Earnings call transcript: Phillips Edison Q2 2025 sees strong growth

Phillips Edison & Co. reported robust growth for the second quarter of 2025, with notable increases in key financial metrics and strong operational performance. The company’s focus on grocery-anchored neighborhood shopping centers continues to drive success, as evidenced by its impressive financial results and strategic acquisitions. The stock saw a slight increase in premarket trading, reflecting investor confidence in the company’s future prospects.

Key Takeaways

• Phillips Edison reported an 8.8% year-over-year growth in NAREIT FFO.
• Portfolio occupancy reached 97.4%, with anchor occupancy at 98.9%.
• The company acquired $287 million in properties year-to-date.
• Full-year 2025 guidance for NAREIT FFO and Core FFO was raised.

Company Performance

Phillips Edison demonstrated strong performance in Q2 2025, driven by its strategic focus on grocery-anchored centers. The company reported a year-over-year increase of 8.8% in NAREIT FFO and 8.5% in Core FFO, highlighting its ability to generate consistent growth. Revenue grew 10.31% year-over-year, while maintaining a healthy gross profit margin of 71.26%. The company’s portfolio occupancy rate reached 97.4%, with significant gains in both anchor and inline occupancy, reflecting the effectiveness of its leasing strategy. InvestingPro data shows the company has raised its dividend for 5 consecutive years, currently offering a 3.87% yield.

Financial Highlights

• NAREIT FFO: $86 million ($0.62/share), 8.8% year-over-year growth
• Core FFO: $88.2 million ($0.64/share), 8.5% year-over-year growth
• Same-center NOI growth: 4.2%
• Portfolio occupancy: 97.4%, anchor occupancy: 98.9%

Outlook & Guidance

Phillips Edison raised its full-year 2025 guidance for both NAREIT FFO and Core FFO, projecting mid to high single-digit core FFO per share growth annually. The company plans to acquire $350-$450 million in properties and target dispositions of $50-$100 million. Same-center NOI growth is expected to be between 3.1% and 3.6%, indicating continued confidence in its business model. Analyst price targets range from $36 to $44, suggesting potential upside. The stock’s low beta of 0.47 indicates less volatility compared to the broader market. Get deeper insights into Phillips Edison’s growth potential and 12+ additional ProTips with an InvestingPro subscription.

Executive Commentary

CEO Jeff Edison emphasized the company’s strategic focus, stating, "We’re not just maintaining a high-quality portfolio, we’re building one." He also highlighted the company’s ability to adapt to consumer behavior, noting, "The consumer is sort of saying one thing and then doing another." These comments underscore Phillips Edison’s proactive approach to market challenges and opportunities.

Risks and Challenges

• Potential impact of economic downturns on consumer spending.
• Competition from other retail property owners and new market entrants.
• Changes in interest rates affecting financing costs and acquisition strategies.
• Dependence on grocery-anchored centers may limit diversification.

Phillips Edison & Co. remains well-positioned for future growth, supported by its strategic acquisitions and strong relationships with major grocers. The company’s robust performance in Q2 2025 and positive outlook signal continued success in the evolving retail landscape.

Full transcript - Phillips Edison & Co Inc (PECO) Q2 2025:

Operator/Conference Moderator: Good day and welcome to Phillips Edison & Company’s second quarter 2025 earnings call. Please note that this call is being recorded. I will now turn the call over to Kimberly Green, Head of Investor Relations. Kimberly, you may begin. Thank you, operator. I’m joined on this call by our Chairman and Chief Executive Officer Jeff Edison, President Bob Myers, and Chief Financial Officer John Caulfield. Once we conclude our prepared remarks, we will open the call to Q&A. After today’s call, an archived version will be published on our website. As a reminder, today’s discussion may contain forward-looking statements about the company’s view of future business and financial performance including forward earnings guidance and future market conditions.

These are based on management’s current beliefs and expectations and are subject to various risks and uncertainties as described in our SEC filings, specifically in our most recent Form 10-K and 10-Q, and our discussion today will reference certain non-GAAP financial measures. Information regarding our use of these measures and reconciliations of these measures to our GAAP results are available in our earnings press release and supplemental information packet, which have been posted on our website. Please note that we have also posted a presentation with additional information. Our caution on forward-looking statements also applies to these materials. Now I’d like to turn the call over to Jeff Edison, our Chief Executive Officer.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Jeff, thank you, Kim, and thank you, everyone, for joining us today. The Phillips Edison & Company team is pleased to deliver another quarter of solid growth. Same center NOI increased 4.2%, and core FFO per share increased 8.5%. Given the continued strength of our business, we are pleased to increase our full year 2025 earnings guidance for same center NOI, core FFO per share, and NAREIT FFO per share. I’d like to thank our Phillips Edison & Company associates for their hard work in maintaining our unique competitive advantages and driving value at the property level. We believe Phillips Edison & Company’s gross rent strategy and necessity-based focus have helped to create a resilient portfolio that also delivers steady growth. We are driving strong rent spreads, increasing occupancy, and generating dependable, high-quality cash flows. This consistency in performance and growth is attributable to several factors.

First and foremost, it takes an experienced and locally smart team to bring the best retailers to our centers. Our neighbors create positive community experiences built around our grocers. Second, it takes decades to build the strong grocer and national neighbor relationships that Phillips Edison & Company enjoys. These relationships give us an advantage in working together to optimize our properties. These relationships also are critical to our acquisition strategy. Third, it requires a portfolio focused on right-size neighborhood centers located in suburban trade areas, with compelling demographic trends and continued macroeconomic tailwinds. Strong demand from national retailers continues to fill our pipeline of ground-up outparcel development and repositioning activity. Fourth, it takes a dedicated team to acquire and curate a high-quality, grocery-anchored portfolio that is expected to deliver 3% to 4% same center NOI growth year after year.

Lastly, it requires a strong balance sheet with great liquidity to invest in the properties and the portfolio. Our long operating history and track record have built these strengths for Phillips Edison & Company that give us both offensive and defensive advantages in the market. Because of these advantages, we believe Phillips Edison & Company is able to deliver mid to high single-digit core FFO per share growth annually on a long-term basis. The market continues to focus on tariffs and U.S. economic stability. As it relates to Phillips Edison & Company’s grocers and neighbors, we feel very good about our portfolio. As a reminder, 70% of our ABR comes from necessity-based goods and services. This provides predictable, high-quality cash flows and downside protection quarter after quarter. This also limits our exposure to discretionary goods, which are at risk of greater impact from tariffs.

