Phillips Edison Grocery Center REIT I Reports Mild FFO Expansion
Phillips Edison Grocery Center REIT I Inc., a publicly registered, non-traded real estate investment trust, reported its results for the first quarter of 2017.
“For the quarter, our same-center results were driven by an increase in minimum rents coupled with an improvement in operating expense management,” said Jeff Edison, chairman and chief executive officer of the REIT. “Going forward, we are confident that our investments into redevelopment projects will drive our performance and continue to increase shareholder value. We are committed to maintaining our leadership position in the grocery-anchored shopping center market.”
First Quarter 2017 Financial Results
Net income attributable to stockholders totaled $1.1 million for the first quarter of 2017, compared to $2.2 million during the first quarter of 2016. The company said that this was driven by an increase in depreciation expense and legal and consulting services, offset by an increase in revenue generated by eight new properties acquired since the beginning of 2016.
Funds from operation totaled $28.3 million for the first quarter of 2017, compared to $27.5 million year-over-year. The company noted that the 2.8 percent increase in FFO was driven by an increase in revenue generated by the additional new properties, as well as the 2.9 percent increase in same-center NOI.
Modified funds from operations increased 9.5 percent to $28.3 million for the first quarter of 2017, compared to $25.8 million for the first quarter of 2016.
First Quarter 2017 Portfolio Results
Same-center NOI increased 2.9 percent to $39.4 million during the first quarter of 2017, compared to $38.3 million during the first quarter of 2016. Contributing to same-center NOI were 137 properties that were owned and operational for the entire portion of both comparable reporting periods.
The company said the improvement was driven by an increase in minimum rent per square foot, a 1.0 percent decrease in same-center operating expenses, and a 0.7 percent increase in same-center occupancy to 96.8 percent, since March 31, 2016.
At quarter-end, the portfolio consisted of 154 properties, totaling approximately 16.8 million square feet located in 28 states. Leased portfolio occupancy totaled 96 percent, compared to 95.8 percent, as of March 31, 2016.
During the first quarter of 2017, 132 new and renewal leases were executed totaling 555,000 square feet. Comparable rent spreads, 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 26 percent for new leases and 12.9 percent for renewal leases during the quarter.
One grocery-anchored shopping center, located in Atwater, California, was acquired for a total cost of $15 million during the first quarter of 2017. The property totals approximately 96,000 square feet.
Balance Sheet Highlights at March 31, 2017
The company has drawn $234 million of its $500 million revolving credit facility, and its net debt to total enterprise value was 36.2 percent.
The weighted-average interest rate of outstanding debt was 3 percent with a weighted-average maturity of 3.2 years. 53.5 percent of the total debt is fixed-rate debt. Effective July 2017, an additional $255 million of variable-rate debt will be fixed through a forward starting interest rate swap agreement. Including the debt subject to the interest rate swap, 77.1 percent of the total debt was fixed-rate debt.
First Quarter 2017 Distributions
Gross distributions of $30.4 million were paid during the first quarter of 2017, including $13.7 million reinvested through the dividend reinvestment plan, for net cash distributions of $16.7 million.
Estimated Value Per Share
The company’s board of directors reaffirmed the estimated value per share of its common stock of $10.20, as of March 31, 2017.
Subsequent to the quarter’s end, the company acquired two grocery-anchored centers, one located at Rocky Ridge Town Center in Roseville, California and the other located at Greentree Centre in Racine, Wisconsin. Together, the properties total approximately 180,000 square feet and were acquired for an total purchase price of $48.1 million.
Phillips Edison Grocery Center REIT I invests in 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’s portfolio consisted of 154 grocery-anchored shopping centers totaling approximately 16.8 million square feet. The REIT went effective in August 2010 and closed in February 2014 after raising nearly $1.8 billion in investor equity.