SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

or

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-12002

 

ACADIA REALTY TRUST

(Exact name of registrant in its charter)

 

 

MARYLAND  (State or other jurisdiction of  incorporation or organization)		23-2715194  (I.R.S. Employer  Identification No.)
411 THEODORE FREMD AVENUE, SUITE 300, RYE, NY  (Address of principal executive offices)		10580  (Zip Code)

(914) 288-8100

(Registrant’s telephone number, including area code)

Title of class of registered securities	Trading symbol	Name of exchange on which registered
Common shares of beneficial interest, par value $0.001 per share	AKR	The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES ☒		NO ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

YES ☒		NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer	☒	Accelerated Filer	☐	Emerging Growth Company	☐
Non-accelerated Filer	☐	Smaller Reporting Company	☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes ☐ No ☒

As of October 24, 2023 there were 95,340,680 common shares of beneficial interest, par value $0.001 per share (“Common Shares”), outstanding.

 

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ACADIA REALTY TRUST AND SUBSIDIARIES

FORM 10-Q

INDEX

 

Item No.		Description		Page
		PART I - FINANCIAL INFORMATION
1.		Financial Statements		4
		Condensed Consolidated Balance Sheets (Unaudited) as of September 30, 2023 and December 31, 2022		4
		Condensed Consolidated Statements of Operations (Unaudited) for the Three and Nine Months Ended September 30, 2023 and 2022		5
		Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) for the Three and Nine Months Ended September 30, 2023 and 2022		6
		Condensed Consolidated Statements of Changes in Equity (Unaudited) for the Three and Nine Months Ended September 30, 2023 and 2022		7
		Condensed Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2023 and 2022		9
		Notes to Condensed Consolidated Financial Statements (Unaudited)		11
2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		44
3.		Quantitative and Qualitative Disclosures about Market Risk		59
4.		Controls and Procedures		62
		PART II - OTHER INFORMATION
1.		Legal Proceedings		63
1A.		Risk Factors		63
2.		Unregistered Sales of Equity Securities and Use of Proceeds		63
3.		Defaults Upon Senior Securities		63
4.		Mine Safety Disclosures		63
5.		Other Information		63
6.		Exhibits		64
		Signatures		65

 

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this Quarterly Report on Form 10-Q (this “Report”) of Acadia Realty Trust, a Maryland real estate investment trust, (the “Company”) may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations are generally identifiable by the use of the words such as “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend” or “project,” or the negative thereof, or other variations thereon or comparable terminology. Forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause our actual results and financial performance to be materially different from future results and financial performance expressed or implied by such forward-looking statements, including, but not limited to: (i) macroeconomic conditions, including due to geopolitical conditions and instability, which may lead to a disruption of or lack of access to the capital markets, disruptions and instability in the banking and financial services industries and rising inflation; (ii) our success in implementing our business strategy and our ability to identify, underwrite, finance, consummate and integrate diversifying acquisitions and investments; (iii) changes in general economic conditions or economic conditions in the markets in which we may, from time to time, compete, and their effect on our revenues, earnings and funding sources; (iv) increases in our borrowing costs as a result of rising inflation, changes in interest rates and other factors, including the discontinuation of USD LIBOR, which was effected on June 30, 2023; (v) our ability to pay down, refinance, restructure or extend our indebtedness as it becomes due; (vi) our investments in joint ventures and unconsolidated entities, including our lack of sole decision-making authority and our reliance on our joint venture partners’ financial condition; (vii) our ability to obtain the financial results expected from our development and redevelopment projects; (viii) our tenants’ ability and willingness to renew their leases with us upon expiration, our ability to re-lease our properties on the same or better terms in the event of nonrenewal or in the event we exercise our right to replace an existing tenant, and obligations we may incur in connection with the replacement of an existing tenant; (ix) our potential liability for environmental matters; (x) damage to our properties from catastrophic weather and other natural events, and the physical effects of climate change; (xi) the economic, political and social impact of, and uncertainty surrounding, any public health crisis, such as the recent COVID-19 Pandemic, which adversely affected the Company and its tenants’ business, financial condition, results of operations and liquidity; (xii) uninsured losses; (xiii) our ability and willingness to maintain our qualification as a real estate investment trust (REIT) in light of economic, market, legal, tax and other considerations; (xiv) information technology security breaches, including increased cybersecurity risks relating to the use of remote technology; (xv) the loss of key executives; and (xvi) the accuracy of our methodologies and estimates regarding environmental, social and governance (“ESG”) metrics, goals and targets, tenant willingness and ability to collaborate towards reporting ESG metrics and meeting ESG goals and targets, and the impact of governmental regulation on our ESG efforts.

