Phillips Edison & Co (NASDAQ:PECO) reported first-quarter financial results on Friday. The transcript from the company’s first-quarter earnings call has been provided below.
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Access the full call at https://events.q4inc.com/attendee/868368165
Summary
Phillips Edison & Co reported a 4.7% growth in NAREIT FFO per share and a 6.2% growth in core FFO per share for Q1 2026, with same center NOI growth of 3.5%.
The company increased its full year 2026 guidance and expects mid to high single digit growth in NAREIT FFO and Core FFO per share.
Operational highlights include high occupancy rates with 97.1% overall, 98.4% in leased anchor occupancy, and 95% in leased inline occupancy, with renewal rent spreads of 21.2%.
Phillips Edison & Co is actively involved in development and redevelopment, with 19 projects under construction, totaling an estimated $74 million in investment.
The company has engaged in $185 million in acquisitions year-to-date, including grocery anchored shopping centers and development land.
Management emphasized resilience in the retail sector, focusing on necessity-based goods and services, and maintaining strong retailer relationships.
The sentiment around capital markets indicates a preference for private over public market valuations, suggesting a lean towards more private market transactions.
Phillips Edison & Co highlighted strong leasing demand and plans to drive additional growth through targeted space approaches and development initiatives.
Full Transcript
OPERATOR
Good day and welcome to Phillips Edison & Co’s first quarter 2026 earnings call. Please note that this call is being recorded. I will now turn the call over to Kimberly Green, Head of Investor Relations. Kimberly, you may begin.
Kimberly Green (Head of Investor Relations)
Thank you. I’m joined today by our Chairman and CEO Jeff Edison, President Bob Myers and CFO John Caulfield. As a reminder, today’s discussion may contain forward looking statements about the Company’s view of future business and financial performance including forward earnings guidance and future market conditions. These are based on management’s current beliefs and expectations and are subject to various risks and uncertainties as described in our SEC filings and our discussion today will reference certain non GAAP financial measures. Information regarding our use of these measures and reconciliations of these measures to our GAAP results are available in our earnings press release and Supplemental information packet, both of which have been posted on our website. Please note that we have also posted a presentation and our caution on forward looking statements also applies to these materials. Following our prepared remarks, we will open the call to Q and A. Given the number of participants on the call today, we respectfully ask that you be limited to one question. Please rejoin the queue if you have follow up questions. With that, I’ll turn the call over to Jeff Edison.
Jeff Edison (Chairman and CEO)
Jeff thank you Kim and thank you everyone for joining us today. We’re pleased to report another quarter of strong results which reflect the strength of our high quality portfolio and the consistency of our execution. The PECO team delivered NAREIT FFO per share growth of 4.7%, core FFO per share growth of 6.2% and same center NOI growth of 3.5%. We’re pleased to increase our full year 2026 guidance. Our growth rates for NAREIT FFO and Core FFO per share are in the mid to high single digits consistent with our long term targets. We are operating in a time where there are many ongoing uncertainties both domestically and globally. Interest rates have been volatile, the global trade picture is shifting and conflicts overseas continue to affect markets. Technology, especially AI is changing how companies work. Add in an active election cycle and high energy cost and it’s no surprise that there is a general feeling of uncertainty in times like this. The market tends to reward businesses that have stability and that’s exactly where PECO plays Grocery anchored necessity based everyday retail. PECO offers resilience while also offering steady growth. We believe PECO is built to deliver growth across changing economic cycles. Our long term growth targets remain unchanged. We are maintaining our focus and driving value at the property levels, our retailers are healthy and continue to look long term. We’re seeing a resilient consumer and our top grocers and necessity based retailers continue to drive solid foot traffic to our centers. One of the dynamics we’re watching closely is the gap between private and public market pricing of assets. This influences our capital decisions including how we fund growth and where we invest and it’s why the PECO team stays disciplined about accessing the most efficient capital. Our platform can raise capital in the public markets through institutional joint ventures and through asset recycling. We believe markets in 2026 will reward companies with a focused growth strategy and and the ability to fund growth responsibly. PECO is well positioned to continue to do both. In summary, we’re pleased with first quarter results and our outlook for 2026. We operate in a resilient part of retail. We’re located in the neighborhood close to your home. We’re disciplined about our investments and most importantly, we have the best teams in the business. With our shares trading at a discount to our long term growth profile, we believe PECO represents an attractive opportunity to invest in a leading operator that can deliver mid to high single digit annual earnings growth. We will continue to drive more alpha with less beta. With that, I’ll turn the call over to Bob.
