Frequently Asked Questions
What is a REIT?
REIT stands for Real Estate Investment Trust, which is a company that owns and, in most cases, operates income-producing real estate, such as apartments, shopping centers, offices, hotels and warehouses. Congress created REITs in 1960 to make investment in large-scale, income-producing real estate companies accessible to average investors. As an investment, REITs historically have provided portfolio diversification plus strong and reliable dividend income.
To qualify as a REIT, a company must have most of its assets and income tied to real estate investments and must distribute at least 90 percent of its taxable income to its shareholders annually. A company that qualifies as a REIT is permitted to deduct dividends paid to its shareholders from its corporate taxable income. As a result, most REITs remit at least 100 percent of their taxable income to their shareholders and therefore owe no federal corporate tax.
While the shares of many REITs are traded on major stock exchanges, there are non-exchange traded REITs (such as Phillips Edison Grocery Center REIT I, Inc.) and private REITs.
Above information provided by the National Association of Real Estate Investment Trusts.
Will I receive distributions and how often?
We have paid and expect to continue paying distributions monthly unless our results of operations, our general financial condition, general economic conditions or other factors make it imprudent to do so. The timing and amount of distributions will be determined by our board, in its sole discretion, may vary from time to time, and will be influenced in part by our intention to comply with REIT requirements of the Internal Revenue Code.
To maintain our qualification as a REIT, we must make aggregate annual distributions to our stockholders of at least 90.0% of our REIT taxable income (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). If we meet the REIT qualification requirements, we generally will not be subject to U.S. federal income tax on the income that we distribute to our stockholders each year. Our board of directors may authorize distributions in excess of those required for us to maintain REIT status depending on our financial condition and such other factors as our board of directors deems relevant.
May I reinvest my distributions in shares of Phillips Edison Grocery Center REIT I, Inc.?
Yes. You may participate in our Distribution Reinvestment Plan (“DRIP”) by checking the appropriate box on the distribution change form. In accordance with the DRIP, participants will acquire shares of common stock at a price equal to the estimated value per share of our common stock. No selling commissions or dealer manager fees will be payable on shares sold under our DRIP. We may amend, suspend or terminate the DRIP for any reason at any time upon 10 days’ notice to the participants. We may provide notice by including such information (1) in a current report on Form 8-K or in our annual or quarterly reports, all publicly filed with the SEC or (2) in a separate mailing to the participants.
As provided under the DRIP, a participant may terminate participation at any time by delivering a written notice to us. To be effective for any distribution, such notice must be received by us at least ten business days prior to the last day of the month to which the distribution relates. Any notice of termination should be sent by facsimile to (877) 894-1127 or by mail to:
Phillips Edison Grocery Center REIT I, Inc.,
P.O. Box 219912,
Kansas City, MO 64121-9912
Will the distributions I receive be taxable as ordinary income?
Yes and no. Distributions that you receive (not designated as capital gain dividends), including distributions reinvested pursuant to our distribution reinvestment plan, will be taxed as ordinary income to the extent they are paid from our earnings and profits (as determined for U.S. federal income tax purposes). However, distributions that we designate as capital gain dividends generally will be taxable as long-term capital gain to the extent they do not exceed our actual net capital gain for the taxable year. Some portion of your distributions may not be subject to tax in the year in which they are received because depreciation expense reduces the amount of taxable income, but does not reduce cash available for distribution. The portion of your distribution which is not designated as a capital gain dividend and is in excess of our current and accumulated earnings and profits is considered a return of capital for U.S. federal income tax purposes and will reduce the tax basis of your investment, deferring such portion of your tax until your investment is sold or our company is liquidated, at which time you will be taxed at capital gains rates. Please note that each investor’s tax considerations are different, therefore, you should consult with your tax advisor prior to making an investment in our shares.
What is the current value of the shares?
On April 14, 2016, our Board of Directors established an estimated value per share of our common stock of $10.20 based substantially on the estimated market value of the Company’s portfolio of real estate properties in various geographic locations in the United States as of March 31, 2016. This valuation was performed in accordance with the provisions of Practice Guideline 2013-01, Valuations of Publicly Registered Non-Listed REITs, issued by the Investment Program Association (“IPA”) in April 2013 (the “IPA Valuation Guidelines”). For more information about the valuation and our methodologies, please see the Current Report on Form 8-K that we filed with the U.S. Securities and Exchange Commission on April 15, 2016.
Are there any special restrictions on the ownership or transfer of shares?
Yes. Our charter contains restrictions on the ownership of our shares that prevent any one person from owning more than 9.8% in value of our aggregate outstanding stock or more than 9.8% in value or number of shares, whichever is more restrictive, of our aggregate outstanding common stock unless exempted by our board of directors. These restrictions are designed to enable us to comply with ownership restrictions imposed on REITs by the Internal Revenue Code. Our charter also limits your ability to sell your shares unless: (1) the prospective purchaser meets the suitability standards regarding income or net worth and (2) the transfer complies with the minimum purchase requirements.
Do you offer a share repurchase program?
We maintain our Amended and Restated Share Repurchase Program (the “SRP”), which provides an opportunity for stockholders to have shares of common stock repurchased, subject to certain restrictions and limitations. Under the SRP, eligible stockholders may submit their shares for repurchase at a price based on our current estimated value per share, subject to the terms and limitations contained in the SRP.
The cash available for repurchases on any particular date in generally limited to the proceeds from the drip during the preceding four fiscal quarters, less amounts already used for repurchases since the beginning of the same period. Beginning in October 2015, repurchase requests surpassed the funding limits under the SRP. No funds will be available for repurchases during the third quarter of 2016, and we believe the funds available for repurchases during the fourth quarter of 2016 will be insufficient to meet all requests. If we are unable to fulfill all repurchase requests in any month, we will attempt to honor requests on a pro rata basis. We will continue to fulfill repurchases sought upon a stockholder's death, determination of incompetence or qualifying disability in accordance with the terms of the SRP.
When will there be a liquidity event?
It is our intention, consistent with the prospectus for our initial public offering, to begin the process of achieving a liquidity event no later than three to five years after the completion of that offering. Our IPO was completed in February 2014, which represents a time frame of 2017 to 2019. However, there can be no assurances that we will achieve a liquidity event in that time frame.
Will I be notified of how my investment is doing?
Yes, we will provide you with periodic updates on the performance of your investment in us, including:
-detailed quarterly dividend reports;
-an annual report; and
-three quarterly financial reports.
We will provide this information to you via one or more of the following methods, in our discretion and with your consent, if necessary:
-U.S. mail or other courier;
-electronic delivery; or
-posting on our web site.
In addition, you can sign up for e-mail alerts by subscribing through the following link: http://investors.grocerycenterreit1.com/Email-Notifications.
Who is the transfer agent?
The name and address of our transfer agent is as follows:
DST Systems, Inc.
430 W 7th St
Kansas City, MO 64105-1407
To ensure that any account changes are made promptly and accurately, all changes (including your address, ownership type and distribution mailing address) should be directed to the transfer agent.