UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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PHILLIPS EDISON & COMPANY, INC.
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Dear Fellow Stockholder,
2021 was a remarkable year for Phillips Edison & Company, Inc. (Nasdaq: PECO) (“PECO,” “Phillips Edison,” “we” or the “Company”). We delivered strong results both at the property and corporate level, returning to, and in some instances exceeding, pre-COVID occupancy, collection, and income levels, as well as completing a $547.4 million underwritten initial public offering (“IPO”) and a $350 million debut investment grade bond offering. Our 2021 highlights include:
Record Occupancy and Leasing Results. The demand for space in our grocery-anchored neighborhood shopping centers is better than we have seen in the 30 years of PECO’s history. The leased occupancy of our portfolio of 268 wholly-owned properties increased to an all-time high of 96.3%. Leasing activity remains strong, and our tenants (whom we call our “Neighbors”) are thriving with quarterly foot traffic surpassing both 2019 and 2020 levels. Net income increased to $17.2 million from $5.5 million for the year ended December 31, 2020. Net income attributable to stockholders totaled $15.1 million, or $0.15 per diluted share, compared to $4.8 million, or $0.05 per diluted share, during the year ended December 31, 2020. Same-Center Net Operating Income (“NOI”)* increased 8.2% to $346.8 million compared to $320.4 million during the year ended December 31, 2020. Same-Center NOI increased 3.9%, compared to the year ended December 31, 2019. Core Funds From Operations (“FFO”)* increased 16% to $255.0 million, or $2.19 per diluted share, compared to $220.4 million, or $1.98 per diluted share during the year ended December 31, 2020. We continue to be encouraged about our growth prospects.
Underwritten IPO and Inaugural Investment Grade Bond Offering. We successfully executed our underwritten IPO on July 19, 2021, where we generated $547.4 million of gross proceeds, including the full exercise of the over-allotment (“greenshoe”) option. The newly issued common stock began trading on Nasdaq on July 15, 2021, under the ticker “PECO,” completing the final step towards full liquidity for our existing investors in January 2022. In October 2021, we completed our debut investment grade bond offering, raising $350 million of 10-year unsecured bonds at a fixed coupon of 2.625%. We have received investment grade ratings from both S&P and Moody’s, underscoring the quality of our portfolio and business strategy. We have one of the strongest balance sheets in the shopping center REIT industry with substantial growth capital and balance sheet capacity to expand our portfolio and drive earnings.
Targeted External Growth. During our IPO, we laid out a strategy to grow our portfolio through net acquisitions of $1 billion over three years. In the second half of 2021, we achieved net acquisitions of over $175 million toward this goal. Due to our strong balance sheet, we believe we can continue to grow our portfolio over the next several years and achieve our goal.
Focused on Environmental, Social, and Governance (“ESG”). Being a responsible corporate citizen has always been integral to our corporate strategy, which is designed to drive accountability in all aspects of our business with the overarching goal of achieving long-term growth and value creation for our stakeholders. We participate in the Global Real Estate Sustainability Benchmark (“GRESB”) Real Estate Assessment and realized a 9% increase in our GRESB scoring from 2020 to 2021 assessments. As part of our ongoing commitment to ESG, in 2021, we established a dedicated cross-functional “ESG Team” to better quantify the qualitative components of our ESG goals and provide greater transparency to our stakeholders. Additionally, we encourage and strongly support associate-led programs that give our associates opportunities to effect positive change within PECO, our industry and our communities. The positive PECO culture contributed to the Cincinnati Enquirer recognizing PECO as a top place to work in Cincinnati for the fifth consecutive year.
* | See Annex A starting on |
Dividend Increase. On September 28, 2021, we announced that our Board of transaction:Directors (the “Board”) unanimously approved a 6% increase to the monthly distribution. The monthly dividend rate is now $0.09 per share, which, if annualized, equals a rate of $1.08 per share. We believe we can continue to grow our distribution as we grow the cash flow from our properties.
As we look to 2022, we find ourselves returning to times of uncertainty. There is economic uncertainty around inflation and rising interest rates, along with global political instability. In challenging times, this further underscores the relevance and resilience of grocery-anchored shopping centers that deliver necessity-based goods and services to the average American.
PECO GROW has been a roadmap for us that we believe positions us to outperform as we look ahead.
¨G: Grocery-Anchored. Since our founding over 30 years ago, our exclusive focus has been owning and operating neighborhood grocery-anchored shopping centers. Our centers provide necessity-based goods and services, which drive regular and recurring foot traffic from customers in the 3-mile trade area.
Fee paid previouslyR: Regular Income; Strong Returns. Our differentiated strategy and operational expertise have resulted in regular income and strong returns for our investors. We have distributed over $1.4 billion to our stockholders in the form of monthly distributions since 2010 and just increased the monthly distribution by 6%.
O: Omni-Channel Landlord. We are an omni-channel landlord, which allows us to capitalize on the future of retail real estate. Our grocery-anchored centers are complementary to e-commerce and are thriving in today’s omni-channel environment. Our brick-and-mortar centers are a critical component to both last mile delivery and buy-online and pick-up in store commerce for our retailers.
W: Well-Aligned & Established. Lastly, we are well-aligned with preliminary materials.our investors. As of the date of this letter, our management team owns 8% of the Company, which represents over $315,000,000 invested alongside you. We have meaningful skin in the game and are committed to driving stockholder value. As PECO’s largest stockholder, it’s important for you to know that I have never sold a share of PECO stock, and I have no plans to sell my shares.
We appreciate your confidence in our team and your support. We could not be more excited about the future of PECO as we look towards 2022 and beyond, and we sincerely thank you for your investment.
As always, please do not hesitate to reach out if you have any questions.
Sincerely, Jeff Edison Stockholder, Co-founder, Chairman & CEO Phillips Edison & Company, Inc. |
Contact our investor relations team:
Transfer Agent - Computershare: (888) 518-8073
Phillips Edison & Company, Inc.: (833) 347-5717
Email Investor Relations: InvestorRelations@phillipsedison.com
Notice of Annual Meeting of Stockholders
2022 ANNUAL MEETING INFORMATION
Dear Stockholder:
The 2022 Annual Meeting of Stockholders (“Annual Meeting”) of Phillips Edison & Company, Inc., a Maryland corporation (the “Company,” “PECO,”“Company” or “our,”“PECO”), will hold our 2020 annual meeting of stockholders (the “Annual Meeting”), which will be a “virtual meeting” held solely via live webcast at www.virtualshareholdermeeting.com/PECO2020.
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DATE: Thursday,June16,2022 WHERE: www.virtualshareholdermeeting. TIME:10:00A.M.EasternTime | |
Holding the Annual Meeting via live webcast allows us to communicate in a more effectivelycost-efficient, environmentally conscious manner with morea larger number of our stockholders. On our pre-meeting forumstockholders and to promote greater stockholder participation in the meeting. To attend the Annual Meeting, you will need the 16-digit control number included on your Notice Regarding the Internet Availability of Proxy Materials, on your proxy card, or on the instructions that accompany your proxy materials. We will start the online check-in process at proxyvote.com/PECO, you can access copies of proxy materials and vote.
YOUR VOTE IS VERY IMPORTANT! Your immediate response will help avoid potential delaysYou are entitled to vote and may save us significant additional expenses associated with soliciting stockholder votes.
| BY TELEPHONE AT 1-800-690-6903 | BY MAIL Vote Processing, Edgewood, NY 11717 |
By Order of the Board of Directors,
Tanya E. Brady
General Counsel, SeniorChief Ethics & Compliance Officer,
Executive Vice President and Secretary
Dated: March 25, 2022
2022 PROXY STATEMENT |
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Cautionary Note Regarding Forward-Looking Statements
Certain of the matters discussedstatements contained in this proxy statement, that are not purelyother than historical arefacts, may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995.1995 (collectively with the Securities Act and Exchange Act, the “Acts”). These forward looking statements include, but are not limited to, statements related tobased on current expectations, estimates and projections about the Company’s expectations regarding the performanceindustry and markets in which we operate, and beliefs of, its business, growth prospects, liquidity potential, and other non-historical statements. You can identify theseassumptions made by, management of our Company and involve uncertainties that could significantly affect our financial results. We intend for all such forward-looking statements to be covered by the applicable safe harbor provisions for forward-looking statements contained in the Acts. Such forward-looking statements generally can be identified by the use of wordsforward-looking terminology such as “may,” “will,” “can,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” “possible,” “initiatives,” “focus,” “seek,” “objective,” “goal,” “strategy,” “plan,” “expect,“potential,” “estimate,“potentially,” “preparing,” “projected,” “future,” “objectives,“long-term,” “believe,“once,” “opportunities,“should,” “continue,“could,” “seek,“would,” “potential,“might,” “looking forward,” “will,” “may,” “focus,“uncertainty,” or other similar words. SuchReaders are cautioned not to place undue reliance on these forward-looking statements, which speak only speak as of the date of this proxy statementreport is filed with the Securities and are subject to various risks and uncertainties, including, but not limited to, the effects of the global pandemic of a novel coronavirus (“COVID-19”Exchange Commission (the “SEC”), including on consumer demand and levels of consumer confidence in the safety of visiting shopping centers as a result of COVID-19; the measures taken by federal, state and local government agencies and tenants in response to COVID-19; the impact of the COVID-19 pandemic on our tenants and their ability to pay rent on time or at all; the length and severity of the COVID-19 pandemic in the United States; the pace of recovery following the COVID-19 pandemic; our ability to implement cost containment strategies; and the adverse effects of COVID-19 on our business. .
Additional important factors that could cause actual results to differ are described in the filings made from time to time by the Company with the U.S. Securities and Exchange CommissionSEC and include the risk factors and other risks and uncertainties described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 20192021 filed with the SEC on March 11, 2020,February 16, 2022, as such factors may be updated from time to time in the Company’s periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. The Company undertakes noExcept as required by law, we do not undertake any obligation to publicly update or revise any forward-looking statements contained in this proxy statement.
2022 PROXY STATEMENT |
The following summary is intended to provide a broad overview of the items that you will find elsewhere in this proxy statement. As this is only a summary, we encourage you to read this proxy statement whetherin its entirety for more information about these topics prior to voting.
ANNUAL MEETING OF STOCKHOLDERS: | PROPOSAL | BOARD’S VOTING RECOMMENDATION | PAGE REFERENCES (for more detail) | |||
DATE: Thursday, June 16, 2022 WHERE: www. virtualshareholdermeeting.com/ PECO2022 TIME: 10:00 A.M., Eastern Time RECORD DATE: March 18, 2022 | Election of Directors | FOR EACH NOMINEE | 8 | |||
Advisory Resolution to Approve Executive Compensation | FOR | 61 | ||||
Ratification of Independent Accountants | FOR | 62 |
If at the close of business on March 18, 2022, you were a stockholder of record, you may authorize a proxy to vote in accordance with your instructions online, by telephone or by mail, if you have requested or received a paper copy of the proxy materials by mail, or you may vote at the virtual Annual Meeting. For shares held through a broker, bank or other nominee, please refer to information from your broker, bank or other nominee on how to submit voting instructions.
If you are a stockholder of record and are authorizing a proxy by internet, telephone or mail, as described below, your proxy must be received by 11:59 P.M. Eastern Time on June 15, 2022 to be counted.
To authorize a resultproxy if you are a stockholder of new information, future events,record:
ONLINE AT www.proxyvote.com/peco | BY TELEPHONE AT 1-800-690-6903 | BY MAIL Vote Processing, c/o Broadridge 51 Mercedes Way Edgewood, NY 11717 |
YOUR VOTE IS IMPORTANT TO US. THANK YOU FOR VOTING.
THE ANNUAL MEETING WILL BE HELD ONLINE ON JUNE 16, 2022 AT 10:00 A.M. EASTERN TIME SOLELY VIA LIVE WEBCAST.
Stockholders will not be permitted to physically attend the Annual Meeting. You can access the virtual Annual Meeting at www.virtualshareholdermeeting.com/PECO2022. Holding the Annual Meeting via live webcast allows us to communicate in a more cost-efficient, environmentally conscious manner with a larger number of stockholders and to promote greater stockholder participation in the meeting. The virtual meeting has been designed to provide the same rights to participate as you would have at an in-person meeting.
To attend the Annual Meeting, you will need the 16-digit control number included in your Notice Regarding the Internet Availability of Proxy Materials, on your proxy card, or otherwise.on the instructions that accompany your proxy materials. The Annual Meeting will begin promptly at 10:00 A.M. Eastern Time. Online check-in will begin at 9:45 A.M. Eastern Time, and you should allow ample time for the online check-in procedures.
2022 PROXY STATEMENT | 1 |
PECO is one of the nation’s largest owners and operators of omni-channel grocery-anchored shopping centers. As of February 28, 2022, we own, directly and indirectly, 291 shopping centers. Our portfolio primarily consists of neighborhood centers anchored by the #1 or #2 grocer tenants by sales within their respective formats by trade area. Our Neighbors are a mix of national, regional, and local retailers that primarily provide necessity-based goods and services.
Our goal is to create great grocery-anchored shopping center experiences and improve our communities, one center at a time.
We seek to achieve this objective by generating recurring cash flows, income growth, and capital appreciation for our stockholders through our differentiated and focused strategy, responsible balance sheet management, and integrated operating platform.
2022 PROXY STATEMENT | 2 |
2021 was a year of strong operational and financial performance for us, highlighted by our underwritten IPO. Our financial and operational achievements during 2021, as highlighted below, have us well-positioned to generate external growth and internal growth from our existing portfolio.
$17.2M NET INCOME | $547.4M UNDERWRITTEN IPO GROSS PROCEEDS | |||
$604.8M TOTAL LIQUIDITY AT DECEMBER 31, 2021 | Baa3/BBB- INVESTMENT GRADE RATINGS | |||
96.3% LEASED OCCUPANCY OF WHOLLY- OWNED PROPERTIES | 96.7% ABR FROM OMNI- CHANNEL GROCERY- ANCHORED SHOPPING CENTERS |
2022 PROXY STATEMENT | 3 |
Financial Highlights | ||||||||||||||||
$17.2M net income; increase of $11.8M from a year ago | $892.8M of capital raised from our underwritten IPO and issuance of senior notes due 2031 | Baa3 and BBB- investment grade ratings achieved from Moody’s Investment Services and S&P Global Ratings | $0.21 improvement to $2.19 of Core FFO per diluted share | |||||||||||||
8.2% growth to $346.8M of Same-Center NOI | 6.0% increase in monthly distribution rate beginning October 2021 to $0.09 per month | 17.5% reduction in net outstanding debt obligations, including the pay down or refinancing of $1.1B in term loan debt | 5.6x net debt to Adjusted EBITDAre* - annualized compared to 7.3x a year ago | |||||||||||||
Portfolio Highlights | ||||||||||||||||
96.3% leased occupancy as of December 31, 2021, an increase of 160 basis points from a year ago | 96.7% ABR from omni-channel grocery-anchored shopping centers as of December 31, 2021 | 71.6% ABR from Neighbors providing necessity-based goods and services as of December 31, 2021 | 99% of monthly billings collected during the second half of 2021; returning to pre-COVID levels | |||||||||||||
Operational Highlights | ||||||||||||||||
$307.6M of asset acquisitions in 2021 | 87.8% Portfolio Retention Rate of expiring leases | 8.0% comparable rent spreads for total executed new, renewal, and option leases compared to 5.4% in 2020 | $59.2M of development and redevelopment projects completed or in process | |||||||||||||
* | See Annex A starting on page A-1 for definitions and reconciliations of non-GAAP metrics. |
2022 PROXY STATEMENT | 4 |
Our Board and executive management team are committed to excellence in corporate governance. Our Board has adopted Corporate Governance Guidelines that set forth the Board’s responsibility for oversight of the business and affairs of the Company as well as guidelines for determining director independence and consideration of potential nominees to the Board. These policies and guidelines can be found on the Company’s website at www.phillipsedison.com/investors/governance.
BOARD COMPOSITION
ONGOING BEST PRACTICES
Through the Nominating and Governance Committee, the Board directly and regularly reviews developments in corporate governance and best practices and makes modifications to the committee charters and other key governance documents, policies and practices as necessary or desirable. As part of our commitment to excellence in corporate governance, the following are examples of some of our policies that align more fully with current best practices:
2022 PROXY STATEMENT | 5 |
SUMMARY OF DIRECTORSKEY CORPORATE GOVERNANCE FEATURES
2022 PROXY STATEMENT | 6 |
Environmental, Social and Governance Highlights
Being a responsible corporate citizen has always been integral to our corporate strategy, and we operate under a clear mission statement of “creating great omni-channel grocery-anchored shopping experiences and improving our communities, one shopping center at a time.” With the goal of better quantifying the qualitative components of our corporate responsibility values and providing greater transparency to our stakeholders, in 2021, we established an internal cross-functional ESG Team consisting of our department heads from Portfolio Management, Construction, Property Management, Leasing, Investor Relations, Marketing, Human Resources, and Legal. Our full Board oversees each of our corporate social responsibility, ESG and enterprise risk management programs, and our Audit Committee oversees our robust ethics and compliance program. We recently began participating in the GRESB Real Estate Assessment using the GRI reporting standards, and our Corporate Social Responsibility Report is designed to align with a number of the 17 United Nations Sustainable Development Goals. Emblematic of our ongoing commitment to sustainability, we highlight the following achievements:
to further reduce energy consumption, the installation of over 3.5 million square feet of white reflective roofing was completed, resulting in over 900,000 kWh in savings and contributing to the minimalization of heat islands;
our exterior lighting program included the installation of 54 LED retrofits in 2021, bringing the total number of centers retrofitted to 249 and savings of 8.6 million kWH produced annually; and
since the inception of the smart water control program, realization of 285.3 million gallons of water saved by PECO.
Additionally, we encourage and strongly support a number of associate-led programs that give our associates opportunities to effect positive change within PECO, our industry and our communities. Our local teams and property managers are passionate about the Neighbors they work with daily and the communities in which our properties operate, which helps drive great shopping experiences at our centers and improves the surrounding communities.
2022 PROXY STATEMENT | 7 |
Proposal 1: Election of Directors
You are being asked to elect eight director nominees to serve on our Board until the 2021 annual meeting of stockholders. As of the date of this proxy statement, the Board consists of nine members. David W. Garrison will be retiring from the Board immediately prior to the Annual Meeting and therefore has not been nominated for re-election. In connection with Mr. Garrison’s retirement, the Board has reduced its size to eight directors effective as of Mr. Garrison’s retirement. All nominees, if elected at the Annual Meeting, will serve until the 2021Company’s 2023 annual meeting of stockholders and until their respective successors are duly elected and qualifyqualify. Our nominees were selected by the Board, based on the recommendation of the Nominating and Governance Committee. All eight nominees currently serve on our Board. All nominees are willing to serve as directors, but if any of them should decline or be unable to act as a director, the individuals designated in the proxy cards as proxies will exercise the discretionary authority provided to vote for the election of such substitute nominee recommended by our Nominating and Governance Committee.
OUR DIRECTOR NOMINEES. Election
The director nominees represent a broad diversity of experience, professions, skills, geographic representation and backgrounds, enabling the Board to lead and advise PECO on its most important matters. The majority of our director nominees have decades of leadership experience in real estate, finance and investment, including institutional experience with PECO and the real estate investment trust (“REIT”) industry, and those who have joined our Board more recently bring new perspectives and insights, including in areas like sustainability. This breadth of experience enables our Board to help guide our strategy and oversee its execution by management. Several of our director nominees have served on boards of other public companies, which we believe is valuable in our new stage as a publicly-traded company, and each of theour director nominees requires the affirmative vote of the holders of a majority of the shares of stock entitled to vote who are presenthas demonstrated prudent judgment and integrity in person or by proxy.
The names and ages of the director nominees, together with certain biographical information and the experience, qualifications, attributes, and skills that led the Board to concludenominate and recommend that the following individuals shoulddirector nominees continue to serve as directors are set forth below.
THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE ELECTION OF EACH OF THE DIRECTOR NOMINEES. |
2022 PROXY STATEMENT | 8 |
Proposal 1: Election of Directors
Jeffrey S. Edison Chairman Director Since 2009 Age | Mr. Edison is our co-founder and has served as |
Leslie T. Chao Lead Independent Director Since 2010 Age 65 Committee • Audit Committee • Nominating and | Mr. Chao has served as a director since July 2010 and | |
as Lead Independent Director |
2022 PROXY STATEMENT | 9 |
Elizabeth O. Fischer Director Since 2019 Age Committee Membership: • Audit Committee • Nominating and | Ms. Fischer joined Goldman Sachs & Co. LLC in 1998 and most recently served as Managing Director of the Bank Debt Portfolio Group from 2010 until her retirement in May 2019, where she managed Leveraged Finance led syndicated loans. She also served four years as co-head of Goldman Sachs’ firm-wide Women’s | |
Paul J. Massey, Jr. Director Since 2010 Age Committee • Nominating and • Compensation Committee | Mr. Massey began his career in 1983 at Coldwell Banker Commercial Real Estate Services, now CBRE, in Midtown Manhattan, first as the head of the market research department, and next as an investment sales broker. Together with partner Robert A. Knakal, he founded Massey Knakal Realty Services, which became New York City’s largest investment property sales brokerage firm, of which Mr. Massey served as Chief Executive Officer. With 250 sales professionals serving more than 200,000 property owners, Massey Knakal Realty Services was ranked as New York City’s #1 property sales company in transaction volume by the |
2022 PROXY STATEMENT | 10 |
Stephen R. Quazzo Director Since 2013 Age Committee Membership: • Audit Committee | Mr. Quazzo is co-founder and Chief Executive Officer of Pearlmark Real Estate, L.L.C. From 1991 to 1996, Mr. Quazzo served as President of Equity Institutional Investors, Inc., a subsidiary of investor Sam Zell’s private holding company, Equity Group Investments, Inc. Mr. Quazzo was responsible for raising equity capital and performing various portfolio management services in connection with the firm’s real estate investments, including institutional opportunity funds and public REITs. Prior to joining the Zell organization, Mr. Quazzo was in the Real Estate Department of Goldman, Sachs & Co., where he was a vice president responsible for the firm’s real estate investment banking activities in the Midwest. Mr. Quazzo holds a Bachelor of Arts and a Master of Business Administration from Harvard University, where he |
Jane E. Silfen Director Since 2019 Age Committee • Compensation | Ms. Silfen is the founder and owner of Mayfair Advisors LLC, which was founded in 2019 to advise clients on sustainability and clean technology investment opportunities. Since 2015, she also has served as Vice President at Mayfair Management Co., Inc., a New York City-based family office, where she is responsible for overseeing and making public and private investments. Ms. Silfen currently serves as a director of HercuTech, Inc. Ms. Silfen began her career in investment banking at Goldman Sachs and later served as Vice President at Encourage Capital, LLC. She holds a Bachelor of Arts from the University of Pennsylvania and a Master in Public Policy and Master of Business Administration from Harvard University. |
2022 PROXY STATEMENT | 11 |
John A. Strong Director Since 2018 Age Committee • Compensation | Since July 2010, Dr. Strong has served as Chairman and Chief Executive Officer of Bankers Financial Corporation, a diversified financial services company for outsourcing solutions for claims, policy and flood products for insurers; insurance tracking for lenders; human resources solutions for small business; warranties for consumer electronics and new homes; insurance and maintenance services for properties, businesses and builders; and surety bonds for bail. From 2005 to 2010, he served as the President and Managing Partner of Greensboro Radiology. Since 2007, Dr. Strong has served as a board member of Bankers Financial Corporation. He previously served as a director of REIT II from May 2017 to November 2018 when it merged into PECO. Dr. Strong holds a Bachelor of |
Gregory S. Wood Director Since 2016 Age Committee Membership: • Audit Committee | Mr. Wood has been Executive Vice President and Chief Financial Officer of EnergySolutions, Inc., a leading services provider to the nuclear industry, since June 2012. Prior to that, Mr. Wood held the role of Chief Financial Officer at numerous public and private companies, including Actian Corporation, Silicon Graphics, Liberate Technologies, and InterTrust Technologies. Mr. Wood was a director of Steinway Musical Instruments, Inc. from October 2011 to October 2013, where he also served as Chairman of the Audit Committee. Mr. Wood, formerly a certified public accountant, |
2022 PROXY STATEMENT | 12 |
VOTE REQUIRED
Election of each of the nominees requires the affirmative vote of the majority of total votes cast with respect to his or her election (that is, the number of votes cast “FOR” the nominee must exceed the number of votes cast “AGAINST” the nominee). Votes cast include votes against but exclude abstentions and broker non-votes with respect to a nominee’s election, and abstentions and broker non-votes will have no effect on the election of any director. The majority voting standard does not apply, however, in a contested election where the number of director nominees exceeds the number of directors to be elected at an annual meeting of stockholders. In such circumstances, directors will instead be elected by a plurality of all the votes cast at the annual meeting at which a quorum is present. The election of directors at our Annual Meeting this year is not contested.
