Market Overview

Phillips Edison Grocery Center REIT II Reports Second Quarter 2018 Results

Share:

Subsequent to Quarter-end, the Company Entered into a Definitive
Merger Agreement with Phillips Edison & Company

Phillips
Edison Grocery Center REIT II, Inc.
("REIT II" or the
"Company"), a real estate investment trust ("REIT") focused on the
acquisition and management of well-occupied grocery-anchored shopping
centers, reported its results for the quarter and six months ended
June 30, 2018.

Merger with Phillips Edison & Company

  • On July 17, 2018, REIT II entered into a definitive merger agreement
    with Phillips Edison & Company, Inc. ("PECO"), an internally-managed
    REIT and one of the nation's largest owners and operators of
    grocery-anchored shopping centers.
  • REIT II's merger with PECO 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 REIT II and PECO 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.grocerycenterreit2.com/investors.

Second Quarter 2018 Highlights (vs. Second Quarter 2017)

  • Net loss totaled $1.6 million
  • Funds from operations (FFO) increased 7.7% to $18.0 million, or $0.38
    per diluted share
  • Modified funds from operations (MFFO) increased 8.6% to $16.7 million,
    or $0.36 per diluted share
  • Same-center net operating income (NOI) increased 1.1% to $24.9 million
  • Net Debt to Total Enterprise Value was 42.8% at quarter-end
  • Outstanding debt had a weighted-average interest rate of 3.5% and
    89.4% was fixed-rate debt

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

  • Net loss totaled $2.9 million
  • FFO increased 6.1% to $36.1 million, or $0.77 per diluted share
  • MFFO increased 8.3% to $33.4 million, or $0.72 per diluted share
  • Same-center NOI increased 2.9% to $50.1 million

Management Commentary

"During the second quarter, continued demand for retail space in our
well-located shopping centers drove another period of strong leasing
activity, as we tripled the new leases executed coupled with new
comparable leasing spreads of 13.9% when compared to the second quarter
of last year," commented Jeff Edison, Chairman and Chief Executive
Officer of Phillips Edison Grocery Center REIT II.

"Subsequent to the end of the quarter, we entered into an agreement to
merge with our sponsor and manager, Phillips Edison & Company. As a
result of the merger, REIT II's shareholders will benefit from owning an
internally-managed, more diversified portfolio exclusively focused on
grocery-anchored real estate. REIT II will no longer pay any
acquisition, asset management, or disposition fees, and the combined
company would have fully covered its distributions for Q1 2018 on an FFO
basis.

"The merger will enhance the long-term value of the combined company and
is an important step towards a full-cycle liquidity event for our
shareholders."

Three and Six Months Ended June 30, 2018 Financial Results

Net Loss

For the second quarter 2018, net loss totaled $1.6 million compared to
net loss of $1.3 million during the second quarter of 2017.

For the six months ended June 30, 2018, net loss totaled $2.9 million
compared to net loss of $1.3 million during the six months ended
June 30, 2017.

The increase in net loss for both periods was primarily driven by
increased depreciation and amortization as a result of owning an
additional six 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 totaled $18.0 million, or $0.38 per
share, compared to $16.7 million, or $0.36 per share, during the second
quarter of 2017.

For the six months ended June 30, 2018, FFO totaled $36.1 million, or
$0.77 per share, compared to $34.1 million, or $0.73 per share, during
the six months ended June 30, 2017.

The improvements in FFO were driven by an increase in net operating
income generated by additional properties owned, coupled with a 1.1% and
2.9% increase in same-center NOI for the three and six months ended June
30, 2018, respectively, when compared to the three and six months ended
June 30, 2017.

Modified Funds from Operations (MFFO)

For the second quarter of 2018, MFFO increased 8.6% to $16.7 million, or
$0.36 per diluted share, compared to $15.4 million, or $0.33 per diluted
share, for the three months ended June 30, 2017.

For the six months ended June 30, 2018, MFFO increased 8.3% to $33.4
million, or $0.72 per diluted share, compared to $30.9 million, or $0.66
per diluted share, for the six months ended June 30, 2017.

The increase in MFFO was directly correlated to the increase in FFO.

Same-Center Results

For the second quarter of 2018, same-center NOI increased 1.1% to $24.9
million compared to $24.6 million during the second quarter of 2017. The
improvement was driven by a $0.22 increase in minimum rent per square
foot partially offset by a 1.8% increase in operating expenses versus
the comparable period.

