Market Overview

Phillips Edison & Company Reports Second Quarter 2018 Results

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Subsequent to Quarter-end, the Company Entered into a Definitive
Merger Agreement with Phillips Edison Grocery Center REIT II

Phillips
Edison & Company, Inc.
("PECO" or the "Company"), an
internally-managed real estate investment trust ("REIT") and one of the
nation's largest owners and operators of grocery-anchored shopping
centers, reported its results for the quarter and six months ended
June 30, 2018.

Merger with Phillips Edison Grocery Center REIT II

  • On July 17, 2018, PECO entered into a definitive merger agreement with
    Phillips Edison Grocery Center REIT II, Inc. ("REIT II"), a public
    non-traded REIT currently advised and managed by PECO.
  • PECO's merger with REIT II's 86 properties will create a national
    portfolio of 321 grocery-anchored shopping centers encompassing
    approximately 36.6 million square feet located across 33 states and a
    total enterprise value ("TEV") of approximately $6.3 billion.
  • The merger is an important step towards a full-cycle liquidity event
    for both PECO and REIT II shareholders.

More information on the merger is available in the Form 8-K filed on
July 18, 2018, which can be found on our website at www.phillipsedison.com/investors.

Second Quarter 2018 Highlights (vs. Second Quarter 2017)

  • Net loss totaled $14.1 million
  • Funds from operations (FFO) per diluted share increased 13.3% to $0.17
  • FFO totaled 100.3% of total distributions made during the quarter
  • Modified funds from operations (MFFO) per diluted share increased
    12.5% to $0.18
  • Pro forma same-center net operating income (NOI)* increased 6.5% to
    $62.4 million
  • Net debt to total enterprise value was 42.2% at quarter-end
  • Outstanding debt had a weighted-average interest rate of 3.5% and
    86.0% was fixed-rate debt

Six Months Ended June 30, 2018 Highlights (vs. Six Months Ended June
30, 2017)

  • Net loss totaled $15.9 million
  • FFO per diluted share increased 13.3% to $0.34
  • FFO totaled 102.8% of total distributions made during the six-month
    period
  • MFFO per diluted share increased 12.5% to $0.36
  • Pro forma same-center NOI* increased 5.4% to $123.5 million

* Pro forma same-center NOI reflects adjustments for the Phillips
Edison Limited Partnership (PELP) acquisition in October 2017. Please
see 'Pro Forma Same-Center Results' under Portfolio Results for
additional disclosure.

Management Commentary

"Our portfolio of grocery-anchored shopping centers continues to produce
strong results, as illustrated by our same-center NOI increase of 6.5%
during the quarter," commented Jeff Edison, Chairman and Chief Executive
Officer of Phillips Edison & Company. "This growth in property NOI,
coupled with $9.1 million of fee income generated by our investment
management business, drove a 13.3% increase in FFO per diluted share.
Our FFO totaled 100.3% of our total distributions for the quarter
compared to 85.7% a year ago."

"On July 17, 2018, we entered into an agreement to merge with Phillips
Edison Grocery Center REIT II, which will result in a larger, more
diverse portfolio that will benefit from increased occupancy, higher
annualized base rent per square foot, and improved trade area
demographics. Importantly, we believe this merger will enhance the
long-term value of the combined company and better positions PECO for a
full-cycle liquidity event."

Three and Six Months Ended June 30, 2018 Financial Results

Net Loss

For the second quarter of 2018, net loss totaled $14.1 million compared
to net loss of $1.2 million for the second quarter of 2017.

For the six months ended June 30, 2018, net loss totaled $15.9 million
compared to a net loss of $0.1 million for the same period in 2017.

The increase in net loss for both periods was primarily driven by
increased depreciation and amortization as a result of owning an
additional 77 properties when compared to June 30, 2017.

Funds from Operations (FFO) as Defined by the National Association of
Real Estate Investment Trusts ("NAREIT")

For the second quarter of 2018, FFO attributable to stockholders and
convertible noncontrolling interests increased 43.4% to $38.7 million,
or $0.17 per diluted share, from $27.0 million, or $0.15 per diluted
share, during the second quarter of 2017. FFO per diluted share
increased 13.3%.

