, future closings of large tenants, changes in macroeconomic assumptions such as rate of inflation and capitalization rates, and changes to the estimated timing of disposition of the properties under review.

We recorded the following expense upon impairment of real estate assets (in thousands):

Three Months Ended March 31,
2021 2020
Impairment of real estate assets $ 5,000 $ 0


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Impairment of real estate assets	$	698	$	—	$	6,754	$	—


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									19


13. SUBSEQUENT EVENTS

In preparing the condensed and unaudited consolidated financial statements, we have evaluated subsequent events through the filing of this report on Form 10-Q for recognition and/or disclosure purposes. Based on this evaluation, we have determined that there were no events that have occurred that require recognition or disclosure, other than certain events and transactions that have been disclosed elsewhere in these consolidated financial statements.


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									20

ITEM 2. 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. All references to “Notes” throughout this document refer to the footnotes to the consolidated financial statements in “Part I, Item 1. Financial ~~Information”~~Statements”. See also “Cautionary Note Regarding Forward-Looking Statements” below.

~~Cautionary Note Regarding Forward-Looking Statements~~


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this Quarterly Report on Form 10-Q (this “Report”) 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”). 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,” “can,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” “possible,” “initiatives,” “focus,” “seek,” “objective,” “goal,” “strategy,” “plan,” “potential,” “potentially,” “preparing,” “projected,” “future,” “long-term,” “once,” “should,” “could,” “would,” “might,” “uncertainty,” 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 ~~focus,~~ plans, strategies, initiatives, and prospects; (b) statements about the COVID-19 pandemic, including its duration and potential or expected impact on our tenants, our business, and our ~~estimated value per share;~~view on forward trends; (c) ~~statements about our distributions, share repurchase program, and dividend reinvestment program; (d)~~ statements about our underwritten incremental yields; and ~~(e)~~(d) statements about our future results of operations, capital expenditures, and ~~liquidity (including any potential listing).~~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) ~~changes in interest rates and the availability of permanent mortgage financing; (v)~~ competition from other available ~~properties~~shopping centers and the attractiveness of properties in our portfolio to our tenants; ~~(vi)~~(v) the financial stability of our tenants, including, ~~the~~without limitation, their ability ~~of tenants~~ 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, including the potential phasing out of LIBOR after 2021; (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; ~~(viii)~~(xii) information technology security breaches; (xiii) our corporate responsibility initiatives; (xiv) loss of key executives; (xv) the ~~concentration~~measures taken by federal, state, and local government agencies and tenants in response to the COVID-19 pandemic, including mandatory business shutdowns, “stay-at-home” orders and social distancing guidelines, the duration of any such measures and the extent to which the revenues of our ~~portfolio~~tenants recover following the lifting of such restrictions; (xvi) the effectiveness or lack of effectiveness of governmental relief in ~~a limited number of industries, geographies, or investments; (ix)~~providing assistance to individuals and businesses adversely impacted by the COVID-19 pandemic, including our tenants; (xvii) the effects of the COVID-19 pandemic, including on the demand for consumer goods and services and levels of consumer confidence in the safety of visiting shopping centers as a result of the COVID-19 pandemic; (x) the measures taken by federal, state, and local government agencies and tenants in response to the COVID-19 pandemic, including mandatory business shutdowns, “stay-at-home” orders and social distancing guidelines; (xi)(xviii) the impact of the COVID-19 pandemic on our tenants and their ability ~~to pay rent on time or at all, or~~and willingness to renew their leases ~~and, in the case of non-renewal,~~upon expiration; (xix) our ability to re-lease ~~the space at~~our properties on the same or ~~more favorable~~better terms, or at ~~all; (xii)~~all, in the ~~length~~event of non-renewal or in the event we exercise our right to replace an existing tenant; (xx) the loss or bankruptcy of our tenants, particularly in light of the adverse impact to the financial health of many retailers and ~~severity~~service providers that has occurred and continues to occur as a result of the COVID-19 ~~pandemic in the United States; (xiii)~~pandemic; (xxi) the pace of recovery following the COVID-19 pandemic given ~~the current severe economic contraction~~its unpredictable nature and increase in unemployment rates; (xiv) our ability to implement cost containment strategies; (xv) our and our tenants’ ability to obtain loans under government programs; (xvi) our ability to pay down, refinance, restructure, or extend our indebtedness as it becomes due; (xvii)impact on macroeconomic conditions; (xxii) to the extent we were seeking to dispose of properties in the near term, significantly greater uncertainty regarding our ability to do so at attractive prices or at all; ~~(xviii) the impact of the COVID-19 pandemic on~~and (xxiii) our ~~business, results of operations, financial condition, and liquidity; and (xix) supply chain disruptions due~~ability to ~~the COVID-19 pandemic.~~implement cost containment strategies. 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 2020 Annual Report on Form 10-K, as originally filed with the SEC on March 12, 2021, and ~~those included in this Report,~~any subsequently filed Quarterly Reports on Form 10-Q, in each case 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.

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~~


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 ~~included as KPIs~~ to be alternatives to measures ~~calculated~~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


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									21

to maintain the operating performance of our ~~properties~~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.

Our KPIs and terminology can be grouped into three key areas:

~~Portfolio~~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 as of ~~March 31,~~September 30, 2021 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.

•~~Inline space—We define an inline space as a space containing less than 10,000 square feet of GLA.~~

•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 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 project upon stabilization and the estimated annualized NOI without the planned improvements. Underwritten incremental 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 yields may vary from our underwritten incremental yield range based on the actual total cost to complete a project and its actual incremental NOI at stabilization.

~~Leasing~~LEASING—Leasing is a key driver of growth for our company.

•Comparable lease—We use this term to refer to a lease with consistent structure that is executed for substantially the exact same space that has been vacant less than twelve months.

•Comparable rent spread—This metric is calculated as ~~being~~ 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 ~~(a)~~(i) total square feet of retained Neighbors with current period lease expirations by ~~(b)~~(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 ~~(a)~~(i) total recovery income by ~~(b)~~(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~~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 the section within this Item 2 titled ~~Management’s~~“Management’s Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP ~~Measures~~Measures” 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) amortization of basis differences in our investments in our unconsolidated joint ventures; and (iv) transaction and acquisition expenses. We use EBITDAre and 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 (“Core FFO”)—To arrive at Core FFO, we adjust Nareit FFO attributable to stockholders and OP unit holders, 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) amortization of unconsolidated joint venture basis differences; (iv) gains or losses on the extinguishment or


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									22

modification of debt, (v) other impairment charges; and (vi) transaction and acquisition expenses. 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 depreciable property. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect EBITDAre on the same basis.

•Equity Market Capitalization—We calculate equity market capitalization as the total dollar value of all outstanding shares.

•Nareit FFO—Nareit defines 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 ~~Attributable to Stockholders and OP Unit Holders~~ in a manner consistent with the Nareit definition.

•Net Debt—We calculate net debt as total debt, excluding 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.~~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, that ~~have~~has been owned and operational for the entirety of each reporting period (i.e., since January 1, 2020).

•Total Enterprise Value—We calculate total enterprise value as our net debt plus our equity market capitalization on a fully diluted basis.

~~Overview~~


OVERVIEW

We are ~~an internally-managed~~a REIT and one of the nation’s largest owners and operators of omni-channel grocery-anchored neighborhood and community shopping centers. The majority of our revenue is lease revenue derived from our real estate investments. Additionally, we operate an investment management business providing property management and advisory services to over $460 million of ~~third-party institutional~~unconsolidated joint ventures. This business provides comprehensive real estate and asset management services to the Managed Funds.

As of ~~March 31,~~September 30, 2021, we wholly-owned ~~278~~267 real estate properties. Additionally, we owned ~~a 20% interest in NRP, a joint venture that owned two properties, and~~ a 14% interest in GRP I, a joint venture that owned 20 properties, and a 20% interest in NRP, a joint venture that owned two properties.

~~Liquidity Alternative Review Process~~RECAPITALIZATION—On ~~March 25,~~June 18, 2021, our stockholders approved Articles of Amendment that effected the Recapitalization, wherein each share of our common stock outstanding at the time the amendment became effective was converted into one share of a newly created class of Class B common stock. The Articles of Amendment became effective upon filing with, and acceptance by, the State Department of Assessments and Taxation of Maryland on July 2, 2021. Unless otherwise indicated, all information in this Form 10-Q gives effect to the Recapitalization and references to “shares” and per share metrics refer to our common stock and Class B common stock, collectively (see Note 9).

REVERSE STOCK SPLIT—On July 2, 2021, our Board ~~announced that we are reviewing alternatives in order to provide liquidity~~approved an amendment to our ~~shareholders.~~articles of incorporation to effect a one-for-three reverse stock split. Concurrent with the reverse split, the Operating Partnership enacted a one-for-three reverse split of its outstanding OP units. Unless otherwise indicated, the information in this Form 10-Q gives effect to the reverse stock and OP unit splits (see Note 9).

UNDERWRITTEN INITIAL PUBLIC OFFERING—On July 19, 2021, we closed our underwritten IPO, through which we offered 17.0 million shares of a new class of common stock, $0.01 par value per share, at an initial price to the public of $28.00 per share, pursuant to a registration statement filed with the SEC on Form S-11 (File No. 333-255846), as amended. In connection with the ~~review process,~~underwritten IPO, the underwriters exercised a 30-day option to purchase additional shares of common stock to cover overallotments, and, accordingly, on August 2, 2021, we settled the sale of an additional 2.6 million shares at a price of $28.00 per share. These shares are listed on NASDAQ under the trading symbol “PECO”. The underwritten IPO, including the underwriters overallotment election, resulted in gross proceeds of $547.4 million.


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									23

On August 4, 2021, as a result of our underwritten IPO, our Board approved the termination of the DRIP ~~has been suspended, beginning~~and the SRP.

2021 BOND OFFERING—In October 2021, in connection with our Bond Registration, we settled the ~~distribution payable April 1, 2021. Additionally,~~2021 Bond Offering priced at 98.692% of the ~~Fourth Amended SRP, which is currently limited to repurchases resulting from stockholder DDI, has been suspended.~~principal amount and maturing in November 2031. This offering resulted in gross proceeds of $345.4 million. The ~~SRP for both standard~~notes are fully and ~~DDI requests will remain suspended until further notice.~~unconditionally guaranteed by us.

COVID-19 ~~Strategy~~STRATEGY—During 2020, as a result of the COVID-19 pandemic, many state governments issued “stay-at-home” mandates that generally limited travel and movement of the general public to essential activities only and required all non-essential businesses to close. ~~In response to the pandemic, we enacted several initiatives including: (1) the implementation of expense reduction initiatives at the property~~All statistics and corporate levels, including reductions to our workforce and travel costs; (2) the reprioritization of our capital investments to support the reopening of our Neighbors and new leasing activity, or deferment of such capital expenditures if possible; (3) temporary reductionsfinancial results included in ~~compensation for certain of our executives and our Board; and (4) the temporary suspension of dividends, the DRIP, and the SRP.~~

At the peak of the pandemic-related closure activity, temporary closures reached 37% of all Neighbor spaces, totaling 27% of our ABR and 22% of our GLA. All temporarily closed Neighbors have since been permitted to reopen; however, a portion of our Neighbors have permanently closed, and we are working to backfill these spaces. We continue to closely monitor the occupancy, operating performance, and Neighbor sales results at our centers, including any Neighbors operating with reduced hours or under government-imposed restrictions.

~~Our management team has determined the following are the key actions for recovery in our portfolio (all statistics~~this COVID-19 Strategy section are approximate and include the prorated portion attributable to properties owned through our joint ~~ventures):~~ventures.

•~~Returning to Monthly Payments—We continue to work with~~Our management team determined the recovery of our portfolio was dependent on the execution of key actions, including guiding our Neighbors toward returning to ~~resume normal~~ monthly rent payments, recovering missed charges, and monitoring for credit risk. Our actions in conjunction with the resiliency of our ~~efforts have included raising awareness of the benefits available through numerous governmental relief programs. We have seen our~~tenant mix has led to improved collections ~~continue to improve~~ from the second quarter of 2020. Further, we believe our collections have returned to levels consistent with those prior to the onset of the pandemic. The following table

summarizes our collections by quarter, as they were originally reported as well as updated for payments received subsequent to the month billed:


		Originally Reported		Current(1)			Originally Reported		Current(1)
Q2 2020	Q2 2020	86	%	93	%	Q2 2020	86	%	93	%
Q3 2020	Q3 2020	94	%	96	%	Q3 2020	94	%	97	%
Q4 2020	Q4 2020	95	%	96	%	Q4 2020	95	%	97	%
Q1 2021	Q1 2021	N/A		95	%	Q1 2021	95	%	98	%
Q2 2021						Q2 2021	98	%	99	%
Q3 2021						Q3 2021	N/A		99	%

(1)~~Including collections~~Collections include those received through ~~April~~October 20, 2021.

~~As of April 20, 2021, approximately 79% of our Neighbor spaces are paying their rent in full.~~

•~~Recovering Missed Rent Charges~~—We believe substantially all Neighbors, including those that were required to temporarily close under governmental mandates, are contractually obligated to continue with their rent payments as documented in our lease agreements with them. However, we ~~may~~decided to negotiate relief for a small subset of our Neighbors, ~~in the form of~~including rent ~~deferrals or abatements.~~deferrals. As of ~~April~~October 20, 2021, we have ~~$5.4~~$4.2 million of outstanding payment plans with our Neighbors ~~and we had recorded rent abatements~~ of which approximately ~~$4.4 million during~~28% are scheduled to be received by December 31, 2021. ~~These payment plans and rent abatements represented 1.4% and 1.1%~~As of ~~portfolio ABR, respectively, and~~October 20, 2021, the weighted-average term over which we expect to receive remaining amounts owed on executed payment plans is approximately 13eleven months.

We are still actively pursuing past due amounts under the terms negotiated with our Neighbors. For our entire portfolio, inclusive of our prorated share of properties owned through joint ventures, 43% of missed monthly charges billed during the first quarter of 2021 have been collected subsequent to the month billed and 5% have been waived, as of April 20, 2021. We will continue to work with Neighbors on establishing plans to repay past due amounts, and will monitor the impact of such payment plans on our results of operations in future quarters. We cannot guarantee that we will ultimately be able to collect these amounts.

•~~Monitoring~~Despite seeing improvements in collections for ~~Credit Risk—The COVID-19~~current and past due amounts during 2021, the negative impact the pandemic ~~and resulting economic downturn~~ has ~~increased the uncertainty of collecting rents from a number of our Neighbors. We have been closely monitoring the status of~~had on our Neighbors continues to ~~identify those~~be considered in our evaluation of Neighbors who potentially pose a credit ~~risk in order to appropriately account for the impact to revenue and in order to quickly take action when a Neighbor is ultimately unable to remain in a space.~~

risk. For Neighbors with a higher degree of uncertainty as to their creditworthiness, we may not record revenue for amounts billed until the cash is received. Based on our analysis, no individual Neighbor category has been accounted for entirely on a cash basis as of March 31, 2021; however, we continue to evaluate each Neighbor individually to determine if they should be accounted for on a cash basis. For the three and nine months ended ~~March 31,~~September 30, 2021, ~~and 2020, inclusive of the prorated portion attributable to properties owned through our joint ventures,~~ we had ~~$4.9~~$0.6 million and ~~$2.9~~$4.2 million, respectively, in net unfavorable monthly revenue adjustments for Neighbors who are being accounted for on a cash basis. For the three and nine months ended September 30, 2020, we had $5.3 million and $20.3 million, respectively, in net unfavorable monthly revenue adjustments for Neighbors who were being accounted for on a cash basis. As of ~~March 31,~~September 30, 2021, our Neighbors currently being accounted for on a cash basis represented approximately ~~10%~~8% of our total Neighbor spaces, ~~which represented 8.4%~~or approximately 7.3% of portfolio ABR. Further, many of our Neighbors who are on a cash basis of accounting are actively making payments toward their outstanding balances. When considering the ABR associated with Neighbors who are currently on a cash basis of accounting, ~~56%~~79% of this ABR is represented by Neighbors who are actively making payments.