2022 PROXY STATEMENT | 13 |
The Board believes CHAIRMAN OF THE BOARD Mr. Jeffrey S. Edison LEAD INDEPENDENT DIRECTOR Mr. Leslie T. Chao BOARD COMMITTEES Independent directors only Since the Chairman of the Board is an employee of the Company, the Board also elects a Lead Independent Director from its independent directors. The Board believes Chairman of the Board As Chairman of the Board, Mr. Edison presides over Lead Independent Director Mr. Chao has served as our Lead Independent Director since November 2017. The Chairman and Chief Executive Officer consults periodically with the Lead Independent Director on Board matters, Board agendas, and issues facing the Company. In addition, the Lead Independent Director: (i) serves as the principal liaison between the Chairman of the Board and the independent directors; (ii) presides at all meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors; and (iii) performs such other duties as may be assigned by the Board. The Lead Independent Director serves as theBoard Leadership Structure that it should have the flexibility to periodically (i) determine the leadership structure that it believes is best for the Company and periodically reviews the leadership(ii) review such structure to determine whether it continues to serve the Company and its stockholders. The current leadership structure of the Board features the following:the currentthis leadership structure withprovides a well-functioning and effective balance between strong management leadership and appropriate oversight by the Lead Independent Director. With Mr. Edison serving as both Chief Executive Officer and Chairman of the Board, provides a well-functioningMr. Chao as the Lead Independent Director, and effective balance between strong Company leadership and appropriate safeguards and oversight bycommittees comprised exclusively of independent directors, the independent Lead Director. The Board believes this is the optimal structure to guide the Company and maintain the focus required to achieve the business goals and grow stockholder value.Boardstockholder and stockholderBoard meetings, oversees the setting of the agenda for those meetings and the dissemination of information about the Company to the Board, and represents the Company at public events.Because the chairman is an employee of the Company, the Board elects a Lead Director from its independent directors. Mr. ChaoEdison has served as our Lead Director since November 2017. The Chairman and Chief Executive Officer consults periodically with the Lead Director on Board matters, Board agendas, and on issues facing the Company. In addition, the Lead Director serves as the principal liaison between the Chairman of the Board and Chief Executive Officer since December 2009.
principal liaison between the
Chairman of the Board and the independent directors.2022 PROXY STATEMENT 14
Director Independence
Currently, our Board consists of the Board at which the Chairman is not present, including executive sessions of the independent directors; and performs such other duties as may be assigned by the Board. Our Lead Director also has the authority to call meetings of the independenteight directors.
Executive Sessions of Independent Directors
The independent directors hold regularly scheduled executive sessions of the Board and each of its committees without the presence of senior management and the non-independent director. The Lead Independent Director chairs the executive sessions of the Board, and the chairs of the applicable committees chair the executive sessions of the committee meetings. In 2021, the independent directors met in executive session at all regularly scheduled Board and committee meetings. | ||
In 2021, the independent directors met in executive session at all of the regularly scheduled Board and committee meetings held. | ||
Attendance
The Board held 5 meetings in 2021. During 2021, each director attended 100% of the NYSE.
2022 PROXY STATEMENT | 15 |
The table below provides certain highlights of the composition of our Board members and nominees as of March 25, 2022. Each of the categories listed in undertaking its responsibilities, and to allow deeper engagementthe table below has the meaning as it is used in certain areas of Company oversight, theNasdaq Rule 5605(f).
Board Diversity Matrix (As of March 25, 2022) |
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Board Size:
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Total Number of Directors
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Gender: | Male | Female | | Non- Binary |
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Number of directors based on gender identity
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Number of directors who identify in any of the categories below:
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White
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LGBTQ+
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Undisclosed
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The Board has established twothree standing committees: an Audit Committee, a Compensation Committee, and Compensationa Nominating and Governance Committee. BothThe current chairs and members of each committee are set forth below:
Audit Committee | Compensation Committee | Nominating and Governance Committee | ||||
Leslie T. Chao | Chair | Member | ||||
Elizabeth O. Fischer | Member | Chair | ||||
Paul J. Massey, Jr. | Member | Member | ||||
Stephen R. Quazzo | Member | |||||
Jane E. Silfen | Member | |||||
John A. Strong | Chair | |||||
Gregory S. Wood | Member |
The principal functions of each committee are described briefly below. Additionally, our Board may from time to time establish other committees are comprised exclusivelyto facilitate our Board’s oversight of independent directors, as determined undermanagement of the NYSE listing standards.business and affairs of our Company. Each committee’s charter is available on our website at www.phillipsedison.com/investors/governance. The current chairs and members of each committee are set forth below.
AUDIT COMMITTEE | ||||||||||
| Total Members: | 4 | ✓ Mr. Chao, Chair, “audit committee financial expert” | |||||||
✓ All members independent | ||||||||||
2021 Meetings: | 4 | ✓ All members “financially literate” per Nasdaq rules |
Duties and Responsibilities:
Oversee the Board in fulfilling its responsibilities by overseeingreporting processes and financial exposure of the Company
Select and engage the Company’s independent registered public accounting firm and reviewing
Monitor the integrity of the financial information to be provided tostatements
Oversee our stockholders and others, overseeing the system of internal control over financial reporting thatestablished by our management, has established, and overseeing our audit and financial reporting process. The Audit Committee also is responsible for overseeingprocess
Review and monitor our compliance programs, and oversee our compliance with applicable laws and regulations
Oversee, review and for establishing procedures forperiodically update the ethical conductCompany’s Code of our business. The Board has determined that Business Conduct and Ethics and the Company’s system to monitor compliance and enforce the Code of Business Conduct and Ethics
Requirements:
Mr. Chao, Audit Committee Chair, qualifies as an “audit committee financial expert” as defined by applicable SEC regulations and that all
All members of the Audit Committee aresatisfy the independence requirements of Nasdaq and the independence rules for members of the Audit Committee issued by the SEC
Each member of the Audit Committee is “financially literate” within the meaning of the NYSE listing standards. During 2019,Nasdaq rules
Audit Committee duties and responsibilities are set forth in further detail in the Audit Committee held four meetings.Charter, which may be found on our website: www.phillipsedison.com/investors/governance
2022 PROXY STATEMENT | 17 |
COMPENSATION COMMITTEE | ||||||||
Total Members: | 3 | ✓ Mr. Strong, Chair | ||||||
2021 Meetings: | 6 | ✓ All members independent | ||||||
Duties and Responsibilities:
Establish and preside over the overall compensation philosophy of the Company
Review and approve corporate goals and objectives relevant to discharge the Board’s responsibility relating toChief Executive Officer and other executive officers’ compensation, of our directorsincluding annual performance objectives, if any
Evaluate and executive officers by evaluating and approvingapprove director and executive officer compensation plans, policies and programs. The Compensation Committee also is responsibleprograms
Assess executive compensation risk and balance it so Company executives are not incentivized to take actions which create unnecessary risk for (i) reviewingthe Company
Review and discussingdiscuss with management the Compensation Discussion and Analysis (‘‘CD&A’’) required to be included in our proxy statement for the annual meeting of stockholders and recommending
Make recommendations as to the Board whether the CD&A should be included in such proxy statement
Review and (ii) providingmonitor all employee retirement, profit sharing and benefit plans of the Company
Monitor executive compliance with the rules and guidelines of our equity-based plans
Provide a Compensation Committee Report that compliesin compliance with the applicable federal securities laws and regulations for inclusion in our proxy statement for the annual meeting
Requirements:
No member of stockholders. During 2019, the Compensation Committee was an officer or employee of the Company during 2021
No member of the Compensation Committee is a former officer of the Company or was a party to any related party transaction involving the Company required to be disclosed under Item 404 of Regulation S-K during 2021
During 2021 none of our executive officers served on the board of directors or on the compensation committee of any other entity that has or had executive officers serving as a member of the Board or the Compensation Committee
All members of our Compensation Committee satisfy the independence requirements of Nasdaq and the independence rules for members of the Compensation Committee issued by the SEC
Compensation Committee duties and responsibilities are set forth in further detail in the Compensation Committee Charter, which may be found on our website: www.phillipsedison.com/investors/governance
2022 PROXY STATEMENT | 18 |
Nominating and Governance Committee* | ||||||||
Total Members: | 3 | ✓ Ms. Fischer, Chair | ||||||
2021 Meetings: | 1 | ✓ All members independent | ||||||
* | Established in connection with our underwritten IPO. |
Duties and Responsibilities:
Establish criteria and qualifications for new directors
Identify high-quality individuals with the skills and experience for nomination to the Board
Evaluate candidates for nomination to the Board, including those recommended by stockholders
Review and make recommendations concerning the size, structure and composition of the Board
Recommend members of the Board to serve on Board committees and, if required, recommend the removal of committee member(s)
Lead the annual Board performance review
Consider possible conflicts of interest of directors and executive officers and questions of director independence
Establish corporate governance practices, guidelines and policies to adopt for the Company
Additional Item of Note:
All members satisfy the independence requirements of Nasdaq and the independence rules for members of the Nominating and Governance Committee issued by the SEC
Nominating and Governance Committee duties and responsibilities are set forth in further detail in the Nominating and Governance Committee Charter, which may be found on our website: www.phillipsedison.com/investors/governance
2022 PROXY STATEMENT | 19 |
Our Stock Ownership Policy (“SOP”) is designed to focus our directors and named executive officers (“NEOs”) on long-term stockholder value creation. Our SOP sets stock ownership targets for NEOs as a multiple of base salary and for non-employee directors as a multiple of their annual retainer. The stock ownership targets are to be achieved by directors and our NEOs over a maximum five- year period. If an SOP participant does not reach his or her target by the end of the required period, they must retain 100% of all equity held five meetings.
Chief Executive Officer | ● | ● | ● | ● | ● | ● | ● | ● | ● | ● | 10x multiple of annual base salary | |||||||||||||||
Lead Independent Director | ● | ● | ● | ● | 4x multiple of retainer | |||||||||||||||||||||
Independent Directors | ● | ● | ● | ● | 4x multiple of retainer | |||||||||||||||||||||
Non-CEO Named Executive Officers | ● | ● | ● | 3x multiple of annual base salary |
POLICY PROHIBITING HEDGING AND PLEDGING OF OUR STOCK
Our Insider Trading Policy prohibits all directors, officers, and other employees from engaging in short- sales and certain hedging or monetization transactions with respect to the Company’s securities. The policy also prohibits all directors, officers and other associates from pledging our securities as collateral for a loan or as collateral in a margin account.
BOARD’S ROLE IN RISK OVERSIGHT
While day-to-day risk management is primarily the responsibility of PECO’s management team, the Board is responsible for selecting its own nomineesstrategic planning and recommending themoverall enterprise-wide supervision of our risk management activities. A key aspect of risk management is not only understanding the risks a company faces and what steps management is taking to manage those risks, but also understanding what level of risk is appropriate for election byus. Therefore, management provides periodic reports to the Board with respect to our stockholders. All director nominees then standoperations, business strategies and the monitoring of related risks, and our Board discusses with management the appropriate level of risk for election bythe Company. Our full Board oversees each of our stockholders annually. corporate social responsibility, ESG and enterprise risk management programs. Management provides periodic updates on each such program to the Board.
The Board does not have a standing nominating committeealso delegates oversight to the Audit and Compensation Committees to oversee selected elements of risk. Our Audit Committee selects and engages our independent registered public accounting firm, from whom it receives regular periodic reports regarding various areas of potential risk and oversees
2022 PROXY STATEMENT | 20 |
its independence. Our Audit Committee also oversees other financial risk exposures by (i) monitoring the integrity of our financial statements and our internal control over financial reporting, (ii) overseeing financial credit and liquidity risk by working with management to evaluate elements of financial and credit risk and advising on our financial strategy, capital structure and long-term liquidity needs, (iii) overseeing our internal audit function, and (iv) meeting periodically with financial management, independent auditors and legal advisors for updates on risks related to our financial reporting function. Our Audit Committee also reviews and monitors our compliance programs, including the whistleblower program, and is tasked with overseeing, reviewing and periodically updating our Code of Business Conduct and Ethics and the systems in place to monitor compliance and ensure enforcement. The Compensation Committee is responsible for overseeing risks related to our compensation policies and practices, and specifically the design of executive compensation to create incentives appropriate to our business strategy and stockholder interests without incentivizing actions which create unnecessary or a charter that governsexcessive risk for the director nomination process. Company.
CODE OF BUSINESS CONDUCT AND ETHICS
The Board believeshas adopted a Code of Business Conduct and Ethics that applies to all of our directors, officers and associates, including our principal executive, principal financial and principal accounting officers. The Code of Business Conduct and Ethics is available on our website at www.phillipsedison.com/investors/ governance. The Company will disclose within four business days any substantive changes in or any waivers of the primary reason for creating a standing nominating committee isCode of Business Conduct and Ethics granted to ensure that candidates for independent director positions can be identifiedour principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, by posting such information on our website.
The Code of Business Conduct and their qualifications assessed under a process free fromEthics sets forth our policies and expectations on several topics, including diversity, equity and inclusion, workplace safety and health, business practices (including conflicts of interestinterest), compliance with PECO. Because nominationslaws (including insider trading laws), use of our assets and interactions with outside parties and our community, and satisfies the SEC’s requirements for vacanciesa code of ethics, as defined by Item 406 of Regulation S-K.
As described in independent director positionsour Code of Business Conduct and Ethics, the Company’s directors, officers and associates are handled exclusively byprovided with the independentfollowing three avenues through which they can report violations or suspected violations of the Code of Business Conduct and Ethics, or any laws, rules, regulations or policies that apply to the Company: (1) speaking with their manager or department head, another trusted leader within the Company or our General Counsel, Chief Compliance Officer or Chief Human Resources Officer; (2) a toll-free phone number; and (3) a website. The toll-free phone number and website are available 24 hours a day, seven days a week. Associates can choose to remain anonymous in reporting violations or suspected violations. In addition, we maintain a formal non-retaliation policy that prohibits action or retaliation against any person who makes a report in good faith.
Prior to each annual meeting of stockholders, or if applicable, a special meeting of stockholders at which directors are to be elected or re-elected, the Nominating and Governance Committee will recommend to the Board for nomination such candidates as the Nominating and Governance Committee has determined that the creation of a standing nominating committeefound to be well-qualified and willing and able to serve. The Nominating and Governance Committee is not necessary.limited to any
2022 PROXY STATEMENT | 21 |
specific process in identifying candidates and characteristics required of directors in the context of the then-current membership of the Board. This assessment includes, in the context of the perceived needswill consider candidates suggested by other members of the Board, at that time, issues of knowledge, experience, judgment,as well as candidates recommended by stockholders. In addition, the Nominating and skills such as an understanding of commercial real estate, capital markets, business leadership, accounting,Governance Committee is authorized to retain search firms and financial management. No one person is likelyother consultants to possess deep experienceassist it in all of these areas. Therefore,identifying candidates and fulfilling its other duties.
Board Membership Criteria
As described in the Company’s Corporate Governance Guidelines, both the Nominating and Governance Committee, in recommending director candidates to the Board, has soughtand the Board, in nominating director candidates, will consider candidates who have a diverse boardhigh level of directors whose members collectively possess these skillspersonal and experiences. Other considerations include the candidate’s independence from PECOprofessional integrity, strong ethics and our affiliatesvalues and the ability to make mature business judgments. The Board and Nominating and Governance Committee both take into account many factors in recommending candidates for a director position. These factors include, but are not limited to, the following criteria set forth in our Corporate Governance Guidelines for all candidates:
Corporate management experience, such as serving as an officer or former officer of a publicly held company;
Board member experience at another publicly held company;
Professional and academic experience relevant to the candidatereal estate industry;
Strength of leadership skills;
Finance and accounting and/or executive compensation practices experience; and
Ability to participate incommit the time required for preparation, participation and attendance at Board meetings regularly and committee meetings, if applicable.
The Nominating and Governance Committee seeks nominees with a broad diversity of experience, professions, skills, geographic representation and backgrounds. The Nominating and Governance Committee does not assign specific weighting to devote an appropriate amount of timeparticular criteria, and effort in preparation for those meetings. It alsono particular criterion is expected that independent directors nominated bynecessarily applicable to all prospective nominees. The Nominating and Governance Committee and the Board shall be individuals who possess a reputationmonitor the mix of specific experience, qualifications and hold (or have held) positions or affiliations befitting a directorskills of a large public company and are (or have been) actively engagedits directors in their occupations or professions or are otherwise regularly involved in the business, professional, or academic community. As detailed in the director biographies above,order to assure that the Board, believes thatas a whole, has the slatenecessary tools to perform its oversight function effectively in light of directors recommended for election at the Annual Meeting possesses these diverse skillsour business and experiences.
Stockholder Nominees
Stockholders may directly nominate potential directors (without the recommendation of the Board) by satisfying the procedural requirements for such nomination as provided in Section 2.12 of our bylaws. In order forBylaws. For stockholder nominees to be considered for nomination by the Board, recommendations made by stockholders must be submitted within the timeframe required to request a proposal to be included in the proxy materials. See “Stockholder Proposals and Director Nominations - 2021Nominations—2023 Annual Meeting of Stockholders” for more information. In evaluating the persons recommended by stockholders as potential directors, the Nominating and Governance Committee and the Board will consider each candidate without regard to the source of the recommendation and take into account those factors that the Nominating and Governance Committee and the Board determinesdetermine are relevant.
2022 PROXY STATEMENT | 22 |
CORPORATE GOVERNANCE GUIDELINES
The Board has adopted the Corporate Governance Guidelines, which are available on our website at www.phillipsedison.com/investors/governance.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee was an officer or employee of PECO during 2019,2021, and no member of the Compensation Committee is a former officer of PECO or was a party to any related party transaction involving PECO required to be disclosed under Item 404 of Regulation S-K. During 2019,2021, none of our executive officers served on the board of directors or on the compensation committee of any other entity that has or had executive officers serving as a member of the Board or the Compensation Committee.
STOCKHOLDER COMMUNICATIONS WITH THE BOARD
We have established several means for our stockholders to communicate concerns to the Board. If the concern relates to (i) our financial statements, accounting practices, or internal controls, then stockholders should submit the concern in writing directed to the Audit Committee Chair, c/o our Corporate Secretary at our executive offices. If the concern relates toChair; (ii) our governance practices, business ethics, or corporate conduct, then stockholders should submit the concern in writing to the Lead Director, c/o our Corporate Secretary at our executive offices. IfIndependent Director; and (iii) if uncertain as to which category a concern relates, then a stockholder should submit the concern in writing to the Independent Directors, independent directors; in each case, by sending such communication or concern by mail to:
Phillips Edison & Company, Inc.
c/o our CorporateSecretary
11501 Northlake Drive
Cincinnati, Ohio 45249
The mailing envelope should contain a clear notation indicating that the enclosed letter is a “Board Communication” or “Director Communication,” and the letter should clearly state the intended recipient. The Secretary at our executive offices.
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1)(2) | All Other Compensation ($)(3) | Total ($) | ||||
Leslie T. Chao | 79,850 | 57,250 | 5,927 | 143,027 | ||||
Elizabeth Fischer(4) | 9,542 | — | — | 9,542 | ||||
David W. Garrison | 68,550 | 57,250 | 2,025 | 127,825 | ||||
Paul J. Massey, Jr. | 58,973 | 57,250 | 5,927 | 122,150 | ||||
Stephen R. Quazzo | 59,250 | 57,250 | 5,927 | 122,427 | ||||
Jane Silfen(4) | 9,542 | — | — | 9,542 | ||||
John A. Strong | 58,250 | 57,250 | 2,025 | 117,525 | ||||
Gregory S. Wood | 59,250 | 57,250 | 5,927 | 122,427 |
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Environmental, Social and Governance
Being a responsible corporate citizen has always been integral to our corporate strategy, and we operate under a clear mission statement of “creating great omni-channel grocery-anchored shopping experiences and improving our communities, one shopping center at a time.”
We strive to have a strong corporate culture based on our core values – Do the Right Thing, Have Fun and Get it Done, Think Big Act Small, Always Keep Learning – which is designed to drive accountability in all aspects of our business with the overarching goal of achieving long-term growth and value creation for our stakeholders.
We recognize that successful corporate responsibility is both internally and externally focused. With the goal of being able to better quantify the qualitative components of our corporate responsibility values and provide greater transparency to our stakeholders, in 2021, we established an internal cross-functional ESG Team consisting of our department heads from Portfolio Management, Construction, Property Management, Leasing, Investor Relations, Marketing, Human Resources and Legal. Our General Counsel has overall responsibility for leading and managing our ESG Team, and reporting on our corporate responsibility and ESG matters to our Board, as more fully described below. Our ESG Team is tasked with conducting more detailed materiality and risk assessments and identifying opportunities with measurable key performance indicators and enhanced reporting, with the overall goal of driving long-term growth and value creation for our stakeholders.
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ENVIRONMENTAL STEWARDSHIP
We believe that sustainable business practices fit with our core value of “Do the Right Thing,” while at the same time being in the best interests of all our stakeholders by having a positive impact on our properties and the communities in which they are located. We recently began participating in the GRESB Real Estate Assessment using the GRI reporting standards, and our Corporate Social Responsibility Report is designed to align with a number of the 17 United Nations Sustainable Development Goals. Our sustainability initiatives include energy efficiency, alternative power sources, water conservation, sustainable design and waste management, among others. Through these initiatives, we continue to make progress towards mitigating the environmental impact of our shopping centers.
In our ongoing commitment to sustainability, we can highlight the following achievements:
to further reduce energy consumption, the installation of over 3.5 million square feet of white reflective roofing was completed, resulting in over 900,000 kWh in savings and contributing to the minimalization of heat islands;
our exterior lighting program included the execution of 54 LED retrofits in 2021, bringing the total number of centers retrofitted to 249 and savings of 8.6 million kWH annually; and
since the inception of the smart water control program, realization of 285.3 million gallons of water saved by PECO.
As noted above, we align with GRI reporting standards and have realized a 9% increase in GRESB scoring from 2020 to 2021 assessments.
Our team of seasoned professionals identifies opportunities in our redevelopment program, which includes outparcel development, footprint reconfiguration, anchor repositioning and anchor expansions, among others. These projects create attractive sustainability opportunities to increase the overall value of our properties, while improving the environmental impact on our communities. Our ESG Team has been, and will continue to be, focused on strategic sustainability initiatives to enhance resource efficiencies as part of that program.
2022 PROXY STATEMENT | 25 |
SOCIAL RESPONSIBILITY
Our culture is driven by our team’s connection to each other and the communities in which we live and work. Our associates are one of our most valuable resources, and we strive to have an outstanding culture that is collaborative, inclusive and that provides significant opportunities for professional and personal development. We encourage and strongly support associate-led programs, such as PECO MORE, PECO NOW and PECO Community Partnership (as described below). These groups give our associates opportunities to effect positive change within our Company, our industry and our communities.
PECO MORE (Multicultural Opportunities, Resources and Education) is dedicated to furthering diversity and inclusion within PECO, the communities we serve, and the commercial real estate industry, and uses a multi-pronged approach including education and awareness, community and industry partnerships, internal engagement, recruiting and metric-led accountability.
PECO NOW (Networking Opportunities for Women), whose mission is to provide leadership opportunities to women at PECO through advocacy, support, scholarship and development, is working to develop and spotlight women leaders in our industry. Since the group’s inception, the number of women in leadership at PECO has tripled. We also currently have nine women in roles at the VP level or higher–including three women in the C-Suite; we also have two women who are independent directors on our Board.
PECO Community Partnership is dedicated to encouraging community involvement and connecting associates to causes important to them, providing associates at every level and in different locations with an opportunity to participate. In 2021, the PECO Community Partnership sponsored six community service-focused events–that associates participated in–ranging from meal delivery, holiday giving, repair work and food pantry organization that resulted in over 200 hours of community service. In addition, the group sponsored two educational events for the Company on recycling and living our core value of “Do the Right Thing.”
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AS AN OUTWARD DEMONSTRATION OF OUR COMMITMENT TO AN INCLUSIVE CULTURE, IN 2021, JEFF EDISON, OUR CEO, SIGNED THE CEO ACTION FOR DIVERSITY & INCLUSION™ PLEDGE ON BEHALF OF THE COMPANY.
The pledge outlines a specific set of actions signatory CEOs will take to cultivate a trusting environment where all ideas are welcome and associates feel comfortable and empowered to have discussions about diversity and inclusion. Additionally, the role of our human resources leader was expanded to Chief People, Diversity & Inclusion Officer to further advance diversity, equity and inclusion (“DE&I”) within the Company. In 2021, we offered a series of interactive learning opportunities focused on unconscious bias, psychological safety, and communicating across cultures. Each of these sessions were designed to increase awareness, create dialogue, and lay a common framework for associates to build upon related to DE&I issues. As part of our external community efforts, in 2021, we also partnered with industry group ICSC (Innovating Commerce Serving Communities) and their Launch Academy, which was designed to recruit and prepare racially or ethnically diverse undergraduate students for a career in the commercial real estate industry. In addition to assisting with development of the Launch Academy curriculum, PECO hosted interns from the program in its Cincinnati and Atlanta offices.
Our director compensation program is intendedlocal teams and property managers are passionate about the Neighbors with whom they work daily and engaging with the shoppers at our centers and the local communities. Their passion for their work and the communities in which our properties operate help drive great shopping experiences at our centers and improve the communities in which they are located.
2022 PROXY STATEMENT | 27 |
CORPORATE GOVERNANCE AND COMPLIANCE
We have a steadfast commitment to provide a total compensation package that enables PECO to attractoperating our business with the utmost integrity and retain qualified and experienced directors and to alignthe highest ethical standards as stewards of our directors’investors’ capital. We believe our corporate governance structure closely aligns our interests with those of our stockholders. Notable features of our structure include: (i) each of our directors being subject to election annually; (ii) a charter that prevents us from classifying our Board unless we receive prior stockholder approval; (iii) we have opted out of the business combination and control share acquisition statutes in the Maryland General Corporation Law; (iv) no stockholder rights plan and
we will not adopt one without stockholder approval or stockholder ratification within 12 months of adoption of such a plan; (v) a Stock Ownership Policy that requires each director, our CEO and each other NEO to own a certain amount of our equity; and (vi) bylaws that permit our stockholders by includingto alter or replace our bylaws upon the affirmative vote of a substantial portionmajority of their compensation in sharesthe votes entitled to be cast.
We operate under the direction of PECO common stock. Non-employeeour Board, which is comprised of eight directors, seven of whom are independent per applicable Nasdaq and SEC rules, and compliant with the diverse director compensation is set by therequirements under Nasdaq’s Board Diversity Rule. Our Audit, Nominating and Governance and Compensation Committee.Committees are comprised solely of independent directors who complete annual self- assessments. Our Board has adopted Corporate
All of our associates are
required to complete
regular training on input from its independent compensation consultant, the Compensationour
Code of Business Conduct
and Ethics and our Insider
Trading Policy, and provide
annual Code of Conduct
Compliance Certifications
to our Chief Ethics and
Compliance Officer.
