Phillips Edison & Company, Inc. Q4 FY2025 earnings call

• 2025 results were strong with NAREIT FFO per share growth of 7.2%, core FFO per share growth of 7%, and same-center NOI growth of 3.8%.
• Confident in 2026 guidance with mid-single digit growth rates for NAREIT FFO and core FFO per share.
• High demand for necessity-based retail with PECO's leasing team driving in-line occupancy to a record high and strong comparable rent spreads.
• In 2025, PECO executed 1,026 leases totaling ~6 million square feet. Portfolio occupancy ended 2025 at 97.3%, anchor occupancy at 98.7%, and in-line leased occupancy at a record high 95.1%.
• 20 projects under active construction with an estimated $70 million investment. 23 projects were stabilized in 2025, delivering over 400,000 square feet and incremental NOI of ~$6.8 million annually.
• Strong balance sheet with $925 million of liquidity as of December 31, 2025, and net debt to trailing 12-month annualized adjusted EBITDA at 5.2x.

The core business of Phillips Edison & Company is its grocery-anchored shopping center business. In 2025, NAREIT FFO per share grew by 7.2%, core FFO per share grew by 7%, and same-center NOI grew by 3.8%. The revenue contribution is primarily from grocery-anchored shopping centers, which drive strong rent and NOI growth. For 2026, guidance includes mid-single digit growth rates for NAREIT FFO and core FFO per share.

• 2026 net income guidance is in the range of $0.74 to $0.77 per share.
• Same-center NOI growth for 2026 is projected to be in the range of 3% to 4%.
• NAREIT FFO per share guidance for 2026 reflects a 5.5% increase over 2025 at the midpoint, and core FFO per share guidance represents 5.4% year-over-year growth at the midpoint.
• Gross acquisitions guidance for 2026 is $400 million to $500 million at PECO share.
• Dispositions guidance for 2026 is between $100 million and $200 million.

• Intensifying competition for high-quality grocery-anchored assets.
• Impact of tariffs on retailers and concerns about consumer health.
• Bad debt levels, although expected to be in line with 2025 at approximately 78 basis points of revenue.
• Interest rate risks affecting variable rate debt, with plans to address floating rate debt through financing activity in 2026.

Q: You're expecting to do even more volume externally this year. So as we think about this level of competition for high-quality grocery-anchored assets and how that's sort of intensified over the last year, could you speak to the diversity of opportunities within your pipeline and what looks most attractive to you externally right now?

A: Sure. Thanks for the question, Andrew. So on the acquisition side, what we're seeing is, as you point out, there's more competition there. But we're also seeing a lot of product on the market. And we think that, that is probably going to balance itself out in a way that creates enough opportunities. And I think that's why we have a high level of confidence that we can reach our targets that we've laid out for the acquisition pace. Bob, any of your thoughts on that?

Q: I was on mute, apologies. I wanted to start off and ask just about occupancy in the portfolio. Both leased and economic is pretty meaningfully above the peer set. I guess, number one, do you feel like we're reaching almost a terminal occupancy level, probably more so on the anchors than the in-line neighbors. But number two, just given where your occupancy is, do you think that gives you more leverage when it comes for these renewal negotiations, maybe being able to push more on rent escalators or with an anchor lease, potentially shortening options or building in some kind of internal growth into those?

A: Yes. Before I turn it over to you, Grif, thanks for the question. Our belief is that the reason our occupancy is higher is because more retailers want to be in our grocery-anchored locations. And the necessity-based retailers see us as where they want to be, which is giving us a higher level of stabilized occupancy than anyone else in the space. And we think that will continue, and we believe that there is upside from where we are today. Obviously, not a ton on the anchor side as we are in the very high 90s on that. But we still think there's 1 or 2 points that we can get of additional growth in the in-line stores. So we're excited about that. We are -- we believe very strongly that the retailers are voting with their leases, and they're leasing a lot of our space. And that's why we are at the highest level of the -- of our peers. Bob, do you want to talk a little more about the tenant demand and what we're seeing there in the tenant side?

Q: First question on capital deployment. I appreciate your comments on the acquisition strategy. I guess I'm curious also on the other capital allocation alternatives that you're considering. So maybe some comments on how you're thinking about either ramping up redev, ground-up development and also potentially buying back the stock here, which looks like it's trading somewhere in the low to mid-6s on implied cap rate, which isn't that much different, a little higher than acquisition cap rates, but it's an immediate return. So just curious on how you're thinking about capital deployment beyond acquisitions.

A: Great question, and one that we obviously think about a lot. And all of the pieces that you're talking about are part of our regular conversation on our allocation of capital. The ground-up development is a very strong part of where we think there is opportunity, small. It's not going to be a major piece. It's going to be -- we hope we can get it to the size that we're talking about with everyday retail. That -- because we think we can get outsized returns there. So that will continue to be a part of our property. We will put up, we think, $70 million of sort of redev and capital that we will put into the ground up this year. we kind of were in that $50 million to $70 million range, $70 million last year, $70 million this year, probably more like $50 million going forward, but we hope we can get that to $70 million. So we love that part of our business. Obviously, the allocation to the acquisition side between our traditional grocery-anchored stuff and our everyday retail, again, a piece where we think there's opportunity to -- if we can find it and get to the unlevered IRRs that we are targeting, we think there's opportunity to allocate capital there as well. And as we -- I think we've said a few times, we can purchase $300 million of property and do redev in $300 million property without going back to the market and keeping our leverage where it is today. So we have opportunities for that growth, and we want to continue to -- where we find the opportunity to be able to take advantage of that. So all those are part of it. We are always looking at share buyback since we started, we've looked at that. Right now, we're in sort of that tweener zone where it's really not a great time to be issuing equity. But also, it's not -- we don't -- we think we can get better returns for our investors with buying properties than we can and doing our readout than we can buying our stock back. So we're in that sort of between range. And that's why we've laid out the vision for this year that we have. and we're excited about it. I think we can do some really exciting things. The one piece that is in addition here is the dispositions. And the dispositions give us more opportunity to buy at a larger scale, and that is something that we'll be looking at this year as well.