Market Overview

Phillips Edison Grocery Center REIT I to Acquire Real Estate Assets and Asset Management Business from Phillips Edison Limited Partnership


Phillips Edison Grocery Center REIT I, Inc. ("PECO I" or the "company")
entered into a definitive contribution agreement on May 18, 2017 to
acquire real estate assets and the third party asset management business
of its sponsor and external advisor, Phillips Edison Limited Partnership
("PELP"), in a stock and cash transaction valued at approximately $1
billion, subject to closing adjustments.

Upon the closing of the transaction, this highly strategic acquisition
will create an internally-managed, non-traded grocery-anchored shopping
center REIT with an expected total enterprise value of approximately $4
billion. The resulting enterprise will own a high-quality,
nationally-diversified portfolio of 230 shopping centers in 32 states
that is well positioned to drive sustained growth and create enhanced
value for all shareholders. PECO I estimates that, on a pro forma basis,
funds from operation ("FFO") would have increased by 8-10% on a per
share basis for the three months ended March 31, 2017 relative to actual

Under the terms of the agreement, PELP will receive approximately 45.2
million operating partnership units ( "OP units") in PECO I's operating
partnership, Phillips Edison Grocery Center Operating Partnership I,
L.P. ("PECO I OP"), inclusive of 4.8 million Class B Units in PECO I OP
already outstanding, and approximately $50.0 million in cash in exchange
for the contribution of PELP's ownership interests in 76 shopping
centers and its third party asset management business.

Each OP unit is exchangeable for PECO I common shares. PECO I's board of
directors recently reaffirmed that the company's common stock has an
estimated value per share of $10.20 as of March 31, 2017. An independent
third party valuation firm, Duff & Phelps, provided a range of the
estimated value per share of the company's common stock based
substantially on its estimate of the market value of the company's
portfolio as of March 31, 2017.

The cash portion of the consideration will be used to retire certain
minority interests in PELP to help ensure the combined company maintains
its qualification as a REIT.

Management will receive no cash consideration in this transaction and
will be subject to traditional and customary lockup provisions.
Additionally, PECO I will not pay any internalization fees in connection
with the transaction, i.e., no consideration is being paid for the
advisory services that PELP provides to PECO I.

Outstanding debt of approximately $501 million is expected to be
refinanced or assumed by PECO I at closing under the terms of the
agreement. The agreement also includes an earn-out structure with an
opportunity for PELP to receive up to an additional 12.49 million OP
units if certain milestones are achieved related to a liquidity event
for PECO I shareholders and fundraising targets in PELP's third
non-traded REIT, Phillips Edison Grocery Center REIT III.

On a pro forma basis, immediately following the closing of the
transaction, PECO I shareholders are expected to own approximately
80.2%, and former PELP shareholders are expected to own approximately
19.8% of the combined company. The transaction was approved by the
independent special committee of PECO I's board of directors, which had
retained independent financial and legal advisors. The closing of the
transaction is subject to the satisfaction of customary conditions.
Although not required by law or under PECO I's governing documents, PECO
I has conditioned the closing of the transaction on the receipt of the
approval of its shareholders. PELP will also seek the approval of its
partners. The transaction is expected to close during the fourth quarter
of 2017.

"Shareholders of PECO I will benefit from a combined enterprise with
internalized management, increased size and scale, higher earnings
potential, greater earnings growth potential, improved dividend coverage
and enhanced access to capital," said Stephen Quazzo, the chair of the
special committee of PECO I's board of directors. "Importantly, we
expect this strategic transaction to be immediately accretive to FFO per
share, and it positions PECO I well for future capital market
opportunities including potential liquidity alternatives."

Summary of Strategic Benefits

The transaction is expected to create significant operational and
financial benefits, including:

  • Maintains Grocery Focus: Combined portfolio and all assets
    under management are focused entirely on grocery-anchored shopping
    centers with an emphasis on necessity-based retailers, which have
    proven to be both internet and recession resilient.
  • Improved Earnings: Expected to be accretive to funds from
    operations (FFO, as defined by the National Association of Real Estate
    Investment Trusts ("NAREIT")) through meaningful cost synergies from
    an internalized management structure. Estimated pro forma FFO for the
    first quarter of 2017 would have increased by approximately 8-10%
    relative to the performance of stand-alone PECO I.
  • Dividends and Dividend Coverage: Future monthly distributions
    for PECO I are expected to remain unchanged following the transaction.
    PECO I estimates that pro forma FFO would have fully covered
    distributions for the three months ended March 31, 2017, relative to
    actual coverage of 92% for PECO I standalone.
  • Strengthened Balance Sheet: The combined company is expected to
    have an improved capital position on a Total Debt/EBITDA basis and a
    total debt to enterprise value of approximately 41.4%, which positions
    the company well for attractive future financing opportunities.
  • Better Alignment of Management: Internalized management
    structure creates better alignment with its shareholders. Through its
    investment in OP Units, management will be PECO I's largest equity
    owner, owning over 18 million OP Units and common shares, with a
    long-term view of shareholder value and will be subject to traditional
    and customary lock-ups.
  • Increased Potential for Future Growth: Acquired real estate has
    the opportunity for higher net operating income growth, and the asset
    management business provides an additional avenue for future long-term
    earnings growth as assets under management increase.
  • Improved Geographic and Tenant Diversity: The combined company
    will own a high-quality portfolio of 230 grocery-anchored shopping
    centers comprising approximately 25.5 million square feet in
    established trade areas located in 32 states, and will benefit from
    greater geographic, grocery anchor and tenant diversification.
  • Superior Financial Strength and Flexibility: With enhanced size
    and scale, the combined company will have additional access to
    capital, which can be used to support strategic investments to drive
    future growth opportunities.
  • Liquidity Opportunities: Given its enhanced size, scale,
    improved financials and internalized management structure, the
    combined company is better positioned to capitalize on capital market
    opportunities, including potential liquidity alternatives.

