- Earnings call transcript Q3 2022

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Operator

Good day and welcome to the Phillips Edison & Company's Third Quarter 2022 Earnings Conference Call. Please note that this conference is being recorded. I will now turn the conference over to Kimberly Green, Vice President of Investor Relations.

You may begin.

Kimberly Green

Thank you, operator. joining conference for call. for quarter Edison's everyone earnings XXXX you us Phillips today third Thank Once will to open conclude the we our call Q&A. prepared remarks, we be Relations After on version an today's will call, our website. Investor archived published I'm Financial Executive, Devin Edison; Chief Chairman Jeff Caulfield. John this joined our our Chief call on and our and by Murphy; Officer, President,

certain and These financial statements filings, recent Form measures views most Investor to of company's based of non-GAAP and press website a results today's XX-K performance, forward our we have current our use expectations supplemental reconciliations also As including and reference are the our beliefs reminder, conditions. our earnings packet Information and to our posted discussion Please with to also and about may regarding available which measures. as future earnings management's XX-Q. will a on are information. SEC and our our guidance business on described in these financial presentation in are release various contain and Relations posted market additional uncertainties, forward-looking and that specifically information these website. we future of measures risks note subject GAAP In our today, in discussion we

Our caution these to on forward-looking statements presentation materials. also applies

to call I'd our over the Officer. turn Jeff? Now, Chief like to Jeff Executive Edison,

Jeff Edison

you, joining today. us Thank for Kim. everyone, you, Thank

of our together performance our with midpoint differentiated the operating owning same-center Our centers, This to of neighborhood have with a growth quarter X.X%. in for us guidance has raise integrated of delivered and focused row. third strong NOI strategy platform XXXX shopping allowed another the quarter grocery-anchored

tailwinds results. releasing of deliver and a of has XXXX us strategy are confidence believe occupancy successfully highs continue we results, to positive our leasing as environment our beyond. our growth our in strong execute continue A and in been evidence and reaching with ability in momentum year for spreads. record current reflected that As This XXXX strong head will we into provides to us and

benefit delivery; trends tailwinds. centers to relief low neighborhood growth; shifts work; As being we've suburban increase macroeconomic from to located our physical create low grocery-anchored strong continue of the most new communities; importantly, unemployment; locations of of importance retailer's structural hybrid from and in growing suburban construction; discussed, the the them in These include: wage and student supply urban population benefits lack markets. and last-mile the recognition of debt to in and that

impacts consumer, with on ahead, introduce Looking the combined uncertainty. inflationary interest higher rates

the we the on the our resiliency pandemic, portfolio recession. the aforementioned throughout from This positioned is for with reflect of we resiliency portfolio a as comes combined tailwinds, However, believe following. PECO's well

we seeing to and unlevered the we well-positioned while participate neighbor necessity-based part strong acquisitions will X% talented Our new for grocery-anchored key continue level our volatility big in lack new right-sized and in positioned our development we market, our growth and box occupancy, the retailers in of occupancy growing also neighbors come pipeline the increases through long-term of portfolio. equity credit targeted and increases to expand, are have on Currently, be growth increasing up of capitalize above. IRR strategy return with markets, high demand, format locations activity. contractual record cap to exposure as exercising neighbor costs they team, our to expect continued acquisition mix, growth opportunities our strong diversified moved PECO borrowing arise. cycle-tested organic to rent and and continues and and in our and our a redevelopment continued from an growth to our we our appropriate of external with are profile, With an the regards of lack in future our distressed well and markets, of caution. Acquisitions rates mix,

As per we've share earnings growth. on flow our said focus cash and is

will know each and weakness and both will for accretive earnings our to portfolio. is to with continue signs seeing always be but evaluate it I are everyone exercised. market will acquisition in ensure looking diligence in the the with acquisitions we of not We we consumer, we the have grocery-anchored currently same

We enjoy continue headwinds. solid to the despite growth

We have a and strong great balance sheet, occupancy. low leverage

Based and we that will recently merger and I expanded located overall that neighbor Kroger post in Albertsons. are we an competitive would we between for necessity-based comment grocery-anchors neighbors. like markets stronger see advantage, this With the merger, our with positive strong upon to We largest growing profitable. and and believe announced know, footprint PECO. become what are is currently news proposed have more resilient our briefly a on

Following a proven ability the to store be at invest who higher will by has productivity operator, to traffic grocery has physical managed centers. an sales level, their merger, stores generated these strong stores in the and our customer drive

focused of is strategy owning anchored merger within portfolio, the our grocer impact market. one this two we remember, As the by think on specifically on or number a centers about our

potentially stores have we that number So a impacted. do are of

$X.XX of within mile one stores XX two to stores store. is within average foot, average $XXX and store, total, We stores located are which which per demonstrated three XX for These million average to profitability store X.X%, foot there productive locations. miles. the stores by ratio XX square following. a another health sales located of two key indicator Their have of PECO's to within are of are of three locations and or one eight another per as the In compares $XX an within XX miles stores

stores. and strong are early. these It's still see, can viable very grocery you As

evaluate to to PECO. potential impact We will carefully the continue

market update it over the will Devin. As Devin? more, will With turn to we accordingly. that, we learn I

