~~Table of Contents~~

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 June 30, ~~2021~~2022

☐ 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

Common stock, par value $0.01 per share

PECO

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

There were ~~19.6~~116.7 million shares of the registrant’s Common Stock, $0.01 par value per share, ~~and 93.7 million shares of Class B stock, $0.01 par value per share,~~ outstanding as of July ~~30, 2021.~~29, 2022.

~~Table of Contents~~

PHILLIPS EDISON & COMPANY, INC. FORM 10-Q


TABLE OF CONTENTS

PART I.
ITEM 1.		FINANCIAL STATEMENTS (CONDENSED AND UNAUDITED)	2
		CONSOLIDATED BALANCE SHEETS AS OF JUNE 30 ~~2021~~, 2022 AND DECEMBER 31, ~~2020~~2021	2
		CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME ~~(LOSS)~~ FOR THE THREE AND SIX MONTHS ENDED JUNE ~~30, 2021~~ 3 0 , 2022 AND ~~2020~~2021	3
		CONSOLIDATED STATEMENTS OF EQUITY FOR THE THREE AND SIX MONTHS ENDED JUNE ~~30, 2021~~ 3 0 , 2022 AND ~~2020~~2021	4
		CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE ~~30, 2021~~ 3 0 , 2022 AND ~~2020~~2021	6
		NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, ~~2021~~2022
	NOTE 1	ORGANIZATION	8
	NOTE 2	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	8
	NOTE 3	LEASES	109
	NOTE 4	REAL ESTATE ACTIVITY	1110
	NOTE 5	OTHER ASSETS, NET	1211
	NOTE 6	DEBT OBLIGATIONS	1311
	NOTE 7	DERIVATIVES AND HEDGING ACTIVITIES	1312
	NOTE 8	COMMITMENTS AND CONTINGENCIES	1413
	NOTE 9	EQUITY	1413
	NOTE 10	EARNINGS PER SHARE	1615
	NOTE 11	~~REVENUE RECOGNITION AND~~ RELATED PARTY TRANSACTIONS	1716
	NOTE 12	FAIR VALUE MEASUREMENTS	1716
	NOTE 13	SUBSEQUENT EVENTS	1918
ITEM 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	2019
ITEM 3.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	4338
ITEM 4.		CONTROLS AND PROCEDURES	4438

PART II.
ITEM 1.		LEGAL PROCEEDINGS	4438
ITEM 1A.		RISK FACTORS	4438
ITEM 2.2.		UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	4739
ITEM 3.		DEFAULTS UPON SENIOR SECURITIES	39
ITEM 4.		MINE SAFETY DISCLOSURES	39
ITEM 5.		OTHER INFORMATION	4739
ITEM 6.		EXHIBITS	4840
		SIGNATURES	4941


PHILLIPS EDISON & COMPANY JUNE 30, ~~2021~~2022 FORM 10-Q									1

~~Table of Contents~~


w PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

PHILLIPS EDISON & COMPANY, INC.

CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, ~~2021~~2022 AND DECEMBER 31, ~~2020~~2021

(Condensed and Unaudited)

(In thousands, except per share amounts)


		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
ASSETS	ASSETS					ASSETS
Investment in real estate:	Investment in real estate:					Investment in real estate:
Land and improvements	Land and improvements	$	1,529,803	$	1,549,362	Land and improvements	$	1,623,203	$	1,586,993
Building and improvements	Building and improvements	3,184,601		3,237,986		Building and improvements	3,487,920		3,355,433
In-place lease assets	In-place lease assets	434,499		441,683		In-place lease assets	465,417		452,504
Above-market lease assets	Above-market lease assets	64,795		66,106		Above-market lease assets	70,842		68,736
Total investment in real estate assets	Total investment in real estate assets	5,213,698		5,295,137		Total investment in real estate assets	5,647,382		5,463,666
Accumulated depreciation and amortization	Accumulated depreciation and amortization	(1,021,456)		(941,413)		Accumulated depreciation and amortization	(1,216,331)		(1,110,426)
Net investment in real estate assets	Net investment in real estate assets	4,192,242		4,353,724		Net investment in real estate assets	4,431,051		4,353,240
Investment in unconsolidated joint ventures	Investment in unconsolidated joint ventures	32,746		37,366		Investment in unconsolidated joint ventures	28,096		31,326
Total investment in real estate assets, net	Total investment in real estate assets, net	4,224,988		4,391,090		Total investment in real estate assets, net	4,459,147		4,384,566
Cash and cash equivalents	Cash and cash equivalents	22,205		104,296		Cash and cash equivalents	24,657		92,585
Restricted cash	Restricted cash	89,196		27,641		Restricted cash	19,030		22,944
Goodwill	Goodwill	29,066		29,066		Goodwill	29,066		29,066
Other assets, net	Other assets, net	126,056		126,470		Other assets, net	162,712		138,050
Real estate investments and other assets held for sale	Real estate investments and other assets held for sale	14,261		0		Real estate investments and other assets held for sale	—		1,557
Total assets	Total assets	$	4,505,772	$	4,678,563	Total assets	$	4,694,612	$	4,668,768

LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Liabilities:	Liabilities:					Liabilities:
Debt obligations, net	Debt obligations, net	$	2,228,232	$	2,292,605	Debt obligations, net	$	1,877,107	$	1,891,722
Below-market lease liabilities, net	Below-market lease liabilities, net	93,949		101,746		Below-market lease liabilities, net	108,323		107,526
Earn-out liability	Earn-out liability	40,000		22,000		Earn-out liability	—		52,436
Derivative liabilities	Derivative liabilities	39,929		54,759		Derivative liabilities	52		24,096
Deferred income	Deferred income	18,978		14,581		Deferred income	21,629		19,145
Accounts payable and other liabilities	Accounts payable and other liabilities	88,436		176,943		Accounts payable and other liabilities	92,856		97,229
Liabilities of real estate investments held for sale	Liabilities of real estate investments held for sale	860		0		Liabilities of real estate investments held for sale	—		288
Total liabilities	Total liabilities	2,510,384		2,662,634		Total liabilities	2,099,967		2,192,442
Commitments and contingencies (Note 8)		0		0
Commitments and contingencies (see Note 8)						Commitments and contingencies (see Note 8)	—		—
Equity:	Equity:					Equity:
Preferred stock, $0.01 par value per share, 10,000 shares authorized, 0 shares issued and
outstanding at June 30, 2021 and December 31, 2020		0		0
Common stock, $0.01 par value per share, 1,000,000 shares authorized, 93,640 and 93,279
shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively		2,808		2,798
Preferred stock, $0.01 par value per share, 10,000 shares authorized, zero shares issued and outstanding at June 30, 2022 and December 31, 2021						Preferred stock, $0.01 par value per share, 10,000 shares authorized, zero shares issued and outstanding at June 30, 2022 and December 31, 2021	—		—
Common stock, $0.01 par value per share, 1,000,000 shares authorized, 115,782 shares issued and outstanding at June 30, 2022; 650,000 shares authorized, 19,550 shares issued and outstanding at December 31, 2021						Common stock, $0.01 par value per share, 1,000,000 shares authorized, 115,782 shares issued and outstanding at June 30, 2022; 650,000 shares authorized, 19,550 shares issued and outstanding at December 31, 2021	1,157		196
Class B common stock, $0.01 par value per share, zero shares authorized, issued, and outstanding at June 30, 2022; 350,000 shares authorized, 93,665 shares issued and outstanding at December 31, 2021						Class B common stock, $0.01 par value per share, zero shares authorized, issued, and outstanding at June 30, 2022; 350,000 shares authorized, 93,665 shares issued and outstanding at December 31, 2021	—		936
Additional paid-in capital (“APIC”)	Additional paid-in capital (“APIC”)	2,749,680		2,739,358		Additional paid-in capital (“APIC”)	3,341,646		3,264,038
Accumulated other comprehensive loss (“AOCI”)		(38,732)		(52,306)
Accumulated other comprehensive income (loss) (“AOCI”)						Accumulated other comprehensive income (loss) (“AOCI”)	8,571		(24,819)
Accumulated deficit	Accumulated deficit	(1,041,617)		(999,491)		Accumulated deficit	(1,129,151)		(1,090,837)
Total stockholders’ equity	Total stockholders’ equity	1,672,139		1,690,359		Total stockholders’ equity	2,222,223		2,149,514
Noncontrolling interests	Noncontrolling interests	323,249		325,570		Noncontrolling interests	372,422		326,812
Total equity	Total equity	1,995,388		2,015,929		Total equity	2,594,645		2,476,326
Total liabilities and equity	Total liabilities and equity	$	4,505,772	$	4,678,563	Total liabilities and equity	$	4,694,612	$	4,668,768

See notes to consolidated financial statements.


PHILLIPS EDISON & COMPANY JUNE 30, ~~2021~~2022 FORM 10-Q									2

~~Table of Contents~~

PHILLIPS EDISON & COMPANY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME ~~(LOSS)~~

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, ~~2021~~2022 AND ~~2020~~2021

(Condensed and Unaudited)

(In thousands, except per share amounts)

Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
Revenues:
Rental income $ 130,335 $ 115,654 $ 257,958 $ 244,120
Fees and management income 2,374 2,760 4,660 4,925
Other property income 361 626 833 1,518
Total revenues 133,070 119,040 263,451 250,563
Operating Expenses:
Property operating 21,974 19,629 44,176 41,391
Real estate taxes 16,814 16,453 33,387 33,565
General and administrative 11,937 9,806 21,278 20,546
Depreciation and amortization 56,587 56,370 111,928 112,597
Impairment of real estate assets 1,056 0 6,056 0
Total operating expenses 108,368 102,258 216,825 208,099
Other:
Interest expense, net (19,132) (22,154) (39,195) (44,929)
Gain (loss) on disposal of property, net 3,744 (541) 17,585 (2,118)
Other (expense) income, net (2,924) (500) (18,509) 9,369
Net income (loss) 6,390 (6,413) 6,507 4,786
Net (income) loss attributable to noncontrolling interests (796) 825 (810) (605)
Net income (loss) attributable to stockholders $ 5,594 $ (5,588) $ 5,697 $ 4,181
Earnings per common share:
Net income (loss) per share attributable to stockholders - basic and
diluted (Note 10)
$ 0.06 $ (0.06) $ 0.06 $ 0.04
Comprehensive income (loss):
Net income (loss) $ 6,390 $ (6,413) $ 6,507 $ 4,786
Other comprehensive income (loss):
Change in unrealized value on interest rate swaps 3,373 (1,747) 15,493 (45,111)
Comprehensive income (loss) 9,763 (8,160) 22,000 (40,325)
Net (income) loss attributable to noncontrolling interests (796) 825 (810) (605)
Change in unrealized value on interest rate swaps attributable to
noncontrolling interests (400) 224 (1,909) 5,798
Reallocation of comprehensive loss upon conversion of noncontrolling
interests (10) 0 (10) 0
Comprehensive income (loss) attributable to stockholders $ 8,557 $ (7,111) $ 19,271 $ (35,132)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Revenues:
Rental income	$	137,230	$	130,335	$	275,978	$	257,958
Fees and management income	4,781		2,374		7,242		4,660
Other property income	505		361		1,459		833
Total revenues	142,516		133,070		284,679		263,451
Operating Expenses:
Property operating	22,852		21,974		46,172		44,176
Real estate taxes	16,473		16,814		33,964		33,387
General and administrative	11,376		11,937		22,908		21,278
Depreciation and amortization	60,769		56,587		117,995		111,928
Impairment of real estate assets	—		1,056		—		6,056
Total operating expenses	111,470		108,368		221,039		216,825
Other:
Interest expense, net	(17,127)		(19,132)		(35,326)		(39,195)
Gain on disposal of property, net	2,793		3,744		4,161		17,585
Other expense, net	(1,457)		(2,924)		(5,822)		(18,509)
Net income	15,255		6,390		26,653		6,507
Net income attributable to noncontrolling interests	(1,727)		(796)		(3,046)		(810)
Net income attributable to stockholders	$	13,528	$	5,594	$	23,607	$	5,697
Earnings per share of common stock:
Net income per share attributable to stockholders - basic and diluted (see Note 10)	$	0.12	$	0.06	$	0.21	$	0.06

Comprehensive income:
Net income	$	15,255	$	6,390	$	26,653	$	6,507
Other comprehensive income:
Change in unrealized value on interest rate swaps	9,834		3,373		37,407		15,493
Comprehensive income	25,089		9,763		64,060		22,000
Net income attributable to noncontrolling interests	(1,727)		(796)		(3,046)		(810)
Change in unrealized value on interest rate swaps attributable to noncontrolling interests	(1,535)		(400)		(4,237)		(1,909)
Reallocation of comprehensive income (loss) upon conversion of noncontrolling interests	432		(10)		220		(10)
Comprehensive income attributable to stockholders	$	22,259	$	8,557	$	56,997	$	19,271

See notes to consolidated financial statements.


PHILLIPS EDISON & COMPANY JUNE 30, ~~2021~~2022 FORM 10-Q									3

~~Table of Contents~~

PHILLIPS EDISON & COMPANY, INC.

CONSOLIDATED STATEMENTS OF EQUITY

FOR THE THREE MONTHS ENDED JUNE 30, ~~2021~~2022 AND ~~2020~~2021

(Condensed and Unaudited)

(In thousands, except per share amounts)


		Three Months Ended June 30, 2021 and 2020																						Three Months Ended June 30, 2022 and 2021
		Common Stock			APIC				AOCI		Accumulated Deficit				Total Stockholders’ Equity		Noncontrolling Interests				Total Equity			Common Stock						Class B Common Stock					APIC			AOCI		Accumulated Deficit			Total Stockholders’ Equity			Noncontrolling Interests			Total Equity
		Shares	Amount
Balance at April 1, 2020		96,805	$	2,903			$	2,793,803					$	(58,552)					$	(986,292)					$	1,751,862		$	341,944		$	2,093,806
Change in unrealized value on interest rate swaps		—	—		—				(1,523)		—				(1,523)		(224)				(1,747)
Share-based compensation		2	1		1,332				—		—				1,333		808				2,141
Conversion of noncontrolling interests		17	1		555				—		—				556		(556)				—
Other		(2)	—		(256)				—		(59)				(315)		(3)				(318)
Net loss		—	—		—				—		(5,588)				(5,588)		(825)				(6,413)
Balance at June 30, 2020		96,822	$	2,905	$	2,795,434			$	(60,075)	$	(991,939)			$	1,746,325	$	341,144			$	2,087,469
																								Shares			Amount			Shares			Amount		APIC			AOCI		Accumulated Deficit			Total Stockholders’ Equity			Noncontrolling Interests			Total Equity
Balance at April 1, 2021	Balance at April 1, 2021	93,582	$	2,807	$	2,746,891			$	(41,695)	$	(1,023,155)			$	1,684,848	$	324,558			$	2,009,406	Balance at April 1, 2021	—			$	—		93,582			$	2,807
Change in unrealized value on interest rate swaps	Change in unrealized value on interest rate swaps	—	—		—				2,973		—				2,973		400				3,373		Change in unrealized value on interest rate swaps	—			—			—			—				—					2,973			—			2,973			400	3,373
Common distributions declared, $0.255 per share	Common distributions declared, $0.255 per share	—	—		—				—		(24,056)				(24,056)		—				(24,056)		Common distributions declared, $0.255 per share	—			—			—			—		—			—		(24,056)			(24,056)			—			(24,056)
Distributions to noncontrolling interests	Distributions to noncontrolling interests	—	—		—				—		—				—		(3,460)				(3,460)		Distributions to noncontrolling interests	—			—			—			—		—			—		—			—			(3,460)			(3,460)
Share-based compensation	Share-based compensation	30	1		2,102				—		—				2,103		1,632				3,735		Share-based compensation	—			—			30			1		2,102			—		—			2,103			1,632			3,735
Conversion of noncontrolling interests	Conversion of noncontrolling interests	28	—		743				—		—				743		(743)				—		Conversion of noncontrolling interests	—			—			28			—		743			—		—			743			(743)			—
Reallocation of operating partnership interests	Reallocation of operating partnership interests	—	—		(56)				(10)		—				(66)		66				—		Reallocation of operating partnership interests	—			—			—			—		(56)			(10)		—			(66)			66			—
Net income	Net income	—	—		—				—		5,594				5,594		796				6,390		Net income	—			—			—			—		—			—		5,594			5,594			796			6,390
Balance at June 30, 2021	Balance at June 30, 2021	93,640	$	2,808	$	2,749,680			$	(38,732)	$	(1,041,617)			$	1,672,139	$	323,249			$	1,995,388	Balance at June 30, 2021	—			$	—		93,640			$	2,808	$	2,749,680		$	(38,732)	$	(1,041,617)		$	1,672,139		$	323,249		$	1,995,388

Balance at April 1, 2022																							Balance at April 1, 2022	113,819			$	1,138		—			$	—	$	3,276,151		$	(160)	$	(1,111,673)		$	2,165,456		$	372,213		$	2,537,669
Issuance of common stock, net																							Issuance of common stock, net	1,860			18			—			—		62,947			—		—			62,965			—			62,965
Change in unrealized value on interest rate swaps																							Change in unrealized value on interest rate swaps	—			—			—			—		—			8,299		—			8,299			1,535			9,834
Common distributions declared, $0.27 per share																							Common distributions declared, $0.27 per share	—			—			—			—		—			—		(31,006)			(31,006)			—			(31,006)
Distributions to noncontrolling interests																							Distributions to noncontrolling interests	—			—			—			—		—			—		—			—			(4,113)			(4,113)
Share-based compensation																							Share-based compensation	31			—			—			—		1,008			—		—			1,008			3,033			4,041
Conversion of noncontrolling interests																							Conversion of noncontrolling interests	72			1			—			—		2,417			—		—			2,418			(2,418)			—
Reallocation of operating partnership interests																							Reallocation of operating partnership interests	—			—			—			—		(877)			432		—			(445)			445			—
Net income																							Net income	—			—			—			—		—			—		13,528			13,528			1,727			15,255
Balance at June 30, 2022																							Balance at June 30, 2022	115,782			$	1,157		—			$	—	$	3,341,646		$	8,571	$	(1,129,151)		$	2,222,223		$	372,422		$	2,594,645

See notes to consolidated financial statements.


PHILLIPS EDISON & COMPANY JUNE 30, ~~2021~~2022 FORM 10-Q									4

~~Table of Contents~~

PHILLIPS EDISON & COMPANY, INC.

CONSOLIDATED STATEMENTS OF EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, ~~2021~~2022 AND ~~2020~~2021

(Condensed and Unaudited)

(In thousands, except per share amounts)

Six Months Ended June 30, 2021 and 2020
   Common Stock APIC AOCI Accumulated Deficit Total Stockholders’ Equity Noncontrolling Interests Total Equity
   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 — — — (39,313) — (39,313) (5,798) (45,111)
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 1,472 — — 1,474 518 1,992
Conversion of noncontrolling interests 56 2 1,859 — — 1,861 (1,861) —
Other (2) — (256) (59) (315) (3) (318)
Net income — — — — 4,181 4,181 605 4,786
Balance at June 30, 2020 96,822 $ 2,905 $ 2,795,434 $ (60,075) $ (991,939) $ 1,746,325 $ 341,144 $ 2,087,469
Balance at January 1, 2021 93,279 $ 2,798 $ 2,739,358 $ (52,306) $ (999,491) $ 1,690,359 $ 325,570 $ 2,015,929
DRIP 280 8 7,360 — — 7,368 — 7,368
Share repurchases (24) 0 (123) — — (123) — (123)
Change in unrealized value on interest
    rate swaps — — — 13,584 — 13,584 1,909 15,493
Common distributions declared, $0.510
    per share
— — — — (47,823) (47,823) — (47,823)
Distributions to noncontrolling interests — — — — — — (6,779) (6,779)
Share-based compensation 77 2 2,427 — — 2,429 2,416 4,845
Conversion of noncontrolling interests 28 0 743 — — 743 (743) —
Reallocation of operating partnership
    interests — — (56) (10) — (66) 66 —
Other 0 — (29) — 0 (29) 0 (29)
Net income — — — — 5,697 5,697 810 6,507
Balance at June 30, 2021 93,640 $ 2,808 $ 2,749,680 $ (38,732) $ (1,041,617) $ 1,672,139 $ 323,249 $ 1,995,388


	Six Months Ended June 30, 2022 and 2021
	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, 2021	—	$	—	93,279	$	2,798	$	2,739,358	$	(52,306)	$	(999,491)	$	1,690,359	$	325,570	$	2,015,929
Dividend reinvestment plan (“DRIP”)	—	—		280	8		7,360		—		—		7,368		—		7,368
Share repurchases	—	—		(24)	—		(123)		—		—		(123)		—		(123)
Change in unrealized value on interest rate swaps	—	—		—	—		—		13,584		—		13,584		1,909		15,493
Common distributions declared, $0.51 per share	—	—		—	—		—		—		(47,823)		(47,823)		—		(47,823)
Distributions to noncontrolling interests	—	—		—	—		—		—		—		—		(6,779)		(6,779)
Share-based compensation	—	—		77	2		2,427		—		—		2,429		2,416		4,845
Conversion of noncontrolling interests	—	—		28	—		743		—		—		743		(743)		—
Reallocation of operating partnership interests	—	—		—	—		(56)		(10)		—		(66)		66		—
Other	—	—		—	—		(29)		—		—		(29)		—		(29)
Net income	—	—		—	—		—		—		5,697		5,697		810		6,507
Balance at June 30, 2021	—	$	—	93,640	$	2,808	$	2,749,680	$	(38,732)	$	(1,041,617)	$	1,672,139	$	323,249	$	1,995,388

Balance at January 1, 2022	19,550	$	196	93,665	$	936	$	3,264,038	$	(24,819)	$	(1,090,837)	$	2,149,514	$	326,812	$	2,476,326
Conversion of Class B common stock	93,665	936		(93,665)	(936)		—		—		—		—		—		—
Issuance of common stock, net	1,860	18		—	—		62,947		—		—		62,965		—		62,965
Change in unrealized value on interest rate swaps	—	—		—	—		—		33,170		—		33,170		4,237		37,407
Common distributions declared, $0.54 per share	—	—		—	—		—		—		(61,921)		(61,921)		—		(61,921)
Distributions to noncontrolling interests	—	—		—	—		—		—		—		—		(8,217)		(8,217)
Share-based compensation	102	1		—	—		1,475		—		—		1,476		5,711		7,187
Conversion of noncontrolling interests	605	6		—	—		19,730		—		—		19,736		(19,736)		—
Reallocation of operating partnership interests	—	—		—	—		(6,544)		220		—		(6,324)		6,324		—
Settlement of earn-out liability	—	—		—	—		—		—		—		—		54,245		54,245
Net income	—	—		—	—		—		—		23,607		23,607		3,046		26,653
Balance at June 30, 2022	115,782	$	1,157	—	$	—	$	3,341,646	$	8,571	$	(1,129,151)	$	2,222,223	$	372,422	$	2,594,645

See notes to consolidated financial statements.


