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EX-10.6.1 - EXHIBIT 10.6.1 - Phillips Edison & Company, Inc.pentr_20170930-ex1061.htm
EX-32.1 - EXHIBIT 32.1 - Phillips Edison & Company, Inc.pentr_20170930-ex321.htm
EX-32.2 - EXHIBIT 32.2 - Phillips Edison & Company, Inc.pentr_20170930-ex322.htm
EX-31.2 - EXHIBIT 31.2 - Phillips Edison & Company, Inc.pentr_20170930-ex312.htm
EX-31.1 - EXHIBIT 31.1 - Phillips Edison & Company, Inc.pentr_20170930-ex311.htm
EX-10.19 - EXHIBIT 10.19 - Phillips Edison & Company, Inc.pentr_20170930-ex1019.htm
EX-10.18 - EXHIBIT 10.18 - Phillips Edison & Company, Inc.pentr_20170930-ex1018.htm
EX-10.17 - EXHIBIT 10.17 - Phillips Edison & Company, Inc.pentr_20170930-ex1017.htm
EX-10.16 - EXHIBIT 10.16 - Phillips Edison & Company, Inc.pentr_20170930-ex1016.htm
EX-10.15 - EXHIBIT 10.15 - Phillips Edison & Company, Inc.pentr_20170930-ex1015.htm
EX-10.14 - EXHIBIT 10.14 - Phillips Edison & Company, Inc.pentr_20170930-ex1014.htm
EX-10.13 - EXHIBIT 10.13 - Phillips Edison & Company, Inc.pentr_20170930-ex1013.htm
EX-10.12 - EXHIBIT 10.12 - Phillips Edison & Company, Inc.pentr_20170930-ex1012.htm
EX-10.11 - EXHIBIT 10.11 - Phillips Edison & Company, Inc.pentr_20170930-ex1011.htm
EX-10.10 - EXHIBIT 10.10 - Phillips Edison & Company, Inc.pentr_20170930-ex1010.htm
EX-10.9 - EXHIBIT 10.9 - Phillips Edison & Company, Inc.pentr_20170930-ex109.htm
EX-10.8 - EXHIBIT 10.8 - Phillips Edison & Company, Inc.pentr_20170930-ex108.htm
EX-10.7 - EXHIBIT 10.7 - Phillips Edison & Company, Inc.pentr_20170930-ex107.htm
EX-10.6 - EXHIBIT 10.6 - Phillips Edison & Company, Inc.pentr_20170930-ex106.htm
EX-10.2 - EXHIBIT 10.2 - Phillips Edison & Company, Inc.pentr_20170930-ex102.htm


 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
x    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017
OR
¨     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to              
Commission file number 000-54691
 
PHILLIPS EDISON GROCERY CENTER REIT I, INC.  
 
(Exact Name of Registrant as Specified in Its Charter)
 
Maryland
27-1106076
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)
 
11501 Northlake Drive
 Cincinnati, Ohio
45249
(Address of Principal Executive Offices)
(Zip Code)
(513) 554-1110
(Registrant’s Telephone Number, Including Area Code)
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ    No   ¨ 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  þ    No  ¨  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer
¨
Accelerated Filer
¨
 
 
 
 
Non-Accelerated Filer
þ (Do not check if a smaller reporting company)
Smaller reporting company
¨
 
 
 
 
Emerging growth company
¨
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  þ
As of October 31, 2017, there were 184.5 million outstanding shares of common stock of Phillips Edison Grocery Center REIT I, Inc.





INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


1



PART I.      FINANCIAL INFORMATION
 
Item 1.      Financial Statements

PHILLIPS EDISON GROCERY CENTER REIT I, INC.
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2017 AND DECEMBER 31, 2016
(Unaudited)
(In thousands, except per share amounts)
  
September 30, 2017
 
December 31, 2016
ASSETS
  
 
  
Investment in real estate:
  
 
  
Land and improvements
$
838,078

 
$
796,192

Building and improvements
1,640,052

 
1,532,888

Acquired in-place lease assets
226,033

 
212,916

Acquired above-market lease assets
43,021

 
42,009

Total investment in real estate assets
2,747,184

 
2,584,005

Accumulated depreciation and amortization
(418,544
)
 
(334,348
)
Total investment in real estate assets, net
2,328,640

 
2,249,657

Cash and cash equivalents
7,189

 
8,224

Restricted cash
6,025

 
41,722

Other assets, net
102,541

 
80,585

Real estate investment and other assets held for sale
4,863

 

Total assets
$
2,449,258

 
$
2,380,188

 
 
 
 
LIABILITIES AND EQUITY
  

 
  

Liabilities:
  

 
  

Mortgages and loans payable, net
$
1,224,779

 
$
1,056,156

Acquired below-market lease liabilities, net of accumulated amortization of $24,790 and $20,255, respectively
42,080

 
43,032

Accounts payable – affiliates
4,567

 
4,571

Accounts payable and other liabilities
69,007

 
51,642

Liabilities of real estate investment held for sale
233

 

Total liabilities
1,340,666

 
1,155,401

Commitments and contingencies (Note 7)

 

Equity:
  

 
  

Preferred stock, $0.01 par value per share, 10,000 shares authorized, zero shares issued and outstanding at
  
 
  
September 30, 2017 and December 31, 2016, respectively

 

Common stock, $0.01 par value per share, 1,000,000 shares authorized, 184,140 and 185,062 shares issued
  
 
  
and outstanding at September 30, 2017 and December 31, 2016, respectively
1,841

 
1,851

Additional paid-in capital
1,617,717

 
1,627,098

Accumulated other comprehensive income
11,175

 
10,587

Accumulated deficit
(539,840
)
 
(438,155
)
Total stockholders’ equity
1,090,893

 
1,201,381

Noncontrolling interests
17,699

 
23,406

Total equity
1,108,592

 
1,224,787

Total liabilities and equity
$
2,449,258

 
$
2,380,188


See notes to consolidated financial statements.

2



PHILLIPS EDISON GROCERY CENTER REIT I, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016
(Unaudited)
(In thousands, except per share amounts)
  
Three Months Ended September 30,
 
Nine Months Ended September 30,
  
2017
 
2016
 
2017
 
2016
Revenues:
  
 
  
 
 
 
 
Rental income
$
53,165

 
$
48,828

 
$
157,425

 
$
143,023

Tenant recovery income
17,052

 
16,199

 
50,442

 
47,652

Other property income
407

 
243

 
911

 
730

Total revenues
70,624

 
65,270


208,778


191,405

Expenses:
  

 
  

 
 
 
 
Property operating
10,882

 
10,030

 
32,611

 
29,978

Real estate taxes
10,723

 
9,104

 
31,136

 
27,745

General and administrative
8,712


7,722

 
25,438

 
23,736

Termination of affiliate arrangements
5,454

 

 
5,454

 

Acquisition expenses
202


870

 
466

 
2,392

Depreciation and amortization
28,650


26,583

 
84,481

 
78,266

Total expenses
64,623


54,309


179,586


162,117

Other:
  

 
  

 
 
 
 
Interest expense, net
(10,646
)

(8,504
)
 
(28,537
)
 
(23,837
)
Transaction expenses
(3,737
)
 

 
(9,760
)
 

Other income (expense), net
6


33

 
642

 
(125
)
Net (loss) income
(8,376
)

2,490


(8,463
)

5,326

Net loss (income) attributable to noncontrolling interests
144

 
(26
)
 
144

 
(83
)
Net (loss) income attributable to stockholders
$
(8,232
)

$
2,464

 
$
(8,319
)
 
$
5,243

Earnings per common share:
  

 
  

 
 
 
 
Net (loss) income per share attributable to stockholders - basic and diluted
$
(0.04
)

$
0.01


$
(0.05
)

$
0.03

Weighted-average common shares outstanding:
 
 
 
 
 
 
 
Basic
183,843

 
184,639

 
183,402

 
183,471

Diluted
183,843

 
187,428

 
183,402

 
186,260

 
 
 
 
 
 
 
 
Comprehensive (loss) income:
  

 
  

 
 
 
 
Net (loss) income
$
(8,376
)
 
$
2,490

 
$
(8,463
)
 
$
5,326

Other comprehensive (loss) income:
  

 
  

 
 
 
 
Unrealized (loss) gain on derivatives
(179
)
 
1,950

 
(1,944
)
 
(9,597
)
Reclassification of derivative loss to interest expense
228

 
888

 
1,203

 
2,762

Comprehensive (loss) income
(8,327
)
 
5,328

 
(9,204
)
 
(1,509
)
Comprehensive loss (income) attributable to noncontrolling interests
144

 
(26
)
 
144

 
(83
)
Comprehensive (loss) income attributable to stockholders
$
(8,183
)
 
$
5,302

 
$
(9,060
)
 
$
(1,592
)

See notes to consolidated financial statements.