Devin Murphy

good results. continues team, to Thank afternoon the everyone. for joining you, neighbors, Jeff and strength PECO outstanding The Thank by us. of operating drive our you supported

financial growth level We levels are as And results. our about occupancy and driving of see, in record you our immediate excited these XX.X%. can occupancy are measurable

portfolio, More than our rents regional necessity-based grocers continue goods retailers. Throughout XXXX, local offering our benefits see of from of to neighbors, XX% the with grocery-anchored continue national, Year-to-date, to healthy come by We we seen recurring grew of to services. holding. through and continue have PECO's mix and many margins September drive continue Grocer to traffic in top to strong strengthen businesses. US sales to grocery are XXXX XX, centers. grocers sales X.X% grow and are and expected foot their our our our

we in neighbor demonstrate Our neighbors in successful healthy in-line to profitably in-line that is XX%, be our and retailers believe continue average can trailing XX-month ratio a centers. basis, our which health is operate centers. our On

centers, generating is remains Third and quarter sales our levels PECO traffic healthy for strong foot neighbors. at

will at to be ratios, health grow strong signs do provide With rents trends, us occupancy good and able continue not we to higher. not attractive power push continue rates. to Our record high that occupancy rents levels record and to any occupancy traffic pricing see we foot

neighbors. local As services. you goods neighbor retailers, from rents of local know, and our XX% from come offering PECO's derived XX% ABR is of necessity

local spreads businesses stable These local Our run hair and at centers. from our neighbor capital. demand beauty care. XX% come services, renew uses are neighbors neighbors market as of Personal successful such and entrepreneurs. in services rents rent by personal the most hard-working attractive rents, our pay less one of is

our Texasliving Texas. unique neighbor winner at the unique and growing medical ABR. Marketplace currently are Magazine neighbor category physical PECO retailers. and of best cocktails kitchen is local of of including backyard This in Medtail local call successful included a XX% our neighbor it, local Also Murphy is neighbor bar. Our and are and Center dentists, in in local PECO's One neighbors, as therapists. the represents local and we chiropractors is our patio use mix Murphy, neighbors example the located

Our payback XX centers This of period of the of just and neighbors months. an resilient tenancy are investment been in favorably length have compares local capital to our X.X average years.

last package. a XX% of added when retained local and three to rates, we to the new local was an years, presentation attractive and local the trailing these XX-month neighbors summary, have believe highlight less did XX% In our re-leasing investor to slides the our Over them neighbors of nationals and basis. neighbors. our in we offer retention higher spreads our are put renewal on into We have we And neighbors. achieve economic similar expensive average spread resiliency spaces replace to strength have

behind addition they provide our centers for local a customers. compelling economics neighbors, and also unique to differentiate our attraction the In

we before successful said have operators As local centers. prosper our grocery-anchored neighborhood in

for in the comparable growth. retailers visit taking to of According insights, many of Suburban migration our made markets to in expense several three, if earlier, store are our stores customer location seeing these access labor and less available in markets retailer. trends suburban offer retailers per including: costs. gaining markets store-based superior have and profitable because markets higher today's at within less markets These of suburban their Chipotle the environment markets. which the with same urban more markets higher-margin base; the four, According markets; have retailers such are advantage expensive better Placer long-term when these smart targets one, National an to script not advantages Jeff secondary Placer.ai or five, larger appealing deliver mentioned are recent are raising locations level of as two, retailers. growth flipped XXXX the in changes proven As compared competition; employer a build-out data to since diversification choice easier market; result to metrics to greater as economics. major

per as XX location Petco, of Since portfolio top Shake suburban the and evidencing Dunkin' Chipotle, increased such In number combined according visits trend. in neighbors Mike's Jersey addition, in Guys, XXXX, markets compared the Kohl's Starbucks, and including Chipotle, MSAs Donuts, by PECO's the this higher XX% Five Wingstop Shack to saw Placer data. to retailers national

concept Do-Nuts Pizzeria During neighbors Village, Texas we deals Colorado. Arapahoe Coppell national Locale,a Shipley Coppell, in with Marketplace Market executed first-time the at quarter, Center third Greenwood Chipotle-backed and including in at

We to suburban see retailer markets. strong our for demand continue

centers. favorable to to We demographic expect benefit well-located neighborhood these trends PECO's continue

to Placer just portfolio. to them investor have added would I presentation. reiterate, Be the insights pandemic. these slides our resilient were on discussed of check like our silver pulled sure to Less from also out. lining We neighbors a I

pandemic. emerged Our post neighbor mix stronger

Another well high-risk we strategy diversified. highlight exposure strength and like is of limited to categories to our are retailer that, that we have

non-grocery non-grocer largest neighbor is ABR. other neighbors Maxx, X%. And Our of all X.X% below T.J. are at

