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Section 1: 424B3 (424B3)

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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-226625



MERGER PROPOSED—YOUR VOTE IS VERY IMPORTANT

To the Stockholders of Phillips Edison & Company, Inc. (“PECO”) and the Stockholders of Phillips Edison Grocery Center REIT II, Inc. (“PE REIT II”):

On July 17, 2018, PECO and PE REIT II entered into an agreement to merge in a 100% stock-for-stock transaction valued at approximately $1.9 billion (the “Proposed Transaction”). This agreement was entered into after a thorough due diligence and negotiation process conducted by PECO’s board of directors (the “PECO Board”), with the assistance of PECO’s advisors, and an independent special committee (the “PE REIT II Special Committee”) of PE REIT II’s board of directors (the “PE REIT II Board”) and its advisors. The PECO Board and, based on the unanimous recommendation of the PE REIT II Special Committee, PE REIT II’s Board each unanimously approved the Proposed Transaction.

Combined Company

If the Proposed Transaction is consummated, the surviving company (the “Combined Company”) will be a $6.3 billion internally-managed non-traded real estate investment trust (“REIT”), exclusively focused on grocery-anchored shopping centers, that will own and operate 321 grocery-anchored shopping centers with more than 36.6 million square feet located across 33 states.

Summary of Strategic Benefits

The Proposed Transaction is expected to create meaningful operational and financial benefits, including:

Actively Positions Company for Liquidity: The Proposed Transaction, which will result in an internally managed REIT of significant scale, is an important step towards a full cycle liquidity event for both PECO and PE REIT II stockholders.
Maintains Exclusive Grocery Focus: Two complementary portfolios are combined to create a high-quality portfolio comprising 321 grocery-anchored shopping centers with more than 36.6 million square feet located in 33 states with an emphasis on necessity-based retailers, which have proven to be internet resistant and recession resilient. This portfolio will benefit from greater geographic, grocery-anchor, and tenant diversification.
Enhances Potential Public Market Valuation and Increases Size, Scale, and Market Prominence: PE REIT II stockholders will benefit from PECO’s internally-managed structure, which is likely to receive a better valuation in the public equity markets compared to externally-managed REITs. Additionally, given its enhanced size and scale, the Combined Company will have improved access to the capital markets, which can be used to support strategic investments to drive future growth opportunities.
Improves Earnings Quality: The Proposed Transaction increases the percentage of PECO’s earnings from real estate from 92% to approximately 97%; real estate earnings are more highly valued in the public equity markets than management fee income, given the long-term, recurring nature of owning and operating real estate.
Full Distribution Coverage and Maintains Strong Balance Sheet: We believe that pro forma funds from operations (“FFO”) of the Combined Company would have fully covered the Combined Company’s pro forma total distributions for the first and second quarters of 2018. Additionally, on a pro forma basis, the Combined Company’s leverage would have been 42.8% on a Net Debt/Total Enterprise Value basis and the Combined Company’s total debt would have been 86.0% fixed-rate with an average duration of 4.4 years, in each case, as of June 30, 2018.
Accelerates Strategy to Simplify Business Model: We expect the Combined Company to realize the synergies of operating a combined enterprise that remains focused on driving stockholder value and expect a seamless integration process as PECO’s management team has managed PE REIT II since PE REIT II’s inception.
No Internalization or Disposition Fees Paid: PE REIT II will not pay PECO any internalization or disposition fees in connection with the Proposed Transaction; in 2017, PE REIT II paid PECO $13.9 million in various advisory fees.

Stockholder Consideration

As consideration for the Proposed Transaction, in exchange for each share of PE REIT II common stock, PE REIT II stockholders will receive 2.04 shares of PECO common stock, which is equivalent to $22.54 per share based on PECO’s most recent estimated net asset value per share of $11.05. The exchange ratio is based on a thorough review of the relative valuation of each company, including PECO’s growing investment management business as well as each company’s transaction costs in connection with the Proposed Transaction.

Annual Meeting

PECO stockholders of record at the close of business on the record date are cordially invited to attend the PECO annual meeting that will be held at the offices of Latham & Watkins LLP, located at 885 Third Avenue, New York, New York, 10022 on November 14, 2018 at 8:00 a.m. Eastern Time.

PE REIT II stockholders of record at the close of business on the record date are cordially invited to attend the PE REIT II annual meeting that will be held at the offices of Latham & Watkins LLP, located at 885 Third Avenue, New York, New York, 10022 on November 14, 2018 at 1:00 p.m. Eastern Time.

At the annual meetings, you will be asked to consider and vote on the Proposed Transaction, in addition to the other items set forth in the Notice of 2018 Annual Meeting of Stockholders of the company of which you are a stockholder of record at the close of business on the record date. No matter the size of your investment in PECO and/or PE REIT II, your vote is very important.

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YOUR VOTE IS VERY IMPORTANT

Proxy Vote

As noted above, all of the members of the PECO Board and, based on the unanimous recommendation of the PE REIT II Special Committee, all of the members of the PE REIT II Board unanimously approved the terms and conditions of the Proposed Transaction, and believe it is advisable and in the best interests of PECO, PE REIT II and their respective stockholders.

Therefore, it is recommended that you vote “FOR” the Proposed Transaction and all of the other proposals set forth in the Notices of 2018 Annual Meetings of Stockholders.

Your Vote Matters

Whether or not you expect to attend the annual meetings in person, please authorize a proxy to vote on your behalf as promptly as possible by completing, signing, dating and mailing your proxy card in the pre-addressed postage-paid envelope provided or by authorizing your proxy by one of the other methods specified in this proxy statement. This saves the companies time and money as we will no longer have to solicit your vote.

This joint proxy statement/prospectus provides you with detailed information about the annual meetings of PECO and PE REIT II, the merger agreement, the Proposed Transaction and other related matters. A copy of the merger agreement is included as Annex A to this joint proxy statement/prospectus. We encourage you to read this joint proxy statement/prospectus in its entirety before voting, including the merger agreement and the other annexes. In particular, you should carefully consider the discussion in the section of this joint proxy statement/prospectus entitled “Risk Factors” beginning on page 23.

On behalf of PECO’s management team and the PECO Board and PE REIT II’s management team, the PE REIT II Board, and the PE REIT II Special Committee, we thank you for your support and urge you to vote “FOR” the approval of each of the matters presented.

Sincerely,



Jeffrey S. Edison
David W. Garrison
Chairman and Chief Executive Officer
Chair of the Special Committee of the Board of
Phillips Edison & Company, Inc.
Directors of Phillips Edison Grocery Center REIT II, Inc.

Neither the SEC, nor any state securities regulatory authority has approved or disapproved of the mergers or the securities to be issued under this joint proxy statement/prospectus or has passed upon the adequacy or accuracy of the disclosure in this joint proxy statement/prospectus. Any representation to the contrary is a criminal offense.

This joint proxy statement/prospectus is dated August 28, 2018, and is first being mailed to PECO and PE REIT II stockholders on or about August 28, 2018.

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JOINT PROXY STATEMENT/PROSPECTUS
   

PHILLIPS EDISON & COMPANY, INC.
11501 Northlake Drive
Cincinnati, Ohio 45249

NOTICE OF 2018 ANNUAL MEETING OF STOCKHOLDERS

Dear Stockholder:

You are cordially invited to attend the 2018 annual meeting of stockholders (the “PECO Annual Meeting”) of Phillips Edison & Company, Inc., a Maryland corporation (“PECO”), that will be held at the offices of Latham & Watkins LLP, located at 885 Third Avenue, New York, New York 10022, at 8:00 a.m. Eastern Time on November 14, 2018.

The purpose of the PECO Annual Meeting is to consider and vote upon the following proposals:

1. Approve the transactions contemplated by the merger agreement, dated July 17, 2018, by and among PECO, Phillips Edison Grocery Center REIT II, Inc., a Maryland corporation (“PE REIT II”), and certain of their respective affiliates, a copy of which is attached as Annex A to this joint proxy statement/prospectus, including the merger of PE REIT II with and into a wholly-owned subsidiary of PECO (as further discussed in the section titled “The Mergers” beginning on page 105) (collectively, the “Merger Proposal”).
The PECO Board of Directors recommends a vote FOR this proposal.
2. Elect five directors to serve until the next annual meeting of stockholders of PECO and until their respective successors are duly elected and qualify.
The PECO Board of Directors recommends a vote FOR each nominee.
3. Approve the amendment of the charter of PECO as set forth in the form of Articles of Amendment attached as Annex B to this joint proxy statement/prospectus.
The PECO Board of Directors recommends a vote FOR this proposal.
4. Approve a non-binding, advisory resolution on executive compensation as more fully described in the accompanying joint proxy statement/prospectus.
The PECO Board of Directors recommends a vote FOR this proposal.
5. Vote, on a non-binding, advisory basis, on the frequency of future advisory resolutions on executive compensation (every one, two or three years).
The PECO Board of Directors recommends a vote for “EVERY YEAR” on the proposal on the frequency of future say-on-pay proposals.
6. Adjourn the PECO Annual Meeting, if necessary or appropriate, as determined by the Chair of the PECO Annual Meeting, to solicit additional proxies in favor of the Merger Proposal or the proposal to approve the PECO charter amendment if there are not sufficient votes to approve such proposals.
The PECO Board of Directors recommends a vote FOR this proposal.
7. Attend to such other business as may properly come before the PECO Annual Meeting and any adjournment or postponement thereof.

The PECO Board of Directors has fixed August 28, 2018 as the record date for the Annual Meeting. Only the holders (the “PECO Stockholders”) of record of shares of common stock of PECO (the “PECO Common Shares”) as of the close of business on August 28, 2018 are entitled to notice of and to vote at the PECO Annual Meeting and any adjournment or postponement thereof.

This joint proxy statement/prospectus and proxy card is dated as of August 28, 2018 and is first being mailed to you on or about August 28, 2018. A copy of PECO’s 2017 annual report was mailed to you on or about August 10, 2018.

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YOUR VOTE IS VERY IMPORTANT

Whether or not you plan to attend the PECO Annual Meeting in person, please authorize a proxy to vote your shares as promptly as possible. To authorize a proxy, complete, sign, date and mail your proxy card in the pre-addressed postage-paid envelope provided or, if the option is available to you, call the toll-free telephone number listed on your proxy card or use the internet as described in the instructions on the enclosed proxy card to authorize your proxy. Authorizing a proxy will assure that your vote is cast and counted at the PECO Annual Meeting if you do not attend in person. If your PECO Common Shares are held in “street name” by your broker or other nominee, only your broker or other nominee can vote your PECO Common Shares at the PECO Annual Meeting and your vote cannot be cast unless you provide instructions to your broker or other nominee on how to vote or obtain a legal proxy from your broker or other nominee. You should follow the directions provided by your broker or other nominee regarding how to instruct your broker or other nominee to vote your PECO Common Shares. You may revoke your proxy at any time before it is voted. Please review the joint proxy statement/prospectus accompanying this notice for more complete information regarding the transactions contemplated by the Merger Proposal and the PECO Annual Meeting.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE PECO ANNUAL MEETING OF PECO STOCKHOLDERS TO BE HELD ON NOVEMBER 14, 2018:
   
Our joint proxy statement/prospectus, form of proxy card and 2017 annual report to PECO Stockholders are also available at www.phillipsedison.com/investors/proxy-materials and www.proxyvote.com/peco with use of the control number on your proxy card.

By Order of the Board of Directors


Devin I. Murphy, Secretary
Cincinnati, Ohio
August 28, 2018

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PHILLIPS EDISON GROCERY CENTER REIT II, INC.
11501 Northlake Drive
Cincinnati, Ohio 45249

NOTICE OF 2018 ANNUAL MEETING OF STOCKHOLDERS

Dear Stockholder:

You are cordially invited to attend the 2018 annual meeting of stockholders (the “PE REIT II Annual Meeting”) of Phillips Edison Grocery Center REIT II, Inc., a Maryland corporation (“PE REIT II”), that will be held at the offices of Latham & Watkins LLP, located at 885 Third Avenue, New York, New York 10022, at 1:00 p.m. Eastern Time on November 14, 2018.

The purpose of the PE REIT II Annual Meeting is to consider and vote upon the following proposals:

1. Approve the transactions contemplated by the merger agreement, dated July 17, 2018, by and among PE REIT II, Phillips Edison & Company, Inc., a Maryland corporation (“PECO”), and certain of their respective affiliates, a copy of which is attached as Annex A to this joint proxy statement/prospectus, including the merger of PE REIT II with and into a wholly-owned subsidiary of PECO (as further discussed in the section titled “The Mergers” beginning on page 105) (collectively, the “Merger Proposal”).
The PE REIT II Board of Directors recommends a vote FOR this proposal.
2. Elect four directors to serve until the next annual meeting of stockholders of PE REIT II and until their respective successors are duly elected and qualify.
The PE REIT II Board of Directors recommends a vote FOR each nominee.
3. Approve the non-binding, advisory proposal to approve the amendment of the charter of PECO as set forth in the form of Articles of Amendment attached as Annex B to this joint proxy statement/prospectus in connection with the Merger Proposal.
The PE REIT II Board of Directors recommends a vote FOR this proposal.
4. Adjourn the PE REIT II Annual Meeting, if necessary or appropriate, as determined by the Chair of the PE REIT II Annual Meeting, to solicit additional proxies in favor of the Merger Proposal if there are not sufficient votes to approve the Merger Proposal.
The PE REIT II Board of Directors recommends a vote FOR this proposal.
5. Attend to such other business as may properly come before the PE REIT II Annual Meeting and any adjournment or postponement thereof.

The PE REIT II Board of Directors has fixed August 28, 2018 as the record date for the PE REIT II Annual Meeting. Only the holders (the “PE REIT II Stockholders”) of record of PE REIT II Common Shares as of the close of business on August 28, 2018 are entitled to notice of and to vote at the PE REIT II Annual Meeting and any adjournment or postponement thereof.

This joint proxy statement/prospectus and proxy card is dated as of August 28, 2018 and is first being mailed to you on or about August 28, 2018. A copy of PE REIT II’s 2017 annual report was mailed to you on or about August 10, 2018.