The factors described above are not exhaustive and additional factors could adversely affect the Company’s future results and financial performance, including the risk factors discussed under the section captioned “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 and other periodic or current reports the Company files with the SEC, including those set forth under the headings “Item 1A. Risk Factors” and “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Report. These risks and uncertainties should be considered in evaluating any forward-looking statements contained or incorporated by reference herein. Any forward-looking statements speak only as of the date hereof. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any changes in the Company’s expectations with regard thereto or changes in the events, conditions or circumstances on which such forward-looking statements are based.

SPECIAL NOTE REGARDING CERTAIN REFERENCES

All references to “Notes” throughout the document refer to the footnotes to the condensed consolidated financial statements of the registrant referenced in Part I, Item 1. Financial Statements.

3

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PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

ACADIA REALTY TRUST AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

 

		September 30,				December 31,
(dollars in thousands, except share and per share data)		2023				2022
ASSETS
Investments in real estate, at cost
Operating real estate, net		$	3,482,675			$	3,343,265
Real estate under development			92,729				184,602
Net investments in real estate			3,575,404				3,527,867
Notes receivable, net ($988 and $898 of allowance for credit losses as of September 30, 2023 and December 31, 2022, respectively)			123,813				123,903
Investments in and advances to unconsolidated affiliates			184,034				291,156
Other assets, net			243,498				229,591
Right-of-use assets - operating leases, net			30,180				37,281
Cash and cash equivalents			19,312				17,158
Restricted cash			7,868				15,063
Marketable securities			35,197				—
Rents receivable, net			50,415				49,506
Assets of properties held for sale			11,057				11,057
Total assets (a)		$	4,280,778			$	4,302,582
LIABILITIES
Mortgage and other notes payable, net		$	961,611			$	928,639
Unsecured notes payable, net			666,188				696,134
Unsecured line of credit			192,287				168,287
Accounts payable and other liabilities			221,586				196,491
Lease liability - operating leases, net			32,520				35,271
Dividends and distributions payable			18,519				18,395
Distributions in excess of income from, and investments in, unconsolidated affiliates			8,545				10,505
Total liabilities (a)			2,101,256				2,053,722
Commitments and contingencies (Note 9)
Redeemable noncontrolling interests (Note 10)			55,284				67,664
EQUITY
Acadia Shareholders' Equity
Common shares, $0.001 par value per share, authorized 200,000,000 shares, issued and outstanding 95,310,104 and 95,120,773 shares, respectively			95				95
Additional paid-in capital			1,950,212				1,945,322
Accumulated other comprehensive income			65,560				46,817
Distributions in excess of accumulated earnings			(330,639	)			(300,402	)
Total Acadia shareholders’ equity			1,685,228				1,691,832
Noncontrolling interests			439,010				489,364
Total equity			2,124,238				2,181,196
Total liabilities, redeemable noncontrolling interests, and equity		$	4,280,778			$	4,302,582

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

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ACADIA REALTY TRUST AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

 

