• Core FFO per Share Growth: Nearly 4% in 2024, potentially 6% if adjusted for interest rates.
• Acquisitions: Closed nearly $100 million in Q4; targeting $350 million to $450 million in 2025.
• Comparable New Rent Spreads: 30.2% in Q4.
• Comparable Renewal Rent Spreads: 20.8% in Q4.
• Portfolio Occupancy: 98% leased at the end of Q4.
• NAREIT FFO: $83.8 million or $0.61 per diluted share in Q4, 8.9% YoY growth.
• Core FFO: $85.8 million or $0.62 per diluted share in Q4, 6.9% YoY growth.
• Same-Center NOI Growth: 6.5% in Q4.
• Liquidity: Approximately $948 million as of December 31, 2024.
• Net Debt to Adjusted EBITDAR: 5 times.
• 2025 Guidance for NAREIT FFO: $2.47 to $2.54 per share, 5.7% increase over 2024 at midpoint.
• 2025 Guidance for Core FFO: $2.52 to $2.59 per share, 5.1% increase over 2024 at midpoint.
• 2025 Same-Center NOI Growth Guidance: 3% to 3.5%.

• Warning! GuruFocus has detected 8 Warning Signs with PECO.

Release Date: February 07, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Phillips Edison & Co Inc (NASDAQ:PECO) delivered solid core FFO per share growth of nearly 4% in 2024, despite significant interest expense headwinds.
• Retailer demand across PECO's portfolio remains strong, evidenced by high occupancy rates and strong rent spreads.
• PECO exceeded the high end of its original guidance for acquisitions in 2024, closing nearly $100 million in acquisitions in the fourth quarter.
• The company has a high-quality portfolio capable of delivering strong cash flow growth, with approximately 70% of ABR coming from necessity-based goods and services.
• PECO's low leverage provides financial capacity to meet growth targets, with diverse sources of capital including additional debt issuance, dispositions, and equity.

Negative Points

• Significant interest expense headwinds impacted core FFO per share growth, which would have been higher without these expenses.
• Several retailers, including Party City and Big Lots, filed for bankruptcy, although PECO has low exposure to these retailers.
• The transaction market is competitive, with more buyers putting pressure on pricing, which could impact acquisition opportunities.
• PECO's strategy of taking back weaker stores to improve merchandising may temporarily put downward pressure on occupancy and retention rates.
• The company faces potential headwinds from tariffs and higher labor costs, which could impact retailer operations and consumer spending.

Q & A Highlights

Q: How does the current tenant demand and acquisition pipeline compare to last year? A: Jeffrey Edison, CEO, stated that they feel better about the current year compared to last year due to a larger pipeline of projects under contract and controlled. They had a strong fourth quarter with nearly $100 million in acquisitions, and they have higher goals for acquisitions this year. The market continues to show a strong pipeline of products, although there is more competition, which is putting pressure on pricing.

Q: How is PECO balancing high occupancy with tenant retention? A: Jeffrey Edison, CEO, explained that PECO is taking a more aggressive approach to merchandising by taking back weaker stores when leases are up, which may temporarily affect occupancy and retention. However, this strategy is expected to improve long-term growth by enhancing the merchandising mix and property value.

Q: What role do dispositions play in funding acquisitions, and how does PECO balance capital recycling with new equity or debt? A: Jeffrey Edison, CEO, mentioned that the market will determine the best source of capital, whether through debt, equity, or dispositions. They have already announced one disposition this year and will continue to use this strategy selectively when they can achieve better returns on acquisitions than on sales.

Q: Can you provide more details on the joint venture partnerships and their role in acquisitions? A: Jeffrey Edison, CEO, noted that joint ventures represent about 10% of their acquisition target for the year. These partnerships, such as those with Cohen & Steers and Northwestern Mutual, allow PECO to pursue unique opportunities that may not fit their balance sheet but still offer solid investment potential.

Q: How is PECO addressing potential tenant credit concerns and bad debt? A: John Caulfield, CFO, stated that PECO's bad debt experience in 2024 was around 75 basis points, and they have set a wider guidance range for 2025 to account for potential variability. They feel confident in the strength of their tenants and have low exposure to known bankruptcies like Party City and Big Lots.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.