Governance Guidelines that, among other things, establish criteria and expectations for our directors, and our Nominating and Governance Committee approved the following changeshas responsibility for evaluating our Board. We are cognizant of “overboarding,” and none of our directors serves on more than two other public company boards.
Our full Board oversees each of our corporate social responsibility, ESG and enterprise risk management programs, and our Audit Committee oversees our robust ethics and compliance program. Management provides periodic updates on each such program to the non-employee director compensation programBoard.
All PECO associates are required to complete regular training on our Code of Business Conduct and Ethics and Insider Trading Policy, and we provide annual Code of Conduct Compliance Certifications to our Chief Ethics and Compliance Officer. We also encourage our associates to speak up when our ethics standards are not being met, including by maintaining a 24-hour ethics hotline and website for 2019: increased the annual cash retainer from $52,500 to $57,250; increased the annual equity retainer from $52,500 to $57,250; increased each of the annual cash retainers for the Lead Director,reporting concerns and keeping our Audit Committee chair, and Compensation Committee chair from $10,000 to $10,300; and eliminated the $1,000 per meeting fee. In addition, the directors received reimbursementapprised of reasonable out-of-pocket expenses incurred in connection with attending meetings in person.all reported concerns.
2022 PROXY STATEMENT | 28 |
Below is certain information about our current executive officers as of the date of this Jeffrey S. Edison Chairman & Chief Executive Officer Age Devin I. Murphy President Age 62 Mr. Murphy has served as our President since August 2019. Prior to that, he served as our Chief Financial Officer from June 2013, when he joined the Company, to August 2019. Before joining Phillips Edison in 2013, Mr. Murphy worked for 27 years as an investment banker and held senior leadership roles at Morgan Stanley and Deutsche Bank. He served as the Global Head of Real Estate Investment Banking at Deutsche Bank. His Deutsche Bank team executed over 500 transactions of all types for clients representing total transaction volume exceeding $400 billion and included initial public offerings, mergers and acquisitions, common stock offerings, secured and unsecured debt offerings, and private placements of both debt and equity. Mr. Murphy began his banking career at Morgan Stanley in 1986 and held a number of senior positions including Vice Chairman, co-head of US Real Estate Investment Banking, and Head of Real Estate Private Capital Markets. He also served on the Investment Committee of the Morgan Stanley Real Estate Funds, a series of global real estate funds with over $35 billion in assets under management. During his 20 years with Morgan Stanley, Mr. Murphy and his teams executed numerous capital markets and merger and acquisition transactions including a number of industry-defining transactions. Mr. Murphy served as a Director of the NYSE-listed real estate services firm Grubb and Ellis prior to its sale to BGC Partners and of the S&P 500 company Apartment Investment and Management (AIV) prior to its spin off transaction. Mr. Murphy currently serves as an independent director of Apartment Income REIT Corp (AIRC), a NYSE-listed apartment REIT, and serves on the Audit, Compensation, and Nominating Committees of AIRC. He is also an independent director of CoreCivic (CXW), a NYSE-listed corporation that provides diversified government solutions in corrections and detention management. He serves on the Audit, Risk, and Special Litigation Committees at CXW. Mr. Murphy received a Bachelor of Arts in English and History with Honors from the College of William & Mary and a Master of Business Administration from the University of Michigan.EXECUTIVE OFFICERSProxy Statement.59Mr. Edison has served as PECO’s Chairman of the Board and Chief Executive Officer since October 2017December 2009 and also served as President from October 2017 to August 15, 2019. He served as Chairman or Co-Chairman of the Board and Chief Executive Officer from December 2009 to October 2017. Mr. Edison also served as Chairman of the Board and Chief Executive Officer of Phillips Edison Grocery Center REIT III Inc. (“REIT III”) from April 2016 tothrough the mergerdate it merged with REIT IIIPECO in October 2019, and served as Chairman of the Board and Chief Executive Officer of Phillips Edison Grocery Center REIT II Inc. (“REIT II”) from 2013 tothrough the mergerdate it merged with REIT IIPECO in November 2018. Mr. Edison co-founded Phillips Edison Limited Partnership PELP and has served as a principal of it since 1995. Before founding Phillips Edison, from 1991 to 1995, Mr. Edison was a senior vice president from 1993 until 1995 and was a vice president from 1991 until 1993 at Nations Bank’s South Charles Realty Corporation. From 1987 until 1990, Mr. Edison was employed by Morgan Stanley Realty Incorporated from 1987 until 1990, and was employed by The Taubman Company from 1984 to 1987. Mr. Edison holds a Bachelor of Arts in mathematics and economics from Colgate University and a Master of Business Administration from Harvard University. 2022 PROXY STATEMENT 29
Robert F. Myers Chief Age 49 | Mr. Myers has served as our Chief Operating Officer since October 2010 and Executive Vice President since August 2020. Mr. Myers joined PECO in 2003 as a Senior Leasing Manager, was promoted to Regional Leasing Manager in 2005 and became Vice President of Leasing in 2006 He was named Senior Vice President of Leasing and Operations in 2009, Chief Operating Officer in 2010 and Executive Vice President in 2020. Before joining PECO, Mr. Myers spent six years with Equity Investment Group, where he started as a property manager in 1997. He served as director of operations from 1998 to 2000 and as director of lease renegotiations/leasing agent from 2000 to 2003. He received his Bachelor of Science in Business Administration from Huntington College in 1995. |
John P. Caulfield Chief Financial Officer, Executive Vice President & Treasurer Age | Mr. Caulfield has served as our Chief Financial Officer |
2022 PROXY STATEMENT | 30 |
Tanya E. Brady General Counsel, Chief Ethics & Compliance Officer, Executive Vice President & Secretary Age | Ms. Brady has served as our General Counsel |
2022 PROXY STATEMENT | ||||||
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This Compensation Discussion and Analysis describes our compensation program as it relates to our named executive officers, COMPENSATION DISCUSSION AND ANALYSISOverview(“NEOs”).or NEOs. For 2019,2021, our named executive officers were:
Jeffrey S. Edison, Chairman of the Board and Chief Executive Officer, and President;Officer;
Devin I. Murphy President and Former Chief Financial Officer;, President;
Robert F. Myers, Chief Operating Officer and Executive Vice President; and
John P. Caulfield, Chief Financial Officer, Executive Vice President.President and Treasurer; and
Tanya E. Brady, General Counsel, Chief Ethics & Compliance Officer, Executive Vice President and Secretary.
Summary of Key Compensation Practices
WHAT WE DO ✓ | ||||||
✓DO | ||||||
✓DO have a formulaic annual incentive bonus program based on | ||||||
✓DO align the interests of our executive officers with our stockholders by awarding a significant percentage of their equity compensation in the form of multi-year, performance-based equity | ||||||
✓DO enhance executive officer retention with time-based, multi-year vesting equity incentive awards | ||||||
✓DO have a Compensation Committee, comprised solely of independent directors, that engages an independent compensation consultant |
WHAT WE DON’T DO X | |||||
XNO “single-trigger” change in control cash severance payments | |||||
XNO guaranteed annual salary increases or minimum cash bonuses | |||||
XNO tax gross-up payments to any of our executive officers for tax amounts they might pay pursuant to Section 4999 or Section 409A of the Internal Revenue | |||||
XNO repricing or buyouts of stock options without prior stockholder | |||||
XNO hedging or |
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2021 Performance
We believe that the compensation of our NEOs for fiscal year 2021 was aligned with the Company’s performance during 2021. Highlights of that performance include:
Net income of $17.2 million, an increase of $11.8 million from a year ago, primarily due to increased collections, higher gains on the disposal of property, and lower interest expense.
Closure of our underwritten IPO, including the full over-allotment option, which generated gross proceeds of $547.4 million.
Attainment of a monthly billings collection rate of 99% during the second half of the year, returning to pre- COVID levels.
Core FFO improvement of $0.21 to $2.19 per diluted share primarily due to increased collections and lower interest expense.
Same-Center NOI improvement of 8.2% to $346.8 million.
Acquisition of $307.6 million and disposition of $216.1 million of assets, resuming our external growth strategy while improving portfolio quality with our dispositions.
Achievement of investment grade ratings from Moody’s Investors Services (Baa3) and S&P Global Ratings (BBB-).
Settlement of our 2021 bond offering, which resulted in gross proceeds of $345.4 million.
Establishment of a new $980 million credit facility comprised of a $500 million senior unsecured revolving credit facility and two $240 million senior unsecured term loan tranches (the “Refinancing”).
Reduction of our total net outstanding debt maturing in 2020obligations by 17.5% from a year ago by utilizing proceeds from the IPO, cash flow from operations and 2021. An additional $30.0 millioncash on hand.
Payment of term loan debt was paid off in January 2020. Following this activity, our next term loan maturity is in 2022.monthly distributions of $0.085 per share, or $1.02 annualized, through September 2021 and increased monthly distributions 6% to $0.09 per share, or $1.08 annualized, for the remainder of the year.
• | |
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2022 PROXY STATEMENT | 33 |
Summary of Fixed and At Risk Pay Elements
The fixed and at risk pay elements of NEO compensation are reflected in the table and charts below.
ELEMENT | FORM | DESCRIPTION | ||||
Fixed Compensation | Base Salary | Cash | • Designed to compensate executive officers for services rendered on a day-to-day basis • Provides guaranteed cash compensation to secure services of our executive talent • Established based on scope of responsibilities, experience, performance, contributions, and internal pay equity considerations • Compensation Committee reviews annually | |||
Variable/ At-Risk Compensation | Annual Incentive Plan | Cash Bonus | • Designed to encourage outstanding individual and Company performance by motivating executives to achieve short-term Company and individual goals by rewarding performance measured against key annual strategic objectives • | |||
Long-Term Incentive Plan | Performance- Based Awards | • Compensation Committee believes a substantial portion of each executive’s compensation should be in the form of long-term equity incentives • Designed to encourage management to create stockholder value over the long term; value of equity awards directly tied to changes in value of our common stock over time • • Performance-based LTI Awards granted under the 2019 LTI Program were deemed earned at maximum based on performance through December 31, 2021 | ||||
Time- Based Awards |
2022 PROXY STATEMENT | 34 |
EXECUTIVE COMPENSATION OBJECTIVES AND PHILOSOPHY
The key objectives of our executive compensation program are to: (1)(i) attract, motivate, reward, and retain superior executive officers with the skills necessary to successfully lead and manage our business; (2)(ii) achieve accountability for performance by linking annual cash incentive compensation to the achievement of measurable performance objectives; and (3)(iii) incentivize our executive officers to build value and achieve financial objectives designed to increase the value of our business through short-term and long-term incentive compensation programs. For our executive officers, these short-term and long-term incentives are designed to accomplish these objectives by providing a significant correlation between our financial results and their actual total compensation.
We expect to continue to provide our executive officers with a significant portion of their compensation through cash incentive compensation contingent upon the achievement of financial and individual performance metrics as well as through equity compensation. These two elements of executive compensation (cash and equity) are aligned with the interests of our stockholders because the amount of compensation ultimately received will vary with our financial performance. Equity compensation derives its value from the appreciation of shares of our common stock. We seek to apply a consistent compensation philosophy to compensation for all executive officers.
SETTING EXECUTIVE COMPENSATION
The Compensation Committee is responsible for approving the compensation of the CEOour Chief Executive Officer and other executive officers. When setting executive compensation, the Compensation Committee considers our overall Company performance, including our achievement of financial goals, and individual performance. TheyThe Compensation Committee also considerconsiders compensation paid by similarly situated REITs for their executive roles. In addition, the Compensation Committee continues to consider the projected performance and strategic outlook for the Company, the changing roles and responsibilities of our executive officers, and the expected future contributions of our executive officers. The Compensation Committee believes that understanding competitive market data is an important part of its decision-making process and,process; while this exercise does not perfectly capture all the unique aspects of our business, typically it provides a solid foundation upon which to base executive compensation decisions.
In determining appropriate compensation levels for our CEO,Chief Executive Officer, the Compensation Committee meets outside the presence of management.management and the Chief Executive Officer. With respect to the compensation levels of all other executives, the Compensation Committee meets outside the presence of all executive officers except our CEO.Chief Executive Officer. Our CEOChief Executive Officer annually reviews the performance of each of the other executives with the Compensation Committee.
Role of Compensation Consultant
The Compensation Committee engaged FPL Associates L.P. (“FPL”)Ferguson Partners Consulting (FPC) to provide guidance regarding our executive compensation program for 2019.2021. The Compensation Committee performs an annual assessment of the compensation consultant’s independence to determine whether the consultant is independent. During 2019, FPL2021, FPC did not provide services to the Company other than the services provided to the Compensation Committee. The Compensation Committee has determined that FPLFPC is independent and that its work has not raised any conflicts of interest.
2022 PROXY STATEMENT | 35 |
Benchmarking and Peer Group Comparisons
The Compensation Committee reviews competitive compensation data from a select group of peer companies and broader survey sources. Although comparisons of compensation paid to our executivesNEOs relative to compensation paid to similarly situated executives in the survey and by our peers assistsassist the Compensation Committee in determining compensation, the Compensation Committee principally evaluates executive compensation based on corporate objectives and individual performance.
For 2019,2021, FPC proposed, and the Compensation Committee approved, the use of the following peer group which is used to benchmark pay practices and withof companies (with whom we compete for talent, was reviewed. Our senior management team proposedtalent) to benchmark our pay practices. The companies considered by FPC in developing the peer group ofincluded other shopping center focused public REITs, generally between 0.5x and 2x the Company’s size, companies which was reviewedanalysts generally compare our performance against and approved byother companies within the Compensation Committee after it was independently verified by FPL.
Acadia Realty Trust | Kimco Realty Corporation | Retail Properties of America, Inc. | ||
Kite Realty Group Trust | SITE Centers Corp. | |||
Federal Realty | Regency Centers Corporation | Weingarten Realty Investors | ||
InvenTrust Properties Corp. | Retail Opportunity Investments Corp. |
* | At the time of grant, Retail Properties of America, Inc. | |
and Weingarten Realty Investors | ||
were included in this peer group but each has since been involved in a merger transaction and is no longer publicly traded. |
To further assess our compensation levels for 2021, FPC also furnished a report to the Compensation Committee that compared the compensation of our executive officers to data in the survey provided by the National Association of Real Estate Investment Trusts, (“Nareit”) survey to assess compensation levels for 2019.or Nareit. The Nareit survey includes 126122 REITs and provides a broad market reference of REITs, including retail REITs, many of which compete with the Companyus for executive talent.
ADVISORY VOTE ON EXECUTIVE COMPENSATION
Each year, the Compensation Committee considers the outcome of the stockholder advisory vote on executive compensation when making future decisions relating to the compensation of our named executive officersNEOs and our executive compensation program and policies. In 2019,2021, stockholders showed support for our executive compensation programs, with approximately 91%more than 88% of the votes cast for the approval of the “say-on-pay”“say-on-pay” proposal at our 20192021 annual meeting of stockholders. The Compensation Committee believes that this support is attributable to its commitment to continuing the alignment of our NEOs’ compensation with the Company’s performance.
ELEMENTS OF EXECUTIVE COMPENSATION
Annual base salary, annual cash incentive, and long-term equity incentives are the primary elements of our executive compensation program, and, on an aggregate basis, they are intended to substantially satisfy our program’s overall objectives. The Compensation Committee seeks to set each of these elements of compensation at the same time to enable it to simultaneously consider all of the significant elements and their impact on compensation as a whole. Taking this comprehensive view of all compensation components also
2022 PROXY STATEMENT | 36 |
allows the Compensation Committee to make compensation determinations that reflect the principles of our compensation philosophy. We strive to achieve an appropriate mix between the various elements of our compensation program to meet our compensation objectives and philosophy; however, the Compensation Committee does not apply any rigid allocation formula in setting our executive compensation and may make adjustments to this approach for various positions after giving due consideration to prevailing circumstances, internal pay equity, and each individual’s responsibilities, experience and performance. The Compensation Committee seeks to establish an appropriate mix of cash payments and equity awards to meet our short-term and long-term goals and objectives.
Base Salary
We provide base salaries to our executivesNEOs to compensate them for services rendered on a day-to-day basis. Base salaries also provide guaranteedguaranteed cash compensation to secure the services of our executive talent. The base salaries of our executivesNEOs are primarily established based on the scope of their responsibilities, experience, performance, and contributions, and internal pay equity considerations, taking into account comparable company data provided by our compensation consultant and based upon the Compensation Committee’s understanding of compensation paid to similarly situated executives, adjusted as necessary to recruit or retain specific individuals. The Compensation Committee reviews the base salaries of our executive officers annually and may also increase the base salary of an executive at other times if a change in the scope of his or her responsibilities, such as a promotion, justifies such consideration.
We believe that providing a competitive base salary relative to the companies with which we compete for executive talent is a necessary element of a compensation program that is designed to attract and retain talented and experienced executives. We also believe that attractive base salaries can motivate and reward our executive officers for their overall performance. Accordingly, the compensation philosophy and approach of the Compensation Committee is to generally provide a base salary for each of our executive officers at or near the 50th50th percentile base salary amount of similarly situated executives at companies in the Nareit survey with adjustments made to take into account for other factors such as the executive’s responsibilities and experience and internal pay equity. Based on such review, Mr. Caulfield received a 10% increase to his base salary in 2021. The following table presents the annual base salary of each of our NEOs received basefor 2020 and 2021 (without giving effect to the voluntary salary increases from 2.6% to 6.3%reductions by our NEOs in 2019.
Executive | 2018 Base Salary | 2019 Base Salary | % Increase |
Jeffrey S. Edison | $800,000 | $850,000 | 6.3% |
John P. Caulfield(1) | — | $300,000 | — |
Tanya E. Brady(1) | — | $350,000 | — |
Devin I. Murphy | $477,500 | $490,000 | 2.6% |
Robert F. Myers | $477,500 | $490,000 | 2.6% |
R. Mark Addy | $231,750 | $240,000 | 3.6% |
Executive | 2020 Base Salary | 2021 Base Salary | % Increase | ||||||||||||
Jeffrey S. Edison | $ | 850,000 | $ | 850,000 | – | ||||||||||
Devin I. Murphy | 490,000 | 490,000 | – | ||||||||||||
Robert F. Myers | 490,000 | 490,000 | – | ||||||||||||
John P. Caulfield | 330,000 | 363,000 | 10 | % | |||||||||||
Tanya E. Brady | 365,000 | 365,000 | – |
2022 PROXY STATEMENT | 37 |
2021 Annual Cash Incentive Program
Program Design
In March 2019,2021, the Compensation Committee, in consultation with FPL,FPC, approved the 20192021 annual cash incentive program for our executive officers. The 20192021 program added a secondused the same Company performance measure,measures, Adjusted FFO per share and Same-Center NOI growth, which the Compensation Committee believes is integral for measuring the ongoing performance of the Company’s portfolio.as in 2020. Accordingly, under the 20192021 annual cash incentive program, for all executive officers except Mr. Addy,Murphy, the weighting of Company and individual performance was as follows: adjustedAdjusted FFO (“AFFO”) per share target (50%), same-centerSame-Center NOI growth (20%), and individual performance (30%). Mr. Addy’sMurphy’s award was based on AFFO/Adjusted FFO per share (10%) and individual performance (90%)., with individual performance reflecting an emphasis on the performance of the asset management business. The Compensation Committee chose the relative weights of the performance measures based on its desire to emphasize financial results while maintaining a focus on non-financialnon- financial initiatives.
Company Performance Goals
The Compensation Committee believes that AFFOAdjusted FFO per share is an appropriate and effective measure of annual Company-wide performance. Nareit FFO is a non-GAAP performance financial measure that is widely recognized as a measure of REIT operating performance. Nareit FFO is net income (loss) attributable to common stockholders computed in accordance with GAAP, excludingaccounting principals generally accepted in the United States (“GAAP”), excluding: (i) gains (or losses) from sales of property plus real estateand gains (or losses) from change in control; (ii) depreciation and amortization related to real estate; (iii) impairment losses on real estate and afterimpairments of in-substance real estate investments in investees that are driven by measurable decreases in the fair value of the depreciable real estate held by the unconsolidated partnerships and joint ventures; and (iv) adjustments for unconsolidated entitiespartnerships and non-controlling interests. AFFOjoint ventures, calculated to reflect FFO on the same basis. Core FFO adjusts Nareit FFO for straight-line rents,(i) depreciation and amortization of in-place leases, defined financing costscorporate assets; (ii) changes in the fair value of the earn-out liability; (iii) amortization equity compensation, net gainof unconsolidated joint venture basis differences; (iv) gains or losslosses on the extinguishment or modification of debt pro rata JV interest, tenant improvements, leasingand other; (v) other impairment charges; (vi) transaction and acquisition expenses; and (vii) realized performance income. Adjustments for unconsolidated partnerships and unconsolidated joint ventures are calculated to reflect Core FFO on the same basis. Adjusted FFO is calculated as Core FFO adjusted to exclude: (i) straight-line rent and non-cash adjustments, such as amortization of market lease adjustments, debt discounts, deferred financing costs, and maintenancemarket debt adjustments; (ii) recurring capital expenditures.
The Compensation Committee believes that Same-Center NOI Growthgrowth is an appropriate and effective measure of financial performance compared to the prior year. Same-Center NOI is a non-GAAP performance financial measure that is widely used to highlight operating trends such as occupancy rates, rental rates, and operating costs on propertiesshopping centers that were operational for both comparable periods. For purposes of evaluating Same-Center NOI growth, the Compensation Committee used Pro Forma Same-Center NOI, which is Same-Center NOI on a pro forma basis as if the merger with REIT II had occurred on January 1, 2018. This perspective allowed the Committee to evaluate Same-Center NOI growth over a comparable period. As of December 31, 2019, we had 276 same-center properties, including 84 same-center properties acquired in the merger with REIT II. Pro Forma Same-Center NOI is not necessarily indicative of what actual Same-Center NOI growth would have been if the merger had occurred on January 1, 2018, nor does it purport to represent Same-Center NOI growth for future periods.
2022 PROXY STATEMENT | 38 |
Short-Term Incentive Program Performance Against Performance Targets
The 20192021 performance criteria for the Company performance metrics, isand our actual performance, are set forth below:
Performance Metric
| Target
| Actual
| Weighting (NEOs other
| Weighting
| ||||||||||||||||
Adjusted FFO per Share(2)
| $1.67(3)
| $1.79
| 50%
| 10%
| ||||||||||||||||
Same-Center NOI Growth
| 2.6%
| 8.2%
| 20%
| 0%
|
(1) | 30% of the short-term incentive is based on individual performance metrics; this percentage is 90% in the case of Mr. Murphy. |
(2) | See Annex A starting on page A-1 for definition and reconciliation. |
(3) | On March 1, 2021, the Compensation Committee established $1.81 as the target level Adjusted FFO per Share performance metric. In light of the dilution resulting from the IPO, on November 3, 2021, the Compensation Committee subsequently revised the target level Adjusted FFO per Share performance metric and approved $1.67 as the revised target. |
Due to continued uncertainty in the table below. Performance between levels is interpolated. The maximum payout for each metric is 150%market resulting from the continued impact of award target, regardless ofCOVID-19 on retail and real estate, rather than establishing defined performance achieved. The threshold levels were set based on a level of performancemetrics that was believedneeded to be achievableachieved in order to motivatereach threshold and retainmaximum payouts under the short-term incentive program, the Compensation Committee established only a target performance level for 2021, with the discretion to approve payments above or below target based on actual performance. After reviewing the Company’s executives. Theactual performance as compared to the target levels were set based on a levelgoals for Adjusted FFO per Share (as adjusted for the dilution from the IPO) and Same-Center NOI Growth, the Compensation Committee approved payouts to the NEOs with respect to such goals at 150% of operating performance that was believed to be aggressive, but obtainable. The maximum levels were set based on a level of operating performance that was believed to be realizable, but only as a result of exceptional performance. target.
Individual Performance Goals
The Compensation Committee has the discretion to adjustalso reviewed the performance of each NEO against his or her individual goals. The individual goals, used to determine whether or not the performance goals were achieved to take into account extraordinary, unusual or infrequently occurring events and transactions not anticipatedas originally set at the timebeginning of March 2021, included, for all NEOs, individual performance related to the achievement of the Company’s financial and operational performance targets and leadership goals, were set.
Performance Metric | Threshold | Target | Maximum | Actual | Percentage Payout |
AFFO/Share | $0.53 | $0.55 | $0.57 | $0.58 | 150% |
Same-Center NOI Growth | 1.75% | 2.20% | 2.75% | 3.70% | 150% |
Mr. Edison: Goals relating to creating and advancing the Company’s strategic vision, the Company’s strategy to maximize long term value, institutional investor and growingpartner relations and liquidity options.
Mr. Murphy: Goals relating to revenue in ourand profitability of the Company’s investment management business.business, performance and liquidation plans for unconsolidated joint ventures and liquidity options for the Company.
Mr. Myers: Goals relating to year-end in-line leasing occupancy, budgeted acquisitions and dispositions and cost controls.
Mr. Caulfield’s individual goals in 2019 included decreasingCaulfield: Goals relating to the Company’s leverage, achieving/exceeding financial performance targets of the Company and our joint ventures, evaluating liquidity options, creating and advancingrefinancing the Company’s strategic vision,revolver and growing revenue in our investment management business.2022 term loan, internal controls, cost controls and liquidity options.