		Three Months Ended September 30,								Nine Months Ended September 30,
(in thousands except per share amounts)		2023				2022				2023				2022
Revenues
Rental income		$	79,961			$	78,453			$	248,839			$	238,479
Other			1,431				1,493				4,340				7,233
Total revenues			81,392				79,946				253,179				245,712
Operating expenses
Depreciation and amortization			33,726				33,744				100,955				102,428
General and administrative			10,309				10,170				30,898				32,768
Real estate taxes			11,726				11,749				34,586				34,657
Property operating			15,254				13,810				44,597				40,727
Impairment charges			3,686				33,311				3,686				33,311
Total operating expenses			74,701				102,784				214,722				243,891
Gain on disposition of properties			—				8,885				—				49,916
Operating income (loss)			6,691				(13,953	)			38,457				51,737
Equity in losses of unconsolidated affiliates			(4,865	)			(50,579	)			(6,273	)			(46,169	)
Interest and other income			5,087				3,994				14,875				9,890
Realized and unrealized holding gains (losses) on investments and other			1,664				(7,862	)			30,236				(18,415	)
Interest expense			(24,885	)			(21,162	)			(68,561	)			(58,309	)
(Loss) income from continuing operations before income taxes			(16,308	)			(89,562	)			8,734				(61,266	)
Income tax benefit (provision)			40				17				(248	)			(7	)
Net (loss) income			(16,268	)			(89,545	)			8,486				(61,273	)
Net loss attributable to redeemable noncontrolling interests			2,495				3,193				5,661				3,193
Net loss attributable to noncontrolling interests			12,347				30,461				7,063				18,653
Net (loss) income attributable to Acadia shareholders		$	(1,426	)		$	(55,891	)		$	21,210			$	(39,427	)
Basic (loss) income per share		$	(0.02	)		$	(0.59	)		$	0.21			$	(0.42	)
Diluted (loss) income per share		$	(0.02	)		$	(0.61	)		$	0.21			$	(0.43	)
Weighted average shares for basic (loss) income per share			95,320				94,980				95,257				94,758
Weighted average shares for diluted (loss) income per share			95,320				95,251				95,257				94,849

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

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ACADIA REALTY TRUST AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

 

		Three Months Ended September 30,								Nine Months Ended September 30,
(in thousands)		2023				2022				2023				2022
Net (loss) income		$	(16,268	)		$	(89,545	)		$	8,486			$	(61,273	)
Other comprehensive income:
Unrealized gain on valuation of swap agreements			26,763				44,114				45,034				96,899
Reclassification of realized interest on swap agreements			(9,478	)			1,518				(24,293	)			10,778
Other comprehensive income			17,285				45,632				20,741				107,677
Comprehensive income (loss)			1,017				(43,913	)			29,227				46,404
Comprehensive loss attributable to redeemable noncontrolling interests			2,495				3,193				5,661				3,193
Comprehensive loss (income) attributable to noncontrolling interests			10,767				23,273				5,065				(3,126	)
Comprehensive income (loss) attributable to Acadia shareholders		$	14,279			$	(17,447	)		$	39,953			$	46,471

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

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ACADIA REALTY TRUST AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)

Three Months Ended September 30, 2023 and 2022

 

		Acadia Shareholders
(in thousands, except per share amounts)		Common Shares				Share Amount				Additional Paid-in Capital				Accumulated Other Comprehensive Income (Loss)				Distributions in Excess of Accumulated Earnings				Total Common Shareholders’ Equity				Noncontrolling Interests				Total Equity				Redeemable Noncontrolling Interests
Balance at July 1, 2023			95,297			$	95			$	1,947,779			$	49,855			$	(312,057	)		$	1,685,672			$	452,437			$	2,138,109			$	59,833
Conversion of OP Units to Common Shares by limited partners of the Operating Partnership			11				—				182				—				—				182				(182	)			—				—
Dividends/distributions declared ($0.18 per Common Share/OP Unit)			—				—				—				—				(17,156	)			(17,156	)			(1,338	)			(18,494	)			—
City Point Loan accrued interest			—				—				—				—				—				—				—				—				(2,332	)
Employee and trustee stock compensation, net			2				—				212				—				—				212				2,353				2,565				—
Capital call receivable			—				—				—				—				—				—				(16,300	)			(16,300	)			—
Noncontrolling interest distributions			—				—				—				—				—				—				(1,754	)			(1,754	)			(37	)
Noncontrolling interest contributions			—				—				—				—				—				—				16,600				16,600				315
Comprehensive income (loss)			—				—				—				15,705				(1,426	)			14,279				(10,767	)			3,512				(2,495	)
Reallocation of noncontrolling interests			—				—				2,039				—				—				2,039				(2,039	)			—				—
Balance at September 30, 2023			95,310			$	95			$	1,950,212			$	65,560			$	(330,639	)		$	1,685,228			$	439,010			$	2,124,238			$	55,284
Balance at July 1, 2022			94,929			$	95			$	1,895,556			$	11,240			$	(214,279	)		$	1,692,612			$	670,606			$	2,363,218			$	—
Conversion of OP Units to Common Shares by limited partners of the Operating Partnership			20				—				333				—				—				333				(333	)			—				—
Dividends/distributions declared ($0.18 per Common Share/OP Unit)			—				—				—				—				(17,092	)			(17,092	)			(1,276	)			(18,368	)			—
Acquisition of noncontrolling interest			—				—				44,605				—				—				44,605				(50,435	)			(5,830	)			—
City Point Loan			—				—				—				—				—				—				—				—				(65,405	)
City Point Loan accrued interest			—				—				—				—				—				—				—				—				(1,564	)
Employee and trustee stock compensation, net			2				—				183				—				—				183				1,997				2,180				—
Noncontrolling interest distributions			—				—				—				—				—				—				(24,632	)			(24,632	)			—
Noncontrolling interest contributions			—				—				—				—				—				—				9,572				9,572				65,945
Comprehensive income (loss)			—				—				—				38,444				(55,891	)			(17,447	)			(23,273	)			(40,720	)			(3,193	)
Reclassification of redeemable noncontrolling interests			—				—				—				—				—				—				(76,569	)			(76,569	)			76,569
Reallocation of noncontrolling interests			—				—				(644	)			—				—				(644	)			644				—				—
Balance at September 30, 2022			94,951			$	95			$	1,940,033			$	49,684			$	(287,262	)		$	1,702,550			$	506,301			$	2,208,851			$	72,352