X%. combined is Our And ABR, less less these minimal. Beyond City as Bed our and distressed of than to points retailers two & than basis XX Party such exposure Bath represent retailers,

focus adjacent under our development XX to strong these trends, developed own, developed active growth land We three currently ground-up pipeline on have we we acquired. XX rental construction. and already that repositioning on to continue projects. are our being are addition being we on In of land Of and projects

in and an estimated yield cost on $XX XX%. these investment be XX% total estimated to projects million, average with is Our between

expect focused to of not of and NOI third These approximately in I'd $X.X turn during we of delivered growing we our is we XXX,XXX and the quarter, stabilized are ever This This these XXXX the risk-adjusted currently like adds you. supplement an a number our projects the of opportunity now to area we activities provide in over see over process impact have feet and that rate. of The evaluating. because a in call projects as future. meaningful to returns, the space represents attractive, five incremental they projects annually. neighbors. The are third we complete achieved opportunity in are projects to company. superior the in have and million John. level in projects Additionally, projects ongoing Thank does that space a our include square list XX on NOI we quarter our pipeline on is growth year largest where

John Caulfield

morning Thank and Devin, and you, good everyone. afternoon good

you operating is an impacts news of tailwinds downturn. that, all completely As strength, to But heading economic good XXXX. are care into with from to immune are we indicated, won't a of position Jeff the we say, the several

grocery remain and featuring historical be goods demand opportunities across and format, with right-sized into above services, quarter. With that, mix strong growing anchors, markets, retention rates our that of healthy growth averages. a Our neighbor get to the our continue necessity-based attractive, I'll

and or FFO reduced increase interest share. $X.XX per result expense. to an million benefited rental XXXX increased, diluted income from in XX.X% This Nareit $XX quarter Third

core quarter revenue by occupancy $XX.X increased increased Our our well and strong properties lower at driven spreads, as as higher FFO interest levels leasing XX.X% third million, to from expense.

the increased increase and higher current to square average X.X% which NOI, foot, quarter year offset a third in an by was per by This same-center XXXX partially collectibility XXXX. improvement reserve was driven lower compared up from ago. million, in when base occupancy primarily $XX.X rent Our period, reversals to

provide to some want I our on commentary Now, guidance.

per Jeff As share FFO raising guidance. continued on based FFO performance XXXX, have mentioned, in to the we we our core achieve and Nareit are

to increased to Our guidance share $X.XX. $X.XX core FFO per range new

We administrative are strong also increasing corporate spreads leasing well results a increases result and to of record and date, from general to as of range property are expenses. X.X%. NOI guidance our occupancy same-center a lower-than-expected to X.X% and as These

XXXX, at acquisitions As result higher as of slowdown the some to planned expenses. interest look additional we of fourth approximately a as $X.X we well due quarter expense, seasonally as of million anticipate primarily

Additionally, $XXX XXXX. are guidance partly we net acquisitions $XXX certain acquisition expected are to our as due to close to to range awarded narrowing is This in million. million timing

share. us anticipated meet also our IPO. We more will acquisitions and $X than the committed post to for changing we this performance XXXX a FFO this buying expectations believe in there and even billion as per net to acquisitions of lower in opportunities first we of three our be Despite be acquisition continue has years exceed market to result year, allowed operating core

sheet. balance the to Turning

maturity average a Our growth our borrowing well $XXX as as the $XXX balance weighted December XXXX. our rate period, we sheet to strong times, of prudent X.X% leverage a available our of be as to EBITDAre continued debt years. of average At Approximately weighted XX, debt was fixed of approximately XX% had to as September of continues XX, X.X X.X interest At the with our management, times capacity XX, facility. a of XXXX, at had result ratio XXXX, rate. debt of on our earnings September X.X million credit million end compared of and adjusted our net

markets revolver, Between flow by cash generated no the is our which and have capacity the a significant to until current free be given maturities significant our capital portfolio on XXXX. excellent environment. have place we debt nice liquidity available We the

around With balance the inflation fortress macro interest sheet and rising increased. we has recession, of concerns rates, importance a believe market the

target market flexibility and net to level extend time EBITDAre. they the gives Our accretive to debt XXXX. capacity acquisition acquisitions still a runway leverage us meaningful pursue our of arise We low- as and leverage to in beyond have mid-six

to changing sheets consider acquisitions and uncertainties, we we Jeff as flexibility XXXX your a pipeline value the to allowing market pivot have As With in will response pursue the sector Devin one be And provide the importantly, of balance of we contribution look NOI we the mentioned, forward and most patient meaningful economic maybe strong conditions. ability us in that XXXX. and quickly strongest opportunities and have expect growth with on that, remain through in offense questions. the create taking to to we to accretive

Operator

St. [Operator Instructions] Your first question comes from Haendel

Juste with Mizuho.

Ravi Vaidya

Haendel. This good for doing morning. is are Hope guys well. Hi, the Ravi you on Vaidya line

forecast where the Just your centers are everything do you volumes wanted the versus and cap markets? rising rates? cap you where And What's XXXX, to Where ask you – market. transaction for with in acquisition rates about do happening rates? XXXX target think grocery-anchored your for broader that's and financing transaction given

Jeff Edison

on We're large rightsized not talking Thanks the focused centers. just power again and or seeing really Jeff. as shopping grocery-anchored is grocery-anchored centers We're this about Ravi, Yes. for – the I'm market question. centers.