PHILLIPS EDISON & COMPANY JUNE 30, ~~2021~~2022 FORM 10-Q									5

~~Table of Contents~~

PHILLIPS EDISON & COMPANY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, ~~2021~~2022 AND ~~2020~~2021

(Condensed and Unaudited)

(In thousands)


		Six Months Ended June 30,					Six Months Ended June 30,
		2021		2020			2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:	CASH FLOWS FROM OPERATING ACTIVITIES:					CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	Net income	$	6,507	$	4,786	Net income	$	26,653	$	6,507
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	109,995		109,709		Depreciation and amortization of real estate assets	116,169		109,995
Impairment of real estate assets	Impairment of real estate assets	6,056		0		Impairment of real estate assets	—		6,056
Depreciation and amortization of corporate assets	Depreciation and amortization of corporate assets	1,933		2,888		Depreciation and amortization of corporate assets	1,826		1,933
Net amortization of above- and below-market leases	Net amortization of above- and below-market leases	(1,725)		(1,583)		Net amortization of above- and below-market leases	(2,080)		(1,725)
Amortization of deferred financing expenses	Amortization of deferred financing expenses	2,448		2,495		Amortization of deferred financing expenses	1,622		2,448
Amortization of debt and derivative adjustments	Amortization of debt and derivative adjustments	739		1,884		Amortization of debt and derivative adjustments	1,207		739
(Gain) loss on disposal of property, net		(17,585)		2,118
Gain on disposal of property, net						Gain on disposal of property, net	(4,161)		(17,585)
Change in fair value of earn-out liability	Change in fair value of earn-out liability	18,000		(10,000)		Change in fair value of earn-out liability	1,809		18,000
Straight-line rent	Straight-line rent	(4,400)		(1,331)		Straight-line rent	(5,146)		(4,400)
Share-based compensation	Share-based compensation	4,845		1,992		Share-based compensation	7,187		4,845
Return on investment in unconsolidated joint ventures	Return on investment in unconsolidated joint ventures	1,533		32		Return on investment in unconsolidated joint ventures	1,242		1,533
Other	Other	(519)		1,239		Other	(100)		(519)
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Other assets, net	Other assets, net	900		(12,853)		Other assets, net	(4,200)		900
Accounts payable and other liabilities	Accounts payable and other liabilities	1,170		(11,470)		Accounts payable and other liabilities	471		1,170
Net cash provided by operating activities	Net cash provided by operating activities	129,897		89,906		Net cash provided by operating activities	142,499		129,897
CASH FLOWS FROM INVESTING ACTIVITIES:	CASH FLOWS FROM INVESTING ACTIVITIES:					CASH FLOWS FROM INVESTING ACTIVITIES:
Real estate acquisitions	Real estate acquisitions	(40,459)		(4,343)		Real estate acquisitions	(170,186)		(40,459)
Capital expenditures	Capital expenditures	(30,230)		(28,540)		Capital expenditures	(42,946)		(30,230)
Proceeds from sale of real estate		119,638		25,778
Proceeds from sale of real estate, net						Proceeds from sale of real estate, net	27,077		119,638
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	3,888		639		Return of investment in unconsolidated joint ventures	3,162		3,888
Net cash provided by (used in) investing activities		49,837		(6,466)
Investment in marketable securities						Investment in marketable securities	(3,000)		—
Net cash (used in) provided by investing activities						Net cash (used in) provided by investing activities	(185,893)		49,837
CASH FLOWS FROM FINANCING ACTIVITIES:	CASH FLOWS FROM FINANCING ACTIVITIES:					CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit facility	Proceeds from revolving credit facility	9,000		255,000		Proceeds from revolving credit facility	197,000		9,000
Payments on revolving credit facility	Payments on revolving credit facility	(9,000)		(255,000)		Payments on revolving credit facility	(149,000)		(9,000)
Payments on mortgages and loans payable	Payments on mortgages and loans payable	(66,237)		(35,200)		Payments on mortgages and loans payable	(68,557)		(66,237)
Distributions paid, net of DRIP	Distributions paid, net of DRIP	(48,308)		(49,083)		Distributions paid, net of DRIP	(61,979)		(48,308)
Distributions to noncontrolling interests	Distributions to noncontrolling interests	(7,931)		(9,406)		Distributions to noncontrolling interests	(8,877)		(7,931)
Repurchases of common stock		(77,765)		(5,211)
Proceeds from issuance of common stock, net of costs						Proceeds from issuance of common stock, net of costs	62,965		—
Repurchases of Class B common stock						Repurchases of Class B common stock	—		(77,765)
Other	Other	(29)		(318)		Other	—		(29)
Net cash used in financing activities	Net cash used in financing activities	(200,270)		(99,218)		Net cash used in financing activities	(28,448)		(200,270)
NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	(20,536)		(15,778)		NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	(71,842)		(20,536)
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	115,529		131,937
End of period	End of period	$	111,401	$	79,330	End of period	$	43,687	$	111,401

RECONCILIATION TO CONSOLIDATED BALANCE SHEETS:	RECONCILIATION TO CONSOLIDATED BALANCE SHEETS:					RECONCILIATION TO CONSOLIDATED BALANCE SHEETS:
Cash and cash equivalents	Cash and cash equivalents	$	22,205	$	53,262	Cash and cash equivalents	$	24,657	$	22,205
Restricted cash	Restricted cash	89,196		26,068		Restricted cash	19,030		89,196
Cash, cash equivalents, and restricted cash at end of period	Cash, cash equivalents, and restricted cash at end of period	$	111,401	$	79,330	Cash, cash equivalents, and restricted cash at end of period	$	43,687	$	111,401


PHILLIPS EDISON & COMPANY JUNE 30, ~~2021~~2022 FORM 10-Q									6

~~Table of Contents~~

PHILLIPS EDISON & COMPANY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

FOR THE SIX MONTHS ENDED JUNE 30, ~~2021~~2022 AND ~~2020~~2021

(Condensed and Unaudited)

(In thousands)


		Six Months Ended June 30,					Six Months Ended June 30,
		2021		2020			2022		2021
SUPPLEMENTAL CASH FLOW DISCLOSURE, INCLUDING NON-CASH INVESTING AND FINANCING ACTIVITIES:
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:						SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest	Cash paid for interest	$	36,845	$	40,980	Cash paid for interest	$	34,130	$	36,845
SUPPLEMENTAL SCHEDULE OF NON-CASH ACTIVITIES:						SUPPLEMENTAL SCHEDULE OF NON-CASH ACTIVITIES:
Settlement of earn-out liability						Settlement of earn-out liability	54,245		—
Right-of-use (“ROU”) assets obtained in exchange for new lease liabilities	Right-of-use (“ROU”) assets obtained in exchange for new lease liabilities	239		551		Right-of-use (“ROU”) assets obtained in exchange for new lease liabilities	—		239
Accrued capital expenditures	Accrued capital expenditures	6,053		2,884		Accrued capital expenditures	4,800		6,053
Change in distributions payable	Change in distributions payable	(7,853)		(16,214)		Change in distributions payable	(58)		(7,853)
Change in distributions payable - noncontrolling interests	Change in distributions payable - noncontrolling interests	(1,152)		(2,301)		Change in distributions payable - noncontrolling interests	(660)		(1,152)
Change in accrued share repurchase obligation	Change in accrued share repurchase obligation	(77,642)		(2,511)		Change in accrued share repurchase obligation	—		(77,642)
Distributions reinvested	Distributions reinvested	7,368		15,940		Distributions reinvested	—		7,368

See notes to consolidated financial statements.


PHILLIPS EDISON & COMPANY JUNE 30, ~~2021~~2022 FORM 10-Q									7

~~Table of Contents~~

Phillips Edison & Company, Inc.

Notes to Consolidated Financial Statements

(Condensed and Unaudited)
As of and for the period ended June 30, ~~2021~~2022


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 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 June 30, ~~2021.~~2022.

As of June 30, ~~2021,~~2022, we wholly-owned ~~272~~269 real estate properties. Additionally, we owned a 14% interest in Grocery Retail Partners I LLC (“GRP I”), a joint venture that owned 20 ~~properties, and a 20% equity interest~~properties.

In May 2022, we sold the final property in our joint venture with Necessity Retail Partners (“NRP”), in which we own a ~~joint venture that owned 2 properties.~~

On20% interest. During the three and six months ended June ~~18, 2021,~~30, 2022, we recognized income of $2.5 million and $2.7 million, respectively, related to NRP’s achievement of certain performance targets, which is included in Fees and Management Income in our ~~stockholders approved an amendment to our charter (the “Articles~~consolidated statements of ~~Amendment”) that effected a change~~operations and comprehensive income (“consolidated statements 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”~~operations”). 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 disclosure 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).

Underwritten Initial Public Offering—On July 19, 2021, we closed our underwritten initial public offering (“underwritten IPO”), through which we ~~offered 17.0~~issued 19.6 million shares, including the underwriters’ overallotment election, 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~~share. As a ~~registration statement filed with~~result of the U.S. Securities and Exchange Commission (“SEC”) on Form S-11 (File No. 333-255846), as amended. These shares are listed on the Nasdaq Global Select Market under the trading symbol “PECO”. The underwriters have since exercised a 30-day option to purchase additional shares of common stock to cover overallotments, and, accordingly, on August 2, 2021underwritten IPO, we ~~settled the sale of an additional 2.55 million shares, with~~received gross proceeds ~~to us~~ of ~~$71.4~~$547.4 million.


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~~periods 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; however, certain of our tenants have permanently closed. We have backfilled a number of these spaces, and continue to work on backfilling any remaining vacancies. The continuing economic impacts of the COVID-19 pandemic could result in increased permanent store closures, reduce the demand for leasing space in our shopping centers, 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 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.


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

~~Table of Contents~~

There were no changes to our significant accounting policies during the six months ended June 30, ~~2021,~~2022, except for those discussed below. For a full summary of our significant accounting policies, refer to our ~~2020~~2021 Annual Report on Form 10-K, ~~as originally~~ filed with the SEC on ~~March 12, 2021.~~February 16, 2022.

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,~~2021, which are included in our ~~2020~~2021 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 six months ended June 30, ~~2021~~2022 are not necessarily indicative of the operating results expected for the full year.

The accompanying consolidated financial statements include our accounts and ~~those~~the accounts of the Operating Partnership and its wholly-owned subsidiaries (over which we exercise financial and operating control). The financial statements of the Operating Partnership are prepared using accounting policies consistent with our ~~majority-owned subsidiaries.~~accounting policies. All intercompany balances and transactions are eliminated upon consolidation.

The basis of presentation of our shares of common stock is described as follows:

~~Underwritten IPO Costs~~•~~—Deferred underwritten IPO costs are currently recorded~~Reverse Stock Split—On July 2, 2021, our board of directors (the “Board”) approved an amendment to our charter 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 (see Note 9).


PHILLIPS EDISON & COMPANY JUNE 30, 2022 FORM 10-Q									8

•Recapitalization—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 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. Our Class B common stock automatically converted into our publicly traded common stock on January 18, 2022 (see Note 9). Prior to the conversion, we have presented common stock and Class B common stock as ~~Other Assets, Net on~~separate classes within our consolidated balance sheets ~~as of June 30, 2021,~~ and will be offset against underwritten IPO proceeds and reclassified as a component of APIC on the consolidated balance sheets upon the consummation of the offering. 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 Other (Expense) Income, Net on our consolidated statements of ~~operations~~equity. On May 5, 2022, we filed Articles Supplementary to our charter with the Maryland State Department of Assessments and ~~comprehensive income (loss) (“consolidated statements~~Taxation in order to reclassify and designate all of ~~operations”).~~the 350 million authorized shares of our Class B common stock, $0.01 par value per share, all of which were unissued at such time, as shares of our common stock, $0.01 par value per share. We no longer have Class B common stock authorized for issue.

Income Taxes—Our consolidated financial statements include the operations of wholly-owned subsidiaries that have jointly elected to be treated as ~~Taxable~~taxable REIT ~~Subsidiaries~~subsidiary entities 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 six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, and we retain a full valuation allowance for our net deferred tax asset. All income tax amounts are included in Other ~~(Expense) Income,~~Expense, Net on our consolidated statements of operations.

~~Recently Issued~~Newly Adopted 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~~There were no newly adopted 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~~pronouncements during the six months ended June 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.~~2022 that impacted the Company.


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

~~Table of Contents~~


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 six months ended June 30, 2021 and 2020~~ (in thousands):


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Rental income related to fixed lease payments(1)	Rental income related to fixed lease payments(1)	$	94,485	$	95,036	$	189,451	$	191,063	Rental income related to fixed lease payments(1)	$	103,163	$	94,485	$	204,673	$	189,451
Rental income related to variable lease payments(1)(2)	Rental income related to variable lease payments(1)(2)	27,454		30,659		58,855		62,497		Rental income related to variable lease payments(1)(2)	29,431		27,454		62,898		58,855
Straight-line rent amortization(3)	Straight-line rent amortization(3)	2,893		(978)		4,262		1,331		Straight-line rent amortization(3)	3,170		2,893		4,865		4,262
Amortization of lease assets	Amortization of lease assets	877		786		1,704		1,565		Amortization of lease assets	1,062		877		2,054		1,704
Lease buyout income	Lease buyout income	1,781		214		2,578		308		Lease buyout income	177		1,781		2,141		2,578
Adjustments for collectibility(4)	Adjustments for collectibility(4)	2,845		(10,063)		1,108		(12,644)		Adjustments for collectibility(4)	227		2,845		(653)		1,108
Total rental income	Total rental income	$	130,335	$	115,654	$	257,958	$	244,120	Total rental income	$	137,230	$	130,335	$	275,978	$	257,958

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

(2)Variable payments are primarily related to tenant recovery income.

(3)Includes ~~favorable~~ revenue adjustments to straight-line rent for tenants ~~previously~~ considered non-creditworthy during the three months ended June 30, 2021 of $0.4 million, and unfavorable adjustments for non-creditworthy tenants during the six months ended June 30, 2021 of $0.4 million. Includes unfavorable adjustments for the three and six months ended June 30, 2020 of $3.2 million, and $3.1 million, respectively.non-creditworthy.

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

For the three and six months ended June 30, 2021, we had net favorable changes to general reserves of $1.9 million and $4.1 million, respectively. Additionally, we had $1.0 million in net collections on receivables that were previously deemed unlikely to be collected for tenants not considered creditworthy for the three months ended June 30, 2021, and $3.0 million in net unfavorable revenue adjustments for non-creditworthy tenants for the six months ended June 30, 2021.

For the three and six months ended June 30, 2020, we had net general reserve increases of $1.3 million and $0.9 million, respectively. Additionally, we had net unfavorable adjustments of $8.8 million and $11.7 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 June 30, ~~2021,~~2022, 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 Amount
Remaining 2021 $ 191,000
2022 363,187
2023 317,301
2024 263,155
2025 209,307
Thereafter 514,528
Total $ 1,858,478

In response to the COVID-19 pandemic, we executed payment plans with our tenants. As of June 30, 2021, we had $5.4 million of outstanding payment plans with our tenants, which represented approximately 2.1% of rental income during the six months ended June 30, 2021. During the three months ended June 30, 2021, we had recorded an immaterial amount of rent abatements related to 2021 missed charges. During the six months ended June 30, 2021, we recorded approximately $0.5 million of rent abatements related to missed 2021 charges, which represented less than 1% of rental income for the six months ended June 30, 2021.


Year	Amount
Remaining 2022	$	205,120
2023	395,127
2024	343,818
2025	287,289
2026	222,902
Thereafter	572,366
Total	$	2,026,622

No single tenant comprised 7%10% or more of our aggregate annualized base rent (“ABR”) as of June 30, ~~2021.~~2022. As of June 30, ~~2021,~~2022, our wholly-owned real estate investments in Florida and California represented ~~12.6%~~11.9% and ~~10.1%~~10.7% 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 JUNE 30, ~~2021~~2022 FORM 10-Q									109

~~Table of Contents~~

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

Balance Sheet Information Balance Sheet Location June 30, 2021 December 31, 2020
ROU assets, net - operating leases Investment in Real Estate $ 4,003 $ 3,867
ROU assets, net - operating and finance leases Other Assets, Net 1,190 1,438
Operating lease liability Accounts Payable and Other Liabilities 5,619 5,731
Finance lease liability Debt Obligations, Net 127 164


4. REAL ESTATE ACTIVITY

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


	Six Months Ended June 30,
	2022		2021
Number of properties acquired	4		2
Number of outparcels acquired(1)	1		3
Contract price	$	169,342	$	40,190
Total price of acquisitions(2)	170,186		40,459

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

(2)Total price of acquisitions includes closing costs and credits.

The aggregate purchase price of the assets acquired during the six months ended June 30, 2022 and 2021 were allocated as follows (in thousands):


	June 30, 2022		June 30, 2021
ASSETS
Land and improvements	$	44,191	$	23,914
Building and improvements	116,087		13,990
In-place lease assets	14,346		4,155
Above-market lease assets	2,362		52
Total assets	176,986		42,111

LIABILITIES
Below-market lease liabilities	6,800		1,652
Total liabilities	6,800		1,652

Net assets acquired	$	170,186	$	40,459

The weighted-average amortization periods for in-place, above-market, and below-market lease intangibles acquired during the six months ended June 30, 2022 and 2021 are as follows (in years):


	June 30, 2022	June 30, 2021
Acquired in-place leases	15	7
Acquired above-market leases	8	5
Acquired below-market leases	16	6

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


		Six Months Ended June 30,					Six Months Ended June 30,
		2021		2020			2022		2021
Number of properties sold(1)	Number of properties sold(1)	13		4		Number of properties sold(1)	3		13
Number of outparcels sold~~(3)~~(2)	Number of outparcels sold~~(3)~~(2)	1		0		Number of outparcels sold~~(3)~~(2)	2		1
Proceeds from sale of real estate		$	119,638	$	25,778
Gain (loss) on sale of properties, net(4)		18,713		(1,436)
Contract Price						Contract Price	$	28,342	$	125,247
Proceeds from sale of real estate, net(3)						Proceeds from sale of real estate, net(3)	27,077		119,638
Gain on sale of property, net(4)						Gain on sale of property, net(4)	4,161		18,713

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

(2)~~One outparcel sold during~~During the six months ended June 30, 2021, ~~was~~the 1 outparcel sale included the only remaining portion of ~~one of our properties, and~~a property we previously owned; therefore, the sale resulted in a reduction in our total property count.

(3)~~In addition to the one outparcel sold during~~Total proceeds from sale of real estate, net includes closing costs and credits.

(4)During the six months ended June 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 June 30, 2021, we sold 2 properties for $16.0 million.~~

~~Acquisitions—The following table summarizes our real estate acquisition~~operations includes miscellaneous write-off activity, ~~(dollars~~which is not included in ~~thousands):~~gain on sale of property, net, presented above.

Six Months Ended June 30,
2021 2020
Number of properties acquired 2 0
Number of outparcels acquired(1)
3 2
Total acquisition price $ 40,459 $ 4,343

~~(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):~~

Six Months Ended June 30, 2021
Fair Value Weighted-Average Useful Life
In-place leases $ 4,155 7
Above-market leases 52 5
Below-market leases (1,652) 6


PHILLIPS EDISON & COMPANY JUNE 30, ~~2021~~2022 FORM 10-Q									1110

~~Table of Contents~~

~~Property Held for Sale~~—As of June 30, 2021, 2 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 June 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 June 30, 2021, both of our held for sale properties were sold. A summary of assets and liabilities for the properties held for sale as of June 30, 2021 is below (in thousands):


	~~June 30, 2021~~
~~ASSETS~~
~~Total investment in real estate assets, net~~	$	~~13,807~~
~~Other assets, net~~	~~454~~
~~Total assets~~	$	~~14,261~~
~~LIABILITIES~~
~~Below-market lease liabilities, net~~	$	~~379~~
~~Accounts payable and other liabilities~~	~~481~~
~~Total liabilities~~	$	~~860~~


5. OTHER ASSETS, NET

The following is a summary of Other Assets, Net outstanding as of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, excluding amounts related to assets classified as held for sale (in thousands):


		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
Other assets, net:	Other assets, net:					Other assets, net:
Deferred leasing commissions and costs	Deferred leasing commissions and costs	$	44,428	$	41,664	Deferred leasing commissions and costs	$	46,592	$	44,968
Deferred financing expenses(1)	Deferred financing expenses(1)	13,971		13,971		Deferred financing expenses(1)	8,985		4,898
Office equipment, ROU assets, and other		22,699		21,578
Office equipment, including capital lease assets, and other						Office equipment, including capital lease assets, and other	27,219		24,823
Corporate intangible assets	Corporate intangible assets	6,804		6,804		Corporate intangible assets	6,705		6,706
Total depreciable and amortizable assets	Total depreciable and amortizable assets	87,902		84,017		Total depreciable and amortizable assets	89,501		81,395
Accumulated depreciation and amortization	Accumulated depreciation and amortization	(50,014)		(45,975)		Accumulated depreciation and amortization	(44,848)		(41,236)
Net depreciable and amortizable assets	Net depreciable and amortizable assets	37,888		38,042		Net depreciable and amortizable assets	44,653		40,159
Accounts receivable, net(2)	Accounts receivable, net(2)	37,151		46,893		Accounts receivable, net(2)	34,499		36,762
Accounts receivable - affiliates	Accounts receivable - affiliates	522		543		Accounts receivable - affiliates	630		711
Deferred rent receivable, net(3)	Deferred rent receivable, net(3)	35,760		32,298		Deferred rent receivable, net(3)	45,068		40,212
Derivative assets						Derivative assets	12,698		—
Prepaid expenses and other	Prepaid expenses and other	11,735		8,694		Prepaid expenses and other	14,540		11,655
Investment in third parties	Investment in third parties	3,000		0		Investment in third parties	3,000		3,000
Investment in marketable securities						Investment in marketable securities	7,624		5,551
Total other assets, net	Total other assets, net	$	126,056	$	126,470	Total other assets, net	$	162,712	$	138,050

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

(2)Net of ~~$7.4~~$3.9 million and ~~$8.9~~$3.5 million of general reserves for uncollectible amounts as of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. Receivables that were removed for tenants considered to be non-creditworthy were ~~$16.2~~$7.5 million and ~~$22.8~~$9.2 million as of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

(3)Net of $5.1 million and $4.7 million ~~and $4.4 million~~ of ~~adjustments~~receivables removed as of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively, related to straight-line rent for tenants previously or currently considered to be non-creditworthy.


