Phillips Edison Grocery Center REIT I Announces Financial Results for 2016
Phillips Edison Grocery Center REIT I Inc., a publicly registered non-traded real estate investment trust, announced its operating results for the year ended December 31, 2016.
“In 2016, we grew our portfolio of diverse, high-quality grocery-anchored properties with $234 million of acquisitions while creating organic growth from our leasing and property management operations. Adjusting for the change in our asset management fee structure, which occurred on October 1, 2015, our funds from operations per share increased by 7.4 percent,” said Jeff Edison, chairman of the board and chief executive officer. “For 2017, we will continue to focus on the operating fundamentals of our portfolio, driving leasing spreads and net operating income growth, as well as evaluating strategic alternatives for the business.”
Operating Results for the Year Ended December 31, 2016
• In 2016, the REIT generated revenue of $257.7 million, a 6.5 percent increase over 2015 revenue of $242.1 million. The company said that the increase was driven by acquisitions, higher same-center minimum rent per square foot and occupancy, and an increase in tenant recoveries over December 31, 2015.
• In 2016, the REIT generated net income of $9 million compared to net income of $13.6 million for the 2015 comparable period. The company noted that the change in net income primarily related to a $14.6 million increase in cash asset management fees paid to the company’s advisor as a result of a change to the advisory fee structure in October 2015. Previously the asset management fee had been deferred via the issuance of class B units in the company’s operating partnership. The fee is now paid 80 percent in cash and 20 percent in class B units.
• In 2016, the REIT generated funds from operations of $108.8 million compared to FFO of $113.4 million for the 2015 comparable period. The company said that the change in FFO was driven by the change in the payment structure of the asset management fee, offset by growth in income from the properties.
• The REIT generated modified funds from operations of $106.3 million in 2016 compared to MFFO of $112.7 million for the 2015 comparable period.
Portfolio Results
• As of December 31, 2016, the company’s portfolio consisted of 153 properties, totaling approximately 16.7 million square feet located in 28 states. Portfolio annualized base rent was $12.41 per leased square foot, compared to the 2015 portfolio ABR of $12.19 per leased square foot.
• The company reported same-center NOI growth of 3.2 percent for 2016, compared to the same period in 2015. Same-center NOI represents the NOI for the 132 properties that were owned and operational for the entire portion of both comparable reporting periods, excluding the five properties classified as redevelopment as of December 31, 2016. The company said the positive growth was primarily due to a $0.20 increase in minimum rent per square foot, a 0.2 percent improvement in occupancy, and a 2.3 percent increase in its overall recovery rate.
•During 2016, the company acquired seven grocery-anchored shopping centers and additional real estate adjacent to previously acquired centers for an aggregate purchase price of approximately $233.9 million.
• As of December 31, 2016, the company reported leased portfolio occupancy of 95.6 percent compared to leased portfolio occupancy of 95.9 percent as of December 31, 2015.
Capital Markets
• In September 2016, the company entered into a new unsecured term loan facility with an interest rate of LIBOR plus 1.70 percent. The term loan has a principal amount of $230 million and matures in September 2023. The company amended this term loan facility in October 2016 to increase the aggregate lender commitments from $230 million to $255 million.
• As of December 31, 2016, $323 million was available to borrow under the company’s $500 million revolving credit facility.
• As of December 31, 2016, the company’s debt to enterprise value was 35.5 percent. Debt to enterprise value is calculated as net debt (total debt, excluding below-market debt adjustments and deferred financing costs, less cash and cash equivalents) as a percentage of enterprise value (equity value, calculated as total common shares and OP units outstanding multiplied by the estimated value per share of $10.20, plus net debt).
• The company’s debt had a weighted-average interest rate of 3.0 percent and a weighted-average maturity of four years. 58.0 percent of the company’s debt was fixed-rate, and, effective July 2017, an additional $255 million of variable-rate debt will be fixed through a forward starting interest rate swap agreement. Including this debt subject to the interest rate swap, 82.1 percent of the company’s debt was fixed-rate debt.
Distributions
• For 2016, the company paid gross distributions of $123.1 million, including $58.9 million of distributions reinvested through the dividend reinvestment plan, for net cash distributions of $64.3 million.
• Operating cash flows of $103.1 million for the year ended December 31, 2016, were greater than the company’s net cash distributions by $38.8 million.
Stockholder Update Call
• On March 27th, the company will provide a stockholder update presentation on its website at www.grocerycenterreit1.com.
Phillips Edison Grocery Center REIT I focuses on investing in grocery-anchored neighborhood shopping centers that have a mix of national and regional retailers selling necessity-based goods and services, in strong demographic markets throughout the United States. The REIT went effective in August 2010 and closed in February 2014 after raising nearly 1.8 billion in investor equity.