We estimate that approximately 85% of our neighbors, based on ABR, will experience limited impact from tariffs. Supporting that estimate is the strength of our neighbor retention and leasing spreads in the second quarter, which Bob will speak about in a moment. Our neighbors are watching the consumer closely. They continue to benefit from their location in the neighborhood, where our top grocers drive strong foot traffic to our centers. We continue to see leasing demand for our existing spaces, along with a healthy development and redevelopment pipeline. We are seeing strong demand from retailers who want to be located at Phillips Edison & Company’s grocery-anchored neighborhood shopping centers, especially from small shop retailers in categories like quick service, restaurants, health and beauty, medical, retail, and personal services. These are the types of neighbors that perform well because they are part of people’s everyday routines.

Importantly, the Phillips Edison & Company team continues to find smart, accretive acquisitions that add long-term value to our portfolio. Our active acquisitions activity is another differentiator in Phillips Edison & Company’s strategy. The Phillips Edison & Company team is acquiring in the market through all cycles, carefully and deliberately acquiring centers that fit our grocery-anchored strategy and right-size format while also delivering long-term growth potential. This has been part of our DNA for over 30 years. We’re not just maintaining a high-quality portfolio, we’re building one. What sets Phillips Edison & Company apart is that we know exactly what we’re looking for, and we have one of the best operating platforms to act quickly and execute, and that puts Phillips Edison & Company in a unique position to grow cash flows in a way that’s both disciplined and opportunistic.

During the second quarter, we purchased $133 million of assets in Phillips Edison & Company’s total share. When you include assets acquired subsequent to quarter end, this brings our year-to-date gross acquisitions at Phillips Edison & Company share to $287 million. Despite recent market volatility, we remain confident in our ability to acquire high-quality centers at attractive returns. We are pleased to affirm our guidance range of $350 million to $450 million in gross acquisitions this year. We continue to successfully find attractive acquisition opportunities at below replacement costs with strong growth profiles that we believe will exceed our unlevered 9% IRR target. We will acquire more if attractive opportunities materialize, but we are comfortable with our current pace and IRR targets. We will continue to be disciplined buyers as we look forward.

In summary, we are very pleased with our results this quarter and our ability to raise guidance for the remainder of the year. While it is still early to understand the full impact tariffs could have on Phillips Edison & Company or our neighbors, we continue to see a resilient consumer and we believe our portfolio will outperform as retailer demand remains strong. Our confidence is driven by the stability of our high quality cash flows and the Phillips Edison & Company team’s ability to deliver solid growth and create value for our shareholders. Given our demonstrated track record through various cycles, we believe an investment in Phillips Edison & Company provides shareholders with a favorable balance of defense and offense. In summary, we believe the quality of our cash flows reduces our beta and the strength of our growth increases our alpha. Less beta, more alpha.

I will now turn the call over to Bob.

Bob Myers, President, Phillips Edison & Company: Bob, thank you Jeff and thank you for joining us. As Jeff said, Phillips Edison & Company’s grocery-anchored focus and necessity-based neighbor mix create strong leasing momentum. That momentum is clear in our operating results again this quarter. Our long operating history has given us an informed measure of what drives quality and value at the shopping center level. We continue to believe SOAR provides important measures of quality, spreads, occupancy advantages of the market, and retention. This is most evident in our continued high occupancy, strong rent spreads, and high retention. In terms of leasing activity, we continue to capitalize on elevated renewal demand. The Phillips Edison & Company team remains focused on maximizing opportunities to improve lease language at renewal and drive rents higher. In the second quarter, we delivered strong comparable renewal rent spreads of 19.1%.

Our inline renewal rent spreads remained high at 20.7% in the quarter. Comparable new leasing rent spreads for the second quarter were 34.6%, and our inline new rent spreads were 28.1% in the quarter. These spreads reflect the continued strength of the leasing and retention environment. We expect new and renewal spreads to continue to be strong throughout the balance of this year and into the foreseeable future. Leasing deals we executed during the second quarter, both new and renewal, achieved average annual rent bumps of 2.7%. Another important contributor to our long-term growth, portfolio occupancy remained high and ended the quarter at 97.4%. Leased anchor occupancy remains strong at 98.9%, a sequential increase of 50 basis points. During the quarter, Phillips Edison & Company executed leases with Dollar Tree, Planet Fitness, Ace Hardware, and Southeast Pickleball.

Inline occupancy ended the quarter at 94.8%, a sequential increase of 20 basis points. Small shop retailers added during the quarter included Cold Stone, Firehouse Subs, H&R Block, and Pacific Dental Services, along with several other Medtail neighbors and health and beauty retailers. Given our robust leasing pipeline, we expect inline occupancy to remain high throughout the year, which is very positive. As it relates to bad debt in the second quarter, we actively monitor the health of our neighbors. Bad debt in the quarter was up from a year ago but in line on a year-to-date basis. It is well within our guidance range. We are not concerned about bad debt in the near term, particularly given the strong retailer demand. We continue to have a highly diversified mix with no meaningful rent concentration outside of our grocers.

A key advantage of Phillips Edison & Company’s suburban locations is that our centers are situated in markets where our top grocers are profitable. Phillips Edison & Company’s three mile trade area demographics include an average population of 68,000 people and an average median household income of $92,000. This is 15% above the U.S. median. These demographics are in line with the store demographics of Kroger and Publix, which are Phillips Edison & Company’s top two neighbors. Our markets also benefit from low unemployment rates, which are below the shopping center peer average. We believe the necessity-based focus of our properties is important when demographics are considered. When looking at our very limited exposure to distressed retailers, the top 10 neighbors currently on our watch list represent approximately 2% of ABR. This is not by accident.

It is a product of many years of being locally smart and intentionally cultivating our portfolio of grocery-anchored neighborhood shopping centers located in lively trade areas with compelling demographic trends. Our neighbor retention remained high at 94% in the second quarter while growing rents at attractive rates. High retention results in better economics with less downtime and dramatically lower tenant improvement costs. Lower capital spend results in better returns. In the second quarter, we spent only $0.49 per square foot on tenant improvements for renewals. In addition to our strong rental growth and retention trends, we continue to expand.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Our pipeline of ground-up outparcel.

Bob Myers, President, Phillips Edison & Company: Development and repositioning projects. At the end of the second quarter, we had 21 projects under active construction with an average estimated yield between 9% and 12%. Year to date, nine projects have been stabilized. This activity delivered over 180,000 square feet of space to our neighbors with incremental NOI of approximately $3.7 million annually. The overall demand environment, the balance of Phillips Edison & Company’s defense and offense, the stability of our high quality cash flows, and the capabilities of the Phillips Edison & Company team give us continued confidence in our ability to deliver strong growth in 2025 and in the long term. I will now turn the call over to John.