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

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ACADIA REALTY TRUST AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)

Nine Months Ended September 30, 2023 and 2022

 

		Acadia Shareholders
(in thousands, except per share amounts)		Common Shares				Share Amount				Additional Paid-in Capital				Accumulated Other Comprehensive Income (Loss)				Distributions in Excess of Accumulated Earnings				Total Common Shareholders’ Equity				Noncontrolling Interests				Total Equity				Redeemable Noncontrolling Interest
Balance at January 1, 2023			95,121			$	95			$	1,945,322			$	46,817			$	(300,402	)		$	1,691,832			$	489,364			$	2,181,196			$	67,664
Conversion of OP Units to Common Shares by limited partners of the Operating Partnership			102				—				1,715				—				—				1,715				(1,715	)			—				—
Dividends/distributions declared ($0.54 per Common Share/OP Unit)			—				—				—				—				(51,447	)			(51,447	)			(4,022	)			(55,469	)			—
City Point Loan			—				—				—				—				—				—				—				—				(796	)
City Point Loan accrued interest			—				—				—				—				—				—				—				—				(6,995	)
Employee and trustee stock compensation, net			87				—				1,476				—				—				1,476				8,719				10,195				—
Capital call receivable			—				—				—				—				—				—				(16,300	)			(16,300	)			—
Noncontrolling interest distributions			—				—				—				—				—				—				(78,114	)			(78,114	)			(38	)
Noncontrolling interest contributions			—				—				—				—				—				—				47,842				47,842				1,110
Comprehensive income (loss)			—				—				—				18,743				21,210				39,953				(5,065	)			34,888				(5,661	)
Reallocation of noncontrolling interests			—				—				1,699				—				—				1,699				(1,699	)			—				—
Balance at September 30, 2023			95,310			$	95			$	1,950,212			$	65,560			$	(330,639	)		$	1,685,228			$	439,010			$	2,124,238			$	55,284
Balance at January 1, 2022			89,304			$	89			$	1,754,383			$	(36,214	)		$	(196,645	)		$	1,521,613			$	628,322			$	2,149,935			$	—
Issuance of Common Shares, net			5,525				6				119,479				—				—				119,485				—				119,485				—
Conversion of OP Units to Common Shares by limited partners of the Operating Partnership			71				—				1,147				—				—				1,147				(1,147	)			—				—
Dividends/distributions declared ($0.54 per Common Share/OP Unit)			—				—				—				—				(51,190	)			(51,190	)			(3,846	)			(55,036	)			—
Acquisition of noncontrolling interest			—				—				67,475				—				—				67,475				(91,811	)			(24,336	)			—
City Point Loan			—				—				—				—				—				—				—				—				(65,405	)
City Point Loan accrued interest			—				—				—				—				—				—				—				—				(1,564	)
Employee and trustee stock compensation, net			51				—				871				—				—				871				7,669				8,540				—
Noncontrolling interest distributions			—				—				—				—				—				—				(72,187	)			(72,187	)
Noncontrolling interest contributions			—				—				—				—				—				—				109,422				109,422				65,945
Comprehensive income (loss)			—				—				—				85,898				(39,427	)			46,471				3,126				49,597				(3,193	)
Reclassification of redeemable noncontrolling interests			—				—				—				—				—				—				(76,569	)			(76,569	)			76,569
Reallocation of noncontrolling interests			—				—				(3,322	)			—				—				(3,322	)			3,322				—				—
Balance at September 30, 2022			94,951			$	95			$	1,940,033			$	49,684			$	(287,262	)		$	1,702,550			$	506,301			$	2,208,851			$	72,352