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YOUR VOTE IS VERY IMPORTANT

Whether or not you plan to attend the PE REIT II Annual Meeting in person, please authorize a proxy to vote your shares as promptly as possible. To authorize a proxy, complete, sign, date and mail your proxy card in the pre-addressed postage-paid envelope provided or, if the option is available to you, call the toll-free telephone number listed on your proxy card or use the internet as described in the instructions on the enclosed proxy card to authorize your proxy. Authorizing a proxy will assure that your vote is cast and counted at the PE REIT II Annual Meeting if you do not attend in person. If your PE REIT II Common Shares are held in “street name” by your broker or other nominee, only your broker or other nominee can vote your PE REIT II Common Shares at the PE REIT II Annual Meeting and your vote cannot be cast unless you provide instructions to your broker or other nominee on how to vote or obtain a legal proxy from your broker or other nominee. You should follow the directions provided by your broker or other nominee regarding how to instruct your broker or other nominee to vote your PE REIT II Common Shares. You may revoke your proxy at any time before it is voted. Please review the joint proxy statement/prospectus accompanying this notice for more complete information regarding the transactions contemplated by the Merger Proposal and the PE REIT II Annual Meeting.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE PE REIT II ANNUAL MEETING OF PE REIT II STOCKHOLDERS TO BE HELD ON NOVEMBER 14, 2018:
   
Our joint proxy statement/prospectus, form of proxy card and 2017 annual report to PE REIT II Stockholders are also available at www.grocerycenterREIT2.com/investors/proxy-materials and www.proxyvote.com/perii with use of the control number on your proxy card.

By Order of the Board of Directors


Devin I. Murphy, Secretary
Cincinnati, Ohio
August 28, 2018

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ADDITIONAL INFORMATION

PECO and PE REIT II file reports and other important business and financial information with the Securities and Exchange Commission, which we refer to herein as the SEC, that is not included in or delivered with this joint proxy statement/prospectus. PECO and PE REIT II stockholders may read and copy these reports, statements or other information filed by PECO and PE REIT II at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at (800) SEC-0330 for further information on the Public Reference Room. The SEC also maintains an internet website that contains reports, proxy and information statements, and other information regarding issuers, including PECO and PE REIT II, who file electronically with the SEC. The address of that site is www.sec.gov.

Copies of annual, quarterly and current reports, proxy statements and other information required to be filed with the SEC by PECO and PE REIT II are available to PECO and PE REIT II stockholders, respectively, without charge upon written or oral request, excluding any exhibits to those documents. PECO stockholders and PE REIT II stockholders can obtain any of these documents by requesting them in writing or by telephone from the appropriate company at:

PECO

Phillips Edison & Company, Inc.
11501 Northlake Drive
Cincinnati, Ohio 45249
Attention: Investor Relations
(833) 347-5717
www.phillipsedison.com

PE REIT II

Phillips Edison Grocery Center REIT II, Inc.
11510 Northlake Drive
Cincinnati, Ohio 45249
Attention: Investor Relations
(833) 347-5717
www.grocerycenterREIT2.com

If you are a stockholder of PECO or a stockholder of PE REIT II and would like to request documents, please do so by October 31, 2018, to receive them before the PECO annual meeting or the PE REIT II annual meeting, as applicable. If you request any documents from PECO or PE REIT II, PECO or PE REIT II, as applicable, will mail them to you by first class mail, or another equally prompt means, within one business day after PECO or PE REIT II receives your request.

See “Where You Can Find More Information” beginning on page 199.

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ABOUT THIS DOCUMENT

This joint proxy statement/prospectus, which forms part of a registration statement on Form S-4 filed by PECO (File No. 333-226625) with the Securities and Exchange Commission, which we refer to as the SEC, constitutes a prospectus of PECO for purposes of the Securities Act of 1933, as amended, which we refer to as the Securities Act, with respect to the shares of PECO common stock to be issued to PE REIT II stockholders in exchange for shares of PE REIT II common stock pursuant to the merger agreement. This joint proxy statement/prospectus also constitutes a proxy statement for each of PECO and PE REIT II for purposes of the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act. In addition, it constitutes a notice of meeting with respect to the PECO annual meeting and a notice of meeting with respect to the PE REIT II annual meeting.

You should rely only on the information contained in this joint proxy statement/prospectus. No one has been authorized to provide you with information that is different from that contained in this joint proxy statement/prospectus. This joint proxy statement/prospectus is dated August 28, 2018. You should not assume that the information contained in this joint proxy statement/prospectus is accurate as of any date other than that date. Neither our mailing of this joint proxy statement/prospectus to PECO stockholders and/or PE REIT II stockholders nor the issuance by PECO of shares of its common stock to PE REIT II stockholders pursuant to the merger agreement will create any implication to the contrary.

This joint proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction in which or from any person or entity to whom it is unlawful to make any such offer or solicitation in such jurisdiction. Information contained in this joint proxy statement/prospectus regarding PECO has been provided by PECO and information contained in this joint proxy statement/prospectus regarding PE REIT II has been provided by PE REIT II.

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QUESTIONS AND ANSWERS ABOUT THE MERGERS AND
THE PECO AND PE REIT II ANNUAL MEETINGS

The following are answers to some questions that PECO stockholders and PE REIT II stockholders may have regarding the proposed transaction between PECO and PE REIT II and about each company’s annual meeting. PECO and PE REIT II urge you to read carefully this entire joint proxy statement/prospectus, including the Annexes, because the information in this section does not provide all the information that might be important to you.

Unless stated otherwise, all references in this joint proxy statement/prospectus to:

“acquired companies” are to PE REIT II and each of its subsidiaries;
“Amended PECO Charter” are to the charter of PECO as amended by the PECO charter amendment;
“Code” are to the Internal Revenue Code of 1986, as amended;
the “Combined Company” are to PECO and its consolidated subsidiaries (including the Surviving Entity) after the closing of the mergers;
the “company merger” are to a merger of PE REIT II with and into REIT Merger Sub, with REIT Merger Sub surviving the merger;
“Exchange Act” are to the Securities Exchange Act of 1934, as amended;
the “merger agreement” are to the agreement and plan of merger, dated as of July 17, 2018, by and among PECO, REIT Merger Sub, PECO OP, OP Merger Sub GP, OP Merger Sub, PE REIT II and PE OP II, as it may be amended from time to time, a copy of which is attached as Annex A to this joint proxy statement/prospectus;
the “mergers” are to, collectively, the company merger and the partnership merger;
“OP Merger Sub” are to OP Merger Sub 2, LLC, a Delaware limited liability company and subsidiary of PECO OP and OP Merger Sub GP;
“OP Merger Sub GP” are to OP Merger Sub, LLC, a Delaware limited liability company and wholly owned subsidiary of PECO OP;
“ordinary course of business” are to, with respect to an action taken by any person or entity, an action that (i) is consistent with the past practices of such person or entity and is taken in the ordinary course of the normal day-to-day operations of the business of such person or entity; (ii) is not required to be authorized by the board of directors of such person or entity (or by any person or entity or group of persons or entities exercising similar authority) and is not required to be specifically authorized by the parent company (if any) or the holders of the capital stock or other equity interests of such person or entity; and (iii) is similar in nature and magnitude to actions customarily taken, without any authorization by the board of directors (or by any person or entity or group of persons or entities exercising similar authority), in the ordinary course of the normal day-to-day operations of other persons or entities that are in the same line of business as such person or entity;
the “Outside Date” is to April 13, 2019;
the “partnership merger” are to the merger of OP Merger Sub with and into PE OP II, with PE OP II surviving the merger and becoming a directly or indirectly wholly owned subsidiary of PECO OP;
“PE OP II” are to Phillips Edison Grocery Center Operating Partnership II, L.P., a Delaware limited partnership;
the “PE OP II partnership agreement” is to the Amended and Restated Agreement of Limited Partnership of PE OP II, dated as of January 22, 2015, as amended (i) by that certain First Amendment to Amended and Restated Agreement of Limited Partnership of PE OP II, dated as of December 3, 2015, (ii) that certain Second Amendment to Amended and Restated Agreement of Limited Partnership of PE OP II, dated as of March 22, 2016, and (iii) that certain Third Amendment to Amended and Restated Agreement of Limited Partnership of PE OP II, dated as of September 1, 2017, as amended;
a “PE OP II unit” are to the GP units and the OP units of PE OP II, as defined in the PE OP II partnership agreement;
“PE REIT II” are to Phillips Edison Grocery Center REIT II, Inc., a Maryland corporation;
the “PE REIT II Board” are to the board of directors of PE REIT II;

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“PE REIT II common stock” are to the common stock of PE REIT II, $0.01 par value per share;
“PE REIT II merger approval” are to the affirmative vote of the holders of outstanding shares of PE REIT II common stock entitled to cast a majority of all the votes entitled to be cast on the company merger;
“PE REIT II parties” are to PE REIT II and PE OP II;
the “PE REIT II Special Committee” are to the special committee of the PE REIT II Board that was formed by the PE REIT II Board in connection with the mergers and the other transactions contemplated by the merger agreement;
“PECO” are to Phillips Edison & Company, Inc., a Maryland corporation;
the “PECO Board” are to the board of directors of PECO;
“PECO charter amendment” are to the proposed amendment to the charter of PECO set forth in the form of Articles of Amendment attached as Annex B to this joint proxy statement/prospectus;
“PECO charter approval” are to the affirmative vote of the holders of outstanding shares of PECO common stock entitled to cast a majority of the votes entitled to be cast on the PECO charter amendment;
“PECO common stock” are to the common stock of PECO, $0.01 par value per share;
“PECO merger approval” are to the affirmative vote of the holders of shares of PECO common stock representing a majority of the votes cast at a meeting of the stockholders of PECO approving the company merger;
“PECO OP” are to Phillips Edison Grocery Center Operating Partnership I, L.P., a Delaware limited partnership;
“PECO OP partnership agreement” are to the Fourth Amended and Restated Agreement of Limited Partnership of PECO OP, dated as of March 26, 2018;
a “PECO OP unit” are to an OP unit, as defined in the PECO OP partnership agreement, in PECO OP;
“PECO parties” are to PECO, PECO OP, REIT Merger Sub, OP Merger Sub GP, and OP Merger Sub;
“PECO stockholder approval” are to the PECO merger approval and the PECO charter approval;
the “PELP transaction” are to the transaction by PECO to acquire certain real estate assets, the third-party investment management business, and the captive insurance company of Phillips Edison Limited Partnership in exchange for stock and cash, which closed on October 4, 2017;
“REIT Merger Sub” are to REIT Merger Sub, LLC, a Maryland limited liability company and wholly owned subsidiary of PECO;
the “SEC” are to the U.S. Securities and Exchange Commission;
“Securities Act” are to the Securities Act of 1933, as amended;
the “Surviving Entity” are to REIT Merger Sub, a wholly owned subsidiary of PECO, after the effective time of the company merger; and
the “Surviving Partnership” are to PE OP II after the effective time of the partnership merger.
Q: What is the proposed transaction?
A: PECO and PE REIT II have entered into a merger agreement pursuant to which (i) PE REIT II will become a wholly owned subsidiary of PECO, and (ii) PE OP II will survive the merger with OP Merger Sub GP, a wholly owned subsidiary of PECO OP, as the sole general partner of the Surviving Partnership, and PECO OP as the sole limited partner of the Surviving Partnership.
Q: What will happen in the proposed transaction?
A: At the effective time of the company merger, each issued and outstanding share of PE REIT II common stock, or fraction thereof, will be converted automatically into the right to receive 2.04 (such ratio, the “exchange ratio”) shares of PECO common stock (or with respect to any fractional share of PE REIT II common stock, that fraction of PECO common stock consistent with the exchange ratio).

At the effective time of the partnership merger, each PE OP II unit outstanding immediately prior to the effective time of the partnership merger will convert into the right to receive 2.04 PECO OP units, rounded down to the nearest whole unit.

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Each Class B unit and the special limited partnership interest of PE OP II will be cancelled and cease to exist, and no consideration will be delivered in exchange therefor, in each case, in connection with the partnership merger.

See “The Merger Agreement—Merger Consideration; Effects of the Mergers” beginning on page 163 for detailed descriptions of the merger consideration and treatment of securities.

Q: How will PECO stockholders be affected by the mergers and the issuance of shares of PECO common stock in connection with the mergers?
A: After the company merger, each PECO stockholder will continue to own the shares of PECO common stock that such stockholder held immediately prior to the effective time of the company merger. As a result, each PECO stockholder will own shares of common stock in a larger company with more assets. However, because PECO will be issuing new shares of PECO common stock to PE REIT II stockholders in exchange for shares of PE REIT II common stock in the company merger, each outstanding share of PECO common stock immediately prior to the effective time of the company merger will represent a smaller percentage of the aggregate number of shares of the Combined Company common stock outstanding after the mergers. Upon completion of the mergers, we estimate that continuing PECO stockholders will own approximately 71% of the issued and outstanding shares of the Combined Company on a fully diluted basis (determined as if each PECO OP unit were exchanged for one share of PECO common stock), and former PE REIT II stockholders will own approximately 29% of the issued and outstanding shares of the Combined Company on a fully diluted basis (determined as if each PECO OP unit were exchanged for one share of PECO common stock).

See “The Merger Agreement—Merger Consideration; Effects of the Mergers” beginning on page 163 for additional information.

Q: Why am I receiving this joint proxy statement/prospectus?
A: The PECO Board and the PE REIT II Board are using this joint proxy statement/prospectus to solicit proxies of PECO stockholders and PE REIT II stockholders in connection with the merger agreement and the transactions contemplated thereby. In addition, PECO is using this joint proxy statement/prospectus as a prospectus for PE REIT II stockholders because PECO is issuing shares of PECO common stock in connection with the company merger.
The mergers cannot be completed unless:
the holders of PECO common stock vote to approve the PECO charter amendment;
the holders of PECO common stock vote to approve the company merger and the other transactions contemplated by the merger agreement; and
the holders of PE REIT II common stock vote to approve the company merger and the other transactions contemplated by the merger agreement.
Approval of the non-binding, advisory proposal to approve the PECO charter amendment by PE REIT II’s stockholders is not required to consummate the mergers.
Each of PECO and PE REIT II will hold separate meetings of their respective stockholders to obtain these approvals and to consider and vote on other proposals as described elsewhere in this joint proxy statement/prospectus.
This joint proxy statement/prospectus contains important information about the mergers and the other proposals being considered and voted on at the annual meetings of stockholders of PECO and PE REIT II, respectively, and you should read it carefully. The enclosed voting materials allow you to vote your shares of PECO common stock and/or PE REIT II common stock, as applicable, without attending the applicable annual meeting in person.

Your vote is very important. You are encouraged to authorize your proxy as promptly as possible.

Q: Am I being asked to vote on any other proposals at the annual meeting in addition to the merger proposals?
A: PECO. Yes. At the PECO annual meeting, PECO stockholders will be asked to consider and vote upon the following additional proposals:
To elect five directors to serve on the PECO Board until the next annual meeting of PECO stockholders and until their respective successors are duly elected and qualify.
To approve the PECO charter amendment.

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To approve the non-binding, advisory resolution on executive compensation as more fully described in this joint proxy statement/prospectus.
To vote, on a non-binding advisory basis, on the frequency of future advisory resolutions on executive compensation.
To approve one or more adjournments of the PECO annual meeting to another date, time or place, if necessary or appropriate, as determined by the Chair of the PECO annual meeting, to solicit additional proxies in favor of the proposal to approve the company merger and the other transactions contemplated by the merger agreement and the proposal to approve the PECO charter amendment.