John Caulfield, Chief Financial Officer, Phillips Edison & Company: Thank you, Bob, and good morning and good afternoon, everyone. I’ll start by highlighting second quarter results, then provide an update on the balance sheet, and finally speak to our increased 2025 guidance. Our second quarter results demonstrate what we built at Phillips Edison & Company, a high-performing grocery-anchored and necessity-based portfolio that generates reliable, high-quality cash flows. Second quarter NAREIT FFO increased to $86 million, or $0.62 per diluted share, which reflects year-over-year per share growth of 8.8%. Second quarter core FFO increased to $88.2 million, or $0.64 per diluted share, which reflects year-over-year per share growth of 8.5%. Our same-center NOI growth in the quarter was 4.2%. Turning to the balance sheet, we have approximately $972 million of liquidity to support our acquisition plans and no meaningful maturities until 2027. Our net debt to trailing twelve-month annualized adjusted EBITDAR was 5.4 times as of June 30, 2025.

This was 5.3 times on a last quarter annualized basis, which is also important to track in quarters with elevated acquisition volume. Our debt had a weighted average interest rate of 4.4% and a weighted average maturity of 5.7 years when including all extension options. At the end of the second quarter, 95% of Phillips Edison & Company’s total debt was fixed rate, which is in line with our target of 90%. During the quarter, Phillips Edison & Company completed a bond offering of $350 million in aggregate principal of 5.25% Senior Notes Due 2032. Proceeds from the offering were used to replenish the liquidity on our revolver, effectively match funding the $287 million in properties acquired to date at Phillips Edison & Company. As Jeff mentioned, the Phillips Edison & Company team is not just maintaining a high-quality portfolio, we’re building one.

We continue to have one of the best balance sheets in the sector, which has us well positioned for continued external growth. As Jeff mentioned, we are pleased to raise our 2025 guidance. Key drivers of our increased guidance include a continued strong operating environment, strong year-to-date acquisition activity, and our recent bond offering. We updated our guidance range for 2025 same-center NOI growth to 3.1% to 3.6% as we continue to enhance our neighbor mix. Our actions in 2024 to improve merchandising and capture mark-to-market rent growth with new neighbors are still a slight headwind to 2025 growth. As we have said previously, the Phillips Edison & Company team is focused on the long term, and our actions to replace neighbors are intentional.

Our updated guidance for 2025 NAREIT FFO per share reflects a 6.3% increase over 2024 at the midpoint, and our updated guidance for 2025 core FFO per share represents a 6% increase over 2024 at the midpoint. We also affirmed our 2025 full year gross acquisition guidance. We believe our low leverage gives us the financial capacity to meet our growth targets. We also have diverse sources of capital that we can use to grow and match fund our investment activity. These sources include additional debt issuance, dispositions, and equity issuance. Match funding our capital sources with our investments is an important component of our investment strategy. Please note that our guidance for the remainder of 2025 does not assume any equity issuance.

We continue to believe this portfolio and this team are well positioned to deliver mid to high single digit core FFO per share growth on an annual basis. We also believe that our long term AFFO growth can be higher as more of our leasing mix is weighted towards renewal activity. We believe our targets for growth in core FFO and AFFO will allow Phillips Edison & Company to outperform the growth of our shopping center peers on a long term basis. With that, we will open the line for questions. Operator.

Operator/Conference Moderator: Thank you. To ask a question, please press Star one on your telephone keypad to raise your hand and join the queue. If you’d like to withdraw your question, again, press Star one. We do ask that you limit yourself to one question and a follow up. Your first question comes from Caitlin Burrows with Goldman Sachs. Please go ahead. Hi, good afternoon, everyone. I guess we hear the transaction market is competitive. Jeff, like you went through, you did have a strong first half. What do you think has allowed Phillips Edison & Company to win these transactions? It looks like shadow-anchored centers have been a focus this year. What is driving that?

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Yeah, thanks, Caitlin, for the question. We had a really good first half. I think it kind of goes back to the fact that we buy properties one at a time, market by market. If you step back and you look at it, that’s how we were able to actually get this volume. It didn’t come in a big chunk of buying something. It came in being active in a lot of markets. We set up our acquisition team to be able to do that over a long period of time. It’s hard, but we’ve been able to put that in place. I think that’s how we’ve been able to get to those numbers. As you know, we’re very focused on a very disciplined approach to our acquisitions. I think we feel really good about that.

We’re actually really excited about the opportunities because if you look at the anchors that we were able to expand our exposure to, like H-E-B and Walmart, Target a little to a small amount, these are really good retailers that we were sort of spreading out a little bit of our exposure to. We feel great about the first quarter and excited about what we can do hopefully in the second half.

Operator/Conference Moderator: Got it. In the prepared remarks, you guys mentioned how the kind of turnover of some tenants that you focused on in 2024 was still a headwind to growth in 2025. I guess as you guys think about tenant retention going forward and the decisions you made in 2024, when do you think those headwinds will be done, and to what extent will it be something that’s kind of ongoing, that tenant replacement versus kind of done for the moment?

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Bob, you want to talk a little bit about leasing activity and how we’re sort of looking at that as opportunity and as well as headwind? Sure, yeah.

Bob Myers, President, Phillips Edison & Company: Thanks for the question. I guess I’ll start a little bit on what I would call the junior anchor side. When our occupancy dropped a little bit in the first quarter on the anchor side, there was just noise there from Joann, Big Lots, Party City, and some of those neighbors that we knew wasn’t a surprise. To us, we’ve actually been able to backfill about 70% of those currently. Specifically to answer your question, we only have probably 15 spaces over 10,000 ft that are vacant in our portfolio. A lot of the backfilling and recapturing of some of those specific neighbors, as an example, the rent will come online in 2026 and it’ll probably be 2H 2026 and maybe some will dribble into 2027. The good news is the leasing demand continues to remain very strong for those junior boxes and on the in line.

We continue to just see from the retailers that they’re hungry for sites to open in 2026, 2027, and 2028. We just don’t see any new supply coming on. We’re in a very good spot. You see that the retailers are wanting to follow the number one, number two grocer because you can see it in our spreads with 35% new leasing spreads, 19% renewal spreads, and 94% retention is very, very strong. We’re encouraged by the activity, we don’t see anything slowing down, and we feel real good about selectively being locally spartan merchandising around those opportunities.

Operator/Conference Moderator: Thank you. Your next question comes from the line of Samir Kanal with Bank of America. Please go ahead.

Bob Myers, President, Phillips Edison & Company: Thank you. Good afternoon, everyone. I guess Jeff or John, can you talk about the deceleration in same store NOI growth that you’re expecting in the second half based on the guidance, you know, the puts and takes to get to the 2.7% on average after having close to 4% in the first half.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Thanks, Samir. I thought you were going to focus on how great it is that we had all that great growth in the first half. John, do you want to cover the sort of what we’re looking at for the second half on same center growth?

