Phillips Edison & Co. S.W.O.

T Analysis

Phillips Edison & Co. is the largest owner of grocery-anchored shopping centers in the

nation. They target vacant or failing shopping centers and focus on transforming it into a

successful grocery-anchored shopping experience for everyone. Our goal is to target the

companys strengths, weaknesses, opportunities, and threats in a well-developed S.W.O.T

analysis of the company.

Phillips Edison & Co. is a company that has been on the rise, with high success rates.

They have strong attributes that help them stand out and excel in a multitude of different areas.

Whether it is a culturally inclusive work environment, their strive for perfection, or their focus

on innovation, Phillips Edison is a force to be reckoned with. The components of their success

will be the main topic of this portion of the research.

Phillips Edison is a company that is very adept in finding their niche in the market. They

mainly focus on properties they are sure they can attain within secondary and tertiary markets for

overall lower costs and higher profit margins. On the other hand, properties in primary markets

prove too costly for the company. In the major markets, competition has meant a meaningful

compression, says Jeffrey S. Edison, CEO of Phillips Edison & Company, in an interview. The

secondary markets have also seen compression, but it has not been as significant. We have to be

selective and disciplined in what we are looking for. Theres a voracious appetite for the top five

or top 10 markets in the country; that will be a difficult place for us to buy. From our

perspective, there will be more opportunities in less frothy markets. While they do invest in

tertiary areas, local grocers tend to have an overall advantage over Phillips Edison because they

know more about their customer base and their buying trends. While these properties are

profitable, Phillips Edison focuses their resources on acquiring spaces in secondary markets due
to higher success rates. Their success is largely due to how they strategically position themselves

in the market.

Every organization has an image in the market based on their goals and ethics. These

goals and ethics derive from their value of teamwork and experience represented by the

company's staff. They say a team is only as strong as its weakest link, which is the type of

thinking Phillips Edison incorporates into their work environment. Phillips Edisons company

culture focus on their employers and emphasizes a balanced work life. Emily Kendall, the

director of marketing and communications at Phillips Edison, said in an interview that as a

working parent and first time mom, the workplace supported her through the transition. We all

think of one another like family, and that translates into care and respect for our families outside

of work. The company does a great job of respecting our time with our kids, Kendall says. This

boils down to their leadership core of immensely experienced and inclusive professionals. With

an average of 23 years of real estate experience, Phillips Edisons senior management team has

managed to successfully run together for more than 10 years now, and this cohesiveness at the

top is what binds the company into what Phillips Edisons work culture is today for the rest of

the employees. Led by their Chief Executive Office and Chairman of their Board of Directors,

Jeffrey S. Edison has been serving PECO since 1995, along with Robert F. Myers (COO) and R.

Mark Addy (Executive Vice President), Phillips Edison now manages more than $1.7 billion of

gross real estate investments.

As well as striving to achieve collaborative goals, PECO believes strongly in coming

together and doing what is right, in turn creating a culture of community engagement and

giving back to society. In an effort to promote this way of thinking they have created PECO

Community Partnership, an associate led organization that strives to facilitate employee

involvement in the community and provides a resource for team members to connect with

different causes they are passionate about. The organization hosts a quarterly company-wide

events in the community with a goal of encouraging interdepartmental interaction and

camaraderie while giving back to the community said Bob Myers, Chief Operating Officer.

Two of Phillips Edisons core values are think big, and act small along with do the right

thing. They take these two core values and implement them into their charitable projects.

PECO also hosts various charity activities proposed by employees to give back to causes

they are passionate about. This dedication to service and giving back to the community is one of

the many reasons Phillips Edison sees as much success as they do. It has created an employee

base that comes together to help others, bringing them closer to their community and to each

other. Not only is it fantastic for the company image they are trying to build, but it creates a bond

between employees and creates a team of philanthropic, socially conscious, good people.

Another unique part of PECO is the organization PECO NOW. PECO NOW is a program

that is designed to support and empower the women at Phillips Edison & Company. Within the

retail workforce, 48% of the it is composed of women but only 2% of the CEOs are women.