For the six months ended June 30, 2018, same-center NOI increased 2.9%
to $50.1 million compared to $48.7 million during the six months ended
June 30, 2017. The improvement was driven by the aforementioned increase
in minimum rent per square foot, partially offset by a 1.8% increase in
same-center operating expenses versus the comparable six-month period.

Contributing to same-center NOI were 74 properties that were owned and
operational for the entire portion of both comparable reporting periods.

Second Quarter Ended June 30, 2018 Portfolio Results

Portfolio Statistics

At quarter-end, the portfolio consisted of 86 properties, totaling
approximately 10.3 million square feet located in 24 states. This
compares to 80 properties, totaling approximately 9.8 million square
feet located in 24 states as of June 30, 2017.

Leased portfolio occupancy totaled 94.9%, an improvement from 94.8% as
of June 30, 2017.

Leasing Activity

During the second quarter of 2018, 85 leases (new, renewal and options)
were executed totaling approximately 444,000 square feet. This compares
to 62 leases executed totaling approximately 165,000 square feet during
the second quarter of 2017.

Comparable rent spreads during the quarter, which compare the percentage
increase of new or renewal leases to the expiring lease of a unit that
was occupied within the past 12 months, were 13.9% for new leases, 9.2%
for renewal leases (excluding options), and 9.5% combined (new and
renewal leases).

During the six months ended June 30, 2018, 153 leases (new, renewal and
options) were executed totaling approximately 749,000 square feet. This
compares to 114 leases executed totaling approximately 324,000 square
feet during the six months ended June 30, 2017.

Acquisition Activity

During the second quarter of 2018, one undeveloped outparcel adjacent to
a REIT II-owned shopping center was purchased for a total cost of
$800,000.

During the six months ended June 30, 2018, one shopping center was
acquired for a total cost of $18.5 million.

Balance Sheet Highlights at June 30, 2018

At quarter-end, the Company had $264.4 million of borrowing capacity
available on its $350 million revolving credit facility.

Net debt to total enterprise value was 42.8% 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 3.0 years, and
89.4% of its total debt was fixed-rate debt at June 30, 2018. This
compared to a weighted-average interest rate of 3.5%, a weighted average
maturity of 3.5 years, and 92.6% fixed-rate debt at December 31, 2017.

Distributions

Gross distributions of $19.0 million were paid during the second quarter
of 2018, including $8.5 million reinvested through the distribution
reinvestment plan ("DRIP"), for net cash distributions of approximately
$10.5 million.

During the quarter, FFO totaled $18.0 million, which was 94.6% of total
distributions made, up from 87.3% in Q2 2017.

Gross distributions of $38.1 million were paid during the six months
ended of June 30, 2018, including $17.3 million reinvested through the
DRIP, for net cash distributions of approximately $20.8 million.

During the first six months of 2018, FFO totaled $36.1 million, which
was 94.9% of total distributions made, up from 90.2% during the
comparable six months.

Subsequent to quarter-end, the Company's board of directors authorized
distributions for September 2018, October 2018, and November 2018 in the
amount of $0.13541652 per share to the shareholders of record at the
close of business on September 17, 2018, October 15, 2018, and November
15, 2018, respectively.

In connection with the proposed merger between PECO and REIT II, REIT II
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 342,000 shares of
common stock, totaling $7.8 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, REIT II
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 standard requests and 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. REIT II expects to make standard
repurchases on a pro rata basis.

Following the August repurchase, REIT II expects to make its next
repurchase on a pro rata basis at the end of October 2018.

Stockholder Update Call

Chairman and Chief Executive Officer Jeff Edison, Chief Financial
Officer Devin Murphy, and President and Chief Operating Officer Mark
Addy will host a live presentation addressing the Company's results
later today at 4:30 p.m. Eastern Time. Following management's prepared
remarks, there will be a question and answer session.

Date: Today, Wednesday, August 8, 2018
Time: 4:30
p.m. Eastern Time
Webcast link: https://services.choruscall.com/links/peco180808reit2.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.grocerycenterreit2.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 Grocery Center REIT II call.

For investor-related updates on Phillips Edison Grocery Center REIT II,
please visit www.grocerycenterreit2.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

Same-Center Net Operating Income

Same-Center NOI is presented as a supplemental measure of the Company's
performance. NOI is defined as total operating revenues less property
operating expenses, real estate taxes, and non-cash revenue items.
Same-Center NOI represents the NOI for the 74 properties that were
wholly-owned and operational for the entire portion of both comparable
reporting periods. The Company believes that NOI and Same-Center NOI
provide useful information to its investors about its financial and
operating performance because each provides a performance measure of the
revenues and expenses directly involved in owning and operating real
estate assets and provides a perspective not immediately apparent from
net income. Because Same-Center NOI excludes the change in NOI from
properties acquired after December 31, 2016, it highlights operating
trends such as occupancy levels, 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, the Company's Same-Center NOI may not be comparable to
other REITs.