John Caulfield, Chief Financial Officer, Phillips Edison & Company: Certainly. Thanks for the question. Definitely one that I was expecting. For this reason, we don’t provide quarterly guidance. As we look at our earnings on same store NOI and FFO, we are projecting more consistent growth for the balance of the year. Our same center growth last year was weighted to the fourth quarter. The fourth quarter alone was over 6.5%, which skews the quarter by quarter growth numbers. As we look at our Q3 and Q4 forecast, they’re actually consistent and growing, improving sequentially from Q2 this year. I think it’s more a function of 2024 than any real deceleration as we look at continued growth from where we stand today. Actually, that’s for same center NOI, for NAREIT FFO, and for core FFO.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Got it.

Bob Myers, President, Phillips Edison & Company: Okay, that’s helpful. Just a follow up to Caitlin’s question on acquisitions. You’ve been doing a lot more of the shadow-anchored properties the last two quarters. I know the market is competitive for the core product right now. Just talk about what you’re seeing for core versus maybe shadow and unanchored. I’m wondering if pricing is sort of getting out of hand or are you getting priced out of some of the core product here? Thanks.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Yeah. Yes, thanks. In the first half of the year, we will have bought three unanchored centers. That’s 14% of what we bought. Seven shadow-anchored centers, which is 50% of what we bought, and four anchored centers that represent 35% of what we bought. It’s really hard to look quarter by quarter and have a view of a change. These were actually stores that we were very excited about getting. We saw these as great opportunities. If you think about it, the average sales of the shadow-anchored centers we did is over $1,000 a foot on the groceries, so we’ve got a quality grocer. These are all centers where the grocer actually owns their store in these centers, the shadows, and our small stores get the full benefit. We don’t have that sort of flat part of our cash flow, which is the gross rancher.

We saw these as great opportunities for us to get increased growth and really stable, strong properties. I wouldn’t say that this is caused by the market other than these are the properties that came on the market and that fit with what we were trying to get, which is that number one or two grocer driving the customer to the center day in, day out because that’s what allows us to really grow rents.

Bob Myers, President, Phillips Edison & Company: No, I appreciate that.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Thanks.

Bob Myers, President, Phillips Edison & Company: Yeah.

Operator/Conference Moderator: Your next question comes from the line of Handel Saint with Mizuho. Please go ahead.

Bob Myers, President, Phillips Edison & Company: Hey guys.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Good. I don’t know if it’s good morning or afternoon out there, but it’s happening here. I was hoping you could add a.

Bob Myers, President, Phillips Edison & Company: Bit more color on the transaction market. Broadly, the opportunities you’re looking at, maybe.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: There’s anything under LOI at the moment, but looking at, you know, kind of.

Bob Myers, President, Phillips Edison & Company: $280 million of acquisitions completed year to date, I guess I’m really curious, you.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Know what’s holding you back from moving.

John Caulfield, Chief Financial Officer, Phillips Edison & Company: The guide up a bit here.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Seems like you’re pretty far along.

Bob Myers, President, Phillips Edison & Company: Seems like the remaining delta is pretty achievable here.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Yeah, thanks for the question. We are very excited about having put $290 million on the board for the first half, and we are prepared to do more than guidance if we find the opportunities. I would say that our macro look at the market right now is that it’s actually fairly stable. There is more product on the market and there are more buyers. We are finding certain buyers that are getting very aggressive, which is where we’ve got to keep our discipline and stay out of that competition or the desire to be in that and stay true to what we do. I think we did that in the first half. If we can find the same amount in the second half, we’ll do it. We’re a little bit cautious there in terms of what the second half is going to look like.

That’s why we maintained our guidance. Got it. Got to appreciate that.

Bob Myers, President, Phillips Edison & Company: On variable rate debt, pretty low today, 5%.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: I think there’s some swaps expiring later this year. John, I know it’s one of your favorite topics, but I’m curious on the.

John Caulfield, Chief Financial Officer, Phillips Edison & Company: Outlook or the plan there, and what.

Bob Myers, President, Phillips Edison & Company: You feel is a comfortable level of variable rate debt.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Thanks, John. You want to take that?

John Caulfield, Chief Financial Officer, Phillips Edison & Company: Oh, yeah, Handel, I saw your note and I’ve been looking forward to this question. Man, I know you love variable rate debt swap. I appreciate the question. Yes, currently we’re 95% fixed. We continue to monitor and look at the markets, but we want to approach the debt capital markets and the equity capital markets opportunistically. The key thing for us is making sure that we’re in a position where we choose to move because we like the market and the opportunity, not because we have to. That’s kind of why we went in June and we did 5.25% debt and extended our maturity ladder while also continuing our pattern and reputation in that unsecured bond market. As I look to the swap market, the swaps that are expiring, our debt profile, we want to continue to be a repeat issuer in that market.

We feel we’ve been well received. I would note that we continue to talk to the agencies where triple will be flat but notice that our balance sheet is very comparable to those of our peers that are either positive or even more highly rated than we are. We continue to talk to them, think there’s opportunity and we want to use that. We’re going to manage our variable rate exposure through additional maturities in that market. We’re going to continue to buy assets and do what we’ve been doing in the last several years to do that and we’ll just keep extending from there. We don’t have any plans to further put more swaps in place unless it matches with things that we do in the term loan market. We will manage it through issuance and at the same time, are grateful for the deal we got done.

Again, our long term target is, we target about 90% fixed. That’s what we’re going to look at on a sustained basis.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Got it, got it.

Bob Myers, President, Phillips Edison & Company: Appreciate the color.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Thanks.

Operator/Conference Moderator: Your next question comes from the line of Ronald Camden with Morgan Stanley. Please go ahead.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Hey, just two quick ones.

Bob Myers, President, Phillips Edison & Company: Just one on the, remind.

John Caulfield, Chief Financial Officer, Phillips Edison & Company: On the occupancy side, you know, I’m looking at the anchor at 90%, almost 99% in line, almost 95%. Just how do you guys think about sort of the structural ceiling there and the sort of the things that you’re doing to maybe maximize either rent spreads or rent escalators, just the interplay between what your peak occupancy you think it is and you know, where you can get more pricing power.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Thanks. Great. Thanks, Ronald. Before I turn it over to Bob, we’re going to keep saying this, and I know some of you will buy it, some of you won’t. We truly believe that occupancy is the stores making a decision about where they want to be. If you have the highest occupancy, our view is you have the highest quality assets. We have consistently been able to do that because the retailers are telling us with their leases that we have the best properties. We’re really happy about getting to these occupancy levels, and we’re very happy to be partnered with our neighbors to be able to achieve those goals. Bob, you want to talk a little bit about occupancy and where we might be able to take it?