3



PHILLIPS EDISON GROCERY CENTER REIT I, INC.
CONSOLIDATED STATEMENTS OF EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016
(Unaudited)
(In thousands, except per share amounts)
  
Common Stock
 
Additional Paid-In Capital
 
Accumulated Other Comprehensive Income (Loss)
 
Accumulated Deficit
 
Total Stockholders’ Equity
 
Noncontrolling Interest
 
Total Equity
  
Shares
 
Amount
 
 
 
 
 
 
Balance at January 1, 2016
181,308

 
$
1,813

 
$
1,588,541

 
$
22

 
$
(323,761
)
 
$
1,266,615

 
$
25,177

 
$
1,291,792

Share repurchases
(752
)
 
(7
)
 
(7,273
)
 

 

 
(7,280
)
 

 
(7,280
)
Dividend reinvestment plan (“DRIP”)
4,387

 
44

 
44,687

 

 

 
44,731

 

 
44,731

Common distributions declared, $0.50 per share

 

 

 

 
(92,107
)
 
(92,107
)
 

 
(92,107
)
Share-based compensation

 

 
10

 

 

 
10

 

 
10

Change in unrealized loss on interest rate swaps

 

 

 
(6,835
)
 

 
(6,835
)
 

 
(6,835
)
Distributions to noncontrolling interests

 

 

 

 

 

 
(1,409
)
 
(1,409
)
Net income

 

 

 

 
5,243

 
5,243

 
83

 
5,326

Balance at September 30, 2016
184,943

 
$
1,850

 
$
1,625,965

 
$
(6,813
)
 
$
(410,625
)
 
$
1,210,377

 
$
23,851

 
$
1,234,228

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2016, as reported
185,062

 
$
1,851

 
$
1,627,098

 
$
10,587

 
$
(438,155
)
 
$
1,201,381

 
$
23,406

 
$
1,224,787

Adoption of new accounting pronouncement (see Note 8)

 

 

 
1,329

 
(1,329
)
 

 

 

Balance at January 1, 2017, as adjusted
185,062


1,851


1,627,098


11,916


(439,484
)

1,201,381


23,406


1,224,787

Share repurchases
(4,471
)
 
(45
)
 
(45,557
)
 

 

 
(45,602
)
 

 
(45,602
)
DRIP
3,546

 
35

 
36,136

 

 

 
36,171

 

 
36,171

Common distributions declared, $0.50 per share

 

 

 

 
(92,037
)
 
(92,037
)
 

 
(92,037
)
Share-based compensation
3

 

 
40

 

 

 
40

 

 
40

Change in unrealized loss on interest rate swaps

 

 

 
(741
)
 

 
(741
)
 

 
(741
)
Distributions to noncontrolling interests

 

 

 

 

 

 
(1,384
)
 
(1,384
)
Redemption of noncontrolling interest

 

 

 

 

 

 
(4,179
)
 
(4,179
)
Net loss

 

 

 

 
(8,319
)
 
(8,319
)
 
(144
)
 
(8,463
)
Balance at September 30, 2017
184,140

 
$
1,841

 
$
1,617,717

 
$
11,175

 
$
(539,840
)
 
$
1,090,893

 
$
17,699

 
$
1,108,592


See notes to consolidated financial statements.

4



PHILLIPS EDISON GROCERY CENTER REIT I, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016
(Unaudited)
(In thousands)
  
2017
 
2016
CASH FLOWS FROM OPERATING ACTIVITIES:
  
 
  
Net (loss) income
$
(8,463
)
 
$
5,326

Adjustments to reconcile net (loss) income to net cash provided by operating activities:
  

 
  

Depreciation and amortization
83,200

 
76,293

Net amortization of above- and below-market leases
(972
)
 
(936
)
Amortization of deferred financing expense
3,572

 
3,757

Net (gain) loss on write-off of unamortized capitalized leasing commissions, market debt adjustments,
 
 
 
and deferred financing expense
(372
)
 
59

Straight-line rental income
(2,913
)
 
(2,793
)
Other
(555
)
 
130

Changes in operating assets and liabilities:
  

 
  

Other assets
(12,193
)
 
(4,339
)
Accounts payable – affiliates
1

 
(1,206
)
Accounts payable and other liabilities
6,217

 
8,888

Net cash provided by operating activities
67,522


85,179

CASH FLOWS FROM INVESTING ACTIVITIES:
  

 
  

Real estate acquisitions
(111,740
)
 
(132,266
)
Capital expenditures
(22,505
)
 
(16,936
)
Proceeds from sale of real estate
37,037

 

Change in restricted cash
(203
)
 
394

Net cash used in investing activities
(97,411
)
 
(148,808
)
CASH FLOWS FROM FINANCING ACTIVITIES:
  

 
  

Net change in credit facility
202,000

 
(23,531
)
Proceeds from mortgages and loans payable

 
230,000

Payments on mortgages and loans payable
(64,287
)
 
(103,622
)
Payments of deferred financing expenses
(2,510
)
 
(2,461
)
Distributions paid, net of DRIP
(56,226
)
 
(47,535
)
Distributions to noncontrolling interests
(1,262
)
 
(1,260
)
Repurchases of common stock
(44,682
)
 
(7,280
)
Redemption of noncontrolling interests
(4,179
)
 

Net cash provided by financing activities
28,854

 
44,311

NET DECREASE IN CASH AND CASH EQUIVALENTS
(1,035
)
 
(19,318
)
CASH AND CASH EQUIVALENTS:
  

 
  

Beginning of period
8,224

 
40,680

End of period
$
7,189

 
$
21,362

 
 
 
 
SUPPLEMENTAL CASH FLOW DISCLOSURE, INCLUDING NON-CASH INVESTING AND FINANCING ACTIVITIES:
 
 
Cash paid for interest
$
26,461

 
$
22,234

Fair value of assumed debt
30,832

 

Accrued capital expenditures
3,560

 
1,834

Change in distributions payable
(360
)
 
(159
)
Change in distributions payable - noncontrolling interests
122

 
149

Change in accrued share repurchase obligation
920

 

Distributions reinvested
36,171

 
44,731

Like-kind exchange of real estate:
 
 
 
   Utilization of restricted cash held for acquisitions
(35,900
)
 


See notes to consolidated financial statements.

5



 Phillips Edison Grocery Center REIT I, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
 
1. ORGANIZATION
Phillips Edison Grocery Center REIT I, Inc. (“we,” the “Company,” “our,” or “us”) was formed as a Maryland corporation in October 2009. Substantially all of our business is conducted through Phillips Edison Grocery Center Operating Partnership I, L.P., (the “Operating Partnership”), a Delaware limited partnership formed in December 2009. We are a limited partner of the Operating Partnership, and our wholly owned subsidiary, Phillips Edison Grocery Center OP GP I LLC, is the sole general partner of the Operating Partnership.
We invest primarily in well-occupied, grocery-anchored, neighborhood and community shopping centers that have a mix of creditworthy national and regional retailers that sell necessity-based goods and services in strong demographic markets throughout the United States. 
As of September 30, 2017, our advisor was Phillips Edison NTR LLC (“PE-NTR”), which was directly or indirectly owned by Phillips Edison Limited Partnership (“Phillips Edison sponsor” or “PELP”). Under the terms of the advisory agreement between PE-NTR and us, PE-NTR was responsible for the management of our day-to-day activities and the implementation of our investment strategy.
As of September 30, 2017, we owned fee simple interests in 159 real estate properties acquired from third parties unaffiliated with us or PE-NTR.
On October 4, 2017, we completed a transaction to acquire certain real estate assets, the captive insurance company, and the third-party asset management business of our Phillips Edison sponsor in a stock and cash transaction (“PELP transaction”). Upon completion of the PELP transaction, our relationship with PE-NTR was terminated. For a more detailed discussion, see Notes 3 and 11.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Certain of our accounting estimates are particularly important for an understanding of our financial position and results of operations and require the application of significant judgment by management. For example, significant estimates and assumptions have been made with respect to the useful lives of assets; recoverable amounts of receivables; and other fair value measurement assessments required for the preparation of the consolidated financial statements. As a result, these estimates are subject to a degree of uncertainty.
Other than those noted below, there have been no changes to our significant accounting policies during the nine months ended September 30, 2017. For a full summary of our accounting policies, refer to our 2016 Annual Report on Form 10-K filed with the SEC on March 9, 2017.
Basis of Presentation and Principles of Consolidation—The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. Readers of this Quarterly Report on Form 10-Q should refer to the audited consolidated financial statements of Phillips Edison Grocery Center REIT I, Inc. for the year ended December 31, 2016, which are included in our 2016 Annual Report on Form 10-K. In the opinion of management, all normal and recurring adjustments necessary for the fair presentation of the unaudited consolidated financial statements for the periods presented have been included in this Quarterly Report. Our results of operations for the three and nine months ended September 30, 2017, are not necessarily indicative of the operating results expected for the full year.
The accompanying consolidated financial statements include our accounts and those of our majority-owned subsidiaries. All intercompany balances and transactions are eliminated upon consolidation.
Held for Sale Entities—We consider assets to be held for sale when management believes that a sale is probable within a year. This generally occurs when a sales contract is executed with no substantive contingencies and the prospective buyer has significant funds at risk. Assets that are classified as held for sale are recorded at the lower of their carrying amount or fair value less cost to sell.