market of leaders are of acquisitions. So terms one the we that's that obviously in the

that has So retail the would one I we're market. very market. active sector And say of been that in the of is most attractive what that

more will And of so last to pricing market. market moving a seen continue we've It's anticipate we've -- months. really increasing clearly it the in that aggressive, into And increasing. was public cost was obviously, a the with over markets is, and And we equity seen very much XX changing. the what seller's and debt buyer's that XX with

to we're are ago, not you will of different at country IRRs mean, nine go that I of because certainly mean, really I rate really change rates. our nine expansion buyers. what today, the IRR unlevered across is -- that And there. north And you and and looking XX if looking as we're cap some can't we're in look our of eight. look say, very you months cap feeling a So guess for regionally were know, buyers are we're there's the and that you we north where We'll change. would markets see is I

an that rates our on in see is expansion as can cap there basis. would underwriting obviously, an you well. IRR affect that And So

Ravi Vaidya

color. Got it. the Thanks for

tenants? broader Just your inflation foot seeing and in traffic grocer impacted risk? one dining casual your given more pricing additional here. food properties Are pullback or elevated recession the higher has at How sales you a given

Jeff Edison

Devin, do you want to take that one?

Devin Murphy

Thanks, Sure. Thanks the for question. Jeff.

over year is As foot spend this is that our the to what they're the average traffic last grocers their we sales centers news year. number it's as prepared by at visit equivalent remaining margins What been next our centers per X% finding is And we're increase And visitors higher. constant of year. mentioned saw so holding. in and again and to our this is good US remarks are to increase year, the expected is that

continue grocers operating environment. foot They're continue we are to the perform that our strong So to recurring going optimistic to favorable to they're traffic going drive to are to going continue and centers. well to have a

Ravi Vaidya

you. Thank

Jeff Edison

Thanks, Ravi.

Operator

of Sanabria question the next Your comes Juan BMO Capital from line Markets. with

Unidentified Analyst

It's on morning. the talk of all Juan. ratio the portfolio. in-line on you for just the Good I appreciate health color in-line. Hi. kind I curious about Eric if could was for

and I'm wondering we should coming going XX% the think And XX%. about You XXXX that's of pandemic? that quoted how XXXX? into forward how out or trended XXXX a just

Jeff Edison

Devin, want that do you take one? to

Devin Murphy

Sure. has Eric, metric held the thanks that fairly for question. consistently. Again,

it's an use. to to currently stands for again, the there's going on that from increase metric it that are that to at instincts Our depend -- ability XX%

ratio higher average, other growth As retailers. circa on ratio that that XX%. incremental an you know, certain retailers there's But can in much absorb we than believe a to health health

and continue things the XX.X%. be you've ability seen And at spreads if constant holding are look And as growing, where grown sales to re-leasing to a a as re-leasing this CAGR one of it's it's we're like was at long that been, our has push higher rents. And almost XXXX increase look that as at what seen up X% I that in in in people now circa to QX quarter to XX.X%. to we you CAGR. able X% now is there's believe you've the we So an a that we've and X% trend CAGR double generate spread spread, been re-leasing in QX, addition had it at from almost to our where

they there's where and grow a allow a we ratio are successful continue will that to which room, additional tenants they're where operating us believe So to health in-line operating our be level at at continue rents. that to

Unidentified Analyst

that. portfolio, in-line the on Appreciate and Okay. beauty or in hair And step you're any the then care, we're any what are affluent understand you or just want on and the of ground? the customer outside actually weakness there? I maybe medical what better reading away to seeing less of seeing news

Jeff Edison

It's primarily basis. to that that. clear I get not we a hard look we both seeing change. that across on a tell picture are would household segments you of income And

We closely when far. obviously if that's some you know start to aren't of to And being Devin we're one it's are lower segments talk it's at we certainly so experience we from anything able the people pretty sure not the that's private level I down have in things adjust -- to the the to to that trade don't see truth some that hearing to accordingly, we'll seeing But label. that make we some but this to people -- at been change They're segment. grocers. substantial is it but at it. not some But they're we're our down look trade people seeing our seeing seeing that, seeing add that grocers point. margin and of about and certain

Devin Murphy

three-mile that average Jeff to understand the our mean, is only add income I would the portfolio, in that the household is Yeah. thing $XX,XXX. ring I circa in

our is at So customer middle this that a centers. class is shopping

to balance And point underreported in So than media it's sheet. line to end can't environment household to them materially will in I higher thing continue from savings. they are balance They two, a go capital better were a But average have then And pre-pandemic. to a perspective into is at has jobs. very customer. the consumer because that lower the sheets will that not the is the they a bottom people begin strong And American that's our allow emphasize in that spend level one. continuing just employment fact dig on now today want that number where is one to the that are inflation forever, number shape find

Fed is how one dynamic know of is to strong concerned the you the As continues the employment be. big about things

balance is beginning negative to signs in we are the employed. continuing and the they're our And of that So strong spend. retailers They not a therefore from consumer. a consumer sheet to seeing see trend are have any portfolio

Unidentified Analyst

guys. you Thank it. Appreciate

Jeff Edison

Yeah. Thanks Eric.