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

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ACADIA REALTY TRUST AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 

		Nine Months Ended September 30,
(in thousands)		2023				2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)		$	8,486			$	(61,273	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization			100,955				102,428
Gain on disposition of properties and other investments			—				(51,389	)
Net unrealized holding (gains) losses on investments			(1,282	)			20,786
Stock compensation expense			10,195				8,540
Straight-line rents			(1,619	)			(7,246	)
Equity in losses of unconsolidated affiliates			6,273				46,169
Distributions of operating income from unconsolidated affiliates			2,907				8,192
Adjustments to straight-line rent reserves			—				(79	)
Amortization of financing costs			4,661				4,100
Non-cash lease expense			2,702				2,584
Adjustments to allowance for credit loss			—				(779	)
Acceleration of below market lease			(8,057	)			—
Impairment charges			3,686				33,311
Other, net			(3,760	)			(6,361	)
Changes in assets and liabilities:
Rents receivable			747				3,523
Other liabilities			(127	)			(817	)
Accounts payable and accrued expenses			5,197				93
Prepaid expenses and other assets			(13,046	)			1,296
Lease liability - operating leases			(2,751	)			(2,600	)
Net cash provided by operating activities			115,167				100,478
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of real estate			(48,909	)			(242,633	)
Proceeds from the disposition of properties and other investments, net			—				195,367
Investments in and advances to unconsolidated affiliates			(30,563	)			(148,430	)
Development, construction and property improvement costs			(51,280	)			(36,863	)
Refund of deposits for properties under purchase contract			1,080				350
Deposits for properties under sale contract			1,515				—
Change in control of previously unconsolidated affiliate			—				3,592
Return of capital from unconsolidated affiliates			41,948				63,661
Payment of deferred leasing costs			(6,233	)			(4,996	)
Acquisition of investment interests			—				(4,527	)
Proceeds from sale of marketable securities			2,371				—
Proceeds from repayment of notes receivable			—				29,530
Net cash used in investing activities			(90,071	)			(144,949	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from unsecured debt			158,889				823,262
Principal payments on unsecured debt			(165,833	)			(621,180	)
Proceeds from the sale of Common Shares			—				119,485
Capital contributions from noncontrolling interests			31,857				109,423
Principal payments on mortgage and other notes			(99,103	)			(429,301	)
Distributions to noncontrolling interests			(32,965	)			(75,796	)
Dividends paid to Common Shareholders			(51,413	)			(47,494	)
Proceeds received from mortgage and other notes			132,902				202,743
Deferred financing and other costs			(3,760	)			(9,191	)
Acquisition of noncontrolling interest			—				(24,336	)
Payments of finance lease obligations			(711	)			—
Net cash (used in) provided by financing activities			(30,137	)			47,615
(Decrease) increase in cash and restricted cash			(5,041	)			3,144
Cash of $17,158 and $17,746 and restricted cash of $15,063 and $9,813, respectively, beginning of period			32,221				27,559
Cash of $19,312 and $18,068 and restricted cash of $7,868 and $12,635, respectively, end of period		$	27,180			$	30,703

 

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ACADIA REALTY TRUST AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Continued)

 

