Earnings call transcript Q2 2023

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Operator

Good day, and welcome to the Phillips Edison & Company's Second Quarter 2023 Earnings Conference Call. Please note that this call is being recorded.

I will now turn the conference over to Kimberly Green, Head of Investor Relations. Kimberly, you may begin.

Kim Green

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

are of earnings based reminder, may and guidance recent described and and market These are view XX-Q. and management's risks a and current financial expectations statements about XX-K contain Form filings, future to As business forward-looking performance, on uncertainties beliefs our today's and in most PECO's including discussion various future subject including forward conditions. our in as SEC

discussion in packet, which regarding Please have to release these our financial measures note information we of our non-GAAP and GAAP we a supplemental reconciliations certain measures. information. our presentation are results our earnings of In our Information to website. that press with posted additional available will these today, have reference use measures posted been also and

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

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

Jeffrey Edison

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

I recent for anniversary we acknowledge future our this during into our to for I of reiterate highlight optimism the progress like also long-term Before the would and team get PECO's like quarter, this has made to results our growth IPO. the would PECO X-year the period plans. and

times our and On a We X own our consistent. simple operate neighborhood our from strategy PECO's XX% and visit grocers average, More grocers. exclusively of shopping grocery-anchored remains rents week. come customers nearly centers. than

is have us our levels to gives retailers. limited in-line XX% demand spaces, occupied, We strong high pricing we which for power. big-box exposure and historically are at Leasing

on a a a are focused great and in changed. shopping positioned the #X grocer levered These lowly with within centers market. for #X fragmented or We by market. components accretive remain not owning anchored acquisitions balance highly have well We sheet

an omnichannel from has XX% base services. our neighbor rents more selling than of strategy Our and and neighbors, goods come necessity,

areas top in demographics these situated successful. money are to our Each favorable with and targeted where critical centers remain make success. Our our components trade our neighbors of are grocers

to continue results. drives format believe We that

which the center center enhances smallest is XXX,XXX REIT pricing the is shopping power. in our space. square Our feet, This average

Our rates growth smaller better strong centers allow FFO they because higher for spreads. yield retention leasing and

XXXX Our quarter and first record is averaged XXXX. XX%, retention between of at retention XX% reaching of Today, rates XX% in XXXX. high a the

our returns. result new downtime costs. for tenant to XXXX retention XXXX, meaningful in leasing comparable Combined, spreads avenue capital were providing X.X%, From less lower XXXX. and average improvement in result leases were spreads Lower XX.X% NOI in High rent cash better rates costs renewal growth. for and a

XX.X% At we of spreads and record of had portfolio combined. at are is exceeded leased occupancy executing pre-COVID renewals occupancy time spread new rent XX% Today, spreads rates all IPO, and high, north the XX% the a leased. when portfolio was XX.X%, at XX%. record Today, of high rent total levels PECO's

X% to in have X% average. rent renewal from nearly new IPO, pushed we the bumps and Since on leases annual our

Additionally, Over of nation's AFFO. largest our become to require built neighborhood, XX integrated a other to centers. years, grocery-anchored lower have estate and centers less platform fully real shopping exposure the of anchors than leads one Lower smaller retail and operators CapEx owners higher formats. secondary we format operating CapEx and

AFFO FFO side, strong differentiator. of on in Since the reflected deliver expectations for our our performance growth. have an financial operating NOI, IPO, is and we to which is quality The exceeded market results. important continue the We consistently

external has includes acronym in a markets through acquisitions. the of retention. of performance occupancy, and our the growth use of define we're a SOAR. This we reminder, record advantages and As through the spreads, PECO portfolio the of the strong quality track our

have selectively our new assets We fit focused strategy. acquired that

the At our the market, the control sporadic Since to The billion which over X to the continues was plan of IPO, can disciplined response of the transaction then, purchase years. $X our but the extremely half activity lower saw and opportunistic. we we we be fragmented assets as remains market cannot you changed. volume next the dramatically We them, to control told the of time with and of first in markets have year.

in the seeing There are to higher While rates in we increasing, response still gaps adjusting activity currently we cap still between and the seller interest private are expectations. are rates. believe markets slowly buyer

for the million market we are net That the our of at as the the of may be remains half first of million end acquisitions today, $XXX reiterating this low in $XXX year. year, that we inconsistent, here range. sit to we if we guidance As said, saw

disciplined We have We X% process. the at price, a right growing our very focused portfolio acquisition on accretively center IRR. our acquisition hurdle remain of a achieving shopping unlevered while

remain we our our business in year, this plan increase. as reflected of guidance remainder in the confident For

internal portfolio we Looking beyond per basis XXXX, drivers. can a share our given mid- to growth external long-term single-digit high and our on deliver growth FFO believe

levered In shopping our space, the objectives. to still gives center sheets one addition, have which we us acquisition the capacity meet of balance the lowest financial in

and but continues motivated IPO we remain growth our We for the to was alpha The focused, beta. believe and executing major just more it a company, generate was committed milestone less which successfully to strategy, our beginning.