For the six months ended June 30, 2018, FFO attributable to stockholders
and convertible noncontrolling interests increased 41.8% to $79.1
million compared to $55.7 million during the same year-ago period. FFO
per diluted share increased 13.3%.

The improvement in FFO for both periods was driven by an increase in net
operating income generated by additional properties owned, a 6.5% and
5.4% increase in pro forma same-center NOI and $9.1 million and $17.8
million of fee income generated by PECO's investment management business
for the three and six months ended June 30, 2018, respectively. The
Company did not generate fee income prior to the acquisition of the
investment management business from PELP in October 2017.

Modified Funds from Operations (MFFO)

For the second quarter of 2018, MFFO increased 39.0% to $40.9 million,
or $0.18 per diluted share, compared to $29.5 million, or $0.16 per
diluted share, during the same year-ago quarter.

For the first six months of 2018, MFFO increased 42.9% to $83.1 million,
or $0.36 per diluted share, compared to $58.2 million, or $0.32 per
diluted share, during the same year-ago period.

The increase in MFFO for both periods was directly correlated to the
increase in FFO.

Pro Forma Same-Center Results*

For the second quarter of 2018, pro forma same-center NOI increased 6.5%
to $62.4 million compared to $58.6 million during the second quarter of
2017. The increase was driven by a $0.22 increase in minimum rent per
square foot, or 1.9%, as well as a 3.2% decrease in operating expenses
versus the comparable period.

For the six months ended June 30, 2018, pro forma same-center NOI
increased 5.4% to $123.5 million compared to $117.1 million during the
same period in 2017. The increase was driven by the aforementioned
increase in minimum rent, as well as a 4.2% decrease in operating
expenses versus the comparable period.

The improvement in operating expenses during both periods was due to
synergies resulting from PECO's acquisition of PELP during 2017.

Pro-forma same-center leased occupancy totaled 94.0% which is unchanged
from June 30, 2017.

*For purposes of evaluating same-center NOI on a comparative basis,
and in light of the acquisition of PELP in October 2017, the Company is
presenting pro forma same-center NOI, which includes all properties that
were owned and operational for the entire portion of both comparable
reporting periods for both Phillips Edison & Company and PELP. As such,
contributing to pro forma same-center NOI were 224 properties.

Three and Six Months Ended June 30, 2018 Portfolio Results

Portfolio Statistics

At quarter-end, the portfolio consisted of 235 properties, totaling
approximately 26.3 million square feet located in 32 states. This
compares to 158 properties, totaling approximately 17.2 million square
feet located in 28 states as of June 30, 2017.

Leased portfolio occupancy totaled 93.8% compared to 93.9% as of
December 31, 2017 (the first comparable period after the PELP
acquisition).

Leasing Activity

During the second quarter 2018, 178 leases (new, renewal and options)
were executed totaling approximately 769,000 square feet. This compares
to 130 leases executed totaling approximately 488,000 square feet during
the second quarter of 2017.

Comparable rent spreads during the quarter, which compare the percentage
increase (or decrease) of new or renewal leases to the expiring lease of
a unit that was occupied within the past 12 months, were 15.1% for new
leases, 7.9% for renewal leases (excluding options), and 8.7% combined
(new and renewal leases).

During the first six months of 2018, there were 369 leases (new, renewal
and options) executed totaling approximately 1.6 million square feet.
This compares to 262 leases executed totaling approximately 1.0 million
square feet during the same period of 2017.

Acquisition & Disposition Activity

During the quarter the Company generated $13.4 million from the sale of
two properties; and there was no acquisition activity.

During the six months ended June 30, 2018, one shopping center was
acquired for a total cost of $8.4 million; and there was no disposition
activity outside of what occurred during the second quarter of 2018.

Investment Management Business

During the second quarter of 2018, the Company generated $9.1 million of
fee income for asset management and property management services
rendered to third parties.

At quarter-end, the Company had approximately $2.1 billion of
third-party assets under management, which included Phillips Edison
Grocery Center REIT II, Inc., Phillips Edison Grocery Center REIT III,
Inc., and Necessity Retail Partners (a joint venture between Phillips
Edison Grocery Center REIT II, Inc. and TPG Real Estate).

Phillips Edison Grocery Center REIT III

On May 8, 2018, the registration statement for Phillips Edison Grocery
Center REIT III ("REIT III") pertaining to an initial public offering
was declared effective by the Securities and Exchange Commission. REIT
III will offer up to an aggregate of $1.7 billion in common stock.