Operator

Your JPMorgan. line with next question Mike comes of from the Mueller

Mike Mueller

acquisition, rate Yeah, the then appreciate to the lease in XX% hi. can any it. going And at a there with give bought you still on a I lease where XX% as today, you us progress guess, about -- I IRRs, is what focus it sense initial looking like Crossroads has as cap that the on that sense been and the but that? or was to yield? you grade or Is looks about it on rate

Jeff Edison

question. for Thanks Yeah. the Mike

So we progress made have on that. some

getting occupancy. key to one is the the have substantially that that second moving floor space linchpin We probably to

have smaller are of couple we where -- and others will that a spaces The have activity leases. that signed we

at say be And that having it ahead we're We we it market as came was a it we're nine up yes, Vegas bought seven north and demand. about us. But again but close terms where pricing where un-levered up of We our a and have it us we buying not yet, an view. then, it pretty in it cautious contract But think, projected underwrote very underwrote wouldn't back a high-fives we and leasing -- and it when good I point increased substantially tough we at -- being And been. was that see under we strong higher. in very from I this really pace. strong our getting that. to continue to that with have deal had on -- of this think the of we IRR I level a ended it moved where ended at we'd was Las mean, to I got substantially had in that

criteria So this we're these for looking met our how at today. centers

Mike Mueller

it. All Got right.

Thank it. That's you. Okay.

Jeff Edison

Thanks Mike. Yeah.

Operator

from Ronald comes Kamdem line question Morgan the of next with Stanley. Your

Ronald Kamdem

XX Hi couple ones, months ago, get that competition closed great. if the back acquisition Thanks. for the A of was bit today sense or quick out guys you biggest ones? looks versus about of example, trying who's the to going deal wondering of who's, could like you this just who sort were a like only sort market the just recent what Just the talk it a little acquisitions competitor? six at was looking to there still to

Jeff Edison

Yeah.

the a market. of who very leverage buyers mean, were So in were the number there -- I active

the have them that of would I are of I market. just is market. were back also say very competition acquisition XXXX but leverage portion Some companies say buyers, that gone. there public effectively were that in buyers the would the stepped that the active from

So less competition the some down part competitive But that's is the -- a families -- that that be have to to level market. of that continue There of dramatically. continue buy. are

market. coming and new -- days a because has early of product it's its there hard we not know, on the to Now, been haven't lot

a a So of on anecdotal very this small base. lot is

I was of don't generally, -- more level to it's we ago. I much a moved is and buyer's have wouldn't anything think add if it's know months XX of I are mean, it. -- conclusions be the early be I you So market down But Devin, competition than making to that? from it to to

Devin Murphy

depth that we I five the depth close centers number six just the down of And in a looking are another on acquire to terms mean, I Ron probably And that, to a one come was half. the there buyers ago has say would by was that pricing. of year No. kind marketplace. to very to

there's now to when six. was there So to five two three

than to year there's So -- less an market it it's there's less still but and depth still a there it's was active demand ago.

Ronald Kamdem

then, one just deal. it. my the on And just Got last propco was

commented as a the I -- portfolio. for think guys it you view you positive

talks so I think portfolio of sell a potential sort there and were of forth.

So by guys be at that? impacted all, how that is do you think you wouldn't view the about that or

Jeff Edison

Well, just know through. like, going because what with date to this dividend be the -- to closing really that variable able not there of it's the and like they're or closing days propco. are not We propco to looks in awful maybe let move an early announcement that XXX the including lot different ways could it what go looks is say stores including with transaction XXX

is know we're sort this the going. So to But doesn't going. informed stay very I The and of this going. Albertsons the like to think we're don't trying of -- kind whole on of Kroger a be where front this FCC information. where as where Kors is know is The don't know

one kind of obviously going little it -- of I end what But where it's if goal So And a to that sure early mean and really close this that each stay outcome everything to any our is think -- to that want that we that you we make to making have prognosis can we And be of grocery ends make to a great be I of happens. up. we're up with do operator stores. to will think we sure the running it. our

Ronald Kamdem

Thank Helpful. it. you. Got

Operator

Your line Green the of Street. Paulina Rojas next question comes with from

Paulina Rojas

remarks, you of numbers your that which this I period is from can In were quarter prepared see. mentioned Good drag out to not the evident me morning. collections

XXXX? year-to-date rents collections collected? in more with share was? it please And X that much how us think drag And how you XXXX much can have is of additional a you So, broadly reasonable to assumption

Jeff Edison

the Paulina, call. do you take that? for John thanks to want

John Caulfield

for Paulina question. Thanks the Yes.

it the period that the at reserves months feel net three in to would like normal. to of look at if we we is closer when both back look debt points. nine I getting months the XXXX XX we've our that and bad And historically basis as say look So, in out XX I period it said have points. on really but basis we is the we did are we at to additional XX

the XXXX. the challenge XXXX stronger that even -- So from were collections is

when full basis kind to think negative which of collectibility XXXX think have the that kind there impact if you get and you we is year-to-date, for When would use the reversal. I to typically points what for reserve about we you year expect. of of XX you do net look XX reserves that

million on do to have what's to So, year-to-date I a when down about and difference positive. that, our been those payment even it's That's less collection quarter plans. to And fourth When look roughly a basis. here, than XXXX on the $X we're very you there million. forward $X from

So, expect get to I points levels XX revenue. I XXXX historical to in think of basis back of the XX to sort would