		Nine Months Ended September 30,
(in thousands)		2023				2022
Supplemental disclosure of cash flow information
Cash paid during the period for interest, net of capitalized interest of $5,660 and $2,331 respectively (a)		$	86,775			$	41,922
Cash paid for income taxes, net of (refunds)		$	248			$	6
Supplemental disclosure of non-cash investing and financing activities
Distribution declared and payable on October 13, 2023 and October 14, 2022, respectively		$	18,372			$	18,244
Assumption of accounts payable and accrued expenses through acquisition of real estate		$	465			$	4,062
Issuance of note receivable used as capital contributions from redeemable noncontrolling interests		$	796			$	65,945
Accrued interest on note receivable recorded to redeemable noncontrolling interest		$	6,995			$	1,564
Distributions to noncontrolling interests of marketable securities		$	49,117			$	—
Reclassification of investment in unconsolidated affiliate to marketable securities		$	32,745			$	—
Reclassification of noncontrolling interest in excess of amount paid to additional paid-in capital		$	—			$	67,475
Change in control of previously unconsolidated investment
Increase in real estate		$	—			$	(55,791	)
Increase in mortgage notes payable			—				35,970
Decrease in investments in and advances to unconsolidated affiliates			—				17,822
Decrease in notes receivable			—				5,306
Decrease in reserve on note receivable			—				(4,582	)
Decrease in accrued interest on notes receivable			—				4,691
Change in other assets and liabilities			—				176
Increase in cash and restricted cash upon change of control		$	—			$	3,592

 

The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).

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ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

 

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ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

 

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ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

 

 

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ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

 

 

 

 

 

 

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ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

 

 

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ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

 

 

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ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

 

 

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ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

 

 

 

 

 

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ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

 

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

OVERVIEW

As of September 30, 2023, we own or have an ownership interest in 201 properties held through our Core Portfolio and Funds. Our Core Portfolio consists of those properties either 100% owned, or partially owned through joint venture interests, by the Operating Partnership, or subsidiaries thereof, not including those properties owned through our Funds. These properties primarily consist of street and urban retail, and suburban shopping centers. Our Funds are investment vehicles through which our Operating Partnership and outside institutional investors invest in primarily opportunistic and value-add retail real estate. Currently, we have active investments in four Funds. A summary of our wholly-owned and partially-owned retail properties and their physical occupancies at September 30, 2023 is as follows:

 

		Number of Properties								Operating Properties
		Development or Redevelopment				Operating				GLA				Occupancy
Core Portfolio:
Chicago Metro			3				36				576,977				85.7	%
New York Metro			—				29				394,557				91.4	%
Los Angeles Metro			—				2				23,757				100.0	%
San Francisco Metro			2				—				—				0.0	%
Dallas Metro			2				14				121,386				85.6	%
Washington DC Metro			1				31				344,590				87.4	%
Boston Metro			—				1				1,050				100.0	%
Suburban			3				25				3,910,213				93.4	%
Total Core Portfolio			11				138				5,372,530				91.9	%
Acadia Share of Total Core Portfolio			11				138				5,011,251				92.4	%
Fund Portfolio:
Fund II			—				1				536,198				70.0	%
Fund III			1				1				4,637				91.6	%
Fund IV			1				26				696,627				89.1	%
Fund V			—				22				7,358,804				92.5	%
Total Fund Portfolio			2				50				8,596,266				90.8	%
Acadia Share of Total Fund Portfolio			2				50				1,872,458				88.5	%
Total Core and Funds			13				188				13,968,796				91.3	%
Acadia Share of Total Core and Funds			13				188				6,883,710				91.3	%

 

The majority of our operating income is derived from rental revenues from operating properties, including expense recoveries from tenants, offset by operating and overhead expenses.

 

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Our primary business objective is to acquire and manage commercial retail properties that will provide cash for distributions to shareholders while also creating the potential for capital appreciation to enhance investor returns. Generally, we focus on the following fundamentals to achieve this objective:

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SIGNIFICANT DEVELOPMENTS DURING THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND SUBSEQUENT EVENTS

Investments

During the nine months ended September 30, 2023, Fund V acquired one unconsolidated property and one consolidated property totaling $111.5 million, inclusive of transaction costs, as described below (Note 2, Note 4):

 

On January 20, 2023, through Mervyns II, we received a special cash dividend of $28.2 million from our investment in Albertsons, of which our share was $11.3 million. Additionally, following the expiration of the lock-up period and distribution of 2.5 million shares of Albertsons to our partners, we received 1.6 million shares of Albertsons (Note 4, Note 8).