Phillips Edison realizes this and is trying to build awareness for women in the workforce. They

have many events that focus on PECOs mission including: networking events, quarterly

learning events, a golf scramble and scholarship opportunities. Phillips Edison wants women in

high leadership roles and will do what they can to ensure this happens

Phillips Edison is a unique company that truly masters the concept of investing for the

future. They built their company to have a high net worth and successful platform. For any

company to grow, they need monetary income. In order to obtain that, Phillips Edison needs

investors to help them fuel their business to obtain more capital for a larger growth. From the
start, Phillips Edison has depended on investors from a few private investment funds, as well as

high net-worth people. Over the years the number of investors grew, as well as they established

themselves in the retail channel. Therefore, they rely on retail investors along with institutional

investors such as TPG, Zurich, GIC and Northwestern mutual. The company knows how to

attract investors with their numbers, high net-worth, and their assets under management worth

around $6 billion, but that is only half the work. In order to continue getting investors, they need

to establish a secure relationship with each investor. Fortunately, Phillips and Edison have been

obtaining a loyal repeat investor base due to their reliability and follow through. The company

uses the CAR method, they have a need or context, they set out a plan or action and they have

promising result, which is all an investor wants, results. Phillips Edison does so by having a high

net worth, the promise of innovation, stability, growth, a diverse profile including over 280

shopping centers in 32 states and the consecutive creation of value. Therefore, investors feel

confident in coming back and placing their own money in Phillips Edison's hands, making this a

strength.

Although Phillips Edison & Company clearly displays strong qualities, there are a few

areas that the company could improve on. We have narrowed it down to three main concerns:

diversity, local competition, and inability to afford primary markets. Good companies can turn

into great companies by acknowledging their weaknesses and using them as foundations for

strengths. By addressing these concerns, Phillips Edison would be able to create a stronger

company.

One small area that could be improved on is diversity. There have been strides taken to

incorporate women into the business of real estate with the initiation of their PECO programs.

The PECO program for women allows women to gain leadership positions within Philips Edison,
and also create an environment where women feel they have the ability to excel and grow.

Despite these efforts, real estate is such a male dominated field and Phillips Edison struggles to

place women in higher ranking positions with more responsibilities in comparison to their male

counterpart. Phillips Edison currently has 36 senior managers on their team, and only 22% of

these management positions are filled by women. According to the US Department of Labor, in

2016, approximately 56.8% of the US labor force are women, yet only 25% hold executive, or

senior management positions. Sadly, even though Phillips Edison are trying to change these

percentages, the company still reflects an overall workforce that excludes women from receiving

leadership positions. Women are the primary shoppers for groceries, and Phillips Edison even

emphasized that when choosing which store to place in the lots chosen, they often think of what

would appeal to women. Since this is true, Phillips Edisons lackluster amount of women

employed by the company is a weakness.

While Phillips Edison is attempting to make progress to diversify their workforce to be

inclusive to gender, there is still progress to be made in the field of cultural diversity. Cultural

diversity creates an atmosphere that encourages creativity and drives innovation, allowing a

company to be more competitive in the long run. Phillips Edison currently is functioning on a

national level with grocery store anchored locations all across the country. America has always

been a very diverse country with many cultures and subcultures within different regions of the

country. Without a culturally diverse team, Phillips Edison is lacking insight and perspective that

could benefit them.

Phillips Edisons second primary weakness is its inability to compete in primary real

estate markets due to price concerns and their fear to take risks. The company currently owns the

majority of their properties in areas that are considered secondary real estate markets. Their
inability and unwillingness to expand into primary real estate markets can be seen as a weakness

due to the fact that primary real estate markets on average accumulate the most profit due to

large populations. The main concern that Phillips Edison has is the real estate pricing of property

in major cities. With an increase of consumers gained by moving into the primary market it

would more than likely make up for the price of the property, and bring in possible investors to

increase potential spending money. Although this pricing is high, it would also be beneficial for

the company to have a more diverse property portfolio. Currently Phillips Edisons property

portfolio consists of overwhelmingly secondary market properties. This is a weakness because

when the economy falters, tertiary and secondary real estate values may be affected. Primary real

estate markets tend to keep their value even when the economy is bad. Because real estate is so

expensive in these major cities, Phillips Edison isnt able to afford property that could help them

expand into different areas with different markets. Reaching these markets is the gateway to

expanding the company nationwide to areas that havent been in controlled by the company in

the past.