Bob Myers, President, Phillips Edison & Company: Absolutely, yeah. Appreciate the question. We’ve done really well in the first half of the year. We moved anchor occupancy up about 50 basis points and inline about 20 basis points. That certainly comes as a result of the retailer demand. I think we have another 100 to 150 basis points of inline occupancy. I really feel that we can get in the 96s up from the 94.8% I believe it is today. I think anchor occupancy will always be 99.2%, 99.3%. We still have some work to do to get that, but I feel good about the leasing demands, the LOIs that we had out for signature. I think one real important strategy in our business, though, is that we run a parallel path of not only growing occupancy in our current portfolio, but also on the acquisition side.

I mentioned this over the last year or two, but in 2023 we bought a great portfolio combination of 14 to 16 assets that were around 87% occupied, and today those are 98%. In 2024, we acquired $300 million that was at 93.1%. That currently sits at 95%. We’re already making good traction on the assets that we’ve acquired this year. The demand is as strong as we’ve seen it in years. I just feel like we’re going to continue to move occupancy up and you see it through the retention when you’re retaining 94% of your neighbors at spreads of 20% and you’re only spending $0.49 a foot in tenant improvements to execute that, that is money well spent. I feel really good about the current environment, our occupancy, and that’s a long-winded answer to your question. Yes, I do feel like we still have room in occupancy.

John Caulfield, Chief Financial Officer, Phillips Edison & Company: Super helpful. My second question is on tariffs, right? I mean, you guys have put out some data on what you think.

Bob Myers, President, Phillips Edison & Company: Your tariff risk is.

John Caulfield, Chief Financial Officer, Phillips Edison & Company: Clearly, you reiterated sort of the credit loss and raised the same store, so nothing in your portfolio.

Bob Myers, President, Phillips Edison & Company: As you’re sort of taking a step back and talking to.

John Caulfield, Chief Financial Officer, Phillips Edison & Company: Tenants, I’m curious about the categories that are most impacted and where do you think, like what’s happening on the ground? Who’s eating that incremental cost on tariff that we know people are paying?

Bob Myers, President, Phillips Edison & Company: Is it the tenants? Is it the consumer?

John Caulfield, Chief Financial Officer, Phillips Edison & Company: I’m just curious how that’s playing out on your grounds and what you’re hearing from your tenants. Thanks.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Yeah, we’re probably not the best ones to ask about it because the necessity-based side, which is where we are, we just don’t have a ton of exposure to tariffs. Our views have been that for that small part, the 15% that we think will have some impact, the story they’ve told us to date is that they have been able to pass that on to the supplier, the majority of it. If it stays in that low teens kind of a percentage, they feel pretty comfortable that they will be able to absorb that between a combination of them taking a little bit of a hit on their profits, but the majority coming from the supplier and then moderate impact on the buyer. I think that’s our view on where that impact is going to happen, how long it’s going to take, and where we’re going to see it.

I mean, as Bob Myers pointed out, we’re certainly not seeing it on the ground on a leasing basis. That part, we still don’t see any cracks from that. We’re, as they say, we’re cautious, probably more cautious, but still have a little bit of optimism there that this is not going to have the kind of impact that we thought it would just three months ago.

John Caulfield, Chief Financial Officer, Phillips Edison & Company: Helpful.

Bob Myers, President, Phillips Edison & Company: Thanks so much.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Yep.

Operator/Conference Moderator: Your next question comes from the line of Todd Thomas with KeyBanc Capital Markets. Please go ahead.

Bob Myers, President, Phillips Edison & Company: Hi, thanks. Just first question, I wanted to follow up on Sameer’s question around the same store growth and growth outlook. Bob, you know, you talked about some of the, that you’ve completed on recent acquisitions and certainly some upside on some of those more recent deals. Just curious, the methodology for your quarterly pool, is that different than the full year pool, the way that you calculate that?

John Caulfield, Chief Financial Officer, Phillips Edison & Company: I’ll jump in on this one.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Actually.

John Caulfield, Chief Financial Officer, Phillips Edison & Company: It is the same. We disclose the quarter and the year on the same basis. The same store pool is calculated as all assets acquired before November of 2025.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Okay.

Bob Myers, President, Phillips Edison & Company: Before 2025 or 2024.

John Caulfield, Chief Financial Officer, Phillips Edison & Company: Sorry, 1124.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Sorry, man.

John Caulfield, Chief Financial Officer, Phillips Edison & Company: That’s 1124. Got it. The assets acquired last year and the assets acquired this year are not in the same center pool.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Right.

Bob Myers, President, Phillips Edison & Company: Okay, that’s helpful. John, just sticking with you, you talked about some of the funding sources for acquisitions going forward. Obviously, you have a lot of options: equity, debt, you’ve talked about retained earnings and free cash flow. Does the stock price where it is today and the company’s cost of equity limit the amount of acquisition volume that you can achieve, and how do positions factor into the equation today?

John Caulfield, Chief Financial Officer, Phillips Edison & Company: Thank you for the recap there. We actually are very happy with the amount of liquidity that we have and the ability that we have to participate in the transaction market. I wouldn’t say that the equity issuance is limiting where we are or see the equity price isn’t where is limiting us today. I mean we do believe that the stock is at a discount relative to private market values relative to our peers that are in the same business we are, which is grocery-anchored shopping centers. I think the key thing for us that you’ve heard us talk about previously is match funding. We’re being opportunistic and want to find those acquisitions that make the most sense.

I do think that, I mentioned in the prepared remarks that we don’t have any equity issuance planned in our guide for 2025 and are very happy that we can execute on our growth plans without needing to go to the equity markets. The pieces that I would say is we are very committed to our mid five times on a leverage basis. We’re going to stay in this area. I do think that we’re looking at it. If it’s a great transaction market and there’s competition out there, it also means it’s a good disposition market as well. I think you will see us go through and capture some of the gains that we’ve realized over years. We’ll look to sell some of that in the back half of the year.

To Jeff’s earlier comment, if the acquisitions present themselves, we will look forward to taking our share of that.

Bob Myers, President, Phillips Edison & Company: Okay, what’s the pricing? I realize you’re underwriting to a 9% levered IRR target on new deals, but what’s the, how should we think about the cap rate spread between what you’re buying and what you might look to sell?

John Caulfield, Chief Financial Officer, Phillips Edison & Company: Sure. We haven’t been really in a, I talked about this in the first quarter or year end. We talked about, you know, we hadn’t been selling as much as we wanted to. Some of the things that we’re selling to start will be closer to the 7%, 7.5% range, I would say, as we look forward on a weighted basis, but still capturing great returns for Phillips Edison & Company. That’s relative to the range of what we’ve been buying at, so the difference isn’t very great. We are taking opportunities to monetize other assets that are meaningfully lower than that. I think that probably gives you some guidelines. All of that would be captured in the guidance numbers we’ve provided.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Okay, helpful.