PE REIT II. Yes. At the PE REIT II annual meeting, PE REIT II stockholders will be asked to consider and vote upon the following additional proposals:

To elect four directors to serve on the PE REIT II Board until the next annual meeting of PE REIT II stockholders and until their respective successors are duly elected and qualify.
To approve a non-binding, advisory proposal to approve the PECO charter amendment in connection with the company merger.
To approve one or more adjournments of the PE REIT II annual meeting to another date, time or place, if necessary or appropriate, as determined by the Chair of the PE REIT II annual meeting, to solicit additional proxies in favor of the proposal to approve the company merger and the other transactions contemplated by the merger agreement.
Q: Why is the merger proposal being submitted to the PECO stockholders?
A: There is no legal requirement to submit the merger proposal to the PECO stockholders for approval. Because PECO believes it is desirable to obtain the PECO stockholders’ approval of the merger proposal, PECO has made the PECO stockholders’ approval of the company merger and the other transactions contemplated by the merger agreement a condition to closing the mergers. If the company merger and the other transactions contemplated by the merger agreement are not approved by the PECO stockholders, PECO and PE REIT II will continue to operate under their current management structure, with PE REIT II paying fees and cost reimbursements to PECO as its advisor.
Q: Will PECO and PE REIT II continue to pay dividends or distributions prior to the closing of the mergers?
A: Yes.

The merger agreement permits the authorization and payment by PECO of dividends in the ordinary course of business and any distribution that is reasonably necessary to maintain its REIT qualification and/or to avoid the imposition of U.S. federal income or excise tax.

Similarly, the merger agreement also permits the authorization and payment by PE REIT II of dividends in the ordinary course of business and any distribution that is reasonably necessary to maintain its REIT qualification and/or to avoid the imposition of U.S. federal income or excise tax.

The payment of dividends will be coordinated by PECO and PE REIT II so that if either PECO stockholders or PE REIT II stockholders receive a regular dividend for any particular period prior to the closing of the mergers, the stockholders of the other company will also receive a dividend for the same period.

Q: What fees will PE REIT II’s advisor receive in connection with the mergers?
A: PECO serves as the advisor for PE REIT II. In connection with the mergers, PECO has waived any disposition fees that would otherwise have been payable under the advisory agreement upon consummation of the mergers.
Q: Why is PECO proposing to amend the PECO charter? What is the effect of the PECO charter amendment?
A: The PECO charter amendment would eliminate the requirement to undertake a liquidity event by February 2019, which would include selling all or substantially all of PECO’s assets, selling or merging into another entity, listing the PECO common stock on a national exchange, or another similar transaction that provides liquidity to the PECO stockholders. The PECO Board and the prospective members of the board of directors of the Combined Company following the consummation of the mergers are fully committed to realizing a liquidity event for shareholders, and the PECO charter amendment will give PECO more flexibility to evaluate the optimal form and timing of a liquidity event as it strives to maximize stockholder value.

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See “Proposals Submitted to PECO Stockholders—PECO Charter Amendment Proposal” beginning on page 74 and “Proposals Submitted to PE REIT II Stockholders—Advisory Vote on PECO Charter Proposal” beginning on page 103 for detailed descriptions of the PECO charter amendment.

Q: When and where are the annual meetings of the PECO stockholders and the PE REIT II stockholders?
A: The PECO annual meeting will be held on November 14, 2018 at 8:00 a.m. Eastern Time at the offices of Latham & Watkins LLP (“Latham & Watkins”), located at 885 Third Avenue, New York, New York 10022. If you need directions to the location of the PECO annual meeting, please contact us at (833) 347-5717.

The PE REIT II annual meeting will be held on November 14, 2018 at 1:00 p.m. Eastern Time at the offices of Latham & Watkins, located at 885 Third Avenue, New York, New York 10022. If you need directions to the location of the PE REIT II annual meeting, please contact us at (833) 347-5717.

Q: Who can vote at the annual meetings?
A: PECO. All holders of PECO common stock of record as of the close of business on August 28, 2018, the record date for determining stockholders entitled to notice of and to vote at the PECO annual meeting, are entitled to receive notice of and to vote at the PECO annual meeting. As of the record date, there were 183,695,565.955 shares of PECO common stock outstanding (which includes 31,264 unvested restricted shares held by PECO’s independent directors) and entitled to vote at the PECO annual meeting, held by approximately 40,091 holders of record. Each share of PECO common stock is entitled to one vote on each proposal presented at the PECO annual meeting.

PE REIT II. All holders of PE REIT II common stock of record as of the close of business on August 28, 2018, the record date for determining stockholders entitled to notice of and to vote at the PE REIT II annual meeting, are entitled to receive notice of and to vote at the PE REIT II annual meeting. As of the record date, there were 46,874,803.405 shares of PE REIT II common stock outstanding (which includes 6,878 unvested restricted shares held by PE REIT II’s independent directors) and entitled to vote at the PE REIT II annual meeting, held by approximately 24,480 holders of record. Each share of PE REIT II common stock is entitled to one vote on each proposal presented at the PE REIT II annual meeting.

Q: Will the limited partners of PECO OP vote on the mergers?
A: Yes. Under the terms of the merger agreement, PECO must use reasonable best efforts to obtain the approval of the PECO limited partners (including PECO and its subsidiaries) to the mergers. Approval of the limited partners of PECO OP requires the affirmative vote of a majority of the votes cast by the holders of PECO OP units entitled to vote on the mergers. For purposes of that vote, PECO is not entitled to vote its PECO OP units and instead is deemed to have cast its votes in proportion to the manner in which all outstanding shares of PECO common stock were voted in the PECO annual meeting for the proposal to approve the company merger and the other transactions contemplated by the merger agreement. In addition, pursuant to certain voting agreements, certain equityholders of PECO OP, who together own 47.08% of the outstanding PECO OP units not owned by PECO, agreed, among other things, to vote their PECO OP units in favor of the mergers, upon the terms and subject to the conditions set forth in such voting agreements.

For a more complete description of PECO’s obligations with respect to obtaining the approval of the PECO limited partners, see “The Merger Agreement—Covenants and Agreements—Notice to PECO OP Limited Partners” beginning on page 176.

Q: Do any of PECO’s executive officers or directors have interests in the mergers that may differ from those of PECO stockholders?
A: None of PECO’s executive officers or members of the PECO Board is party to an arrangement with PECO, or participates in any PECO plan, program or arrangement, that provides such executive officer or board member with financial incentives that are contingent upon the consummation of the mergers.

As of August 28, 2018, Messrs. Edison and Addy beneficially owned 51,111.11 and 2,960.61 shares of PE REIT II common stock, respectively. Upon the consummation of the mergers, they will each receive a number of shares of PECO common stock consistent with the exchange ratio.

Q: Do any of PE REIT II’s executive officers or directors have interests in the mergers that may differ from those of PE REIT II stockholders?
A: PE REIT II’s executive officers and directors have interests in the mergers that are different from, or in addition to, their interests as PE REIT II stockholders. The members of the PE REIT II Special Committee and the PE REIT II Board were

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aware of and considered these interests, among other matters, in evaluating the merger agreement and the mergers, and in recommending that PE REIT II stockholders vote FOR the proposal to approve the company merger and the other transactions contemplated by the merger agreement. For a description of these interests, see the section entitled “The Mergers—Interests of PE REIT II’s Directors and Executive Officers in the Mergers” beginning on page 138.

Q: Will my rights as a stockholder of PECO or PE REIT II change as a result of the mergers?
A: The rights of PECO stockholders will be unchanged as a result of the mergers (other than (i) the ownership position dilution of PECO stockholders in the Combined Company – upon completion of the mergers, we estimate that continuing PECO stockholders will own approximately 71% of the issued and outstanding shares of the Combined Company on a fully diluted basis (determined as if each PECO OP unit were exchanged for one share of PECO common stock), and former PE REIT II stockholders will own approximately 29% of the issued and outstanding shares of the Combined Company on a fully diluted basis (determined as if each PECO OP unit were exchanged for one share of PECO common stock), and (ii) the changes contemplated by the Amended PECO Charter). PE REIT II stockholders will have different rights following the effective time of the company merger due to the differences between the governing documents of PECO and PE REIT II. For more information regarding the differences in stockholder rights, see “Comparison of Rights of the PECO Stockholders and the PE REIT II Stockholders” beginning on page 191.
Q: When are the mergers expected to be completed?
A: PECO and PE REIT II expect to complete the mergers as soon as reasonably practicable following satisfaction of all of the required conditions set forth in the merger agreement. If PE REIT II stockholders approve the company merger, if PECO stockholders approve the PECO charter amendment and approve the company merger, and if the other conditions to closing the mergers are satisfied or waived, it is currently expected that the mergers will be completed in the fourth quarter of 2018. However, there is no guarantee that the conditions to the mergers will be satisfied or that the mergers will close.
Q: If I am a PE REIT II stockholder and the mergers are consummated, how will my receipt of PECO common stock in exchange for my PE REIT II common stock be recorded? Will I have to take any action in connection with the recording of such ownership of PECO common stock? Will such shares of PECO common stock be certificated or in book-entry form?
A: Pursuant to the merger agreement, as soon as practicable following the company merger effective time, PECO will cause DST Systems, Inc., the transfer agent in connection with the mergers, to record the issuance on the stock records of PECO of the amount of PECO common stock equal to the merger consideration which is issuable to each holder of PE REIT II common stock (including any fractional shares thereof) pursuant to the merger agreement. If the mergers are consummated, you will not have to take any action in connection with the recording of your ownership of PECO common stock. Shares of PECO common stock issued as merger consideration to you will not be certificated and will be in book-entry form and will be recorded in the books and records of PECO.
Q: What do I need to do now?
A: After you have carefully read this joint proxy statement/prospectus, please respond by completing, signing and dating your proxy card or voting instruction card and returning it in the enclosed pre-addressed postage-paid envelope or, if available, by submitting your proxy by one of the other methods specified in your proxy card or voting instruction card as promptly as possible so that your shares of PECO common stock and/or your shares of PE REIT II common stock will be represented and voted at the PECO annual meeting or the PE REIT II annual meeting, as applicable.

Please refer to your proxy card or voting instruction card forwarded by your broker or other nominee to see which voting options are available to you.

The method by which you submit a proxy will in no way limit your right to vote at the PECO annual meeting or the PE REIT II annual meeting, as applicable, if you later decide to attend the meeting in person.

However, if your shares of PECO common stock or your shares of PE REIT II common stock are held in the name of a broker or other nominee, you must obtain a legal proxy, executed in your favor, from your broker or other nominee, to be able to vote in person at the PECO annual meeting or the PE REIT II annual meeting, as applicable. Obtaining a legal proxy may take several days.

Q: How will my proxy be voted?
A: PECO Stockholders. All shares of PECO common stock entitled to vote and represented by properly completed proxies received prior to the PECO annual meeting, and not revoked, will be voted at the PECO annual meeting as instructed on

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the proxies. If you properly sign, date and return a proxy card, but do not indicate how your shares of PECO common stock should be voted on a matter, the shares of PECO common stock represented by your proxy will be voted as the PECO Board recommends. If your shares are held in street name through a broker or other nominee and you do not provide voting instructions to your broker or other nominee, your shares of PECO common stock will NOT be voted at the PECO annual meeting and may result in broker non-votes.

PE REIT II Stockholders. All shares of PE REIT II common stock entitled to vote and represented by properly completed proxies received prior to the PE REIT II annual meeting, and not revoked, will be voted at the PE REIT II annual meeting as instructed on the proxies. If you properly sign, date and return a proxy card, but do not indicate how your shares of PE REIT II common stock should be voted on a matter, the shares of PE REIT II common stock represented by your proxy will be voted as the PE REIT II Board recommends. If your shares are held in street name through a broker or other nominee and you do not provide voting instructions to your broker or other nominee, your PE REIT II common stock will NOT be voted at the PE REIT II annual meeting and may result in broker non-votes.

Q: Can I revoke my proxy or change my vote after I have delivered my proxy?
A: Yes. You may revoke your proxy or change your vote at any time before your proxy is voted at the PECO annual meeting or the PE REIT II annual meeting, as applicable. For information on how to revoke your proxy or change your vote, see “The PECO Annual Meeting—Revocation of Proxies or Voting Instructions” beginning on page 60 and “The PE REIT II Annual Meeting—Revocation of Proxies or Voting Instructions” beginning on page 90.
Q: What does it mean if I receive more than one set of voting materials for the PECO annual meeting or the PE REIT II annual meeting?
A: You may receive more than one set of voting materials for the PECO annual meeting and/or the PE REIT II annual meeting, as applicable, including multiple copies of this joint proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold your shares of PECO common stock or your shares of PE REIT II common stock in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold your shares of PECO common stock or your shares of PE REIT II common stock. If you are a holder of record and your shares of PECO common stock or your shares of PE REIT II common stock are registered in more than one name, you may receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive or, if available, please submit your proxy by telephone or over the Internet.
Q: What happens if I am a stockholder of both PECO and PE REIT II?
A: You will receive separate proxy cards for each entity and must complete, sign and date each proxy card and return each proxy card in the appropriate pre-addressed postage-paid envelope or, if available, by submitting a proxy by one of the other methods specified in your proxy card or voting instruction card for each entity.
Q: Do I need identification to attend the PECO or PE REIT II annual meeting in person?
A: Yes. Please bring proper identification, together with proof that you are a record owner of shares of PECO common stock or shares of PE REIT II common stock, as the case may be. If your shares are held in street name, please bring acceptable proof of ownership, such as a letter from your broker or an account statement showing that you beneficially owned shares of PECO common stock or shares of PE REIT II common stock, as applicable, on the applicable record date.
Q: When are the stockholder proposals for the next PECO annual meeting and the next PE REIT II annual meeting due?
A: PECO: Any PECO stockholder who wishes to propose a nominee to the PECO Board or propose any other business to be considered by the stockholders (other than a stockholder proposal included in PECO’s proxy materials pursuant to Rule 14a-8 of the rules promulgated under the Exchange Act) must comply with the advance notice provisions and other requirements of Section 2.12 of PECO’s bylaws. To be considered by the PECO stockholders for the 2019 annual meeting of PECO stockholders, director nominations and other stockholder proposals must be received no earlier than March 31, 2019 and no later than 5:00 p.m. Eastern Time on April 30, 2019. See “Stockholder Proposals” on page 195 for more information.

PE REIT II: PE REIT II will not hold an annual meeting of stockholders in 2019 if the mergers are completed because PE REIT II will have been merged out of existence in the company merger. However, if the merger agreement is terminated for any reason, PE REIT II expects to hold an annual meeting of stockholders in 2019. A date has not been set for PE

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REIT II’s 2019 annual meeting. If PE REIT II holds an annual meeting in 2019, any stockholder proposal, to be considered for inclusion in PE REIT II’s proxy materials for the 2019 annual meeting of stockholders must be received no earlier than March 31, 2019 and no later than 5:00 p.m. Eastern Time on April 30, 2019. See “Stockholder Proposals” on page 195 for more information.