Financing Activity

During the nine months ended September 30, 2023, we (Note 7, Note 4):

On July 15, 2023, the 146 Geary Street, Fund IV non-recourse mortgage loan with an outstanding balance of $19.3 million, or $4.5 million at the Company’s share, matured with no further extension options and was in default (Note 7). The property securing the mortgage is a vacant building located in San Francisco, California. The loan accrued default interest at a rate of 4.00% per annum in excess of the interest rate of SOFR + 3.65%. On October 27, 2023, the Company completed the transfer of the property to its lender through a deed-in-lieu foreclosure (Note 16). The Company has recorded an impairment charge related to such loan default and transfer of the property (Note 8).

Structured Financing Investments

During the nine months ended September 30, 2023, we funded $4.6 million of a $12.8 million construction loan commitment to an unconsolidated venture (Note 4). Through Fund V, we refinanced a $31.7 million bridge loan at an unconsolidated property that was originated by Fund V at acquisition with the a new mortgage loan at an unconsolidated property.

Economic and Other Considerations

The year ended December 31, 2022 and nine months ended September 30, 2023 were impacted by significant volatility in global markets, largely driven by rising inflation, rising interest rates, slowing economic growth, geopolitical uncertainty and instability in the banking sector following multiple bank failures. The rate hikes enacted by the Federal Reserve have had a significant impact on interest rate indexes such as LIBOR, SOFR and the Prime Rate and cost of borrowing. We manage our exposure to fluctuations in interest rates primarily through the use of fixed-rate debt and interest rate swap and cap agreements. We believe we manage our properties in a cost-conscious manner to minimize recurring operational expenses and utilize multi-year contracts to alleviate the impact of inflation on our business and our tenants. We also continue to see consumer confidence and we expect to continue to add value to our portfolio by executing on our current leasing momentum, our active development and redevelopment projects, and leasing pipeline. Except for increased interest costs, we have not experienced any material negative impacts at this time and we intend to actively manage our business to respond to the ongoing economic and social impact from such events.

On April 23, 2023, Bed Bath and Beyond, Inc. (“Bed Bath and Beyond”) filed Chapter 11 bankruptcy protection. Bed Bath and Beyond had leases at two locations within our Core Portfolio and three locations in our Fund Portfolio, with aggregate GLA of 124,432 square feet and 59,391 square feet, representing 2.1% and 0.7% of Core and Fund GLA, respectively. In our Core Portfolio, we recaptured and re-leased one of the spaces to an existing tenant that is expanding a flagship store under a new 15-year lease. We are actively seeking a tenant for the remaining Core Portfolio location.

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In our Fund Portfolio, one lease was assumed by a new tenant and we have regained possession of the other two locations; we have one signed lease and identified a future tenant at the remaining Fund locations. As a result of the bankruptcy filing, for the nine months ended September 30, 2023, we accelerated the amortization of the below-market lease intangibles of $8.1 million related to the Bed Bath and Beyond lease terminations. We did not experience any material negative impacts on our cash flows or property values as a result of the bankruptcy.

 

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RESULTS OF OPERATIONS

See Note 12 in the Notes to Condensed Consolidated Financial Statements for an overview of our three reportable segments.

Comparison of Results for the Three Months Ended September 30, 2023 to the Three Months Ended September 30, 2022

The results of operations by reportable segment for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 are summarized in the table below (in millions, totals may not add due to rounding):

 