6



Newly Adopted and Recently Issued Accounting Pronouncements
The following table provides a brief description of recently issued accounting pronouncements that could have a material effect on our financial statements:
Standard
 
Description
 
Date of Adoption
 
Effect on the Financial Statements or Other Significant Matters
Accounting Standards Update “ASU” 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20)
 
This update amends existing guidance in order to provide consistency in accounting for the derecognition of a business or nonprofit activity. It is effective for annual reporting periods beginning after December 15, 2017, but early adoption is permitted.
 
January 1, 2018
 
We will adopt this standard concurrently with ASU 2014-09, listed below. We expect the adoption will impact our transactions that are subject to the amendments, which, although expected to be infrequent, would include a partial sale of real estate or contribution of a nonfinancial asset to form a joint venture.
ASU 2016-18, Statement of Cash Flows (Topic 230)
 
This update amends existing guidance in order to clarify the classification and presentation of restricted cash on the statement of cash flows. It is effective for annual reporting periods beginning after December 15, 2017, but early adoption is permitted.
 
January 1, 2018
 
Upon adoption, we will include amounts generally described as restricted cash within the beginning-of-period and end-of-period total amounts on the statement of cash flows rather than within an activity on the statement of cash flows.
ASU 2016-15, Statement of Cash Flows (Topic 230)
 
This update addresses the presentation of eight specific cash receipts and cash payments on the statement of cash flows. It is effective for annual reporting periods beginning after December 15, 2017, but early adoption is permitted.
 
January 1, 2018
 
We are currently evaluating the impact the adoption of this standard will have on our consolidated financial statements. Of the eight specific cash receipts and cash payments listed within this guidance, we believe only two would be applicable to our business as it stands currently: debt prepayment or debt extinguishment costs and proceeds from settlement of insurance claims. We will continue to evaluate the impact that adoption of the standard will have on our presentation of these and any other applicable cash receipts and cash payments.
ASU 2016-02, Leases (Topic 842)
 
This update amends existing guidance by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This update is effective for annual reporting periods beginning after December 15, 2018, but early adoption is permitted.
 
January 1, 2019
 
We are currently evaluating the impact the adoption of this standard will have on our consolidated financial statements. We have identified areas within our accounting policies we believe could be impacted by the new standard. We expect to have a change in presentation on our consolidated statement of operations with regards to Tenant Recovery Income, which includes reimbursement amounts we receive from tenants for operating expenses such as real estate taxes, insurance, and other common area maintenance. Additionally, this standard impacts the lessor’s ability to capitalize certain costs related to the leasing of vacant space, which will result in a reduction in the amount of execution costs currently being capitalized in connection with leasing activities.
ASU 2014-09, Revenue from Contracts with Customers (Topic 606)
 
This update outlines a comprehensive model for entities to use in accounting for revenue arising from contracts with customers. ASU 2014-09 states that “an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” While ASU 2014-09 specifically references contracts with customers, it also applies to certain other transactions such as the sale of real estate or equipment. Expanded quantitative and qualitative disclosures are also required for contracts subject to ASU 2014-09. In 2015, the Financial Accounting Standard Board (“FASB”) provided for a one-year deferral of the effective date for ASU 2014-09, making it effective for annual reporting periods beginning after December 15, 2017.
 
January 1, 2018
 
Our revenue-producing contracts are primarily leases that are not within the scope of this standard. As a result, we do not expect the adoption of this standard to have a material impact on our rental or reimbursement revenue. We currently plan to adopt this guidance on a modified retrospective basis.

7



The following table provides a brief description of newly adopted accounting pronouncements and their effect on our financial statements:
Standard
 
Description
 
Date of Adoption
 
Effect on the Financial Statements or Other Significant Matters
ASU 2017-12, Derivatives and Hedging (Topic 815)
 
This update amended existing guidance in order to better align a company’s financial reporting for hedging activities with the economic objectives of those activities.
 
September 2017
 
Upon adoption, we included a disclosure related to the effect of our hedging activities on our consolidated statements of operations. This disclosure also eliminated the periodic measurement and recognition of hedging ineffectiveness. We adopted this guidance on a modified retrospective basis and applied an adjustment to Accumulated Other Comprehensive Income with a corresponding adjustment to the opening balance of Accumulated Deficit as of the beginning of 2017. For a more detailed discussion of this adoption, see Note 8.
ASU 2017-01, Business Combinations
(Topic 805)
 
This update amended existing guidance in order to clarify when an integrated set of assets and activities is considered a business.
 
January 1, 2017
 
For a more detailed discussion of the effect of this adoption on our financial statements, see Note 4.
Reclassifications—The following line item on our consolidated statement of cash flows for the nine months ended September 30, 2016, was reclassified:
Net (Gain) Loss on Write-off of Unamortized Capitalized Leasing Commissions, Market Debt Adjustments, and Deferred Financing Expense was separately disclosed due to significance in the current period. In the previous period these amounts were included in Other.

3. PELP ACQUISITION
On October 4, 2017, we completed the PELP transaction. Under the terms of this transaction, the following consideration was given in exchange for the contribution of PELP’s ownership interests in 76 shopping centers, its captive insurance company, and its third-party asset management business (in thousands):
 
Amount
Value of Operating Partnership units (“OP units”) issued(1)
$
404,317

Debt assumed(2):

Corporate debt
432,091

Mortgages and notes payable
70,837

Cash payments
25,000

Total estimated consideration
$
932,245

(1) 
We issued 39.6 million OP units, excluding 5.1 million OP units and Class B units outstanding prior to the acquisition date, with an estimated value per unit of $10.20 at the time of the transaction.
(2) 
The amounts related to debt assumed are shown at face value, but the final amounts will be recorded at fair value.
Immediately following the closing of the PELP transaction, our shareholders owned approximately 80.6% and former PELP shareholders owned approximately 19.4% of the combined company.
The terms of the transaction also include an earn-out structure with an opportunity for an additional 12.5 million OP units to be issued if certain milestones are achieved related to a liquidity event for our shareholders and reaching certain fundraising targets in Phillips Edison Grocery Center REIT III, Inc., of which PELP was a co-sponsor.
The PELP transaction was approved by the independent special committee of our board of directors (“Board”), which had retained independent financial and legal advisors. It was also approved by our shareholders, as well as PELP’s partners. For additional information, please see the Current Report on Form 8-K filed with the SEC on October 11, 2017, and the Definitive Proxy Statement filed with the SEC on July 6, 2017.
The supplemental purchase accounting disclosures required by GAAP relating to the acquisition of PELP have not been presented as the initial accounting for this acquisition was incomplete at the time this Quarterly Report on Form 10-Q was filed with the SEC.

8



4. REAL ESTATE ACQUISITIONS AND DISPOSITIONS
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. This update amended existing guidance in order to clarify when an integrated set of assets and activities is considered a business. We adopted ASU 2017-01 on January 1, 2017, and applied it prospectively. Under this new guidance, most of our real estate acquisition activity is no longer considered a business combination and is instead classified as an asset acquisition. As a result, most acquisition-related costs that would have been recorded on our consolidated statements of operations are capitalized and will be amortized over the life of the related assets. Costs incurred related to properties that were not ultimately acquired were recorded as Acquisition Expenses on our consolidated statements of operations. As of September 30, 2017, none of our real estate acquisitions in 2017 met the definition of a business; therefore, we accounted for all as asset acquisitions.
During the nine months ended September 30, 2017, we acquired six grocery-anchored shopping centers. Our first quarter acquisition closed out the Internal Revenue Service Code (“IRC”) reverse Section 1031 like-kind exchange outstanding as of December 31, 2016. During the nine months ended September 30, 2016, we acquired three grocery-anchored shopping centers and additional real estate adjacent to previously acquired shopping centers.
For the nine months ended September 30, 2017 and 2016, we allocated the purchase price of our acquisitions, including acquisition costs for 2017, to the fair value of the assets acquired and liabilities assumed as follows (in thousands):
 
2017
 
2016
Land and improvements
$
36,100

 
$
47,834

Building and improvements
95,507

 
74,709

Acquired in-place leases
13,646

 
12,300

Acquired above-market leases
1,012

 
2,398

Acquired below-market leases
(3,703
)
 
(6,313
)
Total assets and lease liabilities acquired
142,562

 
130,928

Less: Fair value of assumed debt at acquisition
30,832

 