Phillips Edisons third primary weakness is their inferior knowledge of the local

community that local competitors already have when moving into a new area or region.

Although Phillips Edison does their due diligence when looking into and purchasing the grocery

anchored lots that they specialize in, it was brought to light that often even when the company

does the necessary research, they fall short to local competitors that understand the climate of

that specific market better. More often than not, Philipps and Edison can compete with these

local companies on a financial level, but since they are still a relatively small company, they do

not have enough human resources to be able to scout out a location for long periods of time. This

is why local competitors have the edge. They are very knowledgeable about logistics of smalls
locations where Phillips Edison strives with having knowledge about broader regions. If they had

more information than local competitors than the company would face less risky investments and

overall strengthen the company. Overall, online spending and ordering of food, beverages and

other grocery products has reached $20 billion in 2017, and predicted to grow

Phillips Edison is a company that looks to grow and expand at every opportunity. While

their company is already growing profits significantly each year and dominate mostly all of their

competition, there is still always more room to develop. Two opportunities for Phillips Edison

would be to become a public corporation and expand into the global market. Taking their

company public and expanding into global markets both have extremely high potential to

maximize profit for Phillips Edison.

Presently, Phillips Edison is a privately owned company, or in other words, the public

does not have the ability to invest in them through the stock market. Among the many

opportunities for Phillips Edison to grow and expand their company, one of the most prominent

and opportunities is taking their company public. Going public refers to a companys IPO, or

initial public offering. Once a company offers the stock of their company for the first time, they

become a publicly traded and owned entity. However, before the company begins selling shares,

they must first understand the processes necessary to reach this goal.

The process of going public takes about six to nine months. In this period of time, the

main focus of the company will be taken off the company's other objectives and directed toward

the work that needs to be done to go public. This work includes creating a relationship with an

investment bank and making decisions such as the number of shares they would like to offer and

the price they would like set for those shares. Doing this could put the companys growth and
production at a slowdown, but the goal is to gain enough money from investors to help grow the

company in a short period of time.

Once opening their company for people to invest and buys stocks, there are many long-

term benefits. They could experience improved liquidity, have much better access to capital at a

lower cost, and would gain the ability to make more acquisitions, or acquire more real estate.

Looking even further into the future, having a public trading status would most likely lead to a

higher price once Phillips Edison is ready to offer the companys assets. Going public will allow

Phillips Edison to acquire more investors, who will provide capital for the company. If Phillips

Edison went public, they would have the opportunity to grow capital and expand the company as

a whole. In terms of expanding their company, Phillips Edison would be diversifying their

ownership and allow more people to see how big of a company they are and how fast they are

expanding.

In relation to diversifying the company, another major opportunity for Phillips Edison is

to expand globally. Going public could be the first step to making this happen. Increased capital

would allow them to explore taking their brand to other countries. The key to global expansion

would be choosing the right country to begin their expansion. Phillips Edison has expressed

interest into expanding somewhere in North America, such as Mexico or Canada.

Before deciding to expand globally, Phillips Edison would need to make sure that they

could take on the challenge. It is a long process for a business to cross over into other markets.

Phillips Edison would need to determine the current state of their business before taking it to

other markets. Since Phillips Edison currently has a really strong and stable base for their

company in the U.S. already, expanding into other markets would be a smart next step for their

company. With that being said, Phillips Edison should first make sure that going into other
countries wouldnt cause problems with their business in the American market, since that is the

currently primary focus. If it would take too much time and resources away from the operation in

America, it would not be worth the all of the inputs.