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

~~Table of Contents~~


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 June 30, ~~2021~~2022 and December 31, ~~2020~~2021 (dollars in thousands):


		Interest Rate(1)	June 30, 2021			December 31, 2020				Interest Rate(1)	June 30, 2022			December 31, 2021
Revolving credit facility	Revolving credit facility	LIBOR + 1.4%	$	0		$	0		Revolving credit facility	SOFR + 1.2%	$	48,000		$	—
Term loans(2)	Term loans(2)	1.3% - 4.6%	1,622,500			1,622,500			Term loans(2)	2.5% - 4.2%	955,000			955,000
Senior unsecured notes due 2031									Senior unsecured notes due 2031	2.6%	350,000			350,000
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%	223,868			290,022			Mortgages	3.5% - 6.4%	146,419			213,316
Finance lease liability	Finance lease liability		127			164			Finance lease liability		690			766
Discount on notes payable									Discount on notes payable		(7,343)			(7,680)
Assumed market debt adjustments, net	Assumed market debt adjustments, net		(1,553)			(1,543)			Assumed market debt adjustments, net		(1,472)			(1,530)
Deferred financing expenses, net	Deferred financing expenses, net		(11,710)			(13,538)			Deferred financing expenses, net		(9,187)			(13,150)
Total	Total		$	2,228,232		$	2,292,605		Total		$	1,877,107		$	1,891,722

Weighted-average interest rate			2.9		%	3.1		%
Weighted-average interest rate(3)									Weighted-average interest rate(3)		3.2		%	3.3		%

(1)Interest rates are as of June 30, ~~2021.~~2022.

(2)Our term loans carry an interest rate of LIBOR or SOFR 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.~~LIBOR or SOFR, as applicable.

(3)Includes the effects of derivative financial instruments (see Notes 7 and 12).


PHILLIPS EDISON & COMPANY JUNE 30, 2022 FORM 10-Q									11

2022 Debt ~~Activity~~Activity—~~—On July 2, 2021,~~In May 2022, we ~~entered into a new $980 million~~amended our credit facility ~~comprised of a $500 million senior~~agreement (the “Amendment”) to, among other things, increase the total amount available under our unsecured revolving credit facility from $500 million to $800 million. The unsecured revolving credit facility also includes an accordion feature that permits us to increase our aggregate borrowing capacity thereunder to up to $1 billion, subject to the satisfaction of certain conditions. The unsecured revolving credit facility is scheduled to mature in January 2026, extendable at our option to January 2027. In addition to expanding the borrowing capacity, the Amendment replaces the London Interbank Offered Rate (“LIBOR”) with the Secured Overnight Financing Rate (“SOFR”) as the benchmark interest rate for the unsecured revolving credit facility and the two $240 million senior unsecured term loan tranches, (the “Refinancing”). In connection with the Refinancing, we paid off the $472.5 million term loan due in 2025. The revolving credit facility will mature in January 2026, and the two senior unsecured term loan tranches will maturematuring in November 2025 and July ~~2026, respectively.~~2026.

~~On July 20, 2021,~~During the six months ended June 30, 2022, we ~~used proceeds from the underwritten IPO to retire our $375~~executed early repayments of $64.1 million ~~term loan maturing~~ in ~~2022.~~mortgage debt.

Debt Allocation—The allocation of total debt between fixed-rate and variable-rate as well as between secured and unsecured, excluding market debt adjustments, discount on senior notes, and deferred financing expenses, net, and including the effects of derivative financial instruments ~~(see Notes 7 and 12)~~ as of June 30, ~~2021~~2022 and December 31, ~~2020~~2021 is summarized below (in thousands):


		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
As to interest rate:	As to interest rate:					As to interest rate:
Fixed-rate debt(1)	Fixed-rate debt(1)	$	1,548,995	$	1,727,186	Fixed-rate debt(1)	$	1,647,109	$	1,889,082
Variable-rate debt	Variable-rate debt	692,500		580,500		Variable-rate debt	248,000		25,000
Total	Total	$	2,241,495	$	2,307,686	Total	$	1,895,109	$	1,914,082
As to collateralization:	As to collateralization:					As to collateralization:
Unsecured debt	Unsecured debt	$	1,622,500	$	1,622,500	Unsecured debt	$	1,353,000	$	1,305,000
Secured debt	Secured debt	618,995		685,186		Secured debt	542,109		609,082
Total	Total	$	2,241,495	$	2,307,686	Total	$	1,895,109	$	1,914,082

(1)Fixed-rate debt includes, and variable-rate debt excludes, the portion of such debt that has been hedged by interest rate derivatives. As of June 30, 2022, $755.0 million in variable rate debt is hedged to a fixed rate for a weighted-average period of 2.1 years.


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.

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 six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, 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 ~~$18.2~~$6.9 million will be reclassified from AOCI as ~~an increase~~a decrease to Interest Expense, Net.


PHILLIPS EDISON & COMPANY JUNE 30, ~~2021~~2022 FORM 10-Q									1312

~~Table of Contents~~

The following is a summary of our interest rate swaps that were designated as cash flow hedges of interest rate risk as of June 30, ~~2021~~2022 and December 31, ~~2020~~2021 (dollars in thousands):


		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
Count	Count	5		6		Count	4		5
Notional amount	Notional amount	$	930,000	$	1,042,000	Notional amount	$	755,000	$	930,000
Fixed LIBOR(1)	Fixed LIBOR(1)	1.3% - 2.9%		1.3% - 2.9%		Fixed LIBOR(1)	1.3% - 2.9%		1.3% - 2.9%
Maturity date	Maturity date	2022 - 2025		2021 - 2025		Maturity date	2023-2025		2022 - 2025
Weighted-average term (in years)						Weighted-average term (in years)	2.1		1.9

~~We assumed 5 hedges~~(1)In May 2022, we replaced LIBOR with ~~a notional amount of $570~~SOFR as the benchmark interest rate for the two $240 million ~~as a part of a merger. The fair value of the five hedges assumed was $14.7 million~~senior unsecured term loan tranches, maturing in November 2025 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 of June 30, 2021 and December 31, 2020 was $4.3 million and $5.0 million, respectively.July 2026. In accordance with ASC Topic 848, Reference Rate Reform, we elected not to dedesignate our LIBOR denominated interest rate swaps related to this hedged debt.

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 June 30, Six Months Ended June 30,
2021 2020 2021 2020
Amount of (loss) gain recognized in
Other Comprehensive Income (Loss)
$ (1,451) $ (6,614) $ 5,814 $ (51,530)
Amount of loss reclassified from AOCI
into interest expense
4,824 4,867 9,679 6,419


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Amount of gain (loss) recognized in Other Comprehensive Income	$	7,080	$	(1,451)	$	29,979	$	5,814
Amount of loss reclassified from AOCI into Interest Expense, Net	2,754		4,824		7,428		9,679

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 June 30, ~~2021,~~2022, 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 ~~$39.9~~$0.1 million. As of June 30, ~~2021,~~2022, 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 ~~$39.9~~$0.1 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~~GRP I joint ~~ventures.~~venture. 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,~~this estimate, and such premiums may be reimbursed by tenants pursuant to specific lease terms.

As of June 30, ~~2021,~~2022, we had ~~four~~4 letters of credit outstanding totaling approximately ~~$9.0~~$11.2 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~~1 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.


PHILLIPS EDISON & COMPANY JUNE 30, ~~2021~~2022 FORM 10-Q									1413

~~Table~~

At-the-Market Offering (“ATM”)—On February 10, 2022, we and the Operating Partnership entered into a sales agreement relating to the potential sale of ~~Contents~~shares of common stock pursuant to a continuous offering program. In accordance with the terms of the sales agreement, we may offer and sell shares of our common stock having an aggregate offering price of up to $250 million from time to time through our sales agents, or, if applicable, as forward sellers. During the three months ended June 30, 2022, we issued 1.9 million shares of our common stock under the ATM program for net proceeds of $63.0 million, after approximately $0.6 million in commissions. As of June 30, 2022, $186.3 million of common stock remained available for issuance under the ATM program.

In July 2022, we issued an additional 0.8 million shares of our common stock under the ATM program for net proceeds of $26.2 million, after approximately $0.3 million in commissions. We received a weighted-average price of $34.23 per share for the 2.6 million shares of common stock sold under the ATM program through July 2022.

Reverse Stock Split—On July 2, 2021, 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 its outstanding OP units. Neither the number of authorized shares nor the par value of the common stock were impacted. As a result of the reverse split, every three shares of our common stock or OP units were automatically combined and converted into one issued and outstanding share of common stock or OP unit rounded to the nearest 1/100th share. The reverse stock split ~~impacts~~impacted 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 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 reverse split on a retroactive basis.

Class B Common Stock—~~Our~~On June 18, 2021, our stockholders approved Articles of Amendment that effected ~~a change of~~the Recapitalization, wherein each share of our common stock outstanding at the time the amendment became effective was converted into ~~one~~1 share of a ~~newly-created~~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.~~stock.

Our Class B common stock iswas identical to our common stock, except that ~~(i) we do~~it was not ~~intend to list our Class B common stock~~listed on a national securities ~~exchange, and (ii) upon~~exchange. Per the ~~six month anniversary~~terms of the ~~listing of our common stock for trading~~Recapitalization, on ~~a national securities exchange, or~~ January ~~15,~~18, 2022, ~~(or such earlier date or dates as may be approved by our Board in certain circumstances with respect to all or any portion of the outstanding shares of our Class B common stock),~~ each share of our Class B common stock ~~will~~ automatically ~~and without any stockholder action, convert~~converted into ~~one~~1 share of our listed common stock.

On May 5, 2022, we filed Articles Supplementary to our charter with the Maryland State Department of Assessments and Taxation in order to reclassify and designate all of the 350 million authorized shares of our Class B common stock, $0.01 par value per share, all of which were unissued at such time, as shares of our common stock, $0.01 par value per share. We no longer have Class B common stock authorized for issue.

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~~used 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~~2.6 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 gross proceeds of $547.4 million.

Distributions—Distributions paid to stockholders and OP unit holders of record subsequent to June 30, ~~2021~~2022 were as follows (dollars in thousands, excluding per share amounts):

Month Date of Record Monthly Distribution Rate Date Distribution Paid Cash Distribution
June 2021 6/15/2021 $ 0.085 7/1/2021 $ 9,063
July 2021 7/15/2021 0.085 8/2/2021 9,065

Month

Date of Record

Date Distribution Paid

Monthly Distribution Rate

Cash Distribution

June

6/15/2022

7/1/2022

0.09

11,595

July

7/15/2022

8/1/2022

0.09

11,768

On August ~~4, 2021,~~3, 2022, our Board authorized ~~distributions~~a distribution for August 2022 of $0.09 per share to the stockholders of record at the close of business on August ~~16, 2021, equal to a monthly amount of $0.085 per share of common stock.~~15, 2022. OP unit holders will receive distributions at the same rate as common ~~stockholders.~~stockholders, subject to certain withholdings.

Convertible Noncontrolling Interests—As of June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, we had approximately ~~13.4~~14.6 million and ~~13.3~~13.4 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~~cause the Operating Partnership to redeem their OP units. The Operating Partnership controls the form of the redemption, and may elect to ~~exchange~~redeem OP units ~~either~~ for shares of our 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 June 30, ~~2021~~2022 and December 31, ~~2020~~2021 are classified as Noncontrolling Interests within permanent equity on our consolidated balance sheets.

On January 18, 2022, we issued approximately 1.6 million OP units in full settlement of the earn-out liability (see note 12).


PHILLIPS EDISON & COMPANY JUNE 30, 2022 FORM 10-Q									14

The table below is a summary of our OP unit activity for the three and six months ended June 30, ~~2021~~2022 and ~~2020~~2021 (dollars and shares in thousands):


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
OP units converted into shares of our common stock(1)		28		17		28		56
OP units converted into shares of common stock(1)										OP units converted into shares of common stock(1)	72		28		605		28
Distributions paid on OP units(2)	Distributions paid on OP units(2)	$	3,460	$	0	$	6,779	$	7,105	Distributions paid on OP units(2)	$	4,113	$	3,460	$	8,217	$	6,779

(1)Prior to the Recapitalization, OP units ~~are~~were converted to shares of common stock at a 1:1 ratio. From the Recapitalization through January 18, 2022, OP units were converted into shares of our Class B common stock at a 1:1 ratio. On January 18, 2022, each share of our Class B common stock automatically converted into 1 share of our listed common stock, and going forward, OP units will be converted into shares of our common stock at a 1:1 ratio.

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


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

~~Table of Contents~~

~~Underwritten IPO Grants—In connection with our underwritten IPO, we issued a total of 0.5 million RSUs~~equity and restricted stock awards in the form of time-based stock compensation awards. 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.cash flows.

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

On August 3, 2022, our Board approved a new share repurchase program of up to $250.0 million of common stock. The ~~DRIP has been~~program may be suspended ~~since April 2021. The SRP, which was limited~~or discontinued at any time, and does not obligate us to ~~repurchases resulting from the death, qualifying disability,~~repurchase any dollar amount or ~~the declaration~~particular number of ~~incompetence (“DDI”) of stockholders, has been suspended since March 2021, and the SRP for standard repurchases had been suspended since August 2019.~~shares.


10. EARNINGS PER SHARE

~~We use the two-class method of computing~~Basic 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 ~~(Loss)~~ 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. ~~EPS reflects earnings per common share prior to the Recapitalization.~~

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 six months ended June 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, and excluding the effects of the Recapitalization as it occurred after June 30, 2021~~ (in thousands, except per share amounts):


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Numerator:	Numerator:									Numerator:
Net income (loss) attributable to stockholders - basic		$	5,594	$	(5,588)	$	5,697	$	4,181
Net income (loss) attributable to convertible OP units(1)		796		(825)		810		605
Net income (loss) - diluted		$	6,390	$	(6,413)	$	6,507	$	4,786
Net income attributable to stockholders - basic										Net income attributable to stockholders - basic	$	13,528	$	5,594	$	23,607	$	5,697
Net income attributable to convertible OP units(1)										Net income attributable to convertible OP units(1)	1,727		796		3,046		810
Net income - diluted										Net income - diluted	$	15,255	$	6,390	$	26,653	$	6,507
Denominator:	Denominator:									Denominator:
Weighted-average shares - basic	Weighted-average shares - basic	93,625		96,821		93,558		96,736		Weighted-average shares - basic	114,124		93,625		113,850		93,558
OP units(1)	OP units(1)	13,381		14,248		13,368		14,273		OP units(1)	14,551		13,381		14,553		13,368
Dilutive restricted stock awards	Dilutive restricted stock awards	169		0		176		131		Dilutive restricted stock awards	442		169		454		176
Adjusted weighted-average shares - diluted	Adjusted weighted-average shares - diluted	107,175		111,069		107,102		111,140		Adjusted weighted-average shares - diluted	129,117		107,175		128,857		107,102
Earnings per common share:	Earnings per common share:									Earnings per common share:
Basic and diluted income (loss) per share		$	0.06	$	(0.06)	$	0.06	$	0.04
Basic and diluted income per share										Basic and diluted income per share	$	0.12	$	0.06	$	0.21	$	0.06

(1)OP units include units that are convertible into 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) Loss~~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 denominator for all periods presented.

~~Approximately 0.4 million time-based~~ OP units are allocated income on a consistent basis with the common stockholder and ~~0.9 million performance-based unvested stock awards were outstanding as~~therefore have no dilutive impact to earnings per share of ~~June 30, 2020. These securities were anti-dilutive for the three months ended June 30, 2020. As a result, their impact was excluded from the weighted-average~~ common ~~shares used to calculate diluted EPS for that period.~~stock.


PHILLIPS EDISON & COMPANY JUNE 30, ~~2021~~2022 FORM 10-Q									1615

~~Table of Contents~~


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 June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Recurring fees(1)	Recurring fees(1)	$	1,103	$	1,182	$	2,228	$	2,398	Recurring fees(1)	$	995	$	1,103	$	2,070	$	2,228
Transactional revenue and reimbursements(2)		461		960		929		1,390
Insurance premiums(3)		810		618		1,503		1,137
Realized performance income(2)										Realized performance income(2)	2,546		—		2,742		—
Transactional revenue and reimbursements(3)										Transactional revenue and reimbursements(3)	447		461		841		929
Insurance premiums(4)										Insurance premiums(4)	793		810		1,589		1,503
Total fees and management income	Total fees and management income	$	2,374	$	2,760	$	4,660	$	4,925	Total fees and management income	$	4,781	$	2,374	$	7,242	$	4,660

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

(2)Realized performance income includes fees received related to the achievement of certain performance targets in our NRP joint venture.

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

~~(3)~~(4)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 June 30, ~~2021,~~2022, the potential “make-whole amount” on the estimated aggregate amount of built-in gain subject to protection under the agreements is approximately ~~$152.6~~$142.5 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 believe we will either (i) continue to own and operate the protected properties or (ii) be able to successfully complete tax-deferred exchanges under Section 1031 ~~Exchanges~~of the Internal Revenue Code of 1986, as amended (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 June 30, ~~2021, the outstanding loan balance related to our NRP joint venture was $32.1 million. As of June 30, 2021,~~2022, we were ~~also~~ the limited guarantor of a $175 million mortgage loan secured by GRP I properties. Our guaranty for ~~both~~ 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~~GRP I in which any potential liability under such ~~guarantees~~guarantee will be apportioned between us and ~~our applicable joint venture partner~~GRP I based on our respective ownership percentages in the ~~applicable~~ joint venture. We have no liability recorded on our consolidated balance sheets for ~~either~~the guaranty as of June 30, ~~2021~~2022 and December 31, ~~2020.~~2021.

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 August 5, 2021, we had entered into two leases under the terms of the investment agreement, both of which carry a term of 10 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~~are 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.

Debt Obligations—We estimate the fair value of our ~~debt~~revolving credit facility, term loans, secured portfolio of loans, and mortgages 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. We estimate the fair value of our senior unsecured notes by using quoted prices in active markets, which are considered Level 1 inputs.


PHILLIPS EDISON & COMPANY JUNE 30, ~~2021~~2022 FORM 10-Q									1716

~~Table of Contents~~

The following is a summary of borrowings as of June 30, ~~2021~~2022 and December 31, ~~2020~~2021 (in thousands):


		June 30, 2021				December 31, 2020					June 30, 2022				December 31, 2021
		Recorded Principal Balance(1)		Fair Value		Recorded Principal Balance(1)		Fair Value			Recorded Principal Balance(1)		Fair Value		Recorded Principal Balance(1)		Fair Value

Revolving credit facility										Revolving credit facility	$	48,000	$	48,000	$	—	$	—
Term loans	Term loans	$	1,612,031	$	1,631,088	$	1,610,204	$	1,621,902	Term loans	947,110		955,976		943,127		955,919
Senior unsecured notes due 2031										Senior unsecured notes due 2031	342,657		271,058		342,320		344,099
Secured portfolio loan facilities	Secured portfolio loan facilities	391,371		411,209		391,131		404,715		Secured portfolio loan facilities	391,852		361,060		391,612		394,356
Mortgages(2)	Mortgages(2)	224,830		234,766		291,270		303,647		Mortgages(2)	147,488		147,547		214,663		221,741
Total	Total	$	2,228,232	$	2,277,063	$	2,292,605	$	2,330,264	Total	$	1,877,107	$	1,783,641	$	1,891,722	$	1,916,115

(1)~~Recorded~~As of June 30, 2022 and December 31, 2021, respectively, recorded principal balances ~~include~~include: (i) net deferred financing ~~expenses~~fees of ~~$11.7~~$9.2 million and ~~$13.5 million as of June 30, 2021 and December 31, 2020, respectively. Recorded principal balances also include~~$13.2 million; (ii) assumed market debt adjustments of ~~$1.6~~$1.5 million and $1.5 million; and (iii) notes payable discounts of $7.3 million ~~as of June 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, in Other Assets, Net on our consolidated balance sheets.$7.7 million.

(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 six months ended June 30, ~~2021~~2022 and the year ended December 31, ~~2020,~~2021 were as follows (in thousands):


		June 30, 2021						December 31, 2020							June 30, 2022						December 31, 2021
		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
Derivative liabilities(1)		$	—	$	(39,929)	$	—	$	—	$	(54,759)	$	—
Marketable securities														Marketable securities	$	7,624	$	—	$	—	$	5,551	$	—	$	—
Derivative assets(1)														Derivative assets(1)	—		12,698		—		—		—		—
Derivative liabilities														Derivative liabilities	—		(52)		—		—		(24,096)		—
Earn-out liability	Earn-out liability	—		—		(40,000)		—		—		(22,000)		Earn-out liability	—		—		—		—		(52,436)		—
Nonrecurring	Nonrecurring													Nonrecurring
Impaired real estate assets, net(2)	Impaired real estate assets, net(2)	$	—	$	22,850	$	—	$	—	$	19,350	$	—	Impaired real estate assets, net(2)	$	—	$	—	$	—	$	—	$	24,000	$	—
Impaired corporate ROU asset, net		—		—		—		—		537		—

(1)We recordderivative ~~liabilities~~assets in ~~Derivative Liabilities~~Other Assets, Net 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 June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, 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 June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, 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.

