Skip to content
    PECO
    Earnings call· Mar 2026(Q1 FY26)

    Phillips Edison & Company Q1 FY26 earnings call PECO

    Apr 24, 2026 Source

    Executive summary

    Phillips Edison & Company Q1 FY26 — Strong Operating Performance Drives Raised FFO Guidance

    Phillips Edison & Company delivered strong Q1 FY26 results, characterized by robust leasing activity and increased FFO guidance, driven by its resilient grocery-anchored portfolio. The company is actively pursuing accretive acquisitions and developments while navigating macroeconomic uncertainties and a notable spread between private and public market valuations, influencing its capital allocation strategy.

    Highlights

    5

    • Nareit FFO per share grew 4.7% and Core FFO per share grew 6.2% in Q1 FY26.

    • Same-center NOI increased 3.5% in Q1 FY26, driven by higher revenue from average rents and economic occupancy.

    • Comparable renewal rent spreads were 21.2% and new rent spreads were 36.2% in Q1 FY26, reflecting strong retailer demand.

    • The company increased its full-year 2026 Nareit FFO and Core FFO per share guidance, now reflecting 5.9% and 5.8% increases over 2025 at the midpoint, respectively.

    • Year-to-date acquisition activity totaled $185 million, including 5 grocery-anchored and 3 everyday retail centers, with a pipeline of $150 million under contract.

    Concerns

    3

    • Bad debt was around 60 basis points of revenue in Q1 FY26, with expectations to be in line with 2025's 78 basis points for the full year.

    • The gap between private and public market pricing of assets is 50 to 75 basis points, making private markets a cheaper source of capital.

    • The SOFR curve is higher than budgeted, which is being watched for potential impact on interest expense.

    Guidance & targets

    8
    CategoryTargetConfidence
    Full-year 2026 Nareit FFO per share growth
    5.9% increase over 2025 at the midpoint
    high materiality
    High
    Full-year 2026 Core FFO per share growth
    5.8% increase over 2025 at the midpoint
    high materiality
    High
    Full-year 2026 Same-center NOI growth
    3% to 4%
    medium materiality
    High
    Full-year 2026 Gross acquisitions (PECO share)
    $400 million to $500 million
    medium materiality
    High
    Full-year 2026 Asset dispositions
    $100 million to $200 million
    medium materiality
    High
    Long-term Same-center NOI growth
    3% to 4%
    high materiality
    High
    Long-term Core FFO per share growth
    mid- to high single-digit
    high materiality
    High
    Long-term AFFO growth
    higher than Core FFO growth
    medium materiality
    Medium

    Operational metrics

    34
    Nareit FFO per diluted share
    $0.67
    Q1 FY26

    Increased to $92.9 million.

    Core FFO per diluted share
    $0.69
    Q1 FY26

    Increased to $96.4 million.

    Lease portfolio occupancy
    97.1%
    Q1 FY26

    Remained high.

    Leased anchor occupancy
    98.4%
    Q1 FY26

    Remained strong.

    Leased inline occupancy
    95%
    Q1 FY26

    Remained high.

    Comparable new rent spreads
    36.2%
    Q1 FY26

    Remained strong.

    Inline leasing annual rent bumps
    2.7%
    Q1 FY26

    Achieved on new and renewal inline leasing deals.

    Development and redevelopment investment
    $74 million
    Current

    Estimated total investment for projects under active construction.

    Development and redevelopment estimated yields
    9% to 12%
    Current

    Average estimated yields for projects under active construction.

    Stabilized projects
    6
    Q1 FY26

    Delivered to neighbors.

    Incremental NOI from stabilized projects
    $1.7 million
    Annually

    From stabilized projects in Q1 FY26.

    Net debt to trailing 12-month annualized adjusted EBITDAre
    5.3x
    Q1 FY26 end

    5.1x on a last quarter annualized basis.

    Weighted average interest rate on debt
    4.4%
    Q1 FY26 end

    Includes PECO's share of JV debt.

    Weighted average maturity of debt
    5.8 years
    Q1 FY26 end

    Extended weighted average duration on maturities.