Ms. Brady’s individual goals in 2019 included overseeing all legal matters affecting the Company, ensuring appropriate risk protection in all of our contracts, Brady: Goals relating to overseeing the Company’s transactional activity, ofadvising with respect to the Company from acquisitions and dispositions to tenant leases, facilitating future growth in ourCompany’s investment management business, through advising on structuringcost controls and legal considerations, and evaluating liquidity options.
The Compensation Committee determined that Messrs. Edison, Caulfield and Murphy and Ms. Brady earned 94% and Mr. Myers earned 117%for 2021 the individual goals for each NEO were achieved at 150% of the portion of their respective annual cash incentive awards attributable to individual performance.target.
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2021 Cash Target Awards and Resulting Awards Earned
Based on the results described above, the following table shows the annual cash incentive target award and the actual amount earned by each NEO for 2019:
Executive | Target Award | AFFO/Share (50% Weight) | Same-Center NOI Growth (20% Weight) | Individual Performance (30% Weight) | Total Award Earned and Paid | ||||
% Achieved | Award Earned | % Achieved | Award Earned | % Achieved | Award Earned | Amount Earned | % of Target | ||
Jeffrey S. Edison | $1,250,000 | 150% | $937,500 | 150% | $375,000 | 94% | $352,500 | $1,665,000 | 133% |
John P. Caulfield | $190,000 | 150% | $142,500 | 150% | $57,000 | 94% | $53,580 | $253,080 | 133% |
Tanya E. Brady | $160,000 | 150% | $120,000 | 150% | $48,000 | 94% | $45,120 | $213,120 | 133% |
Devin I. Murphy | $490,000 | 150% | $367,500 | 150% | $147,000 | 94% | $138,180 | $652,680 | 133% |
Robert F. Myers | $490,000 | 150% | $367,500 | 150% | $147,000 | 117% | $171,990 | $686,490 | 140% |
R. Mark Addy(1) | $800,000 | — | — | — | — | — | — | — | — |
2021:
|
The Compensation Committee believes that a substantial portion of each executive’s annual compensation should be in the form of long-term equity incentive awards. Long-term equity incentive awards encourage management to create stockholder value over the long term because the value of the equity awards is directly attributable to changes in the value of our common stock over time. In addition, long-term equity incentive awards are an effective tool for management retention because full vesting of the awards generally requires continued employment for multiple years. TheAs such, the purpose of theour long-term incentive program is to further align the interests of our stockholders with that of management by encouraging our executivesNEOs to remain employed by us for the long termlong-term and to create stockholder value in a “pay for performance” structure.
2021 Long-Term Incentive Program
In March 2019,2021, the Compensation Committee approved the 20192021 Long-Term Incentive Program for executive officers, (the “2019 LTIP Program”),or the 2021 LTI Program, a multi-year long-term incentive program. Pursuant to the 2019 LTIP2021 LTI Program, we issued long-term equity awards, (“LTIP Units”)or LTI Awards, in the form of restricted stocktime-based vesting units (“RSUs”)and performance–based vesting units.
As part of our annual grant process for our LTI Awards, each executive officer is given the opportunity to elect to receive the annual time-based and performance-based LTI Awards in the Companyform of either (i) rights with respect to common stock, or Class C limited partnership(ii) rights with respect to units (“Class C Units”) ofin Phillips Edison Grocery Center Operating Partnership I, L.P. (our “Operating Partnership”) (“PECO OP”OP Units”), at. These elections are completed prior to the electiongrant date of the executive. For 2019, Messrs. Edison, Addy, Murphy,respective LTI Award. If rights with respect to common stock are elected by the individual, then the LTI Award is in the form of time-based restricted stock units (“RSUs”) or performance-based RSUs, as applicable. If rights with respect to OP Units are elected by the individual, then the LTI Award is in the form of time-based Class B limited partnership units of our Operating Partnership (“Class B Units”) or performance-based Class C limited partnership units of our Operating Partnership (“Class C Units”). Class B Units and Myers elected to receive Class C Units are intended to qualify as profits interests in the Operating Partnership and, Mr.pursuant to our Operating Partnership’s partnership agreement, automatically convert on a one-for-one basis into OP Units once the Class B Units or Class C Units, as applicable, achieve parity with the OP Units (based on capital account balance per unit) and have satisfied all applicable time-vesting and performance-
2022 PROXY STATEMENT | 40 |
vesting conditions. For 2021, Messrs. Edison, Murphy, Myers and Caulfield and Ms. Brady elected to receive RSUs. At issuance, theClass B Units for their time-based and Class C Units were subject to vesting and did not have full parity with common units of limited partnership interest (“OP Units”) in PECO OP with respect to liquidating distributions, but uponfor their performance-based LTI Awards.
Under the occurrence of certain events described in PECO OP’s partnership agreement, could over time achieve full parity with the OP Units for all purposes. Upon vesting and achieving full parity with OP Units, the Class C Units would convert into an equal number of OP Units. Each OP Unit acquired upon conversion of a Class C Unit may be presented for redemption at the election2021 LTI Program, each NEO’s performance-based LTI Award represented 60% of the holder, for cash equal to the fair marketaggregate value of a share of PECO common stock, except that PECO OP may, at its election, acquirethe NEO’s target award and each OP Unit so presented for one share of PECO common stock.
From 2019 to April 2021, Mr. Murphy’s long-term incentive program was limited to the Special LTI Award that he received in 2019. Mr. Murphy’s Special LTI Award was granted in lieu of any time-based or performance- based awards under the 2019 LTI Program and, at the time of grant, it was intended that Mr. Murphy’s Special LTI Award would be granted in lieu of awards under future LTI programs. However, in April 2021, the Compensation Committee modified the long-term incentive program applicable to Mr. Murphy and granted Mr. Murphy a 2021 LTI Award in the form of 13,714 fully vested Class B Units and 20,572 performance-based Class C Units (at target level performance and subject to vesting as described below) based on the values set forth in the table below.
2022 PROXY STATEMENT | ||||||||||||
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The 2021 LTI Awards granted to our NEOs in March 2019,2021 (or April 2021, in the executives were granted LTIP Units withcase of Mr. Murphy), other than the IPO Awards (as defined below), are set forth in the table below. The amounts set forth below reflect the grant date fair values set forth below,of the 2021 LTI Awards, calculated in accordance with FASBAccounting Standards Codification Topic 718: Compensation-Stock Compensation, or ASC 718. TheOther than for Mr. Murphy, time-based awards represent the grant at target levels of time-based awards that were part of the 20182020 Long-Term Incentive Program, (“2018 LTIP Program”).or 2020 LTI Program, and were based on the pre-established Committee-determined target values presented below. Mr. Murphy’s time-based award reflects the value of the award determined by the Compensation Committee at the time of grant in April 2021 as discussed above. The value of the performance-based awards represents the target level of performance achievable under the 2019 LTIP2021 LTI Program, which is 50% of the maximum performance-based award that can be earned and paid.
Name | Time-Based LTIP Units | Performance-Based LTIP Units at Target | Total LTIP Units Granted in 2019 |
Jeffrey S. Edison(1) | $975,140 | $1,755,005 | $2,730,145 |
John P. Caulfield | $78,996 | $66,002 | $144,998 |
Tanya E. Brady | $95,627 | $90,002 | $185,629 |
Devin I. Murphy(1) | $437,624 | — | $437,624 |
Robert F. Myers | $437,624 | $540,002 | $977,626 |
R. Mark Addy | $103,008 | $126,003 | $229,011 |
Name
|
Time-Based
|
Performance-Based
|
Total LTI Award Values
| ||||||||||||
Jeffrey S. Edison | $1,169,989 | $1,754,996 | $2,924,985 | ||||||||||||
Devin I. Murphy | 434,048 | 651,104 | 1,085,152 | ||||||||||||
Robert F. Myers | 359,993 | 540,015 | 900,008 | ||||||||||||
John P. Caulfield | 132,011 | 217,796 | 349,807 | ||||||||||||
Tanya E. Brady | 72,004 | 120,015 | 192,019 |
(1) | |
Excluding IPO Awards. |
For the performance-based LTIP Units,LTI Awards, there are two separate, equally-weighted performance metrics: (i) three-year average Same-Center NOI growth measured against a peer group of nine public retail REITs (listed below); and (ii) three-year Core FFO per share growth measured against the same peer group. At the end of the three-year performance period, other than for Mr. Murphy, 50% of the award earned based on achievement of the performance metrics vests and the remaining 50% of the earned award vests on the one-year anniversary of such date, subject to continued employment. employment through the applicable vesting date. For Mr. Murphy, 100% of the Class C Units earned under his performance-based 2021 LTI Award will vest when earned at the end of the three-year performance period. If Mr. Murphy’s employment terminates for any reason other than by the Company for cause, he will remain eligible to vest in the performance-based 2021 LTI Award as follows: (i) if the termination occurs before 50% of the performance period has elapsed, a pro-rated portion of the award actually earned will vest based on performance at the end of the performance period, with the proration calculated based on the ratio of the number of days employed during the performance period to the total number of days in the performance period, and (ii) if the termination occurs after 50% or more of the performance period has elapsed, 100% of the Class C Units actually earned at the end of the performance period will vest.
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The threshold, target, and maximum levels for the
Metric | Weighting | Threshold | Target | Maximum | ||||||||||||||||
Three-Year Average Same-Center NOI Growth | 50% | 25th Percentile of Peer Group | 50th Percentile of Peer Group | 75th Percentile of Peer Group | ||||||||||||||||
Three-Year Core FFO per Share Growth | 50% | 25th Percentile of Peer Group | 50th Percentile of Peer Group | 75th Percentile of Peer Group |
For the 2019 LTIP2021 LTI Program, the nine public retail REITs peer group against which we will measure these metrics were:
Brixmor Property Group | RPT Realty | |
Kimco Realty Corporation | Regency Centers Corporation | |
Kite Realty Group Trust | Retail Opportunity Investments Corp. |
At the time of grant, Retail Properties of America, Inc. | ||
and Weingarten Realty Investors were included in this peer group but each has since been involved in a merger transaction and is no longer publicly traded. |
In addition, a net assetshare value (“NAV”) modifier will be applied if the growth inCompany’s share value at the Company’s NAV per share forend of the performance period is negative.less than the share value at the beginning of the performance period (which, prior to our IPO, was expressed in terms of the Company’s net asset value (“NAV”)). Specifically, to the extent that performance above the target level is achieved on the performance metrics at the end of the performance period, because our three-year average Same-Center NOI growth and/or three-year average Core FFO growth foryet the Company’s share value at the end of the performance period exceedsis less than the 50
Payout under the 2019 the Compensation Committee approved one-time long-term incentive awards of performance-based LTIP Units to Messrs. Edison and Murphy (each, a “Special LTIP Award”). Long-Term Incentive Program
The backdropperformance period for the Special LTIP Award to Mr. Edison was a determination that, to ensureperformance-based LTI Awards granted under the long-term success2019 LTI Program commenced January 1, 2019 and ended on December 31, 2021. The structure of the Company as a whole, his focus2019 LTI Program was substantially similar to the 2021 LTI Program described above. As set forth in the table below, based on executing PECO’s strategiesour performance through December 31, 2021, these LTI Awards would have been earned at maximum, but because the Company’s share value at the end of the performance period was less than the Company’s NAV at the beginning of the performance period, the amount of earned awards was capped at the target amount, which equals 50% of the 2019 LTI Awards granted. The Contingent Portion will remain eligible to vest if the Company’s share value for managingtwenty consecutive market days prior to December 31, 2026 is greater than the balance sheet and increasing Core FFO should be complemented by a focus on supportingCompany’s NAV at the creationbeginning of an enhanced, scalable investment management business with sustainable revenue. The backdropthe performance period for the Special LTIP Award to Mr. Murphy was a determination2019 LTI Program. 50% of the 2019 LTI performance-based awards that creating value through a separate investment management platform within PECO to diversifywere earned at target vested upon the Company’s sourcescompletion of capital in all market cycles requires intense focus by our second most senior executive officer, with the goal of building new relationships with institutional and other investors that seek to allocate capital to the industry segment in which PECO has had a long and successful track record. Therefore, the Compensation Committee, in consultation with FPL, designed the Special LTIP Awards to create bespoke long-term incentives for each of Mr. Edison and Mr. Murphy.
43 |
period and the remaining 50% is subject to vesting at the one-year anniversary, subject to continued employment through the applicable vesting date.
Summary of 2019 Long-Term Incentive Program Achievement
2019 - 2021 LTI Performance Period and Metrics | Weighting | 2019 2020 2021 | Performance | Result | Payout % | |||||
Same-Center NOI Growth vs. Peers | 50% | 100% Completed | Maximum | 100th percentile (1st place) | 100% | |||||
Core FFO per Share Growth vs. Peers | 50% | 3-Year Measurement Period with 5 Year | Maximum | 89th percentile (2nd place) | 100% | |||||
Share Value Modifier |
| Recoupment Period | Payout Capped at Target/Award Subject to Recoupment | -50%* | Reduced to Target (50%) |
Share value at beginning of performance period |
Share value at end of | ||
IPO Grants
In connection with our IPO, each of our NEOs was granted an award of LTI units in the form of Class C Units. Dividends will accrueB Units to reward the NEO for the successful completion of the IPO (the “IPO Awards”). Each IPO Award vests as to 50% of the award on the LTIP Units until18-month anniversary of the measurement date of grant and 50% of the award on the 36-month anniversary of the date of grant (or, in the case of Mr. Murphy, 50% of the award on the 18-month anniversary of the date of grant and 50% of the award on December 31, 2023), subject to the NEO’s continued employment through the applicable vesting date. The following table sets forth the number of LTI units subject to each IPO Award:
Executive | LTI Units | |||
Jeffrey S. Edison | 99,153 | |||
Devin I. Murphy | 73,729 | |||
Robert F. Myers | 53,390 | |||
John P. Caulfield | 33,898 | |||
Tanya E. Brady | 33,898 |
As the IPO Awards granted in connection with our IPO are one-time in nature, values in the Summary Compensation Table (below) for 2021 will appear significantly higher than those in 2020.
2022 LTI Program
Beginning in 2022, the Compensation Committee approved a change in the Company’s performance-based LTI program such that the performance-based component of awards under the program will be based on a single metric, total shareholder return relative to the FTSE Nareit Equity Shopping Center Index, as illustrated in the following graphic:
2022 PROXY STATEMENT | 44 |
Dividends and Distributions
Holders of unvested time-based RSUs are paid cash dividend equivalents on a quarterly basis, and holders of time-based unvested Class B Units are paid monthly cash distributions, in each case in an amount equal to the cash dividends paid by the Company.
Performance-based LTI Awards accrue dividend or distribution equivalents during the performance period. For performance–based RSUs, accrued dividend equivalents are paid in cash when and only to the extent the performance–based RSUs are earned and shares of common stock are issued. Holders of performance-based Class C Units are entitled to receive cash distributions in an amount per unit equal to, in the case of unearned Class C Units, 10% of the regular quarterly distributions.
We believe that establishing competitive benefit packages for our employeesassociates is an important factor in attracting and retaining highly qualified personnel. Our executivesNEOs are eligible to participate in all of our employee benefit plans, in each case on the same basis as other employees.associates. We also provide a Company matching contribution under our 401(k) savings plan to employeesassociates generally, including our executives,NEOs, up to the Internal Revenue Service limitations for matching contributions.
Mr. Edison receivesreceived personal tax services provided by our internal tax department andprior to July 2021, but thereafter no longer receives personal tax services from our internal tax department. Mr. Edison also has a time-sharean aircraft time-sharing agreement with the Company for personal use of the corporate aircraft leased byto the Company.
EMPLOYMENT, SEVERANCE, CHANGE IN CONTROL, AND OTHER ARRANGEMENTS
We do not have employment agreements, severance or change in control agreements, or other arrangements with any of our executive officersNEOs other than those described below.
Executive Change in Control Severance Plan
Our Amended and Restated Executive Change in Control Severance Plan for executive officers, (the “Severance Plan”)or the Severance Plan, provides for specified payments and benefits in connection with a termination of employment by the Company not for Cause or a resignation by the executive for Good Reason (as each such term is defined in the Severance Plan). Our goal in providing these severance and change in controlSeverance Plan payments and benefits is to offer sufficient cash continuity protection such that our executivesNEOs will focus their full time and attention on
2022 PROXY STATEMENT | 45 |
the requirements of the business rather than the potential implications for their respective positions. We prefer to have certainty regarding the potential severance amounts payable to the executives,NEOs, rather than negotiating severance at the time employment terminates. We also have determined that accelerated vesting provisions with respect to outstanding equity awards in connection with a qualifying termination of employment are appropriate because they encourage our executivesNEOs to stay focused on the business in those circumstances rather than focusing on the potential implications for them personally. In order toTo receive the severance payments and benefits under the Severance Plan, the executivesNEOs must execute a general release of claims and comply with non-competition and non-solicitation provisions that apply for 18 months (or 24 months in the case of Mr. Edison) following termination of employment and confidentiality provisions that apply during and following termination of employment.
Vesting Agreement with Devin Murphy
In October 2017, PECOwe entered into an agreement with Mr. Murphy regarding the vesting of his equity incentive awards (the “Murphy Vesting Agreement”). Pursuant to the Murphy Vesting Agreement, all time-based equity awards granted to Mr. Murphy vested upon the earlier of the vesting date set forth in the applicable equity award agreement and the date Mr. Murphy reached both (i) age 58 and (ii) a combined age and continuous years of service with the Company of 65 years (such date, the “Murphy Retirement Eligibility Date”). The Murphy Retirement Eligibility Date occurred in June 2019. The Murphy Vesting Agreement further provides that if Mr. Murphy’s employment terminates on or following the Murphy Retirement Eligibility Date, he will remainremains eligible to vest in any performance-based LTIP Units,LTI Awards, excluding the Special LTIPLTI Award, as follows: (a) if his retirement occurs before 50% of the performance period has elapsed, then he will vest in a pro-ratedprorated portion of any performance-based LTIP UnitsLTI Awards actually earned based on performance at the end of the performance period, with the pro-rationproration calculated based on the ratio of the number of days Mr. Murphy was employed during the performance period to the total number of days in the performance period and (b) if his retirement occurs after 50% or more of any performance period has elapsed, then Mr. Murphy will vest in any performance-based LTIP UnitsLTI Awards that are actually earned at the end of the performance period.period for each such LTI Award. The provisions of the Murphy Vesting Agreement do not apply to Mr. Murphy’s Special LTIP Award.
TAX AND ACCOUNTING CONSIDERATIONS
We have not provided or agreed to provide any of our executive officers or directors with a gross-up or other reimbursement for tax amounts they might pay pursuant to Section 4999 or Section 409A of the Code. Sections 280G and 4999 of the Code provide that executive officers, directors who hold significant stockholder interests, and certain other service providers could be subject to significant additional taxes if they receive payments or benefits in connection with a change in control of our Company that exceed certain limits, and that we or our successor could lose a deduction on the amounts subject to the additional taxes. Section 409A also imposes additional significant taxes on the individual in the event thatif an employee, director or service provider receives “deferred compensation” that does not meet the requirements of Section 409A.
Section 162(m) of the Internal Revenue Code of 1986 (the “Code”) limits the annual compensation deduction available to publicly held corporations to $1.0 million for certain “covered employees,” which generally includes our NEOs. In December 2019, the IRS issued proposed regulations that, among other things, expanded the definition of compensation to include a publicly held corporate partner’s distributable share of a partnership’s deduction for compensation expense attributable to amounts paid by the partnership for services performed by “covered employees” of the public held corporation, subject to certain transition relief for tax years ending on or after December 20, 2019. The IRS previously issued private letter rulings that held, under certain circumstances, thatIf Section 162(m) does not apply to compensation paid to employees ofapplies for a REIT’s operating partnership. The application of the proposed regulations to our structure is uncertain until more guidance is issued by the IRS. If the proposed regulations are applicable to us, we anticipate thatparticular year, our taxable income will increase on an annual basis as a resultby the amount of the application of Section 162(m).disallowed compensation deduction. To maintain our status as a REIT, we are required to distribute at least 90% of our taxable income to our stockholders in the form of dividends. The increase in taxable income
2022 PROXY STATEMENT | 46 |
resulting from the application of the proposed regulationsSection 162(m) will be taken into account as the Board determines the amount of dividends to be paid to our stockholders for tax years ending on and after December 31, 2019.in future years. Although the Compensation Committee intends to consider the impact of Section 162(m) in structuring compensation programs, after the issuance of IRS regulations, the Compensation Committee expects its primary focus to be on creating programs that address the needs and objectives of the Company regardless of the impact of Section 162(m). As a result, the Compensation Committee may make awards and structure programs that are not deductible under Section 162(m).
Our Board has adopted an Executive Compensation Clawback Policy (“clawback policy”) that applies to our current and Speculative Transactions
In addition, the clawback policy provides that, if a covered employee commits an act giving rise to “misconduct” (as defined in the policy), the Compensation Committee may take remedial action against the covered employee, including the recovery of any incentive compensation paid to the employee within 36 months prior to or following the date of such misconduct and the cancellation of some or all of the employee’s outstanding vested but unsettled incentive compensation awards and outstanding unvested incentive compensation awards.
HEDGING, PLEDGING, AND SPECULATIVE TRANSACTIONS
Our Insider Trading Policy prohibits all directors, officers, and other employeesassociates from engaging in any short-term speculative securities transactions such as short sales or buyingand certain hedging or selling puts, calls, and other derivative securities, or engaging in any other hedging transactionmonetization transactions with respect to the Company’s securities. The policy also prohibits all directors, officers, and other employeesassociates from pledging our securities as collateral for a loan or as collateral in a margin account.
The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis contained in this Proxy Statement. Based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in PECO’sthis Proxy Statement and incorporated by reference into its Annual Report on Form 10-K.
Submitted by the Compensation Committee
John A. Strong (Chair)
Paul J. Massey, Jr.
Jane E. Silfen
The foregoing report shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act or the Exchange Act, except to the extent that the Company specifically incorporates this information by reference, and shall not otherwise be deemed filed under the Exchange Act.
2022 PROXY STATEMENT | 48 |
The following table and footnotes provide information regarding the compensation of our NEOs for the years Summary Compensation Tablepresented.Name and Principal Position Year Salary ($) 2019 838,269 352,500 2,730,145 1,312,500 283,468 5,516,882 2018 725,385 300,000 4,005,035 1,200,000 393,168 6,623,588 2017 411,538 309,000 - - 37,254 757,792 2019 259,505 53,580 210,996 199,500 38,659 762,240 2019 345,192 45,120 275,625 168,000 36,642 870,579 2019 487,045 138,180 437,624 514,500 178,296 1,755,645 2018 464,827 143,222 1,374,922 572,886 285,358 2,841,215 2017 411,538 520,150 - - 12,660 944,348 2019 487,045 171,990 1,517,622 514,500 166,883 2,858,040 2018 474,731 143,222 1,287,372 572,886 289,215 2,767,426 2017 462,981 556,200 - - 11,501 1,030,682 2019 238,064 — 355,000 - 30,326 623,390 2018 230,452 50,000 303,000 120,000 57,892 761,344 2017 225,000 999,862 - - 170,695 1,395,557
Name and Principal Position
| Year
| Salary ($)
| Bonus ($)(1)
| Stock Awards
| Non-Equity Compensation | All Other
| Total ($)
| |||||||||||||||||||||
Jeffrey S. Edison | 2021 | 846,731 | 562,500 | 5,802,345 | 1,312,500 | 282,968 | 8,807,044 | |||||||||||||||||||||
Chairman of the Board | 2020 | 751,923 | 937,500 | 2,924,995 | - | 253,005 | 4,867,423 | |||||||||||||||||||||
and Chief Executive Officer | 2019 | 838,269 | 352,500 | 10,230,150 | 1,312,500 | 585,338 | 13,318,757 | |||||||||||||||||||||
Devin I. Murphy | 2021 | 489,246 | 661,500 | 3,194,945 | 73,500 | 94,368 | 4,513,559 | |||||||||||||||||||||
President | 2020 | 478,692 | 367,500 | - | - | 82,317 | 928,509 | |||||||||||||||||||||
2019 | 487,045 | 138,180 | 4,187,629 | 514,500 | 287,589 | 5,614,943 | ||||||||||||||||||||||
Robert F. Myers | 2021 | 489,246 | 220,500 | 2,440,283 | 514,500 | 83,619 | 3,748,148 | |||||||||||||||||||||
Chief Operating Officer | 2020 | 478,692 | 367,500 | 899,999 | - | 68,812 | 1,815,003 | |||||||||||||||||||||
and Executive Vice President | 2019 | 487,045 | 171,990 | 1,517,622 | 514,500 | 242,315 | 2,933,472 | |||||||||||||||||||||
John P. Caulfield | 2021 | 357,415 | 108,900 | 1,298,947 | 254,100 | 43,866 | 2,063,228 | |||||||||||||||||||||
Chief Financial Officer, | 2020 | 316,615 | 165,000 | 361,339 | - | 23,104 | 866,058 | |||||||||||||||||||||
Executive Vice President | 2019 | 259,505 | 53,580 | 210,996 | 199,500 | 38,659 | 762,240 | |||||||||||||||||||||
and Treasurer | ||||||||||||||||||||||||||||
Tanya E. Brady | 2021 | 364,438 | 78,750 | 1,141,150 | 183,750 | 37,375 | 1,805,463 | |||||||||||||||||||||
General Counsel, | 2020 | 353,692 | 131,250 | 167,999 | - | 20,417 | 673,358 | |||||||||||||||||||||
Chief Ethics & Compliance | 2019 | 345,192 | 45,120 | 275,625 | 168,000 | 36,642 | 870,579 | |||||||||||||||||||||
Officer, Executive Vice | ||||||||||||||||||||||||||||
President and Secretary |
(1) | |
For 2021 and 2019, represents amounts paid under the |
(2) | |
Amounts reflect the grant date fair value of time-based and performance-based |
Name | Time-Based Awards | Performance-Based Awards |
Jeffrey S. Edison | $975,140 | $1,755,005 |
John P. Caulfield | $78,996 | $66,002 |
Tanya E. Brady | $95,627 | $90,002 |
Devin I. Murphy | $437,624 | — |
Robert F. Myers | $437,624 | $540,002 |
R. Mark Addy | $103,008 | $126,003 |
The grant date fair value of the performance-based awards in the stock awards column and in the table above is computed based on the probable outcome of performance conditions as of the grant date. This amount is consistent with the estimate of aggregate compensation cost to be recognized by the Company over the three-year performance period of the award determined as of the grant date under FASB ASC Topic 718, excluding the effect of estimated forfeitures.718. The assumptions used in calculating the valuations are set forth in Note 1513 to the consolidated financial statements in our 2019 Annual Report on Form 10-K.10-K for the fiscal year ended December 31, 2021.