Additionally, certain of our Neighbors ~~have~~ entered into bankruptcy proceedings. While some of these cases have already been resolved, with the assumption or rejection of the lease already reflected in our results, in some cases these claims have yet to be resolved, and as such, the potential fallout is not yet reflected in our occupancy rate or ABR metrics. We believe that Neighbors in the bankruptcy process represent an exposure of ~~approximately~~less than 1% of our total portfolio ABR as of ~~March 31,~~September 30, 2021. We have included our assessment of the impact of these bankruptcies in our estimate of rent collectibility, which impacted recorded revenue, as noted previously.

Certain of our Neighbors ~~have been~~were unable to remain in their spaces as a result of the factors previously noted. Despite this fallout, our leasing activity has been strong as demand for space in our centers remains high, allowing us to re-lease these spaces to Neighbors who may increase our concentration of necessity-based and omni-channel retailers. For the three and nine months ended ~~March 31,~~September 30, 2021, our wholly-owned portfolio retention rate was ~~88.8%~~91.2% and 88.3%, respectively. Additionally, for the three and nine months ended September 30, 2021, for our wholly-owned portfolio, we executed ~~153~~140 and 417 new leases, respectively, each an increase as compared to the same period a year ago.


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									24

~~Portfolio and Leasing Statistics~~PORTFOLIO AND LEASING STATISTICS—Below are statistical highlights of our wholly-owned portfolio as of ~~March 31,~~September 30, 2021 and 2020 (dollars and square feet in thousands):


		March 31, 2021			March 31, 2020				September 30, 2021			September 30, 2020
Number of properties	Number of properties	278			285			Number of properties	267			283
Number of states	Number of states	31			31			Number of states	31			31
Total square feet	Total square feet	31,306			31,862			Total square feet	30,443			31,731
ABR	ABR	$	386,971		$	385,457		ABR	$	388,272		$	385,375
% ABR from grocery-anchored properties		96.4		%	97.0		%
% ABR from omni-channel grocery-anchored shopping centers								% ABR from omni-channel grocery-anchored shopping centers	96.3		%	97.0		%
Leased % of rentable square feet:	Leased % of rentable square feet:							Leased % of rentable square feet:
Total portfolio spaces	Total portfolio spaces	94.8		%	95.6		%	Total portfolio spaces	95.6		%	95.3		%
Anchor spaces	Anchor spaces	97.3		%	98.3		%	Anchor spaces	97.6		%	98.3		%
Inline spaces	Inline spaces	89.8		%	90.1		%	Inline spaces	91.9		%	89.5		%
Average remaining lease term (in years)(1)	Average remaining lease term (in years)(1)	4.6			4.6			Average remaining lease term (in years)(1)	4.6			4.5

(1)The average remaining lease term in years excludes future options to extend the term of the lease.

The following table details information for our joint ventures as of ~~March 31,~~September 30, 2021, which is the basis for determining the prorated information included in the subsequent tables (dollars and square feet in thousands):


		March 31, 2021						September 30, 2021
Joint Venture	Joint Venture	Ownership Percentage	Number of Properties	ABR		GLA	Joint Venture	Ownership Percentage	Number of Properties	ABR		GLA
Grocery Retail Partners I							Grocery Retail Partners I	14%	20	$	29,222	2,214
Necessity Retail Partners	Necessity Retail Partners	20%	2	$	3,845	228	Necessity Retail Partners	20%	2	4,004		228
Grocery Retail Partners I		14%	20	28,735		2,215


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									25

~~Lease Expirations~~LEASE EXPIRATIONS—The following chart shows the aggregate scheduled lease expirations, excluding our Neighbors who are occupying space on a temporary basis, after ~~March 31,~~September 30, 2021 for each of the next ten years and thereafter for our wholly-owned properties and the prorated portion of those owned through our 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 “Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Leasing Activity” of this filing on Form 10-Q for further discussion of leasing activity.


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									26

~~Portfolio Tenancy~~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 joint ventures, by Neighbor type as of ~~March 31,~~September 30, 2021:

The following charts present the composition of our portfolio by Neighbor industry as of ~~March 31,~~September 30, 2021:


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									27

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 ~~for which~~ does not change based on a consumer’s income level). We estimate that approximately ~~73%~~72% of our ABR, including the pro rata portion attributable to properties owned through our joint ventures, is from Neighbors providing necessity-based goods and services. Additionally, within ~~these categories,~~Necessity-based goods and services, we estimate that approximately ~~51%~~50% of our ABR is from retail and service businesses generally deemed essential under most state and local mandates issued in response to the COVID-19 ~~pandemic. The composition of our portfolio as a percentage of ABR is as follows:~~


	~~March 31, 2021~~
~~Essential/Necessity retail and services:~~
~~Grocery~~	~~35.5~~	%
~~Medical/pharmacy~~	~~2.8~~	%
~~Banks~~	~~2.5~~	%
~~Dollar stores~~	~~2.3~~	%
~~Pet supply~~	~~2.1~~	%
~~Hardware/automotive~~	~~1.7~~	%
~~Wine, beer, and liquor~~	~~1.4~~	%
~~Other essential~~	~~2.7~~	%
~~Total Essential/Necessity-based retail and services(1)~~	~~51.0~~	%
~~Other Necessity:~~
~~Quick service - restaurant~~	~~9.6~~	%
~~Beauty and hair care~~	~~4.9~~	%
~~Health care services~~	~~3.8~~	%
~~Other necessity~~	~~3.3~~	%
~~Total ABR from other Necessity~~	~~21.6~~	%

~~Total ABR from Necessity-based goods and services~~	~~72.6~~	%

~~Other retail stores:~~
~~Soft goods~~	~~12.2~~	%
~~Full service - restaurant~~	~~6.3~~	%
~~Fitness and lifestyle services~~	~~5.2~~	%
~~Other retail~~	~~3.7~~	%
~~Total ABR from other retail and services~~	~~27.4~~	%
~~Total ABR~~	~~100.0~~	%

~~(1)Includes Neighbors that we believe are considered to be essential retail and service businesses but~~pandemic, including those that may have temporarily closed at various points during the ~~COVID-19~~ pandemic due to decreases in foot traffic and customer patronage as a result of “stay-at-home” mandates and social distancing guidelines implemented in response to the pandemic.

TOP TWENTY NEIGHBORS

—The following table presents our top twenty Neighbors by ABR, including our wholly-owned properties and the prorated portion of those owned through our joint ventures, as of ~~March 31,~~September 30, 2021 (dollars and square feet in thousands):


Neighbor(1)	Neighbor(1)	ABR		% of ABR		Leased Square Feet	% of Leased Square Feet		Number of Locations(2)	Neighbor(1)	ABR		% of ABR		Leased Square Feet	% of Leased Square Feet		Number of Locations(2)
Kroger	Kroger	$	26,032	6.6	%	3,296	11.0	%	60	Kroger	$	25,830	6.6	%	3,244	11.0	%	59
Publix	Publix	22,003		5.6	%	2,240	7.5	%	56	Publix	23,145		5.9	%	2,304	7.8	%	57
Ahold Delhaize	Ahold Delhaize	17,274		4.4	%	1,240	4.1	%	23	Ahold Delhaize	17,113		4.4	%	1,204	4.1	%	22
Albertsons-Safeway	Albertsons-Safeway	16,897		4.3	%	1,624	5.4	%	30	Albertsons-Safeway	16,804		4.3	%	1,599	5.4	%	29
Walmart	Walmart	8,933		2.3	%	1,770	5.9	%	13	Walmart	8,933		2.3	%	1,770	6.0	%	13
Giant Eagle	Giant Eagle	7,293		1.9	%	738	2.5	%	11	Giant Eagle	7,924		2.0	%	828	2.8	%	11
TJX Companies	TJX Companies	5,061		1.3	%	428	1.4	%	15	TJX Companies	5,205		1.3	%	445	1.5	%	16
Sprouts Farmers Market	Sprouts Farmers Market	4,952		1.3	%	334	1.1	%	11	Sprouts Farmers Market	5,000		1.3	%	334	1.1	%	11
Raley's										Raley's	3,884		1.0	%	253	0.9	%	4
Dollar Tree	Dollar Tree	3,954		1.0	%	406	1.4	%	42	Dollar Tree	3,448		0.9	%	351	1.2	%	37
Raley's		3,884		1.0	%	253	0.8	%	4
SUPERVALU	SUPERVALU	3,209		0.8	%	336	1.1	%	5	SUPERVALU	3,209		0.8	%	336	1.1	%	5
Subway Group	Subway Group	2,829		0.7	%	115	0.4	%	82	Subway Group	2,633		0.7	%	106	0.4	%	75
Anytime Fitness, Inc.										Anytime Fitness, Inc.	2,598		0.7	%	166	0.6	%	34
Schnucks	Schnucks	2,785		0.7	%	329	1.1	%	5	Schnucks	2,545		0.6	%	249	0.8	%	4
Anytime Fitness, Inc.		2,662		0.7	%	177	0.6	%	36
Save Mart		2,618		0.7	%	309	1.0	%	6
Southeastern Grocers		2,513		0.6	%	281	0.9	%	7
Lowe's	Lowe's	2,469		0.6	%	369	1.2	%	4	Lowe's	2,470		0.6	%	369	1.3	%	4
Kohl's Corporation	Kohl's Corporation	2,281		0.6	%	365	1.2	%	4	Kohl's Corporation	2,241		0.6	%	365	1.3	%	4
Food 4 Less (PAQ)	Food 4 Less (PAQ)	2,215		0.6	%	119	0.4	%	2	Food 4 Less (PAQ)	2,215		0.6	%	118	0.4	%	2
Save Mart										Save Mart	2,174		0.6	%	258	0.9	%	5
Petco Animal Supplies, Inc.	Petco Animal Supplies, Inc.	2,118		0.5	%	127	0.4	%	11	Petco Animal Supplies, Inc.	2,130		0.5	%	127	0.4	%	11
Big Y										Big Y	2,022		0.5	%	115	0.4	%	3
Total	Total	$	141,982	36.2	%	14,856	49.4	%	427	Total	$	141,523	36.2	%	14,541	49.4	%	406

(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, in the event that 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 of the~~


RESULTS OF OPERATIONS

KNOWN TRENDS AND UNCERTAINTIES OF THE COVID-19 ~~Pandemic~~

PANDEMIC—The COVID-19 pandemic ~~has~~ resulted in reduced revenues beginning with the second quarter of 2020 and continuing through ~~the first quarter of~~early 2021, and our estimates around collectibility will likely continue to create volatility in our earnings. ~~The~~Although we have seen improved collections of current and past due rent amounts during 2021, the total impact of such collections and estimates around collectibility on revenue ~~in the future cannot be determined~~is still volatile at this time. The duration of the pandemic and mitigating measures, and the resulting economic impact, has caused some of our Neighbors to permanently vacate their spaces and/or not renew their leases, and we may have difficulty leasing these spaces on the same or better terms or at all, and/or incur additional costs to lease vacant spaces, which may reduce our occupancy rates in the future and ultimately reduce our revenue. Extended periods of vacancy or reduced revenues may trigger impairments of our real estate assets. ~~Additionally, these factors have impacted disposition activity by decreasing demand and negatively impacting capitalization rates.~~

The magnitude and duration of the COVID-19 pandemic and its impact on our results of operations in the near term and potentially beyond are uncertain as a result of a number of factors outside of our control. These factors include, but are not limited to: overall economic conditions on both a macro and micro level, including consumer demand as well as retailer demand for space within our shopping centers; the impact of social distancing guidelines, recommendations from governmental authorities, and consumer shopping preferences; the nature and effectiveness of any economic stimulus or relief measures; the timing of availability and distribution of vaccines to the general public and the resulting vaccination rates; and the impact of all of the factors above, including other potentially unknown factors, on our Neighbors’ ability to continue paying rent and related charges on time or at all and Neighbors’ willingness to renew their leases on the same terms or at all. The impact of these factors, some of which have already been realized, could include reduced revenue from Neighbor concessions, increased collectibility reserves, decreased recovery rates on expenses, and other unforeseen impacts that may arise in the course of operating during these circumstances. See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Overview” for our observation of Neighbor impacts through April 20, 2021.

We believe that our investment focus on grocery-anchored shopping centers that provide daily necessities has helped and will continue to help lessen the negative effect of the pandemic on our business compared to non-grocery anchored shopping centers.


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									28

~~Summary of Operating Activities for the Three Months Ended March 31,~~SUMMARY OF OPERATING ACTIVITIES FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2021 ~~and~~AND 2020


		Three Months Ended March 31,				Favorable (Unfavorable) Change					Three Months Ended September 30,				Favorable (Unfavorable) Change
(Dollars in thousands)	(Dollars in thousands)	2021		2020		$		%		(Dollars in thousands)	2021		2020		$		%(1)
Revenues:	Revenues:									Revenues:
Rental income	Rental income	$	127,623	$	128,466	$	(843)	(0.7)	%	Rental income	$	128,826	$	123,298	$	5,528	4.5	%
Fee and management income	Fee and management income	2,286		2,165		121		5.6	%	Fee and management income	2,435		2,581		(146)		(5.7)	%
Other property income	Other property income	472		892		(420)		(47.1)	%	Other property income	1,073		816		257		31.5	%
Total revenues	Total revenues	130,381		131,523		(1,142)		(0.9)	%	Total revenues	132,334		126,695		5,639		4.5	%
Operating Expenses:	Operating Expenses:									Operating Expenses:
Property operating expenses	Property operating expenses	22,202		21,762		(440)		(2.0)	%	Property operating expenses	21,608		20,835		(773)		(3.7)	%
Real estate tax expenses	Real estate tax expenses	16,573		17,112		539		3.1	%	Real estate tax expenses	16,375		17,282		907		5.2	%
General and administrative expenses	General and administrative expenses	9,341		10,740		1,399		13.0	%	General and administrative expenses	11,627		9,595		(2,032)		(21.2)	%
Depreciation and amortization	Depreciation and amortization	55,341		56,227		886		1.6	%	Depreciation and amortization	53,901		56,095		2,194		3.9	%
Impairment of real estate assets	Impairment of real estate assets	5,000		—		(5,000)		NM		Impairment of real estate assets	698		—		(698)		NM
Total operating expenses	Total operating expenses	108,457		105,841		(2,616)		(2.5)	%	Total operating expenses	104,209		103,807		(402)		(0.4)	%
Other:	Other:									Other:
Interest expense, net	Interest expense, net	(20,063)		(22,775)		2,712		11.9	%	Interest expense, net	(18,570)		(20,388)		1,818		8.9	%
Gain (loss) on disposal of property, net		13,841		(1,577)		15,418		NM
Gain on disposal of property, net										Gain on disposal of property, net	14,093		10,734		3,359		31.3	%
Other (expense) income, net	Other (expense) income, net	(15,585)		9,869		(25,454)		NM		Other (expense) income, net	(7,086)		196		(7,282)		NM
Net income	Net income	117		11,199		(11,082)		(99.0)	%	Net income	16,562		13,430		3,132		23.3	%
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	(14)		(1,430)		1,416		99.0	%	Net income attributable to noncontrolling interests	(1,929)		(1,646)		(283)		(17.2)	%
Net income attributable to stockholders	Net income attributable to stockholders	$	103	$	9,769	$	(9,666)	(98.9)	%	Net income attributable to stockholders	$	14,633	$	11,784	$	2,849	24.2	%

(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 ~~274~~261 properties that were owned and operational prior to January 1, 2020. We define our non-same-center portfolio as those properties that were not fully owned and operational in both periods owing to real estate asset activity occurring after December 31, 2019, which includes 1326 properties disposed of and ~~four~~six properties acquired. Below are explanations of the significant fluctuations in the results of operations for the three months ended ~~March 31,~~September 30, 2021 and 2020:

Rental Income ~~decreased $0.8~~increased $5.5 million as follows:

•$~~0.5~~7.9 million ~~decrease primarily related to our net disposition of 9 properties; and~~

•~~$0.3 million decrease~~increase related to our same-center portfolio primarily as follows:

▪$~~1.3~~5.6 million ~~decrease~~increase primarily due to stronger collections in 2021 as compared with lower collections in 2020, the increase owing largely ~~due~~ to the ongoing recovery of our portfolio in the wake of the COVID-19 pandemic and its economic impact, including a ~~$1.1 million decrease due to rent abatement and a $0.2 million~~ decrease in ~~connection with~~ Neighbors we have identified as a credit ~~risk, including the impact of straight-line rent adjustments for the related leases;~~

▪$0.7 million increase due to lease buyout income owing largely to Neighbors (representing less than 1% of ABR and GLA) who opted not to remain in their space following negative impacts as a result of COVID-19;risk; and

▪$~~0.3~~2.2 million increase primarily due to a ~~$0.52~~$0.53 increase in average minimum rent per square foot, partially offset by a 0.8% decline in average occupancy.