John Caulfield, Chief Financial Officer, Phillips Edison & Company: Thank you.

Operator/Conference Moderator: Your next question comes from the line of Mike Mueller with JP Morgan. Please go ahead.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Yeah, hi, guess is there a max % of the portfolio that you’d want to have in shadow-anchored or unanchored centers? Hey, Mike, thanks for that, for the question. If you look at the unanchored, we’ve kind of 10% is probably the number that we’re thinking there. The shadow-anchored, we see as very interchangeable with our core anchored stuff. I mean, these are the exact same projects. You just own a little different piece of it and you own the small store space, which gives us more upside. It’s 7% of our portfolio today, so not worth spending a ton of time talking about in terms of impact. We see it as a really great opportunity to be able to buy some of these centers that have in our mind a lot of upside because of the strength of the grocer and the dominance it has in the marketplace.

I would say that I’m hopeful that we’ll be well above, and 7% includes what we bought in the first half of the year. I’m hopeful that we can get that number higher than that. It will be driven by what opportunities come in the marketplace. Maybe just one quick follow-up to that. If you’re looking at, as you mentioned, because it’s just part of the center, it’s interchangeable. If you’re looking at a traditional shopping center that you would own that’s grocery-anchored, where you own the grocer, what do you think is a cap rate differential for that center that comes with the grocer versus one that’s shadow-anchored? How different is it?

That’s a very complicated question and obviously has, I mean, we’re making a number of generalizations to come with what that is because each property varies a lot in terms of risk, what the tenant makeup is, and then occupancy and the rest. I think generally our look is we think we can get about 100 basis points, 50 to 100 basis points wider unlevered IRR from our shadow anchor than we can from our core grocery. I think that’s a way of looking at it from a pricing standpoint. On a cap rate basis, it’s more complicated. Let’s just say that it would be 50 basis points to 75 basis points difference between a shadow and an owned. Got it. Okay, thank you.

Operator/Conference Moderator: Your next question comes from the line of Paulina Rojas with Green Street. Please go ahead. Good morning. Some metrics suggest the consumer that is very pessimistic and a lot of caution, while others point to a more constructive outlook. From your perspective, how are consumers that shop in your centers behaving today? Are you seeing any trend in terms of them trading down, changes in visit frequency, or other shifts that are worth highlighting?

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Yeah. Great. Thanks, Paulina. Thanks for the question. There’s this dichotomy in the market that’s really weird, which is all the polling, all the consumer sentiment, all that stuff is negative, yet sales continue to grow. The consumer is sort of saying one thing and then doing another. Our views and from the Placer information and other information, we continue to see really strong foot traffic at our centers. That is as current as within the last 15 to 20 days. There is a sort of sentiment and our view is look at employment. We actually just did a study on our properties and I think our properties had a 30% lower unemployment rate than the nation. I think employment is what drives consumer behavior more than what they think about what’s happening in Washington, D.C. or what’s going to happen to the different things that are changing.

John Caulfield, Chief Financial Officer, Phillips Edison & Company: The.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Job is a driver there. We continue to see really strong employment numbers from a historical standpoint. Until we see a major change in that, we think the consumer is going to stay the same. Our retailers are telling us the same thing with their time they’ve been with us, their renewal pace, the rents at which they’re willing to move to. They’re all telling us that they believe the consumer is strong.

Operator/Conference Moderator: Thank you. A second question. We saw that Kroger announced a series of store closures. First question is, are you aware of any locations within your portfolio that may be impacted by that? We’re also seeing a number of grocers pursuing expansion strategies. I’m intrigued, which grocers are you seeing most actively expanding in your markets?

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: I want to make sure I got your questions right. One question was which grocers are expanding in our markets? The other is what impact Kroger’s announcement of closing 60 stores has, are those, is that, did I get that right?

Operator/Conference Moderator: Yes, exactly right.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Okay, Bob, you want to talk about the Kroger exposure, and then we can talk a little bit about the grocers that are expanding. Yeah, yeah.

Bob Myers, President, Phillips Edison & Company: Thanks, Jeff. In terms of the Kroger announcement and the 60 stores, we had one on the list. That is our exposure. It was not a surprise. We’ve been working with Kroger on that particular location for about five years. The good news is we expect them to close this month at that site, but we already have another grocer that is going to backfill it. It is still a good grocer location. That is what we know currently in terms of what Kroger shared with us. We had a meeting at their corporate headquarters last week.

John Caulfield, Chief Financial Officer, Phillips Edison & Company: Right.

Bob Myers, President, Phillips Edison & Company: At this point, they had all their store closings on hold as they were trying to do the merger with Albertsons over the last three years. It’s not a surprise that the announcement came out. It wasn’t a surprise for us, Paulina, to have the one that. The answer to the second question, in terms of our markets and grocers that are expanding, and they are, they’re very selective about it. It’s Sprouts, it’s Kroger, it’s Publix, it’s Whole Foods, and Walmart. Those seem to be the grocers that are active in either. They’re all committing money to remodels. Publix is still very motivated on their tear down rebuild concepts. Kroger’s looking to expand in some new markets. Since we’re Kroger’s number one landlord and Publix’s number two landlord, we’re working alongside them to see if we can assist in any way.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Yeah, the only thing I would add to that, Paulina, is these are not massive changes. These are small. I mean, like, in the scheme of things, it’s a very small amount of space that that’s happening. The only two I would add to Bob’s list would be HEB and Aldi, both sort of playing, you know, a growth strategy. I mean, in all honesty, Aldi doesn’t have a very big impact in our business. They probably have the most aggressive expansion plan of any of the grocers. It’s just they just don’t have that much impact because their sales per store are just not that big. It’s almost like having a dollar store go in versus a grocer. They’re, you know, they’ve been doing well and you know, we’ll continue to follow.

Operator/Conference Moderator: Thank you so much. Your next question comes from the line of Juan Sanabria with BMO Capital. Please go ahead.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Hi. Thanks for the time. I just wanted to follow up on the prior line of questioning around same store NOI. The guidance implies, like was mentioned before, a second half slowdown and I noticed expenses year to date on the same store side are running very, very low. I’m just curious if the implied deceleration is in part related to maybe timing on expenses and if you could just elaborate on what the range of expectations are there for same store NOI or if there’s just a level of conservatism assumed. Great. Thanks, Juan. John, do you want to take that?