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 its 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 its properties that could materially impact 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 Company uses
FFO as defined by the National Association of Real Estate Investment
Trusts ("NAREIT") to be 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 unconsolidated partnerships and joint ventures.
Adjustments for unconsolidated partnerships and joint ventures are
calculated to reflect funds from operations on the same basis.

MFFO is an additional performance financial measure used by us 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 our
    operations;
  • gains or losses related to fair-value adjustments for derivatives not
    qualifying for hedge accounting;
  • gains or losses related to consolidation from, or deconsolidation to,
    equity accounting; and
  • adjustments related to the above items for 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. Neither FFO nor MFFO should be considered
as an alternative to net income (loss) or income (loss) from continuing
operations under GAAP, nor as an indication of liquidity, nor is either
of these measures indicative of funds available to fund the Company's
cash needs, including the Company's 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 and MFFO should be reviewed in connection with other
GAAP measurements. FFO and MFFO should not be viewed as more prominent
measures of performance than net income or cash flows from operations
prepared in accordance with GAAP. FFO and MFFO as presented may not be
comparable to amounts calculated by other REITs.

       

PHILLIPS EDISON GROCERY CENTER REIT II, 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 $ 526,435 $ 520,526
Building and improvements 1,064,058 1,047,758
Acquired in-place lease assets 160,261 158,510
Acquired above-market lease assets 15,017   14,742  
Total investment in property 1,765,771 1,741,536
Accumulated depreciation and amortization (195,514 ) (157,290 )
Net investment in property 1,570,257 1,584,246
Investment in unconsolidated joint venture 11,101   16,076  
Total investment in real estate assets, net 1,581,358 1,600,322
Cash and cash equivalents 4,671 1,435
Restricted cash 4,381 4,382
Other assets, net 55,546   46,178  
Total assets $ 1,645,956   $ 1,652,317  
LIABILITIES AND EQUITY
Liabilities:
Debt obligations, net $ 802,021 $ 775,275
Acquired below-market lease liabilities, net of accumulated
amortization of $13,287
and $10,959, respectively 53,230 54,994
Accounts payable – affiliates 1,628 1,808
Accounts payable and other liabilities 34,274   36,961  
Total liabilities 891,153 869,038
Commitments and contingencies (Note 8)
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, 46,745 and 46,584
shares issued and outstanding at June 30, 2018 and December 31,
2017, respectively
470 468
Additional paid-in capital 1,035,362 1,031,685
Accumulated other comprehensive income ("AOCI") 14,337 6,459
Accumulated deficit (295,366 ) (255,333 )
Total equity 754,803   783,279  
Total liabilities and equity $ 1,645,956   $ 1,652,317  
 
       

PHILLIPS EDISON GROCERY CENTER REIT II, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(LOSS)

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 $ 32,228 $ 29,553 $ 64,207 $ 58,029
Tenant recovery income 11,209 10,130 23,094 20,339
Other property income 269   275   565   391  
Total revenues 43,706 39,958 87,866 78,759
Expenses:
Property operating 6,832 6,192 14,158 12,795
Real estate taxes 6,980 6,489 14,003 12,610
General and administrative 4,694 5,467 9,031 10,080
Depreciation and amortization 19,083   17,514   37,971   34,536  
Total expenses 37,589 35,662 75,163 70,021
Other:
Interest expense, net (7,566 ) (5,452 ) (15,034 ) (9,926 )
Transaction expenses (180 ) (496 )
Other income (expense), net 11   (96 ) (45 ) (151 )
Net loss $ (1,618 ) $ (1,252 ) $ (2,872 ) $ (1,339 )
Earnings per common share:
Net loss per share - basic and diluted $ (0.03 ) $ (0.03 ) $ (0.06 ) $ (0.03 )
Weighted-average common shares outstanding:
Basic and diluted 46,758 46,529 46,726 46,520
 
Comprehensive income (loss):
Net loss $ (1,618 ) $ (1,252 ) $ (2,872 ) $ (1,339 )
Other comprehensive income (loss):
Change in unrealized gain (loss) on interest rate swaps 1,865   (733 ) 7,878   180  
Comprehensive income (loss) $ 247   $ (1,985 ) $ 5,006   $ (1,159 )
 

