Phillips Edison & Company, a publicly registered non-traded real estate investment trust, has increased its estimated value per share to $11.05 as of March 31, 2018 and reported its results for the first quarter of 2018.
The company’s board increased the estimated value per share of its common stock to $11.05 as of March 31, 2018, based on the range of $10.35 to $11.75 provided by Duff & Phelps, an independent third-party valuation firm.
This represents an increase of approximately 0.5 percent compared to last year’s $11.00 NAV per share. Shares were originally sold to investors for $10.00 each.
“Our continued strong performance led our board to increase the estimated value of our common stock despite the challenging retail environment,” said Jeff Edison, chairman and chief executive officer. “We believe the current disparity between the public and private market valuations in retail real estate is unsupported as the operating fundamentals of our centers remain strong.”
First Quarter 2018 Financial Results
For the first quarter of 2018, net loss totaled $1.8 million compared to net income of $1.1 million for the first quarter of 2017. The company said that net loss was primarily driven by increased depreciation and amortization as a result of owning an additional 84 properties when compared to March 31, 2017.
For the first quarter of 2018, funds from operations attributable to stockholders and convertible noncontrolling interests increased 40.4 percent to $40.4 million, or $0.18 per diluted share, from $28.8 million, or $0.15 per diluted share, during the first quarter of 2017.
The company noted that the FFO improvement was driven by an increase in net operating income generated by additional properties owned, $8.7 million of fee income for asset management and property management services generated by the investment management business acquired in the Phillips Edison Limited Partnership acquisition in October 2017, and a 4.3 percent increase in pro forma same-center net operating income.
For the first quarter of 2018, modified funds from operations increased 46.9 percent to $42.2 million, or $0.18 per diluted share, compared to $28.7 million, or $0.15 per diluted share, during the same year-ago quarter. The increase in MFFO was directly correlated to the increase in FFO.
For the first quarter of 2018, pro forma same-center NOI increased 4.3 percent to $61.3 million compared to $58.8 million during the first quarter of 2017. The improvement was driven by a $0.21 increase in minimum rent per square foot on the company’s pro forma portfolio, as well as a $1.4 million decrease in operating expenses versus the comparable period.
Pro-forma same-center leased occupancy totaled 93.8 percent compared to 93.9 percent last year.
First Quarter 2018 Portfolio Results
At quarter-end, the portfolio consisted of 237 properties, totaling approximately 26.4 million square feet located in 32 states. This compares to 154 properties, totaling approximately 16.8 million square feet located in 28 states as of March 31, 2017.
Leased portfolio occupancy totaled 93.6 percent compared to 93.9 percent as of December 31, 2017.
During the first quarter of 2018, a record 192 leases (new, renewal and options) were executed totaling approximately 821,000 square feet. This compares to 132 leases (new, renewal and options) executed totaling 557,000 square feet during the first quarter of 2017.
Comparable rent spreads during the quarter, which compare the percentage increase (or decrease) of new or renewal leases to the expiring lease of a unit that was occupied within the past 12 months, were 20.3 percent for new leases and 10.7 percent for renewal leases, excluding options.
Investment Management Business
During the first quarter of 2018, the company generated $8.7 million of fee income for asset management and property management services rendered.
At quarter-end, the company had approximately $2.1 billion of third-party assets under management, which included Phillips Edison Grocery Center REIT II Inc., Phillips Edison Grocery Center REIT III Inc., and Necessity Retail Partners (a joint venture between Phillips Edison Grocery Center REIT II and TPG).
Balance Sheet Highlights at March 31, 2018
At quarter-end, the company had $474.4 million of borrowing capacity available on its $500 million revolving credit facility. During the quarter, the company executed a delayed draw on its five-year term facility to pay down the revolving credit facility.
Net debt to total enterprise value was 41.9 percent at March 31, 2018.
At quarter-end, the company’s outstanding debt had a weighted-average interest rate of 3.4 percent, a weighted-average maturity of 5.2 years, and 87.1 percent of its total debt was fixed-rate debt. This compared to a weighted-average interest rate of 3.4 percent, a weighted average maturity of 5.5 years, and 88.5 percent fixed-rate debt at December 31, 2017.
First Quarter 2018 Distributions
Gross distributions of $38.3 million were paid to common shareholders and OP unit holders during the first quarter of 2018, including $12.8 million reinvested through the distribution reinvestment plan, for net cash distributions of $25.5 million.
During the quarter, FFO was $40.4 million, which totaled 104 percent of the company’s gross distributions.
Phillips Edison & Company Inc. (formerly known as Phillips Edison Grocery Center REIT I Inc.) is an internally-managed REIT and one of the nation’s largest owners and operators of grocery-anchored shopping centers. As of March 31, 2018, the company manages 344 shopping centers – 237 of which it owns directly – comprising approximately 26.4 million square feet located in 32 states.
The company’s offering was declared effective by the SEC in August 2010 and raised approximately $1.8 billion in investor equity before closing in February 2014.