Balance Sheet Highlights at June 30, 2018

At quarter-end, the Company had $453.0 million of borrowing capacity
available on its $500 million revolving credit facility.

Net debt to TEV was 42.2% at June 30, 2018. Please see the Net Debt to
Total Enterprise Value table for additional disclosure.

At quarter-end, the Company's outstanding debt had a weighted-average
interest rate of 3.5%, a weighted-average maturity of 4.9 years, and
86.0% of its total debt was fixed-rate debt. This compared to a
weighted-average interest rate of 3.4%, a weighted average maturity of
5.5 years, and 88.5% fixed-rate debt at December 31, 2017.

Distributions

For the quarter ended June 30, 2018, gross distributions of $38.5
million were paid to common shareholders and operating partnership
("OP") unit holders, including $12.1 million reinvested through the
distribution reinvestment plan ("DRIP"), for net cash distributions of
$26.4 million.

During the quarter, FFO totaled 100.3% of total distributions, up from
85.7% in Q2 2017.

For the first six months of 2018, gross distributions of $76.8 million
were paid to common shareholders and OP unit holders, including $24.9
million reinvested through the DRIP, for net cash distributions of $51.9
million.

During the first six months of 2018, FFO totaled 102.8% of total
distributions, up from 89.5% during the comparable six months in 2017.

Subsequent to quarter-end, the Company's board of directors authorized
distributions for September 2018, October 2018, and November 2018 in the
amount of $0.05583344 per share to the shareholders of record at the
close of business on September 17, 2018, October 15, 2018, and November
15, 2018, respectively. OP unit holders will receive distributions at
the same rate, subject to required withholding.

In connection with the proposed merger between PECO and REIT II, PECO
was required to temporarily suspend its DRIP during July 2018, and DRIP
participants received their July 2018 distribution (payable on August 1,
2018) in cash. The DRIP will resume in August 2018 (with the
distribution payable on September 1, 2018) as the filing of a joint
preliminary proxy statement and registration statement on Form S-4 has
been completed.

Share Repurchase Program (SRP)

During the second quarter of 2018, approximately 3.8 million shares of
common stock, totaling $42.1 million, were repurchased under the SRP.

The Company fulfilled all repurchases sought upon a stockholder's death,
"qualifying disability," or "determination of incompetence" in
accordance with the terms of the SRP. Standard repurchase requests were
processed on a pro rata basis due to requests surpassing the funding
limits under the SRP.

Cash available for standard repurchases on any particular date under the
SRP is generally limited to the proceeds from the DRIP during the
preceding four quarters, less amounts already used for repurchases
during the same time period.

In connection with the proposed merger between PECO and REIT II, PECO
was required to temporarily suspend the SRP during July 2018 and will
resume the SRP in August 2018 as the filing of the joint preliminary
proxy statement and registration statement on Form S-4 has been
completed. The next repurchase for death, disability, and incompetence
("DDI") is expected to take place on August 31, 2018. SRP paperwork must
be on file and in good order by August 24, 2018 at 6:00pm Eastern Time.
PECO does not expect funding to be available for standard repurchases
for the remainder of 2018.

Stockholder Update Call

Chairman and Chief Executive Officer Jeff Edison, Chief Financial
Officer Devin Murphy, and Executive Vice President Mark Addy will host a
live presentation addressing the Company's results later today at 3:30
p.m. Eastern Time. Following management's prepared remarks, there will
be a question and answer session.

Date: Today, Wednesday, August 8, 2018
Time: 3:30
p.m. Eastern Time
Webcast link: https://services.choruscall.com/links/peco180808.html
U.S.
listen-only:
(888) 346-2646
International listen-only:
(412) 317-5249
Submit Questions: InvestorRelations@phillipsedison.com
Webcast
Replay:
A replay will be available at http://investors.phillipsedison.com/event

Investors are encouraged to submit questions in advance of the
presentation by emailing them to InvestorRelations@phillipsedison.com.
Additionally, questions may be submitted via the webcast interface
during the live presentation.

Interested parties will be able to access the presentation online or by
telephone. If dialing in, please call the conference telephone number
five minutes prior to the start time as an operator will register your
name and organization. Participants should ask to join the Phillips
Edison & Company call.