2022 PROXY STATEMENT | 49 |
Assuming the maximum level of performance is achieved, the aggregate grant date fair value of each of the 2021, 2020, and 2019 performance-based awardsLTI Awards is as shown in the following table.
Name | Performance-Based Awards Assuming Maximum Performance (2021 Awards) | Performance-Based Awards Assuming Maximum Performance (2020 Awards) | Performance-Based Awards Assuming Maximum Performance (2019 Awards) |
| |||||||||||||
Jeffrey S. Edison | $ | 3,509,993 | $ | 3,509,953 | $ | 3,510,055 | |||||||||||
Devin I. Murphy | 1,302,208 | N/A | N/A | ||||||||||||||
Robert F. Myers | 1,080,030 | 1,079,986 | 1,080,027 | ||||||||||||||
John P. Caulfield | 435,593 | 396,004 | 73,328 | ||||||||||||||
Tanya E. Brady | 240,030 | 216,050 | 180,571 |
(3) | |
As previously disclosed in |
Name | Grant Date Fair Value of Special LTIP Award | Value Assuming Maximum Performance |
Jeffrey S. Edison | $7,500,005 | $15,000,010 |
Devin I. Murphy | $3,750,005 | $7,500,010 |
Name | Grant Date Fair Value of Special LTI Award | Value Assuming Maximum Performance |
| |||||||||
Jeffrey S. Edison | $ | 7,500,005 | $ | 15,000,010 |
| |||||||
Devin I. Murphy | 3,750,005 | 7,500,010 |
|
(4) | |
Represents amounts paid under the |
(5) | |
Amounts reported in the “All Other Compensation” column for |
Name | Retirement Plan Contributions | Excess Liability Insurance Premiums and Tax Gross Up | Distributions Paid on Unvested Equity Awards(a) | Perquisites(b) | Total |
Jeffrey S. Edison | $8,400 | $4,243 | $174,619 | $96,206 | $283,468 |
John P. Caulfield | $8,400 | $1,298 | $28,961 | — | $38,659 |
Tanya E. Brady | $8,400 | $1,298 | $26,944 | — | $36,642 |
Devin I. Murphy | $8,400 | $3,302 | $166,594 | — | $178,296 |
Robert F. Myers | $8,400 | $3,302 | $155,181 | — | $166,883 |
R. Mark Addy | $8,400 | $1,632 | $20,294 | — | $30,326 |
Name | Retirement Plan Contributions | Distributions Paid on Unvested Equity- Based Awards(a) | Perquisites(b) | Total | |||||||||||||||||||||
Jeffrey S. Edison | $ | 8,700 | $ | 238,104 | $ | 36,164 | $282,968 |
|
|
| |||||||||||||||
Devin I. Murphy | 8,700 | 85,668 | - | 94,368 |
|
|
| ||||||||||||||||||
Robert F. Myers | 8,700 | 74,919 | - | 83,619 |
|
|
| ||||||||||||||||||
John P. Caulfield | 8,700 | 35,166 | - | 43,866 |
|
|
| ||||||||||||||||||
Tanya E. Brady | 8,700 | 28,675 | - | 37,375 |
|
|
|
Includes distributions paid on |
For Mr. Edison, this amount includes |
(6) | Amounts reported in the “All Other Compensation” column for 2020 and 2019 include distributions on unvested Class B Units, unearned Class C Units and/or earned but unvested Class C Units for Messrs. Edison, Murphy and Myers in the following amounts: (i) for 2020, $95,681, $36,485 and $22,510, respectively, and (ii) for 2019, $301,870, $109,293 and 75,432, respectively. |
2022 PROXY STATEMENT | 50 |
The following table provides information about equity and non-equity incentive awards granted to 2019 Grants of Plan-Based Awardsthe NEOs in 2019. Estimated Future Payouts Under Equity Incentive Plan Awards Grant Date Fair Value of Stock Awards Name Grant Date Threshold ($) Target ($) Maximum ($) Threshold (#) Target (#) Maximum (#) Jeffrey S. Edison 3/14/19 $625,000 $1,250,000 $1,875,000 3/14/19 79,412 158,824 317,648 $1,755,005 3/14/19 — 678,824 1,357,647 $7,501,000 3/14/19 88,248 $975,140 John P. Caulfield 3/14/19 $95,000 $190,000 $380,000 3/14/19 2,986 5,973 11,946 $66,002 3/14/19 7,149 $78,996 Tanya E. Brady 3/14/19 $80,000 $160,000 $320,000 3/14/19 4,073 8,145 16,290 $90,002 3/14/19 8,654 $95,627 Devin I. Murphy 3/14/19 $245,000 $490,000 $735,000 3/14/19 — 339,367 678,734 $3,750,005 3/14/19 39,604 $437,624 Robert F. Myers 3/14/19 $245,000 $490,000 $735,000 3/14/19 24,435 48,869 97,738 $540,002 3/14/19 39,604 $437,624 R. Mark Addy 3/14/19 $400,000 $800,000 $1,200,000 3/14/19 5,702 11,403 22,806 $126,003 3/14/19 9,322 $103,008
|
| Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other (#)
| Grant Date Value of ($)
| ||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||||||||||||||||||||||
Jeffrey S. Edison | 3/10/21 | $ | 625,000 | $ | 1,250,000 | $ | 1,875,000 | ||||||||||||||||||||||||||||||||||||||
3/10/21 | 33,429 | 66,857 | 133,714 | $ | 1,754,996 | ||||||||||||||||||||||||||||||||||||||||
3/10/21 | 44,571 | (3) | 1,169,989 | ||||||||||||||||||||||||||||||||||||||||||
3/10/21 | 3,850 | (4) | 101,063 | ||||||||||||||||||||||||||||||||||||||||||
7/15/21 | - | - | - | - | - | - | 99,153 | (5) | 2,776,284 | ||||||||||||||||||||||||||||||||||||
Devin I. Murphy | 3/10/21 | 245,000 | 490,000 | 735,000 | |||||||||||||||||||||||||||||||||||||||||
3/10/21 | 1,729 | (4) | 45,386 | ||||||||||||||||||||||||||||||||||||||||||
4/29/21 | 10,286 | 20,572 | 41,144 | 651,104 | |||||||||||||||||||||||||||||||||||||||||
4/29/21 | 13,714 | (3) | 434,048 | ||||||||||||||||||||||||||||||||||||||||||
7/15/21 | - | - | - | 73,729 | (5) | 2,064,412 | |||||||||||||||||||||||||||||||||||||||
Robert F. Myers | 3/10/21 | 245,000 | 490,000 | 735,000 | |||||||||||||||||||||||||||||||||||||||||
3/10/21 | 10,286 | 20,572 | 41,144 | 540,015 | |||||||||||||||||||||||||||||||||||||||||
3/10/21 | 13,714 | (3) | 359,993 | ||||||||||||||||||||||||||||||||||||||||||
3/10/21 | 1,728 | (4) | 45,360 | ||||||||||||||||||||||||||||||||||||||||||
7/15/21 | - | - | - | - | - | - | 53,390 | (5) | 1,494,920 | ||||||||||||||||||||||||||||||||||||
John P. Caulfield | 3/10/21 | 121,000 | 242,000 | 363,000 | |||||||||||||||||||||||||||||||||||||||||
3/10/21 | 4,149 | 8,297 | 16,594 | 217,796 | |||||||||||||||||||||||||||||||||||||||||
3/10/21 | 5,029 | (3) | 132,011 | ||||||||||||||||||||||||||||||||||||||||||
7/15/21 | - | - | - | - | - | - | 33,898 | (5) | 949,144 | ||||||||||||||||||||||||||||||||||||
Tanya E. Brady | 3/10/21 | 87,500 | 175,000 | 262,500 | |||||||||||||||||||||||||||||||||||||||||
3/10/21 | 2,286 | 4,572 | 9,144 | 120,015 | |||||||||||||||||||||||||||||||||||||||||
3/10/21 | 2,743 | (3) | 72,004 | ||||||||||||||||||||||||||||||||||||||||||
7/15/21 | - | - | - | - | - | - | 33,898 | (5) | 949,144 |
(1) | |
|
(2) | |
Represents performance-based |
Class B Units and Class C Units are intended to qualify as profits interests in our Operating Partnership and, pursuant to our Operating Partnership’s partnership agreement, automatically convert on a one-for-one basis into OP Units once the Class B Units or Class C Units, as applicable, achieve parity with the OP Units (based on capital account balance per unit) and satisfy all applicable time-vesting and performance-vesting conditions. |
Represents the |
(4) | Represents earned Class C Units attributable to the value of accrued distributions with respect to earned 2018 performance-based LTI Awards, 50% of which vested as of the last day of the applicable performance period and 50% of which vest on the first anniversary thereof, subject to continued employment through the applicable vesting date (or, in the case of Mr. Murphy, 100% of which vested on the last day of the applicable performance period). |
(5) | Represents IPO Awards granted in 2021 in the form of Class B Units. See “Compensation Discussion and Analysis—Long-Term Equity Incentive Program—IPO Grants” for more information regarding the IPO Awards. |
2022 PROXY STATEMENT | 51 |
The following table 2019 Outstanding Equity Awards at Fiscal Year Endprovidessets forth information aboutwith respect to outstanding equity-based incentive compensationequity awards forheld by the NEOs as of December 31, 2019. The market value of unvested stock or units and unearned performance units is based on2021, after giving effect to the estimated value per share of $11.10 on December 31, 2019. Stock Awards Equity Incentive Plan Awards Name Grant Date Market Value of Shares or Units of Stock That Have Not Vested ($) Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) Jeffrey S. Edison 352,992 158,824 $1,762,946 542,987 $6,027,156 177,336 $1,968,430 206,569 $2,292,916 74,250 $824,175 John P. Caulfield 7,149 $79,354 5,973 $66,300 4,788 $53,147 9,091 $100,910 25,000 $277,500 2,046 $22,711 Tanya E. Brady 8,564 $95,060 8,145 $90,410 5,796 $64,336 10,000 $111,000 13,636 $151,360 2,727 $30,270 Devin I. Murphy 271,494 $3,013,583 79,568 $883,205 Robert F. Myers 39,604 $439,604 48,869 $542,446 79,568 $883,205 57,938 $643,112 9,322 $103,474 11,403 $126,573 18,728 $207,881 13,637 $151,371 1,365 $15,152
Name | Date of Grant | Stock Awards | |||||||||||||||||||||||
Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | ||||||||||||||||||||||
Jeffrey S. Edison | 3/15/2018 | (1)** | 22,953 | 758,367 |
|
|
|
|
|
| |||||||||||||||
| 3/15/2018 | (2)** |
|
|
|
|
|
| 29,556 | 976,530 | |||||||||||||||
| 3/12/2019 | (3)** | 14,708 | 485,952 |
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|
| |||||||||||||||
| 3/12/2019 | (4)** | 26,471 | 874,602 | 52,942 | 1,749,204 | |||||||||||||||||||
| 3/12/2019 | (5)** |
|
|
|
|
|
| 90,498 | 2,990,047 | |||||||||||||||
| 3/11/2020 | (6)* | 26,351 | 870,637 |
|
|
|
|
|
| |||||||||||||||
| 3/11/2020 | (7)* |
|
|
|
|
|
| 105,404 | 3,482,548 | |||||||||||||||
| 3/10/2021 | (8)** | 44,571 | 1,472,626 |
|
|
|
|
|
| |||||||||||||||
| 3/10/2021 | (9)** |
|
|
|
|
|
| 66,857 | 2,208,955 | |||||||||||||||
| 7/15/2021 | (10)** | 99,153 | 3,276,015 |
|
|
|
|
|
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Devin I. Murphy | 3/15/2018 | (2)** |
|
|
|
|
|
| 13,262 | 438,176 | |||||||||||||||
| 3/12/2019 | (5)** |
|
|
|
|
|
| 45,249 | 1,495,027 | |||||||||||||||
| 4/29/2021 | (9)** |
|
|
|
|
|
| 20,572 | 679,699 | |||||||||||||||
| 7/15/2021 | (10)** | 73,729 | 2,436,006 |
|
|
|
|
|
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Robert F. Myers | 3/15/2018 | (1)** | 6,438 | 212,712 |
|
|
|
|
|
| |||||||||||||||
| 3/15/2018 | (2)** |
|
|
|
|
|
| 13,262 | 438,176 | |||||||||||||||
| 3/12/2019 | (3)** | 6,600 | 218,064 |
|
|
|
|
|
| |||||||||||||||
| 3/12/2019 | (4)** | 8,145 | 269,111 | 16,290 | 538,222 | |||||||||||||||||||
| 3/11/2020 | (6)* | 8,108 | 267,888 |
|
|
|
|
|
| |||||||||||||||
| 3/11/2020 | (7)* |
|
|
|
|
|
| 32,432 | 1,071,553 | |||||||||||||||
| 3/10/2021 | (8)** | 13,714 | 453,111 |
|
|
|
|
|
| |||||||||||||||
| 3/10/2021 | (9)** |
|
|
|
|
|
| 20,572 | 679,699 | |||||||||||||||
| 7/15/2021 | (10)** | 53,390 | 1,764,006 |
|
|
|
|
|
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
John P. Caulfield | 3/15/2018 | (1)* | 757 | 25,011 |
|
|
|
|
|
| |||||||||||||||
| 3/15/2018 | (11)* | 8,333 | 275,322 |
|
|
|
|
|
| |||||||||||||||
| 3/15/2018 | (2)* |
|
|
|
|
|
| 798 | 26,366 | |||||||||||||||
| 3/12/2019 | (3)* | 1,191 | 39,351 |
|
|
|
|
|
| |||||||||||||||
| 3/12/2019 | (4)* | 553 | 18,271 | 1,106 | 36,542 | |||||||||||||||||||
| 3/11/2020 | (6)* | 3,679 | 121,554 |
|
|
|
|
|
| |||||||||||||||
| 3/11/2020 | (7)* |
|
|
|
|
|
| 11,892 | 392,912 | |||||||||||||||
| 3/10/2021 | (8)** | 5,029 | 166,158 |
|
|
|
|
|
| |||||||||||||||
| 3/10/2021 | (9)** |
|
|
|
|
|
| 8,297 | 274,133 | |||||||||||||||
| 7/15/2021 | (10)** | 33,898 | 1,119,990 |
|
|
|
|
|
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
Tanya E. Brady | 3/15/2018 | (1)* | 833 | 27,522 |
|
|
|
|
|
| |||||||||||||||
| 3/15/2018 | (11)* | 4,545 | 150,167 |
|
|
|
|
|
| |||||||||||||||
| 3/15/2018 | (2)* |
|
|
|
|
|
| 966 | 31,917 | |||||||||||||||
| 3/12/2019 | (3)* | 1,443 | 47,677 |
|
|
|
|
|
| |||||||||||||||
| 3/12/2019 | (4)* | 1,358 | 44,868 | 2,716 | 89,737 | |||||||||||||||||||
| 3/11/2020 | (6)* | 1,352 | 44,670 |
|
|
|
|
|
| |||||||||||||||
| 3/11/2020 | (7)* |
|
|
|
|
|
| 6,488 | 214,364 | |||||||||||||||
| 3/10/2021 | (8)** | 2,743 | 90,629 |
|
|
|
|
|
| |||||||||||||||
| 3/10/2021 | (9)** |
|
|
|
|
|
| 4,572 | 151,059 | |||||||||||||||
| 7/15/2021 | (10)** | 33,898 | 1,119,990 |
|
|
|
|
|
|
2022 PROXY STATEMENT | 52 |
* | RSUs/ |
** | Class B Units/Class C Units |
(1) | Remaining unvested portion of time-based LTI Awards granted in March 2018 that vest in equal amounts over four years, beginning on January 1, 2019. |
(2) | Performance-based LTI Awards granted under the 2018 LTI Program were deemed earned at maximum based on performance through December 31, 2020. However, because the Company’s share value at the end of the performance period was less than the share value at the beginning of the performance period (which, prior to our IPO, was expressed in terms of the Company’s NAV), the number of earned awards was capped at the target amount. Half of the earned units vested on December 31, 2020 and the other half on December 31, 2021. The Contingent Portion will remain eligible to vest if the Company’s share value for twenty consecutive market days on or prior to December 31, 2025 is greater than the share value at the beginning of the performance period. The amount reported in the “Equity Incentive Plan Awards” columns represents the Contingent Portion. |
(3) | Remaining portion of time-based RSUs/LTI units granted in March 2019 that vest in equal amounts over four years, beginning on January 1, 2020. |
(4) | |
Performance-based |
(5) | |
Special |
(6) | Remaining portion of time-based RSUs/LTI units granted in March 2020 that vest in equal amounts over four years, beginning on January 1, 2021. |
Performance-based |
(8) | |
Time-based RSUs granted in March |
(9) | Performance-based LTI Awards granted under the 2021 LTI Program that will be earned, to the extent performance conditions are achieved, as of December 31, 2023, the last day of the performance period. Half of the earned units will vest on December 31, 2023 and half will vest on December 31, 2024. Because the units earned are not currently determinable, in accordance with SEC rules, the number of units and the corresponding market value reflect actual performance through 2021, which was above the threshold level and below target level and is therefore reported at the target level. |
IPO Awards granted in July 2021 that vest as to 50% of the award on the 18-month anniversary of the date of grant and 50% of the award on the 36-month anniversary of the date of grant (or, in |
(11) | |
Special restricted stock award granted March 15, 2018 that vests in full on January 1, 2022. |
The following table sets forth summary information regarding the vesting during 2021 of LTI Awards and/or RSUs held by our NEOs. None of the NEOs held or exercised any stock options in 2021. All share amounts set forth below are shown after giving effect to the Reverse Stock Split.
| Stock Awards |
| ||||||
Name | Number of OP Units/Shares Acquired on Vesting (#) |
| Value Realized on Vesting ($)(1)(2) |
| ||||
Jeffrey S. Edison | 84,189 |
| $2,490,042 |
| ||||
Devin I. Murphy | 15,443 |
| 479,434 |
| ||||
Robert F. Myers | 28,945 |
| 860,135 |
| ||||
John P. Caulfield | 3,532 |
| 99,179 |
| ||||
Tanya E. Brady | 3,845 |
| 113,432 |
|
(1) | Represents the value realized on vesting as calculated by multiplying the number of shares or units that vested by (i) for vesting that occurred prior to the date of our IPO, the estimated value per share of our common stock on the applicable vesting date, and (ii) for vesting that occurred on or after the date of our IPO, the closing market price of our common stock on the applicable vesting date. |
(2) | In addition to time-vesting Class B units and time-vesting RSUs that vested during 2021, amounts shown include Class C Units and/or RSUs that satisfied the applicable performance-vesting condition and time-vesting condition as of December 31, 2021. |
2022 PROXY STATEMENT | 53 |
Amended and Stock Vested
Stock Awards | |||
Name | Number of OP Units/Shares Acquired on Vesting (#) | Value Realized on Vesting ($) | |
Jeffrey S. Edison | 217,956 | $2,415,869 | |
John P. Caulfield | 6,289 | $69,695 | |
Tanya E. Brady | 11,497 | $127,492 | |
Devin I. Murphy | 198,380 | $2,200,953 | |
Robert F. Myers | 179,434 | $1,990,752 | |
R. Mark Addy | 13,794 | $152,886 |
Each of our executive officers participates in the Severance Plan. Under the plan, in the event that aan executive’s employment is terminated by the Company or its affiliates not for Cause (as defined in the Severance Plan) or the executive resigns for Good Reason (as defined in the Severance Plan), then the executive will be entitled to (1)(i) a lump sum payment equal to the product of (i)(A) 1.5 (or 2.0 in the case of Mr. Edison) and (ii)(B) the sum of (A)(1) the executive’s base salary and (B)(2) the executive’s average annual cash performance bonus for the most recent three fiscal years (or such shorter period that the executive was eligible to receive an annual cash performance bonus), (2)(ii) if the executive elects to receive group health insurance under the Consolidated Omnibus Budget Reconciliation Act, or COBRA, following the termination date, the Company will provide such coverage for 18 months (or 24 months in the case of Mr. Edison) following termination, provided that the executive continues to pay the same amount of the monthly premium as in effect for the Company’s other executives and; provided, further, that if the executive becomes employed by another employer during such period and is eligible to receive group health insurance under such other employer’s plans, the Company’s obligations will be reduced to the extent that comparable coverage is actually provided to the executive and his or her covered dependents, and (3) (i)(iii) (A) the executive’s unvested time-base equity awards that would have otherwise vested during the 18 months (or 24 months in the case of Mr. Edison) following termination will vest on the termination date and be paid in full within 70 days of the date of termination and (ii)(B) the executive will remain eligible to vest and be paid on a pro-rata portion of performance-based equity awards based on actual performance at the end of the performance period, with pro-rationproration based on the period of time elapsed between the beginning of the performance period and the termination date as a percentage of the full performance period.
In lieu of the benefits described in the immediately preceding paragraph, in the event that an executive’s employment is terminated by the Company or its affiliates not for Cause or the executive resigns for Good Reason, in either case within two years following a Change in Control (as defined in the Severance Plan), then the executive will be entitled to (1)(i) a lump sum payment equal to the product of (i)(A) 2.0 (or 2.5 in the case of Mr. Edison) and (ii)(B) the sum of (A)(1) the executive’s base salary and (B)(2) the executive’s average annual cash performance bonus for the most recent three fiscal years (or such shorter period that the executive was eligible to receive an annual cash performance bonus) and (2)(ii) if the executive elects to receive group health insurance under COBRA following the termination date, the Company will provide such coverage for 24 months following termination (or 30 months following termination in the case of Mr. Edison), provided that the executive continues to pay the same amount of the monthly premium as in effect for the Company’s other executives and; provided, further, that if the executive becomes employed by another employer during such period and is eligible to receive group health insurance under such other employer’s plans, the Company’s obligations will be reduced to the extent that comparable coverage is actually provided to the executive and his or her covered dependents. The executive’s unvested time-based equity awards and earned but unvested performance-based equity awards will vest as of the date of termination and be paid in full within 70 days of the date of termination.
Upon the closing of any Change in Control, the Compensation Committee will determine the number of performance-based equity awards held by the executive that will be considered earned under such awards based upon the Company’s performance by pro-rating the performance targets for the shortened performance period and then measuring such pro-rated targets against actual Company performance
2022 PROXY STATEMENT | 54 |
through the closing of the Change in Control. Any such earned awards will then be converted into time-based awards that will vest and be paid based on continued service through the end of the
If the executive dies or if the Company and its affiliates terminate an executive’s employment due to Disability (as defined in the Severance Plan), the executive or his or her legal heirs will be entitled to (1) a pro-rated portion of his annual cash performance bonus for the year of termination if the Compensation Committee determines that performance is achieved, (2) accelerated vesting of unvested time-based equity awards that would have otherwise vested during the 18 months (or 24 months in the case of Mr. Edison) following termination, and (3) remain eligible to vest and be paid on a pro-ratedprorated portion of performance-based equity awards based on actual performance at the end of the performance period with pro-ration based on the period of time elapsed between the beginning of the performance period and the termination date as a percentage of the full performance period.
Receipt of the severance payments and benefits under the Severance Plan is subject to the execution and non-revocationnon- revocation of a release agreement by the executive and compliance with non-competition and non-solicitation provisions that apply orfor 18 months (24 months in the case of Mr. Edison) following termination of employment and confidentiality provisions that apply during and following termination of employment.
Special LTIPLTI Awards
Pursuant to the terms of each Special LTIPLTI Award, the last day of the applicable performance period and the number of Class C Unitsunits earned under the Special LTIPLTI Award (the “Earned LTIP Units”) will be measured as of the earliest of a specified date, a change of control, or the executive’s termination of employment (other than a termination for cause). In the case of a voluntary termination or a termination without cause, the number of Class C Unitsunits earned will further be prorated based upon the number of days that elapsed from the effective date of the award through the date of such termination, divided by the number of days in the performance period;period, provided that, in the case of death or disability, the proration will be based upon the sum of (i) the number of days that elapsed from the effective date of the award through the date of such termination and (ii) the number of days in the executive’s applicable severance period (24 months, in the case of Mr. Edison, and 18 months, in the case of Mr. Murphy), divided by the number of days in the performance period. The provisions of the Severance Plan do not apply to the Special LTIPLTI Awards.
Murphy Vesting Agreement
Pursuant to the Murphy Vesting Agreement, if Mr. Murphy’s employment terminates on or following the Retirement Eligibility Date, he will remain eligible to vest in any performance-based equity awards granted by the Company as follows: (i) if his retirement occurs before 50% of the performance period has elapsed, then he will vest in a pro-rated portion of any performance-based equity awards actually earned based on performance at the end of the performance period, with the pro-ration calculated based on the ratio of the number of days he was employed during the performance period to the total number of days in the performance period and (ii) if his retirement occurs after 50% or more of the performance period has elapsed, then he will vest in any performance-based awards that are actually earned at the end of the performance period. The provisions of the Murphy Vesting Agreement do not apply to Mr. Murphy’s Special LTIPLTI Award or Mr. Murphy’s IPO Award.