Net assets acquired
$
111,730

 
$
130,928

The weighted-average amortization periods for in-place, above-market, and below-market lease intangibles acquired during the nine months ended September 30, 2017 and 2016, are as follows (in years):
 
2017
 
2016
Acquired in-place leases
13
 
12
Acquired above-market leases
7
 
6
Acquired below-market leases
19
 
22

9



Property Held for Sale—As of September 30, 2017, one property was classified as held for sale as it was under contract to sell, with no substantive contingencies, and the prospective buyer had significant funds at risk. On October 26, 2017, we sold this property for $6.5 million and intend on deferring the gain through an IRC Section 1031 like-kind exchange by purchasing another property. A summary of assets and liabilities for the property held for sale as of September 30, 2017, is below (in thousands):
 
September 30, 2017
ASSETS
 
Total investment in real estate assets, net
$
4,459

Accounts receivable, net
300

Other assets, net
104

Total assets
$
4,863

 
 
LIABILITIES
 
Liabilities:
 
Acquired below-market lease liabilities, net of accumulated amortization of $38
$
82

Accounts payable – affiliates
5

Accounts payable and other liabilities
146

Total liabilities
$
233


5. FAIR VALUE MEASUREMENTS
The following describes the methods we use to estimate the fair value of our financial and nonfinancial assets and liabilities: 
Cash and Cash Equivalents, Restricted Cash, Accounts Receivable, and Accounts Payable—We consider the carrying values of these financial instruments to approximate fair value because of the short period of time between origination of the instruments and their expected realization.
Real Estate Investments—The purchase prices of the investment properties, including related lease intangible assets and liabilities, were allocated at estimated fair value based on Level 3 inputs, such as discount rates, capitalization rates, comparable sales, replacement costs, income and expense growth rates, and current market rents and allowances as determined by management.
Mortgages and Loans Payable—We estimate the fair value of our debt by discounting the future cash flows of each instrument at rates currently offered for similar debt instruments of comparable maturities by our lenders using Level 3 inputs.  The discount rates used approximate current lending rates for loans or groups of loans with similar maturities and credit quality, assuming the debt is outstanding through maturity and considering the debt’s collateral (if applicable). We have utilized market information, as available, or present value techniques to estimate the amounts required to be disclosed.
The following is a summary of borrowings as of September 30, 2017 and December 31, 2016 (dollars in thousands):
 
 
September 30, 2017
 
December 31, 2016
Fair value
 
$
1,226,748

 
$
1,056,990

Recorded value(1)
 
1,232,190

 
1,065,180

(1) 
Recorded value does not include deferred financing costs of $7.4 million and $9.0 million as of September 30, 2017 and December 31, 2016, respectively.
Derivative InstrumentsAs of September 30, 2017 and December 31, 2016, we had interest rate swaps that fixed LIBOR on portions of our unsecured term loan facilities (“Term Loans”). For a more detailed discussion of these cash flow hedges, see Note 8. As of September 30, 2017 and December 31, 2016, we were also party to an interest rate swap that fixed the variable interest rate on $10.8 million and $11.0 million, respectively, of one of our mortgage notes. The change in fair value of this instrument is recorded in Other Income (Expense), Net on the consolidated statements of operations and was not material for the three and nine months ended September 30, 2017 and 2016.
All interest rate swap agreements are measured at fair value on a recurring basis. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses

10



observable market-based inputs, including interest rate curves and implied volatilities. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves.
To comply with the provisions of ASC 820, we incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.
Although we determined that the significant inputs used to value our derivatives fell within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our counterparties and our own credit risk utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by us and our counterparties. However, as of September 30, 2017 and December 31, 2016, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we have determined that our derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.
We record derivative assets in Other Assets, Net and derivative liabilities in Accounts Payable and Other Liabilities on our consolidated balance sheets. The fair value measurements of our derivative assets and liabilities as of September 30, 2017 and December 31, 2016, were as follows (in thousands):
  
September 30, 2017
 
December 31, 2016
Derivative asset:
 
 
 
Interest rate swaps designated as hedging instruments - Term Loans
$
11,175

 
$
11,916

Derivative liability:
 
 
 
Interest rate swap not designated as hedging instrument - mortgage note
108

 
262


6. MORTGAGES AND LOANS PAYABLE
The following is a summary of the outstanding principal balances of our debt obligations as of September 30, 2017 and December 31, 2016 (in thousands):
   
Interest Rate(1)
 
September 30, 2017
 
December 31, 2016
Revolving credit facility(2)(3)
2.54%
 
$
378,969

 
$
176,969

Term loan due 2019(3)
2.46%
 
100,000

 
100,000

Term loan due 2020(3)
2.65%
 
175,000

 
175,000

Term loan due 2021
2.49%-2.80%
 
125,000

 
125,000

Term loan due 2023
3.03%
 
255,000

 
255,000

Mortgages payable(4)
3.73%-7.91%
 
194,480

 
228,721

Assumed market debt adjustments, net(5) 
 
 
3,741

 
4,490

Deferred financing costs, net(6)
 
 
(7,411
)
 
(9,024
)
Total  
 
 
$
1,224,779

 
$
1,056,156

(1) 
Includes the effects of derivative financial instruments (see Notes 5 and 8) as of September 30, 2017.
(2) 
The gross borrowings and payments under our revolving credit facility were $295 million and $93 million, respectively, during the nine months ended September 30, 2017. The revolving credit facility had a capacity of $500 million as of September 30, 2017 and December 31, 2016.
(3) 
In October 2017, the maturity date of the revolving credit facility was extended to October 2021, with additional options to extend the maturity to October 2022. The term loans have options to extend their maturities to 2021. A maturity date extension for the term loans requires the payment of an extension fee of 0.15% of the outstanding principal amount of the corresponding tranche.
(4) 
Due to the non-recourse nature of our fixed-rate mortgages, the assets and liabilities of the properties securing such mortgages are neither available to pay the debts of the consolidated property-holding limited liability companies, nor do they constitute obligations of such consolidated limited liability companies as of September 30, 2017 and December 31, 2016.
(5) 
Net of accumulated amortization of $3.8 million and $6.1 million as of September 30, 2017 and December 31, 2016, respectively.

11



(6) 
Deferred financing costs shown are related to our Term Loans and mortgages payable and are net of accumulated amortization of $4.8 million and $3.9 million as of September 30, 2017 and December 31, 2016, respectively. Deferred financing costs related to the revolving credit facility, which are included in Other Assets, Net, were $0.4 million and $2.2 million as of September 30, 2017 and December 31, 2016, respectively, and are net of accumulated amortization of $8.5 million and $6.7 million, respectively.
As of September 30, 2017 and December 31, 2016, the weighted-average interest rate for all of our mortgages and loans payable was 3.1% and 3.0%, respectively.
The allocation of total debt between fixed and variable-rate and between secured and unsecured, excluding market debt adjustments and deferred financing costs, as of September 30, 2017 and December 31, 2016, is summarized below (in thousands):
   
September 30, 2017
 
December 31, 2016
As to interest rate:(1)
 
 
 
Fixed-rate debt
$
836,480

 
$
615,721

Variable-rate debt
391,969

 
444,969

Total
$
1,228,449

 
$
1,060,690

As to collateralization:
 
 
 
Unsecured debt
$
1,033,969

 
$
831,969

Secured debt
194,480

 
228,721

Total  
$
1,228,449

 
$
1,060,690

(1) 
Includes the effects of derivative financial instruments (see Notes 5 and 8).
Upon completion of the PELP transaction, in order to increase the availability on our revolving credit facility and refinance the corporate debt assumed from the PELP transaction, we entered into the following new credit agreements (in thousands):
 
Interest Rate
 
Principal Balance
Term loan due April 2022(1)(2)(3)
LIBOR + 1.30%
 
$
310,000

Term loan due October 2024(1)(3)
LIBOR + 1.75%
 
175,000

Loan facility due November 2026(4)
3.55%
 
175,000

Loan facility due November 2027(4)
3.52%
 
195,000

(1) 
The term loan interest rate spreads may vary based on our leverage ratio. The spreads presented were those in effect when we executed the loan agreements.
(2) 
The term loan maturing in 2022 has a delayed draw feature for a total capacity of $375 million.
(3) 
On October 27, 2017, we entered into two interest rate swap agreements with a total notional amount of $350 million on the term loans maturing in 2022 and 2024. These interest rate swaps were effective November 1, 2017.
(4) 
The loan facility maturing in 2026 is secured by 16 properties. The loan facility maturing in 2027 is secured by separate mortgages on 14 properties.
As of September 30, 2017, approximately $12.6 million in deferred financing costs, which are included in Other Assets, Net on our consolidated balance sheet, were related to these refinancings.