I will Devin. the now Devin? to turn call over

Devin Murphy

and Thank both you, another PECO us same-center solid spreads. and with thank for highs our everyone, growth renewal portfolio afternoon, today. increasing team by new joining rent Jeff. Good NOI delivered X.X% reaching you The of in quarter occupancy and record

The focused at market neighborhood drive our X grocers X grocery-anchored team. and anchored centers and or strategy is shopping consistency and differentiated in for to by our cycle-tested owning performance exclusively ability platform's level a the the attributable to of property integrated of our our operating results

the leasing positive The and of by into driven impact occupancy higher retailer strong trends demand demand, work and suburbanization. see the to continues convert to continue macro of team PECO's is levels we retailer hybrid rents.

basis of basis XXX XX XX.X% occupancy high to occupancy points in-line increased record respectively. sequentially and anchor points and increased representing points basis to XX sequentially Our year-over-year a XX.X% of XX increases

strong, in the remained to million of X.X year over Leasing increased half first and activity square totaling of the feet. XXX our deals leases year-over-year volume executed

We of capitalize continue the to key most drive the to opportunity higher. making renewal lease and demand rents strengthen strong on terms and renewal

second the XX.X% for increase quarter, achieved all-time renewal an a spreads, Specifically, we high. rent in

meaningfully success In to activity, terms driving continue portfolio. of new our rents in we lease have higher

for the quarter spreads XX.X%. increased rent New second

expect spreads We strong continue through be this XXXX. balance of to leasing the into year and will that

the these not do is power of and see near we driver term. metrics, Our pricing the changing this in

health to rate driven by strong primarily Demand portfolio. necessity and restaurants, of service-based restaurants, demand continues Donuts, continues such from XX% leasing see in across Subs. as our Firehouse beauty demand from Health for and service medical the and that Dunkin' pipeline space Restaurants and Currently, medical success stabilized our retention leasing be of yields currently ongoing our we mean retention leasing XX% Our remained costs, of High to pipeline. today, activity beauty neighbors. downtime come our quick use rates demand as grocery-anchored XX% PECO's mix, to it, are services see neighbors Zaxby's no we ADR less half are the second current and which or represent Medtail neighbors. to of in assets. current and X% Medtail leasing improvement which quarter. XX% Medical continue fast-growing strong higher our in demand. leasing but for tenant of at leads strong call in we neighbor is uses. and represents PECO's a

On square contributor another X per averaged foot rate. and executed long-term the As our the $X.XX X.X%, to a less our than average, important just renewal over reminder, in $X second foot bumps and had last annual rent our quarter. TI in-line years second spend quarter per new square on contractual the renewals average of leases in growth

cash We of in our flow to use incremental which we space continue neighbors attractive of a outparcel $X.X XXX,XXX delivering to NOI Year-to-date, feet repositioning returns. approximately our value-creating have roundup million over and stabilized development and projects, deliver remain good our of invest X and square annually. projects, free

growth. a provide projects returns have These our risk-adjusted long-term and meaningful on NOI impact superior

we expect cash-on-cash with estimated full to $XX ground-up of $XX repositioning between the XXXX, average X% million XX%. to year For opportunities invest in yields now outparcel and development and million underwritten

starts construction half of to into in year now by XXXX in this that be $XX second expected will planned were approximately originally the projects pushed delayed commence million. X have We that spend XXXX, for lowering our

offering We strong recurring national, traffic of necessity-based enjoy and grocery-anchored of neighbors the PECO's and regional goods and benefits to to grocers than foot XX% mix continue our More continue to our centers. services, many top rents drive our portfolio from come healthy retailers. of our local with

by map PECO's the our continue portfolio, of continues neighbors, remains represent which continued local our behind XX% foot Our anchors traffic neighbors strong locations. positive created health is thrive The local the neighbor to and Local our from and neighborhood benefiting in strength of our grocer ABR, to be improving. strong.

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

XX% we second compared XX% overall for portfolio. Renewal our have an of the XX% rent local retained to quarter, historically. for As neighbors, quarter of XX% for neighbors PECO the from our the local spreads increase were

centers. prosper differentiate grocery-anchored We local addition that In mix local economics a want behind compelling our emphasize unique to and to centers entrepreneurs neighbors, they customers. for the our PECO's our offer merchandising neighborhood successful in

create that for to number the consumer, associated are a physical lack neighbor over work, given tailwinds of and factors favor construction returns continue We to to further from new given migration limited of us of strong population economic forward, new with importance delivery. the drive hybrid These positive construction. last due include communities shifts space supply, macroeconomic that These suburban our in XX strong trends going years and demand. benefit the a in demand healthy trends amplified the and locations last-mile new Sunbelt, the

the John. turn over to to call like now I'd John?