Another extremely important aspect would be for the Phillips Edison to gain extensive

knowledge about the countrys culture. Understanding the culture of the country would allow

Phillips Edison to see what would work best for their brand in that market. These findings would

require significant amounts of research. For example, the leading retailer in food and pharmacy

in Canada is Loblaw Companies Limited. Phillips Edison would potentially want to analyze

Loblaw for the focus of their shopping centers if they were to pursue Canada. Being introduced

to these new cultures could potentially help the current centers they have in America. Knowing

other customs and cultures could help bring in new, innovative ideas into their American market

as well. This could bring in new customers to their centers and generate more revenue for the

company.

After taking all of these steps and processes into account and with proper execution,

Phillips Edison would be able to experience all of the benefits of global expansion. Phillips

Edison would be able to expand the life of their product by selling them in new markets. For

example, a popular trend in the grocery industry in the United States is the fresh format grocery

stores. Americans are currently very interested in fresh and natural produce, and that is a trend

that Phillips Edison could expand into the markets of other countries. Another huge factor for

Phillips Edison is the condition of the real estate market. If they were to expand globally, when

the real estate market is struggling in one country, it could be thriving in another. Phillips Edison

would not have to be dependent one just one market to make or break their company. When one

market is declining, the other will help keep the company afloat, even profiting. Finally, being a
global company would give Phillips Edison much more knowledge of the global marketplace,

allowing them to compete much more efficiently against foreign competitors.

Phillips Edison & Company is undoubtedly a super power of the real estate industry in

the United States, owning well over 300 store locations across the country. Not only do they own

a huge amount of property, but each property is thriving. Very often you will see packed

locations with large amounts of traffic. Even though PECO is one the largest companies in their

area of operation, they still encounter other competitors that can give them a run for their money

and challenge them. The companies that give them the most difficulty are local real estate

businesses. The main advantage they have over PECO is they have many local connections such

as architects and construction agencies that could not only allow them to get to work faster, but

also spend less money. A local company will be more likely to discover the opening of some

profitable land much before a larger firm such as PECO. This allows the smaller local companies

to invest earlier and acquire the land before PECO even knew it existed. Phillips Edison &

Company do try to use local resources as much as possible. Even though this is a great way to

build local support of their store, they simply dont have the same knowledge of certain areas as

the locals. This advantage can be seen through PECO itself. When the company first began to

expand, locations were close to the headquarters in Cincinnati, Ohio. Creating that personal bond

with a community is extremely important, especially when change is occurring. For that reason,

local real estate agencies are a threat to Phillips Edison & Company.

As online technology advances, the thought of online grocery shopping has become a

reality. In fact, there are speculations that sometime in the future grocery store chains will

die out. Newcomers in the online grocery shopping world are the type of shoppers who are

straying from the traditional way of purchasing groceries, but are still in the minority of grocery
shoppers. The majority might argue the fact that going to buy groceries is better because this

method is what they have always done and are comfortable with. On the other hand, online

grocery shopping can save consumers time and money. In fact, online grocery shoppers

experience the same sale prices as in-store shoppers and they have access to online-only

discounts. Online shopping makes buying in bulk a whole lot easier. Finally, an individual can

easily shop for a week of groceries without ever having to leave the comfort of their own home.

Simply add the products you want into your online shopping cart and your groceries will be

delivered right to your door. Online shopping can save you time as well. For example, you dont

have to cut out a large chunk of time in your day to go to the grocery store anymore. Instead,

online grocery shopping is an option at all hours of the day. Another big factor is not having to

wait in line and if you forget to add something to your cart, you have time to add items before

your groceries are delivered. Online grocery shopping can be seen as a potential threat because it

is convenient, is offered 24/7, quality is still a factor, no social interaction is needed, and good

prices and offers are still offered.

One big internal threat for PECO is the extreme desire for growth the company possesses.