Earn-out—As part of our acquisition of ~~PELP~~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~~On January 11, 2022, we finalized the ~~expiration~~fair value of ~~certain provisions in 2019, PELP is now eligible to earn a minimum of 1.0 million~~the earn-out liability based on our share price and ~~a maximum of~~issued approximately ~~1.7~~1.6 million OP units ~~as contingent consideration based upon~~in full settlement of the ~~timing and valuation~~liability with a value 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 price per share is greater than or equal to $33.60, PELP will receive approximately 1.7 million OP units;~~


PHILLIPS EDISON & COMPANY JUNE 30, ~~2021~~2022 FORM 10-Q									1817

~~Table of Contents~~

•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$54.2 million. Changes 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, we estimated~~ the fair value of the earn-out liability ~~on a quarterly basis using~~were recorded to Other Expense, Net in the ~~Monte Carlo method. As~~consolidated statements of June 30, 2021, our underwritten IPO process had commenced and thus the only remaining variable for calculating final amounts to be paid under the earn-out agreement was the liquidity event price per share. Therefore, we estimated the fair value of the liability related to the earn-out using a probability-weighted model to estimate the liquidity event price per share. In calculating the fair value of this liability as of June 30, 2021, we have determined that 1.0 million OP units have been earned and the most likely range of potential outcomes includes a possibility ofoperations. We recorded no ~~additional OP units issued as well as up to a maximum of approximately 0.667 million units being issued.~~

~~For the three months ended June 30, 2021, we recorded~~ expense ~~of $2.0 million related to the change in fair value of the earn-out liability. There was 0 change to the fair value of our earn-out liability~~ for the three months ended June 30, ~~2020.~~2022 and $2.0 million in expense for the three months ended June 30, 2021. We recorded expense of ~~$18.0~~$1.8 million and ~~income of $10.0~~$18.0 million, respectively, for the six months ended June 30, ~~2021~~2022 and June 30, 2020 related to changes in the fair value of the earn-out liability. The increase in the fair value of the liability as of June 30, 2021 was attributable to the commencement of our underwritten IPO as well as improved market conditions in 2021. ~~The change in fair value for 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. There were no impairment charges recorded during the three and six months ended June 30, 2022. During the three and six months ended June 30, 2021, we impaired assets that 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 six months ended June 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~~book 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~~record an impairment charge based on the fair value determined in 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 the 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 and six months ended June 30, 2021 and 2020. However, it 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 June 30, Six Months Ended June 30,
2021 2020 2021 2020
Impairment of real estate assets $ 1,056 $ 0 $ 6,056 $ 0


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Impairment of real estate assets	$	—	$	1,056	$	—	$	6,056


13. SUBSEQUENT EVENTS

In preparing the condensed and unaudited consolidated financial statements, we have evaluated subsequent events through the date of 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 JUNE 30, ~~2021~~2022 FORM 10-Q									1918

~~Table of Contents~~

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.~~thereto and the more detailed information contained in our 2021 Annual Report on Form 10-K, filed with the SEC on February 16, 2022. All references to “Notes” throughout this document refer to the footnotes to the consolidated financial statements in ~~“Part I, Item~~“Item 1. Financial ~~Information”~~Statements”. See also “Cautionary Note Regarding Forward-Looking Statements” below.


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this Quarterly Report on Form 10-Q ~~(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”). These forward-looking statements are based on current expectations, estimates, and projections about the industry and markets in which we operate, and beliefs of, and assumptions made by, management of our company and involve uncertainties that could significantly affect our financial results. We intend for all such forward-looking statements to be covered by the applicable safe harbor provisions for forward-looking statements contained in the Acts. Such forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “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,~~to: (a) statements about our 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;~~pandemic; (c) ~~statements about our distributions, share repurchase program, and dividend reinvestment plan; (d)~~ statements about our underwritten incremental yields; and ~~(e)~~(d) statements about our future results of operations, capital expenditures, and liquidity. Such statements are subject to known and unknown risks and uncertainties, which could cause actual results to differ materially from those projected or anticipated, including, without limitation: (i) changes in national, regional, or local economic climates; (ii) local market conditions, including an oversupply of space in, or a reduction in demand for, properties similar to those in our portfolio; (iii) vacancies, changes in market rental rates, and the need to periodically repair, renovate, and re-let space; (iv) competition from other available shopping centers and the attractiveness of properties in our portfolio to our tenants; (v) the financial stability of our tenants, including, without limitation, their ability to pay rent; (vi) our ability to pay down, refinance, restructure, or extend our indebtedness as it becomes due; (vii) increases in our borrowing costs as a result of changes in interest rates and other ~~factors, including the potential phasing out of LIBOR after 2021;~~factors; (viii) potential liability for environmental matters; (ix) damage to our properties from catastrophic weather and other natural events, and the physical effects of climate change; (x) our ability and willingness to maintain our qualification as a REIT in light of economic, market, legal, tax, and other considerations; (xi) changes in tax, real estate, environmental, and zoning laws; (xii) information technology security breaches; (xiii) our corporate responsibility initiatives; (xiv) loss of key executives; (xv) the ~~measures taken by federal, state,~~concentration of our portfolio in a limited number of industries, geographies, or investments; (xvi) the economic, political, and ~~local government agencies~~social impact of, and ~~tenants in response~~uncertainty relating 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 tenants recover following the lifting of such restrictions; (xvi) the effectiveness or lack of effectiveness of governmental relief in providing assistance to individuals and businesses adversely impacted by the COVID-19 pandemic, including our tenants;pandemic; (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; (xviii) the impact of the COVID-19 pandemic on our tenants and their ability and willingness to renew their leases upon expiration; (xix) our ability to re-lease our properties on the same or better terms, or at all, in the event of non-renewal or in the event we exercise our right to replace an existing tenant; ~~(xx)~~(xviii) the loss or bankruptcy of our tenants, 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; (xxi) the pace of recovery following the COVID-19 pandemic given the current severe economic contraction and increase in unemployment rates; (xxii)tenants; (xix) to the extent we ~~were~~are seeking to dispose of properties, ~~in the near term, significantly greater uncertainty regarding~~ our ability to do so at attractive prices or at all; and ~~(xxiii)~~(xx) the impact of inflation on us and on our ~~ability to implement cost containment strategies.~~tenants. 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~~2021 Annual Report on Form 10-K, ~~as originally~~ filed with the SEC on ~~March 12, 2021, and those included in this Report, in each case~~February 16, 2022, as updated from time to time in our periodic and/or current reports filed with the SEC, which are accessible on the SEC’s website at www.sec.gov. Therefore, such statements are not intended to be a guarantee of our performance in future periods.

Except as required by law, we do not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.


KEY PERFORMANCE INDICATORS AND DEFINED TERMS

We use certain key performance indicators (“KPIs”), which include both financial and nonfinancial metrics, to measure the performance of our operations. We believe these KPIs, as well as the core concepts and terms defined below, allow our Board, management, and investors to analyze trends around our business strategy, financial condition, and results of operations in a manner that is focused on items unique to the retail real estate industry.

We do not consider our non-GAAP measures to be alternatives to measures required in accordance with GAAP. Certain non-GAAP measures should not be viewed as an alternative measure of our financial performance as they may not reflect the operations of our entire portfolio, and they may not reflect the impact of general and administrative expenses, depreciation


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and amortization, interest expense, other income (expense), or the level of capital expenditures and leasing costs necessary to maintain the operating performance of our shopping centers that could materially impact our results from operations. Additionally, certain non-GAAP measures should not be considered as an indication of our liquidity, nor as an indication of funds available to cover our cash needs, including our ability to fund distributions, and may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate our business in the manner currently contemplated. Accordingly, non-GAAP measures should be reviewed in connection with other GAAP measurements, and should not be viewed as more prominent measures of performance than net income (loss) or cash flows from operations prepared in accordance with GAAP. Other REITs may use different methodologies for calculating similar non-GAAP measures, and accordingly, our non-GAAP measures may not be comparable to other REITs.


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

PORTFOLIO—Portfolio metrics help management to gauge the health of our centers overall and individually.

•Anchor space—We define an anchor space as a space greater than or equal to 10,000 square feet of gross leasable area (“GLA”).

•ABR—We use ABR to refer to the monthly contractual base rent asat the end of ~~June 30, 2021~~the period multiplied by twelve months.

•ABR ~~per~~Per Square Foot (“PSF”)—This metric is calculated by dividing ABR by leased GLA. Increases in ABR PSF can be an indication of our ability to create rental rate growth in our centers, as well as an indication of demand for our spaces, which generally provides us with greater leverage during lease negotiations.

•GLA—We use GLA to refer to the total occupied and unoccupied square footage of a building that is available for tenants (whom we refer to as a “Neighbor” or our “Neighbors”) or other retailers to lease.

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

•Leased Occupancy—This metric is calculated as the percentage of total GLA for which a lease has been signed regardless of whether the lease has commenced or the Neighbor has taken possession. High occupancy is an indicator of demand for our spaces, which generally provides us with greater leverage during lease negotiations.

•Underwritten incremental unlevered yield—This reflects the yield we target to generate from a project upon expected stabilization and is calculated as the estimated incremental NOI for a project at stabilization divided by its estimated net project investment. The estimated incremental NOI is the difference between the estimated annualized NOI we target to generate by a project upon stabilization and the estimated annualized NOI without the planned improvements. Underwritten incremental unlevered yield does not include peripheral impacts, such as lease rollover risk or the impact on the long term value of the property upon sale or disposition. Actual incremental unlevered yields may vary from our underwritten incremental unlevered yield range based on the actual total cost to complete a project and its actual incremental NOI at stabilization.

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

•Comparable lease—We use this term to refer to a lease with consistent ~~structure~~terms 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 (i) the total square feet of retained Neighbors with current period lease expirations by (ii) the total square feet of leases expiring during the period. The portfolio retention rate provides insight into our ability to retain Neighbors at our shopping centers as their leases approach expiration. Generally, the costs to retain an existing Neighbor are lower than costs to replace with a new Neighbor.

•Recovery rate—This metric is calculated by dividing (i) total recovery income by (ii) total recoverable expenses during the period. A high recovery rate is an indicator of our ability to recover certain property operating expenses and capital costs from our Neighbors.

FINANCIAL PERFORMANCE—In addition to financial metrics calculated in accordance with GAAP, such as net income or cash flows from operations, we utilize non-GAAP metrics to measure our operational and financial performance. See ~~the section within this Item 2 titled Management’s Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP Measures~~“Non-GAAP Measures” below for further discussion on the following metrics.

•Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization for Real Estate (“Adjusted EBITDAre”)—To arrive at Adjusted EBITDAre, we adjust EBITDAre, as defined below, to exclude certain recurring and non-recurring items including, but not limited to: (i) changes in the fair value of the earn-out liability; (ii) other impairment charges; (iii) amortization of basis differences in our investments in our unconsolidated joint ventures; ~~and~~ (iv) transaction and acquisition ~~expenses.~~expenses; and (v) realized performance income. 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~~Attributable to ~~stockholders~~Stockholders and OP ~~unit holders,~~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


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modification of debt and other; (v) other impairment charges; ~~and~~ (vi) transaction and acquisition ~~expenses.~~expenses; and (vii) realized performance income. We believe Nareit FFO provides insight into our operating performance as it excludes certain items that are not indicative of such performance. Core FFO provides further insight into the sustainability of our operating performance and provides an additional measure to compare our performance across reporting periods on a consistent basis by excluding items that may cause short-term fluctuations in net income (loss).

•EBITDAre—The National Association of Real Estate Investment Trusts (“Nareit”) defines EBITDAre as net income (loss) computed in accordance with GAAP before: (i) interest expense; (ii) income tax expense; (iii) depreciation and amortization; (iv) gains or losses from disposition of depreciable property; and (v) impairment write-downs of depreciable property. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect EBITDAre on the same basis.


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•Equity Market Capitalization—We calculate equity market capitalization as the total dollar value of all outstanding ~~shares.~~shares using the closing price for the applicable date.

•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 in a manner consistent with the Nareit definition.

•Net Debt—We calculate net debt as total debt, excluding discounts, market adjustments, and deferred financing expenses, less cash and cash equivalents.

•Net Debt to Adjusted EBITDAre—This ratio is calculated by dividing net debt by Adjusted EBITDAre (included on an annualized basis within the calculation). It provides insight into our leverage rate based on earnings and is not impacted by fluctuations in our equity price.

•Net Debt to Total Enterprise Value—This ratio is calculated by dividing net debt by total enterprise ~~value.~~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 ~~has~~have been owned and operational for the entirety of each reporting period (i.e., since January 1, ~~2020)~~2021).

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


OVERVIEW

We are a REIT and one of the nation’s largest owners and operators of omni-channel grocery-anchored ~~neighborhood and community~~ shopping centers. ~~The majority~~Our portfolio primarily consists of ~~our revenue is lease revenue derived from our real estate investments. Additionally,~~neighborhood centers anchored by the #1 or #2 grocer tenants by sales within their respective formats by trade area. Our Neighbors are a mix of national, regional, and local retailers that primarily provide necessity-based goods and services.

As of June 30, 2022, we ~~operate an investment management business providing property management~~owned equity interests in 289 shopping centers, including 269 wholly-owned shopping centers and ~~advisory services to over $460 million of~~20 shopping centers owned through one unconsolidated joint ~~ventures. This~~venture, which comprised approximately 33.1 million square feet in 31 states. In addition to managing our shopping centers, our third-party investment management business provides comprehensive real estate ~~and asset~~ management services to the Managed Funds.

AsIn May 2022, we sold the final property in our joint venture with NRP, in which we own a 20% interest. During the three and six months ended June 30, 2022, we recognized income of $2.5 million and $2.7 million, respectively, related to NRP’s achievement of certain performance targets, which is included in Fees and Management Income in our consolidated statements of operations.

PORTFOLIO AND LEASING STATISTICS—Below are statistical highlights of our wholly-owned portfolio as of June 30, 2022 and 2021 ~~we wholly-owned 272 real estate properties. Additionally, we owned a 14% interest~~(dollars and square feet in ~~GRP I, a joint venture that owned 20 properties, and a 20% interest~~thousands):


	June 30, 2022			June 30, 2021
Number of properties	269			272
Number of states	31			31
Total square feet	30,935			30,778
ABR	$	421,019		$	384,916
% ABR from omni-channel grocery-anchored shopping centers	97.2		%	96.0		%
Leased occupancy %:
Total portfolio spaces	96.8		%	94.7		%
Anchor spaces	98.7		%	96.8		%
Inline spaces	93.2		%	90.6		%
Average remaining lease term (in years)(1)	4.6			4.5

(1)The average remaining lease term in ~~NRP, a joint venture that owned two properties.~~years excludes future options to extend the term of the lease.


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~~RECAPITALIZATION~~—On 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 disclosure gives effect to the Recapitalization and references to “shares” and per share metrics refer to our common stock and Class B common stock, collectively (Note 9).

~~REVERSE STOCK SPLIT~~—On July 2, 2021, our 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 OP units. Unless otherwise indicated, the information in this Form 10-Q gives effect to the reverse stock and OP unit splits (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 of $28.00 per share, pursuant to a registration statement filed with the SEC on Form S-11 (File No. 333-255846), as amended. These shares are listed on the Nasdaq Global Select Market under the trading symbol “PECO”. The underwriters have since 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 2.55 million shares, with gross proceeds to us of $71.4 million.

On August 4, 2021, as a result of our underwritten IPO, our Board approved the termination of the DRIP and the SRP. The DRIP has been suspended since April 2021. The SRP, which was limited to repurchases resulting from the DDI of stockholders, has been suspended since March 2021, and the SRP for standard repurchases had been suspended since August 2019.

~~COVID-19 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.

Our management team determined the following were the key actions for recovery in our portfolio (all statistics are approximate and include the prorated portion attributable to properties owned through our joint ventures):

•~~Returning to Monthly Payments~~—We continue to work with our Neighbors to resume normal monthly rent payments, and our efforts have included raising awareness of the benefits available through numerous governmental relief programs. We have seen our collections continue to improve from the second quarter of 2020. 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)
Q2 2020 86 % 93 %
Q3 2020 94 % 96 %
Q4 2020 95 % 97 %
Q1 2021 95 % 98 %
Q2 2021 N/A 98 %

~~(1)Including collections received through July 20, 2021.~~

~~As of July 20, 2021, approximately 95% 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 decided to negotiate relief for a small subset of our Neighbors in the form of rent deferrals or abatements. As of July 20, 2021, we have $5.3 million of outstanding payment plans with our Neighbors, and we had recorded rent abatements of approximately $0.7 million during 2021, related to 2021 missed rental income. These payment plans and rent abatements represented approximately 2.0% and 0.3% of portfolio rental income for the six months ended June 30, 2021, respectively. As of July 20, 2021, approximately 54% of payments are scheduled to be received by December 31, 2021 for all executed payment plans, and the weighted-average term over which we expect to receive remaining amounts owed on executed payment plans is approximately twelve 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, 69% of the missed monthly charges billed during the first and second quarters of 2021 have since been collected, and 5% have been waived, as of July 20, 2021, bringing both Q1 and Q2 2021 collections to 98%. 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.


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•~~Monitoring for Credit Risk~~—The COVID-19 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 our Neighbors to identify those 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.

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 June 30, 2021 or throughout the pandemic; however, we continue to evaluate each Neighbor individually to determine if they should be accounted for on a cash basis. For the three months ended June 30, 2021, inclusive of the prorated portion attributable to properties owned through our joint ventures, we had $1.3 million in net favorable monthly revenue adjustments for Neighbors who are being accounted for on a cash basis. For the six months ended June 30, 2021, we had $3.6 million in net unfavorable monthly revenue adjustments for Neighbors who are being accounted for on a cash basis. For the three and six months ended June 30, 2020, inclusive of the prorated portion attributable to properties owned through our joint ventures, we had $12.1 million and $15.0 million, respectively, in net unfavorable monthly revenue adjustments for Neighbors who are being accounted for on a cash basis. As of June 30, 2021, our Neighbors currently being accounted for on a cash basis represented approximately 8% of our total Neighbor spaces, or approximately 7.4% 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, 76% 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 less than 1% of our total portfolio ABR as of June 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 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 six months ended June 30, 2021, our wholly-owned portfolio retention rate was 85.5% and 87.2%, respectively. Additionally, for the three and six months ended June 30, 2021, for our wholly-owned portfolio, we executed 124 and 277 new leases, respectively, each an increase as compared to the same period a year ago.

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

June 30, 2021 June 30, 2020
Number of properties 272 284
Number of states 31 31
Total square feet 30,778 31,787
ABR $ 384,916 $ 385,696
% ABR from omni-channel grocery-anchored shopping centers 96.0 % 97.0 %
Leased % of rentable square feet:
Total portfolio spaces 94.7 % 95.6 %
Anchor spaces 96.8 % 98.3 %
Inline spaces 90.6 % 90.3 %
Average remaining lease term (in years)(1)
4.5 4.6

~~(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 unconsolidated joint ~~ventures~~venture as of June 30, ~~2021,~~2022, which is the basis for determining the prorated information included in the subsequent tables (dollars and square feet in thousands):

June 30, 2021
Joint Venture Ownership Percentage Number of Properties ABR GLA
Grocery Retail Partners I 14% 20 $ 29,339 2,211
Necessity Retail Partners 20% 2 3,989 228


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	June 30, 2022
Joint Venture	Ownership Percentage	Number of Properties	ABR		GLA
GRP I	14%	20	$	30,308	2,210

LEASE EXPIRATIONS—The following chart shows the aggregate scheduled lease expirations, excluding our Neighbors who are occupying space on a temporary basis, after June 30, ~~2021~~2022 for each of the next ten years and thereafter for our wholly-owned properties and the prorated portion of those owned through our unconsolidated joint ~~ventures:~~venture:

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~~“Results of Operations - Leasing Activity” ~~of this filing on Form 10-Q~~below for further discussion of leasing activity.


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PORTFOLIO TENANCY—We define national Neighbors as those Neighbors that operate in at least three states. Regional Neighbors are defined as those Neighbors that have at least three locations in fewer than three states. The following charts present the composition of our portfolio, including our wholly-owned properties and the prorated portion of those owned through our unconsolidated joint ~~ventures,~~venture, by Neighbor type as of June 30, ~~2021:~~2022:

The following charts present the composition of our portfolio by Neighbor industry as of June 30, ~~2021:~~2022:


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NECESSITY-BASED GOODS AND SERVICES—We define “Necessity-based goods and services” as goods and services that are indispensable, necessary, or common for day-to-day living, or that tend to be inelastic (i.e., those for which the demand does not change based on a consumer’s income level). We estimate that approximately ~~73%~~71% of our ABR, including the pro rata portion attributable to properties owned through our unconsolidated joint ~~ventures,~~venture, is generated from Neighbors providing necessity-based goods and services. Additionally, within these categories, we estimate that approximately 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:


	~~June 30, 2021~~
~~Essential/Necessity Retail and Services:~~
~~Grocery~~	~~35.4~~	%
~~Medical/pharmacy~~	~~2.7~~	%
~~Banks~~	~~2.4~~	%
~~Dollar stores~~	~~2.2~~	%
~~Pet supply~~	~~1.9~~	%
~~Hardware/automotive~~	~~1.7~~	%
~~Wine, beer, and liquor~~	~~1.4~~	%
~~Other essential~~	~~2.7~~	%
~~Total Essential/Necessity-based retail and services(1)~~	~~50.4~~	%
~~Other Necessity:~~
~~Quick service - restaurant~~	~~9.7~~	%
~~Beauty and hair care~~	~~4.9~~	%
~~Health care services~~	~~4.0~~	%
~~Other necessity~~	~~3.5~~	%
~~Total ABR from other Necessity~~	~~22.1~~	%

~~Total ABR from Necessity-based goods and services~~	~~72.5~~	%

~~Other Retail Stores:~~
~~Soft goods(2)~~	~~12.4~~	%
~~Full service - restaurant~~	~~6.4~~	%
~~Fitness and lifestyle services(3)~~	~~5.2~~	%
~~Other retail(4)~~	~~3.5~~	%
~~Total ABR from other retail and services~~	~~27.5~~	%
~~Total ABR~~	~~100.0~~	%

~~(1)~~Includes Neighbors that we believe are considered to be essential retail and service businesses but 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.