•$2.4 million decrease primarily related to our net disposition of 20 properties.

Property Operating Expenses increased$0.8 million primarily as follows:

•$1.1 million increase related to our same-center portfolio and corporate operating activities as follows:

▪$0.6 million increase owing largely to lower performance-based compensation in 2020 as a result of the COVID-19 pandemic, as compared to 2021; and

▪$0.5 million increase in insurance expenses primarily due to higher market rates and an increase in claims and claim development.

•$0.4 million decrease related to our net disposition of 20 properties.

Real Estate Tax Expenses:

•The $0.9 million decrease in ~~average economic occupancy.~~real estate tax expenses is primarily due to successful tax appeals and favorable assessments at our centers, as well as our net disposition of 20 properties.

General and Administrative Expenses increased $2.0 million primarily as follows:

•$1.5 million increase owing largely to lower expense for performance-based compensation in 2020 as a result of the COVID-19 pandemic, as compared to 2021; and


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									29

•$0.5 million increase primarily due to an increase in directors and officers insurance costs as a result of our underwritten IPO.

Depreciation and Amortization decreased $2.2 million as follows:

•$1.2 million decrease related to our net disposition of 20 properties; and

•$1.0 million decrease related to our same-center portfolio and corporate operating activities, primarily due to intangible assets becoming fully amortized.

Interest Expense, Net:

•The $1.8 million decrease during the three months ended September 30, 2021 as compared to the same period in 2020 was due to lower outstanding debt as a result of repayments. Interest Expense, Net was comprised of the following (dollars in thousands):


	Three Months Ended September 30,
	2021			2020
Interest on revolving credit facility, net	$	237		$	260
Interest on term loans, net	8,913			11,195
Interest on secured debt	6,049			7,308
Loss on extinguishment or modification of debt, net	1,674			—
Non-cash amortization and other	1,697			1,625
Interest expense, net	$	18,570		$	20,388

Weighted-average interest rate as of end of period	3.3		%	3.1		%
Weighted-average term (in years) as of end of period	4.2			4.3

Gain on Disposal of Property, Net:

•The $3.4 million increase was primarily related to the sale of seven properties and two outparcels with a net gain (in addition to other property-related miscellaneous disposals and write-offs) of $14.1 million during the three months ended September 30, 2021, as compared to the sale of two properties (as well as other property-related miscellaneous disposals and write-offs) with a net gain of $10.7 million during the three months ended September 30, 2020 (see Note 4).

Other (Expense) Income, Net:

•The $7.3 million change was largely due to the change in the fair value of our earn-out liability as a result of general improving market conditions, as well as an increase in transaction and acquisition expenses as a result of restricted stock units awarded in connection with our underwritten IPO. Other (Expense) Income, Net was comprised of the following (dollars in thousands):


	Three Months Ended September 30,
	2021		2020
Change in fair value of earn-out liability	$	(5,000)	$	—
Transaction and acquisition expenses	(1,775)		(152)
Equity in net (loss) income of unconsolidated joint ventures	(54)		133
Federal, state, and local income tax expense	(165)		(173)
Other	(92)		388
Other (expense) income, net	$	(7,086)	$	196


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									30

SUMMARY OF OPERATING ACTIVITIES FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020


	Nine Months Ended September 30,				Favorable (Unfavorable) Change
(Dollars in thousands)	2021		2020		$		%(1)
Revenues:
Rental income	$	386,784	$	367,418	$	19,366	5.3	%
Fee and management income	7,095		7,506		(411)		(5.5)	%
Other property income	1,906		2,334		(428)		(18.3)	%
Total revenues	395,785		377,258		18,527		4.9	%
Operating Expenses:
Property operating expenses	65,784		62,226		(3,558)		(5.7)	%
Real estate tax expenses	49,762		50,847		1,085		2.1	%
General and administrative expenses	32,905		30,141		(2,764)		(9.2)	%
Depreciation and amortization	165,829		168,692		2,863		1.7	%
Impairment of real estate assets	6,754		—		(6,754)		NM
Total operating expenses	321,034		311,906		(9,128)		(2.9)	%
Other:
Interest expense, net	(57,765)		(65,317)		7,552		11.6	%
Gain on disposal of property, net	31,678		8,616		23,062		NM
Other (expense) income, net	(25,595)		9,565		(35,160)		NM
Net income	23,069		18,216		4,853		26.6	%
Net income attributable to noncontrolling interests	(2,739)		(2,251)		(488)		(21.7)	%
Net income attributable to stockholders	$	20,330	$	15,965	$	4,365	27.3	%

(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 the Summary of Operating Activities for the Three Months Ended September 30, 2021 and 2020 section above. Below are explanations of the significant fluctuations in the results of operations for the nine months ended September 30, 2021 and 2020:

Rental Income increased $19.4 million as follows:

•$23.0 million increase related to our same-center portfolio primarily as follows:

▪$21.2 million increase primarily due to stronger collections in 2021 as compared with lower collections in 2020, the increase owing largely to the ongoing recovery of our portfolio in the wake of the COVID-19 pandemic and its economic impact, including a decrease in Neighbors we have identified as a credit risk, as well as collections on charges that were uncollected in 2020;

▪$4.2 million increase primarily due to a $0.48 increase in average minimum rent per square foot, partially offset by a 0.9% decline in average occupancy; and

▪$2.3 million decrease owing largely to lower recoveries from a lower recovery rate and lower occupancy.

•$3.6 million decrease primarily related to our net disposition of 20 properties.

Property Operating Expenses increased $3.6 million primarily as follows:

•$4.0 million increase related to our same-center portfolio and corporate operating activities as follows:

▪$2.8 million increase owing largely to lower expense for performance-based compensation in 2020 as a result of the COVID-19 pandemic, as compared to 2021; and

▪$1.2 million increase primarily due to higher insurance expenses attributed to higher market rates and an increase in claims and claim development.

•$0.5 million decrease related to our net disposition of 20 properties.

Real Estate Tax Expenses:

•The ~~$1.4~~$1.1 million decrease in ~~general and administrative~~real estate tax expenses is primarily due to successful tax appeals and favorable assessments at our centers, as well as our net disposition of 20 properties.

General and Administrative Expenses increased $2.8 million primarily as follows:

•$5.8 million increase owing largely to lower expense for performance-based compensation in 2020 as a result of the COVID-19 pandemic, as compared to 2021;

•$1.7 million decrease primarily due to lower third-party consultant and custodial costs; and


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									31

•$1.4 million decrease related to expense reductions taken in 2020 to reduce the impact of the COVID-19 pandemic, with the majority of these decreases related to overhead costs at our corporate ~~offices,~~offices.

Depreciation and Amortization decreased $2.9 million as ~~well as decreased travel~~follows:

•$1.8 million decrease related to our net disposition of 20 properties; and

•$1.1 million decrease related ~~costs.~~to our same-center portfolio and corporate operating activities, primarily due to intangible assets becoming fully amortized.

Impairment of Real Estate Assets:

•The ~~$5.0~~$6.8 million increase in impairment of real estate assets was due to ~~an asset under contract~~assets that have sold during 2021 as well as assets that are actively being marketed for sale at a disposition price that ~~was~~is less than the carrying value, the proceeds from which will be used to fund tax-efficient acquisitions, to fund redevelopment opportunities in owned centers, and for general corporate purposes. We continue to sell non-core assets and may potentially recognize impairments in future quarters.value.

Interest Expense, Net:

•The ~~$2.7~~$7.6 million decrease during the ~~three~~nine months ended ~~March 31,~~September 30, 2021 as compared to the same period in 2020 was ~~largely~~due to: (i) lower borrowings as a result of early repayments of debt; (ii) the $200 million draw and subsequent repayment of our draw on the revolver during the second quarter of 2020; and (iii) lower average interest rates due to the decrease in ~~LIBOR and expiring interest rate swaps in 2020 and the first quarter of 2021.~~LIBOR. Interest Expense, Net was comprised of the following (dollars in thousands):


		Three Months Ended March 31,							Nine Months Ended September 30,
		2021			2020				2021			2020
Interest on revolving credit facility, net	Interest on revolving credit facility, net	$	228		$	216		Interest on revolving credit facility, net	$	672		$	1,455
Interest on term loans, net	Interest on term loans, net	10,633			12,731			Interest on term loans, net	30,119			35,611
Interest on secured debt	Interest on secured debt	6,780			7,350			Interest on secured debt	19,075			21,973
Loss on extinguishment of debt		691			73
Loss on extinguishment or modification of debt, net								Loss on extinguishment or modification of debt, net	2,784			73
Non-cash amortization and other	Non-cash amortization and other	1,731			2,405			Non-cash amortization and other	5,115			6,205
Interest expense, net	Interest expense, net	$	20,063		$	22,775		Interest expense, net	$	57,765		$	65,317

Weighted-average interest rate as of end of period	Weighted-average interest rate as of end of period	3.0		%	3.3		%	Weighted-average interest rate as of end of period	3.3		%	3.1		%
Weighted-average term (in years) as of end of period	Weighted-average term (in years) as of end of period	3.8			4.7			Weighted-average term (in years) as of end of period	4.2			4.3

Gain ~~(Loss)~~ on Disposal of Property, Net:

•The ~~$15.4~~$23.1 million ~~change~~increase was primarily related to the sale of ~~six~~20 properties and ~~one outparcel (plus~~three outparcels (in addition to other miscellaneous property-related disposals and write-offs)with a net gain of ~~$13.8~~$31.7 million during the ~~three~~nine months ended ~~March 31,~~September 30, 2021, as compared to the sale of ~~three~~six properties (as well as other property-related miscellaneous disposals and write-offs) with a net ~~loss~~gain of ~~$1.6~~$8.6 million during the ~~three~~nine months ended ~~March 31,~~September 30, 2020 (see Note 4).

Other (Expense) Income, Net:

•The ~~$25.5~~$35.2 million change was largely due to the change in the fair value of our earn-out liability as a result of general improving market conditions, as well as an increase in ~~the EVPS~~transaction and acquisition expenses as a result of restricted stock units awarded in connection with our ~~common stock as well as improved market conditions during the first quarter of 2021.~~underwritten IPO. Other ~~Expense (Income),~~(Expense) Income, Net was comprised of the following (in thousands):


		Three Months Ended March 31,					Nine Months Ended September 30,
		2021		2020			2021		2020
Change in fair value of earn-out liability	Change in fair value of earn-out liability	$	(16,000)	$	10,000	Change in fair value of earn-out liability	$	(23,000)	$	10,000
Transaction and acquisition expenses						Transaction and acquisition expenses	(2,850)		(211)
Equity in income (loss) of unconsolidated joint ventures	Equity in income (loss) of unconsolidated joint ventures	714		(280)		Equity in income (loss) of unconsolidated joint ventures	747		(506)
Transaction and acquisition expenses		(141)		(45)
Federal, state, and local income tax expense	Federal, state, and local income tax expense	(166)		(29)		Federal, state, and local income tax expense	(496)		(382)
Other	Other	8		223		Other	4		664
Other (expense) income, net	Other (expense) income, net	$	(15,585)	$	9,869	Other (expense) income, net	$	(25,595)	$	9,565


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									32

~~Leasing Activity~~LEASING ACTIVITY—Below is a summary of leasing activity for our wholly-owned properties for the three months ended ~~March 31,~~September 30, 2021 and ~~2020:~~2020(1):


		Total Deals(1)						Inline Deals(1)							Total Deals						Inline Deals
		2021			2020			2021			2020				2021			2020			2021			2020
New leases:	New leases:													New leases:
Number of leases	Number of leases	153			87			147			77			Number of leases	140			111			133			110
Square footage (in thousands)	Square footage (in thousands)	467			382			341			180			Square footage (in thousands)	551			302			312			287
ABR (in thousands)	ABR (in thousands)	$	8,120		$	5,563		$	6,605		$	3,214		ABR (in thousands)	$	9,172		$	5,181		$	6,749		$	5,023
ABR per square foot	ABR per square foot	$	17.39		$	14.56		$	19.34		$	17.84		ABR per square foot	$	16.63		$	17.15		$	21.64		$	17.49
Cost per square foot of executing new leases	Cost per square foot of executing new leases	$	29.00		$	22.03		$	29.65		$	27.94		Cost per square foot of executing new leases	$	24.11		$	27.25		$	31.15		$	26.01
Number of comparable leases	Number of comparable leases	70			25			70			25			Number of comparable leases	57			34			56			34
Comparable rent spread	Comparable rent spread	12.4		%	6.8		%	12.4		%	6.8		%	Comparable rent spread	14.1		%	8.2		%	14.1		%	8.2		%
Weighted-average lease term (in years)	Weighted-average lease term (in years)	8.0			9.1			6.2			6.6			Weighted-average lease term (in years)	8.6			6.6			6.2			6.3
Renewals and options:	Renewals and options:													Renewals and options:
Number of leases	Number of leases	163			127			147			113			Number of leases	128			119			110			101
Square footage (in thousands)	Square footage (in thousands)	978			739			312			249			Square footage (in thousands)	854			1,035			211			244
ABR (in thousands)	ABR (in thousands)	$	11,472		$	9,720		$	7,069		$	5,364		ABR (in thousands)	$	11,082		$	12,473		$	5,377		$	4,993
ABR per square foot	ABR per square foot	$	11.73		$	13.15		$	22.67		$	21.53		ABR per square foot	$	12.98		$	12.06		$	25.53		$	20.45
ABR per square foot prior to renewals	ABR per square foot prior to renewals	$	10.97		$	12.33		$	21.02		$	19.18		ABR per square foot prior to renewals	$	12.30		$	11.56		$	22.85		$	19.16
Percentage increase in ABR per square foot	Percentage increase in ABR per square foot	6.9		%	6.7		%	7.8		%	12.2		%	Percentage increase in ABR per square foot	5.5		%	4.3		%	11.7		%	6.7		%
Cost per square foot of executing renewals and options(2)	Cost per square foot of executing renewals and options(2)	$	2.20		$	3.41		$	4.85		$	4.36		Cost per square foot of executing renewals and options(2)	$	0.22		$	0.60		$	0.86		$	1.39
Number of comparable leases~~(2)~~(3)	Number of comparable leases~~(2)~~(3)	136			89			133			86			Number of comparable leases~~(2)~~(3)	97			87			91			82
Comparable rent spread~~(2)~~(3)	Comparable rent spread~~(2)~~(3)	8.0		%	11.2		%	7.9		%	14.4		%	Comparable rent spread~~(2)~~(3)	8.9		%	4.1		%	13.1		%	6.4		%
Weighted-average lease term (in years)	Weighted-average lease term (in years)	3.9			4.7			4.0			4.0			Weighted-average lease term (in years)	5.4			4.8			4.6			4.2
Portfolio retention rate	Portfolio retention rate	88.8		%	71.2		%	80.3		%	67.3		%	Portfolio retention rate	91.2		%	90.4		%	80.4		%	74.9		%

(1)Per square foot amounts may not recalculate exactly based on other amounts presented within the table due to rounding.