John Caulfield

Devin, and good addressing second sheet balance quarter an everyone. afternoon, Thank XXXX then our increased good the by to provide results, on and guidance. speak you, start I'll update and morning,

X.X% rental XXXX an operations. per share, driven quarter property FFO diluted income our in and by increased million to $XX.X strong or $X.XX Second Nareit increase

offset core $XX.X from quarter $X.XX FFO X.X% share, our spreads, expense. properties or interest higher partially Second driven levels million per revenue higher by to increased at diluted strong and by leasing occupancy increased

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

From the of into maturities loan $XXX extended XXXX sheet borrowing our million perspective, at capacity our million all term allow and week, a This already credit XXXX us this that quarter facility. approximately available term profile. $XXX extension push with we Earlier our on loan maintains debt maturity we enhances our balance ended The XXXX our options election. and XX-month position 'XX. well-laddered XXXX has into liquidity to the strong maturity of X

improve appreciate and These navigate our of our profile, markets. extensions debt the for banking the a term maturity we lower allow capital support financial our as flexibility cost partners. maintaining capital debt of current continued loan We

As our we exposure, of influenced revolver. look at floating our and floating currently the debt is our use of is rate by XX%

than We limit floating rate on and we're to target. less our XX% of total alternatives plan to working currently meet our this debt, debt to

our average ratio June as quarter, activity fixed was interest including as to continues management, and years second are weighted At and result a of our solid when X.Xx from of a EBITDA of available our refinancing weighted adjusted our the debt with strong sheet end week debt to prudent a XX, the the of extension as as earnings this balance XX% XXXX. leverage well of Our be debt at our rate. options, of growth X.X rate maturity net had average X.X%

ability free our revolver, the growth cash we our plans. on flow our confident to portfolio in available the by generated significant capacity and remain fund Between our

Turning updated are on FFO share Based our guidance. date, guidance. core performance FFO we raising to to per Nareit and our our

These result increasing Our to spreads, of $X.XX of increases diluted occupancy driven NOI also X.X%. are a X.XX% performance and new property per range guidance leasing core FFO guidance by our to of range a share. to same-center We're a high retention. $X.XX record increased strong to

With we forward taking your look to questions. that, Operator?

Operator

[Operator Instructions].

Burrows Caitlin first of Goldman Your question the Sachs. comes from line of

Caitlin Burrows

addressing a of know maturities year. your XXXX yours this debt I was for goal

that getting on congrats So done.

is debt up average years, from weighted your maturity X.X. Now of X.X

further. your maybe from regarding the to So about here kind bit outlook little could ability and talk that you of opportunity extend a

John Caulfield

Sure.

we flexibility it very amount have year. acquisition -- out, on worked that to with is it grateful are us the we So a lenders limited that the and big remainder just of for the in project was and for of support which the full gives a our the the push on further plan ability that line

financing further additional evaluate extend to us will that help continue that. and alternatives, We

at looking higher, more other activity. a is the like we're we think in bond obviously, base see be but the available. the to rates are to I or have I So flexibility bond we also -- market want issuer, long-term vehicles that unsecured financing mean, -- but secured markets we

Caitlin Burrows

Okay. And particular, the earnings just volumes the for on think in limited has PECO positive but the I for driver for maybe that's side, peers and lower industry versus unique driver. a year-to-date acquisition PECO transaction that

expectation passed So I attractive what developed about finding year-to-date seeing, your the how in for of of opportunities half. guess second you've what talk have and worked on, pace you're the could the opportunities you kind you've of deals transaction kind on

Jeffrey Edison

Sure, Caitlin.

year. as filled I But -- happy know, $XX the #X properties the the we're million #X acquisition a disciplined very it or John really is that of we're and worth mute, rents on in answer those was where but a and our occupancy. and market. I We're know, making question. first of on grocer bought and that we have you centers getting first we've drive terms as half though, the gave well. great you can of yes, about we sure underwriting properties in difficult in And stayed Sorry those what

we to starting have more discipline to recognition the view, quarters. the seeing lot continue to markets, We're a during a are last bit. going in price we're we've loosen X.X And had, the our saw than

that cautiously we say, where would yes, would so of terms year. we that big end of And would is beta there up. the it's on quarters, range. there at a that's I on get of continues couple of the a to early the the the end hard market end And Again, I we're whether or going significant over a it's range, the to feel acquisition we up. into and about in basis pace early, evolve. generally, could working like to that certainly there's next the -- to we're pretty how half optimistic we'll second of are days, And where we a beta depend why -- is But probably end in high lot short-term and the say low really

market have weeks, we're we of But project. probably a would We goals. meet have in But us moving have big that. the for positive add you work if to I able say, one to targeted project to to a -- will that be next so today generally, have I -- know lot we feel in to those get couple do to of the anything project, under close contract smaller don't not is like a direction we still a there. John,

John Caulfield

No, nothing to add.