Although aggressive growth might not always be seen as a threat to a company, it should be

considered. The biggest issue with expanding a real estate company rapidly is the quick thinking

the company would put into effect when considering purchasing a lot of land or a current

location. Companies who attempt to grow too large too quickly can often take more risks than a

company that is slow growing would. Because of this extreme ambition, PECO could potentially

come across a dud of a location that they believe they can fix and make thrive. Large sums of

money would be required to turn the quickly acquired location into a thriving one. Some

expenses the company would face are above average repair costs and more marketing and
promoting expenses. By wanting to grow so aggressively, the purchase of a new location can be

rushed and many negatives can be overlooked. Overlooking these problems will come back and

punish the company for being so aggressive with their growth. These problems could be poor

location choice, weak facilities, and other issues with the land. These problems will lead to a

decrease in the traffic of the location and a dip in sales, showing the location to be non-profitable

for the company. In conclusion, rapid expansion isnt always the best choice for a company,

especially in the real estate business.

Recession in the grocery store industry has seemed unlikely in recent years, which is

great news for Phillips Edison. However, since they are such a large owner of grocery oriented

real estate countries across the country, this could be a serious threat to the company. Many

believe that grocery chains could die out due to online and other new ways of shopping. Because

of this, it is important that PECO find new locations and ways to get the most customers into

these properties and stores. Choosing the right stores to put in their properties and how that store

or franchise is performing economically should also be a main focus. Ultimately, if the stores are

not bringing people in, PECO is not going to do well at that location either. This is why it is

crucial to choose quality stores, especially since the company has a strong desire for growth.

With new technology and online shopping decreasing in-store sales, PECO could consider

looking at all stores and see what is growing economically which would allow them to expand

outside of the grocery business. However, with growth and prime real estate locations comes

high property taxes for those premier locations. Finding locations with steady property and real

estate taxes will decrease the risk of those fluctuating and will not affect the company as much.

Suggestions
 Rapid expansion was identified by Mark Addy as one of the challenges his company

faced and learned from in the early part of this decade. He showed us a chart that depicted 2010

being one of the years where Phillips Edison decided to expand too quickly, resulting in the loss

of 28 properties in one year. The company has since learned its lesson from this expansion, but

in todays strong real estate market, we would suggest revisiting the criteria of each property and

the value and strength it offers to the portfolio. This would help avoid any rapid expansion.

Some properties currently owned in strong markets might be ones to consider selling in

todays market. As part of their expansion, they could sell property in stronger markets and use

those proceeds to buy property in other markets that arent as hot, but have strong value that

meets the criteria to be added to their portfolio of properties. We also suggest looking at

different industries and their real estate needs - for example, buying major online retailer

distribution centers.

One Stop online grocery store pickup services are growing at a rapid rate. Currently

many Grocery store companies are implementing the service across some or all locations. Some

of the larger companies include Kroger, Target, Walmart, etc. It is recommended that Phillips

Edison & Company strongly emphasizes that the stores they select to fill their lots have some

form of online grocery pickup service accessible to customers. Overall, online spending and

ordering of food, beverages and other grocery products has reached $20 billion in 2017, and is

predicted to reach $66 billion in the next five years according to the U.S commerce department.

This service can be seen as extremely profitable. With the service offered in Phillips Edison

grocery anchored shopping centers, its target market will not be limited to Millennials who

currently dominate the online shopping market, but also to busy parents alike. If Phillips Edison

does not begin to emphasize this, they may see some of the grocery stores that sit in their centers
lose business to competitors such as Amazon. Amazon offers services such as Dash Buttons,

which is a device they sell for $4.99 and it allows you to reorder things such as paper towels,

laundry detergent, and flavored drinks. These are products you previously had to go to a grocery

store to buy, but now can purchase at the touch of a button. This takes out the need for multiple

aisles in a traditional grocery store. Amazon has also begun to build AmazonFresh Pickup

stores. AmazonFresh is a service where you can order your groceries on Amazon and select a

time to pick them up. This service threatens everything from meats, to produce, to frozen goods

in a traditional grocery store. Previously Phillips Edison had less to worry about when only

smaller companies offered services that compete with the traditional grocery store model, but

when a massive titan such as Amazon steps into the scene, the more Phillips Edison should focus

on ways to fight back. Since this concept is relatively new for the mass market, Phillips Edison

may not see declining numbers in the next 5 years, but as time progresses, they will notice an

effect. That is why it is strongly recommended that Phillips Edison takes steps to prevent this.