(2)During the third quarter of 2021, we refined our calculation of cost per square foot of executing renewals and options to better align with actual costs incurred. Prior period amounts have been adjusted to reflect costs on the same basis.

(3)Excludes exercise of options.


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									33

Below is a summary of leasing activity for our wholly-owned properties for the nine months ended September 30, 2021 and 2020(1):


	Total Deals						Inline Deals
	2021			2020			2021			2020
New leases:
Number of leases	417			259			401			245
Square footage (in thousands)	1,360			881			931			627
ABR (in thousands)	$	23,630		$	13,778		$	19,171		$	11,038
ABR per square foot	$	17.38		$	15.63		$	20.59		$	17.62
Cost per square foot of executing new leases	$	27.52		$	23.25		$	30.05		$	25.89
Number of comparable leases	184			79			181			78
Comparable rent spread	14.9		%	9.7		%	14.9		%	9.7		%
Weighted-average lease term (in years)	8.1			7.7			6.4			6.6
Renewals and options:
Number of leases	465			354			416			309
Square footage (in thousands)	2,880			2,749			855			702
ABR (in thousands)	$	35,449		$	31,135		$	19,752		$	14,498
ABR per square foot	$	12.31		$	11.33		$	23.10		$	20.64
ABR per square foot prior to renewals	$	11.58		$	10.74		$	21.11		$	18.94
Percentage increase in ABR per square foot	6.3		%	5.4		%	9.4		%	9.0		%
Cost per square foot of executing renewals and options(2)	$	0.56		$	0.72		$	1.22		$	1.18
Number of comparable leases(3)	388			263			372			252
Comparable rent spread(3)	8.2		%	7.4		%	9.8		%	9.9		%
Weighted-average lease term (in years)	5.0			4.9			4.1			4.0
Portfolio retention rate	88.3		%	82.7		%	80.1		%	70.5		%

(1) Per square foot amounts may not recalculate exactly based on other amounts presented within the table due to rounding.

(3)Excludes exercise of options.

~~Non-GAAP Measures~~


NON-GAAP MEASURES

See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Key Performance Indicators and Defined Terms” of this filing on Form 10-Q for a discussion related to the following non-GAAP measures.

~~Same-Center Net Operating Income~~SAME-CENTER NET OPERATING INCOME—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 ~~March 31,~~September 30, 2021 and 2020, Same-Center NOI represents the NOI for the ~~274~~261 properties that were wholly-owned and operational for the entire portion of both comparable periods.

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, 2021 FORM 10-Q									34

The table below presents our Same-Center NOI for the current period and the comparable prior period (dollars in thousands):


		Three Months Ended March 31,	Favorable (Unfavorable)				Three Months Ended September 30,						Favorable (Unfavorable)				Nine Months Ended September 30,				Favorable (Unfavorable)
			2021		2020			$ Change		% Change			2021		2020		$ Change		% Change		2021		2020		$ Change		% Change
Revenues:	Revenues:											Revenues:
Rental income(1)	Rental income(1)		$	92,641	$	93,322		$	(681)			Rental income(1)	$	91,490	$	89,188	$	2,302			$	271,643	$	269,669	$	1,974
Tenant recovery income	Tenant recovery income		31,072		31,265			(193)				Tenant recovery income	29,937		31,102		(1,165)				87,025		91,211		(4,186)
Reserves for uncollectibility(2)	Reserves for uncollectibility(2)		(1,731)		(2,510)			779				Reserves for uncollectibility(2)	57		(5,807)		5,864				1,318		(17,817)		19,135
Other property income	Other property income		469		871			(402)				Other property income	1,010		765		245				1,740		2,213		(473)
Total revenues	Total revenues		122,451		122,948			(497)		(0.4)	%	Total revenues	122,494		115,248		7,246		6.3	%	361,726		345,276		16,450		4.8	%
Operating expenses:	Operating expenses:											Operating expenses:
Property operating expenses	Property operating expenses		19,501		18,410			(1,091)				Property operating expenses	17,333		16,439		(894)				53,397		50,448		(2,949)
Real estate taxes	Real estate taxes		16,431		17,241			810				Real estate taxes	16,039		16,793		754				48,452		49,648		1,196
Total operating expenses	Total operating expenses		35,932		35,651			(281)		(0.8)	%	Total operating expenses	33,372		33,232		(140)		(0.4)	%	101,849		100,096		(1,753)		(1.8)	%
Total Same-Center NOI	Total Same-Center NOI		$	86,519	$	87,297		$	(778)	(0.9)	%	Total Same-Center NOI	$	89,122	$	82,016	$	7,106	8.7	%	$	259,877	$	245,180	$	14,697	6.0	%

(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~~SAME-CENTER NOI ~~Reconciliation~~RECONCILIATION—Below is a reconciliation of Net Income to NOI and Same-Center NOI (in thousands):


		Three Months Ended March 31,			Three Months Ended September 30,						Nine Months Ended September 30,
			2021			2020			2021		2020		2021		2020
Net income	Net income		$	117		$	11,199	Net income	$	16,562	$	13,430	$	23,069	$	18,216
Adjusted to exclude:	Adjusted to exclude:							Adjusted to exclude:
Fees and management income	Fees and management income		(2,286)			(2,165)		Fees and management income	(2,435)		(2,581)		(7,095)		(7,506)
Straight-line rental income(1)	Straight-line rental income(1)		(1,422)			(2,312)		Straight-line rental income(1)	(2,476)		(1,800)		(6,868)		(3,164)
Net amortization of above- and below-market leases	Net amortization of above- and below-market leases		(838)			(788)		Net amortization of above- and below-market leases	(908)		(811)		(2,633)		(2,394)
Lease buyout income	Lease buyout income		(797)			(94)		Lease buyout income	(560)		(664)		(3,138)		(972)
General and administrative expenses	General and administrative expenses		9,341			10,740		General and administrative expenses	11,627		9,595		32,905		30,141
Depreciation and amortization	Depreciation and amortization		55,341			56,227		Depreciation and amortization	53,901		56,095		165,829		168,692
Impairment of real estate assets	Impairment of real estate assets		5,000			—		Impairment of real estate assets	698		—		6,754		—
Interest expense, net	Interest expense, net		20,063			22,775		Interest expense, net	18,570		20,388		57,765		65,317
(Gain) loss on disposal of property, net			(13,841)			1,577
Gain on disposal of property, net								Gain on disposal of property, net	(14,093)		(10,734)		(31,678)		(8,616)
Other expense (income), net	Other expense (income), net		15,585			(9,869)		Other expense (income), net	7,086		(196)		25,595		(9,565)
Property operating expenses related to fees and management income	Property operating expenses related to fees and management income		816			646		Property operating expenses related to fees and management income	1,489		1,058		3,611		2,586
NOI for real estate investments	NOI for real estate investments		87,079			87,936		NOI for real estate investments	89,461		83,780		264,116		252,735
Less: Non-same-center NOI(2)	Less: Non-same-center NOI(2)		(560)			(639)		Less: Non-same-center NOI(2)	(339)		(1,764)		(4,239)		(7,555)
Total Same-Center NOI	Total Same-Center NOI		$	86,519		$	87,297	Total Same-Center NOI	$	89,122	$	82,016	$	259,877	$	245,180

(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~~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. Core FFO is helpful in assisting management and investors with assessing the sustainability of our operating performance in future periods.


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									35

Nareit FFO, Nareit FFO Attributable to Stockholders and OP Unit Holders, 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, Nareit FFO Attributable to Stockholders and OP Unit Holders, 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, Nareit FFO Attributable to Stockholders and OP Unit Holders, and Core FFO, as presented, may not be comparable to amounts calculated by other REITs.

The following table presents our calculation of Nareit FFO Attributable to Stockholders and OP Unit Holders, and Core FFO (in thousands, except per share amounts):


		Three Months Ended March 31,			Three Months Ended September 30,						Nine Months Ended September 30,
			2021			2020			2021		2020(1)		2021		2020(1)
Calculation of FFO Attributable to Stockholders and OP Unit Holders
Calculation of Nareit FFO Attributable to Stockholders and OP Unit Holders								Calculation of Nareit FFO Attributable to Stockholders and OP Unit Holders
Net income	Net income		$	117		$	11,199	Net income	$	16,562	$	13,430	$	23,069	$	18,216
Adjustments:	Adjustments:							Adjustments:
Depreciation and amortization of real estate assets	Depreciation and amortization of real estate assets		54,341			54,817		Depreciation and amortization of real estate assets	52,984		54,579		162,979		164,288
Impairment of real estate assets	Impairment of real estate assets		5,000			—		Impairment of real estate assets	698		—		6,754		—
(Gain) loss on disposal of property, net			(13,841)			1,577
Gain on disposal of property, net								Gain on disposal of property, net	(14,093)		(10,734)		(31,678)		(8,616)
Adjustments related to unconsolidated joint ventures	Adjustments related to unconsolidated joint ventures		(637)			654		Adjustments related to unconsolidated joint ventures	776		166		676		1,760
FFO attributable to stockholders and OP unit holders			$	44,980		$	68,247
Nareit FFO attributable to stockholders and OP unit holders								Nareit FFO attributable to stockholders and OP unit holders	$	56,927	$	57,441	$	161,800	$	175,648
Calculation of Core FFO	Calculation of Core FFO							Calculation of Core FFO
FFO attributable to stockholders and OP unit holders			$	44,980		$	68,247
Nareit FFO attributable to stockholders and OP unit holders								Nareit FFO attributable to stockholders and OP unit holders	$	56,927	$	57,441	$	161,800	$	175,648
Adjustments:	Adjustments:							Adjustments:
Depreciation and amortization of corporate assets	Depreciation and amortization of corporate assets		1,000			1,410		Depreciation and amortization of corporate assets	917		1,516		2,850		4,404
Change in fair value of earn-out liability	Change in fair value of earn-out liability		16,000			(10,000)		Change in fair value of earn-out liability	5,000		—		23,000		(10,000)
Amortization of unconsolidated joint venture basis differences	Amortization of unconsolidated joint venture basis differences		746			467		Amortization of unconsolidated joint venture basis differences	80		546		905		1,267
Loss on extinguishment of debt, net			691			73
Transaction and acquisition expenses	Transaction and acquisition expenses		141			45		Transaction and acquisition expenses	1,775		152		2,850		211
Loss on extinguishment or modification of debt, net								Loss on extinguishment or modification of debt, net	1,674		—		2,784		73
Core FFO	Core FFO		$	63,558		$	60,242	Core FFO	$	66,373	$	59,655	$	194,189	$	171,603

FFO Attributable to Stockholders and OP Unit Holders/Core FFO per Share
Weighted-average common shares outstanding - diluted			320,985			333,228
FFO attributable to stockholders and OP unit holders per share - diluted			$	0.14		$	0.20
Nareit FFO Attributable to Stockholders and OP Unit Holders/Core FFO per Share(1)								Nareit FFO Attributable to Stockholders and OP Unit Holders/Core FFO per Share(1)
Weighted-average shares of common stock outstanding - diluted								Weighted-average shares of common stock outstanding - diluted	122,573		111,188		112,317		111,160
Nareit FFO attributable to stockholders and OP unit holders per share - diluted								Nareit FFO attributable to stockholders and OP unit holders per share - diluted	$	0.46	$	0.52	$	1.44	$	1.58
Core FFO per share - diluted	Core FFO per share - diluted		0.20			0.18		Core FFO per share - diluted	$	0.54	$	0.54	$	1.73	$	1.54

(1)Certain prior period amounts have been reclassified to conform with current year presentation.

(2)Restricted stock awards were dilutive to Nareit FFO Attributable to Stockholders and OP Unit Holders per share and Core FFO per share for the three and nine months ended September 30, 2021 and 2020, and, accordingly, their impact was included in the weighted-average shares of common stock used in their respective per share calculations.


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									36

~~EBITDAre~~EBITDAre and ~~Adjusted EBITDAre~~ADJUSTED EBITDAre—We use EBITDAre and 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.

EBITDAre and 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, EBITDAre and Adjusted EBITDAre 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 EBITDAre and Adjusted EBITDAre, as presented, may not be comparable to amounts calculated by other REITs.

The following table presents our calculation of EBITDAre and Adjusted EBITDAre (in thousands):


		Three Months Ended March 31,			Year Ended December 31,		Three Months Ended September 30,						Nine Months Ended September 30,				Year Ended December 31,
			2021		2020			2020			2021		2020		2021		2020		2020
Calculation of EBITDAre	Calculation of EBITDAre									Calculation of EBITDAre
Net income	Net income		$	117	$	11,199		$	5,462	Net income	$	16,562	$	13,430	$	23,069	$	18,216	$	5,462
Adjustments:	Adjustments:									Adjustments:
Depreciation and amortization	Depreciation and amortization		55,341		56,227			224,679		Depreciation and amortization	53,901		56,095		165,829		168,692		224,679
Interest expense, net	Interest expense, net		20,063		22,775			85,303		Interest expense, net	18,570		20,388		57,765		65,317		85,303
(Gain) loss on disposal of property, net			(13,841)		1,577			(6,494)
Gain on disposal of property, net										Gain on disposal of property, net	(14,093)		(10,734)		(31,678)		(8,616)		(6,494)
Impairment of real estate assets	Impairment of real estate assets		5,000		—			2,423		Impairment of real estate assets	698		—		6,754		—		2,423
Federal, state, and local tax expense	Federal, state, and local tax expense		166		29			491		Federal, state, and local tax expense	165		173		496		382		491
Adjustments related to unconsolidated joint ventures	Adjustments related to unconsolidated joint ventures		1,132		1,177			3,355		Adjustments related to unconsolidated joint ventures	1,107		594		1,704		3,162		3,355
EBITDAre	EBITDAre		$	67,978	$	92,984		$	315,219	EBITDAre	$	76,910	$	79,946	$	223,939	$	247,153	$	315,219
Calculation of Adjusted EBITDAre	Calculation of Adjusted EBITDAre									Calculation of Adjusted EBITDAre
EBITDAre	EBITDAre		$	67,978	$	92,984		$	315,219	EBITDAre	$	76,910	$	79,946	$	223,939	$	247,153	$	315,219
Adjustments:	Adjustments:									Adjustments:
Change in fair value of earn-out liability	Change in fair value of earn-out liability		16,000		(10,000)			(10,000)		Change in fair value of earn-out liability	5,000		—		23,000		(10,000)		(10,000)
Transaction and acquisition expenses										Transaction and acquisition expenses	1,775		152		2,850		211		539
Amortization of unconsolidated joint venture basis differences										Amortization of unconsolidated joint venture basis differences	80		546		905		1,267		1,883
Other impairment charges	Other impairment charges		—		—			359		Other impairment charges	—		—		—		—		359
Amortization of unconsolidated joint venture basis differences			746		467			1,883
Transaction and acquisition expenses			141		45			539
Adjusted EBITDAre	Adjusted EBITDAre		$	84,865	$	83,496		$	308,000	Adjusted EBITDAre	$	83,765	$	80,644	$	250,694	$	238,631	$	308,000

~~Liquidity and Capital Resources~~


LIQUIDITY AND CAPITAL RESOURCES

~~General~~GENERAL—Aside from standard operating expenses, we expect our principal cash demands to be for:

•cash distributions to stockholders;

•investments in real estate;

•capital expenditures and leasing costs;

•redevelopment and repositioning projects; and

•principal and interest payments on our outstanding indebtedness.