For investor-related updates on Phillips Edison, please visit www.phillipsedison.com/investors.

For more information on the Company's quarterly results, please refer to
the Company's Form 10-Q for the quarter ended June 30, 2018, which will
be filed with the SEC and available on the SEC's website at www.sec.gov.

Non-GAAP Disclosures

Pro Forma Same-Center Net Operating Income

Same-Center NOI represents the NOI for the properties that were owned
and operational for the entire portion of both comparable reporting
periods. As of June 30, 2018, we had 224 same-center properties. For
purposes of evaluating Same-Center NOI on a comparative basis, and in
light of the Company's acquisition of 74 shopping centers and the
investment management business from PELP, the Company is presenting Pro
Forma Same-Center NOI, which is Same-Center NOI on a pro forma basis as
if the transaction had occurred on January 1, 2017. This perspective
allows the Company to evaluate Same-Center NOI growth over a comparable
period. Pro Forma Same-Center NOI is not necessarily indicative of what
actual Same-Center NOI and growth would have been if the PELP
transaction had occurred on January 1, 2017, nor does it purport to
represent Same-Center NOI and growth for future periods.

Pro Forma Same-Center NOI highlights operating trends such as occupancy
rates, rental rates, and operating costs on properties that were
operational for both comparable periods. Other REITs may use different
methodologies for calculating Same-Center NOI, and accordingly, Pro
Forma Same-Center NOI may not be comparable to other REITs.

Pro Forma Same-Center NOI should not be viewed as an alternative measure
of the Company's financial performance since it does not reflect the
operations of the Company's entire portfolio, nor does it reflect the
impact of general and administrative expenses, acquisition expenses,
depreciation and amortization, interest expense, other income, or the
level of capital expenditures and leasing costs necessary to maintain
the operating performance of Company properties that could materially
impact its results from operations.

Funds from Operations and Modified Funds from Operations

FFO is a non-GAAP performance financial measure that is widely
recognized as a measure of REIT operating performance. The National
Association of Real Estate Investment Trusts ("NAREIT") defines FFO as
net income (loss) attributable to common stockholders computed in
accordance with GAAP, excluding gains (or losses) from sales of
property, plus depreciation and amortization, and after adjustments for
impairment losses on depreciable real estate and impairments of
in-substance real estate investments in investees that are driven by
measurable decreases in the fair value of the depreciable real estate
held by the unconsolidated partnerships and joint ventures. Adjustments
for unconsolidated partnerships and joint ventures are calculated to
reflect funds from operations on the same basis. The Company calculates
FFO Attributable to Stockholders and Convertible Noncontrolling
Interests in a manner consistent with the NAREIT definition, with an
additional adjustment made for noncontrolling interests that are not
convertible into common stock.

MFFO is an additional performance financial measure used by the Company
as FFO includes certain non-comparable items that affect the Company's
performance over time. MFFO excludes the following items:

  • acquisition and transaction expenses;
  • straight-line rent amounts, both income and expense;
  • amortization of above- or below-market intangible lease assets and
    liabilities;
  • amortization of discounts and premiums on debt investments;
  • gains or losses from the early extinguishment of debt;
  • gains or losses on the extinguishment of derivatives, except where the
    trading of such instruments is a fundamental attribute of Company
    operations;
  • gains or losses related to fair value adjustments for derivatives not
    qualifying for hedge accounting;
  • gains or losses related to fair value adjustments for the Company's
    earn-out liability; and
  • adjustments related to the above items for joint ventures and
    noncontrolling interests and unconsolidated entities in the
    application of equity accounting.

The Company believes that MFFO is helpful in assisting management and
investors with the assessment of the sustainability of operating
performance in future periods. The Company believes it is more
reflective of its core operating performance and provides an additional
measure to compare its performance across reporting periods on a
consistent basis by excluding items that may cause short-term
fluctuations in net income (loss) but have no impact on cash flows.

FFO, FFO Attributable to Stockholders and Convertible Noncontrolling
Interests, and MFFO should not be considered alternatives to net income
(loss) or income (loss) from continuing operations under GAAP, as an
indication of liquidity, nor as an indication of funds available to
cover the Company's cash needs, including its ability to fund
distributions. MFFO may not be a useful measure of the impact of
long-term operating performance on value if the Company does not
continue to operate its business plan in the manner currently
contemplated.