Operator

from the of Spector Your of America. of comes question next line Jeff Bank

Jeffrey Spector

you're but rates again, did to what looking the Just where acquisitions, has versus missed a specifics guess, at? this, Like narrowing. I how on, the just cap been on if follow-up you gap I'm are sorry I provide acquire

Jeffrey Edison

question. thanks about We yet for didn't really talk the Jeff. the specifically Well, narrowing.

think know, XX to think But as -- rates. we having acquisitions we're returns life. getting long-term accretive been focused our points XXX in on that basis movement in I and really there's our cap be early their you

rates come more not coming market. as focused the we have to product pricing, environment. to on we're cap sellers But and task is the the as getting easy in are a so unlevered of on today's seeing an and And new to out that more have moved recognition

basis property, that has a know changed. sort would movement to a of we've probably get generally in XX allow we of wide a into of will that us say as terms I range on rates terms side. things. cap approximation spread there's -- good average a that, think acquisition -- but that pricing of that our way where points talked in XX those fairly factoring And is to that's in just in way about on But pretty an think I the the good we XXX to -- And

Jeffrey Spector

XX the Okay. the to into And points. the year we and gap occupancy. that of is then think about narrowed How second quarter about second question It 'XX? on half economic basis this for leased between should

Jeffrey Edison

take John, one? that do you want to

John Caulfield

long-term Sure. X years, been and year is up is and widens, historical the because or faster leasing, points. than -- XX had majority I our we it for our get at the majority so, point basis think the the over is average Jeff, spaces rent And so those it's leasing XXX activity. really basis XX gotten points. points has that of new vast last paying it if able in at pretty open more line. consistent to our reason box basis is But that We're and in to of the

So is basis points I that would say I look forward, that XX a think good we delta. as

Operator

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

Ronald Kamdem

Congrats on the quarter.

Just X quick ones for me.

is that interest now the extension be we to pieces. going 'XX, executed to should back that? you the in debt think cost what is that about 'XX. Just 'XX for there those delta way to once you annualize quantify extended a Maybe How you've versus

Jeffrey Edison

John, want take you one? do to that

John Caulfield

funded will you that, Sure. you're with mean, I'll -- acquisitions acquisitions. and million. rate $XX But assume take provide for that increases do up that on the depends do think number, we but that about 'XX 'XX then likely going -- that debt, what well. would the say is between those I it that It one if I we it assuming are they're as

Ronald Kamdem

going guess, I acquisition development into just then projects sort spend those I digging pushed. and question, And the acquisition the Helpful. of the down appreciate

those prohibitive? too Was can just little got there costs color? bit something a just provide more it were Why else? pushed. you projects the So Was

about to a hear more bit that. Just would love little

deals the is so to tree Just shake what this -- Is be you Is through. by? hard enough trying get And it are figure front, volume? out you you to do just bid? causing acquisition maybe deals come out getting on think to not this then how to more

Jeffrey Edison

you deal Yes. to on take want acquisition. cover the the Dev, development side the do I'll and

Devin Murphy

portfolio, X there's No, but of reason by to the a, look, the Ron, delays, or -- entitlement either, one pushed 'XX on the way delays projects store basically or the to one for b, projects comes down the things: it the Ron, in the varies delays during closed neighbor Publix from it's the project, the Sure. be like, season. material holiday and 'XX were for was not of did start, several redev c, into want that example, to need these to they

they into it early So 'XX. pushed

cash-on-cash it's on So achieve of but can do these this forward to factors, X% of that it basis a combination do kind that these still average. million that nothing continue on XX% an returns has with million will of projects. We to a deliver $XX activity on on to returns annual believe can to of $XX we projects and we the go

capital very it's the attractive of of use So a risk-reward activities. given these

Jeffrey Edison

-- that stuff? Ron, redev does answer the Does your on that question

pricing as anything goes the side, to bunch think up the kind happened cost times than in expand interest and more in to pricing capital pricing really marketplace. and of go really It's think Ron, process. happen going when and be that change rates is out past up, We're buyers will a to when at the as And I -- hesitant in in not -- a it's is bunch I really owner, market and the I it's the of to don't thinking the a it more. a And the very are an think a that is so -- that's sell of going you're which adjust the new transaction be battle is and process, change on. and anything we're a through pricing to going normal And wider. -- the mean should where you acquisition new of buyer, difficulty sort to of going you're it that's more. have you in going the repricing hesitant side, sort just are of on on the they volume to sellers you going have

said, our has we XXX what time. talked And probably a basis would we've And -- it it we -- that's will hopefully, as the X% process, seeing changed difference that that for moved progress XX exceed acquisition to unlevered we be our to thought allow We it you probably right on than through year be somewhere a as side. from we will And led us and as IRR that meet now, are But what quicker expectations take as than points spread. would. it in about, I go little targeted between to know, slower the we're and thought and would our X%.