Paulina Rojas

Okay. bad not sure about in period follow I prior collections because talking on there aggregate isolating just right? details right? debt You're I'm not you're the

John Caulfield

quarter have challenge that the was third at second if look from is in recorded Yes, just the quarter. I even the I movement stuff

why that's longer tend at So I timeframe. a it over look to

I things So, on QX the when QX reversed where down QX. that I'm reserved I things to because in individual you I think quarter have in nine in reserved that's in get an QX at months looking it re-leased

those we're normal and ebbs say So, flows. when back of kind I it's to

$X that in XXXX say have I look XXXX if about break only point previous some from reversals I to XXXX the you residual it's think XXXX a think then would probably about back I so have And what at well in I say to will thing normal but and we I And normal The it's when to pieces I is related XXXX apart did $XXX,XXX. million. years that's course. consider I we're from as mean

Paulina Rojas

more a then detailed And you. Thank Okay. question.

IRR. calculate are -- you you you I'm you IRR when you highlighted use buyers. wondering what assumptions that So, have

assume I of the is property. the by So, specifics growth of course the driven intermediate

growing You in rate. you're -- cap have

for usually So, if traditional more question. exit assumptions you have growth? this And long-term you is you longer-term you use what maybe rate there? the do that you assume a your assume for what Do holder, of cap approach any the perspective from

Jeff Edison

Paulina. very Yes. project-specific They are

can both if and to we a we're rent to to know and fortunately, just we really is it's -- markets leased terms lot rent not in making kind underwrite be we timing these into at space we center of either this We each space at underwrite How we each TI look where to when I know we we it is rolled in we it. also a generate do that and going any vacant a the So, we there. thumb rents not longer operating -- very a our to or an in can financial is rule -- we down. how and of side. go rate it's the of market a a seven-year of of generalizations get a driver what will so rate look we obviously, is. is over cap it's plan then, that side less from terms a of the it their lease cap then, of happens. specific we -- to move And from it's And from the what think what But plan when on but project out a we the term go

to. And they operationally. acquisition of compared we cap all product above a and in of three driven it, the and get levels. at portfolio, we're cases basis we at starting on It's performed we based period end rate expand to we turnaround And if it have at will bringing those back But regular above them over and at actuals. think generally, look look think certain what the the really rates cap go or fortunately, -- what the across we very do to underwriting not you we We down those years, to have last our upon be. that is each them underwrote order where will in properties,

about be So, rather conservative we'd our there. we good that. in too but really underwriting, we've been Maybe feel

Paulina Rojas

helpful. Very you. Thank

Jeff Edison

the Yes. for Paulina questions. Thanks. Thanks

Operator

the question KeyBanc Thomas from with comes next Markets. Capital Todd of line Your

Todd Thomas

Thanks.

the seen quarters in bit over three discussion what to out X% sort given targeted around and to looking Jeff, that pullback provided expect next far that unlevered sounded Just IRR? around around that really color in IRRs. just at And elaborate several a on detail following little generally, some and investments? trying John, of of It investments deal. around to market can like I how the follow-up about adjustment sort of get the near today on and thinking the your But to Just that penciling years Vegas are you you've just billion Las of the the of big little just the you $X the that of from bit. price on a that the investments appreciate XXXX, a deals IPO you're term? handle comments term talked conditions sort first the in a near we've about changing terms the then your

Jeff Edison

confident going sort of the the market. we're going and same You're thinking thinking about level in in a confident strong We're when uncertainty the pretty We're to there's be less things to same about opportunity. that's happen. of

next we pretty of But so, opportunities one public to balance we the take I well of we want the we take look we to probably want was think advantage of have really think they be get -- reasons what that -- XXXX terms conservative will we taking in advantage buy that as and to of we've a do opportunities year. worked -- to again, those. really to get positioned And we're be in and have access And capital to there think I will sheet we're we hard and able arise.

the we're we will good we certainly, things that's think discipline about And I of cost to do same in So we those of market capital have the we'll pricing and market opportunities going cost that the is position. directionally, we laser-focused seeing difficult projects then I in -- We're seen I and as that that than we're can where get going we're of unique And can the feel think commensurate We're sort truly it haven't really we happened. other months. back and capital seeing market second that's pressure on. to that's it's we to then of again, XX the be And it's -- for said has some seeing there the gone -- stay And forward. they seeing the going us the we on in but to being traditionally come will in buy that active keep very up we'll And -- there. you are that's there's to less the the closed change finding -- know of year, everything tell half where put market. in buyers. mean is how the us, which that much going where and with opportunities

So, about we are that optimistic opportunity.

Todd Thomas

in or nice the doesn't very results term the result or fee cash from or And X.X% X.X%. was that. like Okay. income by income A rental anything number. a last lease see strong same-store terms pickup I disclosures of higher quarter. include the John, reserves then recoveries a It that's in expense

think anything I that leasing What's there gains? big rents, and right? other growth driving that just Is occupancy behind it's than minimum increase?