~~(2)~~TOP 20 NEIGHBORS~~Includes ABR contributions of 2% from each of apparel/shoes/accessories, department stores, and home furnishings Neighbors.~~

~~(3)Includes ABR contribution of 3% from fitness Neighbors.~~

~~(4)Includes ABR contribution of 1% from entertainment Neighbors.~~


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

~~Table of Contents~~

—The following table presents our top ~~twenty~~20 Neighbors by ABR, including our wholly-owned properties and the prorated portion of those owned through our unconsolidated joint ~~ventures,~~venture, as of June 30, ~~2021~~2022 (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	$	25,804	6.6	%	3,244	11.0	%	59	Kroger	$	27,423	6.4	%	3,366	11.1	%	61
Publix	Publix	22,032		5.7	%	2,241	7.6	%	56	Publix	23,623		5.6	%	2,314	7.6	%	57
Albertsons										Albertsons	18,232		4.3	%	1,709	5.6	%	31
Ahold Delhaize	Ahold Delhaize	17,323		4.4	%	1,240	4.2	%	23	Ahold Delhaize	17,662		4.2	%	1,249	4.1	%	23
Albertsons-Safeway		16,804		4.3	%	1,599	5.4	%	29
Walmart	Walmart	8,933		2.3	%	1,770	6.0	%	13	Walmart	8,933		2.1	%	1,770	5.9	%	13
Giant Eagle	Giant Eagle	7,293		1.9	%	738	2.5	%	11	Giant Eagle	7,810		1.8	%	828	2.7	%	12
Sprouts Farmers Market										Sprouts Farmers Market	6,494		1.5	%	421	1.4	%	14
TJX Companies	TJX Companies	5,060		1.3	%	428	1.5	%	15	TJX Companies	6,030		1.4	%	516	1.7	%	18
Sprouts Farmers Market		5,000		1.3	%	334	1.1	%	11
Raley's	Raley's	3,884		1.0	%	253	0.9	%	4	Raley's	3,884		0.9	%	253	0.8	%	4
Dollar Tree	Dollar Tree	3,628		0.9	%	370	1.3	%	39	Dollar Tree	3,454		0.8	%	329	1.1	%	36
SUPERVALU	SUPERVALU	3,209		0.8	%	336	1.1	%	5	SUPERVALU	3,244		0.8	%	336	1.1	%	5
Subway Group	Subway Group	2,731		0.7	%	111	0.4	%	79	Subway Group	2,574		0.6	%	100	0.3	%	71
Lowe's										Lowe's	2,469		0.6	%	369	1.2	%	4
Anytime Fitness, Inc.	Anytime Fitness, Inc.	2,623		0.7	%	171	0.6	%	35	Anytime Fitness, Inc.	2,405		0.6	%	150	0.5	%	31
Schnucks		2,545		0.7	%	249	0.8	%	4
Southeastern Grocers		2,514		0.6	%	281	1.0	%	7
Lowe's		2,469		0.6	%	369	1.3	%	4
Kohl's Corporation	Kohl's Corporation	2,241		0.6	%	365	1.2	%	4	Kohl's Corporation	2,241		0.5	%	365	1.2	%	4
Office Depot										Office Depot	2,237		0.5	%	179	0.6	%	8
Food 4 Less (PAQ)	Food 4 Less (PAQ)	2,215		0.6	%	119	0.4	%	2	Food 4 Less (PAQ)	2,215		0.5	%	118	0.4	%	2
Save Mart	Save Mart	2,174		0.6	%	258	0.9	%	5	Save Mart	2,174		0.5	%	258	0.9	%	5
Starbucks Corporation										Starbucks Corporation	2,136		0.5	%	49	0.2	%	30
Petco Animal Supplies, Inc.	Petco Animal Supplies, Inc.	2,118		0.5	%	127	0.3	%	11	Petco Animal Supplies, Inc.	2,136		0.5	%	127	0.4	%	11
Total	Total	$	140,600	36.1	%	14,603	49.5	%	416	Total	$	147,376	34.6	%	14,806	48.8	%	440

(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 COVID-19 PANDEMIC~~—The COVID-19 pandemic ~~has~~ resulted in reduced revenues beginning with the second quarter of 2020 ~~and continuing~~ through early 2021. Our collections returned to pre-COVID levels during the second ~~quarter~~half of 2021 and have continued through the first half of 2022. As of June 30, 2022, our ~~estimates around collectibility~~Neighbors currently being accounted for on a cash basis represented approximately 5.0% of portfolio ABR. We believe our collections have stabilized, which will ~~likely continue to create~~reduce volatility in our ~~earnings.~~earnings during 2022 as compared to 2021.

Due to changing economic conditions and supply chain limitations, there has been an increase in wages and costs for materials. The ~~total~~resulting increased inflation may negatively impact ~~on revenue in the future cannot be determined at this time. The duration of the pandemic and mitigating measures, and the resulting economic impact, has caused~~ some of our Neighbors and increase our operating and construction costs. Additionally, macroeconomic and geopolitical risks may create challenges that cause current market conditions in the United States to ~~permanently vacate their spaces and/or not renew their leases, and we may have difficulty leasing~~worsen. The policies implemented to address these ~~spaces~~risks, including raising interest rates, could result in adverse impacts on the ~~same~~United States economy, including a slowing of growth 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.

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.potentially a recession.


PHILLIPS EDISON & COMPANY JUNE 30, ~~2021~~2022 FORM 10-Q									2824

~~Table of Contents~~

SUMMARY OF OPERATING ACTIVITIES FOR THE THREE MONTHS ENDED JUNE 30, ~~2021~~2022 AND ~~2020~~2021


		Three Months Ended June 30,				Favorable (Unfavorable) Change					Three Months Ended June 30,				Favorable (Unfavorable) Change
(Dollars in thousands)	(Dollars in thousands)	2021		2020		$		%(1)		(Dollars in thousands)	2022		2021		$		%(1)
Revenues:	Revenues:									Revenues:
Rental income	Rental income	$	130,335	$	115,654	$	14,681	12.7	%	Rental income	$	137,230	$	130,335	$	6,895	5.3	%
Fee and management income		2,374		2,760		(386)		(14.0)	%
Fees and management income										Fees and management income	4,781		2,374		2,407		101.4	%
Other property income	Other property income	361		626		(265)		(42.3)	%	Other property income	505		361		144		39.9	%
Total revenues	Total revenues	133,070		119,040		14,030		11.8	%	Total revenues	142,516		133,070		9,446		7.1	%
Operating Expenses:	Operating Expenses:									Operating Expenses:
Property operating expenses		21,974		19,629		(2,345)		(11.9)	%
Real estate tax expenses		16,814		16,453		(361)		(2.2)	%
General and administrative expenses		11,937		9,806		(2,131)		(21.7)	%
Property operating										Property operating	22,852		21,974		(878)		(4.0)	%
Real estate taxes										Real estate taxes	16,473		16,814		341		2.0	%
General and administrative										General and administrative	11,376		11,937		561		4.7	%
Depreciation and amortization	Depreciation and amortization	56,587		56,370		(217)		(0.4)	%	Depreciation and amortization	60,769		56,587		(4,182)		(7.4)	%
Impairment of real estate assets	Impairment of real estate assets	1,056		—		(1,056)		NM		Impairment of real estate assets	—		1,056		1,056		NM
Total operating expenses	Total operating expenses	108,368		102,258		(6,110)		(6.0)	%	Total operating expenses	111,470		108,368		(3,102)		(2.9)	%
Other:	Other:									Other:
Interest expense, net	Interest expense, net	(19,132)		(22,154)		3,022		13.6	%	Interest expense, net	(17,127)		(19,132)		2,005		10.5	%
Gain (loss) on disposal of property, net		3,744		(541)		4,285		NM
Gain on disposal of property, net										Gain on disposal of property, net	2,793		3,744		(951)		(25.4)	%
Other expense, net	Other expense, net	(2,924)		(500)		(2,424)		NM		Other expense, net	(1,457)		(2,924)		1,467		50.2	%
Net income (loss)		6,390		(6,413)		12,803		NM
Net (income) loss attributable to noncontrolling interests		(796)		825		(1,621)		NM
Net income (loss) attributable to stockholders		$	5,594	$	(5,588)	$	11,182	NM
Net income										Net income	15,255		6,390		8,865		138.7	%
Net income attributable to noncontrolling interests										Net income attributable to noncontrolling interests	(1,727)		(796)		(931)		(117.0)	%
Net income attributable to stockholders										Net income attributable to stockholders	$	13,528	$	5,594	$	7,934	141.8	%

(1)Line items that result in a percent change that exceed certain limitations are considered not meaningful (“NM”) and indicated as such.

Our basis for analyzing significant fluctuations in our results of operations generally includes review of the results of our same-center portfolio, non-same-center portfolio, and revenues and expenses from our management activities. We define our same-center portfolio as the ~~268~~255 properties that were owned and operational prior to January 1, ~~2020.~~2021. 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,~~2020, which includes 1926 properties disposed of and ~~four~~13 properties acquired. Below are explanations of the significant fluctuations in the results of operations for the three months ended June 30, ~~2021~~2022 and ~~2020:~~2021:

Rental Income increased ~~$14.7~~$6.9 million primarily as follows:

•$~~15.5~~2.2 million increase related to our same-center portfolio ~~primarily~~ as follows:

▪$~~16.0~~3.1 million increase primarily due to ~~stronger collections~~a $0.37 increase in ~~2021 as compared with lower collections~~average minimum rent PSF and a 1.6% improvement in ~~2020,~~average occupancy owing largely to the strength of our leasing results during 2021; and

▪$1.4 million increase owing largely to an increase in recoverable income attributable to the ~~ongoing~~1.6% improvement in average occupancy and lower reserves for common area maintenance as compared to 2021; offset by

▪$2.2 million decrease primarily due to the stabilization of collections in 2022 compared to the recovery of prior year income in 2021 and the reversal of reserves for uncollectibility from 2020 resulting from the 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;~~

▪~~$0.5 million increase primarily due to a $0.57 increase in average minimum rent per square foot, partially offset by a 0.8% decrease in average economic occupancy; and~~

▪~~$1.0 million decrease attributable to lower recoveries from a lower recovery rate and lower economic occupancy.~~pandemic.

•$~~0.8~~4.7 million ~~decrease~~increase primarily related to our ~~net~~acquisition and disposition ~~of 15 properties.~~activity.

~~Property Operating Expenses increased$2.3 million as follows:~~Fees and Management Income:

•~~$2.5~~The $2.4 million increase in fees and management income was primarily due to the achievement of certain performance targets related to our joint venture with NRP.

Property Operating Expenses:

•The $0.9 million increase in property operating expenses was largely related to our same-center portfolio and corporate operating activities ~~owing largely~~primarily as follows:

▪$1.2 million increase in recoverable expenses attributed to ~~lower expense for performance-based compensation during 2020 as a result of the COVID-19 pandemic,~~higher common area maintenance costs, as compared to 2021; ~~and~~offset by

•~~$0.2 million decrease related to our net disposition of 15 properties.~~

~~General and Administrative Expenses increased $2.1 million as follows:~~

•~~$3.4 million increase owing largely to lower expense for performance-based compensation during 2020 as a result of the COVID-19 pandemic, as compared to 2021;~~

•~~$0.8 million decrease primarily due to lower third-party consultant and custodial costs; and~~

•▪$0.5 million decrease ~~related~~in compensation expenses due to ~~expense reductions taken~~decreases in performance-based compensation, as compared to ~~reduce the impact of the COVID-19 pandemic, with the majority of these decreases related to overhead costs at our corporate offices.~~2021.


PHILLIPS EDISON & COMPANY JUNE 30, ~~2021~~2022 FORM 10-Q									2925

~~Table~~

Real Estate Tax Expenses:

•The $0.3 million decrease in real estate tax expenses is primarily due to the impact of ~~Contents~~favorable real estate tax reassessments and appeals.

General and Administrative Expenses decreased $0.6 million primarily as follows:

•$1.6 million decrease in compensation expense owing largely to a decrease in performance- and service-based compensation of approximately $0.8 million and $0.4 million, respectively; and

•$0.3 million decrease primarily due to lower third-party consultant and custodial costs; offset by

•$1.0 million increase primarily due to increases in technology-related costs and travel and conference expenses; and

•$0.5 million increase primarily due to an increase in directors and officers insurance as a result of our becoming a publicly traded company.

Depreciation and Amortization:

•The $4.2 million increase in depreciation and amortization is primarily due to the execution of our acquisition strategy and investment in improvements to our Neighbor spaces.

Impairment of Real Estate Assets:

•The $1.1 million ~~increase~~decrease in impairment of real estate assets was due to assets that ~~are actively being marketed for sale~~were sold during 2021 at a disposition price that was less than the carrying value. Proceeds from dispositions 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.

Interest Expense, Net:

•The ~~$3.0~~$2.0 million decrease ~~during the three months ended June 30, 2021 as compared~~was primarily due to ~~the same period in 2020 was due to: (i) lower borrowings as a result of early~~net repayments of ~~debt; (ii) the repayment of our draw on the revolver during the second quarter of 2020; and (iii) lower~~debt outstanding in 2021, partially offset by higher average interest rates ~~due to the decrease~~ in ~~LIBOR and expiring interest rate swaps.~~2022. Interest Expense, Net was comprised of the following (dollars in thousands):


		Three Months Ended June 30,							Three Months Ended June 30,
		2021			2020				2022			2021
Interest on unsecured term loans and senior notes, net								Interest on unsecured term loans and senior notes, net	$	9,512		$	10,573
Interest on secured debt								Interest on secured debt	5,147			6,246
Interest on revolving credit facility, net	Interest on revolving credit facility, net	$	207		$	979		Interest on revolving credit facility, net	521			207
Interest on term loans, net		10,573			11,685
Interest on secured debt		6,246			7,316
Loss on extinguishment of debt		419			—
Non-cash amortization and other	Non-cash amortization and other	1,687			2,174			Non-cash amortization and other	1,818			1,687
Loss on extinguishment or modification of debt and other, net(1)								Loss on extinguishment or modification of debt and other, net(1)	129			419
Interest expense, net	Interest expense, net	$	19,132		$	22,154		Interest expense, net	$	17,127		$	19,132

Weighted-average interest rate as of end of period	Weighted-average interest rate as of end of period	2.9		%	3.1		%	Weighted-average interest rate as of end of period	3.2		%	2.9		%
Weighted-average term (in years) as of end of period	Weighted-average term (in years) as of end of period	3.7			4.5			Weighted-average term (in years) as of end of period	4.9			3.7

(1)Includes defeasance fees related to early repayments of debt.

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

•The ~~$4.3~~$1.0 million ~~change~~decrease was primarily related to the sale of ~~seven properties~~one property and two outparcels with a net gain of $2.8 million during the three months ended June 30, 2022, as compared to the sale of seven properties (in addition to other property-related miscellaneous disposals and write-offs) with a net gain of $3.7 million during the three months ended June 30, 2021 ~~as compared to the sale of one property (as well as other property-related miscellaneous disposals and write-offs) with a net loss of $0.5 million during the three months ended June 30, 2020~~ (see Note 4).

Other Expense, Net:

•The ~~$2.4~~$1.5 million ~~increase~~decrease was ~~largely due~~primarily related to a 2021 charge in connection with the change in the fair value of our earn-out liability, aswhich was settled in January 2022, combined with an increase from equity in income of our unconsolidated joint ventures, partially offset by an increase in transaction and acquisition expenses owing largely to the amortization of the restricted stock units awarded at the time of our underwritten IPO and a ~~result~~decrease in the value of ~~general improving market conditions.~~our investment in marketable securities. Other Expense, Net was comprised of the following ~~(dollars in~~(in thousands):

Three Months Ended June 30,
2021 2020
Change in fair value of earn-out liability $ (2,000) $ —
Equity in net income (loss) of unconsolidated joint ventures 87 (359)
Transaction and acquisition expenses (934) (14)
Federal, state, and local income tax expense (165) (180)
Other 88 53
Other expense, net $ (2,924) $ (500)


	Three Months Ended June 30,
	2022		2021
Increase in fair value of earn-out liability (see Note 12)	$	—	$	(2,000)
Equity in net income of unconsolidated joint ventures	1,228		87
Transaction and acquisition expenses	(2,035)		(934)
Federal, state, and local income tax expense	(97)		(165)
Other	(553)		88
Other expense, net	$	(1,457)	$	(2,924)


PHILLIPS EDISON & COMPANY JUNE 30, ~~2021~~2022 FORM 10-Q									3026

~~Table of Contents~~

SUMMARY OF OPERATING ACTIVITIES FOR THE SIX MONTHS ENDED JUNE 30, ~~2021~~2022 AND ~~2020~~2021


		Six Months Ended June 30,				Favorable (Unfavorable) Change					Six Months Ended June 30,				Favorable (Unfavorable) Change
(Dollars in thousands)	(Dollars in thousands)	2021		2020		$		%(1)		(Dollars in thousands)	2022		2021		$		%(1)
Revenues:	Revenues:									Revenues:
Rental income	Rental income	$	257,958	$	244,120	$	13,838	5.7	%	Rental income	$	275,978	$	257,958	$	18,020	7.0	%
Fee and management income	Fee and management income	4,660		4,925		(265)		(5.4)	%	Fee and management income	7,242		4,660		2,582		55.4	%
Other property income	Other property income	833		1,518		(685)		(45.1)	%	Other property income	1,459		833		626		75.2	%
Total revenues	Total revenues	263,451		250,563		12,888		5.1	%	Total revenues	284,679		263,451		21,228		8.1	%
Operating Expenses:	Operating Expenses:									Operating Expenses:
Property operating expenses		44,176		41,391		(2,785)		(6.7)	%
Real estate tax expenses		33,387		33,565		178		0.5	%
General and administrative expenses		21,278		20,546		(732)		(3.6)	%
Property operating										Property operating	46,172		44,176		(1,996)		(4.5)	%
Real estate taxes										Real estate taxes	33,964		33,387		(577)		(1.7)	%
General and administrative										General and administrative	22,908		21,278		(1,630)		(7.7)	%
Depreciation and amortization	Depreciation and amortization	111,928		112,597		669		0.6	%	Depreciation and amortization	117,995		111,928		(6,067)		(5.4)	%
Impairment of real estate assets	Impairment of real estate assets	6,056		—		(6,056)		NM		Impairment of real estate assets	—		6,056		6,056		NM
Total operating expenses	Total operating expenses	216,825		208,099		(8,726)		(4.2)	%	Total operating expenses	221,039		216,825		(4,214)		(1.9)	%
Other:	Other:									Other:
Interest expense, net	Interest expense, net	(39,195)		(44,929)		5,734		12.8	%	Interest expense, net	(35,326)		(39,195)		3,869		9.9	%
Gain (loss) on disposal of property, net		17,585		(2,118)		19,703		NM
Other (expense) income, net		(18,509)		9,369		(27,878)		NM
Gain on disposal of property, net										Gain on disposal of property, net	4,161		17,585		(13,424)		(76.3)	%
Other expense, net										Other expense, net	(5,822)		(18,509)		12,687		68.5	%
Net income	Net income	6,507		4,786		1,721		36.0	%	Net income	26,653		6,507		20,146		NM
Net income attributable to noncontrolling interests	Net income attributable to noncontrolling interests	(810)		(605)		(205)		(33.9)	%	Net income attributable to noncontrolling interests	(3,046)		(810)		(2,236)		NM
Net income attributable to stockholders	Net income attributable to stockholders	$	5,697	$	4,181	$	1,516	36.3	%	Net income attributable to stockholders	$	23,607	$	5,697	$	17,910	NM

(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~~“Summary of Operating Activities for the Three Months Ended June 30, ~~2021~~2022 and ~~2020 section~~2021” above. Below are explanations of the significant fluctuations in the results of operations for the six months ended June 30, ~~2021~~2022 and ~~2020:~~2021:

Rental Income increased ~~$13.8~~$18.0 million as follows:

•$~~15.3~~10.5 million increase related to our same-center portfolio primarily as follows:

▪$~~15.7~~9.0 million increase primarily due to ~~stronger collections~~a $0.37 increase in ~~2021 as compared with lower collections~~average minimum rent per square foot and a 1.4% improvement in ~~2020, the~~average occupancy; and

▪$3.1 million increase owing largely to an increase in recoverable income attributed to an increase in common area maintenance spending and lower reserves for common area maintenance, as compared to 2021, and the ~~ongoing~~1.4% improvement in average occupancy; offset by

▪$1.7 million decrease primarily due to the stabilization of collections in 2022 compared to the recovery of prior year income in 2021 and the reversal of reserves for uncollectibility from 2020 resulting from the 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; and~~

▪~~$0.2 million decrease primarily due to a 0.8% decrease in average economic occupancy, partially offset by a $0.55 increase in average minimum rent per square foot.~~pandemic.

•$~~1.5~~7.6 million ~~decrease~~increase primarily related to our ~~net~~acquisition and disposition activity.

Fees and management income:

•The $2.6 million increase in fees and management income was primarily due to the achievement of ~~15 properties.~~certain performance targets related to our joint venture with NRP.

Property Operating Expenses increased ~~$2.8~~$2.0 million primarily as follows:

•$~~2.9~~1.4 million increase related to our same-center portfolio and corporate operating activities as follows:

▪$~~2.4~~1.9 million increase ~~owing largely~~attributable to ~~lower expense for performance-based compensation during 2020 as a result of the COVID-19 pandemic,~~higher common area maintenance costs, as compared to 2021; and

▪$0.6 million increase inprimarily due to higher insurance expenses ~~owing~~attributed to higher market rates and an increase in claims and claim development; ~~and~~offset by

▪ ~~$0.1~~$0.4 million decrease ~~primarily~~in compensation expenses due to ~~net reductions of controllable expenses at our properties.~~decreases in performance-based compensation, as compared to 2021.

•$~~0.2~~0.5 million ~~decrease related~~increase primarily due to our ~~net disposition of 15 properties.~~acquisition activity.