We expect our primary sources of liquidity to be:

•net proceeds from our underwritten IPO;

•operating cash flows;

•proceeds received from the disposition of properties;

•~~reinvested distributions~~;

•proceeds from equity and debt financings, including borrowings in connection with our Bond Registration and those under our unsecured revolving credit facility;

•distributions received from our ~~third-party institutional~~unconsolidated joint ventures; and

•available, unrestricted cash and cash equivalents.

At this time, we believe our current sources of liquidity, most significantly the net proceeds from our underwritten IPO, our operating cash flows, and borrowing availability on our revolving credit facility, are sufficient to meet our short- and long-term cash demands.


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									37

~~Debt~~UNDERWRITTEN INITIAL PUBLIC OFFERING—On July 19, 2021, we closed our underwritten IPO, through which we offered 17.0 million shares of a new class of common stock, $0.01 par value per share, at an initial price to the public of $28.00 per share, pursuant to a registration statement filed with the SEC on Form S-11 (File No. 333-255846), as amended. In connection with the underwritten IPO, the underwriters exercised a 30-day option to purchase additional shares of common stock to cover overallotments, and, accordingly, on August 2, 2021, we settled the sale of an additional 2.6 million shares at a price of $28.00 per share. These shares are listed on NASDAQ under the trading symbol “PECO”. The underwritten IPO, including the underwriters overallotment election, resulted in gross proceeds of $547.4 million.

DEBT—The following table summarizes information about our debt as of ~~March 31,~~September 30, 2021 and December 31, 2020 (dollars in thousands):


		March 31, 2021			December 31, 2020				September 30, 2021			December 31, 2020
Total debt obligations, gross	Total debt obligations, gross	$	2,291,181		$	2,307,686		Total debt obligations, gross	$	1,715,714		$	2,307,686
Weighted-average interest rate	Weighted-average interest rate	3.0		%	3.1		%	Weighted-average interest rate	3.3		%	3.1		%
Weighted-average term (in years)	Weighted-average term (in years)	3.8			4.1			Weighted-average term (in years)	4.2			4.1

Revolving credit facility capacity(1)	Revolving credit facility capacity(1)	$	500,000		$	500,000		Revolving credit facility capacity(1)	$	500,000		$	500,000
Revolving credit facility availability(2)	Revolving credit facility availability(2)	490,310			490,404			Revolving credit facility availability(2)	489,329			490,404

(1)~~The~~In July 2021, we refinanced the revolving credit facility ~~matures in October 2021~~ and includes an option to extend the maturity to October 2022, with its execution being subject to compliance with certain terms included in the loan agreement, including the absence of any defaults and the payment of relevant fees. We intend to either exerciseexercised our option to extend ~~the~~its maturity ~~or to negotiate under new terms.~~as noted below.

(2)Net of any outstanding balance and letters of credit.

AsDuring the nine months ended September 30, 2021, we took steps to reduce our leverage and appropriately ladder our debt ~~obligations~~maturities as follows:

•In July 2021, we completed the Refinancing. In connection with the Refinancing, we paid off a $472.5 million term loan due in November 2025. The revolving credit facility will mature in January 2026, and the two senior unsecured term loan tranches will mature in November 2025 and July 2026, respectively. Additionally, we used proceeds from the underwritten IPO to retire a $375.0 million term loan that was set to mature in April 2022.

•In August 2021, we executed a $150 million partial pay down on a term loan that was set to mature in November 2023 utilizing cash on hand.

BOND OFFERING—On September 20, 2021, the SEC declared effective our Bond Registration. We intend to ~~refinance or pay off the balances at maturity using~~use net proceeds from ~~operations and/or corporate-level debt.~~any sale of offered securities to repay outstanding indebtedness and for general corporate purposes, including funding future investment activity.

~~Our debt is subject to certain covenants, and as of March 31,~~In October 2021, we settled the 2021 Bond Offering priced at 98.692% of the principal amount and maturing in November 2031. This offering resulted in gross proceeds of $345.4 million. The notes are fully and unconditionally guaranteed by us. In October 2021, net proceeds from the bond settlement were used, in ~~compliance with~~part, to pay down the ~~restrictive covenants~~remaining $150 million balance of the term loan debt that was set to mature in November 2023.

Based on our ~~outstanding debt obligations. We~~current borrowings, we expect to ~~continue to meet the requirements~~save approximately $11.2 million in interest annually as a result of our debt ~~covenants over~~activity.

The allocation of total debt between fixed-rate and variable-rate as well as between secured and unsecured, excluding market debt adjustments and deferred financing expenses, net, and including the ~~next twelve months.~~effects of derivative financial instruments (see Notes 7 and 12) as of September 30, 2021 and December 31, 2020 is summarized below (in thousands):


	September 30, 2021		December 31, 2020
As to interest rate:
Fixed-rate debt	$	1,540,714	$	1,727,186
Variable-rate debt	175,000		580,500
Total	$	1,715,714	$	2,307,686
As to collateralization:
Unsecured debt	$	1,105,000	$	1,622,500
Secured debt	610,714		685,186
Total	$	1,715,714	$	2,307,686

Our maturity schedule as of September 30, 2021 with respective principal payment obligations, excluding finance lease liabilities, market debt adjustments, and deferred financing expenses, is as follows (in thousands):


	2021		2022		2023		2024		2025		Thereafter		Total
Term loans	$	—	$	—	$	150,000	$	475,000	$	240,000	$	240,000	$	1,105,000
Secured debt	1,803		84,926		42,942		28,124		27,877		424,925		610,597
Total	$	1,803	$	84,926	$	192,942	$	503,124	$	267,877	$	664,925	$	1,715,597

~~Financial Leverage Ratios~~


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									38

FINANCIAL LEVERAGE RATIOS—We believe our net debt to Adjusted EBITDAre, net debt to total enterprise value, and debt covenant compliance as of ~~March 31,~~September 30, 2021 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 ~~third-party institutional~~unconsolidated joint ventures, as of ~~March 31,~~September 30, 2021 and December 31, 2020 (in thousands):


		March 31, 2021		December 31, 2020			September 30, 2021		December 31, 2020
Net debt:	Net debt:					Net debt:
Total debt, excluding market adjustments and deferred financing expenses	Total debt, excluding market adjustments and deferred financing expenses	$	2,322,096	$	2,345,620	Total debt, excluding market adjustments and deferred financing expenses	$	1,746,487	$	2,345,620
Less: Cash and cash equivalents	Less: Cash and cash equivalents	20,738		104,952		Less: Cash and cash equivalents	24,855		104,952
Total net debt	Total net debt	$	2,301,358	$	2,240,668	Total net debt	$	1,721,632	$	2,240,668

Enterprise value:	Enterprise value:					Enterprise value:
Net debt	Net debt	$	2,301,358	$	2,240,668	Net debt	$	1,721,632	$	2,240,668
Total equity value(1)	Total equity value(1)	3,384,978		2,797,234		Total equity value(1)	3,887,303		2,797,234
Total enterprise value	Total enterprise value	$	5,686,336	$	5,037,902	Total enterprise value	$	5,608,935	$	5,037,902

(1)~~Total~~As of September 30, 2021, total equity value iswas calculated as the ~~number~~126.6 million diluted shares multiplied by the closing market price per share of common stock of $30.71. As of December 31, 2020, prior to the underwritten IPO, total equity value was calculated as 106.6 million diluted shares ~~and OP units outstanding~~ multiplied by the EVPS as of ~~March 31, 2021~~$26.25. Diluted shares include shares of common stock and December 31, 2020, respectively. There were 320.9 million diluted shares outstanding with an EVPS of $10.55 as of March 31, 2021 and 319.7 million diluted shares outstanding with an EVPS of $8.75 as of December 31, 2020.OP units.

The following table presents our calculation of net debt to Adjusted EBITDAre and net debt to total enterprise value as of ~~March 31,~~September 30, 2021 and December 31, 2020 (dollars in thousands):


		March 31, 2021		December 31, 2020			September 30, 2021		December 31, 2020
Net debt to Adjusted EBITDAre - annualized:	Net debt to Adjusted EBITDAre - annualized:					Net debt to Adjusted EBITDAre - annualized:
Net debt	Net debt	$	2,301,358	$	2,240,668	Net debt	$	1,721,632	$	2,240,668
Adjusted EBITDAre - annualized(1)	Adjusted EBITDAre - annualized(1)	309,369		308,000		Adjusted EBITDAre - annualized(1)	320,063		308,000
Net debt to Adjusted EBITDAre - annualized	Net debt to Adjusted EBITDAre - annualized	7.4x		7.3x		Net debt to Adjusted EBITDAre - annualized	5.4x		7.3x

Net debt to total enterprise value	Net debt to total enterprise value					Net debt to total enterprise value
Net debt	Net debt	$	2,301,358	$	2,240,668	Net debt	$	1,721,632	$	2,240,668
Total enterprise value	Total enterprise value	5,686,336		5,037,902		Total enterprise value	5,608,935		5,037,902
Net debt to total enterprise value	Net debt to total enterprise value	40.5%		44.5%		Net debt to total enterprise value	30.7%		44.5%

(1)Adjusted EBITDAre is based on a trailing twelve month period. See “Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Measures - EBITDAre and Adjusted EBITDAre” of this filing on Form 10-Q for a reconciliation to Net Income.

~~Capital Expenditures and Redevelopment Activity~~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.

During the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020, we had capital spend of ~~$13.5~~$49.3 million and ~~$16.0~~$40.8 million, respectively. Generally, we expect our development and redevelopment projects to stabilize within 24 months. We anticipate that obligations related to capital improvements as well as redevelopment and development in 2021 can be met with cash flows from operations, cash flows from dispositions, or borrowings on our unsecured revolving line of credit. Below is a summary of our capital spending activity, excluding leasing commissions, on a cash basis (dollars in thousands):


		Three Months Ended March 31,					Nine Months Ended September 30,
		2021		2020			2021		2020
Capital expenditures for real estate:
Capital expenditures for real estate(1):						Capital expenditures for real estate(1):
Capital improvements	Capital improvements	$	848	$	833	Capital improvements	$	5,900	$	5,580
Tenant improvements	Tenant improvements	3,741		3,714		Tenant improvements	16,350		8,788
Redevelopment and development	Redevelopment and development	8,098		10,484		Redevelopment and development	24,312		23,519
Total capital expenditures for real estate	Total capital expenditures for real estate	12,687		15,031		Total capital expenditures for real estate	46,562		37,887
Corporate asset capital expenditures	Corporate asset capital expenditures	439		553		Corporate asset capital expenditures	1,429		1,565
Capitalized indirect costs(1)	Capitalized indirect costs(1)	411		381		Capitalized indirect costs(1)	1,324		1,320
Total capital spending activity	Total capital spending activity	$	13,537	$	15,965	Total capital spending activity	$	49,315	$	40,772

(1)Amount includes internal salaries and related benefits of personnel who work directly on capital projects as well as capitalized interest expense.

Our underwritten incremental yields on development and redevelopment projects are expected to range between ~~8% to~~9% - 11%. Our current in process projects represent an estimated total investment of ~~$35.1~~$42.6 million, and the total underwritten


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									39

incremental yield range on this estimated investment is approximately 9.5% - 10.5%. Actual incremental yields may vary from our underwritten incremental yield range based on the actual total cost to complete a project and its actual incremental annual NOI at stabilization. See “Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Key Performance Indicators and Defined Terms” ~~and “Part II, Item 1A. Risk Factors”~~ of this filing on Form 10-Q for further information.

~~Acquisition Activity~~ACQUISITION ACTIVITY—We continually monitor the commercial real estate market for properties that have future growth potential, are located in attractive demographic markets, and support our business objectives. ~~During the three months ended March 31,~~The following table highlights our property acquisitions (dollars in thousands):


	Nine Months Ended September 30,
	2021		2020
Number of properties acquired	4		1
Number of outparcels acquired(1)	3		2
Total acquisition price	$	88,954	$	23,014

(1)Outparcels acquired are adjacent to shopping centers that we own.

Subsequent to September 30, 2021, we ~~acquired~~purchased two properties ~~and two parcels of land~~ for ~~a total cash outlay of $39.9~~$91.2 million. ~~During the three months ended March 31, 2020, we acquired two parcels of land for a total cash outlay of $4.3 million. See Note 4 to the consolidated financial statements.~~

~~Disposition Activity~~DISPOSITION ACTIVITY—We are actively evaluating 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. We expect to continue to make strategic dispositions during the remainder of 2021. The following table highlights our property dispositions (dollars ~~and square feet~~ in thousands):


		Three Months Ended March 31,					Nine Months Ended September 30,
		2021		2020			2021		2020
Number of properties sold(1)	Number of properties sold(1)	6		3		Number of properties sold(1)	20		6
Number of outparcels sold~~(1)~~(3)	Number of outparcels sold~~(1)~~(3)	1		—		Number of outparcels sold~~(1)~~(3)	3		—
Proceeds from sale of real estate	Proceeds from sale of real estate	$	58,356	$	17,447	Proceeds from sale of real estate	$	180,340	$	48,276
Gain (loss) on sale of property, net(2)		14,355		(826)
Gain on sale of property, net(4)						Gain on sale of property, net(4)	33,121		9,915

(1)~~The~~We retained an outparcel for one property sold during the nine months ended September 30, 2021, and therefore the sale did not result in a reduction in our total property count.

(4)The gain ~~(loss)~~ on sale of ~~property,~~properties, net does not include miscellaneous write-off activity, which is also recorded in Gain ~~(Loss)~~ on Disposal of Property, Net on the consolidated statements of operations.

Subsequent to September 30, 2021, we sold one property for $4.4 million.


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									40

~~Distributions~~DISTRIBUTIONS—Distributions to our common stockholders and OP unit holders, including key financial metrics for comparison purposes, for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 and 2020, are as follows (in thousands):

Cash distributions to OP unit holders

Net cash provided by operating activities

Cash distributions to common stockholders

Core FFO(1)

Distributions reinvested through the DRIP


(1)See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Key Performance Indicators” for the definition of Core FFO, or information regarding why we present Core FFO. See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Measures - Nareit FFO and Core FFO” for a reconciliation of this non-GAAP financial measure to Net Income.

We paid monthly distributions of ~~$0.02833333~~$0.085 per share, or ~~$0.34~~$1.02 annualized, for the months of December 2020, and each month beginning January ~~February, and March~~2021 through September 2021. On ~~April 14,~~September 28, 2021, our Board authorized an increase of 6% on the monthly distribution in the amount of $0.090 per share, or $1.08 annualized, which was paid on November 1, 2021. On November 3, 2021, our Board authorized distributions for ~~May~~November and December 2021, ~~equal~~as well as January 2022, to ~~a monthly amount~~the stockholders of ~~$0.02833333~~record at the close of business on November 15, 2021, December 15, 2021, and January 19, 2022, respectively, of $0.09 per share of common stock. ~~The May 2021 distributions were paid on May 3, 2021.~~

On March 25, 2021, our Board announced that we are reviewing alternatives in order to provide liquidity to our shareholders. In connection with the review process, the Third Amended and Restated Dividend Reinvestment Plan has been suspended, beginning with the distribution payable on April 1, 2021. StockholdersOP unit holders will receive ~~their full monthly distribution of $0.02833333 per share in cash until further notice. The timing and amount of~~ distributions ~~is determined by our Board and is influenced in part by our intention to comply with REIT requirements of~~at the ~~Internal Revenue Code,~~same rate as ~~well as our results of operations, our general financial condition, general economic conditions, and other factors. Our Board intends to evaluate distributions on a monthly basis throughout 2021.~~common stockholders.