    Fixed rate debt percentage
    94%
    Q1 FY26 end

    Increased percentage of fixed rate debt.

    Liquidity
    $810 million
    Q1 FY26 end

    Capacity to execute growth plans.

    Acquisition cap rate
    6.6% to 6.7%
    YTD

    For $185 million in acquisitions.

    Unlevered returns on acquisitions
    above 9%
    YTD

    For $185 million in acquisitions.

    Unanchored centers acquisition cap rate
    6.9%
    Over 2.5 years

    For acquisitions of unanchored centers.

    Unanchored centers unlevered returns
    10% to 11%
    Over 2.5 years

    For acquisitions of unanchored centers.

    Unanchored centers occupancy increase
    310 bps
    Over 2.5 years

    Achieved on the subset of 12 unanchored centers.

    Unanchored centers new leasing spreads
    45%
    Over 2.5 years

    For unanchored centers.

    Unanchored centers renewal spreads
    27%
    Over 2.5 years

    For unanchored centers.

    Unanchored centers average purchase price per square foot
    $321
    Over 2.5 years

    For unanchored centers.

    Unanchored centers average CAGR
    5%
    Over 2.5 years

    Some cases 8% to 10% CAGRs for unanchored centers.

    Inline tenant health ratio (OCR)
    9.5% to 10%static over last 3 years
    Current

    Management sees room to push this to 10-14% over time.

    Inline tenant average base rent (ABR)
    $27
    Current

    Starting ABR for inline neighbors.

    Local neighbor rent concentration
    26%vs 25% last quarter
    Q1 FY26

    No real movement.

    Opportunities reviewed
    195up 70% over last year (115 deals)
    YTD

    Reflects ample supply of product.

    Deals presented to investment committee
    up 40%
    YTD

    Reflects increased deal flow.

    Deals underwritten
    up 26%
    YTD

    Reflects increased deal flow.

    Private vs. public market pricing difference
    50 to 75 bps
    Current

    Private markets are a cheaper source of capital.

    Leasing deals approved
    28
    Last 9 days

    Reflects strong demand and pipeline.

    Retention rate (excluding one-time event)
    92.4%
    Q1 FY26

    Actual reported retention was 88% due to a 64,000 sq ft box vacating. This adjusted rate reflects underlying performance.

    Industry KPIs

    6
    MetricValueDetails
    Credit loss ratio60 bpsbps
    Same store rent revenue growth3.5%%
    Investment volume and initial cash yield$185 millionUSD
    Rent recapture rate on renewals re leasing21.2%%
    Sourced opportunity volume and selectivity195 deals revieweddeals
    Blended acquisition cap rate and spread vs cost6.6% to 6.7%%

    Orderbook & backlog

    1
    Assets awarded or under contract$150 millionQ1 FY26 end

    Expected to close by the end of Q2 FY26. Includes grocery-anchored, everyday retail, and joint venture opportunities.

    Deals & partnerships

    2
    VariousAcquisition of grocery-anchored and everyday retail centers$185 million

    Includes 5 grocery-anchored shopping centers and 3 everyday retail centers. Year-to-date activity.

    VariousSale of assets$29 million

    Year-to-date asset sales at PECO share.

    Capital programs

    2
    Development and redevelopment projectsunderway$74 million

    Benefit: 19 projects under active construction, average estimated yields between 9% and 12%

    6 projects stabilized in Q1 FY26, delivering 87,000 sq ft and $1.7 million incremental NOI annually. Increased from $40 million to $50 million in prior years.

    Public debt offeringcompleted$350 million
    Funding: public debt offering
    Start: February 2026

    Benefit: 4.75% senior notes

    Proceeds used to repay term loans maturing in 2027 and a portion of the revolver. The interest rate was lower than budgeted.

    Risks & headwinds

    3
    Macroeconomic uncertaintyOngoing

    Interest rates volatile, global trade shifting, conflicts overseas, active election cycle, high energy costs.

    Mitigation: PECO's resilient, grocery-anchored, necessity-based retail portfolio; disciplined investment and capital sourcing.