Operator

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

Juan Sanabria

a question sheet. on Just balance the

job You done a good down guys have time. taking over leverage

the it with today. you leverage up attention So that, how about to acquisitions floating rate equity mix And closer of John reducing lever to kind fund the should we is think debt to future funding exposure. or an it as where keep of mentioned to part as

So just curious on options are. what the there

Jeffrey Edison

about the Okay. don't debt. -- little about can talk bit I we're will John, about in of of some the question, thinking if the -- a you of the bit little part fixing what terms why a first talk I

on our of with Juan, as very cost know, acquisitions. you we're our matching focused capital

can get in we a shown to show that's actively expect that going this acquire to that market into that, will right. have sheet balance only do will able that year of use we continue unlevered an we but are create use accretive have we order sheet value where machine with And when a to that forward in. So our growth when we the properties lot and balance be getting solid you the to can discipline can we're opportunities the to

what way at -- markets know, the of will sort tapped appropriate do be good the thought really year and that That time. and of we saying last an time we to that the we at a were was a favorable. where ATM thing our we the are our you looking at getting markets as at where debt spread that's time cost we were equity so and buying, between of capital And we long-winded a right thought

looking and the rates. keeping And talk so at John, bit little you two. to to we're that strategy our that balance a keep between always fixing -- want on do trying about

Devin Murphy

move million in picking generate over on cash we just year after to $XXX million Juan dividend flow. $XXX we I with a and on free John a we Before acquire free that to Juan, want flow in rates, remind the year assets cash that can

$XXX in in So the us funding for year need acquisitions. when million a we kicks exceed

-- is So and capacity. do leverage then now have debt as to you know, X.Xx sheet our balance so we EBITDA

typically increment so that leverage And would advantage to $XXX to our we that capacity million, take acquire of increment.

John Caulfield

leverage in are a we Xx. point, But to I'll And referencing $XXX increase is buy to approximately we But is our leverage and this would be. place increasing, and that. think, that can environment, $XXX to low the we Yes. million target leverage this that say million utilizing Devin's of definitely have then say opportunities, we is long-term given I the Devin increasing a without really

floating regards to With million at And us in really does flexibility gives we of where term uncertainty. end of that debt the as liquidity. fixed, term yes, to higher now. the from do of this $XXX are flexibility quarter, time we about what more the or in the is not And it or elevated at whether treasuries we because look time gives us those loan we the get the here, to the also right financing versus What it market. spread where have they're but for is going it, do capital markets great discuss lower, opportunistic are us frame more floating a loans seem can

the we're us about that. term about we And fixed thinking to do think allowed as instruments so loan and that

We a getting XX% $XXX fund move goal XX% -- that million hopefully, to even move XX% fixed do less that, as with on that floating We have an less acquisition I'm as I'm than longer-term year, thinking we target a a sorry, to fixed to of us. will it, [indiscernible] peers sorry, XX% being we floating have our and less available us closer forward so and then for fixed a revolver about our help if than instrument with target. basis. buy are, -- long-term than where the of towards goal And

but a financing thinking it So right the now. way, again, we long-winded opportunity and about in of as where are terms

Juan Sanabria

And guidance there, reduced low that then one debt, range. last end the you're towards seems running maybe the Bad just revised follow-up. like of you

the the behind on lower range? assumed in end there kind debt and what's there of the range. the assumptions there is on end built of curious high Just degradation end the at economy an curious low -- of of range? just that And further weaker bad the is of the Or

Jeffrey Edison

John, to take want do you that?

John Caulfield

Sure.

strength revenue between of XX and points So of historically, long given basis a neighbors. XX this we the -- consumer portfolio has been the over our over of and period time. And are well trending

of there in I half quite that we're we say positive do of is don't second tight that's in there. continued in the into the I first say this the it's middle the strength. would of debt as it's to -- I look would think we year, because it do, was that not less account forecasting As number a number pretty we terms as disruption in half. would probably taken But that. bad that

I would we're we're seeing, collections, that everything in not say of deterioration. FFO we it's more on leasing, based considered the retention, But any seeing it be provide. whether signs range that

on positive year. very second half we're so of And the the

Operator

Next from line of JPMorgan. question Mueller Mike of the comes

Michael Mueller

out though. of Thank queue. you, to My get question tried answered, the was

Operator

line comes Haendel of from question St. next Your the

of Juste Mizuho.

