Phillips Edison Grocery Center REIT I Reports 12% MFFO Growth During 2Q17
Phillips Edison Grocery Center REIT I Inc., a publicly registered, non-traded real estate investment trust, reported its results for the second quarter of 2017.
“During the quarter, we announced the acquisition of certain real estate assets and the third-party asset management business from our sponsor, PELP, for total consideration of approximately $1 billion,” said Jeff Edison, chairman and chief executive officer of Phillips Edison Grocery Center REIT I. “The transaction will result in the largest internally-managed non-traded REIT and further aligns management with shareholders, as management is expected to own approximately 10 percent of the combined company.”
Second Quarter 2017 Highlights
• Entered into a definitive contribution agreement to acquire 76 real estate assets and the third-party asset management business of its sponsor, Phillips Edison Limited Partnership, for approximately $1 billion
• Net loss attributable to stockholders totaled $1.2 million compared to net income of $0.6 million, year-over-year. The company noted that the net loss was driven by $4.4 million of transaction expenses related to the acquisition of PELP. Excluding these expenses, net income attributable to stockholders would have been $3.2 million versus $0.6 million in the second quarter of 2016
• Funds from operations increased 1.7 percent to $26.6 million, year-over-year. The company said that improvement was driven by a 10.8 percent increase in total revenue, which resulted from owning nine more properties than the previous year, partially offset by the related 6.6 percent increase in property-related operating expenses and $4.4 million of transaction expenses.
• Modified funds from operations increased 12.1 percent to $29 million, year-over-year.
• Same-center net operating income increased 1.4 percent to $39.4 million, year-over-year. The company noted that the improvement was driven by a $0.26 increase in minimum rent per square foot and a 1.5 percent decrease in same-center operating expenses versus the comparable period.
• Same-center occupancy totaled 96.7 percent, an increase of 0.3 percent, year-over-year.
• The REIT purchased four grocery-anchored shopping centers totaling approximately 404,000 square feet for a combined $92.5 million during the second quarter of 2017.
• The company has $297 million outstanding on its $500 million revolving credit facility, and its net debt to total enterprise value was 38.1 percent.
• The weighted-average interest rate of outstanding debt was 3.1 percent with a weighted-average maturity of 3.4 years. 51.8 percent of the total debt was fixed-rate debt. On July 1, 2017, an additional $255 million of variable-rate debt was fixed through a forward starting interest rate swap agreement. Including the debt subject to the interest rate swap, 73.5 percent of the total debt was fixed-rate debt.
• Gross distributions of $31 million were paid during the second quarter of 2017, including $9.1 million reinvested through the dividend reinvestment plan, for net cash distributions of $21.9 million.
Phillips Edison Grocery Center REIT I invests in grocery-anchored neighborhood shopping centers having a mix of national and regional retailers selling necessity-based goods and services. The offering was declared effective in August 2010 and raised nearly $1.8 billion before closing in the first quarter of 2014. The company’s portfolio consists of 158 properties with a combined purchase price of approximately $2.5 billion. Upon closing, the acquisition of Phillips Edison Limited Partnership will create a $4 billion internally-managed, non-traded REIT that will own approximately 230 shopping centers.