Q: Will a proxy solicitor be used?
A: Yes. PECO has contracted with Broadridge Financial Solutions, Inc. (“BFS”) to assist PECO in the distribution of proxy materials and the solicitation of proxies. PECO expects to pay BFS fees of approximately $975,000 to solicit proxies plus other fees and expenses for other services related to this proxy solicitation, including the review of proxy materials, dissemination of brokers’ search cards, distribution of proxy materials, operating online and telephone voting systems and receipt of executed proxies. PECO will also reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and solicitation materials to PECO’s stockholders.

PE REIT II has also contracted with BFS to assist PE REIT II in the distribution of proxy materials and the solicitation of proxies. PE REIT II expects to pay BFS fees of approximately $592,000 to solicit proxies plus other fees and expenses for other services related to this proxy solicitation, including the review of proxy materials, dissemination of brokers’ search cards, distribution of proxy materials, operating online and telephone voting systems and receipt of executed proxies. PE REIT II will also reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and solicitation materials to PE REIT II’s stockholders.

Q: If I plan to attend the PECO annual meeting or the PE REIT II annual meeting in person, should I notify anyone?
A: While you are not required to notify anyone in order to attend the PECO annual meeting or the PE REIT II annual meeting, if you do plan to attend either annual meeting, PECO and PE REIT II would appreciate if you would mark the appropriate box on the applicable enclosed proxy card to let them know how many stockholders will be attending the meeting and a suitable meeting room for the attendees can be prepared.
Q: Who can answer my questions?
A: If you have any questions about the mergers or how to submit your proxy or need additional copies of this joint proxy statement/prospectus, the enclosed proxy card or voting instructions, you should contact:
If you are a PECO stockholder:
Phillips Edison & Company, Inc.
Attention: Investor Relations
11501 Northlake Drive
Cincinnati, Ohio 45249
1 (833) 347-5717
If you are a PE REIT II stockholder:
Phillips Edison Grocery Center REIT II, Inc.
Attention: Investor Relations
11501 Northlake Drive
Cincinnati, Ohio 45249
1 (833) 347-5717
 
 
BFS:
Broadridge Financial Solutions, Inc.
51 Mercedes Way
Edgewood, New York 11717
1 (855) 835-8312
BFS:
Broadridge Financial Solutions, Inc.
51 Mercedes Way
Edgewood, New York 11717
1 (855) 737-3178

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SUMMARY

The following summary highlights some of the information contained in this joint proxy statement/prospectus. This summary may not contain all of the information that is important to you. For a more complete description of the merger agreement, the mergers and the other transactions contemplated by the merger agreement, PECO and PE REIT II encourage you to read carefully this entire joint proxy statement/prospectus, including the attached Annexes and the other documents to which we have referred you because this section does not provide all the information that might be important to you with respect to the mergers at the applicable annual meeting. See also the section entitled “Where You Can Find More Information” beginning on page 199. We have included page references to direct you to a more complete description of the topics presented in this summary.

The Companies

Phillips Edison & Company, Inc. and Phillips Edison Grocery Center Operating Partnership I, L.P. (See page 47)

PECO is a public, internally managed, non-traded REIT that was formed as a Maryland corporation in October 2009 and elected to be taxed as a REIT for U.S. federal income tax purposes for the year ended December 31, 2010 and each year thereafter.

PECO focuses its investment strategy on well-occupied, grocery-anchored neighborhood and community shopping centers having a mix of creditworthy national and regional retailers selling necessity-based goods and services in diversified markets with growth potential throughout the United States, including Florida, Georgia, Ohio, California, Illinois and North Carolina. PECO also operates a growing investment management business with approximately $2.1 billion of third-party assets under management as of June 30, 2018. PECO owns its interests in all of its properties and conducts substantially all of its business through PECO OP, a Delaware limited partnership formed in December 2009. The principal executive office of PECO and PECO OP is located at 11501 Northlake Drive, Cincinnati, Ohio 45249, and its telephone number is (513) 554-1110.

Phillips Edison Grocery Center REIT II, Inc. and Phillips Edison Grocery Center Operating Partnership II, L.P. (See page 52)

PE REIT II is a public non-traded REIT that was formed as a Maryland corporation in June 2013 and elected to be taxed as a REIT for U.S. federal income tax purposes for the year ended December 31, 2014 and each year thereafter.

Historically, PE REIT II has been externally advised and paid fees to Phillips Edison NTR II LLC (the “advisor”), an affiliate of PECO, under the advisory agreement. In connection with the mergers, the advisory agreement will be terminated immediately prior to the closing of the mergers.

PE REIT II invests primarily in well-occupied, grocery-anchored neighborhood and community shopping centers having a mix of creditworthy national and regional retailers selling necessity-based goods and services in strong demographic markets throughout the United States. PE REIT II owns its interests in all of its properties and conducts substantially all of its business through PE OP II, a Delaware limited partnership formed in June 2013. In addition, PE REIT II owns a 20% equity interest in a joint venture that owned 14 properties as of June 30, 2018. The principal executive office of PE REIT II and PE OP II is located at 11501 Northlake Drive, Cincinnati, Ohio 45249, and its telephone number is (513) 554-1110.

The Combined Company (See page 57)

References to the Combined Company are to PECO after the effective time of the company merger. The Combined Company will be named “Phillips Edison & Company, Inc.” and will be a Maryland corporation. The Combined Company after the completion of the mergers is expected to have a pro forma total enterprise value of approximately $6.3 billion (based on the estimated net asset value per share of PECO of $11.05 and the total estimated pro forma outstanding indebtedness of $2.7 billion, including transaction expenses). The Combined Company’s asset base after the completion of the mergers will consist primarily of 321 grocery-anchored shopping centers encompassing approximately 36.6 million square feet across 33 states.

The business of the Combined Company will be operated through PECO OP and its subsidiaries, including the Surviving Partnership. After giving effect to the mergers, PECO OP will hold a limited partnership interest in the Surviving Partnership (and be the sole limited partner of the Surviving Partnership), and a wholly owned subsidiary of PECO OP, OP Merger Sub GP, will be the sole general partner of the Surviving Partnership. Following the effective times of the company merger and the partnership merger, the PECO parties will have the full, exclusive and complete responsibility for and discretion in the day-to-day management and control of PECO OP and the Surviving Partnership.

The Combined Company’s principal executive offices will be located at 11501 Northlake Drive, Cincinnati, Ohio 45249, and its telephone number is (513) 554-1110.

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The Mergers

The Merger Agreement (See page 162)

The PECO parties and the PE REIT II parties have entered into the merger agreement attached as Annex A to this joint proxy statement/prospectus, which is incorporated herein by reference. PECO and PE REIT II encourage you to carefully read the merger agreement in its entirety because it is the principal document governing the mergers and the other transactions contemplated by the merger agreement.

The merger agreement provides that the closing of the mergers will take place at 10:00 a.m. Eastern time on the second business day following the date on which the last of the conditions to closing of the mergers has been satisfied or waived.

The Mergers (See page 105)

Subject to the terms and conditions of the merger agreement, at the effective time of the company merger, PE REIT II will merge with and into REIT Merger Sub, with REIT Merger Sub surviving the company merger as the Surviving Entity, which will be a wholly owned subsidiary of PECO.

The merger agreement also provides for the merger of OP Merger Sub with and into PE OP II, with PE OP II surviving the merger as the Surviving Partnership. At the effective time of the partnership merger, OP Merger Sub GP, a wholly owned subsidiary of PECO OP, will be the sole general partner of the Surviving Partnership, and PECO OP will be the sole limited partner of the Surviving Partnership.

The Merger Consideration (See page 163)

At the effective time of the company merger and by virtue of the company merger, each outstanding share of PE REIT II common stock (including the outstanding restricted shares of PE REIT II common stock granted under the PE REIT II independent director stock plan to be treated as described below in “—Treatment of PE REIT II Equity Awards—PE REIT II Restricted Shares”), and each fraction thereof, will be cancelled and converted into the right to receive the merger consideration of 2.04 shares of PECO common stock (or with respect to any fractional share of PECO common stock, that fraction of PECO common stock consistent with the exchange ratio).

At the effective time of the partnership merger, each PE OP II unit (excluding each Class B unit and the special limited partnership interest of PE OP II which will be cancelled in connection with the partnership merger) issued and outstanding immediately prior to the effective time of the partnership merger will be converted into the right to receive the consideration of 2.04 validly issued PECO OP units, which we refer to as the partnership merger consideration. The PECO OP units issued in exchange for PE OP II units in connection with the partnership merger will be rounded down to the nearest whole unit; no fractional PECO OP units will be issued in connection with the partnership merger. Each Class B unit and the special limited partnership interest of PE OP II will be cancelled and cease to exist, and no consideration will be delivered in exchange therefor, in each case, in connection with the partnership merger.

Upon completion of the mergers, we estimate that continuing PECO stockholders will own approximately 71% of the issued and outstanding shares of the Combined Company on a fully diluted basis (determined as if each PECO OP unit were exchanged for one share of PECO common stock), and former PE REIT II stockholders will own approximately 29% of the issued and outstanding shares of the Combined Company on a fully diluted basis (determined as if each PECO OP unit were exchanged for one share of PECO common stock).

Voting Agreements (See page 185)

Concurrently with the execution of the merger agreement, certain equityholders and executive officers of PECO and/or PECO OP, including Jeffrey S. Edison, PECO’s Chief Executive Officer and Chairman of the PECO Board, and Devin I. Murphy, PECO’s Chief Financial Officer, Treasurer and Secretary, entered into voting agreements with PE REIT II and PE OP II pursuant to which such individuals agreed, among other things, to vote in favor of the PECO charter amendment and the mergers, upon the terms and subject to the conditions set forth in such voting agreements. The shares of PECO common stock subject to such voting agreements comprise approximately 0.20% of the outstanding shares of PECO common stock and the limited partnership interests of PECO OP subject to such voting agreements comprise approximately 47.08% of the outstanding PECO OP units not owned by PECO.

Reasons for the Merger (See page 115)

In evaluating the mergers, the merger agreement and the other transactions contemplated by the merger agreement, the PECO Board consulted with PECO’s management and legal and financial advisors. In deciding to declare advisable and approve and adopt the merger agreement, the mergers and the other transactions contemplated by the merger agreement, including the PECO

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charter amendment, and to recommend that the PECO stockholders vote to approve the mergers and the other transactions contemplated by the merger agreement and the PECO charter amendment, the PECO Board considered various factors that it viewed as supporting its decision. In the course of its evaluation of the proposed transactions, the PECO Board also considered a variety of risks and other potentially negative factors concerning the merger agreement, the mergers and the other transactions contemplated by the merger agreement.

A fulsome discussion of certain factors considered by the PECO Board in reaching its decision to approve the merger agreement, the mergers and the other transactions contemplated by the merger agreement can be found in the section entitled “The Mergers—Recommendation of the PECO Board of Directors and Its Reasons for the Mergers” beginning on page 115.

In evaluating the mergers, the merger agreement and the other transactions contemplated by the merger agreement, the PE REIT II Board considered the recommendation of the PE REIT II Special Committee. The PE REIT II Special Committee, prior to making its unanimous recommendation, consulted with its independent legal and financial advisors. In reaching their respective determinations, the PE REIT II Board and PE REIT II Special Committee considered a number of factors, including various factors which the PE REIT II Board and the PE REIT II Special Committee viewed as supporting their respective decisions with respect to the merger agreement, the mergers and the other transactions contemplated by the merger agreement. In the course of their evaluations of the proposed transactions, the PE REIT II Special Committee and the PE REIT II Board also considered a variety of risks and other potentially negative factors concerning the merger agreement, the mergers and the other transactions contemplated by the merger agreement.

The PE REIT II Special Committee also considered whether to solicit proposals from third parties prior to entering into the merger agreement. After considering the likelihood that a third party would emerge with a competitive proposal, the right of PE REIT II to actively solicit alternative acquisition proposals during the 30-day “go shop” period and the provisions of the draft merger agreement permitting PE REIT II to terminate the merger agreement to enter into an agreement for a Superior Proposal (as defined in “The Merger Agreement—Covenant and Agreements—No Solicitation and Change in Recommendation with Competing Proposal”), the PE REIT II Special Committee determined to move forward with the transaction without soliciting other proposals before execution of the definitive merger agreement.

A fulsome discussion of certain factors considered by the PE REIT II Special Committee and the PE REIT II Board in reaching their decision to approve the merger agreement, the mergers and the other transactions contemplated by the merger agreement can be found in the section entitled “The Mergers—Recommendation of the PE REIT II Board of Directors and Its Reasons for the Mergers” beginning on page 118.

Recommendation of the PECO Board of Directors (See page 115)

On July 17, 2018, after careful consideration, the PECO Board unanimously (i) determined that the mergers and the other transactions contemplated by the merger agreement are advisable and in the best interests of PECO and its stockholders, (ii) approved the merger agreement, the mergers and the other transactions contemplated by the merger agreement, and (iii) declared the PECO charter amendment advisable. Certain factors considered by the PECO Board in reaching its decision to approve the merger agreement, the mergers and the other transactions contemplated by the merger agreement and declare the PECO charter amendment advisable can be found in the section entitled “The Mergers—Recommendation of the PECO Board of Directors and Its Reasons for the Mergers” beginning on page 115.

The PECO Board unanimously recommends that PECO stockholders vote (i) FOR the proposal to approve the company merger and the other transactions contemplated by the merger agreement, (ii) FOR each of the nominees for election as a director, (iii) FOR the proposal to approve the PECO charter amendment, (iv) FOR the approval of the non-binding, advisory resolution on executive compensation, (v) for “EVERY YEAR” on the non-binding, advisory vote on the frequency of future non-binding, advisory resolutions on executive compensation and (vi) FOR the proposal to approve one or more adjournments of the PECO annual meeting to another date, time or place, if necessary or appropriate, as determined by the Chair of the PECO annual meeting, to solicit additional proxies in favor of the proposal to approve the company merger and the other transactions contemplated by the merger agreement or to approve the PECO charter amendment.

Recommendation of the PE REIT II Board of Directors (See page 118)

On July 17, 2018, after careful consideration, the PE REIT II Board, based on the unanimous recommendation of the PE REIT II Special Committee, unanimously determined that the mergers and the other transactions contemplated by the merger agreement are advisable and in the best interests of PE REIT II and its stockholders and (ii) authorized and approved the mergers and the other transactions contemplated by the merger agreement and authorized, approved and adopted the merger

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agreement. Certain factors considered by the PE REIT II Special Committee and the PE REIT II Board in reaching their decisions to approve the merger agreement, the mergers and the other transactions contemplated by the merger agreement can be found in the section entitled “The Mergers—Recommendation of the PE REIT II Board of Directors and Its Reasons for the Mergers” beginning on page 118.

