Phillips Edison & Company Upgraded by S&P to ‘BBB’ with Stable Outlook

Rhea-AI Summary

Phillips Edison & Company (PECO) has received a credit rating upgrade from S&P Global Ratings to 'BBB' from 'BBB-' with a stable outlook. This upgrade reflects PECO's solid operating performance, conservative balance sheet management, and reduced exposure to floating-rate debt. S&P expects PECO's fixed-charge coverage ratio to improve due to anticipated interest rate cuts.

PECO's financial policy is supported by a prudent investment strategy, with annual net acquisitions between $200-300 million and redevelopment spending of $40-50 million. The company has funded investments in a leverage-neutral manner using free cash flow, dispositions, equity, and debt. PECO's CEO, Jeff Edison, attributes the company's success to its focused strategy of owning high-quality, grocery-anchored neighborhood shopping centers in suburban markets.

Positive

• Credit rating upgrade from S&P to 'BBB' from 'BBB-'
• Reduced exposure to floating-rate debt (approximately 9% of total debt)
• Expected improvement in fixed-charge coverage ratio
• Prudent investment strategy with $200-300 million annual net acquisitions
• Leverage-neutral funding approach for investments

Negative

• None.

Insights

Financial Analyst

S&P's upgrade of PECO's credit rating to 'BBB' from 'BBB-' is a significant positive development for the company. This upgrade reflects PECO's improved financial stability and conservative balance sheet management. The reduction in floating-rate debt exposure to 9% demonstrates prudent risk management, especially in a volatile interest rate environment.

The expected improvement in PECO's fixed-charge coverage ratio, coupled with their disciplined investment strategy of $200-300 million in net acquisitions and $40-50 million in redevelopment spending annually, suggests a sustainable growth trajectory. This balanced approach to growth and financial prudence is likely to resonate well with investors seeking stable, long-term returns in the real estate sector.

Real Estate Market Analyst

PECO's focus on grocery-anchored neighborhood shopping centers in suburban markets is a strategic advantage in the current retail landscape. These centers have proven resilient, offering essential services and daily necessities, which provide a stable tenant base and consistent foot traffic. The company's ability to maintain solid operating performance and market-leading metrics in this niche suggests a robust business model.

The emphasis on right-sized, high-quality centers aligns well with evolving consumer preferences and the trend towards localized shopping experiences. This positioning, combined with PECO's operational expertise, could provide a competitive edge in attracting and retaining tenants, potentially leading to higher occupancy rates and stronger rental income compared to peers in the broader retail real estate sector.

CINCINNATI, Aug. 08, 2024 (GLOBE NEWSWIRE) -- Phillips Edison & Company, Inc. (Nasdaq: PECO) (“PECO” or the “Company”), one of the nation’s largest owners and operators of grocery-anchored neighborhood shopping centers, today announced that S&P Global Ratings (“S&P”) upgraded its issuer credit rating for PECO and the Company’s operating partnership, Phillips Edison Grocery Center Operating Partnership I L.P., to ‘BBB’ from ‘BBB-’, with a stable outlook.

In its public announcement, S&P noted: “We expect Phillips Edison's operating performance will remain solid over the next two years supported by its grocery-anchored portfolio and healthy retail fundamentals. Phillips Edison has demonstrated a commitment to maintaining a conservative balance sheet. The Company has significantly reduced its exposure to floating-rate debt (approximately 9% of total debt as of June 30, 2024). In addition, S&P Global economists expect the Fed will initiate a series of interest-rate cuts later this year. As such, we expect the Company's fixed-charge coverage ratio to improve over the coming years.”

S&P added: “The Company's financial policy is supported by its prudent investment strategy, with net acquisitions of between $200 million and $300 million and redevelopment spending of approximately $40 million to $50 million annually. The Company has funded its investment activity in a relatively leverage-neutral manner over the past few years using a combination of free cash flow, proceeds from dispositions, equity and debt. We expect Phillips Edison will continue to employ a similar investment strategy over the near term.”

Jeff Edison, Chairman and Chief Executive Officer of PECO stated: “The PECO team is pleased to see S&P acknowledge our commitment to operational excellence and balance sheet strength. The continued strength of our operating performance is attributable to our differentiated and focused strategy of owning right-sized, high-quality, grocery-anchored neighborhood shopping centers, the PECO team’s ability to drive results at the property level and the many advantages of the suburban markets where we operate our centers. The PECO team is well positioned to continue to deliver solid earnings growth, market-leading operating metrics and long-term value creation.”

Connect with PECO
For additional information, please visit https://www.phillipsedison.com/

Follow PECO on:
Twitter at https://twitter.com/PhillipsEdison
Facebook at https://www.facebook.com/phillipsedison.co
Instagram at https://www.instagram.com/phillips.edison/; and
Find PECO on LinkedIn at https://www.linkedin.com/company/phillipsedison&company

About Phillips Edison & Company
Phillips Edison & Company, Inc. (“PECO”) is one of the nation’s largest owners and operators of grocery-anchored neighborhood shopping centers. Founded in 1991, PECO has generated strong results through its vertically-integrated operating platform and national footprint of well-occupied shopping centers. PECO’s centers feature a mix of national and regional retailers providing necessity-based goods and services in fundamentally strong markets throughout the United States. PECO’s top grocery anchors include Kroger, Publix, Albertsons and Ahold Delhaize. As of June 30, 2024, PECO managed 306 shopping centers, including 286 wholly-owned centers comprising 32.6 million square feet across 31 states and shopping centers owned in two institutional joint ventures. PECO is focused on creating great omni-channel, grocery-anchored shopping experiences and improving communities, one neighborhood shopping center at a time.

PECO uses, and intends to continue to use, its Investors website, which can be found at https://investors.phillipsedison.com, as a means of disclosing material nonpublic information and for complying with its disclosure obligations under Regulation FD.

Forward-Looking Statements
This press release may contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements can generally be identified by the Company’s use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” “seek,” “objective,” “goal,” “strategy,” “plan,” “focus,” “priority,” “should,” “could,” “potential,” “possible,” “look forward,” “optimistic,” or other similar words. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Such statements are subject to known and unknown risks and uncertainties, which could cause actual results to differ materially from those projected or anticipated, including the risk factors and other risks and uncertainties described in the Company’s 2023 Annual Report on Form 10-K, filed with the SEC on February 12, 2024, as updated from time to time in the Company’s periodic and/or current reports filed with the SEC, which are accessible on the SEC’s website at www.sec.gov. Except as required by law, the Company does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

Investors
Kimberly Green, Head of Investor Relations
(513) 692-3399, kgreen@phillipsedison.com

FAQ

What was Phillips Edison & Company's (PECO) new credit rating from S&P Global Ratings?

S&P Global Ratings upgraded Phillips Edison & Company's (PECO) credit rating to 'BBB' from 'BBB-' with a stable outlook.

How much is PECO's exposure to floating-rate debt as of June 30, 2024?

As of June 30, 2024, PECO's exposure to floating-rate debt was approximately 9% of total debt.

What is PECO's annual net acquisition target according to the press release?

PECO's annual net acquisition target is between $200 million and $300 million, according to the press release.

How much does PECO plan to spend annually on redevelopment?

PECO plans to spend approximately $40 million to $50 million annually on redevelopment.