Accordingly, FFO, FFO Attributable to Stockholders and Convertible
Noncontrolling Interests, and MFFO should be reviewed in connection with
other GAAP measurements, and should not be viewed as more prominent
measures of performance than net income (loss) or cash flows from
operations prepared in accordance with GAAP. The Company's FFO, FFO
Attributable to Stockholders and Convertible Noncontrolling Interests,
and MFFO, as presented, may not be comparable to amounts calculated by
other REITs.

         

PHILLIPS EDISON & COMPANY, INC.

CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2018 AND DECEMBER 31, 2017

(Unaudited)

(In thousands, except per share amounts)

 
June 30, 2018 December 31, 2017
ASSETS
Investment in real estate:
Land and improvements $ 1,118,536 $ 1,121,590
Building and improvements 2,265,554 2,263,381
Acquired in-place lease assets 311,829 313,432
Acquired above-market lease assets 53,432   53,524  
Total investment in real estate assets 3,749,351 3,751,927
Accumulated depreciation and amortization (544,034 ) (462,025 )
Total investment in real estate assets, net 3,205,317 3,289,902
Cash and cash equivalents 9,125 5,716
Restricted cash 16,728 21,729
Account receivable - affiliates 5,596 6,102
Corporate intangible assets, net 49,300 55,100
Goodwill 29,066 29,085
Other assets, net 137,806   118,448  
Total assets $ 3,452,938   $ 3,526,082  
 
LIABILITIES AND EQUITY
Liabilities:
Debt obligations, net $ 1,838,472 $ 1,806,998
Acquired below-market lease liabilities, net of accumulated
amortization
of $32,327 and $27,388, respectively 84,974 90,624
Accounts payable – affiliates 948 1,359
Accounts payable and other liabilities 143,272   148,419  
Total liabilities 2,067,666   2,047,400  
Commitments and contingencies
Equity:
Preferred stock, $0.01 par value per share, 10,000 shares
authorized, zero shares issued
and outstanding at June 30, 2018 and December 31, 2017, respectively
Common stock, $0.01 par value per share, 1,000,000 shares
authorized, 183,304 and 185,233
shares issued and outstanding at June 30, 2018 and December 31,
2017, respectively
1,833 1,852
Additional paid-in capital 1,608,590 1,629,130
Accumulated other comprehensive income 31,293 16,496
Accumulated deficit (676,673 ) (601,238 )
Total stockholders' equity 965,043 1,046,240
Noncontrolling interests 420,229   432,442  
Total equity 1,385,272   1,478,682  
Total liabilities and equity $ 3,452,938   $ 3,526,082  
 
         

PHILLIPS EDISON & COMPANY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS)
INCOME

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(Unaudited)

(In thousands, except per share amounts)

 
Three Months Ended June 30, Six Months Ended June 30,
2018     2017 2018     2017
Revenues:
Rental income $ 72,853 $ 53,167 $ 144,302 $ 104,260
Tenant recovery income 21,557 16,454 43,994 33,390
Fees and management income 9,137 17,849
Other property income 626   230   1,227   504  
Total revenues 104,173 69,851 207,372 138,154
Expenses:
Property operating 16,901 10,297 35,016 21,729
Real estate taxes 13,326 10,155 26,473 20,413
General and administrative 13,450 9,209 23,911 16,990
Depreciation and amortization 46,385 28,207 92,812 55,831
Impairment of real estate assets 10,939     10,939    
Total expenses 101,001 57,868 189,151 114,963
Other:
Interest expense, net (17,051 ) (9,501 ) (33,830 ) (17,891 )
Transaction expenses (4,383 ) (6,023 )
Other (expense) income, net (197 ) 680   (304 ) 636  
Net loss (14,076 ) (1,221 ) (15,913 ) (87 )
Net income attributable to noncontrolling interests 2,725   28   2,962    
Net loss attributable to stockholders $ (11,351 ) $ (1,193 ) $ (12,951 ) $ (87 )
Earnings per common share:
Net loss per share - basic and diluted $ (0.06 ) $ (0.01 ) $ (0.07 ) $ (0.00 )
Weighted-average common shares outstanding:
Basic 184,450 183,126 185,171 183,178
Diluted 228,903 183,126 229,624 183,178
 