2022 PROXY STATEMENT | 55 |
QUANTIFICATION OF PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
The following table provides information regarding certain potential payments that would have been made to the NEOs if the triggering event occurred on December 31, 2019,2021, the last day of the fiscal year, based on the value of a share of our common stock on such date, where applicable. Amounts actually received upon the occurrence ofIf a triggering event would actually occur, the amounts actually received will vary based on factors such as the timing during the year of such triggering event and the estimated value per share of our common stock. The only plan or agreement that provides for potential payments upon a termination or change in controltriggering event is the Severance Plan. Accordingly, all amounts shown in the table below represent the applicable potential payments under the Severance Plan.
Name | Benefit | Retirement ($) | Termination for Cause or Resignation without Good Reason ($) | Termination without Cause or Resignation for Good Reason ($) | Death or Disability ($) | Change in Control without Termination ($) | Change in Control with Termination ($) | ||||||
Jeffrey Edison | Severance Pay | — | — | 4,016,000 | 1,665,000 | — | 5,020,000 | ||||||
Health Care Benefits(1) | — | — | 27,017 | — | — | 33,771 | |||||||
Time-Based Equity Acceleration | — | — | 2,018,391 | 2,018,391 | — | 6,211,127 | |||||||
Performance-Based Equity Acceleration | 807,631 | 807,631 | 2,446,765 | 4,060,550 | 7,533,942 | 10,481,924 | |||||||
Total | — | — | 8,508,173 | 7,743,941 | — | 21,746,822 | |||||||
John Caulfield | Severance Pay | — | — | 900,000 | 253,080 | — | 1,058,271 | ||||||
Health Care Benefits(1) | — | — | 30,177 | — | — | 40,236 | |||||||
Time-Based Equity Acceleration | — | — | 90,143 | 90,143 | — | 583,904 | |||||||
Performance-Based Equity Acceleration | — | — | 57,527 | 57,527 | — | 119,447 | |||||||
Total | — | — | 1,077,847 | 400,750 | — | 1,801,858 | |||||||
Tanya Brady | Severance Pay | — | — | 1,050,000 | 213,120 | — | 1,084,497 | ||||||
Health Care Benefits(1) | — | — | 10,132 | — | — | 13,509 | |||||||
Time-Based Equity Acceleration | — | — | 103,530 | 103,530 | — | 357,420 | |||||||
Performance-Based Equity Acceleration | — | — | 73,018 | 73,018 | — | 73,018 | |||||||
Total | — | — | 1,236,680 | 389,668 | — | 1,528,444 | |||||||
Devin Murphy(4) | Severance Pay | — | — | 1,470,000 | 652,680 | — | 2,098,525 | ||||||
Health Care Benefits(1) | — | — | 32,422 | — | — | 43,229 | |||||||
Time-Based Equity Acceleration | — | — | — | — | — | — | |||||||
Performance-Based Equity Acceleration | 1,154,351 | 1,154,351 | 1,154,351 | 2,283,821 | 3,766,974 | 4,650,179 | |||||||
Total | — | 2,656,773 | 2,936,501 | — | 6,791,933 | ||||||||
Robert Myers | Severance Pay | — | — | 1,470,000 | 716,108 | — | 2,305,610 | ||||||
Health Care Benefits(1) | — | — | 32,422 | — | — | 43,229 | |||||||
Time-Based Equity Acceleration | — | — | 648,540 | 648,540 | — | 1,082,716 | |||||||
Performance-Based Equity Acceleration | — | — | 769,732 | 769,732 | — | 1,425,651 | |||||||
Total | — | — | 2,920,694 | 2,134,380 | — | 4,857,206 | |||||||
Mark Addy(2) | Severance Pay | N/A | — | N/A | N/A | N/A | N/A | ||||||
Health Care Benefits | N/A | — | N/A | N/A | N/A | N/A | |||||||
Time-Based Equity Acceleration | N/A | — | N/A | N/A | N/A | N/A | |||||||
Performance-Based Equity Acceleration | N/A | — | N/A | N/A | N/A | N/A | |||||||
Total | N/A | — | N/A | N/A | N/A | N/A |
Name | Benefit | Retirement ($) | Termination ($) | Termination ($) | Death or Disability ($) | Change in Control without Termination ($) | Change in Control with Termination ($) | |||||||||||||||||||||||||
Jeffrey S. Edison | Severance Pay | - | 4,685,000 | 1,875,000 | 5,856,250 | |||||||||||||||||||||||||||
| Health Care Benefits(1) |
|
|
| - | 29,338 | - |
|
|
| 36,673 | |||||||||||||||||||||
| Time-based Equity Acceleration |
|
|
|
|
|
| 4,957,421 | 4,957,421 |
|
|
| 7,621,965 | |||||||||||||||||||
| Performance-based Equity Acceleration | 1,139,066 | - | 3,910,835 | 3,910,835 | 2,990,047 | 7,814,879 | |||||||||||||||||||||||||
| Total | 1,139,066 | - | 13,582,594 | 10,743,256 | 2,990,047 | 21,329,766 | |||||||||||||||||||||||||
Devin I. Murphy | Severance Pay |
|
|
| - | 1,612,590 | 735,000 |
|
|
| 2,150,120 | |||||||||||||||||||||
| Health Care Benefits(1) |
|
|
| - | 32,765 | - |
|
|
| 43,686 | |||||||||||||||||||||
| Time-based Equity Acceleration |
|
|
|
|
|
| 1,217,987 | 1,217,987 |
|
|
| 2,436,006 | |||||||||||||||||||
| Performance-based Equity Acceleration | 797,348 | - | 1,023,914 | 1,023,914 | 1,495,027 | 2,174,726 | |||||||||||||||||||||||||
| Total | 797,348 | - | 3,887,255 | 2,976,901 | 1,495,027 | 6,804,538 | |||||||||||||||||||||||||
Robert F. Myers | Severance Pay |
|
|
| - | 1,644,304 | 735,000 |
|
|
| 2,192,405 | |||||||||||||||||||||
| Health Care Benefits(1) |
|
|
| - | 35,207 | - |
|
|
| 46,943 | |||||||||||||||||||||
| Time-based Equity Acceleration |
|
|
|
|
|
| 1,930,626 | 1,930,626 |
|
|
| 3,128,492 | |||||||||||||||||||
| Performance-based Equity Acceleration |
|
|
| - | 852,862 | 852,862 |
|
|
| 1,484,586 | |||||||||||||||||||||
| Total | - | - | 4,462,999 | 3,518,488 | - | 6,852,425 | |||||||||||||||||||||||||
John P. Caulfield | Severance Pay |
|
|
| - | 935,040 | 363,000 |
|
|
| 1,246,720 | |||||||||||||||||||||
| Health Care Benefits(1) |
|
|
| - | 32,765 | - |
|
|
| 43,686 | |||||||||||||||||||||
| Time-based Equity Acceleration |
|
|
|
|
|
| 1,063,789 | 1,063,789 |
|
|
| 1,747,386 | |||||||||||||||||||
| Performance-based Equity Acceleration |
|
|
| - | 240,619 | 240,619 |
|
|
| 488,860 | |||||||||||||||||||||
| Total | - | - | 2,272,213 | 1,667,408 | - | 3,526,652 | |||||||||||||||||||||||||
Tanya E. Brady | Severance Pay |
|
|
| - | 850,935 | 262,500 |
|
|
| 1,134,580 | |||||||||||||||||||||
| Health Care Benefits(1) |
|
|
| - | 10,999 | - |
|
|
| 14,665 | |||||||||||||||||||||
| Time-based Equity Acceleration |
|
|
|
|
|
| 860,428 | 860,428 |
|
|
| 1,480,655 | |||||||||||||||||||
| Performance-based Equity Acceleration |
|
|
| - | 166,676 | 166,676 |
|
|
| 303,109 | |||||||||||||||||||||
| Total | - | - | 1,889,038 | 1,289,603 | - | 2,933,009 |
(1) | |
Represents the aggregate present value of continued participation in the Company’s group health insurance coverage based on the portion of the premiums payable by the Company during the eligible period. The eligible period for a termination without cause or resignation for good reason is 24 months for Mr. Edison and 18 months for the other NEOs. The eligible period for a change in control with termination is 30 months for Mr. Edison and 24 months for the other NEOs. The amounts reported may ultimately be lower if the NEO is no longer eligible to receive benefits, which could occur upon obtaining other employment and becoming eligible for group health insurance coverage through the new employer. |
2022 PROXY STATEMENT | 56 |
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K, we are providing the following information regarding the ratio of the annual total compensation of our Chairman CEO, and President,CEO, Mr. Edison, to the annual total compensation of our median employee.
As reported in the Summary Compensation Table, our CEO had annual total compensation for 20192021 of $5,516,882.$8,807,044. Using this Summary Compensation Table methodology, the annual total compensation of our median employee for 20192021 was $92,518.$106,942. As a result, we estimate that the ratio of our CEO’s annual total compensation to that of our median employee for fiscal 2019year 2021 was 59.682.4 to 1.
We believe that our compensation philosophy mustshould be consistent and internally equitable to motivate our employeesassociates to create stockholder value. We are committed to internal pay equity, and our Compensation Committee monitors the relationship between the pay that our CEO receives and the pay that all of our non-executive employeesother associates receive.
We identified the median employeeassociate in 20182021 based on the pool of individuals who were employed by us on December 31, 20182021 (whether employed on a full-time part-time, or seasonalpart-time basis). EmployeesAssociates on leave of absence were excluded from the list and reportable wages were annualized for those employeesassociates who were not employed for the full calendar year. The compensation of this pool of employeesassociates was calculated using the Summary Compensation Table methodology.
The pay ratio reported above is a reasonable estimate calculated in a manner consistent with SEC rules, based on our internal records and the methodology described above. The SEC rules for identifying the median compensated employee allow companies to adopt a variety of methodologies, to apply certain exclusions and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. Accordingly, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies have different employee populations and compensation practices and may use different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.
Supplemental CEO Pay Ratio
We are presenting an alternative CEO pay ratio that we believe facilitates a better understanding of our regular annual long-term incentive grant practices for our CEO.
The CEO pay ratio above is based on our CEO’s 2021 annual total compensation, as reported in the Summary Compensation Table, which includes the IPO Award. Because the IPO Award was a one-time award granted to Mr. Edison to reward him for the successful completion of our IPO, Mr. Edison’s 2021 total compensation is not representative of his intended annual long-term incentive equity grant value. The value of Mr. Edison’s IPO Award included in the Summary Compensation Table is $2,776,284.
2022 PROXY STATEMENT | 57 |
The supplemental CEO pay ratio excludes the value of Mr. Edison’s IPO Award and the one-time equity-based award granted to our median employee in connection with our IPO. For purposes of this supplemental ratio, Mr. Edison’s 2021 annual total compensation is $6,030,760, and the annual total compensation of our median employee is $102,742. The resulting supplemental pay ratio of our CEO’s annual total compensation to that of our median employee for fiscal year 2021 was 58.7:1.
2022 PROXY STATEMENT | 58 |
Our director compensation program is intended to provide a total compensation package that enables the Company to attract and retain qualified and experienced directors, and to align our directors’ interests with those of our stockholders by including a substantial portion of their compensation in shares of our common stock. Non-employee director compensation is set by the Compensation Committee. The Compensation Committee undertook an extensive analysis of director compensation of other publicly traded REITs in 2021. As a result of such analysis, the Compensation Committee revised the cash and equity compensation to be paid to our directors following our IPO to ensure alignment with our peers so that we continue to draw and keep qualified and experienced directors on our Board.
2021 Non-Employee Director Compensation Program (Pre-IPO)
Prior to our IPO, our non-employee director compensation for 2021 consisted of an annual cash retainer of $51,525 and an annual equity retainer (in the form of restricted stock) of $51,525 per non-employee director and additional annual cash retainers for the Lead Independent Director, Audit Committee chair and Compensation Committee chair of $10,300 each. The annual equity retainers awarded vest on the first anniversary of the grant date, subject to continued service through such date.
2021 Non-Employee Director Compensation Program (Post-IPO)
Cash Compensation
In accordanceJune 2021, in connection with our IPO, our Compensation Committee approved certain revisions to our director compensation program. Under the revised director compensation program, effective as of the date of our IPO, each non-employee director is entitled to receive an annual cash retainer in the amount of $60,000. The Compensation Committee also approved additional annual cash retainers for directors as follows:
Chair of Audit Committee: $25,000
Chair of Compensation Committee: $15,000
Chair of Nominating and Governance Committee: $15,000
Non-Chair Audit Committee Member: $15,000
Non-Chair Compensation Committee Member: $10,000
Non-Chair Nominating and Governance Committee Member: $10,000
Lead Independent Director: $40,000
Equity Compensation
In addition to cash retainers, commencing with our Annual Meeting, each non-employee director who first becomes a director at an annual meeting of our stockholders and each person who otherwise continues to be a director immediately following such annual meeting will receive an annual grant of restricted stock covering a number of shares with a total award value equal to $110,000. Each annual grant will vest in full on the earlier of (i) the date of the next annual meeting of our stockholders following the grant date (which,
2022 PROXY STATEMENT | 59 |
under the minimum vesting requirements contained in our 2020 Omnibus Incentive Plan, as amended, generally must be at least 50 weeks after the immediately preceding year’s annual meeting) or (ii) the first anniversary of the grant date, subject to the director’s continued service through the vesting date.
IPO Grants
In connection with our IPO, each of our seven non-employee directors received an award of 3,389 shares of restricted stock. The restricted stock award is structured such that 50% will vest 18-months after the grant date and the remaining 50% will vest on the 36-month anniversary of the date of grant, subject to the director’s continued service through the applicable vesting date.
Directors are also entitled to reimbursement of reasonable out-of-pocket expenses incurred in connection with attending meetings in person.
Stock Ownership Policy
We have adopted the SOP designed to focus our NEOs and non-employee directors on long-term stockholder value creation. The SOP is more fully described under “Corporate Governance—Stock Ownership Policy” above.
The following table sets forth the compensation of our non-employee directors who served on the Board during 2021. Mr. Edison did not receive any compensation for his service as a director and his compensation as an executive officer is set forth in the Summary Compensation Table.
| Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2)(3) | All Other Compensation ($)(4) | Total ($) | ||||||||||||
Leslie T. Chao | 106,425 | 152,155 | 3,323 | 261,903 | ||||||||||||
Elizabeth O. Fischer | 73,625 | 152,155 | 3,570 | 229,350 | ||||||||||||
Paul J. Massey, Jr. | 68,625 | 152,155 | 3,323 | 224,103 | ||||||||||||
Stephen R. Quazzo | 66,125 | 152,155 | 3,323 | 221,603 | ||||||||||||
Jane E. Silfen | 63,625 | 152,155 | 3,570 | 219,350 | ||||||||||||
John A. Strong | 71,275 | 152,155 | 3,236 | 226,666 | ||||||||||||
Gregory S. Wood | 66,125 | 152,155 | 3,323 | 221,603 |
(1) | Represents cash fees earned in 2021, certain of which were paid in 2022 in arrears. |
(2) | Represents the aggregate grant date fair value of restricted stock awards made to our directors in 2021, calculated in accordance with ASC 718, excluding any estimated forfeitures related to service-based vesting conditions. The amounts reported in this column reflect the accounting cost for these restricted stock awards, and do not correspond to the actual economic value that may be received by the director upon vesting of the awards. Assumptions used in the calculation of these amounts are included in Note 13 to our consolidated financial statements for the year ended December 31, 2021. |
(3) | As of December 31, 2021, each non-employee director held 5,198 shares of unvested restricted stock. |
(4) | Represents distributions paid on unvested restricted stock. |
2022 PROXY STATEMENT | 60 |
Proposal 2: Advisory Vote on Executive Compensation
As required by Section 14A of the Exchange Act, stockholdersyou have the opportunity to cast an advisory, non-binding vote to approve the compensation of our NEOs as disclosed in this Proxy Statement in accordance with the SEC’s compensation disclosure rules.
As described in detail underin the heading “Compensation Discussion and Analysis,”Analysis” section of this proxy statement, the key objectives of our executive compensation program are to: (i) attract, motivate, reward and retain superior executive officers with the skills necessary to successfully lead and manage our business; (ii) achieve accountability for performance by linking annual cash incentive compensation to the achievement of measurable performance objectives; and (iii) incentivize itsour executive officers to build value and achieve financial objectives designed to increase the value of theour business through short-term and long-term incentive compensation programs. For our executive officers, these short-term and long-term incentives are designed to accomplish these objectives by providing a significant correlation betweenaligning their compensation with our financial results and their actual total compensation.
We are asking our stockholders to indicate their support for our named executive officerNEO compensation, as described in this Proxy Statement. Accordingly, our Board is asking our stockholders to castproxy statement, by casting a non-binding advisory vote “FOR” the following resolution:
‘‘RESOLVED, that the stockholders hereby APPROVE the compensation paid to the named executive officers, as disclosed in this proxy statement pursuant to the compensation disclosure rules of the SEC, including the compensation discussion and analysis, compensation tables, and related narrative discussion.’’
The vote on this resolution is not intended to address any specific element of compensation, but rather the overall compensation of our NEOs as described in this proxy statement. The vote is advisory and, therefore, not
binding on the Company, the Board or the Compensation Committee. The Board and the Compensation Committee value the opinions expressed by stockholders in their advisory votes on this proposal and will consider the outcome of the vote when making future compensation decisions regarding NEOs.The next advisory vote on executive compensation will be held at our 2023 annual meeting of stockholders.
VOTE REQUIRED
Approval of this proposal requires the affirmative vote of a majority of all of the votes cast on the proposal at the Annual Meeting.
Plan Category | (a) Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants, and Rights(1) | (b) Weighted-Average Exercise Price of Outstanding Options, Warrants, and Rights | (c) Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in column (a))(2)(3) | |||||||
Equity compensation plans approved by security holders | 4,851,996 | $ | — | 6,040,000 | ||||||
Equity compensation plans not approved by security holders | — | — | — | |||||||
Total / weighted average | 4,851,996 | $ | — | 6,040,000 |
THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE ADVISORY RESOLUTION TO APPROVE THE COMPANY’S EXECUTIVE COMPENSATION. |
61 |
The Audit Committee has selected Deloitte & Touche LLP to serve as our independent registered public accounting firm for the year ending December 31, 2020.2022. Deloitte & Touche LLP has served as our independent registered public accounting firm since our formation in 2009.
Although the submission of this matter for approval by stockholders is not required by our bylaws or otherwise, the Board is submitting the selectionappointment of Deloitte & Touche LLP to our stockholders for ratification as good corporate governance practice.because we value our stockholders’ views. If theour stockholders fail todo not ratify the selection, the Audit Committee may, but is not required to, reconsider whether to retain that firm. Even if the selection is ratified, the Audit Committee, in its discretion, may direct the appointment ofselect a different auditor at any time during the year if it determines that a change would be in the best interests of the Company.
We expect that a representativerepresentatives of Deloitte & Touche LLP will be present at the meeting,Annual Meeting. They will have the opportunity to make a statement if he or she desiresthey desire to do so, and they will be available to answer any appropriate questions from stockholders.
VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2020.
Ratification of this proposal requires the affirmative vote of a majority of all of the votes cast on the proposal at the Annual Meeting. Abstentions are not votes cast and will have no effect on the vote on this proposal.
THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31, 2022 |
The following table presents the aggregate fees billed for professional services provided by Deloitte & Touche LLP for the annual audit of our financial statements, in 2019 and 2018, and for audit-related, tax and other services performed in 20192021 and 2018.
2019 | 2018 | |||||||
Audit fees(1) | $ | 940,000 | $ | 1,045,000 | ||||
Audit-related fees(2) | 48,121 | 141,510 | ||||||
Tax fees(3) | 46,055 | 2,601 | ||||||
All other fees | — | — | ||||||
Total fees | $ | 1,034,176 | $ | 1,189,111 |
| 2021 | 2020 | ||||||
Audit fees(1) | $ | 1,238,992 | $ | 890,000 | ||||
Audit-related fees(2) | 455,000 | 10,000 | ||||||
Tax fees(3) | 140,779 | 93,573 | ||||||
All other fees | - | - | ||||||
Total fees | $ | 1,834,771 | $ | 993,573 |
(1) | |
Includes aggregate fees billed for annual audit and quarterly reviews of our consolidated financial statements, including services related to the Company’s adoption of certain new accounting pronouncements. |
2022 PROXY STATEMENT | 62 |
(2) | Includes fees billed for services reasonably related to the performance of the audit and review of the consolidated financial statements, including review of |
(3) | |
Includes aggregate fees billed for services related to tax advice and planning. |
The Audit Committee charter imposes a duty on the Audit Committee to preapprove all auditingaudit and non-audit services performed for us by our independent auditors, as well as all permitted nonaudit services (includingunless the fees and terms thereof) in orderengagement is entered into pursuant to ensure
Requests or applications to provide services that require specific preapproval by the Audit Committee will beare submitted to the Audit Committee by both the independent auditors and the chief financial officer, and must include a joint statement as to whether, in their view, the request or application is consistent with the SEC’s rules on auditor independence.Chief Executive Officer. The Chair of the Audit Committee has been delegated the authority to specifically preapprove allcertain services not covered by the general preapproval guidelines. Amounts requiring preapproval in excess of the amount require specific preapproval by all members of the Audit Committee prior to engagement of our independent auditors. All amounts specifically preapproved by the Chair of the Audit Committee in accordance with this policyguidelines, provided that such preapprovals are to be disclosed to the full Audit Committee at the next regularly scheduled meeting. All services rendered by Deloitte & Touche LLP for the year ended December 31, 20192021 were preapproved in accordance with the policies and procedures described above.
The Audit Committee reviews the financial reporting process on behalf of the board of directors.Board. Our management has the primary responsibility for the financial statements and the reporting process, including the system of internal control over financial reporting. Membership on the Audit Committee does not call for the professional training and technical skills generally associated with career professionals in the field of accounting and auditing. In addition, the independent auditors devote more time and have access to more information than does the Audit Committee. Accordingly, the Audit Committee’s role does not provide any special assurance with regard to our financial statements, nor does it involve a professional evaluation of the quality of the audits performed by the independent auditors. In this context, the Audit Committee reviewed the 20192021 audited consolidated financial statements with management, including a discussion of the quality and acceptability of our financial reporting, the reasonableness of significant judgments, and the clarity of disclosures in the consolidated financial statements.
The Audit Committee reviewed with Deloitte & Touche LLP, which is responsible for expressing an opinion on the conformity of those audited consolidated financial statements with U.S. generally accepted accounting principles, their judgments as to the quality and the acceptability of the consolidated financial statements and discussed the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board and the SEC. The Audit Committee received from and discussed with Deloitte & Touche LLP the written disclosures and the letter required by the applicable requirements of the Public Company Accounting Oversight Board regarding that firm’s independence from us. In addition, the Audit Committee considered whether Deloitte & Touche LLP’s provision of nonauditnon-audit services is compatible with maintaining its independence from us.
2022 PROXY STATEMENT | 63 |
The Audit Committee discussed with Deloitte & Touche LLP the overall scope and plans for the audit. The Audit Committee meets periodically, and at least quarterly, with Deloitte & Touche LLP, with and without management present, to discuss the results of their examinations, their evaluations of our internal controls, and the overall quality of our financial reporting.
In reliance on these reviews and discussions, the Audit Committee recommended to the board of directors,Board, and the board of directorsBoard approved, the inclusion of the 20192021 audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 20192021 for filing with the SEC.
Submitted by the Audit Committee
Leslie T. Chao (Chair)
Elizabeth O. Fischer
Stephen R. Quazzo
Gregory S. Wood
The foregoing report shall not be deemed incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act or the Exchange Act, except to the extent that the Company specifically incorporates this information by reference, and shall not otherwise be deemed filed under the Exchange Act.
2022 PROXY STATEMENT | 64 |
Securities Authorized for Issuance Under Equity Compensation Plans
Information related to the Company’s equity compensation plans, including the number of unvested awarded shares outstanding and the number of shares available for future issuance as of December 31, 2021 under such plans, is as follows:
| (a) Number of Securities of Outstanding Options, Warrants, and Rights(1) | (b) Weighted-Average Outstanding Options, | (c) Number of Securities Remaining Equity Compensation Plans (excluding | ||||||||||||
Equity compensation plans approved by security holders | 2,248,968 | $ | - | 4,924,238 | |||||||||||
Equity compensation plans not approved by securityholders | - | - | - | ||||||||||||
Total | 2,248,968 | $ | - | 4,924,238 |
(1) | Includes approximately 1.1 million and 0.3 million performance stock units (“PSUs”) at maximum achievement level under the plan metrics that were issued under our Amended and Restated 2010 Long-Term Incentive Plan (the “2010 Plan”) and our 2020 Omnibus Incentive Plan (the “2020 Plan”), respectively. Based upon results to date, we currently expect a total of approximately 0.6 million of such PSUs to vest. |
(2) | Represents shares of our common stock available for grants under the 2020 Plan. There were no shares available under the 2010 Plan as of December 31, 2021. |
2022 PROXY STATEMENT | 65 |
Beneficial Ownership of Common Stock
The following table sets forth information, as of March 18, 2022, regarding the beneficial ownership of shares of our common stock and OP Units,units, which are exchangeable on a oneredeemable for one basis withcash or, at our election, shares of our common stock beneficially owned as of March 16, 2020 by our directors, NEOs, ouron a one-for-one basis for: (i) each director; (ii) each NEO; (iii) all directors and executive officers as a group,group; and (iv) any person who is known byto us to be the beneficial owner of more than 5% of our common stock.
