Phillips Edison Raises Outlook as Property Income Growth Accelerates
Same-center net operating income rose 3.8% as revenue outpaced expense growth.
Phillips Edison & Company (PECO), the grocery-anchored shopping-center owner, increased second-quarter Core FFO per share 7.8% and raised its full-year outlook.
The quarter extended an acceleration in property-level growth. Same-center net operating income growth reached 3.8%, up from 3.5% in the first quarter and 3.2% in the fourth quarter of 2024.
Revenue rose 6.7% to $189.6 million from $177.8 million a year earlier, led by higher rental income. Net income attributable to stockholders increased to $41.1 million, or $0.33 a diluted share, from $12.8 million, or $0.10 a share. A $19.4 million gain on property disposals aided the increase, compared with a $66,000 disposal loss a year earlier.
Nareit FFO increased 9.0% to $93.7 million, while the per-share result rose 8.1% to $0.67. Per-share growth accelerated from 4.7% in the first quarter, though the result was unchanged sequentially. Core FFO rose 8.3% to $95.5 million, or $0.69 a share, with the per-share figure also holding steady from the first quarter.
Same-center revenue increased 3.5%, while operating expenses rose 2.8%, supporting the faster growth in net operating income. Inline occupancy reached a record 95.5%, up from 95.0% in the first quarter, even as total leased portfolio occupancy remained slightly below its year-earlier level.
Leasing activity reached a record 304 transactions, up from 276 a year earlier, though leased volume declined to about 1.2 million square feet from 1.4 million. Comparable new-lease rent spreads moderated to 33.7% from 36.2% in the first quarter, while renewal spreads held at 21.2%.
Phillips Edison now expects 2024 diluted net income of $0.95 to $0.97 a share, up from $0.79 to $0.81, and Core FFO of $2.73 to $2.79 a share, a one-cent increase at each end. The company also lifted the lower end of its same-center net operating income growth range to 3.4%, leaving the upper end at 4.0%.
The company raised its gross acquisition target to $500 million to $600 million after acquiring $152.4 million of assets at its prorated share during the quarter. Net debt increased to $2.53 billion, but leverage improved to 5.1 times adjusted EBITDAre from 5.2 times at year-end.