Comprehensive (loss) income:
Net loss $ (14,076 ) $ (1,221 ) $ (15,913 ) $ (87 )
Other comprehensive (loss) income:
Change in unrealized gain (loss) on interest rate swaps 4,855   (2,616 ) 18,343   (800 )
Comprehensive (loss) income (9,221 ) (3,837 ) 2,430 (887 )
Net income attributable to noncontrolling interests 2,725 28 2,962
Comprehensive loss (income) attributable to noncontrolling interests 1,782     (584 )  
Comprehensive (loss) income attributable to stockholders $ (4,714 ) $ (3,809 ) $ 4,808   $ (887 )
 

The table below compares Pro Forma Same-Center NOI for the three and six
months ended June 30, 2018 and 2017 (in thousands):

      Three Months Ended June 30,     Six Months Ended June 30,
2018     2017(1)     $ Change    

%
Change

2018     2017(1)     $ Change    

%
Change

Revenues:
Rental income(2) $ 66,299 $ 63,916 $ 2,383 $ 131,511 $ 128,196 $ 3,315
Tenant recovery income 20,510 20,108 402 41,661 41,202 459
Other property income 591   387   204   1,161   861   300  
Total revenues 87,400 84,411 2,989 3.5 % 174,333 170,259 4,074 2.4 %
Operating expenses:
Property operating expenses(3) 12,284 13,318 (1,034 ) 25,904 27,904 (2,000 )
Real estate taxes 12,713   12,496   217   24,973   25,211   (238 )
Total operating expenses 24,997   25,814   (817 ) (3.2 )% 50,877   53,115   (2,238 ) (4.2 )%
Total Same-center NOI $ 62,403   $ 58,597   $ 3,806   6.5 % $ 123,456   $ 117,144   $ 6,312   5.4 %

(1) Excludes straight-line rental income, net
amortization of above- and below-market leases, and lease buyout income.

Below is a reconciliation of Net Loss to Owned Real Estate NOI and Pro
Forma Same-Center NOI for the three and six months ended June 30, 2018
and 2017 (in thousands):

      Three Months Ended June 30,     Six Months Ended June 30,
2018     2017 2018     2017
Net loss $ (14,076 ) $ (1,221 ) $ (15,913 ) $ (87 )
Adjusted to exclude:

Fees and management income

(9,137 ) (17,849 )
Straight-line rental income (1,409 ) (1,451 ) (2,489 ) (1,943 )
Net amortization of above- and below-market leases (983 ) (357 ) (1,990 ) (686 )
Lease buyout income (43 ) (1,085 ) (66 ) (1,112 )
General and administrative expenses 13,450 9,209 23,911 16,990
Depreciation and amortization 46,385 28,207 92,812 55,831
Impairment of real estate assets 10,939 10,939
Interest expense, net 17,051 9,501 33,830 17,891
Transaction expenses 4,383 6,023
Other 102 (680 ) 115 (636 )

Property management allocations to third-party assets

under management(1)

4,001     7,791    
Owned Real Estate NOI 66,280 46,506 131,091 92,271
Less: NOI from centers excluded from same-center (3,877 ) (1,247 ) (7,635 ) (1,672 )

NOI prior to October 4, 2017, from same-center properties

acquired in the PELP transaction(2)

  13,338     26,545  
Total Pro Forma Same-Center NOI $ 62,403   $ 58,597   $ 123,456   $ 117,144  

(1) This represents property management expenses
allocated to third-party owned properties based on the property
management fee that is provided for in the individual management
agreements under which the Company's investment management business
provides services.

(2) See calculation on the
following page.

NOI from the PELP properties acquired prior to the PELP transaction was
obtained from the accounting records of PELP without adjustment. The
accounting records were subject to internal review by the Company. The
table below provides Same-Center NOI detail for the non-ownership period
of PELP, which was the three and six months ended June 30, 2017.

