The board of Phillips Edison & Company, Inc., an internally managed real estate investment trust focused on grocery-anchored shopping centers, has approved a one-for-four reverse stock split. The company has also reinstated monthly distributions and plans to launch a voluntary tender offer.
The reverse stock split is expected to take place around March 9, 2021, and as a result, every four shares of PECO’s issued and outstanding common stock will be automatically combined and converted into one share of common stock. A corresponding reverse split of the outstanding OP units will also be effective at that time.
After the split, PECO’s common stock and OP units will have an initial net asset value per share of $35.00, and PECO will continue as a publicly registered, non-traded REIT. The common stock will have a new CUSIP number, which will be provided closer to the split date, the company said.
The company’s management believes that a higher share price will prepare PECO for a future liquidity event while a smaller number of shares will provide improved per-share visibility into its financial results.
PECO expects to appoint its transfer agent, Computershare, to act as exchange agent. Stockholders that own shares through a custodial or brokerage account will have their positions automatically adjusted and will not be required to take further action.
“Executing a reverse stock split is a necessary undertaking before potentially listing our shares on a national stock exchange,” said Jeff Edison, chairman and chief executive officer of PECO. “Doing so in the first quarter of 2021 grants our investors and advisors time to acclimate to the change and avoids potential confusion in the future around a potential liquidity event. Additionally, it will provide a more granular representation in our financial reporting, as fewer shares outstanding allow for more detail in our per share reporting metrics.”
Additionally, Phillips Edison declared a monthly distribution payable in January 2021 at an annualized rate of $0.34 per share and plans to evaluate distributions on a monthly basis throughout 2021. As a response to the COVID-19 pandemic, the REIT suspended distributions after March 2020, as well as share repurchases.
The December 2020 distribution is expected to be made on January 7, 2021.
“We are seeing solid collections and improving results at our properties, and our results have given us the necessary clarity in order to resume our distribution,” said Edison. “When evaluating the distribution, it is prudent to balance our distribution level with the uncertainties in the market, to provide interim liquidity to investors that need it, and to invest in the long-term growth of the company.”
The dividend reinvestment plan has also been reinstated by the board effective January 7, 2021. Stockholders participating in the DRIP can reinvest their monthly distributions at the current NAV per share of $8.75, starting with the upcoming distribution on January 7, 2021.
The company plans to launch a voluntary tender offer to repurchase up to 4.5 million shares, or approximately $26 million, of common stock at $5.75 per share during the fourth quarter of 2020.
The tender offer price is 34 percent lower than the $8.75 NAV per share, reflecting, according to the company, the board’s acknowledgment that the share prices of publicly-traded shopping center REIT peers have declined below their respective NAVs, primarily as a result of the ongoing market uncertainty caused by the COVID-19 pandemic.
The tender offer will expire at 5:00 p.m. EST on December 15, 2020, unless extended or withdrawn. The PECO board plans to consider periodic tender offers going forward.
Effective January 2021, the REIT expects to recommence repurchases under the death, qualifying disability, and determination of incompetence (DDI) portion of its share repurchase plan. The first redemption is expected to take place at the end of January 2021 and continue monthly thereafter.
Qualifying repurchase requests are projected to be made at the current tender offer price of $5.75.
Phillips Edison will host a conference call on November 12, 2020, at 1:00 p.m. EST to address the company’s third quarter 2020 results and recent developments.
Phillips Edison & Company Inc. (formerly known as Phillips Edison Grocery Center REIT I Inc.) is one of the nation’s largest owners and operators of grocery-anchored shopping centers. The company oversees a portfolio of 309 properties. 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.