John Caulfield, Chief Financial Officer, Phillips Edison & Company: Sure, I will. Thanks for the question. As I mentioned before, I think as we look at same store NOI, and if I think about it in an absolute dollar rather than a relative from last year, we see growth from Q2 to Q3 to Q4. I would again point out that last year it was the timing of expensing and the spending and the recoveries associated with that that moved that to the fourth quarter. I think we see it a bit smoother this year just related to some of our spend in the mix that I had referenced last year. I would say that from an expense standpoint there may be some more expenses, but overall we see NOI growth in the portfolio sequentially from here.

It’s tough to provide quarterly guidance because of some of these factors, but that’s the part I would say is if we just focus on this year forward, we do see growth and last year at 6.5% in the fourth quarter was more timing related.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Gotcha. Just on the dispositions that you mentioned, what’s the kind of the numbers, dollar values we’re talking about for dispositions that are assumed in guidance? Just to think of the offset versus the gross acquisition guidance. We aren’t giving guidance on that, but I would say that we kind of see $50 million to $100 million of dispositions for the year as kind of fairway, almost a year in, year out, that we will continue to have those opportunities, assuming we get the pricing in the market. I think the key there is you just have to be as disciplined on your disposals as you are on your acquisitions. They’re just that, they’re the same thing, just on the different side and where we can manage our portfolio.

From a growth standpoint and from a risk standpoint, we’re going to be more active, I think, than we have been the last three years, probably a little bit less active than we’ve been over the last 10. We will continue to push that. Thank you. Yep.

Operator/Conference Moderator: Your next question comes from the line of Rich Hightower from Barclays. Please go ahead.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Hey, good afternoon, guys. Thanks for taking the question. Forgive the ignorance, but back to the Kroger question for a second. Are there any, in a situation like that, are there any co-tenancy issues that crop up that need to be dealt with? How should we think about those situations in general to the extent they kind of happen periodically? I’ve got one follow-up after that. Bob, you want to take that one?

Bob Myers, President, Phillips Edison & Company: Yeah, sure.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Yeah, yeah.

Bob Myers, President, Phillips Edison & Company: In this particular example, in this site that they’re closing, there’s no co-tenancies. I think when you get into co-tenancies, you’re typically in the power space. You think about Ross, they typically have co-tenancy language with two or three other junior boxes or possibly an anchor. We just don’t see that in our portfolio. With our grocery-anchored focus, our grocers are the anchor. Typically, it’s going to be the co-tenants that would want that to make sure that Kroger is going to stay there. In our example, we’re absolutely fine. We just don’t see it much in our space. That is really more of a different strategy, which I see a lot in the power space.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Okay, that’s very helpful. Just, you know, quickly, on the modeling side, I know guidance does not foresee equity issuance, but is there any incremental debt issuance baked into the guide or is that not the case? Sean, you want to take that?

John Caulfield, Chief Financial Officer, Phillips Edison & Company: Sure. From an incremental debt issuance, I would say that we’ve talked about the sources and uses. We don’t explicitly have another bond offering planned this year. As we look ahead in addressing Andel’s variable rate interest, it’s a possibility. The key piece that I would highlight from my previous answer is we want to access the markets opportunistically and very thoughtfully. We will look to manage the maturity calendar as well as any debt that we are getting related to acquisitions, to match fund the acquisitions and to term that out. I’ll stay with that.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: All right, great. Thank you.

Operator/Conference Moderator: Your next question comes from the line of Cooper Clark with Wells Fargo. Please go ahead.

Bob Myers, President, Phillips Edison & Company: Hi, thanks for taking the question. Just wanted to touch on the updated.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Bad debt guidance held at the midpoint.

Bob Myers, President, Phillips Edison & Company: Tighten the range. Just wondering if there’s any more visibility.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Into the back half of the year and what outcomes could get you to.

John Caulfield, Chief Financial Officer, Phillips Edison & Company: The higher low end.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Anything to call out there? I think John gets to get that one. That’s fun.

John Caulfield, Chief Financial Officer, Phillips Edison & Company: Yeah, thanks for the question, Cooper. Look, I think for us it’s pretty consistent as we look at the second quarter, it was consistent with the first quarter 2025, and if you look at it, you know, six months at 2025, it’s pretty consistent with 2024. Overall, we’re not concerned with the level that we’ve got and it gives us the confidence to tighten the range. When we’re looking at the strong leasing demand and the leasing spreads that Bob Myers talked about, we’re achieving 35% on new leases and 19% on renewal spreads and we were still able to deliver 4% same store NOI growth. As we look at the remainder of the year, we have great conversations and relationships with our retailers. I would say we think it’s probably consistent where we are.

We intentionally set the range wider at the beginning of the year and are pleased with the portfolio performance so far that allowed us to tighten it up. The other piece is that the nature of our neighborhood grocery-anchored shopping centers is that it’s small pieces. Each neighbor is a small component. We’re not impacted as greatly as the large anchor bankruptcies. I think you’re going to see kind of this incremental here and there. We really feel good about our centers over the long run.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Great, thanks. Just a quick follow up.

Bob Myers, President, Phillips Edison & Company: Anything specifically that led you to tighten?

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: it on the low end or really just kind of tightening the range more generally?

John Caulfield, Chief Financial Officer, Phillips Edison & Company: I think for us it was just tightening the range, more generally consistent with what we’ve been experiencing.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Great, thank you.

Operator/Conference Moderator: Your next question comes from the line of Ken Billingsley with Compass Point Research and Trading. Please go ahead.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Hello. I have a question that’s a little more granular. It’s about option leases. For the second quarter, it was 7.1%. Looking on an annual basis, it was 4.8%. Anything that’s unique about the second quarter? I know last year it was a little bit higher than the rest of the quarters. Anything unique about the second quarter that drives that? Help me with that again. You said the option leases, the rent spread. Page 40 of the supplement, option leases. Rent spread was 7.1%, totals 4.8%. I’m just curious if there is anything unique about why the second quarter tends to roll that way. It’s higher than last year, but it seems to be elevated in prior years as well. John, do you want to cover that?

John Caulfield, Chief Financial Officer, Phillips Edison & Company: Sure. Ken, I wish I had a better answer for you, but it kind of depends on whether or not it’s grocers that are rolling or other leases in the case, because as grocers roll, those tend to be lower. If we have options with other neighbors, that can tend to be higher. Unfortunately, doing 40 options in the quarter, it’s just unfortunate.

Bob Myers, President, Phillips Edison & Company: Mix.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Okay. The other question I have, this is getting back to the question about your cap rate spread between what you’re buying and selling. What was the spread on the acquisition, the cap rate on the acquisitions for the quarter, and maybe for year to date?