~~General and Administrative Expenses increased $0.7 million as follows:~~Real Estate Tax Expenses:

•~~$4.3~~The $0.6 million increase ~~owing largely to lower expense for performance-based compensation during 2020 as a result of the COVID-19 pandemic, as compared to 2021;~~

•~~$1.6 million decrease~~in real estate tax expenses is primarily due to ~~lower third-party consultant and custodial costs;~~

•~~$2.0 million decrease related to expense reductions taken to reduce the impact of the COVID-19 pandemic, with the majority of these decreases related to overhead costs at~~ our ~~corporate offices, as well as decreased travel and related costs.~~acquisition activity.


PHILLIPS EDISON & COMPANY JUNE 30, ~~2021~~2022 FORM 10-Q									3127

~~Table~~

General and Administrative Expenses increased $1.6 million primarily as follows:

•$1.2 million increase primarily due to an increase in directors and officers insurance as a result of ~~Contents~~our becoming a publicly traded company; and

•$1.0 million increase primarily due to increases in overhead attributed to technology-related costs and travel and conference expenses; offset by

•$0.5 million decrease in compensation expense owing largely to lower performance-based compensation.

Depreciation and Amortization:

•The $6.1 million increase in depreciation and amortization is primarily due to the execution of our acquisition strategy and investment in improvements to our Neighbor spaces.

Impairment of Real Estate Assets:

•The $6.1 million ~~increase~~decrease in impairment of real estate assets was due to assets that ~~are actively being marketed for sale~~were sold during 2021 at a disposition price that was less than the carrying value. Proceeds from dispositions 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.

Interest Expense, Net:

•The ~~$5.7~~$3.9 million decrease ~~during the six months ended June 30, 2021 as compared~~was primarily due to ~~the same period in 2020 was due to: (i) lower borrowings as a result of early~~net repayments of ~~debt; (ii) the repayment of our draw on the revolver during the second quarter of 2020; and (iii) lower~~debt outstanding in 2021, partially offset by higher average interest rates ~~due to the decrease~~ in ~~LIBOR and expiring interest rate swaps.~~2022. Interest Expense, Net was comprised of the following (dollars in thousands):


		Six Months Ended June 30,							Six Months Ended June 30,
		2021			2020				2022			2021
Interest on unsecured term loans and senior notes, net								Interest on unsecured term loans and senior notes, net	$	19,428		$	21,206
Interest on secured debt								Interest on secured debt	10,678			13,026
Interest on revolving credit facility, net	Interest on revolving credit facility, net	$	435		$	1,195		Interest on revolving credit facility, net	768			435
Interest on term loans, net		21,206			24,416
Interest on secured debt		13,026			14,665
Loss on extinguishment of debt		1,110			73
Non-cash amortization and other	Non-cash amortization and other	3,418			4,580			Non-cash amortization and other	3,423			3,418
Loss on extinguishment or modification of debt and other, net(1)								Loss on extinguishment or modification of debt and other, net(1)	1,029			1,110
Interest expense, net	Interest expense, net	$	39,195		$	44,929		Interest expense, net	$	35,326		$	39,195

Weighted-average interest rate as of end of period	Weighted-average interest rate as of end of period	2.9		%	3.1		%	Weighted-average interest rate as of end of period	3.2		%	2.9		%
Weighted-average term (in years) as of end of period	Weighted-average term (in years) as of end of period	3.7			4.5			Weighted-average term (in years) as of end of period	4.9			3.7

(1)Includes defeasance fees related to early repayments of debt.

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

•The ~~$19.7~~$13.4 million ~~change~~decrease was primarily related to the sale of ~~thirteen~~three properties and two outparcels with a net gain of $4.2 million during the six months ended June 30, 2022, as compared to the sale of 13 properties and one outparcel ~~(in addition to~~(as well as other property-related miscellaneous ~~property-related~~ disposals and write-offs) with a net gain of $17.6 million during the six months ended June 30, 2021 ~~as compared to the sale of four properties (as well as other property-related miscellaneous disposals and write-offs) with a net loss of $2.1 million during the six months ended June 30, 2020~~ (see Note 4).

~~Other (Expense) Income, Net:~~

•The $27.9 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. Other (Expense) Income, Net was comprised of the following (in thousands):

Six Months Ended June 30,
2021 2020
Change in fair value of earn-out liability $ (18,000) $ 10,000
Equity in income (loss) of unconsolidated joint ventures 801 (639)
Transaction and acquisition expenses (1,075) (59)
Federal, state, and local income tax expense (331) (209)
Other 96 276
Other (expense) income, net $ (18,509) $ 9,369


PHILLIPS EDISON & COMPANY JUNE 30, ~~2021~~2022 FORM 10-Q									3228

~~Table~~

Other Expense, Net:

•The $12.7 million decrease was primarily related to a 2021 charge in connection with the change in the fair value of ~~Contents~~our earn-out liability, which was settled in January 2022, combined with an increase from equity in income of our unconsolidated joint ventures, partially offset by an increase in transaction and acquisition expenses owing largely to the amortization of the restricted stock units awarded at the time of our underwritten IPO and a decrease in the value of our investment in marketable securities. Other Expense, Net was comprised of the following (in thousands):


	Six Months Ended June 30,
	2022		2021
Increase in fair value of earn-out liability (see Note 12)	$	(1,809)	$	(18,000)
Equity in net income of unconsolidated joint ventures	1,174		801
Transaction and acquisition expenses	(4,080)		(1,075)
Federal, state, and local income tax expense	(194)		(331)
Other	(913)		96
Other expense, net	$	(5,822)	$	(18,509)

LEASING ACTIVITY—Below is a summary of leasing activity for our wholly-owned properties for the three months ended June 30, ~~2021~~2022 and ~~2020~~2021(1):


		Total Deals						Inline Deals							Total Deals						Inline Deals
		2021			2020			2021			2020				2022			2021			2022			2021
New leases:	New leases:													New leases:
Number of leases	Number of leases	124			61			121			58			Number of leases	105			124			98			121
Square footage (in thousands)	Square footage (in thousands)	341			197			278			159			Square footage (in thousands)	404			341			225			278
ABR (in thousands)	ABR (in thousands)	$	6,338		$	3,034		$	5,816		$	2,801		ABR (in thousands)	$	7,479		$	6,338		$	5,479		$	5,816
ABR per square foot		$	18.57		$	15.38		$	20.94		$	17.59
Cost per square foot of executing new leases		$	31.01		$	19.48		$	29.30		$	23.35
ABR PSF														ABR PSF	$	18.51		$	18.57		$	24.40		$	20.94
Cost PSF of executing new leases														Cost PSF of executing new leases	$	35.10		$	31.01		$	35.18		$	29.30
Number of comparable leases	Number of comparable leases	57			20			55			19			Number of comparable leases	38			57			37			55
Comparable rent spread	Comparable rent spread	18.5		%	15.5		%	19.0		%	15.9		%	Comparable rent spread	39.0		%	18.5		%	24.5		%	19.0		%
Weighted-average lease term (in years)	Weighted-average lease term (in years)	7.2			6.1			6.8			7.2			Weighted-average lease term (in years)	9.0			7.2			7.6			6.8
Renewals and options:	Renewals and options:													Renewals and options:
Number of leases	Number of leases	174			108			159			95			Number of leases	160			174			141			159
Square footage (in thousands)	Square footage (in thousands)	1,049			975			333			209			Square footage (in thousands)	1,225			1,049			290			333
ABR (in thousands)	ABR (in thousands)	$	12,895		$	8,942		$	7,306		$	4,141		ABR (in thousands)	$	15,132		$	12,895		$	7,290		$	7,306
ABR per square foot		$	12.30		$	9.17		$	21.95		$	19.81
ABR per square foot prior to renewals		$	11.55		$	8.73		$	20.08		$	18.40
Percentage increase in ABR per square foot		6.5		%	5.0		%	9.3		%	7.7		%
Cost per square foot of executing renewals and options		$	3.01		$	1.62		$	4.60		$	3.69
ABR PSF														ABR PSF	$	12.35		$	12.30		$	25.17		$	21.95
ABR PSF prior to renewals														ABR PSF prior to renewals	$	11.49		$	11.55		$	22.46		$	20.08
Percentage increase in ABR PSF														Percentage increase in ABR PSF	7.5		%	6.5		%	12.1		%	9.3		%
Cost PSF of executing renewals and options(2)														Cost PSF of executing renewals and options(2)	$	0.55		$	0.89		$	0.75		$	1.11
Number of comparable leases~~(2)~~(3)	Number of comparable leases~~(2)~~(3)	155			87			148			84			Number of comparable leases~~(2)~~(3)	120			155			118			148
Comparable rent spread~~(2)~~(3)	Comparable rent spread~~(2)~~(3)	8.0		%	7.1		%	9.4		%	9.0		%	Comparable rent spread~~(2)~~(3)	14.4		%	8.0		%	13.4		%	9.4		%
Weighted-average lease term (in years)	Weighted-average lease term (in years)	5.4			5.4			4.0			3.5			Weighted-average lease term (in years)	5.5			5.4			4.2			4.0
Portfolio retention rate	Portfolio retention rate	85.5		%	88.2		%	79.5		%	70.3		%	Portfolio retention rate	92.1		%	85.5		%	85.3		%	79.5		%

(1)~~Per square foot~~PSF 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 PSF 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 JUNE 30, ~~2021~~2022 FORM 10-Q									3329

~~Table of Contents~~

Below is a summary of leasing activity for our wholly-owned properties for the six months ended June 30, ~~2021~~2022 and ~~2020~~2021(1):


		Total Deals						Inline Deals							Total Deals						Inline Deals
		2021			2020			2021			2020				2022			2021			2022			2021
New leases:	New leases:													New leases:
Number of leases	Number of leases	277			148			268			135			Number of leases	197			277			186			268
Square footage (in thousands)	Square footage (in thousands)	808			579			619			339			Square footage (in thousands)	661			808			411			619
ABR (in thousands)	ABR (in thousands)	$	14,458		$	8,597		$	12,421		$	6,015		ABR (in thousands)	$	12,421		$	14,458		$	9,800		$	12,421
ABR per square foot		$	17.89		$	14.84		$	20.06		$	17.72
Cost per square foot of executing new leases		$	28.51		$	21.16		$	28.00		$	25.78
ABR PSF														ABR PSF	$	18.80		$	17.89		$	23.86		$	20.06
Cost PSF of executing new leases														Cost PSF of executing new leases	$	32.69		$	28.51		$	34.37		$	28.00
Number of comparable leases	Number of comparable leases	127			45			125			44			Number of comparable leases	72			127			70			125
Comparable rent spread	Comparable rent spread	15.3		%	10.8		%	15.3		%	10.7		%	Comparable rent spread	36.6		%	15.3		%	25.8		%	15.3		%
Weighted-average lease term (in years)	Weighted-average lease term (in years)	7.7			8.2			6.5			6.8			Weighted-average lease term (in years)	8.1			7.7			7.5			6.5
Renewals and options:	Renewals and options:													Renewals and options:
Number of leases	Number of leases	337			235			306			208			Number of leases	312			337			287			306
Square footage (in thousands)	Square footage (in thousands)	2,027			1,714			645			458			Square footage (in thousands)	1,744			2,027			613			645
ABR (in thousands)	ABR (in thousands)	$	24,367		$	18,662		$	14,375		$	9,505		ABR (in thousands)	$	24,379		$	24,367		$	14,592		$	14,375
ABR per square foot		$	12.02		$	10.89		$	22.30		$	20.75
ABR per square foot prior to renewals		$	11.27		$	10.24		$	20.54		$	18.83
Percentage increase in ABR per square foot		6.6		%	6.7		%	8.6		%	12.2		%
Cost per square foot of executing renewals and options		$	2.19		$	3.41		$	4.08		$	4.36
ABR PSF														ABR PSF	$	13.98		$	12.02		$	23.81		$	22.30
ABR PSF prior to renewals														ABR PSF prior to renewals	$	12.84		$	11.27		$	21.14		$	20.54
Percentage increase in ABR PSF														Percentage increase in ABR PSF	8.8		%	6.6		%	12.7		%	8.6		%
Cost PSF of executing renewals and options(2)														Cost PSF of executing renewals and options(2)	$	0.58		$	0.71		$	0.81		$	1.34
Number of comparable leases~~(2)~~(3)	Number of comparable leases~~(2)~~(3)	291			176			281			170			Number of comparable leases~~(2)~~(3)	248			291			244			281
Comparable rent spread~~(2)~~(3)	Comparable rent spread~~(2)~~(3)	8.0		%	9.2		%	8.7		%	11.8		%	Comparable rent spread~~(2)~~(3)	14.6		%	8.0		%	14.0		%	8.7		%
Weighted-average lease term (in years)	Weighted-average lease term (in years)	4.9			5.0			4.0			3.7			Weighted-average lease term (in years)	5.1			4.9			4.0			4.0
Portfolio retention rate	Portfolio retention rate	87.2		%	79.5		%	79.9		%	68.6		%	Portfolio retention rate	90.6		%	87.2		%	81.6		%	79.9		%

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

(3)Excludes exercise of options.


NON-GAAP MEASURES

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

SAME-CENTER ~~NET OPERATING INCOME~~NOI—Same-Center NOI is presented as a supplemental measure of our performance, as it highlights operating trends such as occupancy levels, rental rates, and operating costs for our Same-Center portfolio. Other REITs may use different methodologies for calculating Same-Center NOI, and accordingly, our Same-Center NOI may not be comparable to other REITs. For the three and six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, Same-Center NOI represents the NOI for the ~~268~~255 properties that were wholly-owned and operational for the entire portion of ~~both~~all comparable reporting 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 JUNE 30, ~~2021~~2022 FORM 10-Q									3430

~~Table of Contents~~

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


		Three Months Ended June 30,				Favorable (Unfavorable)				Six Months Ended June 30,				Favorable (Unfavorable)					Three Months Ended June 30,				Favorable (Unfavorable)				Six Months Ended June 30,				Favorable (Unfavorable)
		2021		2020		$ Change		% Change		2021		2020		$ Change		% Change			2022		2021		$ Change		% Change		2022		2021		$ Change		% Change
Revenues:	Revenues:																	Revenues:
Rental income(1)	Rental income(1)	$	91,305	$	90,814	$	491			$	182,599	$	182,852	$	(253)			Rental income(1)	$	94,169	$	89,516	$	4,653			$	188,562	$	179,141	$	9,421
Tenant recovery income	Tenant recovery income	27,250		30,197		(2,947)				57,851		60,980		(3,129)				Tenant recovery income	28,375		26,818		1,557				59,772		56,921		2,851
Reserves for uncollectibility(2)	Reserves for uncollectibility(2)	2,889		(9,706)		12,595				1,261		(12,129)		13,390				Reserves for uncollectibility(2)	256		2,783		(2,527)				(515)		1,221		(1,736)
Other property income	Other property income	284		600		(316)				756		1,465		(709)				Other property income	439		286		153				1,186		751		435
Total revenues	Total revenues	121,728		111,905		9,823		8.8	%	242,467		233,168		9,299		4.0	%	Total revenues	123,239		119,403		3,836		3.2	%	249,005		238,034		10,971		4.6	%
Operating expenses:	Operating expenses:																	Operating expenses:
Property operating expenses	Property operating expenses	17,504		16,495		(1,009)				36,614		34,562		(2,052)				Property operating expenses	18,337		17,043		(1,294)				38,105		35,756		(2,349)
Real estate taxes	Real estate taxes	16,519		16,038		(481)				32,749		33,182		433				Real estate taxes	15,213		16,331		1,118				31,650		32,341		691
Total operating expenses	Total operating expenses	34,023		32,533		(1,490)		(4.6)	%	69,363		67,744		(1,619)		(2.4)	%	Total operating expenses	33,550		33,374		(176)		(0.5)	%	69,755		68,097		(1,658)		(2.4)	%
Total Same-Center NOI	Total Same-Center NOI	$	87,705	$	79,372	$	8,333	10.5	%	$	173,104	$	165,424	$	7,680	4.6	%	Total Same-Center NOI	$	89,689	$	86,029	$	3,660	4.3	%	$	179,250	$	169,937	$	9,313	5.5	%

(1)Excludes straight-line rental income, net amortization of above- and below-market leases, and lease buyout income.

(2)Includes billings that will not be recognized as revenue until cash is collected or the Neighbor resumes regular payments and/or we deem it appropriate to resume recording revenue on an accrual basis, rather than on a cash basis.

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


		Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Net income (loss)		$	6,390	$	(6,413)	$	6,507	$	4,786
Net income										Net income	$	15,255	$	6,390	$	26,653	$	6,507
Adjusted to exclude:	Adjusted to exclude:									Adjusted to exclude:
Fees and management income	Fees and management income	(2,374)		(2,760)		(4,660)		(4,925)		Fees and management income	(4,781)		(2,374)		(7,242)		(4,660)
Straight-line rental (income) expense(1)		(2,970)		948		(4,392)		(1,364)
Straight-line rental income(1)										Straight-line rental income(1)	(3,319)		(2,970)		(5,128)		(4,392)
Net amortization of above- and below-market leases	Net amortization of above- and below-market leases	(887)		(795)		(1,725)		(1,583)		Net amortization of above- and below-market leases	(1,078)		(887)		(2,080)		(1,725)
Lease buyout income	Lease buyout income	(1,781)		(214)		(2,578)		(308)		Lease buyout income	(176)		(1,781)		(2,141)		(2,578)
General and administrative expenses	General and administrative expenses	11,937		9,806		21,278		20,546		General and administrative expenses	11,376		11,937		22,908		21,278
Depreciation and amortization	Depreciation and amortization	56,587		56,370		111,928		112,597		Depreciation and amortization	60,769		56,587		117,995		111,928
Impairment of real estate assets	Impairment of real estate assets	1,056		—		6,056		—		Impairment of real estate assets	—		1,056		—		6,056
Interest expense, net	Interest expense, net	19,132		22,154		39,195		44,929		Interest expense, net	17,127		19,132		35,326		39,195
(Gain) loss on disposal of property, net		(3,744)		541		(17,585)		2,118
Other expense (income), net		2,924		500		18,509		(9,369)
Gain on disposal of property, net										Gain on disposal of property, net	(2,793)		(3,744)		(4,161)		(17,585)
Other expense, net										Other expense, net	1,457		2,924		5,822		18,509
Property operating expenses related to fees and management income	Property operating expenses related to fees and management income	1,306		891		2,122		1,528		Property operating expenses related to fees and management income	1,287		1,306		2,357		2,122
NOI for real estate investments	NOI for real estate investments	87,576		81,028		174,655		168,955		NOI for real estate investments	95,124		87,576		190,309		174,655
Less: Non-same-center NOI(2)	Less: Non-same-center NOI(2)	129		(1,656)		(1,551)		(3,531)		Less: Non-same-center NOI(2)	(5,435)		(1,547)		(11,059)		(4,718)
Total Same-Center NOI	Total Same-Center NOI	$	87,705	$	79,372	$	173,104	$	165,424	Total Same-Center NOI	$	89,689	$	86,029	$	179,250	$	169,937

(1)Includes straight-line rent adjustments for Neighbors for whom revenue is being recorded on a cash basis.

(2)Includes operating revenues and expenses from non-same-center properties which includes properties acquired or sold and corporate activities.

NAREIT FFO AND CORE FFO—Nareit FFO is a non-GAAP financial performance measure that is widely recognized as a measure of REIT operating performance. Core FFO is an additional financial performance measure used by us as Nareit FFO includes certain non-comparable items that affect our performance over time. We believe that Core FFO is helpful in assisting management and investors with assessing the sustainability of our operating performance in future periods.


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

~~Table of Contents~~

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.


PHILLIPS EDISON & COMPANY JUNE 30, 2022 FORM 10-Q									31

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 June 30,				Six Months Ended June 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Calculation of Nareit 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 (loss)		$	6,390	$	(6,413)	$	6,507	$	4,786
Net income										Net income	$	15,255	$	6,390	$	26,653	$	6,507
Adjustments:	Adjustments:									Adjustments:
Depreciation and amortization of real estate assets	Depreciation and amortization of real estate assets	55,654		54,892		109,995		109,709		Depreciation and amortization of real estate assets	59,849		55,654		116,169		109,995
Impairment of real estate assets	Impairment of real estate assets	1,056		—		6,056		—		Impairment of real estate assets	—		1,056		—		6,056
(Gain) loss on disposal of property, net		(3,744)		541		(17,585)		2,118
Gain on disposal of property, net										Gain on disposal of property, net	(2,793)		(3,744)		(4,161)		(17,585)
Adjustments related to unconsolidated joint ventures	Adjustments related to unconsolidated joint ventures	537		940		(100)		1,594		Adjustments related to unconsolidated joint ventures	(1,186)		537		(481)		(100)
Nareit FFO attributable to stockholders and OP unit holders	Nareit FFO attributable to stockholders and OP unit holders	$	59,893	$	49,960	$	104,873	$	118,207	Nareit FFO attributable to stockholders and OP unit holders	$	71,125	$	59,893	$	138,180	$	104,873
Calculation of Core FFO	Calculation of Core FFO									Calculation of Core FFO
Nareit FFO attributable to stockholders and OP unit holders	Nareit FFO attributable to stockholders and OP unit holders	$	59,893	$	49,960	$	104,873	$	118,207	Nareit FFO attributable to stockholders and OP unit holders	$	71,125	$	59,893	$	138,180	$	104,873
Adjustments:	Adjustments:									Adjustments:
Depreciation and amortization of corporate assets	Depreciation and amortization of corporate assets	933		1,478		1,933		2,888		Depreciation and amortization of corporate assets	920		933		1,826		1,933
Change in fair value of earn-out liability	Change in fair value of earn-out liability	2,000		—		18,000		(10,000)		Change in fair value of earn-out liability	—		2,000		1,809		18,000
Transaction and acquisition expenses										Transaction and acquisition expenses	2,035		934		4,080		1,075
Loss on extinguishment or modification of debt and other, net										Loss on extinguishment or modification of debt and other, net	129		419		1,029		1,110
Amortization of unconsolidated joint venture basis differences	Amortization of unconsolidated joint venture basis differences	79		254		825		721		Amortization of unconsolidated joint venture basis differences	175		79		219		825
Loss on extinguishment of debt, net		419		—		1,110		73
Transaction and acquisition expenses		934		14		1,075		59
Realized performance income(1)										Realized performance income(1)	(2,546)		—		(2,742)		—
Core FFO	Core FFO	$	64,258	$	51,706	$	127,816	$	111,948	Core FFO	$	71,838	$	64,258	$	144,401	$	127,816

Nareit FFO Attributable to Stockholders and OP Unit Holders/Core FFO per Share(1)
Weighted-average common shares outstanding - diluted		107,175		111,165		107,102		111,140
Nareit FFO Attributable to Stockholders and OP Unit Holders/Core FFO per diluted share										Nareit FFO Attributable to Stockholders and OP Unit Holders/Core FFO per diluted share
Weighted-average shares of common stock outstanding - diluted										Weighted-average shares of common stock outstanding - diluted	129,117		107,175		128,857		107,102
Nareit FFO attributable to stockholders and OP unit holders per share - diluted	Nareit FFO attributable to stockholders and OP unit holders per share - diluted	$	0.56	$	0.45	$	0.98	$	1.06	Nareit FFO attributable to stockholders and OP unit holders per share - diluted	$	0.55	$	0.56	$	1.07	$	0.98
Core FFO per share - diluted	Core FFO per share - diluted	$	0.60	$	0.47	$	1.19	$	1.01	Core FFO per share - diluted	$	0.56	$	0.60	$	1.12	$	1.19

(1)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 six months ended June 30, 2021 and 2020, and, accordingly, their impact was included in the weighted-average common shares used in their respective per share calculations. For the three months ended June 30, 2020, restricted stock units had an anti-dilutive effect upon the calculation of earnings per share and thus were excluded. For detailsRealized performance income includes fees received related to the ~~calculation~~achievement of ~~earnings per share, see Note 10.~~

certain performance targets in our NRP joint venture.