         

Three Months Ended
June 30, 2017

Six Months Ended
June 30, 2017

Revenues:
Rental income(1) $ 14,834 $ 29,600
Tenant recovery income 3,973 8,217
Other property income 205   453
Total revenues 19,012 38,270
Operating expenses:
Property operating expenses 3,168 6,701
Real estate taxes 2,506   5,024
Total operating expenses 5,674   11,725
Total Same-Center NOI $ 13,338   $ 26,545

(1) Excludes straight-line rental income, net
amortization of above- and below-market leases, and lease buyout income.

The following section presents the Company's calculation of FFO, FFO
Attributable to Stockholders and Convertible Noncontrolling Interests,
and MFFO and provides additional information related to the Company's
operations for the three and six months ended June 30, 2018 and 2017 (in
thousands, except per share amounts):

      Three Months Ended June 30,     Six Months Ended June 30,
2018     2017 2018     2017(1)

Calculation of FFO Attributable to
Stockholders and

Convertible Noncontrolling Interests

Net loss $ (14,076 ) $ (1,221 ) $ (15,913 ) $ (87 )
Adjustments:
Depreciation and amortization of real estate assets 42,841 28,207 85,140 55,831
Impairment of real estate assets 10,939 10,939
Gain on disposal of properties (985 )   (985 )  
FFO attributable to the Company 38,719 26,986 79,181 55,744

Adjustments attributable to noncontrolling interests not

convertible into common stock

(31 )   (128 )  
FFO attributable to stockholders and convertible noncontrolling
interests
$ 38,688   $ 26,986   $ 79,053   $ 55,744  

Calculation of MFFO

FFO attributable to stockholders and convertible noncontrolling
interests
$ 38,688 $ 26,986 $ 79,053 $ 55,744
Adjustments:
Net amortization of above- and below-market leases (982 ) (357 ) (1,990 ) (688 )
Depreciation and amortization of corporate assets 3,544 7,672
Loss (gain) on extinguishment of debt, net 145 145 (524 )
Straight-line rent (1,414 ) (1,451 ) (2,471 ) (1,943 )
Amortization of market debt adjustment (465 ) (293 ) (737 ) (571 )
Change in fair value of earn-out liability 1,500 1,500
Transaction expenses 4,383 6,023
Other (71 ) 187   (41 ) 140  
MFFO $ 40,945   $ 29,455   $ 83,131   $ 58,181  
 

FFO Attributable to Stockholders and
Convertible

Noncontrolling Interests/MFFO per share

Weighted-average common shares outstanding - diluted(2) 228,909 185,911 229,628 183,178

FFO attributable to stockholders and convertible noncontrolling

interests per share - diluted(2)

$ 0.17 $ 0.15 $ 0.34 $ 0.30
MFFO per share - diluted $ 0.18 $ 0.16 $ 0.36 $ 0.32

(1) Certain prior period amounts have been restated to
conform with current year presentation.

(2) Restricted
stock awards were dilutive to FFO Attributable to Stockholders and
Convertible Noncontrolling Interests and MFFO for the three and six
months ended June 30, 2018 and 2017, and, accordingly, were included in
the weighted-average common shares used to calculate diluted FFO
Attributable to Stockholders and Convertible Noncontrolling Interests
and MFFO per share.

Net Debt to Total Enterprise Value

The following table presents the Company's calculation of debt to total
enterprise value as of June 30, 2018 and December 31, 2017 (dollars in
thousands):

      June 30, 2018     December 31, 2017
Net debt:
Total debt, excluding below-market adjustments and deferred
financing costs
$ 1,847,983 $ 1,817,786
Less: Cash and cash equivalents (9,125 ) (5,716 )
Total net debt $ 1,838,858   $ 1,812,070  
Enterprise Value:
Total net debt $ 1,838,858 $ 1,812,070
Total equity value 2,517,544   2,526,557  
Total enterprise value $ 4,356,402   $ 4,338,627  
   
Net debt to total enterprise value 42.2 % 41.8 %

(1) Total equity value is calculated as the product of the
number of diluted shares outstanding and the estimated value per share
at the end of the period. There were 227.8 million and 229.7 million
diluted shares outstanding as of June 30, 2018 and December 31, 2017,
respectively.