The PE REIT II Board, based on the unanimous recommendation of the PE REIT II Special Committee of the proposals set forth in the following clauses (i), (iii) and (iv), and the PE REIT II Board’s independent consideration of the proposal set forth in clause (ii), unanimously recommends that the PE REIT II stockholders vote (i) FOR the proposal to approve the company merger and the other transactions contemplated by the merger agreement, (ii) FOR each of the nominees for election as a director, (iii) FOR the non-binding, advisory proposal to approve the PECO charter amendment in connection with the company merger, and (iv) FOR the proposal to approve one or more adjournments of the PE REIT II annual meeting to another date, time or place, if necessary or appropriate, as determined by the Chair of the PE REIT II annual meeting, to solicit additional proxies in favor of the proposal to approve the company merger and the other transactions contemplated by the merger agreement.

Summary of Risks Related to the Mergers (See page 23)

You should consider carefully the risk factors described below together with all of the other information included in this joint proxy statement/prospectus before deciding how to vote. The risks related to the mergers and the other transactions contemplated by the merger agreement are described under the section “Risk Factors—Risks Related to the Mergers.” Certain of the risks related to the mergers and the other transactions contemplated by the merger agreement, include, amongst others, the following:

PECO and PE REIT II stockholders will be diluted by the mergers and, consequently, will have less influence over the management and policies of the Combined Company after the mergers than each currently exercises over the management and policies of PECO and PE REIT II, as applicable;
completion of the mergers is subject to many conditions and if these conditions are not satisfied or waived, the mergers will not be completed, which could result in the requirement that (i) PECO pay to PE REIT II a termination fee of $75,620,000 or (ii) PE REIT II pay to PECO a termination fee of $15,850,000 in connection with the go shop provisions of the merger agreement or a termination fee of $31,700,000 other than in connection with the go shop provisions of the merger agreement;
failure to complete the mergers could negatively affect the future business and financial results of both PECO and PE REIT II;
the pendency of the mergers could adversely affect the business and operations of PECO and PE REIT II;
the merger agreement contains provisions that could discourage a potential competing acquirer of PE REIT II from proposing an alternative transaction that may be more advantageous to PE REIT II’s stockholders or could result in a competing acquisition proposal being at a lower price than it might otherwise be;
based on the exchange ratio of 2.04, in the event the mergers are consummated, the total annual dividend that PE REIT II stockholders will receive after closing in respect of each share of PE REIT II common stock will be approximately $1.367 compared to $1.625 prior to the closing of the transaction;
if the mergers are not consummated by the Outside Date, either PECO or PE REIT II may terminate the merger agreement;
if and when the Combined Company completes a liquidity event, the market value ascribed to the shares of common stock of the Combined Company upon the liquidity event may be significantly lower than the estimated net asset value per share of PECO and PE REIT II considered by their respective boards of directors in approving and recommending the mergers; and
some of the directors and executive officers of PE REIT II have interests in the mergers that are different from, or in addition to, those of the other PE REIT II stockholders.

The PECO Annual Meeting (See page 58)

The annual meeting of the PECO stockholders will be held at the offices of Latham & Watkins, located at 885 Third Avenue, New York, New York 10022 on November 14, 2018, commencing at 8:00 a.m. Eastern Time.

At the PECO annual meeting, the PECO stockholders will be asked to consider and vote upon the following matters:

1. a proposal to approve the company merger and the other transactions contemplated by the merger agreement;

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2. a proposal to elect five nominees for director, with each to serve until the next annual meeting of PECO stockholders and until their respective successors are duly elected and qualify;
3. a proposal to approve the PECO charter amendment;
4. a proposal to approve, on a non-binding, advisory basis, the compensation of the PECO named executive officers;
5. a proposal to vote, on a non-binding advisory basis, on the frequency of future non-binding advisory resolutions on executive compensation (every year, every two years or every three years);
6. a proposal to approve one or more adjournments of the PECO annual meeting to another date, time or place, if necessary or appropriate, as determined by the Chair of the PECO annual meeting, to solicit additional proxies in favor of the proposal to approve the company merger and the other transactions contemplated by the merger agreement or to approve the PECO charter amendment; and
7. such other business as may properly come before the meeting and any adjournment or postponement thereof.

This joint proxy statement/prospectus also contains information regarding the PE REIT II annual meeting, including the items of business for that annual meeting. Unless they also own shares of PE REIT II as of the close of business on the record date for the PE REIT II annual meeting, PECO stockholders may not vote on the proposals to be voted on at the PE REIT II annual meeting.

Approval of the proposal to approve the company merger and the other transactions contemplated by the merger agreement requires the affirmative vote of a majority of all of the votes cast on such proposal.

The election of each of the nominees for director requires the affirmative vote of the holders of a majority of the shares of stock entitled to vote who are present in person or by proxy.

Approval of the proposal to approve the PECO charter amendment requires the affirmative vote of a majority of all of the votes entitled to be cast on such proposal.

Approval of the non-binding, advisory resolution on executive compensation requires the affirmative vote of a majority of all of the votes cast on such proposal.

With regard to the non-binding, advisory vote on the frequency of future non-binding, advisory resolutions on executive compensation, the option of every year, every two years or every three years that receives the affirmative vote of a majority of all of the votes cast on such proposal will be the frequency recommended by stockholders. In the event that no option receives such a majority, the PECO Board will consider the option that receives the most votes to be the frequency recommended by PECO stockholders.

Approval of the proposal to approve one or more adjournments of the PECO annual meeting to another date, time or place, if necessary or appropriate, as determined by the Chair of the PECO annual meeting, to solicit additional proxies in favor of the proposal to approve the company merger and the other transactions contemplated by the merger agreement or to approve the PECO charter amendment requires the affirmative vote of a majority of all of the votes cast on such proposal.

At the close of business on the record date, directors and executive officers of PECO and their affiliates were entitled to vote 512,931 shares of PECO common stock, or less than 1% of the shares of PECO common stock issued and outstanding on that date. PECO currently expects that all PECO directors and executive officers will vote their shares of PECO common stock in favor of the proposal to approve the PECO charter amendment and the proposal to approve the company merger and the other transactions contemplated by the merger agreement as well as the other proposals to be considered at the PECO annual meeting.

Your vote as a PECO stockholder is very important. Accordingly, please sign and return the enclosed proxy card whether or not you plan to attend the PECO annual meeting in person.

The PE REIT II Annual Meeting (See page 88)

The annual meeting of the PE REIT II stockholders will be held at the offices of Latham & Watkins, located at 885 Third Avenue, New York, New York 10022 on November 14, 2018, commencing at 1:00 p.m. Eastern Time.

At the PE REIT II annual meeting, the PE REIT II stockholders will be asked to consider and vote upon the following matters:

1. a proposal to approve the company merger and the other transactions contemplated by the merger agreement;

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2. a proposal to elect four nominees for director, with each to serve until the next annual meeting of PE REIT II stockholders and until their respective successors are duly elected and qualify;
3. a non-binding, advisory proposal to approve the PECO charter amendment in connection with the company merger;
4. a proposal to approve one or more adjournments of the PE REIT II annual meeting to another date, time or place, if necessary or appropriate, as determined by the Chair of the PE REIT II annual meeting, to solicit additional proxies in favor of the proposal to approve the company merger and the other transactions contemplated by the merger agreement; and
5. such other business as may properly come before the meeting and any adjournment or postponement thereof.

This joint proxy statement/prospectus also contains information regarding the PECO annual meeting, including the items of business for that annual meeting. Unless they also own shares of PECO as of the close of business on the record date for the PECO annual meeting, PE REIT II stockholders may not vote on the proposals to be voted on at the PECO annual meeting.

Approval of the proposal to approve the company merger and the other transactions contemplated by the merger agreement requires the affirmative vote of a majority of all of the votes entitled to be cast on such proposal.

The election of each of the nominees for director requires the affirmative vote of holders of a majority of the shares of stock entitled to vote who are present in person or by proxy.

Approval of the non-binding, advisory proposal to approve the PECO charter amendment in connection with the company merger requires the affirmative vote of a majority of all of the votes cast on such proposal.

Approval of the proposal to approve one or more adjournments of the PE REIT II annual meeting to another date, time or place, if necessary or appropriate, as determined by the Chair of the PE REIT II annual meeting, to solicit additional proxies in favor of the proposal to approve the company merger and the other transactions contemplated by the merger agreement requires the affirmative vote of a majority of all of the votes cast on such proposal.

At the close of business on the record date, directors and executive officers of PE REIT II and their affiliates were entitled to vote 67,069 shares of PE REIT II common stock, or less than 1% of the shares of PE REIT II common stock issued and outstanding on that date. PE REIT II currently expects that all PE REIT II directors and executive officers will vote their shares of PE REIT II common stock in favor of the proposal to approve the company merger and the other transactions contemplated by the merger agreement as well as the other proposals to be considered at the PE REIT II annual meeting, although none of them is contractually obligated to do so.

Your vote as a PE REIT II stockholder is very important. Accordingly, please sign and return the enclosed proxy card whether or not you plan to attend the PE REIT II annual meeting in person.

Opinions of Financial Advisors

Opinion of PECO’s Financial Advisor (See page 121)

In connection with the mergers, BofA Merrill Lynch delivered a written opinion, dated July 17, 2018, to the PECO Board as to the fairness, from a financial point of view and as of such date, to PECO of the exchange ratio provided for in the company merger. The full text of BofA Merrill Lynch’s written opinion, dated July 17, 2018, which describes, among other things, the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken, is attached as Annex C to this joint proxy statement/prospectus and is incorporated by reference herein in its entirety.

BofA Merrill Lynch delivered its opinion to the PECO Board for the benefit and use of the PECO Board (in its capacity as such) in connection with and for purposes of the PECO Board’s evaluation of the exchange ratio provided for in the company merger from a financial point of view to PECO. BofA Merrill Lynch’s opinion did not address any terms or other aspects or implications of the mergers (other than the exchange ratio to the extent expressly specified in such opinion) or related transactions and no opinion or view was expressed as to the relative merits of the mergers in comparison to other strategies or transactions that might be available to PECO or in which PECO might engage or as to the underlying business decision of PECO to proceed with or effect the mergers or related transactions. BofA Merrill Lynch also expressed no opinion or recommendation as to how any stockholder should vote or act in connection with the mergers, any related transactions or any other matter. See “The Mergers—Opinion of PECO’s Financial Advisor” beginning on page 121.

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Opinion of the PE REIT II Special Committee’s Financial Advisor (See page 128)

The PE REIT II Special Committee retained Morgan Stanley to provide it with financial advisory services and a financial opinion in connection with the company merger. The PE REIT II Special Committee selected Morgan Stanley to act as its financial advisor based on Morgan Stanley’s qualifications, expertise and reputation, and its knowledge of the business and affairs of PE REIT II. As part of this engagement, the PE REIT II Special Committee requested that Morgan Stanley evaluate the fairness from a financial point of view of the exchange ratio provided for in the company merger to the holders of shares of PE REIT II common stock. On July 17, 2018, at a meeting of the PE REIT II Special Committee, Morgan Stanley rendered its oral opinion, which was subsequently confirmed in writing by delivery of a written opinion to the PE REIT II Special Committee, dated July 17, 2018, that, as of such date and based upon and subject to the various assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Morgan Stanley as set forth therein, the exchange ratio pursuant to the merger agreement was fair from a financial point of view to the holders of shares of PE REIT II common stock.

The full text of the written opinion of Morgan Stanley, dated July 17, 2018, is attached to this joint proxy statement/prospectus as Annex D, and is hereby incorporated by reference into this joint proxy statement/prospectus in its entirety. The opinion sets forth, among other things, the various assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Morgan Stanley in rendering its opinion. You are encouraged to, and should, read Morgan Stanley’s opinion and the section summarizing Morgan Stanley’s opinion carefully and in their entirety. Morgan Stanley’s opinion was directed to the PE REIT II Special Committee, in its capacity as such, and addressed only the fairness from a financial point of view of the exchange ratio pursuant to the merger agreement to the holders of shares of the PE REIT II common stock, as of the date of the opinion, and did not address any other aspects or implications of the company merger. It was not intended to, and does not, constitute advice or a recommendation to any stockholder of PE REIT II or of PECO as to how to act or vote in connection with any of the transactions contemplated by the merger agreement. See “Opinion of the PE REIT II Special Committee’s Financial Advisor” beginning on page 128.

Treatment of PE REIT II Equity Awards (See pages 138 and 164)

PE REIT II’s independent directors hold restricted shares of PE REIT II common stock issued pursuant to the PE REIT II independent director stock plan. Except as described below, at the effective time of the company merger, each of these outstanding restricted shares of PE REIT II common stock will vest and all restrictions thereon will lapse, and each such PE REIT II restricted share will be cancelled and converted into the right to receive 2.04 shares of PECO common stock (or with respect to any fractional share of PECO common stock, that fraction of PECO common stock consistent with the exchange ratio). Prior to the effective time of the company merger, Mark D. McDade will (i) resign from the PE REIT II Board and (ii) enter into an agreement with PE REIT II, whereby his unvested restricted shares of PE REIT II common stock will vest and PE REIT II will redeem his shares of PE REIT II common stock (including his newly vested restricted shares of PE REIT II common stock) for cash for an amount equal to the number of shares of PECO common stock he would have received in the company merger multiplied by $11.05 (the most recent estimated value per share of PECO common stock). Accordingly, Mr. McDade will not receive any shares of PECO common stock in the company merger.

For more information regarding treatment of PE REIT II equity awards, see “The Mergers—Interests of PE REIT II’s Directors and Executive Officers in the Mergers—Treatment of PE REIT II Equity Awards” beginning on page 138 and “The Merger Agreement—Merger Consideration; Effects of the Merger—Treatment of PE REIT II Equity Awards” beginning on page 164.

Directors and Management of the Combined Company After the Mergers (See page 139)

Immediately following the effective time of the company merger, the board of directors of the Combined Company will be increased to seven members, with the five directors of the PECO Board elected by the PECO stockholders at the PECO annual meeting continuing as directors of the Combined Company. In addition, two independent directors of the PE REIT II Board, David W. Garrison and John A. Strong, will join the board of directors of the Combined Company, to serve until the next annual meeting of the stockholders of the Combined Company (and until their successors qualify and are duly elected).

The executive officers of PECO immediately prior to the effective time of the company merger will continue to serve as the executive officers of the Combined Company, with Jeffrey S. Edison continuing to serve as the Chief Executive Officer of the Combined Company. See “The Merger Agreement—Board of Directors, Partners and Officers of the Surviving Entities” on page 163 for more information.

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Dissenters’ and Appraisal Rights in the Mergers (See page 164)

Pursuant to the PE REIT II charter, and, with respect to PECO, as a result of the structure of the transaction, no dissenters’ or appraisal rights or rights of objecting stockholders will be available with respect to the mergers or the other transactions contemplated by the merger agreement.