Ravi Vaidya

do on do now limited to going the acquisition with nearly guys Haendel. and Vaidya ask Ravi you What be line be is rents I for Do volumes from? portfolio within coming able full here think you estimate are the and will forward? your This and spreads to mark-to-market opportunities incremental similar growth hope going just minimal wanted to think continue you source current push the renewal doing I well. portfolio? the forward. you bankruptcies of Where you'll

Jeffrey Edison

the question. for thanks Rav,

ability contractual the that spreads the know, capital growth. strong rental through pillars with our a our stream for both and X that from through on those. there retention trying get, you strong doing also to internal minimize And As really bumps, but really There's we're we coming getting re-leasing rent grow our while growth to are rate. that's

to So the points XX that I to driven to grow in that we're But also rents. be that And occupancy think be less very We which see been ongoing. the small internal believe more work doing, that, that our there. mentioned really anywhere positive numbers will we increases power at increased has that, basis, adding is we've very engines we're store stuff will from basis we a getting think And you got we XXX that occupancy hard -- growth. have in go, can by obviously on still to pricing readout longer-term be and go. driven have and think the by to then will working we you that of and accretive those

to allows can to FFO then And strong have we grow an still the we have the single-digit sheet, very basis range. core us And points solid remarks, growth operating in in Devin really and made are that which And a we we've our annual some growth. got mid- you environment balance the tailwinds we there. that things, those to allowing -- his on us external combine high prepared some when see believe of

I is but... thing very emphasize today. That cracks. to make a -- Devin, continue market we to and appear we're So there like anything storm not to we're we're any if And one that. optimistic know, there's into do want that we're I as to thinking I it. to that add it's ability happening, our just we want -- in that everyone be see mean huge happening we missed, not it you doesn't sure really I seeing we would the don't getting about

Devin Murphy

growth. to what say, get been from new points. Jeff, we same-store XXX that to rent mean, XXX the will spreads basis and to growth go-forward NOI the I by no occupancy in points. that Yes. and contractual where XXX be growth on over closer contribute we've was generate getting our be we basis level to is from growth Ravi, Then I this longer getting will points which will XXX that an portfolio realized X% we we're to renewal of occupancy will same-store basis number increases NOI think down, can it that same-store would going a think go of and the will NOI in That NOI contribute that second And replaced time, to XX quarter we growth. X%

XXX. And to redev contribute XX then lastly, will

the So of in same-store to that same-store get by other X% without those elements still with we growth X% to growth. occupancy uplift, NOI created X number even

Ravi Vaidya

helpful. Very

and merger here. update the regarding have any the more Albertsons Kroger potential one closure Just Do update any store you impact. with

Jeffrey Edison

would We an have have -- we -- don't would don't I that really anything update. say as

happen. continue We are in don't and could -- that a us would see to downside options that really we of any for be really feel thing positive it either the

the We happening, watch a merger. Albertsons a -- metric continue as at the discount it of trading strike thinks to the market stock chances of what in still is price the where the to XX%

around uncertainty of still obviously a lot there's it. So

It say we've going And you that to these happen very is it's likely. of seen and management happen, or way it other, its pieces, going through there get or government. -- environment normal not we're normal mean going pushback from taking highly nothing I mergers bits that the an process absolutely likely a in is doesn't -- for looking course, but big real where it's and to which from kind feels it's a throws that the think or us hearing highly less that one but it's to at sizable

lost not government so government. it's you the for a big thing Now see the with that an this that Microsoft week can all-win case

I go I -- certainly to So to and say Albertsons going are continuing they that through. there -- that. believe believe mean and is a it both Kroger that is

Devin Murphy

closures, look Ravi. on not Ravi's we health the that regarding but to PECO portfolio, portfolio, will no Jeff, we've closures the there viable generally, are because merger for the grocery approved, these store part of that in ratio, and of we're store the is confident banners from our and What occur foot at question as to closing per productivity that there be sales merger the be they be been order specifically a as locations. our advised then would in portfolio in

portfolio the a there not that as closures will that in confident any we're merger. be of so result And PECO

Operator

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

Todd Thomas

questions. couple A of

I quickly. about First, pricing. just asset your comments wanted Jeff, to clarify

XXX to You basis mentioned points. XX

XXX spread rate clarify heard just you also the question. require I to your entirely. you response think and... for in Were speaking speaking to cap that points cost basis something else or a to I you versus what expansion investments new capital? Can you're of Or

Jeffrey Edison

at The points has I in talking the points mud, XX PECO the clear the I the look unlevered to that rate. was basis Sorry about increase cap XXX basis guess was opportunities. what we -- underwriting in IRR right? as increase to our new that. The was I XXX about was done as

the points I -- don't about did believe because don't to were, where XXX unlevered cap know basis the the -- come I IRR that add said I XX think, those but in I would XXX what and numbers. I to have XXX But the know So X we that rates. basis increase there's from. point

Todd Thomas

rates are And a more seeing cap you stabilized still bit bit it. Or Got recently? expand Okay. a they have today?