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 ~~(loss)~~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.

DRIP AND THE SRP—On August 4, 2021, as a result of our underwritten IPO, our Board approved the termination of the DRIP and the SRP.


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									41

~~Cash Flow Activities~~CASH FLOW ACTIVITIES—As of ~~March 31,~~September 30, 2021, we had cash and cash equivalents and restricted cash of ~~$62.3~~$114.2 million, a net cash decrease of ~~$69.7~~$17.7 million during the ~~three~~nine months ended ~~March 31,~~September 30, 2021.

Below is a summary of our cash flow activity (dollars in thousands):


		Three Months Ended March 31,									Nine Months Ended September 30,
		2021		2020		$ Change		% Change			2021		2020		$ Change		% Change
Net cash provided by operating activities	Net cash provided by operating activities	$	48,751	$	35,613	$	13,138	36.9	%	Net cash provided by operating activities	$	198,313	$	157,245	$	41,068	26.1	%
Net cash provided by (used in) investing activities	Net cash provided by (used in) investing activities	4,690		(2,413)		7,103		NM		Net cash provided by (used in) investing activities	37,835		(13,561)		51,396		NM
Net cash used in financing activities	Net cash used in financing activities	(123,125)		(43,733)		(79,392)		NM		Net cash used in financing activities	(253,870)		(101,994)		(151,876)		148.9	%

~~Operating Activities~~OPERATING ACTIVITIES—Our net cash provided by operating activities was primarily impacted by the following:

•Property operations and working capital—Most of our operating cash comes from rental and tenant recovery income and is offset by property operating expenses, real estate taxes, and general and administrative costs. During the ~~three~~nine months ended ~~March 31,~~September 30, 2021, we had a net cash ~~outlay~~inflow of ~~$15.3~~$4.6 million from changes in working capital as compared to a net cash outlay of ~~$23.4~~$17.6 million during the same period in 2020. This change was primarily driven by improved collections on amounts due from Neighbors as well as expense reduction initiatives, and was partially offset by higher leasing ~~commissions. Additionally, we had an increase in returns on our investments in unconsolidated joint ventures.~~commissions and prepaid expenses.

•Fee and management income—We also generate operating cash from our third-party investment management business, pursuant to various management and advisory agreements between us and the Managed Funds. Our fee and management income was ~~$2.3~~$7.1 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2021, ~~an increase~~a decrease of ~~$0.1~~$0.4 million as compared to the same period in 2020.

•Cash paid for interest—During the ~~three~~nine months ended ~~March 31,~~September 30, 2021, we paid ~~$18.9~~$53.5 million for interest, a decrease of ~~$1.4~~$6.4 million over the same period in 2020, largely due to: (i) lower borrowings as a result of early repayments of debt; (ii) the $200 million draw and subsequent repayment of our draw on the revolver during the second quarter of 2020; and (iii) lower average interest rates due to athe decrease in ~~LIBOR and expiring interest rate swaps.~~LIBOR.

~~Investing Activities~~INVESTING ACTIVITIES—Our net cash provided by (used in) investing activities was primarily impacted by the following:

•Real estate acquisitions—During the ~~three~~nine months ended ~~March 31,~~September 30, 2021, our acquisitions resulted in a total cash outlay of ~~$39.9~~$89.0 million, as compared to a total cash outlay of ~~$4.3~~$23.0 million during the same period in 2020.

•Real estate dispositions—During the ~~three~~nine months ended ~~March 31,~~September 30, 2021, our dispositions resulted in a net cash inflow of ~~$58.4~~$180.3 million, as compared to a net cash inflow of ~~$17.4~~$48.3 million during the same period in 2020.

•Capital expenditures—We invest capital into leasing our properties and maintaining or improving the condition of our properties. During the ~~three~~nine months ended ~~March 31,~~September 30, 2021, we paid ~~$13.5~~$49.3 million for capital expenditures, ~~a decrease~~an increase of ~~$2.4~~$8.5 million over the same period in 2020, primarily due to in increase in tenant improvements owing largely to an increase in leasing volume as compared to the ~~timing~~same period a year ago.

•Return of ~~our development and redevelopment projects.~~investment in unconsolidated joint ventures—During the nine months ended September 30, 2021, we had a return of investment in unconsolidated joint ventures of $4.3 million, including $2.1 million in connection with NRP primarily as a result of property dispositions. During the nine months ended September 30, 2020, we had a return of investment in unconsolidated joint ventures of $1.9 million.

•Investment in third parties—During the ~~three~~nine months ended ~~March 31,~~September 30, 2021, we made an investment in a third party business that resulted in a net cash outflow of $3.0 million.

~~Financing Activities~~FINANCING ACTIVITIES—Our net cash used in financing activities was primarily impacted by the following:

•Underwritten IPO—Upon consummation of our underwritten IPO in July 2021, including the over-allotment option exercised in full by the underwriters, we had gross proceeds from the issuance of common stock of $547.4 million, offset by a cash outflow of $39.0 million for offering costs, discounts, and commissions during the nine months ended September 30, 2021. We did not issue any common shares during the nine months ended September 30, 2020.

•Debt borrowings and payments—During the ~~three~~nine months ended ~~March 31,~~September 30, 2021, we had ~~$16.5~~$597.4 million in net repayment of debt primarily as a result of: (i) a pay down in July 2021 of a $375 million term loan set to mature in 2022 using proceeds from our underwritten IPO; (ii) a partial pay down in August 2021 of a $150 million term loan set to mature in 2023 utilizing cash on hand; and (iii) early repayments of mortgage loans. During the ~~three~~nine months ended ~~March 31,~~September 30, 2020 we had net ~~borrowings~~payments of ~~$1.5~~$37.8 million, ~~largely~~primarily as a result of ~~drawing $34.0 million on our revolving credit facility, offset by~~ a pay down in January 2020 of $30.0 million on term loan debt ~~maturing~~that was set to mature in 2021.

•Distributions to stockholders and OP unit holders—Cash used for distributions to common stockholders and OP unit holders ~~decreased $11.1~~increased $28.5 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 as compared to the same period in 2020, ~~primarily~~ due ~~a reduction of the~~to an increase in our distribution rate, ~~beginning with the December 2020 distribution, which was paid~~an increase in ~~January 2021, and due to a lower share count~~common shares outstanding as a result of ~~a tender offer.~~our underwritten IPO, and the suspension of our distributions from April 2020 through September 2020.

•Share repurchases—Cash outflows for share repurchases increased by $72.6 million for the ~~three~~nine months ended ~~March 31,~~September 30, 2021 as compared to the same period in 2020, primarily as a result of a tender offer, which was settled in January 2021.


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									42


CONTRACTUAL COMMITMENTS AND CONTINGENCIES

We have debt obligations related to both our secured and unsecured debt. In ~~connection with~~addition, we have operating leases pertaining to office equipment for our business as well as ground leases at certain of our shopping centers. We are presenting an update to our future contractual commitments and contingencies as a result of our material debt transactions occurring in the ~~liquidity alternative review process,~~third quarter of 2021 (see Note 6 for more details). The table below excludes obligations related to tenant allowances and improvements because such amounts are not fixed or determinable. However, we believe we currently have sufficient financing in place to fund any such amounts as they arise through cash from operations or borrowings. The following table details our contractual obligations as of September 30, 2021 (in thousands):


	Payments Due by Period
	Total		2021		2022		2023		2024		2025		Thereafter
Debt obligations - principal payments(1)	$	1,715,597	$	1,803	$	84,926	$	192,942	$	503,124	$	267,877	$	664,925
Debt obligations - interest payments(2)	227,429		14,145		54,242		50,221		37,535		24,687		46,599
Operating lease obligations	8,504		215		823		672		546		317		5,931
Finance lease obligations	121		12		45		40		24		—		—
Total	$	1,951,651	$	16,175	$	140,036	$	243,875	$	541,229	$	292,881	$	717,455

(1)In July 2021, we amended our $500 million revolving credit facility to extend the ~~Fourth Amended SRP, which is currently limited~~maturity from October 2021 to ~~repurchases resulting~~January 2026, and lower the interest rate spread from ~~DDI~~1.40% over LIBOR to 1.35% over LIBOR. Additionally, the new terms include two six-month maturity extension options. As of ~~stockholders, has been suspended,~~September 30, 2021, we have no outstanding balance on our revolving credit facility.

(2)Future variable-rate interest payments are based on interest rates as of September 30, 2021, including the impact of our swap agreements.

Our portfolio debt instruments and the ~~March 31, 2021 repurchases related~~unsecured revolving credit facility contain certain covenants and restrictions. The following list provides an update to ~~stockholder DDI~~certain restrictive covenants specific to the unsecured revolving credit facility and unsecured term loans that were ~~not executed. The SRP~~deemed significant as a result of our debt activity occurring in July 2021:

•limits the ratio of total debt to total asset value, as defined, to 60% or less with a surge to 65% for ~~both standard~~a period of four consecutive fiscal quarters following a material acquisition;

•limits the ratio of secured debt to total asset value, as defined, to 35% or less with a surge to 40% for a period of four consecutive fiscal quarters following a material acquisition;

•requires the fixed-charge ratio, as defined, to be 1.5:1 or greater;

•limits the ratio of cash dividend payments to Nareit FFO, as defined, to 95%;

•limits the ratio of unsecured debt to unencumbered total asset value, as defined, to 60% or less with a surge to 65% for a period of four consecutive fiscal quarters following a material acquisition;

•requires the unencumbered NOI to interest expense ratio, as defined, to be 1.75:1 or greater; and ~~DDI requests~~

•if we were to lose our investment grade rating in the future, the current tangible net worth will ~~remain suspended until further notice.~~be required to exceed the minimum tangible net worth, as defined, at that time.

~~Critical Accounting Policies and Estimates~~


CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our 2020 Annual Report on Form 10-K, originally filed with the SEC on March 12, 2021, contains a description of our critical accounting policies and estimates, including those relating to real estate acquisitions, rental income, and the valuation of real estate assets. There have been no significant changes to our critical accounting policies during 2021.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~There~~We utilize interest rate swaps in order to hedge a portion of our exposure to interest rate fluctuations. We do not intend to enter into derivative or interest rate transactions for speculative purposes. Our hedging decisions are determined based upon the facts and circumstances existing at the time of the hedge and may differ from our currently anticipated hedging strategy. Because we use derivative financial instruments to hedge against interest rate fluctuations, we may be exposed to both credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. If the fair value of a derivative contract is positive, the counterparty will owe us, which creates credit risk for us. If the fair value of a derivative contract is negative, we will owe the counterparty and, therefore, do not have ~~been no material changes~~credit risk. We seek to minimize the credit risk in derivative instruments by entering into transactions with high-quality counterparties. Market risk is the adverse effect on the value of a financial instrument that results from ~~the quantitative and qualitative disclosures about~~a change in interest rates. The market risk ~~disclosed~~associated with interest-rate contracts is managed by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken.

As of September 30, 2021, we had five interest rate swaps that fixed LIBOR on $930 million of our unsecured term loan facilities. As of September 30, 2021, we had not fixed the interest rate on $175 million of our unsecured debt through


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									43

derivative financial instruments. We estimate that a one percentage point increase in interest rates on the outstanding balance of our variable rate debt would result in approximately $1.8 million of additional interest expense annually.

The additional interest expense was determined based on the impact of hypothetical interest rates on our borrowing cost and assumes no changes in our capital structure. For further discussion of certain quantitative details related to our interest rate swaps, see Note 7.

See “Part II, Item 7A. Quantitative and Qualitative Disclosures about Market Risk” of our 2020 Annual Report on Form 10-K originally filed with the SEC on March 12, ~~2021.~~2021 for more details associated with our exposure to credit risk and market risk.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Principal Executive Officer and Principal Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of ~~March 31,~~September 30, 2021. Based on that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) were effective as of ~~March 31,~~September 30, 2021.

Changes in Internal Control over Financial Reporting

During the quarter ended ~~March 31,~~September 30, 2021, there were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


w PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we are party to legal proceedings, which arise in the ordinary course of our business. We are not currently involved in any legal proceedings for which we are not covered by our liability insurance or the outcome is reasonably likely to have a material impact on our results of operations or financial condition, nor are we aware of any such legal proceedings contemplated by governmental authorities.

ITEM 1A. RISK FACTORS

~~The following risk factor supplements the~~There have been no material changes to our risk factors ~~set forth~~and other risks and uncertainties as described in our 2020 Annual Report on Form 10-K, filed with the U.S. Securities and Exchange Commission (“SEC”) on March 12, 2021. Except to the extent updated below or previously updated, or to the extent additional factual information disclosed elsewhere in our Quarterly Report on Form 10-Q relates to such risk factors (including, without limitation, the matters discussed in “Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations”), there were no material changes to the risk factors disclosed in “Part I, Item 1A. Risk Factors” of our 2020 Annual Report on Form 10-Kas originally filed with the SEC on March 12, ~~2021.~~

~~The ongoing COVID-19 pandemic has had,~~2021, and ~~is expected to continue to have, a negative effect on our and our Neighbors’ businesses, financial condition, results of operations, cash flows, and liquidity.~~

In March 2020, the World Health Organization declared COVID-19 a global pandemic. The COVID-19 pandemic has caused, and is expected to continue to cause, significant disruptions to the United States and global economy and has contributed to significant volatility and negative pressure in financial markets. The global impact of the outbreak is continually evolving and, as additional cases of the virus are identified, many countries, including the United States, reacted by instituting quarantines, restrictions on travel, and/or mandatory closures of businesses. Certain states and cities, including where our properties are located, also reacted by instituting quarantines, restrictions on travel, “shelter-in-place” or “stay-at-home” rules, restrictions on types of businesses that may continue to operate, and/or restrictions on the types of construction projects that may continue. In May 2020, many state and local governments began lifting, in whole or in part, the “stay-at-home” mandates, effectively removing or lessening the limitations on travel and allowing many businesses to reopen in full or limited capacity.

The COVID-19 pandemic has impacted our business and financial performance, and we expect this impact to continue. Our retail and service-based tenants (whom we refer to as a “Neighbor” or our “Neighbors”) depend on in-person interactions with their customers to generate unit-level profitability, and the COVID-19 pandemic has decreased, and may continue to decrease, customers’ willingness to frequent, and mandated “shelter-in-place” or “stay-at-home” orders may prevent customers from frequenting our Neighbors’ businesses, which may result in their inability to maintain profitability and make timely rental payments to us under their leases or to otherwise seek lease modifications or to declare bankruptcy. At the peak of the pandemic-related closure activity, for our wholly-owned properties and those owned through our joint ventures, our temporary closures reached approximately 37% of all Neighbor spaces, totaling 27% of our annualized base rent (“ABR”) and 22% of our gross leasable area (“GLA”). All temporarily closed Neighbors have since been permitted to reopen; however, a portion of our Neighbors have permanently closed, and we are working to backfill these spaces. Some may be limiting the number of customers allowed in their stores, or have modified their operations in other ways that may impact their profitability, either as a result of government mandates or self-elected efforts to reduce the spread of COVID-19. These actions, as well as the continuing economic impacts of the COVID-19 pandemic, could result in increased permanent store closures. In addition to the permanent closures that have occurred in our portfolio, this could reduce the demand for leasing space in our shopping centers and result in a decline in average rental rates on expiring leases.