Conditions to Completion of the Mergers (See page 181)

A number of conditions must be satisfied or waived, where legally permissible, before the mergers can be consummated. These include, among others:

approval by PE REIT II stockholders of the mergers and the other transactions contemplated by the merger agreement (except that the approval of the PECO charter amendment by the PE REIT II stockholders is not a condition to the closing of the mergers);
approval by PECO stockholders of the mergers and the other transactions contemplated by the merger agreement, including the PECO charter amendment;
the receipt by PECO of certain written consents from third parties previously agreed among the parties;
declaration of effectiveness of the Form S-4 registration statement, of which this joint proxy statement/prospectus is a part, and the absence of any stop order suspending the effectiveness of such Form S-4 and any threat by the SEC to do so, or any commencement or threat of any proceeding to that effect; and
truth and accuracy of the representations and warranties of each party made in the merger agreement as of the closing, subject to certain materiality standards.

Neither PECO nor PE REIT II can give any assurance as to when or if all of the conditions to the consummation of the mergers will be satisfied or waived or that the mergers will occur.

See “The Merger Agreement—Conditions to Completion of the Mergers” beginning on page 181 for more information.

Regulatory Approvals Required for the Mergers (See page 140)

PECO and PE REIT II are not aware of any material federal or state regulatory requirements that must be complied with, or regulatory approvals that must be obtained, in connection with the mergers or the other transactions contemplated by the merger agreement.

PE REIT II Go Shop; Acquisition Proposals (See page 170)

Until 11:59 p.m. (Eastern Time) on August 15, 2018 (the “go shop period end time”), under certain specified circumstances, the acquired companies and their respective representatives had the right to (i) initiate, solicit or knowingly facilitate, encourage or assist any inquiry or the making of any proposal or offer that constitutes, or would reasonably be expected to lead to, a Competing Proposal (as defined in “The Merger Agreement—Covenants and Agreements—No Solicitation and Change in Recommendation with Competing Proposal”), including by way of contacting third parties and providing non-public information pursuant to acceptable confidentiality agreements, (ii) engage in and continue to discuss and negotiate regarding such proposals, inquiries or offers, (iii) enter into any contract (including any letter of intent or agreement in principle) with respect to a Competing Proposal, (iv) grant any waiver, amendment or release under any standstill or confidentiality agreement to the extent, and only for so long as necessary to allow the counterparty to make a Competing Proposal or inquire, negotiate, evaluate, propose or make an offer that would be reasonably likely to lead to a Competing Proposal prior to the go shop period end time, and (v) disclose to PE REIT II stockholders certain information required to be disclosed under applicable law (provided, that in certain circumstances, such disclosure may constitute a PE REIT II Adverse Recommendation Change). In accordance with the terms of the merger agreement, following the execution of the merger agreement, Morgan Stanley, at the direction of the PE REIT II Special Committee, began soliciting inquiries and proposals from third parties. Prior to the go shop period end time, Morgan Stanley contacted 35 third parties, two of which executed confidentiality agreements with PE REIT II. None of the third parties contacted by Morgan Stanley provided PE REIT II with a proposal or offer regarding an alternative acquisition proposal.

No Solicitation and Change in Recommendation with Competing Proposal (See page 171)

Under the merger agreement, from and after the go shop period end time, PE REIT II has agreed not to, and to cause its subsidiaries not to, directly or indirectly: (i) solicit, initiate or knowingly facilitate, encourage or assist any inquiry or the making of any proposal or offer that constitutes, or would reasonably be expected to lead to, a Competing Proposal, (ii) engage in, continue or otherwise participate in any discussions or negotiations regarding any proposal or offer that constitutes, or would

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reasonably be expected to lead to, a Competing Proposal, or furnish to any other person or entity information or afford to any other person or entity access to the business, properties, assets or personnel of the acquired companies, in each case, in connection with, or for the purpose of knowingly encouraging, facilitating or assisting, a Competing Proposal, (iii) enter into any contract (including any letter of intent or agreement in principle) with respect to a Competing Proposal, (iv) grant any waiver, amendment or release under any standstill or confidentiality agreement or any takeover statute (provided, that notwithstanding anything contained in the merger agreement to the contrary, PE REIT II may waive any provision that prohibits a confidential proposal being made to the PE REIT II Special Committee or the PE REIT II Board), or (v) otherwise knowingly facilitate any effort or attempt to make a Competing Proposal.

However, prior to the approval of the company merger by the PE REIT II stockholders, PE REIT II may, under certain specified circumstances, engage in discussions or negotiations with and provide non-public information regarding itself to a third party making an unsolicited, written Competing Proposal. Under the merger agreement, PE REIT II is required to notify PECO promptly if it receives any inquiry or any request for negotiation regarding a Competing Proposal and must provide to PECO a copy of any Competing Proposal (including a copy of any acquisition agreement and any related transaction documents and financing commitments, if any, and any subsequence amendments) and a written summary of any other material terms of any Competing Proposal not made in writing.

Before the approval of the company merger by the stockholders of PE REIT II, the PE REIT II Board may, under certain specified circumstances, withdraw its recommendation of the company merger and terminate the merger agreement to enter into an alternative acquisition agreement with respect to a Superior Proposal if the PE REIT II Special Committee and the PE REIT II Board determine in good faith, after consultation with outside legal counsel, that failure to take such action would be inconsistent with the directors’ duties under applicable law.

For more information regarding the limitations on PE REIT II, the PE REIT II Board and the PE REIT II Special Committee to consider other proposals, see “The Merger Agreement—Covenants and Agreements—No Solicitation and Change in Recommendation with Competing Proposal” beginning on page 171.

Change in Recommendation with Intervening Events (See page 174)

In addition, each of the PE REIT II Board and the PECO Board may change its recommendation to stockholders in the event or occurrence of a material event, circumstance, change or development that was not known to the applicable board of directors prior to the execution of the merger agreement (other than with respect to a Competing Proposal, as discussed in the immediately preceding section above). However, in the event of such a change in recommendation, the applicable board of directors is still obligated under the merger agreement to cause the approval of the mergers (and, in the case of PECO, to the extent permitted under Maryland law, the PECO charter amendment) to be taken to a vote of its stockholders at its annual meeting.

For more information regarding the limitations on PECO, the PECO Board, PE REIT II, the PE REIT II Board and the PE REIT II Special Committee in connection with certain intervening events, see “The Merger Agreement—Covenants and Agreements—Change in Recommendation with Intervening Events” beginning on page 174.

Termination of the Merger Agreement (See page 182)

The merger agreement may be terminated at any time by the mutual consent of the PECO parties and the PE REIT II parties in a written instrument, even after receipt of the PE REIT II merger approval or the PECO stockholder approval.

In addition, the merger agreement may also be terminated prior to the effective time of the company merger by either PECO or PE REIT II under the following conditions, each subject to certain exceptions:

there has been a breach by the other party of any representation, warranty or covenant set forth in the merger agreement, which causes a condition of the merger agreement not to be satisfied (and such breach is not curable prior to the Outside Date or, if curable, not cured within the required timeline) (provided that the terminating party is not then in material breach of any representation, warranty, covenant or agreement set forth in the merger agreement);
the mergers are not consummated by the Outside Date;
a governmental entity has issued a final, non-appealable judgment permanently restraining, enjoining or otherwise prohibiting the consummation of the mergers or the other transactions contemplated by the merger agreement;
the holders of PE REIT II common stock do not approve the company merger and the other transactions contemplated by the merger agreement; or

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the holders of PECO common stock do not approve the PECO charter amendment, the company merger and the other transactions contemplated by the merger agreement.

The merger agreement may also be terminated by PECO if, prior to the PE REIT II merger approval by the PE REIT II stockholders, the PE REIT II Board:

fails to recommend to the PE REIT II stockholders that they approve the company merger (the “PE REIT II Board recommendation”) or fails to include the PE REIT II Board recommendation in this joint proxy statement/prospectus;
changes, qualifies, withholds, withdraws or modifies, or publicly proposes to change, qualify, withhold, withdraw or, in a manner adverse to PECO, modify, the PE REIT II Board recommendation;
takes any formal action or makes any recommendation or public statement or other disclosure in connection with a tender offer or exchange offer other than as provided in the merger agreement;
adopts, approves or recommends, or publicly proposes to approve or recommend to the PE REIT II stockholders a Competing Proposal; or
fails to make or reaffirm the PE REIT II Board recommendation within five business days following PE REIT II’s written request to do so following PE REIT II’s or its representatives’ receipt of a Competing Proposal or any material change thereto.

The merger agreement may also be terminated by PE REIT II if the PECO Board fails to recommend to the PECO stockholders that the PECO stockholder approval be given (the “PECO Board recommendation”) or fails to include the PECO Board recommendation in this joint proxy statement/prospectus, or changes, qualifies, withholds, withdraws or modifies or publicly proposes to change, qualify, withhold, withdraw or, in any manner adverse to PE REIT II, modify, the PECO Board recommendation:

For more information regarding the rights of PECO and PE REIT II to terminate the merger agreement, see “The Merger Agreement—Termination of the Merger Agreement” beginning on page 182.

Termination Fee and Expenses (See page 183)

Generally, all fees and expenses incurred in connection with the mergers and the other transactions contemplated by the merger agreement will be paid by the party incurring those fees and expenses (other than expenses incurred to obtain the Debt Consents and Amendments, and certain financial printer escrow agreement expenses that will be borne 50% by each party). Additionally, upon termination of the merger agreement in certain circumstances, the merger agreement provides for the payment of a termination fee to PECO by PE REIT II of $15,850,000 (in the case of termination in connection with the go shop provisions of the merger agreement) or $31,700,000 (in connection with termination under certain other circumstances). The merger agreement also provides for the payment of a termination fee to PE REIT II by PECO of $75,620,000 upon termination of the merger agreement in certain circumstances.

See “The Merger Agreement—Termination of the Merger Agreement—Termination Payments” beginning on page 183 for more information.

Material U.S. Federal Income Tax Consequences of the Company Merger (See page 141)

PECO and PE REIT II intend that the company merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. The closing of the mergers is conditioned on the receipt by each of PECO and PE REIT II of an opinion from its counsel to the effect that the company merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. Assuming that the company merger qualifies as a reorganization, U.S. holders (as defined below) of shares of PE REIT II common stock generally will not recognize gain or loss as a result of the company merger.

For further discussion of certain U.S. federal income tax consequences of the company merger and the ownership and disposition of the Combined Company common stock, see “The Mergers—U.S. Federal Income Tax Considerations” beginning on page 140.

Holders of shares of PE REIT II common stock should consult their tax advisors to determine the tax consequences to them (including the application and effect of any state, local or non-U.S. income and other tax laws) of the company merger and the ownership and disposition of the Combined Company common stock.

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Accounting Treatment of the Mergers (See page 160)

PECO prepares its financial statements in accordance with U.S. generally accepted accounting principles, which we refer to herein as GAAP. The mergers will be treated as an asset acquisition under GAAP. See “The Merger — Accounting Treatment” beginning on page 160 for more information.

Comparison of Rights of PECO Stockholders and PE REIT II Stockholders (See page 191)

The rights of PE REIT II stockholders are currently governed by and subject to the provisions of the Maryland General Corporation Law (the “MGCL”), and the charter and bylaws of PE REIT II. Upon consummation of the mergers, the rights of the former PE REIT II stockholders who receive shares of PECO common stock in the company merger will continue to be governed by the MGCL and will be governed by the PECO charter and bylaws (as amended by the PECO charter amendment and as they may be further amended from time to time in accordance with the MGCL), rather than the charter and bylaws of PE REIT II. In particular, as is typical for REITs to protect their status as a REIT, the PECO charter provides that, with limited exceptions, no person may beneficially own, or be deemed to beneficially own by virtue of the attribution provisions of the Code, more than 9.8% in value of the outstanding shares of PECO’s capital stock or 9.8%, in value or in number of shares, whichever is more restrictive, of the aggregate of the outstanding shares of PECO common stock.

For a summary of certain differences between the rights of PECO stockholders and PE REIT II stockholders, see “Comparison of Rights of the PECO Stockholders and the PE REIT II Stockholders” beginning on page 191.

Selected Historical Financial Information of PECO (See page F-13)

Presented below is the selected historical consolidated financial data of PECO as of and for the periods indicated. The selected historical consolidated financial data of PECO for each of the fiscal years ended December 31, 2017, 2016, 2015, 2014, and 2013 has been derived from PECO’s historical audited consolidated financial statements, which are included in this joint proxy statement/prospectus beginning on page F-13. The selected historical financial information for the six months ended June 30, 2018, has been derived from PECO’s unaudited interim consolidated financial statements, which are included in this joint proxy statement/prospectus.

You should read the historical financial information together with the financial statements included in this joint proxy statement/prospectus and their accompanying notes beginning on page F-18 and PECO management’s discussion and analysis of operations and financial condition of PECO attached to this joint proxy statement/prospectus as Annex E.

 
As of and for
the six
months ended
As of and for the years ended December 31,
(in thousands, except per share amounts)
June 30, 2018
2017(1)
2016
2015
2014
2013
Balance Sheet Data:(2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment in real estate assets at cost
$
3,749,351
 
$
3,751,927
 
$
2,584,005
 
$
2,350,033
 
$
2,201,235
 
$
1,136,074
 
Cash and cash equivalents
 
8,310
 
 
5,716
 
 
8,224
 
 
40,680
 
 
15,649
 
 
460,250
 
Total assets
 
3,452,123
 
 
3,526,082
 
 
2,380,188
 
 
2,226,248
 
 
2,141,196
 
 
1,716,256
 
Debt obligations, net
 
1,838,472
 
 
1,806,998
 
 
1,056,156
 
 
845,515
 
 
640,889
 
 
195,601
 
Operating Data:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
$
207,372
 
$
311,543
 
$
257,730
 
$
242,099
 
$
188,215
 
$
73,165
 
Property operating expenses
 
(35,016
)
 
(53,824
)
 
(41,890
)
 
(38,399
)
 
(32,919
)
 
(11,896
)
Real estate tax expenses
 
(26,473
)
 
(43,456
)
 
(36,627
)
 
(35,285
)
 
(25,262
)
 
(9,658
)
General and administrative expenses
 
(23,911
)
 
(36,348
)
 
(31,804
)
 
(15,829
)
 
(8,632
)
 
(4,346
)
Interest expense, net
 
(33,830
)
 
(45,661
)
 
(32,458
)
 
(32,390
)
 
(20,360
)
 
(10,511
)
Net (loss) income
 
(15,913
)
 
(41,718
)
 
9,043
 
 
13,561
 
 
(22,635
)
 
(12,350
)
Net (loss) income attributable to stockholders
 
(12,951
)
 
(38,391
)
 
8,932
 
 
13,360
 
 
(22,635
)
 
(12,404
)
Cash Flow Data:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flows provided by operating activities
$
77,812
 
$
108,861
 
$
103,076
 
$
106,073
 
$
75,671
 
$
18,540
 
Cash flows used in investing activities(3)
 
(13,268
)
 
(640,742
)
 
(191,328
)
 
(110,744
)
 
(718,828
)
 
(767,413
)
Cash flows (used in) provided by financing activities
 
(66,951
)
 
509,380
 
 
90,685
 
 
29,732
 
 
195,500
 
 
1,210,275
 
Per Share Data:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net (loss) income per share—basic and diluted
$
(0.07
)
$
(0.21
)
$
0.05
 
$
0.07
 
$
(0.13
)
$
(0.18
)
Common stock distributions declared
 
0.34
 
 
0.67
 
 
0.67
 
 
0.67
 
 
0.67
 
 
0.67
 
Weighted-average shares outstanding—basic
 
185,171
 
 
183,784
 
 
183,876
 
 
183,678
 
 
179,280
 
 
70,227
 
Weighted-average shares outstanding—diluted
 
229,624
 
 
196,497
 
 
186,665
 
 
186,394
 
 
179,280
 
 
70,227
 
(1) Includes the impact of the PELP transaction

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(2) Certain prior period balance sheet amounts have been restated to conform with PECO’s adoption in 2016 of Accounting Standards Update (“ASU”) 2015-03, Simplifying the Presentation of Debt Issuance Costs.
(3) Certain prior period cash flows used in investing activities amounts have been restated to conform with PECO’s adoption in 2018 of ASU 2016-18, Statement of Cash Flows (Topic 230).