As mentioned in the previously in the the SWOT analysis, one major weakness of Phillips

Edison is their lack of diversity throughout the company. Although Phillips Edison has taken a

step towards diversifying their company through the PECO program, which provides

opportunities for women to rise in status through the company as well as the business of real

estate, they still have a lot of work to do with this aspect of their company. The company

continues to lack in diversity of ethnicity and cultural backgrounds. Considering all of this,

Phillips Edison should strongly consider diversifying their company, and they can do this in a

multitude of ways.

As mentioned in the previously in the the SWOT analysis, one major weakness of

Phillips Edison is their lack of diversity throughout the company. Although Phillips Edison has
taken a step towards diversifying their company through the PECO program, which provides

opportunities for women to rise in status through the company as well as the business of real

estate, they still have a lot of work to do with this aspect of their company. The company

continues to lack in diversity of ethnicity and cultural backgrounds. Considering all of this,

Phillips Edison should strongly consider diversifying their company, and they can do this in a

multitude of ways.

One step Phillips Edison can take to achieve this goal is by simply reaching out to local

organizations with connections to the community such as churches, colleges, or cultural

institutions. By becoming involved with their local community, Phillips Edison can build many

connections that will provide them with the diversity they are looking for. On a wider scale,

Phillips Edison can become much more involved in non profit organizations such as the National

Diversity Council, the Urban League, or any other organization they feel best represents the

morals and principals of their company. Another great source that Phillips Edison can utilize is a

website called diversityworking.com. Through this web source, Phillips Edison get in contact

with many different minority job hunters.

Another idea that Phillips Edison should consider incorporating is more developing more

diversity organizations within their company. Considering the success they have had with their

PECO program, Phillips Edison could largely benefit from adding other organizations that focus

on diversity. Similarly, another suggestion for Phillips Edison is to provide diversity training in

their workplace. All employees should have a good understanding of other cultures and

ethnicities. They should also learn to appreciate all of the benefits of having a diverse workplace.

Working to make Phillips Edison a more diverse company will provide many advantages

for the company. Employees from diverse backgrounds can offer many different talents and have
skills and experiences that others do not have. These different skills and experiences will in turn

lead to innovation within the company. Furthermore, embracing diversity will draw a wider

talent pool. Finally, having a more diverse company will draw many more connections for

Phillips Edison to benefit largely from.

 Works Cited

Bishop, Todd, and Nat Levy. Amazon Finally Unveils Grocery Pickup Service - but Its

Only for Employees at First. GeekWire, GeekWire, 28 Mar. 2017,

www.geekwire.com/2017/amazon-finally-unveils-grocery-pick-service-seattle-

employees-first/.

Chavez, Jon. Grocery Delivery Options Growing Rapidly. The Blade, Toledo Blade, 19 Aug.

2017, www.toledoblade.com/Retail/2017/08/20/Grocery-delivery-options-growing-

rapidly.html.

Corley, Judith Warner and Danielle. The Women's Leadership Gap. Center for American

Progress, Center for American Progress, 21 May 2017,

www.americanprogress.org/issues/women/reports/2017/05/21/432758/womens-

leadership-gap/.

Davies, Malcolm. A Game of Risk. A Game of Risk | CCIM Institute, CCIM Institute,

www.ccim.com/cire-magazine/articles/287317/2013/03/game-risk/?gmSsoPc=1.

DeWolf, Mark. 12 Stats About Working Women. 12 Stats About Working Women | U.S.

Department of Labor Blog, U.S. Department of Labor Blog, 1 Mar. 2017,

blog.dol.gov/2017/03/01/12-stats-about-working-women.

How to Increase Workplace Diversity. The Wall Street Journal, Dow Jones & Company,

guides.wsj.com/management/building-a-workplace-culture/how-to-increase-workplace-

diversity/.

Property Search. Phillips Edison & Company, Phillips Edison & Company,

www.phillipsedison.com/about/our-team.