    Private vs. public market pricing gapCurrent

    50 to 75 basis points difference, making private markets a cheaper source of capital.

    Mitigation: Focus on accessing the most efficient capital through public markets, institutional joint ventures, and asset recycling; willingness to lean into dispositions and JV capital.

    Rising SOFR curveOngoing

    SOFR curve is higher than where it started the year.

    Mitigation: Extended weighted average duration on maturities and increased percentage of fixed rate debt (94% fixed rate debt); bond offering at lower than budgeted interest rate.

    What to watch in Q2 FY26

    5

    Disposition volume

    Next quarter / H2 FY26
    Current$29 million (YTD)
    TargetProgress towards $100 million to $200 million target

    Why it matters

    Dispositions are a key source of capital for funding growth, especially given the private vs. public market pricing gap.

    Year-to-date, we've sold $29 million of assets at PECO share. We plan to sell between $100 million and $200 million in assets in 2026.

    Q&A highlights

    6

    Inquire about the health and sentiment of discretionary and mom-and-pop tenants compared to 6 months ago, especially given macro uncertainty.

    Management sees no signs of slowing demand from retailers, including local tenants. The renewal and new leasing pipeline is the best in 6-9 months, with 28 deals approved recently. Occupancy costs remain strong at 10%, and market-leading rent spreads reflect strength.

    “The visibility that we have would suggest that we have the best renewal pipeline and new leasing pipeline that we've seen at about the last 6 to 9 months.”

    asked by Andrew Reale · answered by Robert Myers

    2 min read5 chapters

    Detailed Narrative

    01

    Resilient Operating Environment

    PECO's grocery-anchored, necessity-based retail portfolio continues to demonstrate resilience amidst global uncertainties, including interest rate volatility, shifting trade dynamics, and an active election cycle. The company emphasizes its ability to deliver steady growth across economic cycles, with retailers remaining healthy and consumers driving solid foot traffic to its centers. This stability is a key differentiator in the current market, allowing PECO to 'drive more alpha with less beta'.

    02

    Strong Leasing Momentum

    The first quarter saw robust leasing activity, with lease portfolio occupancy at 97.1%, anchor occupancy at 98.4%, and inline occupancy at 95%. Comparable renewal rent spreads reached 21.2% and new rent spreads were 36.2%, indicating strong pricing power. Inline leasing deals achieved average annual rent bumps of 2.7%, contributing to long-term growth. The company noted a strong renewal and new leasing pipeline, with 28 deals approved in the last 9 days, reflecting no signs of slowing demand.

    03

    Accretive Acquisitions and Development

    PECO closed $185 million in acquisitions year-to-date, including 5 grocery-anchored and 3 everyday retail centers, at an average cap rate of 6.6%-6.7% and unlevered returns above 9%. An additional $150 million in assets are under contract or awarded, expected to close by Q2 FY26. The development pipeline includes 19 active projects with an estimated total investment of $74 million, targeting yields between 9% and 12%. Six projects were stabilized in Q1, adding $1.7 million in annual incremental NOI.

    04

    Strategic Capital Allocation

    The company is actively managing its capital structure, completing a $350 million public debt offering at 4.75% due 2033 to repay term loans and revolver debt. Liquidity stands at $810 million, and net debt to trailing 12-month adjusted EBITDAre was 5.3x. Management highlighted the 50-75 basis point spread between public and private market valuations, influencing a disciplined approach to capital sourcing, including asset recycling and joint ventures, with a willingness to lean more into dispositions.

    05

    Focus on Everyday Retail

    PECO is strategically expanding into 'everyday retail' centers (unanchored) to capitalize on market inefficiencies and achieve outsized returns. These acquisitions, totaling 12 assets for $221 million over 2.5 years, target properties with exceptional demographics, good configuration, and a mix of local and national tenants. The company has seen significant occupancy gains (310 bps) and strong leasing spreads (45% new, 27% renewal) in this segment, demonstrating its ability to create value with average 5% CAGRs and 10-11% unlevered returns.

    AI-generated summary of the company’s earnings call. Not investment advice.