Selected Historical Financial Information of PE REIT II (See page F-70)

Presented below is the selected historical consolidated financial data of PE REIT II as of and for the periods indicated. The selected historical consolidated financial data of PE REIT II for each of the fiscal years ended December 31, 2017, 2016, 2015, and 2014, has been derived from PE REIT II’s historical audited consolidated financial statements, which are included in this joint proxy statement/prospectus beginning on page F-70. The selected historical financial information for the six months ended June 30, 2018 has been derived from PE REIT II’s unaudited interim consolidated financial statements, which are included in this joint proxy statement/prospectus.

You should read the historical financial information together with the financial statements included in this joint proxy statement/prospectus and their accompanying notes beginning on page F-75 and PE REIT II management’s discussion and analysis of operations and financial condition of PE REIT II attached to this joint proxy statement/prospectus as Annex F.

 
As of and for
the six
months ended
As of and for the years ended December 31,
(in thousands, except per share amounts)
June 30, 2018
2017
2016
2015
2014
Balance Sheet Data:(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment in real estate assets at cost
$
1,765,771
 
$
1,741,536
 
$
1,510,160
 
$
1,066,509
 
$
341,554
 
Cash and cash equivalents
 
3,440
 
 
1,435
 
 
8,259
 
 
17,359
 
 
179,117
 
Total assets
 
1,644,725
 
 
1,652,317
 
 
1,486,527
 
 
1,079,713
 
 
524,091
 
Debt obligations, net
 
802,021
 
 
775,275
 
 
533,215
 
 
81,305
 
 
27,383
 
Operating Data:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
$
87,866
 
$
162,577
 
$
129,796
 
$
60,413
 
$
8,445
 
Property operating expenses
 
(14,158
)
 
(27,270
)
 
(22,226
)
 
(10,756
)
 
(1,651
)
Real estate tax expenses
 
(14,003
)
 
(25,154
)
 
(20,157
)
 
(9,592
)
 
(966
)
General and administrative expenses
 
(9,031
)
 
(19,352
)
 
(18,139
)
 
(3,744
)
 
(1,606
)
Interest expense, net
 
(15,034
)
 
(22,494
)
 
(10,970
)
 
(3,990
)
 
(1,206
)
Net loss
 
(2,872
)
 
(9,531
)
 
(5,497
)
 
(6,698
)
 
(5,833
)
Cash Flow Data:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flows provided by (used in) operating activities
$
29,474
 
$
50,308
 
$
45,353
 
$
16,618
 
$
(1,311
)
Cash flows used in investing activities(2)
 
(19,406
)
 
(197,535
)
 
(360,548
)
 
(617,941
)
 
(296,089
)
Cash flows provided by financing activities
 
(8,064
)
 
141,956
 
 
307,775
 
 
440,478
 
 
476,653
 
Per Share Data:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss per share—basic and diluted
$
(0.06
)
$
(0.20
)
$
(0.12
)
$
(0.18
)
$
(0.57
)
Common distributions declared
 
0.81
 
 
1.62
 
 
1.62
 
 
1.62
 
 
1.49
 
Weighted-average shares outstanding—basic
 
46,726
 
 
46,544
 
 
46,228
 
 
36,538
 
 
10,302
 
Weighted-average shares outstanding—diluted
 
46,726
 
 
46,544
 
 
46,230
 
 
36,538
 
 
10,302
 
(1) Certain prior period balance sheet amounts have been restated to conform with PE REIT II’s adoption in 2016 of ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs.
(2) Certain prior period cash flows used in investing activities amounts have been restated to conform with PE REIT II’s adoption in 2018 of ASU 2016-18, Statement of Cash Flows (Topic 230).

Selected Unaudited Pro Forma Consolidated Financial Information (See page F-3)

The following tables set forth selected unaudited pro forma consolidated financial information. The pro forma consolidated financial information combines the historical financial statements of PECO and PE REIT II after giving effect to the mergers using the acquisition method of accounting and preliminary estimates, assumptions and pro forma adjustments as described below and in the accompanying notes to the unaudited pro forma consolidated financial information.

The unaudited pro forma consolidated financial information should be read in conjunction with PECO’s historical consolidated financial statements and PE REIT II’s historical consolidated financial statements, including the notes thereto, which are included herein. The selected unaudited pro forma combined consolidated financial information has been derived from and should be read in conjunction with the unaudited pro forma consolidated financial information and accompanying notes included in this joint proxy statement/prospectus beginning on page F-7.

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The unaudited pro forma consolidated financial information is presented for illustrative purposes only and does not purport to be indicative of the results that would actually have occurred if the transactions described above had occurred as presented in such statements or that may be obtained in the future. In addition, future results may vary significantly from the results reflected in such statements.

 
For the Six Months
Ended June 30, 2018
For the Year Ended
December 31, 2017
Statements of operations data:
 
 
 
 
 
 
Total revenue
$
282,869
 
$
546,970
 
Net loss
 
(29,752
)
 
(28,936
)
Net loss attributable to stockholders
 
(25,682
)
 
(24,961
)
Net loss per share—basic and diluted
 
(0.09
)
 
(0.09
)
 
For the Six Months
Ended June 30, 2018
Balance sheet data:
 
 
 
Total investment in real estate assets, net
$
5,152,192
 
Cash and cash equivalents
 
11,750
 
Total assets
 
5,410,001
 
Debt obligations, net
 
2,666,479
 
Total liabilities
 
2,978,535
 
Total equity
 
2,431,466
 

Unaudited Comparative Per Share Information (See page F-13)

The following table sets forth for the year ended December 31, 2017 and the six months ended June 30, 2018, selected per share information for PECO and PE REIT II common stock on an historical basis and for the Combined Company on a pro forma basis after giving effect to the mergers accounted for as an asset acquisition. The information in the table is unaudited. You should read the tables below together with the historical consolidated financial statements and related notes of PECO and PE REIT II, which are included in this joint proxy statement/prospectus beginning on page F-13 and F-70, respectively.

The pro forma Combined Company net earnings per share for the six months ended June 30, 2018 and the year ended December 31, 2017 includes the combined net earnings attributable to the common stockholders of PECO and PE REIT II on a pro forma basis as if the transaction was consummated on January 1, 2017 and, with respect to net book value per share of common stock, on June 30, 2018.

The PECO pro forma combined per share data is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the transactions had been consummated at the beginning of the earliest period presented, nor is it necessarily indicative of future operating results or financial position. The pro forma adjustments are estimates based upon information and assumptions available at the time of the filing of this proxy statement/prospectus.

The PE REIT II pro forma equivalent information shows the effect of the mergers from the perspective of an owner of PE REIT II common stock and the information was computed by multiplying the PECO pro forma combined information by the exchange ratio of 2.04.

 
PECO
PE REIT II
 
Historical
Pro Forma
Combined
Historical
Pro Forma
Equivalent
For the year ended December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
Net (loss) income per share—basic and diluted
$
(0.21
)
$
(0.09
)
$
(0.20
)
$
(0.18
)
Common stock distributions declared
 
0.67
 
 
0.67
 
 
1.625
 
 
1.367
 
For the six months ended June 30, 2018
 
 
 
 
 
 
 
 
 
 
 
 
Net loss per share—basic and diluted
$
(0.07
)
$
(0.09
)
$
(0.06
)
$
(0.18
)
Common stock distributions declared
 
0.335
 
 
0.1675
 
 
0.8125
 
 
0.342
 
As of June 30, 2018
 
 
 
 
 
 
 
 
 
 
 
 
Estimated net asset value per share
$
11.05
 
$
11.05
 
$
22.80
 
$
22.54
 

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Comparative PECO and PE REIT II Market Price and Dividend Information

PECO’s Market Price and Dividend Data

 
Distributions
Declared Per
Share
Annualized Rate
(at $10.00 per
share)
Amount per
$1,000 Invested
2018
 
 
 
 
 
 
 
 
 
Second Quarter
$
0.1675
 
 
6.70
%
$
16.75
 
First Quarter
$
0.1675
 
 
6.70
%
$
16.75
 
2017
 
 
 
 
 
 
 
 
 
Fourth Quarter
$
0.1675
 
 
6.70
%
$
16.75
 
Third Quarter
$
0.1675
 
 
6.70
%
$
16.75
 
Second Quarter
$
0.1675
 
 
6.70
%
$
16.75
 
First Quarter
$
0.1675
 
 
6.70
%
$
16.75
 
2016
 
 
 
 
 
 
 
 
 
Fourth Quarter
$
0.1675
 
 
6.70
%
$
16.75
 
Third Quarter
$
0.1675
 
 
6.70
%
$
16.75
 
Second Quarter
$
0.1675
 
 
6.70
%
$
16.75
 
First Quarter
$
0.1675
 
 
6.70
%
$
16.75
 

There is no established public trading market for shares of PECO common stock. At the close of business on August 28, 2018, the record date for PECO’s annual meeting, there were approximately 40,091 holders of record of PECO common stock. The following table sets forth the distributions declared on PECO common stock for the first and second quarters of 2018 and for the 2017 and 2016 fiscal years, which correspond to PECO’s respective quarterly fiscal periods for financial reporting purposes.

PE REIT II’s Market Price and Dividend Data

There is no established public trading market for shares of PE REIT II common stock. At the close of business on August 28, 2018, the record date for PE REIT II’s annual meeting, there were approximately 24,480 holders of record of PE REIT II common stock. The following table sets forth the distributions declared on PE REIT II common stock for the first and second quarters of 2018 and for the 2017 and 2016 fiscal years, which correspond to PE REIT II’s respective quarterly fiscal periods for financial reporting purposes.

 
Distributions
Declared Per
Share
Annualized Rate
(at $25.00 per
share)
Amount per
$1,000 Invested
2018
 
 
 
 
 
 
 
 
 
Second Quarter
$
0.40625
 
 
6.50
%
$
16.25
 
First Quarter
$
0.40625
 
 
6.50
%
$
16.25
 
2017
 
 
 
 
 
 
 
 
 
Fourth Quarter
$
0.40625
 
 
6.50
%
$
16.25
 
Third Quarter
$
0.40625
 
 
6.50
%
$
16.25
 
Second Quarter
$
0.40625
 
 
6.50
%
$
16.25
 
First Quarter
$
0.40625
 
 
6.50
%
$
16.25
 
2016
 
 
 
 
 
 
 
 
 
Fourth Quarter
$
0.40625
 
 
6.50
%
$
16.25
 
Third Quarter
$
0.40625
 
 
6.50
%
$
16.25
 
Second Quarter
$
0.40625
 
 
6.50
%
$
16.25
 
First Quarter
$
0.40625
 
 
6.50
%
$
16.25
 

If the Combined Company continues to pay quarterly cash dividends at the rate of $0.1675 per share, after giving effect to the exchange ratio of 2.04, this dividend, from the perspective of a holder of PE REIT II common stock, would be approximately 15.9% less than PE REIT II’s most recent quarterly dividend of $0.40625 per share.

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RISK FACTORS

In addition to the other information included in this joint proxy statement/prospectus, including the matters addressed in the section entitled “Cautionary Statement Concerning Forward-Looking Statements,” whether you are a PECO stockholder or a PE REIT II stockholder, you should carefully consider the following risks before deciding how to vote your shares of common stock of PECO and/or PE REIT II. In addition, you should read and consider the risks associated with each of the businesses of PECO and PE REIT II because these risks will also affect the Combined Company. These risks can be found in the respective Annual Reports on Form 10-K for the year ended December 31, 2017 and subsequent Quarterly Reports on Form 10-Q of PECO and PE REIT II. You should also read and consider the other information in this joint proxy statement/prospectus, including the Annexes. See “Where You Can Find More Information” beginning on page 199.

Risks Related to the Mergers

The exchange ratio will not be adjusted, other than as expressly contemplated in the merger agreement.

Upon the consummation of the company merger, each outstanding share of PE REIT II common stock, and each fraction thereof, will be converted automatically into the right to receive 2.04 shares of PECO common stock (or with respect to any fractional share of PE REIT II common stock, that fraction of PECO common stock consistent with the exchange ratio). The exchange ratio of 2.04 will not be adjusted, other than as expressly contemplated in the merger agreement. Except as expressly contemplated in the merger agreement, no change in the exchange ratio will be made for any reason, including the following:

changes in the respective businesses, operations, assets, liabilities and prospects of PECO and PE REIT II;
changes in the estimated value per share of either the shares of PECO common stock or PE REIT II common stock;
interest rates, general market and economic conditions and other factors generally affecting the businesses of PECO and PE REIT II;
federal, state and local legislation, governmental regulation and legal developments in the businesses in which PECO and PE REIT II operate; and
other factors beyond the control of PECO and PE REIT II, including those described or referred to elsewhere in this “Risk Factors” section.

PECO and PE REIT II stockholders will be diluted by the mergers.

The mergers will dilute the ownership position of PECO stockholders and result in PE REIT II stockholders having an ownership stake in the Combined Company that is smaller than their current stake in PE REIT II. Upon completion of the mergers, we estimate that continuing PECO stockholders will own approximately 71% of the issued and outstanding shares of the Combined Company on a fully diluted basis (determined as if each PECO OP unit were exchanged for one share of PECO common stock), and former PE REIT II stockholders will own approximately 29% of the issued and outstanding shares of the Combined Company on a fully diluted basis (determined as if each PECO OP unit were exchanged for one share of PECO common stock). Consequently, PECO stockholders and PE REIT II stockholders, as a general matter, will have less influence over the management and policies of the Combined Company after the effective time of the company merger than each currently exercises over the management and policies of PECO and/or PE REIT II, as applicable.