7. COMMITMENTS AND CONTINGENCIES 
Litigation 
We are involved in various claims and litigation matters arising in the ordinary course of business, some of which involve claims for damages. Many of these matters are covered by insurance, although they may nevertheless be subject to deductibles or retentions. Although the ultimate liability for these matters cannot be determined, based upon information currently available, we believe the resolution of such claims and litigation will not have a material adverse effect on our consolidated financial statements.
Environmental Matters
In connection with the ownership and operation of real estate, we may potentially be liable for costs and damages related to environmental matters. In addition, we may own or acquire certain properties that are subject to environmental remediation. Generally, the seller of the property, the tenant of the property, and/or another third party is responsible for environmental

12



remediation costs related to a property. Additionally, in connection with the purchase of certain properties, the respective sellers and/or tenants may agree to indemnify us against future remediation costs. We also carry environmental liability insurance on our properties that provides limited coverage for any remediation liability and/or pollution liability for third-party bodily injury and/or property damage claims for which we may be liable. We are not aware of any environmental matters which we believe are reasonably likely to have a material effect on our consolidated financial statements.

8. DERIVATIVES AND HEDGING ACTIVITIES
In September 2017, we adopted ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. This update amended existing guidance in order to better align a company’s financial reporting for hedging activities with the economic objectives of those activities. It requires us to disclose the effect of our hedging activities on our consolidated statements of operations and eliminated the periodic measurement and recognition of hedging ineffectiveness.
In accordance with the modified retrospective transition method required by ASU 2017-12, the Company recognized the cumulative effect of the change, representing the reversal of the $1.3 million cumulative ineffectiveness gain as of December 31, 2016, in the opening balance of Accumulated Other Comprehensive Income (“AOCI”) with a corresponding adjustment to the opening balance of Accumulated Deficit as of the beginning of 2017.
Risk Management Objective of Using Derivatives
We are exposed to certain risks arising from both our business operations and economic conditions. We principally manage our exposure to a wide variety of business and operational risks through management of our core business activities. We manage economic risks, including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of our debt funding and the use of derivative financial instruments. Specifically, we enter into interest rate swaps to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. Our derivative financial instruments are used to manage differences in the amount, timing, and duration of our known or expected cash receipts and our known or expected cash payments principally related to our investments and borrowings.
Cash Flow Hedges of Interest Rate Risk
Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for our making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.
The changes in the fair value of derivatives designated, and that qualify, as cash flow hedges is recorded in AOCI and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the nine months ended September 30, 2017 and 2016, such derivatives were used to hedge the variable cash flows associated with certain variable-rate debt. The ineffectiveness previously reported in earnings for the quarters ended March 31, 2017 and June 30, 2017, was adjusted to reflect application of the provisions of ASU 2017-12 as of the beginning of 2017 (as discussed above). This adjustment was not material.
Amounts reported in AOCI related to these derivatives will be reclassified to Interest Expense, Net as interest payments are made on the variable-rate debt. During the next twelve months, we estimate that an additional $0.6 million will be reclassified from Other Comprehensive (Loss) Income as a decrease to Interest Expense, Net.

13



The following is a summary of our interest rate swaps that were designated as cash flow hedges of interest rate risk as of September 30, 2017 and December 31, 2016, which includes an interest rate swap with a notional amount of $255 million that we entered into in October 2016 and became effective in July 2017 (notional amount in thousands):
Count
 
Notional Amount
 
Fixed LIBOR
 
Maturity Date
4
 
$642,000
 
1.2% - 1.5%
 
2019-2023
The table below details the location of the gain or loss recognized on interest rate derivatives designated as cash flow hedges in the consolidated statements of operations and comprehensive (loss) income for the three and nine months ended September 30, 2017 and 2016 (in thousands):
  
Three Months Ended September 30,
 
Nine Months Ended September 30,
  
2017
 
2016
 
2017
 
2016
Amount of (loss) gain recognized in OCI on derivative
$
(179
)
 
$
1,306

 
$
(1,944
)
 
$
(9,584
)
Amount of loss reclassified from AOCI into interest expense
(228
)
 
(888
)
 
(1,203
)
 
(2,762
)
Credit-risk-related Contingent Features
We have agreements with our derivative counterparties that contain provisions where, if we either default or are capable of being declared in default on any of our indebtedness, we could also be declared to be in default on our derivative obligations. As of September 30, 2017, the fair value of our derivatives in a net liability position, which included accrued interest but excluded any adjustment for nonperformance risk related to these agreements, was approximately $0.1 million. As of September 30, 2017, we had not posted any collateral related to these agreements and were not in breach of any agreement provisions. If we had breached any of these provisions, we could have been required to settle our obligations under the agreements at their termination value of $0.1 million.

9. EQUITY
On November 8, 2017, our Board increased the estimated value per share of our common stock to $11.00 based substantially on the estimated market value of our portfolio of real estate properties and our recently acquired third-party asset management business as of October 5, 2017, the first full business day after the closing of the PELP transaction. We engaged a third-party valuation firm to provide a calculation of the range in estimated value per share of our common stock as of October 5, 2017, which reflected certain pro forma balance sheet assets and liabilities as of that date. For a description of the methodology and assumptions used to determine the estimated value per share, see the Current Report on Form 8-K filed with the SEC on November 9, 2017. Prior to November 8, 2017, the estimated value per share was $10.20 based substantially on the estimated market value of our portfolio of real estate properties as of March 31, 2017.
Dividend Reinvestment Plan—We have adopted a DRIP that allows stockholders to invest distributions in additional shares of our common stock. For the nine months ended September 30, 2017 and 2016, shares were issued under the DRIP at a price of $10.20 per share. In connection with the May announcement of the PELP transaction (see Note 3), the DRIP was suspended during May 2017; therefore, all DRIP participants received their May distribution, which was payable in June, in cash rather than in stock. The DRIP plan resumed in June 2017, with distributions payable in July 2017.
Share Repurchase Program—Our share repurchase program (“SRP”) provides an opportunity for stockholders to have shares of common stock repurchased, subject to certain restrictions and limitations. The cash available for repurchases on any particular date will generally be limited to the proceeds from the DRIP during the preceding four fiscal quarters, less amounts already used for repurchases since the beginning of that period. The Board reserves the right, in its sole discretion, at any time and from time to time, to reject any request for repurchase. In connection with the May announcement of the PELP transaction, the SRP was suspended during May 2017 and resumed in June 2017.
During the nine months ended September 30, 2017, repurchase requests surpassed the funding limits under the SRP. Due to the program’s funding limits, no funds will be available for the remainder of 2017. When we are unable to fulfill all repurchase requests in any month, we will honor requests on a pro rata basis to the extent possible. As of September 30, 2017, we had 9.8 million shares of unfulfilled repurchase requests, which will be treated as requests for repurchase during future months until satisfied or withdrawn. We continue to fulfill repurchases sought upon a stockholder’s death, “qualifying disability,” or “determination of incompetence” in accordance with the terms of the SRP.
Class B and Operating Partnership Units—The Operating Partnership issued limited partnership units that were designated as Class B units for asset management services provided by PE-NTR. In connection with the PELP transaction, Class B units

14



were no longer issued for asset management services subsequent to September 19, 2017. Upon closing of the transaction, all outstanding Class B units were vested and will be converted to OP units.
OP units may be exchanged at the election of the holder for cash or, at the option of the Operating Partnership, for shares of our common stock, under the terms of the Third Amended and Restated Agreement of Limited Partnership, provided, however, that the OP units have been outstanding for at least one year. As the form of the redemptions for the OP units is within our control, the OP units outstanding as of September 30, 2017 and December 31, 2016, are classified as Noncontrolling Interests within permanent equity on our consolidated balance sheets. Additionally, the cumulative distributions that have been paid on these OP units are included in Distributions to Noncontrolling Interests on the consolidated statements of equity.
In September 2017, we entered into an agreement with American Realty Capital II Advisors, LLC (“ARC”) to terminate all remaining contractual and economic relationships between us and ARC. In exchange for a payment of $9.6 million, ARC sold their OP units, unvested Class B Units, and their special limited partnership interests back to us, terminating all fee-sharing arrangements between ARC and PE-NTR. The 417,801 OP unit repurchase was recorded at a value of $4.2 million on the consolidated statement of equity. The $5.4 million value of the unvested Class B units, special limited partnership interests, and value of fee-sharing arrangements is recorded on the consolidated statement of operations.
Below is a summary of our number of outstanding OP units and unvested Class B units as of September 30, 2017 and December 31, 2016 (in thousands):
 
 
September 30, 2017
 
December 31, 2016
OP units
 
2,367

 
2,785

Class B units(1)
 
2,710

 
2,610

(1) 
Upon closing of the PELP transaction, all outstanding Class B units were converted to OP units.