While most of our Neighbors have reopened, we cannot presently determine how many of the Neighbors that remain closed will reopen, or whether a portion of those that have reopened will be required by government mandates to temporarily close again or will encounter financial difficulties that require them to close permanently. We believe substantially all Neighbors, including those that were required to temporarily close under governmental mandates, are contractually obligated to continue with their rent payments as documented in our lease agreements with them. However, we believe it is best to begin negotiation of relief only once a Neighbor has reopened and made payments toward rent and recovery charges accrued. Inclusive of our prorated share of properties owned through our joint ventures, as of April 20, 2021, we have $5.4 million of outstanding payment plans with our Neighbors, and we had recorded rent abatements of approximately $4.4 million during

2021. These payment plans and rent abatements represented 1.4% and 1.1% of portfolio ABR, respectively, and the weighted-average term over which we expect to receive remaining amounts owed on executed payment plans is approximately 13 months. We are still actively pursuing past due amounts under the terms negotiated with our Neighbors. We are in negotiations with additional Neighbors, which we believe will lead to more Neighbors repaying their past due charges. As of April 20, 2021, we have collected approximately 95% of rent and recoveries billed during the second through fourth quarters of 2020, and approximately 95% of rent and recoveries billed during the first quarter of 2021. In the event of any default by a Neighbor under its lease agreement or relief agreement, we may not be able to fully recover, and/or may experience delays in recovering and additional costs in enforcing our rights as landlord to recover, amounts due to us under the terms of the lease agreement and/or relief agreement. Additionally, certain Neighbors have declared bankruptcy as a result of the effects of the pandemic. As of March 31, 2021, we have several Neighbors in bankruptcy proceedings where we have not yet received notice that the lease has been assumed or rejected, representing an exposure of approximately 1% of our total ABR.

Moreover, the ongoing COVID-19 pandemic, restrictions intended to prevent and mitigate its spread, resulting consumer behavior, and the economic slowdown or recession could have additional adverse effects on our business, including with regards to:

•the ability and willingness of our Neighbors to renew their leases upon expiration, our ability to re-lease the properties on the same or better terms in the event of nonrenewal or in the event we exercise our right to replace an existing Neighbor, and obligations we may incur in connection with the replacement of an existing Neighbor, particularly in light of the adverse impact to the financial health of many retailers and service providers that has occurred and continues to occur as a result of the COVID-19 pandemic and the significant uncertainty as to when and the conditions under which certain potential Neighbors will be able to operate physical retail locations in the future;

•a potential sustained or permanent increase in online shopping instead of shopping at physical retail properties, thereby reducing demand for space in our shopping centers and possible related reductions in rent or increased costs to lease space;

•the adverse impact of current economic conditions on the market value of our real estate portfolio and our third-party investment management business, and consequently on the estimated value per share of our common stock;

•~~the adverse impact of the current economic conditions on our ability to effect a liquidity event at an attractive price or at all in the near term and for a potentially lengthy period of time;~~

•~~the financial impact and continued economic uncertainty that could continue to negatively impact our ability to pay distributions to our stockholders and/or to repurchase shares;~~

•~~to the extent we were seeking to sell properties in the near term, significantly greater uncertainty regarding our ability to do so at attractive prices or at all;~~

•~~anticipated returns from development and redevelopment projects, which have been prioritized to support the reopening of our Neighbors and new leasing activity, or deferred if possible;~~

•the broader impact of the severe economic contraction due to the COVID-19 pandemic, the resulting increase in unemployment that has occurred in the short-term and its effect on consumer behavior, and negative consequences that will occur if these trends are not reversed in a timely way;

•state, local, or industry-initiated efforts, such as a rent freeze for Neighbors or a suspension of a landlord’s ability to enforce evictions, which may affect our ability to collect rent or enforce remedies for the failure to pay rent;

•severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions, which could make it difficult for us to access debt and equity capital on attractive terms, or at all, and impact our ability to fund business operations and activities and repay liabilities on a timely basis;

•our ability to pay down, refinance, restructure, or extend our indebtedness as it becomes due, and our potential inability to comply with the financial covenants of our credit facility and other debt agreements, which could result in a default and potential acceleration of indebtedness and impact our ability to make additional borrowings under our credit facility or otherwise in the future; and

•the potential negative impact on the health of our personnel, particularly if a significant number of them and/or key personnel are impacted, and the potential impact of adaptations to our operations in order to protect our personnel, such as remote work arrangements, could introduce operational risk, including but not limited to cybersecurity risks, and could impair our ability to manage our business.

We may in the future choose to pay distributions in shares of our common stock rather than solely in cash, which may result in our stockholders having a tax liability with respect to such distributions that exceeds the amount of cash received, if any.

While the rapid developments regarding the COVID-19 pandemic preclude any prediction as to its ultimate adverse impact, the current economic, political, and social environment presents material risks and uncertainties with respect to our and our Neighbors’ business, financial condition, results of operations, cash flows, liquidity, and ability to satisfy debt service obligations. Moreover, to the extent any of these risks and uncertainties adversely impact us in the ways described above or otherwise, they may also have the effect of heightening many of the other risks described under the section entitled “Item 1A. Risk Factors” in our most recent annual reportsubsequently filed Quarterly Reports on Form ~~10-K for the year ended December 31, 2020.~~

~~Actual incremental yields for our development and redevelopment projects may vary from our underwritten incremental yield range.~~

As part of our standard development and redevelopment underwriting process, we analyze the yield for each project and establish a range of target yields (“underwritten incremental yields”). Underwritten incremental yields reflect the yield we target to generate from each project upon expected stabilization and are 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 from a project upon stabilization and the estimated annualized NOI without the planned improvements. Underwritten incremental 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.

Underwritten incremental yields are based solely on our estimates, using data available to us in our development and redevelopment underwriting processes. The actual total cost to complete a development or redevelopment project may differ substantially from our estimates due to various factors, including unanticipated expenses, delays in the estimated start and/or completion date of planned development projects, effects of the COVID-19 pandemic, and other contingencies. In addition, the actual incremental NOI from our planned development and redevelopment activities may differ substantially from our estimates based on numerous other factors, including delays and/or difficulties in leasing and stabilizing a development or redevelopment project, failure to obtain estimated occupancy and rental rates, inability to collect anticipated rental revenues, Neighbor bankruptcies, and unanticipated expenses that we cannot pass on to our Neighbors. Actual incremental yields may vary from our underwritten incremental yield range based on the actual total cost to complete a project and its incremental NOI at stabilization.

We and the Operating Partnership entered into a tax protection agreement with certain protected partners, which may limit the Operating Partnership’s ability to sell or otherwise dispose of certain properties and may require the Operating Partnership to maintain certain debt levels that otherwise would not be required to operate its business.

We and our consolidated subsidiary, Phillips Edison Grocery Center Operating Partnership I, L.P. (the “Operating Partnership”), entered into a tax protection agreement with, among others, Jeffrey S. Edison, our Chairman and Chief Executive Officer, and certain entities controlled by him at the closing of a transaction in May 2017 pursuant to which we internalized our management structure through the acquisition of certain real estate assets and the third party investment management business of Phillips Edison Limited Partnership in exchange for ownership units of the Operating Partnership and cash. Pursuant to this tax protection agreement, if the Operating Partnership: (i) sells, exchanges, transfers or otherwise disposes of certain properties in a taxable transaction, or undertakes any taxable merger, combination, consolidation or similar transaction (including a transfer of all or substantially all assets), for a period of ten years commencing on October 4, 2017; or (ii) fails, prior to the expiration of such period, to maintain certain minimum levels of indebtedness that would be allocable to each protected partner for tax purposes or, under certain circumstances, fails to offer such protected partners the opportunity to guarantee certain types of the Operating Partnership’s indebtedness, then the Operating Partnership will indemnify each affected protected partner, including our Chairman and Chief Executive Officer, Jeffrey S. Edison, against certain resulting tax liabilities. Our tax indemnification obligations include a tax gross-up.

Therefore, although it may be in our stockholders’ best interest for us to cause the Operating Partnership to sell, exchange, transfer or otherwise dispose of one of these properties, it may be economically prohibitive for us to do so until the expiration of the protection period in 2027 because of these indemnity obligations. Moreover, these obligations may require us to cause the Operating Partnership to maintain more or different indebtedness than we would otherwise require for our business. As a result, the tax protection agreement could, during its term, restrict our ability to take actions or make decisions that otherwise would be in our best interests.10-Q.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~Share Repurchases~~

On August 4, 2021, as a result of our underwritten IPO, our Board approved the termination of the standard repurchase program (“SRP”). During the ~~three~~nine months ended ~~March 31,~~September 30, 2021, we ~~repurchased~~did not repurchase any shares ~~as follows (shares in thousands):~~

Period Total Number of Shares Repurchased
Average Price Paid per Share(1)(2)
Total Number of Shares Purchased as Part of a Publicly Announced Plan or Program(1)
Approximate Dollar Value of Shares That May Yet Be Repurchased Under the Program
January 2021(3)
54 $ 8.75 — (2)
February 2021 64 5.75 64 (2)
March 2021 9 5.75 9 (2)

~~(1)We announced the commencement of the Share Repurchase Program (“SRP”) in August 2010. It has subsequently been amended, most recently in January 2021.~~

~~(2)~~We currently limit the dollar value and number of shares that may yet be repurchased under the SRP, as described in “Part II, Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities” in our Annual Report on Form 10-K filed with the SEC on March 12, 2021.

~~(3)~~During the three months ended March 31, 2021, we repurchased approximately 54,000 shares for an aggregate purchase price of $0.5 million (average price of $8.75 per share) in connection with common shares surrendered to us to satisfy statutory minimum tax withholding obligations associated with the vesting of restricted stock awards under our equity-based compensation plan.

~~On March 25, 2021, our Board announced that we are reviewing alternatives in order to provide liquidity~~prior to our shareholders. In connection with the review process, the Fourth Amended and Restated SRP has been suspended, and the March 31, 2021 repurchases related to stockholder death, qualifying disability, or determination of incompetence (“DDI”) were not executed. The SRP for both standard and DDI requests will remain suspended until further notice.underwritten initial public offering, which closed on July 19, 2021.

~~ITEM 5. OTHER INFORMATION~~

~~Long-Term Incentive Award~~

On April 29, 2021, the Compensation Committee of the Board of Directors of the Company (the “Committee”) modified the Company’s long-term incentive program applicable to Devin I. Murphy, President of the Company, and granted Mr. Murphy a long-term incentive award (the “2021 LTIP Award”) in the form of 41,143 fully vested Class B limited partnership units of Phillips Edison Grocery Center Operating Partnership I, L.P. and 123,429 performance-based Class C Units of Phillips Edison Grocery Center Operating Partnership I, L.P. (“Class C Units”).

In March 2019, the Compensation Committee granted Mr. Murphy a one-time long-term incentive award of performance-based Class C units (the “Special LTIP Award”) in order to drive long-term incremental revenue streams from the investment management business, focusing his efforts more on building recurring revenue than transaction-based fee income. In 2018, prior to approval of the Special LTIP Award tied specifically to performance of the investment management business, the form of Mr. Murphy’s long-term incentive mirrored that of the other executives, consisting of an annual restricted time-based award, and a performance-based award. At the time the Special LTIP Award was granted, the Committee intended that the Special LTIP Award would be in lieu of any other long-term incentive awards to Mr. Murphy under the Company’s 2019 long-term incentive program. Several factors have led the Committee to reinstate an annual long-term incentive award, like those granted to each of the other executives, in addition to the Special LTIP, including: (1) continued focus on building recurring revenue streams from the investment management business; (2) further alignment of incentives across the executive team on 3-year Core FFO per share and Same-Center NOI growth; and (3) a market evaluation of Mr. Murphy’s total compensation package and structure, including but not limited to the retention value of the plan.

Mr. Murphy’s performance-based 2021 LTIP Award is earned based on the achievement of the following two equally-weighted performance metrics measured at the end of the three-year performance period commencing January 1, 2021 and ending December 31, 2023: (i) the Company’s three-year average Same-Center NOI growth measured against a peer group of eight public retail real estate investment trusts, and (ii) the Company’s three-year Core FFO per share growth measured against the same peer group. The maximum number of Class C Units earned under the performance-based 2021 LTIP Award cannot exceed two times the target number of Class C Units. One hundred percent of the Class C Units earned under the performance-based 2021 LTIP Award will vest when earned at the end of the three-year performance period. If Mr. Murphy’s employment terminates for any reason other than by the Company for cause, he will remain eligible to vest in the performance-based 2021 LTIP Award as follows: (i) if the termination occurs before 50% of the performance period has elapsed, a pro-rated portion of the award actually earned will vest based on performance at the end of the performance period, with the pro-ration calculated based on the ratio of the number of days employed during the performance period to the total number of days in the performance period, and (ii) if the termination occurs after 50% or more performance period has elapsed, 100% of the Class C Units that are actually earned at the end of the performance period will vest.

The performance metrics, threshold, target, and maximum performance levels, and other terms of the performance-based 2021 LTIP Award are substantially similar to those applicable to similar performance-based long-term incentive awards granted to the Company’s other named executive officers and described in the Company’s proxy statement filed on April 9, 2021.

~~Estimated Value per Share~~

~~Valuation Overview~~—On April 29, 2021, the independent directors of our Board declared the estimated value per share (“EVPS”) of our common stock as $10.55. The valuation was based substantially on the estimated “as is” market value of our portfolio of real estate properties in various geographic locations in the United States as well as our pro rata share of those properties owned through our joint ventures (collectively, our “Portfolio”) and the estimated value of in-place contracts of our third-party asset management business as of March 31, 2021.

We provided the EVPS to assist broker-dealers that participated in our public offering in meeting their customer account statement reporting obligations under Financial Industry Regulatory Authority (“FINRA”) Rule 2231. This valuation was performed in accordance with the provisions of Practice Guideline 2013-01, Valuations of Publicly Registered Non-Listed REITs, issued by the Institute for Portfolio Alternatives (“IPA”) in April 2013 (“IPA Valuation Guidelines”).

We engaged Duff & Phelps, LLC (“Duff & Phelps”), an independent valuation expert that has expertise in appraising commercial real estate assets, to provide a calculation of the range in EVPS of our common stock as of March 31, 2021. Duff & Phelps prepared a valuation report (“Valuation Report”) that provided this range based substantially on its estimate of the “as is” market value of the Portfolio and the estimated value of in-place contracts of the third-party asset management business. Duff & Phelps made adjustments to the aggregate estimated value of our Portfolio to reflect balance sheet assets and liabilities provided by our management as of March 31, 2021, before calculating a range of estimated values based on the number of outstanding shares of our common stock as of March 31, 2021. These calculations produced an EVPS in the range of $9.87 to $11.22 as of March 31, 2021, and the independent directors, after discussions with management, approved $10.55 as the EVPS as of March 31, 2021. We previously established an EVPS of $8.75 (as of March 31, 2020) on May 6, 2020 based substantially on the same methodology and process. We expect to review the EVPS at least annually.