Jeffrey Edison

say that there to expansion in believe would it's minor far some our probably is happened cap in opinion. what's compared I that more rates, but we so the

could that stay change. longer, from rates be be the rates. it But is major seen our more for cap here, higher we've it if change in than change that Now of kind adjustments major will any will belief

Todd Thomas

indications to around across to with almost the XX this then thoughts there? Any on portfolio, particularly high lease expect expect again hold retention the 'XX? And might you what quarter. the early Do in regard any you you And talked anchor specifically? expirations, that Okay. expiration about XX% the anchor

Jeffrey Edison

to take don't want specifics. Devin John, you those I on that if one know or do

Devin Murphy

rates Todd, I we seen would XX. low fairly to retention year, consistent terms of just over I mean high retention, a have say, in a the of from of XX varying last

believe be strong retailer continue is So because we fairly the the that of rates But to see end retention very the type. at we our to going product stable range. higher are XX demand our for

so that see And what move rate to seen in we've to retention a not we're historically. expecting material relative

That of high overall XX.X% then a Todd. XXX%. And low it's on anchors, of rate, was between an a and retention varied the

So XXX%. and again, it's between XX%

rate confident -- in consistent be a on will pretty that go that, we're forward. So

the kind we're of the factors them, will health all Again, out from those that productivity the of seeing seeing given lead we're combination of renewals ratios that that us they options anchors they have. that our exercise may and or confident to be

Todd Thomas

this they've and Okay. has from Amazon I various but their them discussing formats, growth And article there in unclear out the in footprint was somewhat know a grocery. their little then growth tested limited, over few an been lastly, -- years. morning grocery last maybe

and the to on how any the them footprint, for impact that like curious, thoughts what that landscape expand you expansion? about your think as portfolio specifically and potential Just look might grocery their could that maybe potential

Jeffrey Edison

Yes.

looked work a more strategy lot that side, one since I But to them a It's traditional that to store. -- their take Todd, concept. I grocery really than a they've looked a they consistently as lot on question. mean never productive that Amazon. So they allows not a grocery given. it's a to opened been I that we prove have got new first grocery be great actually at differentiated have They to able at the underestimate you mean find do. of -- have

just similar you'd with every new to sort but say, to very anything little go all to it's really you a want when into their wow, see and get this is very there. And have customer nice you that, store be going that are stores, they to of

willing -- go Kroger to look, lot develop of to going I'm say, not got going prove a format to actually I'm to is consumer to that to So go they've a that work there they can the anymore. my Amazon.

to haven't been do they And that. so able far,

that, a And format sales aren't going And scale. mean, threat of making at only they making kind current any not that hearing the in money, are not not do because not we're they mediocre. money. they're certainly the it until really serious numbers current I is format scale to And it's very

I So do able something mean haven't differentiate to themselves. -- they they've they And to where can find date, been that. to really got they

bunch to of there can until even. overlapping to you were the stuff. about them. that to going obligations always mean a So be I They Amazon seem deals. have they a do buy we're they up of been lot that that, Albertsons because do rumors open been the I opening rumors got they've mean Kroger, don't -- to watch stores they've they forever going

work they -- prove market. successfully to So they're to into in lot do of a can get they've that got a

Operator

Kesten line Fargo. Dori the from of comes question of next Your Wells

Dori Kesten

'XX at you XX but the know basis you When bad XX average, to your small points. your this at watch you close list, it's look would relatively looks imagine say point, long-term debt I your to

Jeffrey Edison

I don't as see do Yes. Dori, obviously, that We a it -- that's box have there what that we will believe mean, -- we big don't projecting. we we -- anything exposure. of you are know, don't lot

limited. grocers So than our brand to other any our is exposures particular very

-- we of so we see category. anything would normal a there us push and of don't that And sort outside

recession the X focus losing, the our and relative anybody terms did of then occupancy done in well we think, know, mean grocer last and major see -- Obviously, space. you a that's basis, in focus. in recessions have we've again, the goods you I And on our necessity-based But you a I what happens. as on really of least

Operator

of comes Your Point. next of line Compass question from Floris Dijkum the Gerbrand Van