PHILLIPS EDISON & COMPANY JUNE 30, ~~2021~~2022 FORM 10-Q									3632

~~Table of Contents~~

EBITDAre and 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 June 30,				Six Months Ended June 30,				Year Ended December 31,			Three Months Ended June 30,				Six Months Ended June 30,				Year Ended December 31,
		2021		2020		2021		2020		2020			2022		2021		2022		2021		2021
Calculation of EBITDAre	Calculation of EBITDAre											Calculation of EBITDAre
Net income (loss)		$	6,390	$	(6,413)	$	6,507	$	4,786	$	5,462
Net income												Net income	$	15,255	$	6,390	$	26,653	$	6,507	$	17,233
Adjustments:	Adjustments:											Adjustments:
Depreciation and amortization	Depreciation and amortization	56,587		56,370		111,928		112,597		224,679		Depreciation and amortization	60,769		56,587		117,995		111,928		221,433
Interest expense, net	Interest expense, net	19,132		22,154		39,195		44,929		85,303		Interest expense, net	17,127		19,132		35,326		39,195		76,371
(Gain) loss on disposal of property, net		(3,744)		541		(17,585)		2,118		(6,494)
Gain on disposal of property, net												Gain on disposal of property, net	(2,793)		(3,744)		(4,161)		(17,585)		(30,421)
Impairment of real estate assets	Impairment of real estate assets	1,056		—		6,056		—		2,423		Impairment of real estate assets	—		1,056		—		6,056		6,754
Federal, state, and local tax expense	Federal, state, and local tax expense	165		180		331		209		491		Federal, state, and local tax expense	97		165		194		331		327
Adjustments related to unconsolidated joint ventures	Adjustments related to unconsolidated joint ventures	(535)		1,391		597		2,568		3,355		Adjustments related to unconsolidated joint ventures	(885)		(535)		134		597		1,431
EBITDAre	EBITDAre	$	79,051	$	74,223	$	147,029	$	167,207	$	315,219	EBITDAre	$	89,570	$	79,051	$	176,141	$	147,029	$	293,128
Calculation of Adjusted EBITDAre	Calculation of Adjusted EBITDAre											Calculation of Adjusted EBITDAre
EBITDAre	EBITDAre	$	79,051	$	74,223	$	147,029	$	167,207	$	315,219	EBITDAre	$	89,570	$	79,051	$	176,141	$	147,029	$	293,128
Adjustments:	Adjustments:											Adjustments:
Change in fair value of earn-out liability	Change in fair value of earn-out liability	2,000		—		18,000		(10,000)		(10,000)		Change in fair value of earn-out liability	—		2,000		1,809		18,000		30,436
Transaction and acquisition expenses	Transaction and acquisition expenses	934		14		1,075		59		539		Transaction and acquisition expenses	2,035��		934		4,080		1,075		5,363
Amortization of unconsolidated joint venture basis differences	Amortization of unconsolidated joint venture basis differences	79		254		825		721		1,883		Amortization of unconsolidated joint venture basis differences	175		79		219		825		1,167
Other impairment charges		—		—		—		—		359
Realized performance income(1)												Realized performance income(1)	(2,546)		—		(2,742)		—		(675)
Adjusted EBITDAre	Adjusted EBITDAre	$	82,064	$	74,491	$	166,929	$	157,987	$	308,000	Adjusted EBITDAre	$	89,234	$	82,064	$	179,507	$	166,929	$	329,419

(1)Realized performance income includes fees received related to the achievement of certain performance targets in our NRP joint venture.


LIQUIDITY AND CAPITAL RESOURCES

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

•investments in real estate;

•cash distributions to stockholders;

•~~investments in real estate;~~redevelopment and repositioning projects;

•capital expenditures and leasing costs;

•~~redevelopment and repositioning projects~~; and

•principal and interest payments on our outstanding ~~indebtedness~~.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;

•~~proceeds~~borrowings from ~~equity and debt financings, including borrowings under~~ our unsecured revolving credit ~~facility;~~facility and proceeds from debt financings;

•proceeds from any ATM offering activities;

•distributions received from our 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 JUNE 30, ~~2021~~2022 FORM 10-Q									3733

~~Table of Contents~~

IMPACT OF THE UNDERWRITTEN ~~INITIAL PUBLIC OFFERING~~IPO—On July 19, 2021, we ~~completed an~~closed our underwritten IPO, from which we received gross proceeds of $547.4 million. The underwritten IPO has allowed us access to forms of capital not previously available to us as follows:

•In October 2021, we settled the registered offering of $350 million aggregate principal amount of 2.625% senior notes, which resulted in gross proceeds of $345.4 million.

•In February 2022, we filed an automatically effective shelf registration statement on Form S-3 providing for the public offering and sale, from time to time, by us of our preferred stock, common stock, debt securities, depository shares, warrants, right, units, and guarantees of debt securities and by the Operating Partnership of its debt securities, in each case in unlimited amounts.

•In connection with our February 2022 Form S-3 filing, we commenced the ATM program through which we may offer and sell shares of our common stock having an aggregate offering price of up to $250 million. During the three months ended June 30, 2022, we issued ~~17.0~~1.9 million shares of our common stock ~~at an offering price of $28.00 per share. We used a portion of~~under the ATM program for net proceeds ~~to reduce our leverage and expect to use~~of $63.0 million, after approximately $0.6 million in commissions. As of June 30, 2022, $186.3 million of common stock remained available for issuance under 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 fromATM program. In July ~~14, 2021 to purchase up to~~2022, we issued an additional ~~2.55~~0.8 million shares of our common stock atunder the ~~underwritten IPO~~ATM program for net proceeds of $26.2 million, after approximately $0.3 million in commissions. We received a weighted-average price ~~less underwriting discounts and commissions. On~~of $34.23 per share for the 2.6 million shares of commons stock sold under the ATM program through July ~~29, 2021, the underwriters exercised their option.~~2022.

DEBT—The following table summarizes information about our debt as of June 30, ~~2021~~2022 and December 31, ~~2020~~2021 (dollars in thousands):


		June 30, 2021			December 31, 2020				June 30, 2022			December 31, 2021
Total debt obligations, gross	Total debt obligations, gross	$	2,241,495		$	2,307,686		Total debt obligations, gross	$	1,895,109		$	1,914,082
Weighted-average interest rate	Weighted-average interest rate	2.9		%	3.1		%	Weighted-average interest rate	3.2		%	3.3		%
Weighted-average term (in years)	Weighted-average term (in years)	3.7			4.1			Weighted-average term (in years)	4.9			5.2

Revolving credit facility capacity(1)	Revolving credit facility capacity(1)	$	500,000		$	500,000		Revolving credit facility capacity(1)	$	800,000		$	500,000
Revolving credit facility availability(2)	Revolving credit facility availability(2)	489,329			490,404			Revolving credit facility availability(2)	740,706			489,329

(1)The revolving credit facility matures in January 2026, extendable at our option to January 2027. In ~~July 2021, we refinanced~~addition, the revolving credit facility ~~and exercised~~also includes an accordion feature that permits us to increase our ~~option~~aggregate borrowing capacity thereunder to ~~extend its maturity as noted below.~~up to $1 billion, subject to the satisfaction of certain conditions.

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

In ~~July 2021,~~May 2022, we ~~took steps~~amended our credit facility agreement to, ~~reduce~~among other things, increase the total amount available under our ~~leverage, lower our cost of debt, and appropriately ladder our debt maturities as follows:~~

•~~On July 2, 2021, we completed the Refinancing. In connection with the Refinancing, we paid off the $472.5 million term loan due in 2025. The~~unsecured revolving credit facility ~~will~~from $500 million to $800 million. The unsecured revolving credit facility also includes an accordion feature that permits us to increase our aggregate borrowing capacity thereunder to up to $1 billion, subject to the satisfaction of certain conditions. The unsecured revolving credit facility is scheduled to mature in January 2026, extendable at our option to January 2027. In addition to expanding the borrowing capacity, the Amendment replaces LIBOR with SOFR as the benchmark interest rate for the unsecured revolving credit facility and the two $240 million senior unsecured term loan tranches, ~~will mature~~maturing in November 2025 and July ~~2026, respectively.~~2026.

•~~On July 20,~~The 2.625% senior notes issued by the Operating Partnership pursuant to an effective registration statement in October 2021 ~~we used proceeds from~~were, and debt securities of the ~~underwritten IPO~~Operating Partnership registered under our automatically effective shelf registration statement on Form S-3 filed in February 2022 will be, fully and unconditionally guaranteed by us. At June 30, 2022, the Operating Partnership had issued and outstanding its 2.625% senior notes. The obligations of the Operating Partnership to ~~retire our $375.0 million term loan maturing in 2022.~~

~~We have been assigned investment grade ratings from Moody’s Investors Service (Baa3)~~pay principal, premiums, if any, and ~~S&P Global Ratings (BBB-) which may allow~~interest on the 2.625% senior notes are fully and unconditionally guaranteed by us ~~access to additional capital markets. We expect to save approximately $7.2 million in interest annually as~~on a senior basis. As a result of the amendments to SEC Rule 3-10 of Regulation S-X, subsidiary issuers of obligations guaranteed by the parent are not required to provide separate financial statements, provided that: (i) the subsidiary obligor is consolidated into the parent company’s consolidated financial statements; (ii) the parent guarantee is “full and unconditional”; and (iii) subject to certain exceptions as set forth below, the alternative disclosure required by Rule 13-01 of Regulation S-X is provided, which includes narrative disclosure and summarized financial information. We meet the conditions of this requirement and thus, are not presenting separate financial statements. Furthermore, as permitted under Rule 13-01(a)(4)(vi) of Regulation S-X, we have excluded the summarized financial information for the Operating Partnership because the assets, liabilities, and results of operations of the Operating Partnership are not materially different than the corresponding in our ~~debt activity~~consolidated financial statements, and ~~our investment grade ratings. Further, our weighted-average interest rate was 3.1% as of June 30, 2021, as adjusted~~management believes such summarized financial information would be repetitive and would not provide incremental value to ~~reflect certain material July debt transactions described above.~~

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 June 30, 2021 and December 31, 2020 is summarized below. We have also presented this allocation as of June 30, 2021 on an adjusted basis to reflect certain material July debt transactions described above (in thousands):

June 30, 2021
June 30, 2021
(As Adjusted)
December 31, 2020
As to interest rate:
Fixed-rate debt $ 1,548,995 $ 1,548,995 $ 1,727,186
Variable-rate debt 692,500 325,000 580,500
Total $ 2,241,495 $ 1,873,995 $ 2,307,686
As to collateralization:
Unsecured debt $ 1,622,500 $ 1,255,000 $ 1,622,500
Secured debt 618,995 618,995 685,186
Total $ 2,241,495 $ 1,873,995 $ 2,307,686

Our maturity schedule as of June 30, 2021 with respective principal payment obligations, excluding finance lease liabilities, market debt adjustments, and deferred financing expenses, is presented below on an adjusted basis to reflect certain material July debt transactions described above (in thousands):

2021 2022 2023 2024 2025 Thereafter Total
Term loans $ — $ — $ 300,000 $ 475,000 $ 240,000 $ 240,000 $ 1,255,000
Secured debt 10,068 61,171 66,702 28,124 27,877 424,925 618,867
Total $ 10,068 $ 61,171 $ 366,702 $ 503,124 $ 267,877 $ 664,925 $ 1,873,867
investors.


PHILLIPS EDISON & COMPANY JUNE 30, ~~2021~~2022 FORM 10-Q									3834

~~Table of Contents~~

FINANCIAL LEVERAGE RATIOS—We believe our net debt to Adjusted EBITDAre, net debt to total enterprise value, and debt covenant compliance as of June 30, ~~2021~~2022 allow us access to future borrowings as needed in the near term. The following table presents our calculation of net debt and total enterprise value, inclusive of our prorated portion of net debt and cash and cash equivalents owned through our unconsolidated joint ventures, as of June 30, ~~2021~~2022 and December 31, ~~2020~~2021 (in thousands):


		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
Net debt:	Net debt:					Net debt:
Total debt, excluding market adjustments and deferred financing expenses		$	2,272,268	$	2,345,620
Total debt, excluding discounts, market adjustments, and deferred financing expenses						Total debt, excluding discounts, market adjustments, and deferred financing expenses	$	1,919,467	$	1,941,504
Less: Cash and cash equivalents	Less: Cash and cash equivalents	22,633		104,952		Less: Cash and cash equivalents	25,072		93,109
Total net debt	Total net debt	$	2,249,635	$	2,240,668	Total net debt	$	1,894,395	$	1,848,395

Enterprise value:	Enterprise value:					Enterprise value:
Net debt	Net debt	$	2,249,635	$	2,240,668	Net debt	$	1,894,395	$	1,848,395
Total equity value(1)		3,386,803		2,797,234
Total equity market capitalization(1)(2)						Total equity market capitalization(1)(2)	4,354,726		4,182,996
Total enterprise value	Total enterprise value	$	5,636,438	$	5,037,902	Total enterprise value	$	6,249,121	$	6,031,391

(1)Total equity ~~value~~market capitalization is calculated as ~~the number of common~~diluted shares ~~and OP units outstanding~~ multiplied by the ~~EVPS~~closing market price per share, which includes 130.3 million and 126.6 million diluted shares as of June 30, ~~2021~~2022 and December 31, ~~2020, respectively. There were 107.0 million diluted shares outstanding with an EVPS~~2021, respectively, and the closing market price per share of ~~$31.65~~$33.41 and $33.04 as of June 30, 2022 and December 31, 2021, ~~and 106.6 million~~respectively.

(2)Fully diluted shares ~~outstanding with an EVPS~~include common stock and OP units as of ~~$26.25~~June 30, 2022 and Class B common stock, common stock, and OP units as of December 31, ~~2020.~~2021.

The following table presents our calculation of net debt to Adjusted EBITDAre and net debt to total enterprise value as of June 30, ~~2021~~2022 and December 31, ~~2020~~2021 (dollars in thousands):


		June 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
Net debt to Adjusted EBITDAre - annualized:	Net debt to Adjusted EBITDAre - annualized:					Net debt to Adjusted EBITDAre - annualized:
Net debt	Net debt	$	2,249,635	$	2,240,668	Net debt	$	1,894,395	$	1,848,395
Adjusted EBITDAre - annualized(1)	Adjusted EBITDAre - annualized(1)	316,942		308,000		Adjusted EBITDAre - annualized(1)	341,997		329,419
Net debt to Adjusted EBITDAre - annualized	Net debt to Adjusted EBITDAre - annualized	7.1x		7.3x		Net debt to Adjusted EBITDAre - annualized	5.5x		5.6x

Net debt to total enterprise value
Net debt to total enterprise value:						Net debt to total enterprise value:
Net debt	Net debt	$	2,249,635	$	2,240,668	Net debt	$	1,894,395	$	1,848,395
Total enterprise value	Total enterprise value	5,636,438		5,037,902		Total enterprise value	6,249,121		6,031,391
Net debt to total enterprise value	Net debt to total enterprise value	39.9%		44.5%		Net debt to total enterprise value	30.3%		30.6%

(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~~“Non-GAAP Measures - EBITDAre and Adjusted EBITDA~~re”~~ re~~of this filing on Form 10-Q~~” above for a reconciliation to Net ~~Income (Loss).~~Income.

CAPITAL EXPENDITURES AND REDEVELOPMENT ACTIVITY—We make capital expenditures during the course of normal operations, including maintenance capital expenditures and tenant improvements, as well as value-enhancing anchor space repositioning and redevelopment, ground-up outparcel development, and other accretive projects.


PHILLIPS EDISON & COMPANY JUNE 30, 2022 FORM 10-Q									35

During the six months ended June 30, ~~2021~~2022 and ~~2020,~~2021, we had capital spend of $42.9 million and $30.2 million, ~~and $28.5 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~~(in thousands):


		Six Months Ended June 30,					Six Months Ended June 30,
		2021		2020			2022		2021
Capital expenditures for real estate(1):
Capital expenditures for real estate:						Capital expenditures for real estate:
Capital improvements	Capital improvements	$	3,101	$	2,142	Capital improvements	$	4,822	$	3,101
Tenant improvements	Tenant improvements	9,557		5,840		Tenant improvements	11,924		9,557
Redevelopment and development	Redevelopment and development	15,658		18,659		Redevelopment and development	22,590		15,658
Total capital expenditures for real estate	Total capital expenditures for real estate	28,316		26,641		Total capital expenditures for real estate	39,336		28,316
Corporate asset capital expenditures	Corporate asset capital expenditures	1,007		810		Corporate asset capital expenditures	2,085		1,007
Capitalized indirect costs(1)	Capitalized indirect costs(1)	907		1,089		Capitalized indirect costs(1)	1,525		907
Total capital spending activity	Total capital spending activity	$	30,230	$	28,540	Total capital spending activity	$	42,946	$	30,230

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

We anticipate that obligations related to capital improvements, as well as redevelopment and development, in 2022 can be met with cash flows from operations, cash flows from dispositions, or borrowings on our unsecured revolving credit facility.

Generally, we expect our development and redevelopment projects to stabilize within 24 months. Our underwritten incremental unlevered yields on development and redevelopment projects are expected to range between ~~9% - 11%~~10%-12%. Our current in process projects represent an estimated total investment of ~~$36.3 million, and the total underwritten incremental yield range on this estimated investment is approximately 9.5% - 10.5%.~~$59.5 million. Actual incremental unlevered yields may vary


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

~~Table of Contents~~

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

ACQUISITION ACTIVITY—We ~~continually monitor~~are actively monitoring the commercial real estate market for properties that have future growth potential, are located in attractive demographic markets, and support our business objectives. We expect to continue to make strategic acquisitions during the remainder of 2022. The following table highlights our property acquisitions (dollars in thousands):


		Six Months Ended June 30,					Six Months Ended June 30,
		2021		2020			2022		2021
Number of properties acquired	Number of properties acquired	2		—		Number of properties acquired	4		2
Number of outparcels acquired(1)	Number of outparcels acquired(1)	3		2		Number of outparcels acquired(1)	1		3
Total acquisition price		$	40,459	$	4,343
Contract price						Contract price	$	169,342	$	40,190
Total price of acquisitions(2)						Total price of acquisitions(2)	170,186		40,459

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

(2)Total price of acquisitions includes closing costs and credits.

DISPOSITION ACTIVITY—We ~~are actively evaluating~~continually evaluate our portfolio of assets for opportunities to make strategic dispositions of assets that no longer meet our growth and investment objectives or assets that have stabilized in order to capture their value. ~~We expect to continue to make strategic dispositions during the remainder of 2021.~~ The following table highlights our property dispositions (dollars in thousands):


		Six Months Ended June 30,					Six Months Ended June 30,
		2021		2020			2022		2021
Number of properties sold(1)		13		4
Number of properties sold(1)						Number of properties sold(1)	3		13
Number of outparcels sold~~(3)~~(2)	Number of outparcels sold~~(3)~~(2)	1		—		Number of outparcels sold~~(3)~~(2)	2		1
Proceeds from sale of real estate		$	119,638	$	25,778
Gain (loss) on sale of property, net(4)		18,713		(1,436)
Contract price						Contract price	$	28,342	$	125,247
Proceeds from sale of real estate, net(3)						Proceeds from sale of real estate, net(3)	27,077		119,638
Gain on sale of property, net(4)						Gain on sale of property, net(4)	4,161		18,713

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

(2)~~One outparcel sold during~~During the six months ended June 30, 2021, ~~was~~the one outparcel sale included the only remaining portion of ~~one of our properties, and~~a property we previously owned; therefore, the sale resulted in a reduction in our total property count.

(3)~~In addition to the one outparcel sold during~~Total proceeds from sale of real estate, net includes closing costs and credits.

~~(4)The gain (loss) on sale of property, 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.~~operations includes miscellaneous write-off activity, which is not included in gain on sale of property, net, presented above.


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DISTRIBUTIONS—~~Distributions to our common stockholders and OP unit holders, including key financial metrics for comparison purposes, for the six months ended June 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 (Loss).

We paid 2022 monthly distributions of ~~$0.085~~$0.09 per share, or ~~$1.02~~$1.08 annualized, for ~~the months of December 2020, and~~ each month beginning January ~~2021~~2022 through July ~~2021.~~2022. On August ~~4, 2021, the~~3, 2022, our Board authorized a ~~monthly~~ distribution ~~in the amount~~for August 2022 of ~~$0.085~~$0.09 per share ~~payable on September 1, 2021~~ to the stockholders of record at the close of business on August ~~16, 2021.~~15, 2022. OP unit holders will receive distributions at the same rate as common stockholders, subject to certain withholdings.