John Caulfield

Todd. Thanks, Sure.

so reserves that So at the spreads rental rent things you break the and to grow activity. is supplement can in of. for but all-time there. with have on have is that a total like temporary have that -- had we But answer in income, off gives We that I think collectibility and place percentage. of it help out But occupancy, we've think the do in I page we the is mentioned leasing that it re-leasing the the it a us and kind mean, peak we're in to additional solid do incremental detail like. the continue some doesn't revenue

Jeff Edison

when of a The about real. in broken mean, and that what in making R-O-S and as I the to rental I we explain laser on that ROS getting the we there something. are is on is a is something not benefit saw them. They're we're are I Jeff. have bit this focus mean we call part that's laser this -- of little happening And up record macro market this like going presentation being talked renewal ones Todd, because the make they're three why are on. we a really of new for look And tailwinds, probably we're rates sort cost decisions that market what in the things know be they and of there the and those you our where sales who obviously to their areas, they're think occupancy. three you money. making a spreads renewal rates at in can gives rent in at leading They are us the they're are are centers grow. good know know who And really they we can retailers those They and they take it's doing. are. what what sort And

high. occupancy Our really levels are

look good portfolio in things rental three good. the ROS, then grow ability And and space So they're staying correlation the that's there good at what those They pretty call and the quality to business our together we our of really you consistently they're flow of the assets. if put focused And things, of those is with have really if cash pretty the spreads. a you have a and what the on. we're across good definition you

Devin Murphy

it's Todd, Hey, Devin.

the You had billion And expected in acquire period billion. committed ended second we the IPO, in we of to as the know that invest three-year also of asked about time at the $X you $X quarter the assets XXXX. of

and we're of date. So time million acquired assets through that to we've of $XXX basically period halfway

terms on are hitting that in of reasonably track we So metric.

And John capacity to is to incremental flow only dividends. you our a be But disciplined. is balance an indicated. we're evolving free in billion because just of the flexibility point number making acquire was today as market times has million one. We know our will have Jeff ability terms the two of X.X the that given we continue $XXX cash we levered $X as year sheet Number you know post as generate

before to go assets to have stay capital market. we an $X so billion within leverage metrics of our acquire needing and the And back to the capacity incremental equity

at billion will believe metric. balance in the more IPO that than and given guidance market. But on hit do the hit $X we're the gave uncertain The got is the of one, the enough track to we've time capacity that uncertainties number sheet we that. two, So we timing number to we

one we achieve. reason why will So to that that's able the is metric that that be believe we

Todd Thomas

same-store NOI whether centers, some appreciate the I then impacting that's redevelopment a income as Yeah. No, Okay. can though that back the that is that and you helpful. potential And comes within follow-up. taking same-store is place a And for that's positively contribution? -- of Is ground-up that to the remind rental impacting -- second. online? John us,

John Caulfield

It is. right. That's,

Todd Thomas

guidance? from the like Okay. year, full contribution within for revised redevelopment and what's the development the And same-store look

John Caulfield

tailwinds at progress, we optimistic believe disclosed, our are points when very I have it's the believe the we about -- we should expand and say, our continued returns. we the us have do a because of Obviously, this that redeploy great I to disclosed allows we there. and And basis -- I have just So, projects about we way, the our have controlled high but very with our positive capital in the at revised, not growth. look I pipeline about pipeline, in we footprint and have is that -- development we occupancy XXX record our of

can our into think growth that continue we the this future. So,

Todd Thomas

I the costs But deal changes and know, level Las forth the all capitalized. expense Great. back over at The Okay. Crossroads that expenses guess, for were guess, it's why me. million. accounting the That's, I $X.X transaction they last one quarter just I or years of the I about guess. And that I one thought to? What Vegas the in helpful. being attributable are some is

deal-related these are not completed is. I'm curious, that deals It that a like from that number. you're pretty pursuing? being seems what just And costs are So big

Jeff Edison

do you John, want that? take to

John Caulfield

Thanks. Yes. take that. I'll Sure,

that -- so capital we component -- closed. write that on it we acquisitions is you So on a of

terminated. that those. We in are that transactions did able have given the were we pursuit to We changes, capitalize

not So we assets based did with have that those. we on determined that did moves, we continue the

that of amortization related to from declining So some had will do we be we expenses, is component each a then it there have That is that. will that year our IPO. just also -- that. anticipate we've But

Todd Thomas

right. you. Thank Great. All Okay.

Jeff Edison

Todd. Thanks,

Operator

line from next [Operator Suisse. Instructions] Credit the with question Tayo of Your comes Okusanya

Tayo Okusanya

the you're of demographics. your that's slowing you portfolio may going your market, of kind end granted calls if to again higher perform? that? think But really one demographics. shopping, think Again, focus how relative use sewer this On kind you a of be they of everyone. understand just about on economy of something up stressing a the earnings of may peers, specifically, necessity how that differentiator backdrop? do think of of end -- afternoon, performing backdrop. you a the you with word, one good Hi, on key their That's how of more the I guys economic kind how your curious, a in And kind I'm to your I against shopper affluent middle-class were