~~The following table summarizes the material components of the EVPS of our common stock as of March 31, 2021 (in thousands, except per share amounts):~~

Low High
Investment in Real Estate Assets:
Phillips Edison real estate valuation $ 5,363,344 $ 5,788,544
Management company 44,000 44,000
Joint venture properties(1)
71,758 77,854
Total market value 5,479,102 5,910,398
Other Assets:
Cash and cash equivalents 15,649 15,649
Restricted cash 41,621 41,621
Accounts receivable 67,457 67,457
Prepaid expenses and other assets 16,184 16,184
Total other assets 140,911 140,911
Liabilities:
Notes payable and credit facility 21,500 21,500
Mark to market - debt 2,322,090 2,322,090
Derivative liability 42,970 42,970
Accounts payable and accrued expenses 65,777 65,777
Total liabilities 2,452,337 2,452,337
Net Asset Value $ 3,167,676 $ 3,598,972
Common stock and Operating Partnership units (“OP units”) outstanding 320,892 320,892
Net Asset Value Per Share $ 9.87 $ 11.22

~~(1)Represents our pro rata share of the properties owned by our joint ventures.~~

Our goal is to provide an estimate of the market value of our shares. However, the majority of our assets consist of commercial real estate, and as with any valuation methodology, the methodologies used were based upon a number of assumptions and estimates that may not have been accurate or complete. Different parties with different assumptions and estimates could have derived a different EVPS, and those differences could have been significant. These limitations are discussed further under “Limitations of Estimated Value per Share” below.

~~Valuation Methodologies~~—Our goal in calculating an EVPS was to arrive at a value that was reasonable and based off of what we deemed to be appropriate valuation and appraisal methodologies and assumptions and a process that was in accordance with the IPA Valuation Guidelines. The following is a summary of the valuation methodologies and components used to calculate the EVPS.

~~Independent Valuation Firm~~—We retained Duff & Phelps on February 11, 2021, as authorized by the independent directors of the Board, to provide independent valuation services. Duff & Phelps, who is not affiliated with us, is a leading global valuation advisor with expertise in complex valuation work. Duff & Phelps had previously provided services to us pertaining to the allocation of acquisition purchase prices for financial reporting purposes in connection with the Portfolio, for which it received usual and customary compensation. Duff & Phelps may be engaged to provide professional services to us in the future. The Duff & Phelps personnel who prepared the valuation had no present or prospective interest in the Portfolio and no personal interest with us.

Duff & Phelps’ engagement for its valuation services was not contingent upon developing or reporting predetermined results. In addition, Duff & Phelps’ compensation for completing the valuation services was not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of us, the amount of the value opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related to the intended use of its Valuation Report. We agreed to indemnify Duff & Phelps against certain liabilities arising out of this engagement.

Duff & Phelps’ analyses, opinions, or conclusions were developed, and the Valuation Report was prepared, in conformity with the Uniform Standards of Professional Appraisal Practice. The Valuation Report was reviewed, approved and signed by individuals with the professional designation of MAI (Member of the Appraisal Institute). The use of the Valuation Report is subject to the requirements of the Appraisal Institute relating to review by its duly authorized representatives. Duff & Phelps did not inspect the properties that formed the Portfolio.

In preparing the Valuation Report, Duff & Phelps relied on information provided by us regarding the Portfolio. For example, we provided information regarding building size, year of construction, land size and other physical, financial, and economic characteristics. We also provided lease information, such as current rent amounts, rent commencement and expiration dates, and rent increase amounts and dates.

Duff & Phelps did not investigate the legal description or legal matters relating to the Portfolio, including title or encumbrances, and title to the properties was assumed to be good and marketable. The Portfolio was also assumed to be free and clear of liens, easements, encroachments and other encumbrances, and to be in full compliance with zoning, use, occupancy, environmental and similar laws unless otherwise stated by us. The Valuation Report contains other assumptions, qualifications and limitations that qualify the analysis, opinions and conclusions set forth therein. Furthermore, the prices at which our real estate properties may actually be sold could differ from their appraised values.

~~The foregoing is a summary of the standard assumptions, qualifications and limitations that generally apply to the Valuation Report.~~

~~Real Estate Portfolio Valuation~~—Duff & Phelps estimated the “as is” market values of the Portfolio as of March 31, 2021 using various methodologies. Generally accepted valuation practice suggests assets may be valued using a range of methodologies. Duff & Phelps utilized the income capitalization approach with support from the sales comparison approach for each property. The income approach was the primary indicator of value, with secondary consideration given to the sales approach. Duff & Phelps performed a study of each market to measure current market conditions, supply and demand factors, growth patterns, and their effect on each of the subject properties.

The income capitalization approach simulates the reasoning of an investor who views the cash flows that would result from the anticipated revenue and expense on a property throughout its lifetime. Under the income capitalization approach, Duff & Phelps used an estimated net operating income (“NOI”) for each property, and then converted it to a value indication using a discounted cash flow analysis. The discounted cash flow analysis focuses on the operating cash flows expected from a property and the anticipated proceeds of a hypothetical sale at the end of an assumed holding period, with these amounts then being discounted to their present value. The discounted cash flow method is appropriate for the analysis of investment properties with multiple leases, particularly leases with cancellation clauses or renewal options, and especially in volatile markets.

The sales comparison approach estimates value based on what other purchasers and sellers in the market have agreed to as a price for comparable improved properties. This approach is based upon the principle of substitution, which states that the limits of prices, rents and rates tend to be set by the prevailing prices, rents and rates of equally desirable substitutes. Duff & Phelps gathered comparable sales data throughout various markets as secondary support for its valuation estimate.

~~The following summarizes the upper and lower bounds of the average terminal capitalization rates and discount rates that were used to arrive at the estimated market values of our Portfolio:~~


			~~Range in Values~~
~~Terminal Capitalization Rate~~			~~6.77% - 7.27%~~
~~Discount Rate~~			~~7.38% - 7.88%~~

~~Management Company Valuation~~—Duff & Phelps estimated the aggregate market value associated with our third-party asset management business using various methodologies. Duff & Phelps considered various applications of the income approach, market approach, and underlying assets approach, with the income approach determined to be the most reliable method for purposes of the analysis. The income approach analysis considered the projected fee income earned for services provided pursuant to various management and advisory agreements over the expected duration of that contract, assuming normal and customary renewal provisions. Such services include property management services performed for the properties in the Portfolio, as well as property and asset management services for certain unaffiliated real estate investment portfolios. In performing this analysis, solely fee income related to properties owned as of March 31, 2021 was considered. The income approach also considered a reasonable level of expenses to support such activities, as well as other adjustments, and a discount rate that accounted for the time value of money and the risk of achieving the projected cash flows. All other assets

and liabilities acquired are short term in nature and therefore the carrying value is considered to approximate the fair value. The result of the income approach analysis was the aggregate market value of the third-party asset management business, from which an estimated market value of net tangible assets (liabilities) was subtracted (added), to result in the aggregate intangible value of the management company.

~~Sensitivity Analysis~~

—While we believe that Duff & Phelps’ assumptions and inputs were reasonable, a change in these assumptions would have impacted the calculations of the estimated value of the Portfolio, the estimated value of our third-party asset management business, and our EVPS. The table below illustrates the impact on Duff & Phelps’ range in EVPS if the terminal capitalization rates or discount rates were adjusted by 25 basis points and assumes all other factors remain unchanged. Additionally, the table illustrates the impact if only one change in assumptions was made, with all other factors held constant. Further, each of these assumptions could change by more than 25 basis points or 5%.

PHILLIPS EDISON & COMPANY

SEPTEMBER 30, 2021 FORM 10-Q

~~Resulting Range in Estimated Value Per Share~~

~~Increase of 25 basis points~~

~~Decrease of 25 basis points~~

~~Increase of 5%~~

~~Decrease of 5%~~

~~Terminal Capitalization Rate~~

~~$9.56 - $10.84~~

~~$10.20 - $11.61~~

~~$9.44 - $10.73~~

~~$10.33 - $11.74~~

~~Discount Rate~~

~~$9.56 - $10.88~~

~~$10.18 - $11.56~~

~~$9.40 - $10.73~~

~~$10.35 - $11.71~~44

~~Other Assets and Other Liabilities~~—Duff & Phelps made adjustments to the aggregate estimated values of our investments to reflect our other assets and other liabilities based on balance sheet information provided by us as of March 31, 2021.

~~Role of the Independent Directors~~—The independent directors discussed the valuation process and results with representatives of Duff & Phelps. The independent directors also discussed the results, the Portfolio, the third-party asset management business, our other assets and liabilities, and other matters with management. Management recommended to the independent directors that $10.55 per share be approved as the EVPS of our common stock. The independent directors discussed the rationale for this value with management.

Following the independent directors’ discussion with Duff & Phelps and the recommendation of management, and in light of other factors considered by the independent directors, the independent directors concluded that the range in EVPS of $9.87 to $11.22 was appropriate. The independent directors agreed to accept the recommendation of management and approved $10.55 as the EVPS of our common stock as of March 31, 2021, which determination was ultimately and solely the responsibility of the independent directors.

~~Limitations of Estimated Value per Share~~—We are providing this EVPS to assist broker-dealers that participated in our public offering in meeting our customer account statement reporting obligations. This valuation was performed in accordance with the provisions of the IPA Valuation Guidelines. As with any valuation methodology, the methodologies used were based upon a number of estimates and assumptions that may not have been accurate or complete. Different parties with different assumptions and estimates could have derived a different EVPS, and this difference could have been significant. The EVPS is not audited and does not represent a determination of the fair value of our assets or liabilities based on accounting principles generally accepted in the United States (“GAAP”), nor does it represent a liquidation value of our assets and liabilities, the price a third party would pay to acquire us, the price at which our shares of common stock would trade in secondary markets, or the amount at which our shares of common stock would trade on a national securities exchange.

~~Accordingly, we can give no assurance that:~~

•~~our shares would trade at or near the EVPS if listed on a national securities exchange;~~

•~~a stockholder would be able to resell his or her shares at the EVPS;~~

•~~a stockholder would ultimately realize distributions per share equal to the EVPS upon a liquidation of our assets and settlement of our liabilities;~~

•~~a stockholder would receive an amount per share equal to the EVPS upon a sale of the Company;~~

•~~a third party would offer the EVPS in an arm’s-length transaction to purchase all or substantially all of our shares of common stock;~~

•~~another independent third-party appraiser or third-party valuation firm would agree with our EVPS; or~~

•the methodologies used to calculate our EVPS would be acceptable to FINRA for use on customer account statements or that the EVPS will satisfy the applicable annual valuation requirements under the Employee Retirement Income Security Act of 1974.

Further, we have not made any adjustments to the valuation of our EVPS for the impact of other transactions occurring subsequent to March 31, 2021, including, but not limited to, (1) acquisitions or dispositions of assets; (2) the issuance of common stock under the Dividend Reinvestment Plan (“DRIP”), which was suspended beginning with the distribution payable April 1, 2021; (3) NOI and dividends declared (see “Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Measures - Same-Center Net Operating Income” of this filing on Form 10-Q for the calculation of NOI); (4) the repurchase of shares; and (5) changes in leases, tenancy, or other business and operational changes. The value of our shares of common stock will fluctuate over time in response to developments related to individual real estate assets, the management of those assets, and changes in the real estate and finance markets. Because of, among other factors, the high concentration of our total assets in real estate and the number of shares of our common stock outstanding, changes in the value of individual real estate assets or changes in valuation assumptions could have a very significant impact on the value of our shares of common stock. The EVPS does not take into account any disposition costs or fees for real estate properties, debt prepayment penalties that may be incurred upon the prepayment of certain of our debt obligations, or the impact of restrictions on the assumption of debt. Accordingly, the EVPS of our common stock may or may not be an accurate reflection of the fair market value of our stockholders’ investments and will not likely represent the amount of net proceeds that would result from an immediate sale of our assets.

ITEM 6. EXHIBITS


Ex.		Description	Reference
3.1		Fifth Articles of Amendment and Restatement of Phillips Edison & Company, Inc., as amended	Form 10-Q, filed August 5, 2021. Exhibit 3.1
3.2		Fifth Amended and Restated Bylaws of Phillips Edison & Company, Inc.	Form 8-K, filed July 19, 2021, Exhibit 3.1
4.1		Form of Indenture, by and among Phillips Edison & Company, Inc., as issuer, and U.S. Bank National Association, as trustee	Form S-3, filed August 25, 2021, Exhibit 4.2
4.2		Form of Indenture, by and among Phillips Edison Grocery Center Operating Partnership I, L.P., as issuer, and U.S. Bank National Association, as trustee	Form S-3, filed August 25, 2021, Exhibit 4.3
10.1		First Amendment to Credit Agreement, by and among Phillips Edison Grocery Center Operating Partnership I, L.P., Phillips Edison & Company, Inc., the Lenders and Capital One, National Association, as administrative agent, dated November 16, 2018	Form S-11/A, filed July 7, 2021, Exhibit 10.4
10.2		Credit Agreement among Phillips Edison Grocery Center Operating Partnership I, L.P., Phillips Edison & Company, Inc., the lenders party thereto, and PNC Bank, National Association as administrative agent, dated July 2, 2021	Form 8-K, filed July 2, 2021, Exhibit 10.1
10.3		Tax Protection Agreement by and among Phillips Edison & Company, Inc., Phillips Edison Grocery Center Operating Partnership I, L.P., and each Protected Partner identified as a signatory on Schedule I	Form 8-K, filed July 19, 2021, Exhibit 10.1
10.4		Form of LTIP Listing Equity Grant	Form S-11/A, filed July 7, 2021, Exhibit 10.32
10.5		Form of LTIP Listing Equity Grant (Murphy)	Form S-11/A, filed July 7, 2021, Exhibit 10.33
10.6		Form of RSU Listing Equity Grant	Form S-11/A, filed July 7, 2021, Exhibit 10.34
10.7		Form of Restricted Stock Listing Equity Grant	Form S-11/A, filed July 7, 2021, Exhibit 10.35
31.1	*	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*2002
31.2	*	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*2002
32.1	*	Certification of Principal Executive Officer pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002*2002
32.2	*	Certification of Principal Financial Officer pursuant to 18 U.S.C. 1350, as created by Section 906 of the ~~Sarbanes -Oxley~~Sarbanes-Oxley Act of 2002*2002
~~99.1~~	Consent of Duff & Phelps, LLC*
101.INS		Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as inline XBRL and contained in exhibit 101)

*Filed herewith


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									45

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	PHILLIPS EDISON & COMPANY, INC.

Date: ~~May~~November 4, 2021	By:	/s/ Jeffrey S. Edison
		Jeffrey S. Edison
		Chairman of the Board and Chief Executive Officer (Principal Executive Officer)

Date: ~~May~~November 4, 2021	By:	/s/ John P. Caulfield
		John P. Caulfield
		Chief Financial Officer, Senior Vice President and Treasurer (Principal Financial Officer)


PHILLIPS EDISON & COMPANY SEPTEMBER 30, 2021 FORM 10-Q									46


Period	Total Number of Shares Repurchased	Average Price Paid per Share(1)(2)		Total Number of Shares Purchased as Part of a Publicly Announced Plan or Program(1)	Approximate Dollar Value of Shares That May Yet Be Repurchased Under the Program
January 2021(3)	54	$	8.75	—	(2)
February 2021	64	5.75		64	(2)
March 2021	9	5.75		9	(2)


	Low		High
Investment in Real Estate Assets:
Phillips Edison real estate valuation	$	5,363,344	$	5,788,544
Management company	44,000		44,000
Joint venture properties(1)	71,758		77,854
Total market value	5,479,102		5,910,398

Other Assets:
Cash and cash equivalents	15,649		15,649
Restricted cash	41,621		41,621
Accounts receivable	67,457		67,457
Prepaid expenses and other assets	16,184		16,184
Total other assets	140,911		140,911

Liabilities:
Notes payable and credit facility	21,500		21,500
Mark to market - debt	2,322,090		2,322,090
Derivative liability	42,970		42,970
Accounts payable and accrued expenses	65,777		65,777
Total liabilities	2,452,337		2,452,337

Net Asset Value	$	3,167,676	$	3,598,972

Common stock and Operating Partnership units (“OP units”) outstanding	320,892		320,892
Net Asset Value Per Share	$	9.87	$	11.22