Bob Myers (President)
Bob thank you Jeff and thank you for joining us everyone. Our first quarter results were marked by solid leasing activity and success in growing cash flows. We continue to see high retailer demand with no current signs of slowing. Necessity based categories including quick service and fast casual restaurants, health and wellness, beauty, fitness and medtail (medical retail) continue to be excellent drivers of demand. 74% of PECO’s rents come from necessity based goods and services. PECO’s leasing team remains focused on capturing demand and driving continued high occupancy while pushing very impressive comparable rent spreads. Our pricing power remains market leading during the first quarter. Lease portfolio occupancy remained high at 97.1%. Leased anchor occupancy remained strong at 98.4% and leased in line occupancy remained high at 95%. Our rent spreads reflect an extremely positive retailer environment. During the first quarter, PICO delivered comparable renewal rent spreads of 21.2%. Solid retention during the quarter means less downtime and lower tenant improvement costs which translates to better economics for PECO. Looking at comparable new rent spreads, they remain strong at 36.2% during the quarter. Inline leasing deals executed during the first quarter, both new and renewal achieved average annual rent bumps of 2.7%. This is another important contributor to our long term growth as it relates to bad debt. We actively monitor the health of our neighbors. Bad debt was lower than expected in the first quarter at around 60 basis points of revenue. We continue to expect bad debt in 2026 to be in line with 2025 which came in at just 78 basis points of revenue for the year. Our retailers remain healthy. We have a highly diversified neighbor mix with no meaningful rent concentration outside of our grocers. Turning to development and redevelopment, PECO has 19 projects under active construction. Our total investment in this activity is estimated to be approximately 74 million with average estimated yields between 9 and 12%. During the first quarter, six projects were stabilized with over 87,000 square feet of space delivered to our neighbors. This reflects incremental NOI of approximately 1.7 million annually. We are focused on growing PECO’s development and redevelopment pipelines which is an important driver of growth. In addition, the PECO team continues to find accretive acquisitions that add long term value to to our portfolio. Our year to date acquisition activity through this week reflects 185 million. This includes five grocery anchored shopping centers, three everyday retail centers and land for future development. Currently in our pipeline we have approximately 150 million in assets that we’ve been awarded or under contract that we expect to close by the end of the second quarter. Our pipeline reflects a combination of grocery anchored neighborhood shopping centers, everyday retail centers and joint venture opportunities. I will now turn the call over to John.
John Caulfield (Chief Financial Officer)
John thank you Bob and good morning and good afternoon everyone. Our strong first quarter results demonstrate what we’ve built at Pico A high performing grocery anchored and necessity based portfolio that generates reliable high quality cash flows. First quarter 2026 NAREIT FFO increased to $92.9 million or $0.67 per diluted share. First quarter core FFO increased to $96.4 million or $0.69 per diluted share and same center NOI increased 3.5% in the quarter primarily due to higher revenue which was driven by increases in average rent and economic occupancy. Turning to our balance sheet this quarter we extended our weighted average duration on our maturities and increased our percentage of fixed rate debt which is important in times of interest rate volatility. In February we completed a public debt offering of $350 million. Aggregate principal amount of 4.75% senior notes due 2033. The proceeds were used to repay term loans that were maturing in 2027 and a portion of our revolver with $810 million in liquidity at the end of the quarter we have the capacity to execute our growth plans. Our net debt to trailing twelve month annualized adjusted EBITDA was 5.3 times at quarter end and was 5.1 times on a last quarter annualized basis. At the end of the first quarter PECO’s outstanding debt at a weighted average interest rate of 4.4% and a weighted average maturity of 5.8 years when including all extension options and 94% of our total debt is fixed rate debt which includes Pico share of debt. For our JVs we are pleased to increase our 2026 guidance. Key drivers of our increased guidance include a continued strong operating environment, strong year to date acquisitions activity and our recent bond offering. Our updated guidance for 2026 NAREIT FFO per share reflects a 5.9% increase over 2025 at the midpoint and our updated guidance for 2026 core FFO per share represents a 5.8% increase over 2025 at the midPoint. We are pleased with these strong growth rates. We are reiterating Our full year 2026 guidance of 3 to 4% same Center NOI growth and we are pleased to reaffirm Our full year 2026 guidance of 400 to $500 million in gross acquisitions at PECO’s share. The Pico team is not just maintaining a high quality portfolio, we’re building one. We continue to have one of the best balance sheets in the sector which has us well positioned for continued external growth. As Jeff mentioned, we remain disciplined about accessing the most efficient capital. These sources include additional debt issuance dispositions, joint ventures and equity issuance when the markets are more favorable. Year to date we’ve sold $29 million of assets at PECO’s share. We plan to sell between 100 and 200 million dollars in assets in 2026. In summary, we’re very pleased with our results this quarter and our ability to raise guidance for the remainder of the year. We continue to see a resilient consumer and we believe our portfolio will outperform as necessity based retailer demand remains Strong. Looking beyond 2026, we continue to believe that Pico can consistently deliver 3 to 4% same center NOI growth and achieve mid to high single digit core FFO per share growth on a long term basis. We also believe that our long term AFFO growth can be higher as more of our leasing mix is weighted towards renewal activity. We believe our targets for core FFO per share and AFFO growth will allow Pico to outperform the growth of our shopping center peers on a long term basis. With that, we will open the line for questions. Operator.
OPERATOR
Thank you. If you would like to ask a question, please press Star one on your telephone keypad to raise your hand and join the queue. And if you’d like to withdraw that question again, press star one. As a gentle reminder, please limit yourself to one question. If you have a follow up, you may re queue. Your first question comes from Andrew Real with Bank of America. Please go ahead.
Andrew Real (Equity Analyst)
Good afternoon. Thanks for taking my question. You know, we can appreciate your necessity focused tenant base’s position to weather some macro uncertainty. But just curious to hear any latest color on your conversations with, you know, some of these discretionary or off price mom and pop tenants in the current environment. Maybe just any incremental changes in their tone or plans versus say six months ago. And how do those conversations compare to what you’re hearing on the necessity side?
Jeff Edison (Chairman and CEO)
Well, Andrew, great question because it’s one that we are, you know, very focused on trying to read where, what feedback we can get there. Bob, I don’t know if you want to give a little, you know, color to that and how we’re, you know,
Bob Myers (President)
what, what we’re doing. Yeah, absolutely. So Andrew, thank you for the question. This is something that we monitor all the time and probably our best indicator, not only are we, you know, on the ground locally smart, we also the visibility that we have would suggest that, you know, we have the best renewal pipeline and new leasing pipeline that we’ve seen and about the last six to nine months, …
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