Phillips Edison & Company, Inc. ((PECO)) has held its Q1 earnings call. Read on for the main highlights of the call.
Phillips Edison & Company, Inc. (PECO) recently held its earnings call, showcasing a strong operational performance despite facing macroeconomic uncertainties. The company reported high occupancy rates and robust leasing spreads, maintaining a positive outlook with significant acquisition activity. While there were concerns over increasing variable rate debt exposure and a notable one-time lease termination fee, these did not overshadow the overall positive sentiment expressed during the call.
Strong Same-Center NOI Growth
The PECO team delivered an impressive quarter with a 3.9% increase in same-center net operating income (NOI). This growth underscores the company’s effective management and operational efficiency, contributing to its robust financial performance.
High Occupancy and Leasing Performance
Portfolio occupancy remained high at 97.1%, with anchor occupancy at 98.4%. The company achieved record in-line renewal rent spreads of 21.7% and comparable new leasing rent spreads of 28.1%, indicating a strong leasing and retention environment.
Robust Acquisition Activity
In the first quarter, PECO purchased $146 million in assets and affirmed its acquisition guidance of $350 million to $450 million for 2025. This activity highlights the company’s strategic growth initiatives and confidence in its market positioning.
Full-Year Guidance Affirmed
PECO confirmed its 2025 guidance, projecting a Nareit FFO per share increase of 5.7% over 2024 at the mid-point and a Core FFO per share increase of 5.1% at the mid-point. The company aims for a 3% to 3.5% same-center NOI growth for the year, emphasizing its focus on grocery-anchored centers.
Concerns Over Tariffs and Economic Uncertainty
Despite uncertainties surrounding the macroeconomic environment and potential tariff impacts, PECO has not observed any immediate signs of slowing demand. The company remains vigilant in monitoring these external factors.
Lease Termination Impact
The first-quarter funds from operations (FFO) benefited from a one-time lease termination fee, which was highlighted as a non-recurring event. This fee provided a temporary boost to the company’s financial results.
Increased Variable Rate Debt Exposure
PECO’s variable rate debt exposure is expected to increase from 14% to about 25-26% later this year due to swap expirations. This shift raises concerns about potential impacts on the company’s financial stability amid fluctuating interest rates.
Forward-Looking Guidance
Looking ahead, Phillips Edison & Company remains committed to its strategic goals, with a focus on grocery-anchored centers that provide insulation against potential tariff disruptions. The company expects to acquire $350 million to $450 million in assets, targeting an unlevered internal rate of return (IRR) of 9%. This forward-looking guidance reflects PECO’s confidence in navigating economic uncertainties while pursuing growth opportunities.
In conclusion, Phillips Edison & Company, Inc. demonstrated a strong operational performance during its recent earnings call, with high occupancy rates and robust leasing spreads. Despite some concerns over debt exposure and macroeconomic uncertainties, the company maintained a positive outlook with affirmed guidance and strategic acquisition plans. Investors will likely find reassurance in PECO’s resilience and growth prospects.