The SEC defines “beneficial ownership” of a security to mean the possession, directly or indirectly, of voting power and/or investment power over such security. The OP Units held by a person, and the RSUs, Class B Units and Class C Units held by a person that are vested as of, or that will vest within 60 days of, March 18, 2022 are deemed to be outstanding and beneficially owned shares of our common stock. The voting and economic ownership percentages are based on 290,388,656 shares of our common stock for purposes of the table below for such person, but are not deemed outstanding for the purpose of computing the percentage of beneficial ownership for any other person. Class B Units and Class C Units are issued under our LTI program and are intended to qualify as profits interests in the Operating Partnership and, pursuant to our Operating Partnership’s partnership agreement, automatically convert on March 16, 2020.
Name of Beneficial Owner | Amount of Common Stock Beneficial Ownership | Amount of OP Unit Beneficial Ownership | Total Beneficial Ownership | Voting Percentage | Economic Ownership Percentage(1) | |||||||
Non-Employee Directors | ||||||||||||
Leslie T. Chao | 41,342 | (2) | — | 41,342 | * | * | ||||||
Elizabeth Fischer | — | — | — | — | — | |||||||
David W. Garrison | 14,791 | — | 14,791 | * | * | |||||||
Paul J. Massey, Jr. | 26,425 | — | 26,425 | * | * | |||||||
Stephen R. Quazzo | 77,840 | — | 77,840 | * | * | |||||||
Jane Silfen | — | — | — | — | — | |||||||
John A. Strong | 10,025 | — | 10,025 | * | * | |||||||
Gregory S. Wood | 12,997 | — | 12,997 | * | * | |||||||
Named Executive Officers | ||||||||||||
Jeffrey S. Edison | 540,510 | (3)(4) | 22,057,582 | (4) | 22,598,092 | * | 7.8 | % | ||||
John P. Caulfield | 5,883 | — | 5,883 | * | * | |||||||
Tanya E. Brady | 5,919 | — | 5,919 | * | * | |||||||
Devin I. Murphy | 40,727 | 1,093,191 | (4) | 1,133,918 | * | * | ||||||
Robert F. Myers | 12,514 | (4) | 89,558 | (4) | 102,072 | * | * | |||||
R. Mark Addy | 49,619 | (4) | 270,356 | 319,975 | * | * | ||||||
All directors and executive officers as a group (14 persons) | 838,592 | 23,510,687 | 24,349,279 | * | 8.4 | % |
Unless otherwise indicated, the address of each individual listed below is c/o Phillips Edison & Company, Inc., 11501 Northlake Drive, Cincinnati, Ohio 45249.
| Shares/Units Beneficially Owned | |||||||||||||||
Name of Beneficial Owner | Common | OP Units(1) | Total | Ownership Percentage(2) | ||||||||||||
Non-Employee Directors |
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Leslie T. Chao | 28,555 | * | 28,555 | (3)(4) | * | |||||||||||
Elizabeth O. Fischer | 8,143 | * | 8,143 | (4) | * | |||||||||||
Paul J. Massey, Jr. | 16,672 | * | 16,672 | (4) | * | |||||||||||
Stephen R. Quazzo | 33,721 | * | 33,721 | (4) | * | |||||||||||
Jane E. Silfen | 8,143 | * | 8,143 | (4) | * | |||||||||||
John A. Strong | 10,535 | * | 10,535 | (4) | * | |||||||||||
Gregory S. Wood | 13,606 | * | 13,606 | (4) | * | |||||||||||
NEOs Jeffrey S. Edison | 314,400 | (5) | 8,472,870 | (6) | 8,787,270 | 7.2 | % | |||||||||
Devin I. Murphy | 13,575 | 606,094 | (7) | 619,669 | * | |||||||||||
Robert F. Myers | 7,835 | 108,591 | (8) | 116,426 | * | |||||||||||
John P. Caulfield | 12,275 | 1,257 | 13,532 | * | ||||||||||||
Tanya E. Brady | 9,177 | 686 | 9,863 | * | ||||||||||||
All directors and executive officers as a group (12 persons) | 476,637 | 9,189,498 | 9,666,135 | 7.9 | % |
* | Less than 1%. |
(1) | There were an aggregate of 14,540,495 OP Units outstanding and not directly or indirectly held by the |
(2) | Based on 113,819,146 shares of our common stock outstanding, |
2022 PROXY STATEMENT | 66 |
vest within 60 days of, March 18, 2022. These rights to acquire common stock are deemed to be outstanding shares of common stock in calculating the total beneficial ownership |
(3) | Includes 189 shares held by Mr. Chao’s wife. |
(4) | Includes 3,389 shares of unvested Restricted Stock. |
Represents (i) 158,292 shares of common stock held directly, (ii) 77,354 shares of our common |
(6) | Represents (i) 3,098,481 OP Units and 4,499 Class C Units held directly that are vested as of, or will vest within 60 days of, March 18, 2022, (ii) 1,134,215 OP Units held by Edison Properties LLC, as to which Mr. Edison has shared voting and dispositive power, (iii) 60,583 OP units held by Father’s Trust, (iv) 276,927 OP units held by Old 97, Inc., as to which Mr. Edison has shared voting and dispositive power, (v) 211,266 OP units held by a trust, of which Mr. Edison’s wife is the trustee, (vi) 500,593 OP Units held by a trust, of which Mr. Edison is the |
(7) | Represents (i) 216,363 OP Units and |
(8) | Represents 107,207 OP Units and 1,384 Class C Units that are vested as of, |
2022 PROXY STATEMENT | 67 |
RELATED PERSON TRANSACTIONS POLICY AND PROCEDURES
The Board has adopted thea Related PartyPerson Transactions Policy requiringand Procedures in conformity with Nasdaq requirements that requires certain transactions with related persons to be reviewed and approved or ratified by the Audit Committee. The policy applies to all transactions or a series of transactions (i) in which the aggregate amount involved will or may exceed $120,000 in any fiscal year, (ii) between the Company and a director, executive officer or beneficial owner of more than 5% of our common stock, or immediate family member of the foregoing (“related person”) and (iii) in which such related person had, has or will have a direct or indirect material interest. Prior to entering intoIn the course of its review and approval or ratification of such a transaction, coveredthe Audit Committee routinely considers the relevant known facts and circumstances of each such transaction, including whether the transaction is on terms comparable to those that could be obtained in arm’s-length dealings with an unrelated third party, whether the transaction arose in the ordinary course of business, and the extent of the related person’s interest in the transaction, taking into account the conflicts of interest and corporate opportunity provisions of our Code of Business Conduct and Ethics. If advance Audit Committee approval of a related party transaction is not feasible, then a related party transaction may be preliminarily entered into upon prior approval of the transaction by the policy, a majority of the membersChairperson of the Audit Committee, must conclude thatsubject to ratification of the transaction at the Audit Committee’s next regularly scheduled meeting. If ratification is fair andnot obtained at the Audit Committee’s next regularly scheduled meeting, then all reasonable efforts will be taken to us and on terms and conditionscancel or nullify the transaction. A transaction that was not less favorableinitially recognized as a related party transaction will be presented to us than those available from unaffiliated third parties.
The Audit Committee has preapproved certain transactions, that involveincluding: (i) employment ofany compensation to an executive officer or director if the relatedsuch compensation is required to be reported in the Company’s proxy statement or Annual Report on Form 10-Kunder Item 402 of Regulation S-K; (ii) any compensation paid to a director ifS-K and has been approved by the related compensation isBoard or the Compensation Committee, or would have been required to be reported if the executive was a NEO and such compensation has been approved, or recommended to the Board for approval, by the Compensation Committee; and (ii) any transaction in the Company’s proxy statement under Item 402ordinary course of Regulation S-K; and (iii) any transaction with another companybusiness where the related person’s interest arises
2022 PROXY STATEMENT | 68 |
Advisory, Services,We, the Operating Partnership, and Joint Venture Agreements — We havecertain persons who are limited partners of the Operating Partnership, or the protected partners, entered into a tax protection agreement (the “2017 TPA”) on October 4, 2017 in connection with the closing of the October 2017 transaction pursuant to which we internalized our management structure through the acquisition of certain advisory, servicesreal estate assets and joint venture agreementsthe third-party investment management business of PELP, in exchange for OP units and cash (the “PELP Transaction”). The 2017 TPA requires the indemnification of the protected partners for tax liabilities in certain instances, as detailed below. As a result of our effective tax planning and use of tax-deferred exchanges under Section 1031 (“Section 1031 Exchanges”) of the Code, no liability under the 2017 TPA has been incurred to date. We believe that we will either (i) continue to own and operate the remaining protected properties or (ii) be able to successfully complete Section 1031 Exchanges (unless there is a change in applicable law) or complete other tax efficient transactions to avoid any liability under the 2017 TPA during the term of the 2017 TPA.
In accordance with the 2017 TPA, if, during the period beginning on October 4, 2017 and ending on October 4, 2027, or the tax protection period, the Operating Partnership: (i) without the written approval of the “Partners’ Representative” (as defined in the 2017 TPA), (A) sells, exchanges, transfers or otherwise disposes of certain properties in a transaction that would result in the recognition of taxable income or gain by any protected partner under Section 704(c) of the Code, or (B) undertakes any merger, combination, consolidation or similar transaction (including a transfer of all or substantially all assets), or a fundamental transaction, that would result in the recognition of taxable income or gain by any protected partner; or (ii) fails (without the written approval of the Partners’ Representative) to maintain certain minimum levels of indebtedness that would be allocable to each protected partner for tax purposes or, under certain circumstances, to offer the protected partners the opportunity to guarantee certain types of the Operating Partnership’s indebtedness, then the Operating Partnership will pay each affected protected partner cash equal to the estimated applicable “make whole amount.” The “make whole amount” applicable to a transfer or transaction described in clause (i) above is generally equal to the sum of (1) the product of the applicable amount of income or gain recognized by the protected partner in respect of such transfer or transaction, multiplied by an assumed tax rate (based on the highest combined statutory U.S. federal and state tax rate), plus (2) a tax gross-up amount. The “make whole amount” applicable to a breach by the Operating Partnership of the obligations described in clause (ii) above is generally equal to the sum of (1) the product of the amount of income or gain recognized by the protected partner by reason of such breach, multiplied by an assumed tax rate, plus (2) a tax gross-up amount. As of December 31, 2021, 30 of our 268 wholly-owned properties, four outparcels and the land under which we earn revenueone of our properties is located, comprising approximately 11.9% of our annualized base rent, are subject to the protection described in clause (i) above, and the potential “make-whole amount” on the estimated aggregate amount of built-in gain subject to such protection is approximately $146.8 million.
Additionally, in the event a fundamental transaction occurs during the tax protection period in which the Company or the Operating Partnership is acquired by, or merged with or into, certain acquiror entities, each protected partner shall be provided with certain choices of consideration for managing day-to-day activitieseach of their OP units, including (i) the same consideration that is paid with respect to each share of our common stock and implementing(ii) units of partnership interest in certain acquiror partnerships. During the investment strategytax protection period, if a protected partner elects to receive the units described in clause (ii) in the preceding sentence and the
2022 PROXY STATEMENT | 69 |
Company, the Operating Partnership or their successors fail (without the written approval of the Partners’ Representative) to comply with certain equity, leverage or distribution obligations, then to the extent any protected partner elects to, or is required to, receive the consideration payable with respect to the redemption, exchange or other liquidity rights relating to such units, the Operating Partnership will pay each affected protected partner an amount of cash equal to the estimated applicable “make whole amount.” The “make whole amount” applicable to such transaction is generally equal to the sum of (1) the product of the amount of income or gain recognized by the protected partner in respect of such transaction, multiplied by an assumed tax rate, plus (2) a tax gross-up amount.
We and the Operating Partnership entered into an additional tax protection agreement (the “2021 TPA”) on July 19, 2021 with Mr. Edison, Mr. Murphy and Mr. Myers, which will become effective upon the expiration of the 2017 TPA. The 2021 TPA generally has the following terms: (i) the 2021 TPA will severally provide to Mr. Edison, Mr. Murphy and Mr. Myers the same protection provided under the 2017 TPA until 2031, so long as (a) Mr. Edison, Mr. Murphy or Mr. Myers (or their permitted transferees), as applicable, individually owns at least 65% of the OP units owned by him as of July 19, 2021 and (b) in the case of Mr. Murphy or Mr. Myers, Mr. Edison individually owns at least 65% of the OP units owned by him as of July 19, 2021; and (ii) following the expiration of the four-year tax protection period under the 2021 TPA in 2031, for REIT IIIso long as Mr. Edison holds at least $5 million in value of OP units, (a) Mr. Edison will have the opportunity to guarantee debt of the Operating Partnership or enter into a “deficit restoration” obligation, and certain joint ventures(b) the Operating Partnership will provide reasonable notice to Mr. Edison before effecting a significant transaction reasonably likely to result in the recognition of more than one-third of the built-in gain allocated to Mr. Edison that was protected under the 2017 TPA as July 19, 2021, and private funds (collectively,will consider in good faith any proposal made by Mr. Edison relating to structuring such transaction in a manner to avoid or mitigate adverse tax consequences to him; provided, however, that any such proposal by Mr. Edison would not, in the “Managed Funds”)sole discretion of the Board, adversely affect or be reasonably likely to adversely affect the Company (including with respect to the timing or certainty of closing of any such transaction). The Operating Partnership has no obligation to ensure that the counterparty in a transaction accepts any alternative structure proposed by Mr. Edison.
Mr. Edison is a protected partner and the “Partners’ Representative” under the 2017 TPA and the 2021 TPA. Mr. Murphy and Mr. Myers are also protected partners under the 2017 TPA and the 2021 TPA.
PELP Transaction Contribution Agreement
In connection with the mergerPELP Transaction, we entered into a contribution agreement (as amended, the “PELP Contribution Agreement”) with the Operating Partnership and the contributors listed therein. The PELP Contribution Agreement established an earn-out structure by which the contributors had the right to receive an aggregate of between a minimum of 1,000,000 and a maximum of 1,666,667 OP units as contingent consideration if a liquidity event, including the approval and listing for trading of our common stock on any national securities exchange, was successfully achieved by the Company by December 31, 2021, with the final number determined by the highest volume weighted average price per share of our common stock over any 30-consecutive-trading-day period during the 180 days after the approval and listing for trading of our common stock on a national securities exchange. On January 11, 2022, 768,845.770, 129,233.064 and 18,048.225 OP units were awarded to Mr. Edison, Mr. Murphy and Mr. Myers, respectively, in full satisfaction of the earn-out. OP units are redeemable for cash or, at our election, shares of our common stock on a one-for-one basis, subject to adjustment in certain circumstances.
2022 PROXY STATEMENT | 70 |
Institutional REIT III in October 2019, our advisoryContribution Agreement
On July 1, 2021, the Operating Partnership and certain of its subsidiaries entered into a contribution agreement, with REIT III was terminated and all amounts due to us thereunder were settled. Our services agreement with Phillips Edison Limited Partnership has a five year term through October 3, 2022. Our Necessity Retail Partners (“NRP”) joint venture agreement has a seven year term through March 21, 2023. Our joint venture agreements with Northwestern Mutual, pursuant to which we formed Grocery Retail Partners Icertain subsidiaries of the Operating Partnership contributed certain assets, including ownership interests in 23 wholly-owned properties, to Phillips Edison Institutional REIT LLC (“GRP I”) and Grocery Retail Partners II LLC (“GRP II”(the “Institutional REIT”), in exchange for equity interests in the Institutional REIT in transactions treated as tax-deferred contributions for U.S. federal income tax purposes. In the event we recognize gain on the taxable disposition of the stock of the Institutional REIT during the terms of the 2017 TPA or 2021 TPA, we would incur additional liability under those agreements.
Equity Holder Agreement
We and the Operating Partnership entered into an equity holder agreement at the closing of the PELP Transaction. Among other things, if the shares of our common stock are listed on a national securities exchange and a Form S-3 is filed, each named equity holder (except one who has permanently waived such rights) will have the opportunity to be named as a 10 year termselling securityholder and to register their shares of our common stock held (or received upon the exchange of their OP units), subject to certain exceptions. Additionally, the equity holder agreement permitted Mr. Edison, or his designee, to be nominated to the Board through November 8, 2028.
Property Management and Services Agreements Aircraft Leases— Under our property management and services agreements with the Managed Funds (collectively, “Management Agreements”), we earn revenues for managing day-to-day activities at the properties of the Managed Funds. As property manager, we are to provide various services (e.g., accounting, finance, and operations) for which we receive a distinct fee based on a set percentage of gross cash receipts each month. Under the Management Agreements, we also serve as a leasing agent to the Managed Funds. For each new lease, lease renewal or extension, and lease expansion, we receive a leasing commission. Leasing commissions are recognized as lease deals occur and are dependent on the terms of the lease. We also assist in overseeing the construction of various improvements for Managed Funds, for which we receive a distinct fee based on a set percentage of total project cost calculated upon completion of construction. We may have hired, directed, or established policies for employees who had direct responsibility for the operations of each real property we managed, which may have included on-site managers and building and maintenance personnel. We consider our Management Agreements with PELP month-to-month contracts because they are generally terminable by either party upon satisfaction of certain notice requirements. Our Management Agreements with our joint ventures have terms commensurate with their respective joint venture agreements, which are terminable by the joint ventures for cause and by us upon satisfaction of certain notice requirements.
PECO Air L.L.C. (“PECO Air”), an entity in which Mr. Edison our Chairman and Chief Executive Officer, owns a 50% interest, owns an airplaneaircraft that the Company uses for business purposes in the course of its operations pursuant to two written lease agreements. Pursuant to the two lease agreements, we pay PECO Air aggregate annual fees of $925,000 for 135 hours of operation, plus $500 for each hour of operation as well as fuel and certain maintenance costs. During 2019,2021, we made aggregate payments of approximately $1.0$0.8 million to PECO Air.Air, which represents the aggregate annual flat fee owed pursuant to the two lease agreements. In addition, we entered into an aircraft time sharing agreement with Mr. Edison for personal use of the aircraft leased to us by PECO Air. The FAA limits the costs that can be charged and reimbursed under a time share arrangement. Mr. Edison pays an hourly fee that is within the restraintsconstraints of the FAA requirements. In 2019,2021, the cost to us exceeded the amount reimbursed by $21,206,approximately $26,164, which amount is included in the All“All Other CompensationCompensation” column of the table set forth in “Executive Compensation Tables—Summary Compensation Table.”
2022 PROXY STATEMENT | 71 |
Guarantees — Upon completionStockholder Proposals and Director Nominations—2023 Annual Meeting of the PELP transaction, we assumed PELP’s obligation as the limited guarantor for up to $200 million, capped at $50 million in most instances, of NRP debt. Our NRP guarantee is limited to being the non-recourse carveout guarantor and the environmental indemnitor. As a part of the GRP I Joint Venture, GRP I assumed from us a $175 million mortgage loan from us for which we assumed the obligation of limited guarantor. Our GRP I guarantee is limited to being the non-recourse carveout guarantor and the environmental indemnitor. We entered into a separate agreement with Northwestern Mutual in which we agree to apportion any potential liability under this guarantee between us and them based on our ownership percentages in GRP I.Stockholders
Any stockholder proposal pursuant to Rule 14a-8 of the rules promulgated under the Exchange Act, to be considered for inclusion in PECO’s proxy materials for the 20212023 annual meeting of stockholders, must be received at PECO’s principal executive offices, Phillips Edison & Company, Inc., Attention: Secretary, 11501 Northlake Drive, Cincinnati, Ohio 45249, no later than 5:00 p.m. Eastern Time on December 8, 2020.
In addition, our bylaws currently provide that for director nominations or other business to be properly brought at an annual meeting by a stockholder, the stockholder must comply with the advance notice provisions and other requirements of Section 2.12 of our current bylaws. These notice provisions require that nominations of individuals for election to the Board and the proposal of business to be considered by the stockholders forat the 20212023 annual meeting of stockholders, together with the information and other materials required by our bylaws, must be received no earlier than January 18, 2021October 26, 2022 and no later than 5:00 p.m. Eastern Time on FebruaryNovember 25, 2022. In addition to satisfying the foregoing requirements under our current bylaws, to comply with the universal proxy rules (once they become effective), stockholders who intend to solicit proxies in support of director nominees other than PECO’s nominees must provide notice that sets forth the information required by Rule 14a-19 of the rules promulgated under the Exchange Act no later than April 17, 2021.2023. All proposals should be submitted in writing to: Phillips Edison & Company, Inc., Attn: CorporateAttention: Secretary, 11501 Northlake Drive, Cincinnati, OH 45249. All proposals must be in writing and otherwise in compliance with applicable SEC requirements and our bylaws.
Householding of Proxy Materials
SEC rules permit companies, brokers, banks or other intermediaries to deliver a single copy of a proxy statement and annual
If you would like to opt out of this practice for future mailings and receive separate proxy statements and annual reports for each stockholder sharing the same address, please contact your broker, bank or other intermediary. You may also obtain a
2022 PROXY STATEMENT | 72 |
Where You Can Find More Information
PECO files annual, quarterly and current reports, proxy statements and other information with the SEC under the Exchange Act. This proxy statement is, and PECO filings with the SEC are, available to the public over the internet at the SEC’s website at www.sec.gov. Investors may also consult our website for more information at www.phillipsedison.com/investors.
Copies of annual, quarterly and current reports, proxy statements and other information required to be filed with the SEC by PECO are available to our stockholders without charge upon written or oral request, excluding any exhibits to those filings. Our stockholders can obtain any of these filings by requesting them in writing at: Phillips Edison & Company, Inc., 11501 Northlake Drive, Cincinnati, Ohio 45249, Attention: Investor Relations; or by calling: 1-833-347-5717.
2022 PROXY STATEMENT | 73 |
Frequently Asked Questions
Q: | Why am I being provided with these materials? |
A: | We have made these proxy materials available to you via the internet or, upon your request, have delivered printed versions to you by mail in connection with the Board’s solicitation of proxies for our Annual Meeting to be held on June 16, 2022, and any postponements or adjournments of the Annual Meeting. The Annual Meeting will be solely a virtual meeting of stockholders, and will be held at 10:00 A.M., Eastern Time via live webcast at www.virtualshareholdermeeting.com/PECO2022. By use of a proxy, you can vote whether you participate in the Annual Meeting or not. This proxy statement describes the matters on which we would like you to vote and provides information on those matters so that you can make an informed decision. This proxy statement and the related proxy card were first made available to our stockholders on or about March 25, 2022. |
Q: | Why are you holding a virtual Annual Meeting? |
A: | We believe holding our Annual Meeting via live webcast is an environmentally-friendly way to provide expanded access, improved communication and cost savings for our stockholders and the Company. The virtual meeting provides the same rights to participate as an in-person meeting. Stockholders will not be permitted to physically attend the Annual Meeting. During the Annual Meeting, you may submit questions and vote your shares electronically. |
Q: | Who is entitled to vote? |
A: | Only holders of record of shares of the Company’s common stock at the close of business on March 18, 2022, the record date, or their duly appointed proxies are entitled to notice of, and to vote at, the Annual Meeting. As of the record date, there were approximately 113,819,146 shares of the Company’s common stock outstanding and approximately 14,540,495 OP units not held by the Company, which are exchangeable for shares of the Company’s common stock. |
Q: | Who can participate in the Annual Meeting? |
A: | Persons with evidence of stock ownership as of the record date, including both registered holders and stockholders whose shares are held in street name (defined below) can participate in the virtual meeting by visiting www.virtualshareholdermeeting.com/PECO2022. You will need the 16-digit control number included on your Notice Regarding the Availability of Proxy Materials, on your proxy card or on the instructions that accompany your proxy materials. If you do not have a control number, please contact your broker, bank or other nominee as soon as possible so that you can be provided with one. You may also submit questions in advance of the Annual Meeting by visiting www.proxyvote.com/peco and entering your control number. Additional information regarding stockholder questions and participation, rules, procedures and technical support can be viewed 15 minutes prior to the meeting at www.virtualshareholdermeeting.com/PECO2022. |
Q: | What is the difference between holding shares as a registered stockholder and as a beneficial owner or in “street name”? |
A: | If your shares were registered directly in your name as of the record date with our transfer agent, Computershare Trust Company, N.A., you are considered the “registered stockholder” of those shares. As a stockholder of record, we will mail the Notice Regarding the Availability of Proxy Materials or, if requested, copies of the proxy materials directly to you. If your shares are held in a stock brokerage |
account or by a bank or other nominee (“street name”), you are considered the “beneficial owner” of the shares that are registered in street name. In this case, the Notice Regarding the Availability of Proxy Materials or, if requested, printed proxy materials and our 2021 Annual Report were forwarded to you by your broker, bank or other nominee. As the beneficial owner, you have the right to direct your broker, bank or other nominee how to vote your shares by following the voting instructions included in the materials. |
Q: | How many votes do I have? |
A: | Each share of the Company’s common stock is entitled to one vote on each of the eight director nominees and |
Q: | Who is asking for my vote, and who pays for this proxy solicitation? |
A: | Your proxy is being solicited by the Board. PECO is paying the cost of soliciting proxies. Proxies may be solicited personally, by telephone, electronically via the internet or by mail. We will pay the cost of soliciting proxies. In accordance with the regulations of the SEC, we also will reimburse brokerage firms and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses incurred in forwarding proxy and solicitation materials to beneficial owners of our common stock. |
Q: | What constitutes a “quorum”? |
A: | Our bylaws provide that the presence in person or by proxy of stockholders entitled to cast a majority of all the votes entitled to be cast at such meeting on any matter constitutes a quorum at a meeting of our stockholders. Proxies received but marked as abstentions and “broker non-votes,” if any, are treated as being present at the Annual Meeting for purposes of determining whether a quorum is present. |
No business may be conducted at the Annual Meeting if a quorum is not present. Pursuant to PECO’s bylaws, the chairman of the meeting may adjourn the Annual Meeting to a later date, time and place announced at the meeting, whether or not a quorum is present and without a vote of stockholders. |
Q: | What is a “broker non-vote”? |
A: | A “broker non-vote” occurs when shares held by a broker, bank or other nominee are not voted with respect to a proposal because (1) the broker, bank or other nominee has not received voting instructions from the stockholder who beneficially owns the shares and (2) the broker, bank or other nominee lacks the authority to vote the shares at his or her discretion. This means that if the beneficial owner does not provide voting instructions, the broker, bank or other nominee can still vote the shares with respect to matters that are considered to be “routine,” but cannot vote the shares with respect to “non-routine” matters. |
Q: | What are the voting requirements of the proposals? How are abstentions and broker non-votes treated? |
A: | Proposal 1: Election of Directors – You may vote “FOR,” “AGAINST” or “ABSTAIN” with respect to each nominee. In uncontested elections, an affirmative vote of the majority of the total votes cast for and against such nominee is required for the election of a director. Votes cast includes votes against but excludes abstentions and broker non-votes with respect to a nominee’s election, and abstentions and broker non-votes will have no effect on the election of any director. The majority voting standard does not apply, however, in a contested election where the number of director nominees exceeds the number of directors to be elected at the annual meeting of stockholders. In such circumstances, directors will instead be elected by a plurality of all the votes cast at the annual meeting at which a quorum is present. The election of directors at the Annual Meeting is not contested. |
2022 PROXY STATEMENT | 75 |
Proposal 2: Advisory Vote on Executive Compensation – You may vote “FOR,” “AGAINST” or “ABSTAIN” with respect to the advisory resolution on executive compensation, commonly referred to as a “say-on-pay” resolution. Approval requires the affirmative vote of a majority of votes cast on the proposal at the meeting. Abstentions and broker non-votes are not votes cast and will have no effect on the vote on this proposal. The say-on-pay vote is advisory only, and therefore not binding on the Company, the Compensation Committee or our Board. Although non-binding, our Board values the opinions that our stockholders express with their votes and the votes will provide information to the Compensation Committee regarding investor sentiment about our executive compensation philosophy, policies and practices, which the Compensation Committee will be able to consider when determining executive compensation in the future. |
Proposal 3: Ratification Appointment of Independent Registered Public Accounting Firm – You may vote “FOR,” “AGAINST” or “ABSTAIN” with respect to the ratification of the independent registered public accounting firm selected by the Audit Committee. Ratification by the stockholders requires the affirmative vote of the majority of votes cast on the proposal at the meeting. Abstentions are not votes cast and will have no effect on the vote on this proposal. Because this proposal is considered “routine”, brokers, banks and other nominees have discretionary authority to vote without receiving instructions. Thus, we do not expect any broker non-votes on this proposal. |
Q: | How do I vote? |
A: | Registered stockholders or stockholders that hold shares in street name as of the close of business on the record date may vote in one of the following ways (as applicable): |
Registered Stockholders:
Internet. You may submit a proxy by going to proxyvote.com/peco with use of the control number on your proxy card. Once at the website, follow the instructions to submit a proxy.