John Caulfield, Chief Financial Officer, Phillips Edison & Company: Sure, I’ll take that one. Oh, no, go ahead, Jeff.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Are you asking the cap rate of what we, year to date, what the cap rate is? Is that, yeah. What you’re acquiring? Yes. I know you get a range of 7% to 7.5% is what you’re targeting. What is it? Do you have like specific? If you said it earlier, I may have missed it. Year to date is 6.3%. Cap rate is what we bought stuff at, and that’s based on the full market value of what we bought. Great. I appreciate it. Thank you for taking my questions. Yeah, thanks, Jim.

Operator/Conference Moderator: Your next question comes from the line of Floris Van Dijkum with Ladenburg Thalmann. Please, go ahead.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Hey, thanks, guys, for taking my question. Jeff, you mentioned something really interesting. You said that if I recall correctly.

Bob Myers, President, Phillips Edison & Company: In answering one of the previous questions.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: About 10% of your total acquisition volume.

Bob Myers, President, Phillips Edison & Company: Is likely going to be in these unanchored centers.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Could you maybe elaborate a little bit on the cap rates and the rationale behind buying some of those assets? Are they, you know, where’s their location, what’s the strategic rationale, etc. Thank you for the question. I’ll dig in. And Bob, join in with me. This is a new initiative we’ve been talking about and implementing over, really over the last year and a half. It basically is taking the view that at centers that we own and in markets where we are really locally smart and have a very strong presence in the markets, there are select unanchored centers that we find really intriguing in terms of both initial yield but also our ability to grow the rents in them. Because we have boots in the ground in these markets, we actually have a really good insight into them.

We’ve started to gradually buy a few of these as we’ve gone to make sure that we’re testing them from a risk perspective, from a return perspective, from our ability to really grow rents at these centers. Our results have been very positive. We continue to see this as an opportunity for us to grow. It will probably be in that 10% to, you know, maybe it could get to 15%, but I would say it probably would remain below 10% of our total portfolio. I do believe it will add incremental growth to what we do with a risk profile that we feel really good about because these are in really strong markets, strong locations, great traffic. They tend to be closer to, you know, very close to a grocery that’s driving traffic to the area.

They create, we think, really good retail locations that we can buy at yields that will get us a return at least 100 basis points wide of what we can get on the owned grocery-anchored centers. That’s why we’re excited about it. I don’t know, Bob, if you have any things you want to add to there, but we’re excited about that opportunity. Yeah.

Bob Myers, President, Phillips Edison & Company: The only thing I would add, Jeff, is that we’ve acquired 11. All right, so it’s about 3.5% of our entire portfolio. It’s a small part of our business, markets like Minneapolis, Chicago, Houston, Dallas, Atlanta, South Florida, Denver as an example. It’s early indications, early days. I’m super excited about the opportunity set. We have a very strict criteria in terms of how we operate. Can we get consistent spreads? Can we still get 20% renewal spreads, 30% new leasing spreads? When I went through all the numbers on the activity so far, our new leasing spreads on our unanchored piece is right around 43% and our renewal spreads were in the mid-30s with CAGRs above 3%. As Jeff mentioned, we’re going to be very opportunistic about the space. It is a natural complement to what we do well day in and day out. Early indications are very positive.

If we can be selective over the next two or three years and continue to acquire this type of product type, I think we’ll do very well. These assets have a CAGR above 5.5%. A great complement to growing same center NOI.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Maybe just a follow up because I noticed the one asset that you listed unanchored, it’s 84% leased. How quickly are you able to ramp?

Bob Myers, President, Phillips Edison & Company: Up occupancy in those assets as well? Yeah, a great example is the assets that we bought in Denver, and I believe that one, trying to see what the occupancy was, it was in the low 80% and we’ve already leased 13,000 ft. So we’re in the upper 90% on that within two months of acquiring the asset. That’s not uncommon. As I mentioned, when we acquired in 2023 a portfolio that was 87% occupied, within a year we were 98%. We’re already seeing one of the assets in Houston, we’ve already completed six new leases in a period of a year. We’re seeing retailer demand. As long as you’re buying with the right criteria in mind, it happens quickly. Thanks, Bob.

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Maybe my follow-up is related, I guess, on the acquisitions for JV.

Bob Myers, President, Phillips Edison & Company: You do have a couple of JV partnerships. How do you feed those, and how do you. Is there more demand from your JV partners to acquire more assets in this?

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Kind of environment and have their return expectations changed over the last 12 to 18 months? Yes. We have two JVs that we are currently buying into. What we’ve done is we’ve basically set a target for each of the funds that is outside of Phillips Edison & Company’s balance sheet. You know, we now have bought, I believe it’s four properties between the two. I think we’ll make even better progress in the second half of this year on those. The way we look at it is we own four centers today that we wouldn’t own without these JVs. We think we’re going to be able to make very strong returns on our equity investment as well as the fees from doing that on these properties. We see it as a growth opportunity.

In terms of whether we’re going to buy more or less, that again is going to be really driven by what’s in the market and how well it fits with both of these funds. We do anticipate having one of them fully placed by the end of this year. It’s a smaller fund and the second one will continue for some period of time. Thanks, Jeff. Yep, thanks Lawrence. Thanks for the questions.

Operator/Conference Moderator: This concludes our question and answer session. I will now turn the conference back to Jeff Edison for some closing remarks. Jeff?

Jeff Edison, Chairman and Chief Executive Officer, Phillips Edison & Company: Yeah, great. Thank you everyone for being on today. We appreciate it and thank you, operator, for helping us. In closing, the Phillips Edison & Company team continued our solid performance in the second quarter. Given our strong leasing momentum, year to date acquisitions activity, and recent bond offering, we’re pleased to increase our full year 2025 earnings guidance for same center NOI, NAREIT FFO per share, and core FFO per share. The balance of Phillips Edison & Company’s defense and offense, the stability of our high quality cash flows, and the capabilities of the Phillips Edison & Company team give us continued confidence in our ability to deliver strong growth in 2025 and over the long term.

Because of our unique format and competitive advantages, we believe Phillips Edison & Company is able to deliver mid to high single digit core FFO per share growth annually on a long term basis. The Phillips Edison & Company team remains focused on delivering on this expectation and driving value at the property level. Given our demonstrated track record through various cycles, we believe an investment in Phillips Edison & Company provides shareholders with a favorable balance of quality cash flows, mitigation of downside risk, and strong internal and external growth. In summary, and I think you’ve heard this before, we believe the quality of our cash flows reduces our beta, the strength of our growth increases our alpha. Less beta, more alpha.

On behalf of the management team, I’d like to thank our shareholders, Phillips Edison & Company associates, and our neighbors for their continued support, and thank you all for being on the call today. Have a great weekend.

Operator/Conference Moderator: This concludes today’s conference call. Thank you for your participation, and you may now disconnect.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.