Floris Gerbrand Van Dijkum

amaze have think to a I a highest your me occupancy, think, in how empty continue I occupancy, guys it's is I shop handful, because to your also highest I anchor sector. your know portfolio, is sector. you the in in the the You than And got boxes many the but less don't handful. believe, be

you anchor side. how particularly to occupancy, ability push if shop give Obviously occupancy that can your the much more you your on But impacts realistically? can grow us a opinion, maybe in

now. almost supply. fundamentals in more -- There's appear very landscape markets as And you Jeff, be for underlying no justified. to for you new But continually. to construction do follow-up What evolves need that much certainly new think how the on in order rise is right -- rents your the then the retail positive know,

Jeffrey Edison

new talk we I'll and -- then the take retail your the growth, the to the about sort development. -- occupancy Dev, do do for you growth want side Dev, you opportunity of want think the Floris, on to is question. thanks for take what

Devin Murphy

Sure, us. you. continue to Floris, continue because underestimate focus you is to surprise our we to you continue to surprise And

that, to occupancy, we replaced be super continue we points will of uptick another, of we NOI XXX by growth have NOI believe which same-store occupancy said, rents. of as our to be then because our ability loss to forward to by We X% shop impacts will going there. Jeff occupancy growth, So push created realize in think XX same-store that to terms continue the basis X%

X% we XXX our that renewal spreads points. Contractual metric our same-store rent points. In the second and so and the increases XXX forward, of growth components of to XX to quarter, at to basis that our was which XXX metric. you XXX basis XXX then points, points to going XX basis at same-store of basis of growth the to new gets think X% And redev contribution NOI activity

we We look are profiles on assets costs think $XXX circa square if And foot the again, a we square $XXX foot. for those QX, we continue a you we believe because reasonable that those the on these replacement a in growth look is for marketplace, to average at paid as assets. acquired go-forward at centers

So for need investment. would in order almost to development to generate an acceptable new rents double on return

supply limited where rents a on years we supply So meaningfully move they today. be from over and our not last see been there's view of there are is go-forward incremental market this will until the XX

Jeffrey Edison

add that, the regional are markets to where just Floris, specific And expanding. Yes. to there grocers are some of

Publix, But that be cautious competition to each look in some very in and those you at markets. those got to at of You levels. HEB. a got specific you They win radius that coming with it look in win compete like doing terms Hy-Vee, one you've X-mile look it, as are at about in where new we is you because areas it's we you have centers, its its our know own more market And is around own competition. in to stores

where for the is because watching markets development. that you -- we we're very you specific in is is but development happening always vast we need have we're new at it rents majority that to the And of -- that to locations. one the not in. So the things specific look don't stores get of the And

that of you rents development, some first look markets, likely closer that actually we're markets more some is see, markets happen major in. new those in more as the to And than is and are development to where do where the at the it than to construction. could happen urban get happening. will are, of to If mean, -- you're more can areas you -- Orlando, and that it's they our urban We in the see and you're not in. centers we're markets in that likely where going kind see it to I rents believe of the you Tampa in where Atlanta the new denser happened justify more it

Floris Gerbrand Van Dijkum

quarter. can consistent else? year anything part previously NOI X is I relatively you that caused the of but you during the expense anything growth follow-up, Obviously, drop? some were marginally margins dropped got my noticed uncollected last that that they Is months, first -- this or rents just your the that through it Maybe

Jeffrey Edison

one? John, to that do want you take

John Caulfield

about points talking Floris, Sure. basis we're XX here.

really point, in that's run margin strong. I good the it's that XX.X% months, is mean X quarter, I mean, But where we are So mean, move. very it. on I XX% rate, the a think at and see XX% the think I still to I expenses going it's

Floris Gerbrand Van Dijkum

your ability run testament a to the by business? also your to And it. is That's way, that your --

Jeffrey Edison

Thanks, Floris. it. We appreciate

Operator

I Jeff call to [Operator Instructions]. Jeff? to would back the Edison. turn question-and-answer concludes session. our This like

Jeffrey Edison

solid loan and to record we the Well, balance material in EBITDA, growth for -- us and your increasing ability. first able to when and And terms year no little our improve leasing our same-store all, really 'XX any being half basis our to When the flexibility our thanks, want. you're really quarter of NOI We getting giving did really on purchase X.X%, of extending able tough XXXX a to $XX when you're until adjusting seeing you're debt a very million tough a sheet, were anchors your for maturities market. a at of that if you're occupancy call in-line in today. have really of cracks on first everybody, stores, and the we

and going really drive, internal to results and to going strong good through we 'XX, 'XX growth. on We're focus we're continue external to think, and

So great a again, being on the today, thank for have call and you day.

Operator

This you. today's Thank concludes call.

disconnect. now may You

Phillips Edison & Company (PECO) 2 Aug 232023 Q2 Earnings call transcript