About Phillips Edison & Company

Phillips Edison & Company, Inc., an internally-managed REIT, is one of
the nation's largest owners and operators of grocery-anchored shopping
centers. Its diversified portfolio of well-occupied neighborhood
shopping centers has a mix of national and regional retailers selling
necessity-based goods and services, in strong demographic markets
throughout the United States. As of June 30, 2018, the Company manages
342 shopping centers - 235 of which it owns directly - comprising
approximately 26.3 million square feet located in 32 states. The
Company's proven, vertically-integrated operating platform allows it to
effectively and efficiently acquire, lease and manage its properties,
resulting in a history of strong operating results and great shopping
experiences. For more information, please visit www.phillipsedison.com.

Additional Information and Where You Can Find It

This communication shall not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor shall there be any
sale of securities in any jurisdiction in which such offer, solicitation
or sale would be unlawful prior to registration or qualification under
the securities laws of any such jurisdiction. No offering of securities
shall be made except by means of a prospectus meeting the requirements
of the federal securities laws. PECO and REIT II have filed a joint
proxy statement/registration statement on Form S-4 in connection with
the merger. Investors are urged to read carefully the joint proxy
statement/prospectus and other relevant materials because they contain
important information about the merger. Investors may obtain free copies
of these documents and other documents filed by PECO or REIT II with the
SEC through the website maintained by the SEC at www.sec.gov.
Investors may obtain free copies of the documents filed with the SEC by
PECO by going to PECO's corporate website at www.phillipsedison.com
or by directing a written request to: Phillips Edison & Company, Inc.,
11501 Northlake Drive, Cincinnati, OH 45249, Attention: Investor
Relations. Investors may obtain free copies of documents filed with the
SEC by REIT II by going to REIT II's corporate website at www.grocerycenterREIT2.com
or by directing a written request to: Phillips Edison Grocery Center
REIT II, Inc., 11501 Northlake Drive, Cincinnati, OH 45249, Attention:
Investor Relations. Investors are urged to read the joint proxy
statement/prospectus and the other relevant materials before making any
voting decision with respect to the merger.

PECO and its directors and executive officers and REIT II and its
directors and executive officers may be deemed to be participants in the
solicitation of proxies from the stockholders of each of PECO and REIT
II in connection with the merger. Information regarding the interests of
these directors and executive officers in the merger has been included
in the joint proxy statement/prospectus referred to above. Additional
information regarding certain of these persons and their beneficial
ownership of PECO common stock is also set forth in the Definitive Proxy
Statement for PECO's 2017 Annual Meeting of Stockholders, which has been
filed with the SEC. Additional information regarding certain of these
persons and their beneficial ownership of REIT II's common stock is set
forth in the Definitive Proxy Statement for REIT II's 2017 Annual
Meeting of Stockholders, which has been filed with the SEC.

Forward-Looking Statements

This press release may contain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of
the Securities Exchange Act of 1934. These statements include, but are
not limited to, statements related to the anticipated benefits of the
business combination transaction involving PECO and REIT II, including
future financial and operating results, and the combined Company's
plans, objectives and expectations, and the Company's expectations
regarding the performance of its business, its financial results, its
liquidity and capital resources, the quality of the Company's portfolio
of grocery-anchored shopping centers and other non-historical
statements. You can identify these forward-looking statements by the use
of words such as "outlook," "believes," "expects," "potential,"
"continues," "may," "will," "should," "seeks," "approximately,"
"projects," "predicts," "intends," "plans," "estimates," "anticipates,"
or the negative version of these words or other comparable words. Such
forward-looking statements are subject to various risks and
uncertainties, such as the risks that retail conditions may adversely
affect the Company's base rent and, subsequently, the Company's income,
and that the Company's properties consist primarily of retail properties
and the Company's performance, therefore, is linked to the market for
retail space generally, as well as other risks that are described under
the section entitled "Risk Factors" in the Company's Annual Report on
Form 10-K for the year ended December 31, 2017, and the joint
preliminary proxy statement/prospectus filed with the SEC on August 6,
2018, as such factors may be updated from time to time in the Company's
periodic filings with the SEC, which are accessible on the SEC's website
at www.sec.gov.
Accordingly, there are or will be important factors that could cause
actual outcomes or results to differ materially from those indicated in
these statements. These factors should not be construed as exhaustive
and should be read in conjunction with the other cautionary statements
that are included in this press release and in the Company's filings
with the SEC. The Company undertakes no obligation to publicly update or
revise any forward-looking statement, whether as a result of new
information, future events, or otherwise.

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