Distribution Reinvestment Plan and Share Repurchase Program

In connection with the proposed acquisition, PECO I has modified its
distribution reinvestment plan (DRP) for the month of June, and DRP
participants will receive their June distribution in cash. The DRP plan
will resume in July after the expected filing of a preliminary proxy
statement in June. The share repurchase program (SRP) is suspended for
the month of June and is also expected to resume in July after the
filing of the same preliminary proxy statement in June.


Lazard is acting as the exclusive financial advisor and Sidley Austin
LLP is acting as legal advisor to the special committee of the board of
directors of PECO I. Goldman, Sachs & Co., JP Morgan Securities LLC, and
KeyBanc Capital Markets Inc. are acting as financial advisors, and
Latham Watkins LLP is acting as legal advisor to PELP.

Forward Looking Statements

Certain statements contained in this press release may be considered
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act"), and Section
21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), including statements regarding the transaction and the ability to
consummate the transaction and anticipated accretion, dividend coverage,
dividends and other anticipated benefits of the transaction. We intend
for all such forward-looking statements to be covered by the safe harbor
provisions for forward-looking statements contained in Section 27A of
the Securities Act and Section 21E of the Exchange Act, as applicable.
Such statements include, in particular, statements about PECO I's plans,
strategies, and prospects and are subject to certain risks and
uncertainties, as well as known and unknown risks, which could cause
actual results to differ materially from those projected or anticipated.
Therefore, such statements are not intended to be a guarantee of PECO
I's performance in future periods. Such forward-looking statements can
generally be identified by our use of forward-looking terminology such
as "pro forma," "may," "will," "would," "could," "should," "expect,"
"intend," "anticipate," "estimate," "believe," "continue," or other
similar words. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date of
this release. PECO I makes no representation or warranty (express or
implied) about the accuracy of any such forward-looking statements
contained in this release, and does not intend, and undertakes no
obligation, to publicly update or revise any forward-looking statements,
whether as a result of new information, future events, or otherwise.

About Phillips Edison Grocery Center REIT I, Inc.

PECO I is a public non-traded REIT that seeks to acquire and manage
well-occupied grocery-anchored neighborhood shopping centers having a
mix of national and regional retailers selling necessity-based goods and
services, in strong demographic markets throughout the United States. As
of March 31, 2017, the company owned and managed an institutional
quality retail portfolio consisting of 154 grocery-anchored shopping
centers totaling approximately 16.8 million square feet.

About Phillips Edison Limited Partnership

Since 1991, Phillips Edison Limited Partnership has focused on the
grocery-anchored shopping center sector. The company has a fully
integrated in-house operating platform built on market leading expertise
designed to optimize property value and consistently deliver a great
shopping experience. Led by a veteran management team, Phillips Edison's
operating platform provides retail services including acquisition,
redevelopment, leasing and management of grocery-anchored retail
centers. The company's portfolio currently includes a national footprint
of retail properties. The company has corporate offices in Cincinnati,
Salt Lake City, New York City and Atlanta. More information about PELP
can be obtained at PELP's website at
or on PELP's LinkedIn page.

Additional Information About the Transaction and Where to Find It

This communication does not constitute a solicitation of materials of
any vote or approval in respect of the proposed transaction involving
PECO I or otherwise. In connection with the proposed transaction, a
stockholder meeting will be announced soon to obtain stockholder
approval. In connection with the proposed transaction, PECO I intends to
file relevant materials, including a proxy statement, with the
Securities and Exchange Commission (the "SEC"). Investors and security
holders of PECO I are urged to read the definitive proxy statement and
other relevant materials when they become available because they will
contain important information about PECO I and the proposed transaction.
The proxy statement and other relevant materials (when they become
available), and any other documents filed by PECO I with the SEC, may be
obtained free of charge at the SEC's website at,
at PECO I's website at
or by sending a written request to the Company at 11501 Northlake Drive,
Cincinnati, OH 45249, Attention: Investor Relations.

Participants in the Solicitation

PECO I and its directors, executive officers and certain other members
of management and employees may be deemed to be participants in
soliciting proxies from the stockholders of PECO I in favor of the
proposed transaction. Information regarding the persons who may, under
the rules of the SEC, be considered to be participants in the
solicitation of PECO I's stockholders in connection with the proposed
transaction and their ownership of PECO I's common stock will be set
forth in the proxy statement for its stockholder meeting. Investors can
find more information about PECO I's executive officers and directors in
its Annual Report on Form 10-K for the fiscal year ended December 31,
2016 and in its definitive proxy statement filed with the SEC on
Schedule 14A on April 29, 2016.

Stockholder Update Call

Company management will publish a stockholder update webinar on May 22,
2017 to discuss the transaction. Interested parties can listen to the
presentation by clicking the link available in the Events &
Presentations section of the Investor Relations website at

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