10. EARNINGS PER SHARE
We use the two-class method of computing earnings per share (“EPS”), which is an earnings allocation formula that determines EPS for common stock and any participating securities according to dividends declared (whether paid or unpaid). Under the two-class method, basic EPS is computed by dividing the income available to common stockholders by the weighted-average
number of shares of common stock outstanding for the period. Diluted EPS reflects the potential dilution that could occur from share equivalent activity.
Class B units and OP units held by limited partners other than us are considered to be participating securities because they contain non-forfeitable rights to dividends or dividend equivalents and they have the potential to be exchanged for shares of our common stock in accordance with the terms of the Partnership Agreement. The impact of these Class B units and OP units on basic and diluted EPS has been calculated using the two-class method whereby earnings are allocated to the Class B units and OP units based on dividends declared and the units’ participation rights in undistributed earnings. The effects of the two-class method on basic and diluted EPS were immaterial to the consolidated financial statements for the three and nine months ended September 30, 2017 and 2016.
Since the OP units are fully vested, they were treated as potentially dilutive in the diluted earnings per share computations for the three and nine months ended September 30, 2017 and 2016. There were 2.7 million and 2.5 million Class B units outstanding as of September 30, 2017 and 2016, respectively, that remained unvested and, therefore, were not included in the diluted earnings per share computations. Upon closing of the PELP transaction, all outstanding Class B units were converted to OP units.

15



The following table provides a reconciliation of the numerator and denominator of the earnings per unit calculations for the three and nine months ended September 30, 2017 and 2016 (in thousands, except per share amounts):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017
 
2016
Numerator for basic and diluted earnings per share:
 
 
 
 
 
 
 
Net (loss) income attributable to stockholders
$
(8,232
)
 
$
2,464

 
$
(8,319
)
 
$
5,243

Denominator:
 
 
 
 
 
 
 
Denominator for basic earnings per share - weighted-average shares
183,843

 
184,639

 
183,402

 
183,471

Effect of dilutive OP units


2,785

 

 
2,785

Effect of restricted stock awards

 
4

 

 
4

Denominator for diluted earnings per share - adjusted weighted-average shares
183,843

 
187,428

 
183,402

 
186,260

Earnings per common share:
 
 
 
 
 
 
 
Net (loss) income attributable to stockholders - basic and diluted
$
(0.04
)
 
$
0.01

 
$
(0.05
)
 
$
0.03

As of September 30, 2017, approximately 2.4 million OP units and 17,200 restricted stock awards were outstanding. For the three and nine months ended September 30, 2017, these securities were anti-dilutive and, as a result, were excluded from the weighted average common shares used to calculate diluted EPS.

11. RELATED PARTY TRANSACTIONS
Economic Dependency—During the three and nine months ended September 30, 2017 and 2016, we were dependent on PE-NTR, Phillips Edison & Company Ltd. (the “Property Manager”), and their respective affiliates for certain services that were essential to us, including asset acquisition and disposition decisions, asset management, operating and leasing of our properties, and other general and administrative responsibilities.
As of September 30, 2017 and December 31, 2016, PE-NTR owned 176,509 shares of our common stock, or approximately 0.1% of our outstanding common stock issued during our initial public offering period. PE-NTR was not able to sell any of those shares while serving as our advisor. 
Upon closing of the PELP transaction on October 4, 2017, our relationship with PE-NTR and the Property Manager was terminated. As a result, we now have an internalized management structure.
Advisory Agreement—On September 1, 2017, in connection with the termination of ARC’s and PE-NTR’s fee-sharing arrangements (see Note 9), we entered into an amended and restated advisory agreement (the “PE-NTR Agreement”). Under the PE-NTR Agreement, all fees payable to PE-NTR were decreased by 15%. Other than the foregoing, there were no material changes in the PE-NTR Agreement. Subsequent to September 30, 2017, upon closing of the PELP transaction, the PE-NTR
Agreement was terminated. As a result of purchasing PELP’s third-party asset management business, we will no longer incur the fees listed below.
Pursuant to the PE-NTR Agreement, PE-NTR was entitled to specified fees for certain services, including managing our day-to-day activities and implementing our investment strategy. PE-NTR managed our day-to-day affairs and our portfolio of real estate investments subject to the Board’s supervision. Expenditures were reimbursed to PE-NTR based on amounts incurred on our behalf.
Acquisition Fee—During the three and nine months ended September 30, 2017 and 2016, we paid PE-NTR under the PE-NTR Agreement an acquisition fee related to services provided in connection with the selection and purchase or origination of real estate and real estate-related investments. The acquisition fee was equal to 0.85%, or 1.0% prior to September 1, 2017, of the cost of investments we acquired or originated, including any debt attributable to such investments.
Due Diligence Fee—During the three and nine months ended September 30, 2017 and 2016, we reimbursed PE-NTR for expenses incurred related to selecting, evaluating, and acquiring assets on our behalf, including certain personnel costs.
Asset Management Fee and Subordinated Participation—During the three and nine months ended September 30, 2017 and 2016, the asset management compensation was equal to 0.85%, or 1.0% prior to September 1, 2017, of the cost of our assets. Prior to September 20, 2017, the asset management compensation was paid 80% in cash and 20% in Class B units of the Operating Partnership. The cash portion was paid on a monthly basis in arrears at the rate of 0.05667% multiplied by the cost of

16



our assets as of the last day of the preceding monthly period. All asset management fees incurred between September 20, 2017 and the closing of the PELP transaction were paid 100% in cash.
We paid an asset management subordinated participation by issuing a number of restricted operating partnership units designated as Class B units to PE-NTR, equal to: (i) the product of (x) the cost of our assets multiplied by (y) 0.0425%, or 0.05% prior to September 1, 2017, divided by (ii) the most recent primary offering price for a share of our common stock as of the last day of such calendar quarter less any selling commissions and dealer manager fees that would have been payable in connection with that offering.
PE-NTR was entitled to receive distributions on the Class B units (and OP units converted from previously issued and vested Class B units) at the same rate as distributions were paid to common stockholders. Subsequent to September 30, 2017, upon closing of the PELP transaction, all outstanding Class B units were converted to OP units. During the nine months ended September 30, 2017 and 2016, the Operating Partnership issued 0.6 million and 0.4 million Class B units, respectively, to PE-NTR and ARC under the PE-NTR Agreement for asset management services performed by PE-NTR.
Disposition Fee—During the three and nine months ended September 30, 2017 and 2016, we paid PE-NTR for substantial assistance by PE-NTR, or its affiliates, 1.7%, or 2.0% prior to September 1, 2017, of the contract sales price of each property or other investment sold. The conflicts committee of our Board determined whether PE-NTR or its affiliates had provided substantial assistance to us in connection with the sale of an asset. Substantial assistance in connection with the sale of a property included preparation of an investment package for the property (including an investment analysis, rent rolls, tenant information regarding credit, a property title report, an environmental report, a structural report, and exhibits) or such other substantial services performed by PE-NTR or its affiliates in connection with a sale. However, if we sold an asset to an affiliate, our organizational documents prohibited us from paying a disposition fee to PE-NTR or its affiliates. 
Prior to September 1, 2017, ARC also received the acquisition fee, asset management subordinated participation, and disposition fee, as well as distributions on Class B and OP units. For a more detailed discussion of the termination of our relationship with ARC, see Note 9.
General and Administrative Expenses—As of September 30, 2017 and December 31, 2016, we owed PE-NTR and their affiliates approximately $117,000 and $43,000, respectively, for general and administrative expenses paid on our behalf.
Summarized below are the fees earned by and the expenses reimbursable to PE-NTR and ARC for the three and nine months ended September 30, 2017 and 2016. As of September 1, 2017, pursuant to the termination of our relationship with ARC, they were no longer entitled to these fees and reimbursements. This table includes any related amounts unpaid as of September 30, 2017 and December 31, 2016, except for unpaid general and administrative expenses, which we disclose above (in thousands):
  
Three Months Ended
 
Nine Months Ended
 
Unpaid Amount as of
  
September 30,
 
September 30,
 
September 30,
 
December 31,
  
2017
 
2016
 
2017
 
2016
 
2017
 
2016
Acquisition fees(1)
$
294

 
$
367

 
$
1,344

 
$
1,307

 
$

 
$

Due diligence fees(1)
370

 
73

 
583

 
228

 
1

 
29

Asset management fees(2)
5,071

 
4,852

 
15,388

 
14,182

 
1,529

 
1,687

OP units distribution(3)
448

 
470

 
1,373

 
1,398

 
145

 
158

Class B units distribution(4)
482

 
408

 
1,393

 
1,144

 
130

 
148

Disposition fees

 

 
19

 

 

 

Total
$
6,665

 
$
6,170

 
$
20,100

 
$
18,259

 
$
1,805

 
$
2,022

(1) 
Prior to January 1, 2017, acquisition and due diligence fees were recorded on our consolidated statements of operations. The majority of these costs are now capitalized and allocated to the related investment in real estate assets on the consolidated balance sheet based on the acquisition-date fair values of the respective assets and liability acquired.
(2) 
Asset management fees are presented in General and Administrative on the consolidated statements of operations.
(3) 
The distributions paid to holders of OP units are presented as Distributions to Noncontrolling Interests on the consolidated statements of equity.
(4) 
The distributions paid to holders of unvested Class B units are presented in General and Administrative on the consolidated statements of operations.
Property Manager—During the three and nine months ended September 30, 2017 and 2016, all of our real properties were managed and leased by the Property Manager, which was wholly owned by our Phillips Edison sponsor. The Property Manager also manages real properties owned by Phillips Edison affiliates and other third parties.
Effective October 4, 2017, our agreement with the Property Manager was terminated. As a result, we will no longer incur the fees listed below.
Property Management Fee—We paid to the Property Manager a monthly property management fee of 4% of the monthly gross cash receipts from the properties it managed.

