Phillips Edison & Company, Inc.

Good day and welcome to the Phillips Edison & Company's second quarter 2026 earnings call. Please note that this call is being recorded. I will now turn the call over to Kimberly Green, head of investor relations. Kimberly, you may begin.

Thank you. I'm joined today by our chairman and CEO, Jeff Edison, President Bob Myers, and CFO, John Caulfield. As a reminder, today's discussion may contain forward-looking statements about the company's view of future business and financial performance, including forward earnings guidance and future market conditions. These are based on management's current beliefs and expectations and are subject to various risks and uncertainties as described in our SEC filings. And our discussion today will reference certain non-GAAP financial measures. Information regarding our use of these measures and reconciliations of these measures to our GAAP results are available in our earnings press release and supplemental information packet, both of which have been posted to our website. Please note that we have also posted a presentation and our caution on forward-looking statements also applies to these materials. Following our prepared remarks, we will open the call to Q&A. Given the number of participants on the call today, we respectfully ask that you be limited to one question. Please rejoin the queue if you have follow-up questions. With that, I'll turn the call over to Jeff Edison.

Thank you, Kim, and thank you, everyone, for joining us today. During the second quarter, the PICO team delivered NAE REIT FFO per share growth of 8.1%, core FFO per share growth of 7.8%, and same-center NOI growth of 3.8%. Our strong performance is due to a combination of high demand for spaces in our grocery-anchored shopping centers and our team's ability to capture that demand with occupancy gains, Great Rent Spreads, and Superior Operations. We're continuing to expand our ability to drive growth and create value while maintaining a strong balance sheet and a thoughtful approach to investing in long-term growth. These disciplines have always been core to PICO. As we look toward the second half of 2026 and into 2027, we believe PICO is well-positioned to deliver what we view as compelling combination for our investors. More alpha with less beta. While macroeconomics headlines continue to evolve, the fundamentals supporting PICO's portfolio remain consistent. We're seeing continued traffic resiliency across our portfolio. Our centers generated 2% year-over-year traffic growth in June and 2% traffic growth year-to-date. While consumers are increasingly seeking value, they're continuing to make frequent trips to necessity-based destinations, which reinforces the strength of our Grocer Anchor strategy. We also continue to see leading grocers invest in their businesses. Kroger's announced acquisition of Giant Eagle underscores the value large grocers place on growing market share and expanding their brick-and-mortar footprint in attractive markets. As Kroger's largest landlord and longtime partner to both companies, we view this as another positive indicator for the long-term strength of the grocery-anchored shopping center sector. But healthy operating fundamentals are only part of the story. The larger opportunity is how PICO converts these fundamentals into long-term earnings growth. We have a number of ways we can create value. including strong internal growth from leasing, occupancy, rent spreads, retention, and development and redevelopment activity. We're also growing through acquisitions, joint ventures, and portfolio recycling. We think like owners. Every capital decision begins with a simple question. Where can today's dollar create the highest return opportunities? During June and July, we continue to strengthen our capital position by raising $92 million of equity to invest accretively in long-term earnings growth. Given the strength of our first half performance and the opportunities we continue to see, we're pleased to increase our full-year guidance for gross acquisitions to a range of $500 to $600 million. Importantly, we're accomplishing this without changing our disciplined investment approach. We continue to target unlevered IRRs of 9% for our gross-ranked centers, and 10% for everyday retail centers. We believe patience and discipline matter more than volume. Our objective isn't simply to grow the portfolio. It's to strengthen quality while refreshing and enhancing our growth profile. As we look ahead, we see attractive investment opportunities that allow us to create incremental shareholder value while preserving our balance sheet strength. Portfolio recycling remains another important competitive advantage. As assets mature or no longer meet our long-term return objectives, we recycle that capital into opportunities for stronger growth prospects. A strong acquisition market also means a strong disposition market, and we're taking advantage of both. A meaningful part of the active transaction market is institutional investor participation. The strength of retail real estate delivering necessity-based goods and services continues to attract direct investment. Our joint venture partners have recognized this for years and we're very pleased with the returns that we have generated for them. We continue to explore the expansion of our current joint ventures as well as investments in new opportunities. At the same time, we remain equally focused on reducing risk. Growth is most valuable when it is funded responsibly, which we are doing through our recent equity issuance. portfolio recycling, joint ventures, and the strength of our balance sheet. Our growth plans are not dependent on a single source of capital, and that flexibility allows us to remain disciplined through volatile markets while still pursuing opportunities that meet our return thresholds. That is what differentiates PICO. We are the cycle-tested leader in right-size, brush-anchored neighborhood centers located where America's top grocers are most profitable. Pico's portfolio is built around the daily needs of the consumer, supported by grocery stability, necessity-based demand, and a national operating platform that has delivered consistent growth through multiple economic cycles. That starts with the stability of our grocers as the backbone of our earnings. Our centers are anchored by leading grocers and complemented by retailers that provide necessity-based goods and services, creating consistent traffic and durable cash flow. Consumers continue to shop close to home, and our neighbors want space at our centers in the neighborhood. The result is high occupancy, strong retention, and the ability to push rents while maintaining a high-quality cash flow profile. PECA also has a differentiated ability to execute tactically across markets. We are not limited to one geography or one capital channel. Our national footprint locally smart market knowledge, and vertically integrated platforms allow us to identify opportunities across the country. Whether that is core grocery-ranked acquisitions, under-managed or under-occupied everyday retail centers, development, joint ventures, or portfolio recycling, that flexibility helps us allocate capital where the long-term risk-adjusted returns are most attractive. Everyday retail enhances that growth profile without changing who we are. Growth-ranked neighborhood centers remain our core business, but everyday retail gives us another way to use the PICO operating machine. Our leasing relationships, national accounts team, data, and merchandising expertise to release, re-merchandise, and improve smaller centers in strong trade areas. We continue to see everyday retail as a complementary growth opportunity that can generate attractive returns while reinforcing our focus on necessity-based close-to-home retail. Our balance sheet further distinguishes PECA. We have an investment-grade profile, significant liquidity, and proven access to both debt and equity capital markets, along with joint ventures and portfolio recycling. That gives us the capacity to match fund growth responsibly. Our growth plans are not dependent on a single source of capital. Instead, we continue to allocate capital toward the highest return opportunities available to us. Taken together, PICO offers a combination that's hard to replicate. A resilient, growth-shankered base. Strong internal growth from occupancy, rent spreads, and development and redevelopment activity. A complimentary everyday retail opportunity. a disciplined national acquisition platform and one of the strongest balance sheets in the sector. We believe that combination positions PICO to deliver durable same center NOI growth and mid to high single digit core FFO per share growth over the long term. More alpha, less beta. Looking ahead, we continue to believe the building blocks for 2027 are becoming increasingly visible. The investments we're making today are anticipated to support long-term earnings growth, not simply near-term volume. With that, I'll turn the call over to Bob. Bob?