Telephone. You may submit a proxy using the toll-free number at 1-800-690-6903 and follow the recorded instructions. You will be asked to provide the control number from your proxy card.
Mail. You may submit a proxy by completing, signing, dating, and returning your proxy card, or voting instruction card, in the pre-addressed postage-paid envelope provided.
The internet and telephone proxy submission procedures are designed to authenticate stockholders and to allow them to confirm that their instructions have been properly recorded. If you submit a proxy over the internet or by telephone, then you do not need to return a written proxy card or voting instruction card by mail. These internet and telephone facilities will close at 11:59 p.m. Eastern Time on June 15, 2022.
Live Annual Meeting Participation. You may elect to participate in the Annual Meeting via live webcast, through which you may vote online during the Annual Meeting prior to the closing of the polls, and any previous votes that you submitted by mail, telephone or internet will be superseded.
Stockholders holding in street name:
Voting Instructions. You may submit voting instructions to your broker, bank or other nominee. In most instances, you will be able to do this over the internet, by telephone or by mail. Please refer to information from your broker, bank or other nominee on how to submit voting instructions.
Live Annual Meeting Participation. You may elect to participate in the Annual Meeting via live webcast, through which you may vote online during the Annual Meeting prior to the closing of the polls, and any previous votes that you submitted will be superseded.
Q: | How will my proxy be voted? |
A: | All PECO shares entitled to vote and represented by properly completed proxies received prior to the Annual Meeting, and not revoked, will be voted at the Annual Meeting as instructed on the proxies. If |
2022 PROXY STATEMENT | 76 |
Q: | How does the Board recommend I vote? |
A: | The Board unanimously recommends that stockholders vote: |
FOR each of the nominees named in this proxy statement for election as a director;
FOR the approval of the non-binding, advisory resolution on executive compensation; and
FOR ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the year ending December 31, 2022.
Q: | Once I have submitted my proxy, is it possible for me to change or revoke my proxy? |
A: | Yes, a vote may be changed or a previously authorized proxy may be revoked at any time before it is exercised at the Annual Meeting by: |
notifying our Secretary in writing that you are revoking your proxy;
executing and delivering a later-dated proxy card or submitting a later-dated proxy by telephone or via the internet, in either case, so long as we receive such card or later-dated proxy before the Annual Meeting date; or
participating in the Annual Meeting via live webcast and voting online during the Annual Meeting prior to the closing of the polls.
Only the most recently submitted proxy will be counted and all others will be discarded regardless of the method of voting.
Stockholders who hold shares in street name may revoke their voting instructions by following the instructions provided by their broker, bank or other nominee.
Q: | Will my vote make a difference? |
A: | YES! Your vote is needed to ensure that the proposals can be acted upon. Because we are a widely held company, YOUR VOTE IS VERY IMPORTANT! Please vote promptly. Your immediate response will help avoid potential delays and may save us significant additional expenses associated with soliciting stockholder votes. |
2022 PROXY STATEMENT | 77 |
Same-Center Net Operating Income
The Company presents Same-Center NOI as a supplemental measure of its performance. The Company defines NOI as total operating revenues, adjusted to exclude non-cash revenue items, less property operating expenses and real estate taxes. For the years ended December 31, 2021, 2020 and 2019, Same-Center NOI represents the NOI for properties that were wholly-owned and operational for the entire portion of all comparable reporting periods and therefore highlights operating trends such as occupancy levels, rental rates, and operating costs. The Company believes Same-Center NOI provides useful information to its investors about its financial and operating performance because it provides a performance measure of the revenues and expenses directly involved in owning and operating real estate assets and provides a perspective not immediately apparent from net income (loss). Other REITs may use different methodologies for calculating Same-Center NOI, and accordingly, PECO’s Same-Center NOI may not be comparable to other REITs.
Same-Center NOI should not be viewed as an alternative measure of the Company’s financial performance as it does not reflect the operations of its entire portfolio, nor does it reflect the impact of general and administrative expenses, depreciation and amortization, interest expense, other income (expense), or the level of capital expenditures and leasing costs necessary to maintain the operating performance of the Company’s properties that could materially impact its results from operations.
Nareit Funds from Operations, Core Funds from Operations and Adjusted Funds from Operations
Nareit FFO is a non-GAAP financial performance measure that is widely recognized as a measure of REIT operating performance. Nareit defines FFO as net income (loss) computed in accordance with GAAP, excluding: (i) gains (or losses) from sales of property and gains (or losses) from change in control; (ii) depreciation and amortization related to real estate; and (iii) impairment losses on real estate and impairments of in-substance real estate investments in investees that are driven by measurable decreases in the fair value of the depreciable real estate held by the unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect Nareit FFO on the same basis. The Company calculates Nareit FFO Attributable to Stockholders and OP Unit Holders in a manner consistent with the Nareit definition.
Core FFO is an additional financial performance measure used by the Company as Nareit FFO includes certain non-comparable items that affect its performance over time. The Company believes that Core FFO is helpful in assisting management and investors with the assessment of the sustainability of operating performance in future periods, and that it is more reflective of its core operating performance and provides an additional measure to compare PECO’s performance across reporting periods on a consistent basis by excluding items that may cause short-term fluctuations in net income (loss). To arrive at Core FFO, the Company adjusts Nareit FFO Attributable to Stockholders and OP Unit Holders to exclude certain recurring and non-recurring items including, but not limited to: (i) depreciation and amortization of corporate assets; (ii) changes in the fair value of the earn-out liability; (iii) amortization of unconsolidated joint venture basis differences; (iv) gains or losses on the extinguishment or modification of debt and other; (v) other impairment charges; (vi) transaction and acquisition expenses; and (vii) realized performance income.
2022 PROXY STATEMENT | A-1 |
Adjusted FFO is calculated as Core FFO adjusted to exclude: (i) straight-line rent and non-cash adjustments, such as amortization of market lease adjustments, debt discounts, deferred financing costs, and market debt adjustments; (ii) recurring capital expenditures, tenant improvement costs, and leasing commissions; (iii) non-cash share-based compensation expenses; and (iv) our prorated share of the aforementioned adjustments for our unconsolidated joint ventures. Adjusted FFO provides further insight into our portfolio performance by focusing on the revenues and expenditures directly involved in our operations and the management of our entire real estate portfolio. Recurring property-related capital expenditures are costs to maintain properties and their common areas, including new roofs, paving of parking lots, and other general upkeep items, and recurring corporate capital expenditures are primarily costs for computer software and equipment.
Nareit FFO, Nareit FFO Attributable to Stockholders and OP Unit Holders, Core FFO and Adjusted FFO should not be considered alternatives to net income (loss) under GAAP, as an indication of the Company’s liquidity, nor as an indication of funds available to cover its cash needs, including its ability to fund distributions. Core FFO and Adjusted FFO may not be useful measures of the impact of long-term operating performance on value if the Company does not continue to operate its business plan in the manner currently contemplated.
Accordingly, Nareit FFO, Nareit FFO Attributable to Stockholders and OP Unit Holders, Core FFO and Adjusted FFO should be reviewed in connection with other GAAP measurements, and should not be viewed as more prominent measures of performance than net income (loss) or cash flows from operations prepared in accordance with GAAP. The Company’s Nareit FFO, Nareit FFO Attributable to Stockholders and OP Unit Holders, Core FFO and Adjusted FFO, as presented, may not be comparable to amounts calculated by other REITs.
Earnings Before Interest, Taxes, Depreciation, and Amortization for Real Estate and Adjusted EBITDAre
Nareit defines EBITDAre as net income (loss) computed in accordance with GAAP before (i) interest expense, (ii) income tax expense, (iii) depreciation and amortization, (iv) gains or losses from disposition of depreciable property, and (v) impairment write-downs of depreciable property. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect EBITDAre on the same basis.
Adjusted EBITDAre is an additional performance measure used by the Company as EBITDAre includes certain non-comparable items that affect the Company’s performance over time. To arrive at Adjusted EBITDAre, the Company excludes certain recurring and non-recurring items from EBITDAre, including, but not limited to: (i) changes in the fair value of the earn-out liability; (ii) other impairment charges; (iii) amortization of basis differences in the Company’s investments in its unconsolidated joint ventures; (iv) transaction and acquisition expenses; and (v) realized performance income.
The Company has included the calculation of EBITDAre to better align with publicly traded REITs. The Company uses EBITDAre and Adjusted EBITDAre as additional measures of operating performance which allow it to compare earnings independent of capital structure, determine debt service and fixed cost coverage, and measure enterprise value. Additionally, the Company believes they are a useful indicator of its ability to support its debt obligations. EBITDAre and Adjusted EBITDAre should not be considered as
2022 PROXY STATEMENT | A-2 |
alternatives to net income (loss), as an indication of the Company’s liquidity, nor as an indication of funds available to cover its cash needs, including its ability to fund distributions. Accordingly, EBITDAre and Adjusted EBITDAre should be reviewed in connection with other GAAP measurements, and should not be viewed as more prominent measures of performance than net income (loss) or cash flows from operations prepared in accordance with GAAP. The Company’s EBITDAre and Adjusted EBITDAre, as presented, may not be comparable to amounts calculated by other REITs.
Same-Center Net Operating Income
The tables below compare same-center NOI (dollars in thousands):
Year Ended December 31, | Favorable (Unfavorable) | |||||||||||||||
| 2021 | 2020 | $ Change | % Change | ||||||||||||
Revenues: |
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Rental income(1) | $ | 361,297 | $ | 356,096 | $ | 5,201 |
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Tenant recovery income | 115,989 | 120,475 | (4,486 | ) |
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Reserves for uncollectibility(2) | 1,876 | (26,243 | ) | 28,119 |
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Other property income | 2,761 | 2,570 | 191 |
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Total revenues | 481,923 | 452,898 | 29,025 | 6.4 | % | |||||||||||
Operating expenses: |
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Property operating expenses | 72,226 | 68,101 | (4,125 | ) |
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Real estate taxes | 62,929 | 64,420 | 1,491 |
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Total operating expenses | 135,155 | 132,521 | (2,634 | ) | (2.0 | )% | ||||||||||
Total Same-Center NOI | $ | 346,768 | $ | 320,377 | $ | 26,391 | 8.2 | % |
(1) | Excludes straight-line rental income, net amortization of above- and below-market leases, and lease buyout income. |
(2) | Includes billings that will not be recognized as revenue until cash is collected or the Neighbor resumes regular payments and/or we deem it appropriate to resume recording revenue on an accrual basis, rather than on a cash basis. |
Year Ended December 31, | Favorable (Unfavorable) | |||||||||||||||
| 2021 | 2019 | $ Change | % Change | ||||||||||||
Revenues: |
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Rental income(1) | $ | 352,400 | $ | 342,706 | $ | 9,694 |
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Tenant recovery income | 113,046 | 115,269 | (2,223 | ) |
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Reserves for uncollectibility(2) | 1,736 | (4,714 | ) | 6,450 |
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Other property income | 2,477 | 2,384 | 93 |
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Total revenues | 469,659 | 455,645 | 14,014 | 3.1 | % | |||||||||||
Operating expenses: |
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Property operating expenses | 70,246 | 66,394 | (3,852 | ) |
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Real estate taxes | 61,458 | 63,836 | 2,378 |
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Total operating expenses | 131,704 | 130,230 | (1,474 | ) | (1.1 | )% | ||||||||||
Total Same-Center NOI | $ | 337,955 | $ | 325,415 | $ | 12,540 | 3.9 | % |
2022 PROXY STATEMENT | A-3 |
(1) | Excludes straight-line rental income, net amortization of above- and below-market leases, and lease buyout income. |
(2) | Includes billings that will not be recognized as revenue until cash is collected or the Neighbor resumes regular payments and/or we deem it appropriate to resume recording revenue on an accrual basis, rather than on a cash basis. |
Same-Center Net Operating Income Reconciliation-Below is a reconciliation of Net Income (Loss) to NOI and Same-Center NOI (in thousands):
Year Ended December 31, | ||||||||||||
| 2021 | 2020 | 2019 | |||||||||
Net income (loss) | $ | 17,233 | $ | 5,462 | $ | (72,826 | ) | |||||
Adjusted to exclude: |
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Fees and management income | (10,335 | ) | (9,820 | ) | (11,680 | ) | ||||||
Straight-line rental income(1) | (9,404 | ) | (3,356 | ) | (9,079 | ) | ||||||
Net amortization of above- and below-market leases | (3,581 | ) | (3,173 | ) | (4,185 | ) | ||||||
Lease buyout income | (3,485 | ) | (1,237 | ) | (1,166 | ) | ||||||
General and administrative expenses | 48,820 | 41,383 | 48,525 | |||||||||
Depreciation and amortization | 221,433 | 224,679 | 236,870 | |||||||||
Impairment of real estate assets | 6,754 | 2,423 | 87,393 | |||||||||
Interest expense, net | 76,371 | 85,303 | 103,174 | |||||||||
Gain on disposal of property, net | (30,421 | ) | (6,494 | ) | (28,170 | ) | ||||||
Other expense (income), net | 34,361 | (9,245 | ) | 676 | ||||||||
Property operating expenses related to fees and management income | 4,855 | 6,098 | 6,264 | |||||||||
NOI for real estate investments | 352,601 | 332,023 | 355,796 | |||||||||
Less: Non-same-center NOI(2) | (5,833 | ) | (11,646 | ) | (27,452 | ) | ||||||
Total Same-Center NOI | $ | 346,768 | $ | 320,377 | $ | 328,344 | ||||||
Less: Centers not included in 2019 Same-Center | (8,813 | ) |
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| (2,929 | ) | |||||
Total Same-Center NOI - adjusted for 2019 | $ | 337,955 |
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| $ | 325,415 |
(1) | Includes straight-line rent adjustments for Neighbors for whom revenue is being recorded on a cash basis. |
(2) | Includes operating revenues and expenses from non-same-center properties which includes properties acquired or sold and corporate activities. |
2022 PROXY STATEMENT | A-4 |
Nareit Funds from Operations, Core Funds from Operations and Adjusted Funds from Operations
The following table presents the Company’s calculation of Nareit FFO Attributable to Stockholders and OP Unit Holders, Core FFO and Adjusted FFO and provides additional information related to its operations (in thousands, except per share amounts):
Year Ended December 31, | ||||||||
| 2021 | 2020 | ||||||
Calculation of Nareit FFO Attributable to Stockholders and OP Unit Holders |
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Net income | $ | 17,233 | $ | 5,462 | ||||
Adjustments: |
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Depreciation and amortization of real estate assets | 217,564 | 218,738 | ||||||
Impairment of real estate assets | 6,754 | 2,423 | ||||||
Gain on disposal of property, net | (30,421 | ) | (6,494 | ) | ||||
Adjustments related to unconsolidated joint ventures | 72 | 1,552 | ||||||
Nareit FFO attributable to stockholders and OP unit holders | $ | 211,202 | $ | 221,681 | ||||
Core FFO |
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Nareit FFO attributable to stockholders and OP unit holders | $ | 211,202 | $ | 221,681 | ||||
Adjustments: |
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Depreciation and amortization of corporate assets | 3,869 | 5,941 | ||||||
Change in fair value of earn-out liability | 30,436 | (10,000 | ) | |||||
Other impairment charges | - | 359 | ||||||
Amortization of unconsolidated joint venture basis differences | 1,167 | 1,883 | ||||||
Transaction and acquisition expenses | 5,363 | 539 | ||||||
Loss on extinguishment or modification of debt and other, net | 3,592 | 4 | ||||||
Realized performance income | (675 | ) | - | |||||
Core FFO | $ | 254,954 | $ | 220,407 | ||||
Adjusted FFO |
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Core FFO | $ | 254,954 |
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Adjustments: |
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Straight-line and non-cash adjustments | (6,748 | ) |
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Capital expenditures and leasing commissions(1) | (52,009 | ) |
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Non-cash share-based compensation expense | 13,530 |
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Adjustments related to unconsolidated joint ventures | (783 | ) |
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Adjusted FFO | $ | 208,944 |
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Nareit FFO Attributable to Stockholders and OP Unit Holders/Core FFO/Adjusted FFO per Diluted Share(2) |
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Weighted-average shares of common stock outstanding - diluted | 116,672 | 111,156 | ||||||
Nareit FFO attributable to stockholders and OP unit holders per share - diluted | $ | 1.81 | $ | 1.99 | ||||
Core FFO per share - diluted | $ | 2.19 | $ | 1.98 | ||||
Adjusted FFO per share - diluted | $ | 1.79 |
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(1) | Excludes development and redevelopment projects. |
2022 PROXY STATEMENT | A-5 |
(2) | Restricted stock awards were dilutive to Nareit FFO attributable to stockholders and OP unit holders per share, Core FFO and Adjusted FFO per share for the years ended December 31, 2021 and 2020, and, accordingly, their impact was included in the weighted-average shares of common stock used in their respective per share calculations. |
EBITDAre and Adjusted EBITDAre
The following table presents the Company’s calculation of EBITDAre and Adjusted EBITDAre (in thousands):
Year Ended December 31, | ||||||||
2021 | 2020 | |||||||
Calculation of EBITDAre |
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Net income | $ | 17,233 | $ | 5,462 | ||||
Adjustments: |
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Depreciation and amortization | 221,433 | 224,679 | ||||||
Interest expense, net | 76,371 | 85,303 | ||||||
Gain on disposal of property, net | (30,421 | ) | (6,494 | ) | ||||
Impairment of real estate assets | 6,754 | 2,423 | ||||||
Federal, state, and local tax expense | 327 | 491 | ||||||
Adjustments related to unconsolidated joint ventures | 1,431 | 3,355 | ||||||
EBITDAre | $ | 293,128 | $ | 315,219 | ||||
Calculation of Adjusted EBITDAre |
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EBITDAre | $ | 293,128 | $ | 315,219 | ||||
Adjustments: |
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Change in fair value of earn-out liability | 30,436 | (10,000 | ) | |||||
Amortization of unconsolidated joint venture basis differences | 1,167 | 1,883 | ||||||
Transaction and acquisition expenses | 5,363 | 539 | ||||||
Realized performance income | (675 | ) | - | |||||
Other impairment charges | - | 359 | ||||||
Adjusted EBITDAre | $ | 329,419 | $ | 308,000 |
2022 PROXY STATEMENT | A-6 |
Financial Leverage Ratios
The Company believes its net debt to Adjusted EBITDAre allows it access to future borrowings as needed in the near term. The following table presents the Company’s calculation of net debt, inclusive of its prorated portion of net debt and cash and cash equivalents owned through its unconsolidated joint ventures, as of December 31, 2021 and 2020 (in thousands):
| December 31, 2021 | December 31, 2020 | ||||||
Net debt: |
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Total debt, excluding discounts, market adjustments, and deferred financing expenses | $ | 1,941,504 | $ | 2,345,620 | ||||
Less: Cash and cash equivalents | 93,109 | 104,952 | ||||||
Total net debt | $ | 1,848,395 | $ | 2,240,668 |
The following table presents the calculation of net debt to Adjusted EBITDAre as of December 31, 2021 and 2020 (dollars in thousands):
| December 31, 2021 | December 31, 2020 | ||||||
Net debt to Adjusted EBITDAre - annualized: |
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Net debt | $ | 1,848,395 | $ | 2,240,668 | ||||
Adjusted EBITDAre - annualized(1) | 329,419 | 308,000 | ||||||
Net debt to Adjusted EBITDAre - annualized | 5.6x | 7.3x |
(1) | Adjusted EBITDAre is based on a trailing twelve-month period. |
2022 PROXY STATEMENT | A-7 |
SCAN TO VIEW MATERIALS & VOTE w 11501 NORTHLAKE DRIVE VOTE BY INTERNET CINCINNATI, OH 45249 Before The Meeting - Go to www.proxyvote.com/peco or scan the QR Barcode above Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Follow the instructions to obtain your records and to create an electronic voting instruction form. During The Meeting - Go to www.virtualshareholdermeeting.com/PECO2022 You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: D72814-P70868 KEEP THIS PORTION FOR YOUR RECORDS THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY PHILLIPS EDISON & COMPANY, INC. The Board of Directors recommends a vote FOR all nominees listed in Proposal 1. 1. Election of Directors The Board of Directors recommends you vote FOR Proposals Nominees: For Against Abstain 2 and 3. For Against Abstain 2. Approve a non-binding, advisory resolution on executive 1a. Jeffrey S. Edison compensation as more fully described in the proxy statement for the annual meeting. 1b. Leslie T. Chao 3. Ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2022. 1c. Elizabeth O. Fischer NOTE: The proxies are authorized to vote in their discretion on such other business as may properly come before the Annual 1d. Paul J. Massey, Jr. Meeting or any adjournment or postponement thereof. 1e. Stephen R. Quazzo 1f. Jane E. Silfen 1g. John A. Strong 1h. Gregory S. Wood Please sign exactly as your name appears on this proxy card and date. When shares of common stock are held by joint tenants, both should sign. When signing as attorney, executor, administrator, trustee, or guardian, please give full title as such. If a corporation, please sign in full corporate name by president or other authorized officer. If a partnership, please sign in partnership name by general partner or other authorized person. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
PROXY FOR THE 2022 ANNUAL MEETING OF STOCKHOLDERS PHILLIPS EDISON & COMPANY, INC. June 16, 2022 At 10:00 A.M. Eastern Time Via live webcast at www.virtualshareholdermeeting.com/PECO2022 Your Vote is Very Important! IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE 2022 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 16, 2022: The Notice and Proxy Statement and 2021 Annual Report are available at www.proxyvote.com/peco. D72815-P70868 Phillips Edison & Company, Inc. 11501 Northlake Drive, Cincinnati, Ohio 45249 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned stockholder hereby appoints each of John P. Cauleld and Tanya E. Brady, as proxy and attorney-in-fact, each with the power to appoint his or her substitute, on behalf and in the name of the undersigned, to attend the 2022 annual meeting of stockholders of Phillips Edison & Company, Inc. (the “Company”) to be held at 10:00 A.M. Eastern Time, on June 16, 2022, and at any adjournment or postponement thereof, and to cast on behalf of the undersigned all of the votes that the undersigned would be entitled to cast at said meeting and to otherwise represent the undersigned at said meeting with all powers possessed by the undersigned if personally present at said meeting. The undersigned acknowledges receipt of the notice of the 2022 annual meeting of stockholders, the notice and proxy statement and the 2021 annual report, the terms of each of which are incorporated herein by reference, and revokes any proxy heretofore given with respect to said meeting. The votes entitled to be cast by the undersigned will be cast in the manner directed herein by the undersigned stockholder. If this proxy is executed but no direction is made, the votes entitled to be cast by the undersigned will be cast (i) “FOR” all nominees in Proposal 1 and (ii) “FOR” Proposals 2 and 3. The votes entitled to be cast by the undersigned will be cast in the discretion of the Proxy holder on any other matter that may properly come before the meeting or any adjournment or postponement thereof. PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE. IF YOU AUTHORIZE YOUR PROXY BY INTERNET OR TELEPHONE, YOU DO NOT NEED TO MAIL YOUR PROXY CARD.