The table below is a comparison of the 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     $ Change     % Change 2018     2017     $ Change     % Change
Revenues:
Rental income(1) $ 27,202 $ 26,657 $ 545 $ 54,262 $ 52,981 $ 1,281
Tenant recovery income 9,751 9,727 24 20,313 19,799 514
Other property income 163   237   (74 ) 404   328   76  
Total revenues 37,116 36,621 495 1.4 % 74,979 73,108 1,871 2.6 %
Operating expenses:
Property operating expenses 6,145 5,802 343 12,680 12,198 482
Real estate taxes 6,109   6,233   (124 ) 12,210   12,250   (40 )
Total operating expenses 12,254   12,035   219   1.8 % 24,890   24,448   442   1.8 %
Total Same-Center NOI $ 24,862   $ 24,586   $ 276   1.1 % $ 50,089   $ 48,660   $ 1,429   2.9 %
 

(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 NOI and 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 $ (1,618 ) $ (1,252 ) $ (2,872 ) $ (1,339 )
Adjusted to exclude:
Straight-line rental income (577 ) (656 ) (1,319 ) (1,492 )
Net amortization of above- and below-market leases (604 ) (606 ) (1,202 ) (1,213 )
General and administrative expenses 4,694 5,467 9,031 10,080
Transaction expenses 180 496
Depreciation and amortization 19,083 17,514 37,971 34,536
Interest expense, net 7,566 5,452 15,034 9,926
Other (63 ) 96   (7 ) 151  
NOI 28,661 26,015 57,132 50,649
Less: NOI from centers excluded from Same-Center (3,799 ) (1,429 ) (7,043 ) (1,989 )
Total Same-Center NOI $ 24,862   $ 24,586   $ 50,089   $ 48,660  
 

The following section presents the Company's calculation of FFO and MFFO
and provides additional information related to the Company's operations
for 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

Calculation of FFO

Net loss $ (1,618 ) $ (1,252 ) $ (2,872 ) $ (1,339 )
Adjustments:
Depreciation and amortization of real estate assets 19,083 17,514 37,971 34,536
Adjustments related to unconsolidated joint venture 528   446   1,047   872  
Funds from operations $ 17,993   $ 16,708   $ 36,146   $ 34,069  

Calculation of MFFO

Funds from operations $ 17,993 $ 16,708 $ 36,146 $ 34,069
Adjustments:
Net amortization of above- and below-market leases (604 ) (606 ) (1,202 ) (1,213 )
Straight-line rental income (577 ) (656 ) (1,319 ) (1,492 )
Transaction expenses 180 496
Amortization of market debt adjustment (270 ) (252 ) (540 ) (534 )
Gain on extinguishment of debt (11 )
Change in fair value of derivatives (108 ) (119 ) (239 ) (235 )
Adjustments related to unconsolidated joint venture 102 25 77 23
Other 6   300   4   259  
Modified funds from operations $ 16,722   $ 15,400   $ 33,423   $ 30,866  
 
Earnings per common share:
Weighted-average common shares outstanding - diluted(1) 46,760 46,531 46,729 46,522
FFO per share - diluted $ 0.38 $ 0.36 $ 0.77 $ 0.73
MFFO per share - diluted $ 0.36 $ 0.33 $ 0.72 $ 0.66
 

(1)

  Restricted stock awards were dilutive to FFO/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/MFFO per share.

Net Debt to Total Enterprise Value

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

       
2018 2017
Net debt:
Total debt, excluding below-market adjustments and deferred
financing costs
$ 802,791 $ 776,438
Less: Cash and cash equivalents 4,671   1,435  
Total net debt $ 798,120   $ 775,003  
Enterprise value:
Total net debt $ 798,120 $ 775,003
Total equity value(1) 1,065,854   1,059,854  
Total enterprise value $ 1,863,974   $ 1,834,857  
   
Net debt to total enterprise value 42.8 % 42.2 %
 
(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 46.7 million and 46.6 million diluted
shares outstanding as of June 30, 2018 and December 31, 2017,
respectively.

About Phillips Edison Grocery Center REIT II, Inc.

Phillips Edison Grocery Center REIT II, Inc. is a public non-traded REIT
that owns well-occupied grocery-anchored neighborhood shopping centers
with 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 owned an institutional quality
retail portfolio consisting of 86 grocery-anchored shopping centers
totaling approximately 10.3 million square feet. For more information,
please visit the Company website at www.grocerycenterREIT2.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, related to 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 our base rent and, subsequently, our
income, and that our properties consist primarily of retail properties
and our performance, therefore, is linked to the market for retail space
generally, risk the proposed merger with PECO will not be consummated,
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.

View Comments and Join the Discussion!