Phillips Edison & Co Inc at NAREIT REITweek: Investor Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Caitlin Burrows - Goldman Sachs - Analyst : So with that, maybe, Jeff or anyone else, do you want to start with just a brief intro to the PECO portfolio and what makes you unique?

Question: Caitlin Burrows - Goldman Sachs - Analyst : So yeah. With that, recently, in May, it was the ICSC conference leasings. Obviously, a big part of what you guys do. So maybe if you guys could talk about the goals going into the event, what were your major takeaways, and perhaps what might have been different in 2024 versus 2023?

Question: Caitlin Burrows - Goldman Sachs - Analyst : I guess it feels like whether it was this year or last year that ICSC has been strong for a couple of years now. So is there anything you could point to that might have been different this year, or how we might start to see the strength of multiple years in a row flow through into your results?

Question: Caitlin Burrows - Goldman Sachs - Analyst : May there on that acquisition volume you mentioned that its volume it seems like more is coming to market. It seems like the interest level for the types of properties you guys want to buy is also high. So what do you think sets PECO apart, and what do you think makes you able to complete these acquisitions when there is that competition? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 05, 2024 / 7:30PM, PECO.OQ - Phillips Edison & Co Inc at NAREIT REITweek: Investor Conference

Question: Caitlin Burrows - Goldman Sachs - Analyst : And when you guys make these acquisitions, I know you talked a lot about your required IRRs on them. The REIT community likes to talk about cap rates too. So what stats or numbers are you guys underwriting to? And are they accretive necessarily from day one?

Question: Caitlin Burrows - Goldman Sachs - Analyst : And you'd mentioned maybe last one for now and acquisitions but the guidance for this year of $200 million to $300 million. I guess what would it take do you think to get above that $300 million? Is it just more properties coming to market, bigger properties? Not that you necessarily want bigger properties, but what would get you above that level?

Question: Caitlin Burrows - Goldman Sachs - Analyst : Maybe moving back over to the non-acquisition side. You mentioned how occupancy is at, I think, all-time highs. Leasing demand is really strong. So everything is chugging along maybe on the potential negative side. So in May, Stop & Shop announced they would close a number of under for performing stores. So what's your exposure to Stop & Shop? And do you expect if you go to experience any closures?

Question: Caitlin Burrows - Goldman Sachs - Analyst : And I guess, bigger picture, so you are a grocery-anchored shopping center, the grocers matter a lot to the extent there were to be a grocer move out in the future. I imagine you'd backfill it with a grocer. How long do you think that takes? And do you expect that, in terms of the lease, it could be any different than they were? I know maybe we could get into talking about leasing spreads after, but you have a lot of options. So would there be any change to lease structure? Do you think that's kind of set?

Question: Caitlin Burrows - Goldman Sachs - Analyst : On the pricing side, total portfolio leasing spreads have been in the low double digit range for over a year now. How long do you think this strength can continue for? And it does seem like the real opportunity is on the new leasing side, so what potential do you guys have to increase new leasing?

Question: Caitlin Burrows - Goldman Sachs - Analyst : I think it is an exciting time for retail because you guys are the sector that doesn't have that construction headwinds. Maybe moving over to the bad debt side. So the bad debt for PECO has historically been pretty low, especially compared to peers. A range of 60 to 80 basis points I think was guidance last year and this year. Last year was at the lower end, and you mentioned this year could be at the higher end. It feels like that's coming from a point of strength, but you tell us. So as you talk about that high occupancy, the demand there is, like what could be the reason for it being high this year? And what should we take away from that?

Question: Caitlin Burrows - Goldman Sachs - Analyst : Jeff, before you were talking about some of the unique pieces of the PECO portfolio. I know one of the other things you guys talk about is the local neighbors and how important they are. So is there a little more than a quarter of your rents? They stay for over nine years, they have lower TIs, those are some of the things you guys have talked about. How do you assess the credit of these businesses before leasing? How does that impact the lease and your desire to have them in the center? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 05, 2024 / 7:30PM, PECO.OQ - Phillips Edison & Co Inc at NAREIT REITweek: Investor Conference

Question: Caitlin Burrows - Goldman Sachs - Analyst : Maybe one for John. You guys recently issued $350 million of unsecured bonds. I think you've been talking about doing it for a while. So congrats. But could you just discuss the decision to move forward with the offering now, kind of which pieces were you happy with, which could have been better, I guess the 10-year could have been lower? But yeah, discuss that.

Question: Caitlin Burrows - Goldman Sachs - Analyst : And so I guess with that complete, what are the balance sheet priorities for the rest of, I guess, this year and next year as you look forward?

Question: Caitlin Burrows - Goldman Sachs - Analyst : And if we were to get to that higher end then of the $200 million to $300 million volume, do you think you'd be using equity leverage?

Question: Caitlin Burrows - Goldman Sachs - Analyst : So does the audience have any questions? No. Okay. I'll keep going. So I guess, as we think about the long-term growth of the company, you guys have the internal growth from a same-store perspective, there's the acquisitions from a same-store perspective. What same-store NOI growth do you think the portfolio can support long term?

Question: Caitlin Burrows - Goldman Sachs - Analyst : And maybe just another question on the outparcel opportunities. So we've seen a number of the rigs getting active with it. It does seem like there's good returns on that. How do you decide which centers can accommodate an added outparcel, and maybe what's the timing of completing those projects?

Question: Caitlin Burrows - Goldman Sachs - Analyst : I think with such high occupancy, one of the other opportunities you guys have is to maybe shrink some in-line space in some locations. So could you talk about how widespread that opportunity is? I imagine it's definitely space by space, but is that something that's significant, or is it more one-off?

Question: Caitlin Burrows - Goldman Sachs - Analyst : Shrink as one to then have two stores next year.

Question: Caitlin Burrows - Goldman Sachs - Analyst : Just checking anybody? No. Okay. Another thing that we've heard over the past couple of years is that our tenant retention has been really high. I think that speaks to maybe the strength of the tenants and that they like being in PECO centers. So what are you seeing from a retention side? And how does that I guess it has an impact on your potential CapEx and downtime? But how are you considering that retention piece?

Question: Caitlin Burrows - Goldman Sachs - Analyst : We've gotten through a lot of questions here. Maybe again thinking on the local neighbors, I see you have a list here of who's hot. So maybe, Bob, you could talk to us back to the ICSC conference and who you are doing a lot of conversations with. And as you think of that merchandising mix, where do you think there's further upside in the portfolio?

Question: Caitlin Burrows - Goldman Sachs - Analyst : Okay. With that, I think we're done.