Phillips Edison & Company (PECO) Status update summary

Market environment and leasing trends

• Retail demand remains high, especially for grocery-anchored centers in suburban markets with top grocers, supporting strong occupancy and pricing power.

• Occupancy rates are at 97% with leasing rates at all-time highs and high tenant retention, showing no signs of slowing demand.

• Retailers are focused on efficient, smaller footprints (2,000-2,500 sq ft), with strong demand from QSR, fitness, wellness, and service-oriented concepts.

• Speed to open is increasingly prioritized over rent economics, with tenants expediting construction and permitting to accelerate revenue.

• Lease negotiation and execution timelines have shortened, with some leases signed in two weeks or less due to strong relationships and market scarcity.

Acquisition strategy and capital markets

• Acquisition pipeline remains robust, with $185 million acquired year-to-date and over $200 million under contract, affirming $400-$500 million full-year guidance.

• Focus remains on $20-$50 million deal sizes, leveraging market inefficiencies and expanding into everyday retail for higher returns.

• Everyday retail portfolio has grown to $220 million in 24 months, with continued expansion and veteran sourcing talent added.

• Cap rates have compressed due to institutional capital inflows, but further compression is limited by interest rates; capital recycling is increasingly attractive.

• Committed to 9% unlevered IRR for grocery and 10% for everyday retail centers, maintaining disciplined underwriting.

Retailer and tenant dynamics

• Retailers are not slowing expansion, with multi-year pipelines extending into 2027 and 2028, especially among high-performing QSR and fitness brands.

• Grocers are investing in store upgrades rather than new development due to high costs, reinforcing the value of existing centers.

• Service-based and daily-use tenants, such as salon suites and wellness brands, are expanding, benefiting from proximity to grocery anchors.

• Relationships with grocers and tenants are a key competitive advantage, enabling value creation and deal execution.

• AI and data analytics are used to accelerate leasing decisions, optimize tenant mix, and identify unmet demand.