17



Leasing Commissions—In addition to the property management fee, if the Property Manager provided leasing services with respect to a property, we paid the Property Manager leasing fees in an amount equal to the leasing fees charged by unaffiliated persons rendering comparable services based on national market rates. The Property Manager was paid a leasing fee in connection with a tenant’s exercise of an option to extend an existing lease, and the leasing fees payable to the Property Manager could have been increased by up to 50% if the Property Manager engaged a co-broker to lease a particular vacancy.
Construction Management Fee—If we engaged the Property Manager to provide construction management services with respect to a particular property, we paid a construction management fee in an amount that was usual and customary for comparable services rendered to similar projects in the geographic market of the property.
Expenses and Reimbursements—The Property Manager hired, directed, and established policies for employees who had direct responsibility for the operations of each real property it managed, which could have included, but was not limited to, on-site managers and building and maintenance personnel. Certain employees of the Property Manager may have been employed on a part-time basis and may have also been employed by PE-NTR or certain of its affiliates. The Property Manager also directed the purchase of equipment and supplies and supervised all maintenance activity. We reimbursed the costs and expenses incurred by the Property Manager on our behalf, including employee compensation, legal, travel, and other out-of-pocket expenses that were directly related to the management of specific properties and corporate matters, as well as fees and expenses of third-party accountants.
Summarized below are the fees earned by and the expenses reimbursable to the Property Manager for the three and nine months ended September 30, 2017 and 2016, and any related amounts unpaid as of September 30, 2017 and December 31, 2016 (in thousands):
  
Three Months Ended
 
Nine Months Ended
 
Unpaid Amount as of
  
September 30,
 
September 30,
 
September 30,
 
December 31,
  
2017
 
2016
 
2017
 
2016
 
2017
 
2016
Property management fees(1)
$
2,717

 
$
2,457

 
$
7,986

 
$
7,456

 
$
888

 
$
840

Leasing commissions(2)
1,677

 
1,828

 
6,077

 
5,570

 
314

 
705

Construction management fees(2)
683

 
251

 
1,367

 
664

 
327

 
165

Other fees and reimbursements(3)
2,409

 
1,499

 
6,030

 
4,064

 
1,116

 
796

Total
$
7,486

 
$
6,035

 
$
21,460

 
$
17,754

 
$
2,645

 
$
2,506

(1) 
The property management fees are included in Property Operating on the consolidated statements of operations.
(2) 
Leasing commissions paid for leases with terms less than one year are expensed immediately and included in Depreciation and Amortization on the consolidated statements of operations. Leasing commissions paid for leases with terms greater than one year, and construction management fees, are capitalized and amortized over the life of the related leases or assets.
(3) 
Other fees and reimbursements are included in Property Operating, General and Administrative, and Transaction Expenses on the consolidated statements of operations based on the nature of the expense.

12. OPERATING LEASES
The terms and expirations of our operating leases with our tenants vary. The lease agreements frequently contain options to extend the terms of leases and other terms and conditions as negotiated. We retain substantially all of the risks and benefits of ownership of the real estate assets leased to tenants.

18



Approximate future rental income to be received under non-cancelable operating leases in effect as of September 30, 2017, assuming no new or renegotiated leases or option extensions on lease agreements, was as follows (in thousands):
Year
Amount
Remaining 2017
$
53,743

2018
205,462

2019
182,579

2020
160,034

2021
134,587

2022 and thereafter
453,701

Total
$
1,190,106

No single tenant comprised 10% or more of our aggregate annualized base rent as of September 30, 2017. As of September 30, 2017, our real estate investments in Florida represented 12.8% of our ABR. As a result, the geographic concentration of our portfolio makes it particularly susceptible to adverse economic developments in the Florida real estate market.

13. SUBSEQUENT EVENTS
Distributions to Stockholders
Distributions equal to a daily amount of $0.00183562 per share of common stock or OP unit outstanding were paid subsequent to September 30, 2017, to the stockholders and OP unit holders of record from September 1, 2017, through October 31, 2017, as follows (in thousands):
Distribution Period
 
Date Distribution Paid
 
Gross Amount of Distribution Paid
 
Distribution Reinvested through the DRIP
 
Net Cash Distribution
September 1, 2017, through September 30, 2017
 
10/2/2017
 
$
10,145

 
$
4,301

 
$
5,844

October 1, 2017, through October 31, 2017
 
11/1/2017
 
12,541

 
4,415

 
8,126

In November 2017 our Board authorized distributions to the stockholders and OP unit holders of record at the close of business each day in the period commencing December 1, 2017 through December 31, 2017, equal to a daily amount of $0.00183562 per share of common stock or OP unit. They also authorized distributions for January 2018 and February 2018 to the stockholders and OP unit holders of record at the close of business on January 16, 2018 and February 15, 2018, respectively, equal to a monthly amount of $0.05583344 per share of common stock or OP unit. The monthly distribution rate will result in the same annual distribution amount as the current, daily distribution rate.
Acquisitions
Subsequent to September 30, 2017, we acquired the following properties (dollars in thousands):
Property Name
 
Location
 
Anchor Tenant
 
Acquisition Date
 
Contractual Purchase Price
 
Square Footage
 
Leased % of Rentable Square Feet at Acquisition
Winter Springs Town Center
 
Winter Springs, FL
 
Publix
 
10/20/2017
 
$24,870
 
118,735
 
91.9%
Flynn Crossing Center
 
Alpharetta, GA
 
Publix
 
10/26/2017
 
$23,691
 
95,002
 
96.0%

Item 2.        Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Note Regarding Forward-Looking Statements
Certain statements contained in this Quarterly Report on Form 10-Q of Phillips Edison Grocery Center REIT I, Inc. (“we,” the “Company,” “our,” or “us”) other than historical facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We intend for all such forward-looking statements to be covered by the applicable safe harbor provisions for forward-looking statements contained in those acts. Such statements include, in particular, statements about our plans, strategies, and prospects and are subject to certain risks and uncertainties, including known and unknown risks, which could cause actual results to differ materially from those projected or anticipated. Therefore, such statements are not

19



intended to be a guarantee of our performance in future periods. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” or other similar words. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this report is filed with the SEC. We make no representations or warranties (express or implied) about the accuracy of any such forward-looking statements contained in this Quarterly Report on Form 10-Q, and we do not intend to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Any such forward-looking statements are subject to risks, uncertainties, and other factors and are based on a number of assumptions involving judgments with respect to, among other things, future economic, competitive, and market conditions, all of which are difficult or impossible to predict accurately. To the extent that our assumptions differ from actual conditions, our ability to accurately anticipate results expressed in such forward-looking statements, including our ability to generate positive cash flow from operations, make distributions to stockholders, and maintain the value of our real estate properties, may be significantly hindered.
See Item 1A. Risk Factors, in Part II of this Form 10-Q and Item 1A. Risk Factors, in Part I of our 2016 Annual Report on Form 10-K, filed with the SEC on March 9, 2017, for a discussion of some of the risks and uncertainties, although not all of the risks and uncertainties, that could cause actual results to differ materially from those presented in our forward-looking statements. Except as required by law, we do not undertake any obligation to update or revise any forward-looking statements contained in this Form 10-Q. Important factors that could cause actual results to differ materially from the forward-looking statements are disclosed in Item 1A. Risk Factors, in Part II and Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, of this Form 10-Q.

Overview
Organization
Phillips Edison Grocery Center REIT I, Inc. is a public non-traded real estate investment trust (“REIT”) that invests in retail real estate properties. Our primary focus is on grocery-anchored neighborhood and community shopping centers that meet the day-to-day needs of residents in the surrounding trade areas.
On October 4, 2017, we completed the PELP transaction. For a more detailed discussion of this transaction, see Note 3 to the consolidated financial statements.
Portfolio
Below are statistical highlights of our portfolio:
  
 
Total Portfolio as of
 
Properties Acquired in PELP Transaction
 
Pro Forma Portfolio
  
 
September 30, 2017
 
October 4, 2017
 
October 4, 2017
Number of properties
 
159

 
76

 
235

Number of states
 
28

 
25

 
32

Total square feet (in thousands)
 
17,415

 
8,721

 
26,136

Leased % of rentable square feet
 
96.4
%
 
90.3
%
 
94.4
%
Average remaining lease term (in years)(1)
 
5.3

 
4.4

 
5.0

(1) 
As of September 30, 2017. The average remaining lease term in years excludes future options to extend the term of the lease.

