Phillips Edison & Company, Inc.PECO
Phillips Edison & Company, Inc. Fair Value Disclosure
| 16. FAIR VALUE MEASUREMENTS | ||
The following describes the methods we use to estimate the fair value of our financial and nonfinancial assets and liabilities:
Cash and Cash Equivalents, Restricted Cash, Accounts Receivable, and Accounts Payable—We consider the carrying values of these financial instruments to approximate fair value because of the short period of time between origination of the instruments and their expected realization.
Real Estate Investments—The purchase prices of the investment properties, including related lease intangible assets and liabilities, are allocated at estimated fair value based on Level 3 inputs, such as discount rates, capitalization rates, comparable sales, replacement costs, income and expense growth rates, and current market rents and allowances as determined by management.
Debt Obligations—We estimate the fair value of our revolving credit facility, term loans, secured portfolio of loans, and mortgages by discounting the future cash flows of each instrument at rates currently offered for similar debt instruments of comparable maturities by our lenders using Level 3 inputs. The discount rates used approximate current lending rates for loans or groups of loans with similar maturities and credit quality, assuming the debt is outstanding through maturity and considering the debt’s collateral (if applicable). We have utilized market information, as available, or present value techniques to estimate the amounts required to be disclosed. We estimate the fair value of our senior unsecured notes by using quoted prices in active markets, which are considered Level 1 inputs.
The following is a summary of borrowings as of December 31, 2025 and 2024 (in thousands):
| 2025 | 2024 | |||||||||||||||||||||||||
Recorded Principal Balance(1) | Fair Value | Recorded Principal Balance(1) | Fair Value | |||||||||||||||||||||||
| Revolving credit facility | $ | 92,000 | $ | 92,445 | $ | 40,000 | $ | 40,088 | ||||||||||||||||||
| Term loans | 483,415 | 485,508 | 580,928 | 587,341 | ||||||||||||||||||||||
| Senior unsecured notes due 2031 | 345,157 | 313,817 | 344,417 | 292,810 | ||||||||||||||||||||||
| Senior unsecured notes due 2032 | 346,529 | 357,868 | — | — | ||||||||||||||||||||||
| Senior unsecured notes due 2034 | 342,564 | 366,377 | 341,919 | 350,735 | ||||||||||||||||||||||
| Senior unsecured notes due 2035 | 342,117 | 345,356 | 341,453 | 329,280 | ||||||||||||||||||||||
| Secured portfolio loan facilities | 393,012 | 370,922 | 393,056 | 359,194 | ||||||||||||||||||||||
Mortgages(2) | 30,534 | 29,621 | 67,770 | 66,883 | ||||||||||||||||||||||
| Total | $ | 2,375,328 | $ | 2,361,914 | $ | 2,109,543 | $ | 2,026,331 | ||||||||||||||||||
(1)As of December 31, 2025 and 2024, respectively, recorded principal balances include: (i) net deferred financing fees of $3.4 million and $5.7 million; (ii) assumed market debt adjustments of $0.3 million and $0.1 million; and (iii) notes payable discounts of $23.6 million and $22.2 million.
(2)Our finance lease liability is included in the mortgages line item, as presented.
Recurring and Nonrecurring Fair Value Measurements—Our marketable securities and interest rate swaps are measured and recognized at fair value on a recurring basis, while certain real estate assets and liabilities are measured and recognized at fair value as needed. Fair value measurements that occurred as of and during the years ended December 31, 2025 and 2024 were as follows (in thousands):
| 2025 | 2024 | ||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 | ||||||||||||||||||
| Recurring | |||||||||||||||||||||||
Marketable securities(1) | $ | 16,355 | $ | — | $ | — | $ | 7,420 | $ | — | $ | — | |||||||||||
Derivative assets(1)(2) | — | 177 | — | — | 4,510 | — | |||||||||||||||||
(1)We record marketable securities and derivative assets in Other Assets, Net on our consolidated balance sheets.
(2)The fair values of the derivative assets exclude associated accrued interest receivable of $0.1 million and $0.5 million as of December 31, 2025 and 2024, respectively.
Marketable Securities—We estimate the fair value of marketable securities using Level 1 inputs. We utilize unadjusted quoted prices for identical assets in active markets that we have the ability to access.
Derivative Instruments—As of December 31, 2025 and 2024, we had interest rate swaps that fixed SOFR on portions of our unsecured term loan facilities.
All interest rate swap agreements are measured at fair value on a recurring basis. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The fair values of interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments (or receipts) are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves.
To comply with the provisions of ASC 820, we incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.
Although we determined that the significant inputs used to value our derivatives fell within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our counterparties and our own credit risk utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by us and our counterparties. However, as of December 31, 2025 and 2024, we have assessed the significance of the impact of the credit valuation adjustments on the
overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we have determined that our derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.
Real Estate Asset Impairment—Our real estate assets are measured and recognized at fair value, less costs to sell for held-for-sale properties, on a nonrecurring basis dependent upon when we determine an impairment has occurred. We impair assets that are under contract at a disposition price that is less than carrying value, or that have other operational impairment indicators. The valuation technique used for the fair value of all impaired real estate assets was the expected net sales proceeds, which we consider to be a Level 2 input in the fair value hierarchy.
We recorded no expense for impairment of real estate assets for the years ended December 31, 2025, 2024, and 2023.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 10, 2026 | Showing above |
| 2024 | Feb 11, 2025 | |
| 2023 | Feb 12, 2024 | |
| 2022 | Feb 21, 2023 | |
| 2021 | Feb 16, 2022 | |
| 2020 | Mar 12, 2021 | |
| 2019 | Mar 12, 2020 | |
| 2018 | Mar 13, 2019 | |
| 2017 | Mar 30, 2018 | |
| 2016 | Mar 9, 2017 | |
| 2015 | Mar 3, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.