Jeff Edison

Publix income, they I balance America necessity-based of -- has their and sheet much Kroger the necessity Albertsons Kroger is $XX,XXX -- and a it's that a end way lower And that make aligned their It's their -- our look mean most often a customer and get the kind goods stronger shops is, have it. or -- we've and look most not an that that for this the this going at home. customer. That's, that. is above can what where recession and it's of have we're within of the about that's I they remember. today had the is at And the does any our them three and a properties confused house. do. Albertsons And question, their at -- And median a been a and we And business, that's $XX,XXX And miles where centers. average is belief shopping America to great average we talking that end Publix our somewhere income. not of they're above service we when we with long money. time. into household centers lower our That's of you their -- or And a on close customer median what to that with household American $XX,XXX to segment at customer very slightly is than them

a got they've So strong balance sheet.

low really unemployment rate. a We have

It not on And get So you've got is today. -- thing side from been there middle But where at very layoffs that the may pace. to looking I they significant that the is you're that technology and in job. we're a and are difficult of like -- you today has the it think rapid when on can't that be issue. Fed's most trying of issue class kind the seeing an the more places a reductions are seeing really make only the issue

So capital a Thank with in centers mean at at great the place -- actually this when is and in downside hedging kind tailwinds be time we yourselves And in really that a look really That’s because more and alpha the about the presentation a our -- more necessity-based talked giving we with centers we upside. what in I why we markets bring and provide with that we do really your it's less you lot to point difficult that's that beta. the our your are the time very that our of you. our centers think stability helpful. believe

Jeff Edison

Yes. Thanks.

Operator

comes next the Bank from of Craig question Schmidt with Your of America. line

Craig Schmidt

is and exit compete Amazon the the Albertsons Yes. doesn't some to Thank trying through? your if the about I mean talking Kroger the and been merger the But hear that in happens to through? go you. these we does stock. What I that Albertsons we've them investors are about two of merger a thoughts are know merger. if merger at mean? between help what doesn't Walmart and go What that against way looking

Jeff Edison

lawsuit to want Craig, the outcome go the post sell and does drive question. been thanks for out through. is they on investments. be and if the going to of get bus. lawsuit one what playbook lose that They're their does not If decide pretty has clear. the going who merger the They is my happen service the to mean take the is I it

other other do about. I the --who the going somebody the a think us it scenario So they which decide when other I company focused in for I back to up And pieces FTC us buyers is get And Maybe we probably That's for actually like I easily. we'll in then -- it have to a say scenario the about them. months would the the is for pieces to just break heard There way that now going mean public announcement they closer. to rumors in more best is that part the all and probably even that's Kroger long-term as another it biggest mean the we're judge to oversee look up is they who's maybe is through competitor is of of were decision will buys who the because other that's as where judge -- we -- -- a whole have go breakup things to that execution. they There -- us. really this regionally. the put the buyers. there they Washington That you're talking But saga that for there's -- uncertain do introducing to this, That today reinvest and possibility if XX market go like all D.C. to a operator are and opportunity going that off possibility. really the going the sell is with merger. mean to say probably but that a on and be break And we of they the and so on going and I going out get challenging to into market a thing think months that. be It's on important really the which -- keep who that not to the that bleeding would this this certainly we're most think case hold and be outcomes another we're And good this in regionally what. sell into sell another I they know one XX Craig. strong discussion. I say that's where in I than probably -- stores shares

Craig Schmidt

Great. portfolio stronger PECO your XXXX? does that while and Thanks do traffic for those mean think formats comments. sales more in have, or be And sales then recessionary resilient negative, foot can be that see actually flat other the just will about you thinking may this you

Jeff Edison

probably traffic per stable see to basket. continue can increasing we cost that, believe We

probably probably ton much up in direction. going a increased think things don't not that will not because we probably, I of traffic, sales So as – move see

would increasing increasing would – that We an say So that's – we that, likely be a XXXX. sales. that outcome for could be would

inflation, to on it to don't and has slam Fed we the harder the and to seem seem if Now, be. harder, handle doesn't to brakes able harder and be

that story. is, Now a different

habits. mean, You the their will I will customer – change

got more view It's change is certainty in spend. they like in that's continue don't the most a spend to move tends than they they'll job will Our but maybe at if employment it customers they continue when to when have our when even changes to balance slightly a likely they've habits, sheet. job, mind the reduced – when rate their

So I they in have that, will would our say grocery sales centers and been. historically a up be recession,

Our of small terms sales. stores will stable That's guess. our be in

Craig Schmidt

Thank you.

Jeff Edison

Yeah. Thanks, Craig.

Operator

closing back Jeff question-and-answer like Edison would This to comments. to I our turn some session. concludes it for

Jeff Edison

operator. Great. you, Thank

to This grocer Our the in market. or of owning foot one this in operating, number drives number highlight results operating performance, the third which the and neighbor neighborhood financial quarter. differentiated small and quarter strength traffic focused format, and PECO's recurring anchored high shown strategy demand, we've and by two of superior and results continue centers

the operating strong integrated grocer-anchored in strategy and – our a platform despite environment. and team cycle-tested placed PECO even and uncertain is macroeconomic that experienced Our despite position,

team, and our Our like to great you being thank as a advantage have our support. us weekend. associates day great they for continued of I Thanks fortress balance for allow call. stockholders, On the arise. on take and of management the will behalf neighbors opportunities hope I'd and all importantly, liquidity the a to their sheet

Operator

for you participating. Thank

You disconnect. may now

Phillips Edison & Company (PECO) 4 Nov 222022 Q3 Earnings call transcript