20



Lease Expirations
The following table lists, on an aggregate basis, all of the scheduled lease expirations after September 30, 2017, for each of the next ten years and thereafter for our 159 shopping centers. The table shows the leased square feet and annualized base rent (“ABR”) represented by the applicable lease expirations (dollars and square feet in thousands):
Year
 
Number of Leases Expiring
 
Leased Square Feet Expiring
 
% of Leased Square Feet Expiring
 
ABR(1)
 
% of Total Portfolio ABR
Remaining 2017(2)
 
104

 
274

 
1.6
%
 
$
3,577

 
1.7
%
2018
 
332

 
1,227

 
7.3
%
 
17,857

 
8.4
%
2019
 
415

 
2,031

 
12.1
%
 
26,936

 
12.7
%
2020
 
349

 
1,827

 
10.9
%
 
23,828

 
11.3
%
2021
 
349

 
2,073

 
12.4
%
 
24,691

 
11.7
%
2022
 
306

 
2,123

 
12.7
%
 
23,560

 
11.1
%
2023
 
138

 
1,924

 
11.5
%
 
22,892

 
10.8
%
2024
 
149

 
1,271

 
7.6
%
 
13,709

 
6.5
%
2025
 
114

 
700

 
4.2
%
 
11,200

 
5.3
%
2026
 
119

 
974

 
5.8
%
 
14,295

 
6.8
%
Thereafter
 
218

 
2,356

 
13.9
%
 
29,098

 
13.7
%
 
 
2,593

 
16,780

 
100.0
%
 
$
211,643

 
100.0
%
(1) 
We calculate ABR as monthly contractual rent as of September 30, 2017, multiplied by 12 months.
(2) 
Subsequent to September 30, 2017, of the 2,593 leases expiring we renewed 24 leases, which accounts for 164,196 total square feet and total ABR of $2.2 million.
Portfolio Tenancy
The following table presents the composition of our portfolio by tenant type as of September 30, 2017 (dollars and square feet in thousands):
Tenant Type
 
ABR
 
% of ABR
 
Leased Square Feet
 
% of Leased Square Feet
Grocery anchor
 
$
84,879

 
40.1
%
 
8,829

 
52.6
%
National and regional(1)
 
80,255

 
37.9
%
 
5,448

 
32.5
%
Local
 
46,509

 
22.0
%
 
2,503

 
14.9
%
  
 
$
211,643

 
100.0
%
 
16,780

 
100.0
%
(1) 
We define national tenants as those that operate in at least three states. Regional tenants are defined as those that have at least three locations.
The following table presents the composition of our portfolio by tenant industry as of September 30, 2017 (dollars and square feet in thousands):
Tenant Industry
 
ABR
 
% of ABR
 
Leased Square Feet
 
% of Leased Square Feet
Grocery
 
$
84,879

 
40.1
%
 
8,829

 
52.6
%
Service
 
48,933

 
23.1
%
 
2,549

 
15.2
%
Retail
 
47,059

 
22.2
%
 
3,962

 
23.6
%
Restaurants
 
30,772

 
14.6
%
 
1,440

 
8.6
%
  
 
$
211,643

 
100.0
%
 
16,780

 
100.0
%

21



The following table presents our grocery anchor tenants, grouped according to parent company, by leased square feet as of September 30, 2017 (dollars and square feet in thousands):
Tenant  
 
ABR
 
% of ABR
 
Leased Square Feet
 
% of Leased Square Feet
 
Number of Locations(1)
Kroger
 
$
19,567

 
9.2
%
 
2,377

 
14.1
%
 
41

Publix Super Markets
 
15,514

 
7.3
%
 
1,503

 
9.0
%
 
32

Ahold Delhaize
 
8,383

 
4.0
%
 
555

 
3.3
%
 
10

Albertsons Companies
 
7,744

 
3.7
%
 
756

 
4.5
%
 
13

Giant Eagle
 
5,435

 
2.6
%
 
560

 
3.3
%
 
7

Walmart
 
5,197

 
2.5
%
 
1,121

 
6.7
%
 
9

Raley's Supermarkets
 
3,422

 
1.6
%
 
193

 
1.2
%
 
3

SuperValu
 
2,382

 
1.1
%
 
273

 
1.6
%
 
4

Sprouts Farmers Market
 
2,281

 
1.1
%
 
195

 
1.1
%
 
6

Southeastern Grocers
 
1,545

 
0.7
%
 
147

 
0.9
%
 
3

Schnuck Markets
 
1,459

 
0.7
%
 
121

 
0.7
%
 
2

Coborn's
 
1,388

 
0.7
%
 
108

 
0.6
%
 
2

BJ’s Wholesale Club
 
1,223

 
0.6
%
 
115

 
0.7
%
 
1

H.E. Butt Grocery Company
 
1,210

 
0.6
%
 
81

 
0.5
%
 
1

Big Y Foods
 
1,091

 
0.4
%
 
65

 
0.4
%
 
1

PAQ
 
1,046

 
0.5
%
 
59

 
0.4
%
 
1

Trader Joe's
 
934

 
0.4
%
 
55

 
0.3
%
 
4

McKeever Enterprises
 
844

 
0.4
%
 
68

 
0.4
%
 
1

Save Mart Supermarkets
 
843

 
0.4
%
 
102

 
0.6
%
 
2

The Fresh Market
 
841

 
0.4
%
 
59

 
0.4
%
 
3

Pete's Fresh Market
 
579

 
0.3
%
 
72

 
0.4
%
 
1

U R M Stores
 
574

 
0.3
%
 
51

 
0.3
%
 
1

Hy-Vee Food Stores
 
527

 
0.2
%
 
127

 
0.8
%
 
2

Fresh Thyme Farmers Market
 
450

 
0.2
%
 
30

 
0.2
%
 
1

Marc’s
 
400

 
0.2
%
 
36

 
0.2
%
 
1

 
 
$
84,879

 
40.1
%
 
8,829

 
52.6
%
 
152

(1) 
Number of locations excludes (a) auxiliary leases with grocery anchors such as fuel stations, pharmacies, and liquor stores, (b) four locations where we do not own the portion of the shopping center that contains the grocery anchor, and (c) four locations that have non-grocery anchors. Number of locations also includes one shopping center that has two grocery anchors.


22



Results of Operations
In conjunction with the closing of the PELP transaction on October 4, 2017, we expect our operations to change significantly. As a result of acquiring the third-party asset management business of PELP, we will earn fee and management income for certain services provided to Phillips Edison Grocery Center REIT II, Inc. and other funds, and incur expenses related to managing their day-to-day activities and implementing their investment strategy. Furthermore, following the termination of the PE-NTR Agreement, we will no longer pay fees to an advisor, including asset management fees. The acquisition of 76 real estate assets from PELP through this transaction substantially increased the size of our portfolio. Consequently, we expect our operating revenues to increase over the short- and long-term.
Summary of Operating Activities for the Three Months Ended September 30, 2017 and 2016
 
 
 
 
 
 
Favorable (Unfavorable) Change
(In thousands, except per share amounts)
 
2017
 
2016
 
$
 
%
Operating Data:
 
 
 
 
 
 
 
 
Total revenues
 
$
70,624

 
$
65,270

 
$
5,354

 
8.2
 %
Property operating expenses
 
(10,882
)
 
(10,030
)
 
(852
)
 
(8.5
)%
Real estate tax expenses
 
(10,723
)
 
(9,104
)
 
(1,619
)
 
(17.8
)%
General and administrative expenses
 
(8,712
)
 
(7,722
)
 
(990
)
 
(12.8
)%
Termination of affiliate arrangements
 
(5,454
)
 

 
(5,454
)
 
NM

Acquisition expenses
 
(202
)
 
(870
)
 
668

 
76.8
 %
Depreciation and amortization
 
(28,650
)
 
(26,583
)
 
(2,067
)
 
(7.8
)%
Interest expense, net
 
(10,646
)
 
(8,504
)
 
(2,142
)
 
(25.2
)%
Transaction expenses
 
(3,737
)
 

 
(3,737
)
 
NM

Other income, net
 
6

 
33

 
(27
)
 
81.8
 %
Net (loss) income
 
(8,376
)
 
2,490

 
(10,866
)
 
NM

Net loss (income) attributable to noncontrolling interests
 
144

 
(26
)
 
170

 
NM

Net (loss) income attributable to stockholders
 
$
(8,232
)
 
$
2,464

 
$