Completion of the mergers is subject to many conditions and if these conditions are not satisfied or waived, the mergers will not be completed, which could result in the requirement that PECO or PE REIT II pay certain termination fees.

The merger agreement is subject to many conditions which must be satisfied or waived in order to complete the mergers. The mutual conditions of the parties include, among others: (i) the approval by the PE REIT II stockholders of the company merger; (ii) the approval by PECO stockholders of the PECO charter amendment and the company merger; (iii) the absence of any law, order or injunction that would prohibit, restrain, enjoin or make illegal the consummation of the mergers or any judgment, order, decree, award, ruling, decision, verdict, subpoena, injunction or settlement entered, issued, made or rendered by, or any consent agreement, memorandum of understanding or other contract with, any governmental entity (whether temporary, preliminary or permanent) of a court of competent jurisdiction in effect preventing, restraining or enjoining the consummation of the mergers; and (iv) the effectiveness of the registration statement on Form S-4 to be filed by PECO for purposes of registering the PECO common stock to be issued in connection with the company merger. In addition, each party’s obligation to consummate the mergers is subject to certain other conditions, including, among others: (a) the accuracy of the other party’s representations and warranties (subject to customary materiality qualifiers and other customary exceptions); (b) the other party’s compliance with its covenants and agreements contained in the merger agreement (subject to customary materiality qualifiers);

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(c) the absence of any change, event, circumstance or development arising during the period from the date of the merger agreement until the effective time of the company merger that has had or is reasonably likely to have a material adverse effect on the other party; (d) the receipt of an opinion of counsel of the other party to the effect that such party has been organized and has operated in conformity with the requirements for qualification and taxation as a REIT; and (e) the receipt of an opinion of counsel of each party to the effect that the company merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. In addition, PECO’s obligation to consummate the mergers is also subject to certain other conditions, including, among others, receipt of reasonable evidence that all applicable lender(s), administrative agents, rating agencies, and/or servicers with respect to certain loan documents have affirmatively consented to the mergers (or waived their right to approve or consent to the mergers) and any amendments and/or modification to certain other loan documents. For a more complete summary of the conditions that must be satisfied or waived prior to completion of the mergers, see “The Merger Agreement—Conditions to Completion of the Mergers” beginning on page 181.

There can be no assurance that the conditions to closing of the mergers will be satisfied or waived or that the mergers will be completed. Failure to consummate the mergers may adversely affect PECO’s or PE REIT II’s results of operations and business prospects for the following reasons, among others: (i) each of PECO and PE REIT II will incur certain transaction costs, regardless of whether the proposed mergers close, which could adversely affect each company’s financial condition, results of operations and ability to make distributions to its stockholders; and (ii) the mergers, whether or not they close, will divert the attention of certain management and other key employees of PECO and PE REIT II from ongoing business activities, including the pursuit of other opportunities that could be beneficial to PECO or PE REIT II, respectively. In addition, PECO or PE REIT II may terminate the merger agreement under certain circumstances, including, among other reasons, if the mergers are not completed by the Outside Date. If the merger agreement is terminated under certain circumstances specified in the merger agreement, PECO may be required to pay PE REIT II a termination fee of $75,620,000, and PE REIT II may be required to pay PECO a termination fee of $15,850,000, in connection with the go shop process, or of $31,700,000 otherwise. If the mergers are not consummated, the ongoing businesses of PECO and PE REIT II could be adversely affected. See “The Merger Agreement—Termination of the Merger Agreement” beginning on page 182.

The limited partners of PECO OP will vote on a proposal to approve the mergers, which may reduce the likelihood of the mergers being consummated, even if the company merger has been approved by the stockholders of PECO and PE REIT II.

The merger agreement provides that PECO will use its reasonable best efforts to obtain the approval of the limited partners of PECO OP to the mergers. To obtain such approval of the limited partners of PECO OP, PECO must obtain the affirmative vote of a majority of the votes cast by the holders of PECO OP units (including PECO and its subsidiaries) entitled to vote on the mergers. For purposes of that vote, PECO is not entitled to vote its PECO OP units and instead is deemed to have cast its votes in proportion to the manner in which all outstanding shares of PECO common stock were voted in the PECO annual meeting for the proposal to approve the company merger and the other transactions contemplated by the merger agreement.

The limited partners of PECO OP may have interests in the mergers that differ from those of the PECO stockholders, and there can be no assurance that PECO will be able to obtain the approval of the limited partners of PECO OP to the mergers. As a result, if a sufficient number of limited partners of PECO OP oppose the mergers, the consummation of the mergers may be materially delayed and/or prevented from occurring, even if the PECO stockholder approval and the PE REIT merger approval have been obtained.

Failure to complete the mergers could negatively impact the future business and financial results of both PECO and PE REIT II.

If the mergers are not completed, the ongoing businesses of PECO and PE REIT II could be adversely affected and each of PECO and PE REIT II will be subject to a variety of risks associated with the failure to complete the mergers, including the following:

PE REIT II being required, under certain circumstances, to pay to PECO a termination fee of $15,850,000, in connection with the go shop process, or of $31,700,000 otherwise;
PECO being required, under certain circumstances, to pay to PE REIT II a termination fee of $75,620,000;
PECO and/or PE REIT II having to pay certain costs relating to the proposed mergers, such as legal, accounting, financial advisor, filing, printing and mailing fees; and
the diversion of PECO and PE REIT II management focus and resources from operational matters and other strategic opportunities while working to implement the mergers.

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If the mergers are not completed, these risks could materially affect the business and financial results of both PECO and PE REIT II.

The pendency of the mergers could adversely affect the business and operations of PECO and PE REIT II.

Prior to the effective time of the company merger, some customers, prospective customers or vendors of each of PECO and PE REIT II may delay or defer decisions, which could negatively affect the revenues, earnings, cash flows and expenses of PECO and PE REIT II, regardless of whether the mergers are completed. Similarly, current and prospective employees of PECO may experience uncertainty about their future roles with the Combined Company following the mergers, which may materially adversely affect the ability of PECO to attract and retain key personnel during the pendency of the mergers. In addition, due to operating restrictions in the merger agreement, each of PECO and PE REIT II may be unable, during the pendency of the mergers, to pursue strategic transactions, undertake significant capital projects, undertake certain significant financing transactions and otherwise pursue other actions, even if such actions would prove beneficial.

The merger agreement contains provisions that could discourage a potential competing acquirer of PE REIT II after the go shop period end time or could result in a competing acquisition proposal being at a lower price than it might otherwise be.

The merger agreement contains provisions that, subject to limited exceptions necessary to comply with the duties of the PE REIT II Board and the PE REIT II Special Committee, restrict the ability of PE REIT II to, after the go shop period end time, solicit, initiate or knowingly facilitate any third party proposals to acquire beneficial ownership of at least 20% of the assets of, equity interest in, or businesses of, PE REIT II. Prior to receiving PE REIT II merger approval, PE REIT II may negotiate with a third party after receiving an unsolicited written proposal if the PE REIT II Board determines in good faith, after consultation with its financial advisors and outside legal counsel, that the unsolicited proposal would reasonably be likely to result in a transaction that is more favorable to the PE REIT II stockholders from a financial point of view than the mergers. Once a third party proposal is received, PE REIT II must notify PECO within 24 hours following receipt of the proposal and keep PECO informed of the status and terms of the proposal and associated negotiations. In response to such a proposal, PE REIT II may, under certain circumstances, withdraw or modify its recommendation to PE REIT II stockholders with respect to the mergers, and enter into an agreement to consummate a competing transaction with a third party, if each of the PE REIT II Board and the PE REIT II Special Committee determines in good faith, after consultation with their financial advisors and outside legal counsel, that the competing proposal is more favorable to PE REIT II stockholders from a financial point of view and that failure to take such action would be inconsistent with its duties under applicable law, and PE REIT II pays the $15,850,000 termination fee (in the case of a termination in connection with the “go shop” process) or $31,700,000 (in the case of termination in certain other circumstances by PE REIT II) to PECO. See “The Merger Agreement—Covenants and Agreements—No Solicitation and Change in Recommendation with Competing Proposal” beginning on page 171 and “The Merger Agreement—Termination of the Merger Agreement” beginning on page 182.

These provisions could discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of PE REIT II from considering or proposing such an acquisition, even if the potential competing acquirer was prepared to pay consideration with a higher per share value than the value proposed to be received or realized in the mergers, or might result in a potential competing acquirer proposing to pay a lower per share value than it might otherwise have proposed to pay because of the added expense of the termination fee that may become payable in certain circumstances under the merger agreement.

The merger agreement contains provisions that grant the PE REIT II Board and the PECO Board a general ability to terminate the merger agreement based on the exercise of the directors’ duties.

Either PE REIT II or PECO may terminate the merger agreement, subject to the terms thereof, in response to a material event, circumstance, change or development that was not known to the applicable entity’s board of directors prior to the execution of the merger agreement (or if known, the consequences of which were not known or reasonably foreseeable), which event, circumstance, change or development, or any material consequence thereof, becomes known to the applicable entity’s board of directors prior to the effective time of the merger if the applicable entity’s board of directors determines in good faith, after consultation with its outside legal counsel, that failure to change its recommendation with respect to the mergers (and, in the case of the PECO Board, with respect to the PECO charter amendment) would be inconsistent with the directors’ duties under applicable law. If the merger is not completed, the ongoing businesses of PE REIT II and PECO could be adversely affected.

The pendency of the mergers could discourage a potential acquirer of PECO or could result in an offer being at a lower purchase multiple than it might otherwise be.

A potential acquirer that might have interest in acquiring PECO or all or substantially all of PECO’s assets may be discouraged from considering, proposing or otherwise pursuing such an acquisition because of the pendency of the mergers and the transactions contemplated by the merger agreement. While the merger agreement permits PECO to agree to a merger,

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consolidation or recapitalization in a manner that would not materially and adversely affect the economic benefits of the mergers to the PE REIT II stockholders or materially delay or impair the ability of PECO and PECO OP to consummate the mergers, a potential acquirer may be discouraged by the obligation to be bound by the terms of the merger agreement in connection with a potential acquisition of PECO. A potential acquirer that might be interested in acquiring PECO may not be interested during the pendency of the mergers to pursue an acquisition of PECO given the increased regulatory issues associated with the mergers (and the other transactions contemplated by the merger agreement) and/or other obligations and issues related to acquiring the larger Combined Company, instead of PECO as a standalone business. A potential acquirer may also offer a lower per share value to the PECO stockholders than it might otherwise have proposed to pay because of the added risks surrounding the present transaction and the obligation to be bound by the terms of the merger agreement if an acquisition of PECO were completed prior to the closing of the mergers.

If the mergers are not consummated by the Outside Date, either PECO or PE REIT II may terminate the merger agreement.

Either PECO or PE REIT II may terminate the merger agreement if the mergers have not been consummated by the Outside Date. However, this termination right will not be available to a party if that party failed to fulfill its obligations under the merger agreement and that failure was a principal cause of, or resulted in, the failure to consummate the mergers.

Some of the directors of PE REIT II have interests in the mergers that are different from, or in addition to, those of the other PE REIT II stockholders.

Some of the directors of PE REIT II have arrangements that provide them with interests in the mergers that are different from, or in addition to, those of the PE REIT II stockholders, generally. These interests include, among other things, continued service as a director of the Combined Company. These interests, among other things, may influence or may have influenced the directors of PE REIT II to support or approve the company merger.

The mergers will result in changes to the board of directors of the Combined Company.

Upon completion of the mergers, the composition of the board of directors of the Combined Company will be different than the current PECO Board and the PE REIT II Board. The PECO Board currently consists of five directors and upon the consummation of the mergers, all of the directors of PECO immediately prior to the effective time of the company merger and two independent directors of PE REIT II, David W. Garrison and John A. Strong, are expected to comprise the board of directors of the Combined Company after the effective time of the company merger. Each of Mr. Garrison and Dr. Strong is currently a member of the PE REIT II Board and has been nominated for reelection at the PE REIT II annual meeting. This new composition of the board of directors of the Combined Company may affect the future decisions of the Combined Company.

Risks Related to the Combined Company Following the Mergers

The Combined Company will have substantial indebtedness upon completion of the mergers.

In connection with the mergers, the Combined Company will assume and/or refinance certain indebtedness of PE REIT II and will be subject to risks associated with debt financing, including a risk that the Combined Company’s cash flow could be insufficient to meet required payments on its debt. On June 30, 2018, PECO had indebtedness of $1.8 billion, comprised of $1.3 billion of outstanding unsecured debt, including $46.6 million of outstanding borrowings under its revolving credit facility, a total of $595.7 million of outstanding mortgage debt, and $690,000 of capital leases. After giving effect to the mergers, the Combined Company’s total pro forma consolidated indebtedness will increase. Taking into account PECO’s existing indebtedness, transaction expenses, and the assumption and/or refinancing of indebtedness in the mergers, the Combined Company’s pro forma consolidated indebtedness as of June 30, 2018, after giving effect to the mergers, would be approximately $2.7 billion. The combined indebtedness is comprised of $1.9 billion of outstanding unsecured debt, including $132.0 million of outstanding borrowings under its revolving credit facility and a total of $743.2 million of outstanding mortgage debt, and $690,000 of capital leases. As of June 30, 2018, the latest practicable date before the date of this joint proxy statement/prospectus, PECO had an outstanding balance of $46.6 million for its revolving credit facility, and PE REIT II had an outstanding balance of $85.4 million for its revolving credit facility.

The Combined Company’s indebtedness could have important consequences to holders of its common stock and preferred stock, if any, including PE REIT II stockholders who receive PECO common stock in the mergers, including:

vulnerability of the Combined Company to general adverse economic and industry conditions;
limiting the Combined Company’s ability to obtain additional financing to fund future working capital, capital expenditures and other general corporate requirements;

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requiring the use of a substantial portion of the Combined Company’s cash flow from operations for the payment of principal and interest on its indebtedness, thereby reducing its ability to use its cash flow to fund working capital, acquisitions, capital expenditures and general corporate requirements;
limiting the Combined Company’s flexibility in planning for, or reacting to, changes in its business and its industry; and
putting the Combined Company at a disadvantage compared to its competitors with less indebtedness.

If the Combined Company defaults under a mortgage loan, it will automatically be in default under any other loan that has cross-default provisions, and it may lose the properties securing these loans.

The future results of the Combined Company will suffer if the Combined Company does not effectively manage its expanded operations following the mergers.

Following the mergers, the Combined Company expects to continue to expand its operations through additional acquisitions, some of which may involve