To maintain our qualification as a REIT, we must make aggregate annual distributions to our stockholders of at least 90% of our REIT taxable income (which is computed without regard to the dividends paid deduction or net capital gain, and which does not necessarily equal net income or loss as calculated in accordance with GAAP). We generally will not be subject to U.S. federal income tax on the income that we distribute to our stockholders each year due to meeting the REIT qualification requirements. However, we may be subject to certain state and local taxes on our income, property, or net worth and to federal income and excise taxes on our undistributed income.

We have not established a minimum distribution level, and our charter does not require that we make distributions to our stockholders.

~~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. The DRIP has been suspended since April 2021. The SRP, which was limited to repurchases resulting from the DDI of stockholders, has been suspended since March 2021, and the SRP for standard repurchases had been suspended since August 2019.


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CASH FLOW ACTIVITIES—As of June 30, ~~2021,~~2022, we had cash and cash equivalents and restricted cash of ~~$111.4~~$43.7 million, a net cash decrease of ~~$20.5~~$71.8 million during the six months ended June 30, ~~2021.~~2022.

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


		Six Months Ended June 30,									Six Months Ended June 30,
		2021		2020		$ Change		% Change			2022		2021		$ Change		% Change(1)
Net cash provided by operating activities	Net cash provided by operating activities	$	129,897	$	89,906	$	39,991	44.5	%	Net cash provided by operating activities	$	142,499	$	129,897	$	12,602	9.7	%
Net cash provided by (used in) investing activities		49,837		(6,466)		56,303		NM
Net cash (used in) provided by investing activities										Net cash (used in) provided by investing activities	(185,893)		49,837		(235,730)		NM
Net cash used in financing activities	Net cash used in financing activities	(200,270)		(99,218)		(101,052)		101.8	%	Net cash used in financing activities	(28,448)		(200,270)		171,822		85.8	%

(1)Line items that result in a percent change that exceed certain limitations are considered not meaningful (“NM”) and indicated as such.

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

•Property operations 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. The increase in property operations was primarily due to a $9.3 million, or 5.5%, improvement in same center NOI as compared to the same period in 2021, and the execution of our acquisition strategy. During the six months ended June 30, ~~2021,~~2022, we had a net cash ~~inflow~~outlay of ~~$2.1~~$3.7 million from changes in working capital as compared to a net cash ~~outlay~~inflow of ~~$24.3~~$2.1 million during the same period in ~~2020.~~2021. This change was primarily driven by ~~improved~~higher bonus payments, lower receivables collections ~~on amounts~~ due ~~from Neighbors as well as expense reduction initiatives,~~to the stabilization of collections in 2022 compared to the recovery of prior year receivables in 2021, and ~~was~~the timing of interest payments, partially offset by ~~higher leasing commissions. Additionally, we had an increase in returns on our investments in unconsolidated joint ventures.~~the timing of real estate tax payments.

•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 ~~$4.7~~$7.2 million for the six months ended June 30, ~~2021, a decrease~~2022, an increase of ~~$0.3~~$2.6 million as compared to the same period in ~~2020.~~2021. The increase in fees and management income was primarily due to our joint venture with NRP from which we recognized income of $2.7 million related to NRP’s achievement of certain performance targets.

•Cash paid for interest—During the six months ended June 30, ~~2021,~~2022, we paid ~~$36.8~~$34.1 million for interest, a decrease of ~~$4.1~~$2.7 million over the same period in ~~2020, largely~~2021, primarily due ~~to: (i) lower borrowings as a result of~~to our debt activity in 2021, including early repayments of ~~debt; (ii) the repayment of our draw on the revolver during the second quarter of 2020; and (iii) lower interest rates due to the decrease in LIBOR and expiring interest rate swaps.~~debt outstanding.

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

•Real estate acquisitions—During the six months ended June 30, ~~2021,~~2022, our acquisitions resulted in a total cash outlay of ~~$40.5~~$170.2 million, as compared to a total cash outlay of ~~$4.3~~$40.5 million during the same period in ~~2020.~~2021.

•Real estate dispositions—During the six months ended June 30, ~~2021,~~2022, our dispositions resulted in a net cash inflow of ~~$119.6~~$27.1 million, as compared to a net cash inflow of ~~$25.8~~$119.6 million during the same period in ~~2020.~~2021.

•Capital expenditures—We invest capital into leasing our properties and maintaining or improving the condition of our properties. During the six months ended June 30, ~~2021,~~2022, we paid ~~$30.2~~$42.9 million for capital expenditures, an increase of ~~$1.7~~$12.7 million over the same period in ~~2020,~~2021, primarily due to ~~the timing of~~an increase in tenant improvements owing largely to our ~~development~~leasing volume during 2022 and ~~redevelopment projects and reduced spend during the same period period a year ago.~~

•~~Return of investment in unconsolidated joint ventures~~—During the six months ended June 30, 2021, we had a return of investment in unconsolidated joint ventures of $3.9 million, including $2.0 million in connection with NRP primarily as a result of property dispositions. During the six months ended June 30, 2020, we had a return of investment in unconsolidated joint ventures of $0.6 million.

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

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

•Debt borrowings and payments—During the six months ended June 30, ~~2021,~~2022, we had ~~$66.2~~$20.6 million in net repayment of debt primarily as a result of early repayments of mortgage ~~loans.~~loans, partially offset by our net borrowings under our revolving credit facility. During the six months ended June 30, ~~2020~~2021, we had net payments of ~~$35.2~~$66.2 million, primarily as a result of ~~a pay down in January 2020~~early repayments of ~~$30.0 million on term loan debt maturing in 2021.~~

•~~Distributions to stockholders and OP unit holders~~—Cash used for distributions to common stockholders and OP unit holders decreased $2.3 million for the six months ended June 30, 2021 as compared to the same period in 2020, due to a reduction of the distribution rate.

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

mortgage loans.


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~~CONTRACTUAL COMMITMENTS AND CONTINGENCIES~~

~~We have debt obligations related~~•Distributions to ~~both our secured~~stockholders and ~~unsecured debt. In addition, we have operating leases pertaining~~OP unit holders—Cash used for distributions to ~~office equipment~~common stockholders and OP unit holders increased $14.6 million for ~~our business as well as ground leases at certain of our shopping centers. We are presenting our future contractual commitments and contingencies as of~~the six months ended June 30, 2021 on an adjusted basis to reflect our material debt transactions occurring in July 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 amounts2022 as ~~they arise through cash from operations or borrowings. The following table details our pro forma contractual obligations as of June 30, 2021 (in thousands):~~

    Payments Due by Period
    Total 2021 2022 2023 2024 2025 Thereafter
Debt obligations - principal
   payments(1)
$ 1,873,867 $ 10,068 $ 61,171 $ 366,702 $ 503,124 $ 267,877 $ 664,925
Debt obligations - interest
   payments(2)
236,284 27,875 53,942 48,516 36,736 24,323 44,892
Operating lease obligations 8,713 424 823 672 546 317 5,931
Finance lease obligations 134 25 45 40 24 — —
Total    $ 2,118,998 $ 38,392 $ 115,981 $ 415,930 $ 540,430 $ 292,517 $ 715,748

~~(1)~~In July 2021, we amended our $500 million revolving credit facility to extend the maturity from October 2021 to January 2026, and lower the interest rate spread from 1.40% over LIBOR to 1.35% over LIBOR. Additionally, the new terms include two six-month maturity extension options. As of June 30, 2021, we have 0 outstanding balance on our revolving credit facility.

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

~~Our portfolio debt instruments and the unsecured revolving credit facility contain certain covenants and restrictions. The following list provides an update to certain restrictive covenants specific~~compared to the ~~unsecured revolving credit facility and unsecured term loans that were deemed significant~~same period in 2021, primarily due to an increase in shares of common stock outstanding 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 a period of four consecutive fiscal quarters following a material acquisition;~~underwritten IPO.

•~~limits~~Issuance of common stock—During the ~~ratio~~six months ended June 30, 2022, we issued 1.9 million shares of ~~secured debt to total asset value, as defined, to 35% or less with a surge to 40%~~our common stock under the ATM program for ~~a period~~net proceeds of ~~four consecutive fiscal quarters following a material acquisition;~~$63.0 million, after approximately $0.6 million in commissions.

•~~requires~~Share repurchases—Cash outflows for share repurchases decreased by $77.8 million for the ~~fixed-charge ratio,~~six months ended June 30, 2022 as ~~defined,~~compared to ~~be 1.5:1 or greater~~

•~~limits~~ the ~~ratio~~same period in 2021, primarily as a result 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~~

•~~if we were to lose our investment grade rating~~tender offer which was settled in ~~the future, the current tangible net worth will be required to exceed the minimum tangible net worth, as defined, at that time.~~January 2021.


CRITICAL ACCOUNTING ~~POLICIES AND~~ ESTIMATES

~~Our 2020~~“Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates” of our 2021 Annual Report on Form 10-K, ~~originally~~ filed with the SEC on ~~March 12, 2021,~~February 16, 2022, 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.~~assets and rental income. There have been no significant changes to our critical accounting policies during ~~2021.~~2022.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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 uponThere have been no material changes from the ~~facts~~quantitative 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 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 a change in interest rates. Thequalitative disclosures about market risk ~~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 June 30, 2021, we had five interest rate swaps that fixed LIBOR on $930 million of our unsecured term loan facilities. In July 2021, we paid down $375 million~~disclosed in unsecured term loan debt using proceeds from our underwritten IPO. Taking into effect our pay down of this unsecured term loan as if such pay down occurred on June 30, 2021 (“as adjusted”), we had not


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fixed the interest rate on $325 million of our unsecured debt through derivative financial instruments. Further, as of June 30, 2021, we estimate that a one percentage point increase in interest rates on the outstanding balance of our variable rate debt (as adjusted) would result in approximately $3.3 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, other than the effect of the unsecured term loan pay down as described above. 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~~2021 Annual Report on Form 10-K ~~originally~~ filed with the SEC on ~~March 12, 2021 for more details associated with our exposure to credit risk and market risk.~~February 16, 2022.

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 June 30, ~~2021.~~2022. 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 June 30, ~~2021.~~2022.

Changes in Internal Control over Financial Reporting

During the quarter ended June 30, ~~2021,~~2022, 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 risk factors set forth 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 wereThere have been no material changes to ~~the~~our risk factors ~~disclosed~~and other risks and uncertainties as described in “Part I, Item 1A. Risk Factors” of our ~~2020~~2021 Annual Report on Form 10-K filed with the SEC on ~~March 12, 2021.~~

The ongoing COVID-19 pandemic has had, 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, there are

February 16, 2022.


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~~continuing economic impacts from the COVID-19 pandemic which could result in future store closures or could reduce the demand for leasing space in our shopping centers.~~

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 July 20, 2021, we have $5.3 million of outstanding payment plans with our Neighbors, and we had recorded rent abatements of approximately $0.7 million during 2021. These payment plans and rent abatements represented approximately 2.0% and 0.3% of portfolio rental income for the six months ended June 30, 2021, respectively. As of July 20, 2021, approximately 54% of payments are scheduled to be received by December 31, 2021 for all executed payment plans, and the weighted-average term over which we expect to receive remaining amounts owed on executed payment plans is approximately twelve 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 July 20, 2021, we have collected approximately 95% of rent and recoveries billed during the second through fourth quarters of 2020, and approximately 98% of rent and recoveries billed during the first and second quarters 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.

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.


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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 report 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 our consolidated subsidiary, Phillips Edison Grocery Center Operating Partnership I, L.P. (the “Operating Partnership”), entered into tax protection agreements with certain protected partners, which may limit the Operating Partnership’s ability to sell or otherwise dispose of certain shopping centers and may require the Operating Partnership to maintain certain debt levels that otherwise would not be required to operate its business.

We and the Operating Partnership entered into a tax protection agreement on October 4, 2017 (the “2017 TPA”) 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 (“OP units”) and cash. Pursuant to the 2017 TPA, if the Operating Partnership: (i) sells, exchanges, transfers or otherwise disposes of certain shopping centers 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 Mr. Edison, against certain resulting tax liabilities. Our tax indemnification obligations include a tax gross-up. As of June 30, 2021, 36 of our 272 wholly-owned properties, comprising approximately 11.4% of our ABR, are subject to the protection described in clause (i) above, and the potential “make-whole amount” on the estimated aggregate amount of built-in gain subject to such protection is approximately $152.6 million.

We and the Operating Partnership entered into an additional tax protection agreement (the “2021 TPA”) on July 19, 2021 with Mr. Edison; Devin I. Murphy, our President; and Robert F. Myers, our Chief Operating Officer and Executive Vice President, which will become effective upon the expiration of the 2017 TPA. The 2021 TPA generally has the following terms: (i) the 2021 TPA will severally provide to Mr. Edison, Mr. Murphy and Mr. Myers the same protection provided under the 2017 TPA until 2031, so long as (a) Mr. Edison, Mr. Murphy or Mr. Myers (or their permitted transferees), as applicable, individually owns at least 65% of the OP units owned by him as of the date of the execution of the 2021 TPA and (b) in the case of Mr. Murphy or Mr. Myers, Mr. Edison individually owns at least 65% of the OP units owned by him as of the date of the execution of the 2021 TPA; and (ii) the 2021 TPA will provide that following the expiration of the four-year tax protection period under the 2021 TPA, for so long as Mr. Edison holds at least $5.0 million in value of OP units, (a) Mr. Edison will have the opportunity to guarantee debt of the Operating Partnership or enter into a “deficit restoration” obligation, and (b) the Operating Partnership will provide reasonable notice to Mr. Edison before effecting a significant transaction reasonably likely to result in the recognition of more than one-third of the built-in gain allocated to Mr. Edison that is protected under the 2017 TPA as of the date that the 2021 TPA is executed, and will consider in good faith any proposal made by Mr. Edison relating to structuring such transaction in a manner to avoid or mitigate adverse tax consequences to him.

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 or more of these shopping centers, it may be economically prohibitive for us to do so until the expiration of the applicable protection period 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 agreements could, during their term, restrict our ability to take actions or make decisions that otherwise would be in our best interests.


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

~~Table of Contents~~

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

UNREGISTERED SALE OF SECURITIES—During the three months ended June 30, ~~2021,~~2022, we issued ~~28,000~~an aggregate of approximately 72,000 shares of common stock in redemption of ~~28,000~~approximately 72,000 OP units.

~~As described~~ These shares of common stock were issued in ~~Item 5. “Other Information”, our Board has approved the termination~~reliance on an exemption from registration under Section 4(a)(2) of the ~~share~~Securities Act of 1933, as amended. We relied on the exemption under Section 4(a)(2) based upon factual representations received from the limited partners who received the shares of common stock.

SHARE REPURCHASES—We did not have a publicly announced repurchase ~~program (“SRP”)~~plan in effect during the three months ended June 30, 2022. The table below summarizes other repurchases of our common stock made during the three months ended June 30, 2022:


Period	Total Number of Shares Repurchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of a Publicly Announced Plan or Program	Approximate Dollar Value of Shares That May Yet Be Repurchased Under the Program
April 2022	—	$	—	—	N/A
May 2022(1)	3,150	34.99		—	N/A
June 2022	—	—		—	N/A

(1)Represents 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 which were repurchased at an aggregate purchase price of approximately $0.1 million (average price of $34.99 per share).

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

On August 4, 2021, as a result of our underwritten IPO, our Board approved the termination of the Dividend Reinvestment Plan (“DRIP”) and the SRP. The DRIP has been suspended since April 2021. The SRP, which was limited to repurchases resulting from the death, qualifying disability, or the declaration of incompetence of stockholders, has been suspended since March 2021, and the SRP for standard repurchases had been suspended since August 2019.None.


PHILLIPS EDISON & COMPANY JUNE 30, ~~2021~~2022 FORM 10-Q									4739

~~Table of Contents~~

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 May 5, 2022, 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
10.1		~~Phillips Edison & Company, Inc. 2020 Omnibus Incentive Plan~~	~~DEF14A, filed April 7, 2021, Appendix A~~
~~10.2~~		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~~
~~10.3~~		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
~~10.4~~10.2		~~Tax Protection~~First Amendment to the Credit Agreement ~~by and~~ among ~~Phillips Edison & Company, Inc.,~~ Phillips Edison Grocery Center Operating Partnership I, L.P., Phillips Edison & Company, Inc., the lenders party thereto, and ~~each Protected Partner identified~~PNC Bank, National Association as ~~a signatory on Schedule I~~administrative agent, dated May 20, 2022.	Form 8-K, filed ~~July 19, 2021,~~May 20, 2022, Exhibit 10.1
~~10.5~~22.1	*	~~Form~~List of ~~LTIP Listing Equity Grant~~Issuers of Guaranteed Securities	~~Form S-11/A, filed July 7, 2021, Exhibit 10.32~~
~~10.6~~		~~Form of LTIP Listing Equity Grant (Murphy)~~	~~Form S-11/A, filed July 7, 2021, Exhibit 10.33~~
~~10.7~~		~~Form of RSU Listing Equity Grant~~	~~Form S-11/A, filed July 7, 2021, Exhibit 10.34~~
~~10.8~~		~~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
31.2	*	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 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
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
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 JUNE 30, ~~2021~~2022 FORM 10-Q									4840

~~Table of Contents~~

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: August ~~5, 2021~~4, 2022	By:	/s/ Jeffrey S. Edison
		Jeffrey S. Edison
		Chairman of the Board and Chief Executive Officer (Principal Executive Officer)

Date: August ~~5, 2021~~4, 2022	By:	/s/ John P. Caulfield
		John P. Caulfield
		Executive Vice President, Chief Financial Officer, ~~Senior Vice President~~ and Treasurer (Principal Financial Officer)


PHILLIPS EDISON & COMPANY JUNE 30, ~~2021~~2022 FORM 10-Q									4941


	Six Months Ended June 30, 2021 and 2020
	Common Stock			APIC		AOCI		Accumulated Deficit		Total Stockholders’ Equity		Noncontrolling Interests		Total Equity
	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	—	—		—		(39,313)		—		(39,313)		(5,798)		(45,111)
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		1,472		—		—		1,474		518		1,992
Conversion of noncontrolling interests	56	2		1,859		—		—		1,861		(1,861)		—
Other	(2)	—		(256)				(59)		(315)		(3)		(318)
Net income	—	—		—		—		4,181		4,181		605		4,786
Balance at June 30, 2020	96,822	$	2,905	$	2,795,434	$	(60,075)	$	(991,939)	$	1,746,325	$	341,144	$	2,087,469

Balance at January 1, 2021	93,279	$	2,798	$	2,739,358	$	(52,306)	$	(999,491)	$	1,690,359	$	325,570	$	2,015,929
DRIP	280	8		7,360		—		—		7,368		—		7,368
Share repurchases	(24)	0		(123)		—		—		(123)		—		(123)
Change in unrealized value on interest rate swaps	—	—		—		13,584		—		13,584		1,909		15,493
Common distributions declared, $0.510 per share	—	—		—		—		(47,823)		(47,823)		—		(47,823)
Distributions to noncontrolling interests	—	—		—		—		—		—		(6,779)		(6,779)
Share-based compensation	77	2		2,427		—		—		2,429		2,416		4,845
Conversion of noncontrolling interests	28	0		743		—		—		743		(743)		—
Reallocation of operating partnership interests	—	—		(56)		(10)		—		(66)		66		—
Other	0	—		(29)		—		0		(29)		0		(29)
Net income	—	—		—		—		5,697		5,697		810		6,507
Balance at June 30, 2021	93,640	$	2,808	$	2,749,680	$	(38,732)	$	(1,041,617)	$	1,672,139	$	323,249	$	1,995,388


Year	Amount
Remaining 2021	$	191,000
2022	363,187
2023	317,301
2024	263,155
2025	209,307
Thereafter	514,528
Total	$	1,858,478


Balance Sheet Information	Balance Sheet Location	June 30, 2021		December 31, 2020
ROU assets, net - operating leases	Investment in Real Estate	$	4,003	$	3,867
ROU assets, net - operating and finance leases	Other Assets, Net	1,190		1,438
Operating lease liability	Accounts Payable and Other Liabilities	5,619		5,731
Finance lease liability	Debt Obligations, Net	127		164


	Six Months Ended June 30, 2021
	Fair Value		Weighted-Average Useful Life
In-place leases	$	4,155	7
Above-market leases	52		5
Below-market leases	(1,652)		6


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


	June 30, 2021			June 30, 2020
Number of properties	272			284
Number of states	31			31
Total square feet	30,778			31,787
ABR	$	384,916		$	385,696
% ABR from omni-channel grocery-anchored shopping centers	96.0		%	97.0		%
Leased % of rentable square feet:
Total portfolio spaces	94.7		%	95.6		%
Anchor spaces	96.8		%	98.3		%
Inline spaces	90.6		%	90.3		%
Average remaining lease term (in years)(1)	4.5			4.6


	June 30, 2021		June 30, 2021 (As Adjusted)		December 31, 2020
As to interest rate:
Fixed-rate debt	$	1,548,995	$	1,548,995	$	1,727,186
Variable-rate debt	692,500		325,000		580,500
Total	$	2,241,495	$	1,873,995	$	2,307,686
As to collateralization:
Unsecured debt	$	1,622,500	$	1,255,000	$	1,622,500
Secured debt	618,995		618,995		685,186
Total	$	2,241,495	$	1,873,995	$	2,307,686


	Payments Due by Period
	Total		2021		2022		2023		2024		2025		Thereafter
Debt obligations - principal payments(1)	$	1,873,867	$	10,068	$	61,171	$	366,702	$	503,124	$	267,877	$	664,925
Debt obligations - interest payments(2)	236,284		27,875		53,942		48,516		36,736		24,323		44,892
Operating lease obligations	8,713		424		823		672		546		317		5,931
Finance lease obligations	134		25		45		40		24		—		—
Total	$	2,118,998	$	38,392	$	115,981	$	415,930	$	540,430	$	292,517	$	715,748