		Three Months Ended																Three Months Ended
		September 30, 2023																September 30, 2022																Increase (Decrease)
		Core				Funds				SF				Total				Core				Funds				SF				Total				Core				Funds				SF				Total
Revenues		$	47.3			$	34.1			$	—			$	81.4			$	50.1			$	29.9			$	—			$	79.9			$	(2.8	)		$	4.2			$	—			$	1.5
Depreciation and amortization			(18.8	)			(14.9	)			—				(33.7	)			(18.8	)			(14.9	)			—				(33.7	)			—				—				—				—
Property operating expenses and real estate taxes			(15.6	)			(11.4	)			—				(27.0	)			(14.8	)			(10.8	)			—				(25.6	)			0.8				0.6				—				1.4
General and administrative expenses			—				—				—				(10.3	)			—				—				—				(10.2	)			—				—				—				0.1
Impairment charges			—				(3.7	)			—				(3.7	)			—				(33.3	)			—				(33.3	)			—				(29.6	)			—				(29.6	)
Gain on disposition of properties			—				—				—				—				—				8.9				—				8.9				—				(8.9	)			—				(8.9	)
Operating income			12.9				4.1				—				6.7				16.5				(20.2	)			—				(14.0	)			(3.6	)			24.3				—				20.7
Interest and other income			—				—				5.1				5.1				—				—				4.0				4.0				—				—				1.1				1.1
Realized and unrealized holding gains (losses) on investments and other			1.7				—				(0.1	)			1.7				—				(7.3	)			(0.6	)			(7.9	)			1.7				7.3				0.5				9.6
Equity in earnings (losses) of unconsolidated affiliates			(0.8	)			(4.0	)			—				(4.9	)			(49.8	)			(0.8	)			—				(50.6	)			49.0				(3.2	)			—				45.7
Interest expense			(11.4	)			(13.5	)			—				(24.9	)			(10.4	)			(10.7	)			—				(21.2	)			1.0				2.8				—				3.7
Income tax (provision) benefit			—				—				—				—				—				—				—				—				—				—				—				—
Net income (loss)			2.5				(13.5	)			5.0				(16.3	)			(43.8	)			(39.0	)			3.4				(89.5	)			46.3				25.5				1.6				73.2
Net loss attributable to redeemable noncontrolling interests			—				2.5				—				2.5				—				3.2				—				3.2				—				(0.7	)			—				(0.7	)
Net (income) loss attributable to noncontrolling interests			(0.2	)			12.5				—				12.3				2.9				27.6				—				30.5				(3.1	)			(15.1	)			—				(18.2	)
Net income attributable to Acadia		$	2.3			$	1.5			$	5.0			$	(1.4	)		$	(40.9	)		$	(8.2	)		$	3.4			$	(55.9	)		$	43.2			$	9.7			$	1.6			$	54.5

 

Core Portfolio

The results of operations for our Core Portfolio segment are depicted in the table above under the headings labeled “Core.” Segment net income attributable to Acadia for our Core Portfolio increased $43.2 million for the three months ended September 30, 2023 compared to the prior year period as a result of the changes further described below.

Revenues for our Core Portfolio decreased $2.8 million for the three months ended September 30, 2023 compared to the prior year period primarily due to the bankruptcy of Bed, Bath and Beyond.

Realized and unrealized holding gains (losses) on investments and other for our Core Portfolio increased $1.7 million for the three months ended September 30, 2023 compared to the prior year period primarily due to the mark-to-market adjustment on the Investment in Albertsons in 2023. In January 2023, following the expiration of the lock-up period and distribution of approximately 2.5 million shares by Mervyns II to its partners, the Company received 1.6 million shares of Albertsons, which are now included in the Core portfolio (Note 4, Note 8).

Equity in earnings (losses) of unconsolidated affiliates for our Core Portfolio increased $49.0 million for the three months ended September 30, 2023 compared to the prior year period primarily due to an impairment charge for 840 N. Michigan Avenue in 2022

Interest expense for our Core Portfolio increased $1.0 million for the three months ended September 30, 2023 compared to the prior year period primarily due to higher average outstanding borrowings and interest rates in 2023 (Note 7).

Net income attributable to noncontrolling interests for our Core Portfolio decreased $3.1 million for the three months ended September 30, 2023 compared to the prior year period based on the noncontrolling interests’ share of the variances discussed above.

Funds (all amounts below are consolidated amounts and are not representative of our proportionate share)

The results of operations for our Funds segment are depicted in the table above under the headings labeled “Funds.” Segment net income attributable to Acadia for the Funds increased $9.7 million for the three months ended September 30, 2023 compared to the prior year period as a result of the changes described below.

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Revenues for the Funds increased $4.2 million for the three months ended September 30, 2023 compared to the prior year period primarily due to (i) $2.9 million from new tenant lease up in 2022 and 2023 and (ii) $1.6 million from Fund property acquisitions. These increases were offset by $0.5 million from Fund property dispositions in 2022.

Impairment charges for the Funds decreased $29.6 million for the three months ended September 30, 2023 compared to the prior year period. Impairment charges totaling $3.7 million during 2023 for the Funds related to 146 Geary Street in Fund IV. Impairment charges totaling $33.3 million during 2022 for the Funds related to 146 Geary Street and 717 N. Michigan Avenue in Fund IV.

Gain on disposition of properties for the Funds decreased $8.9 million for the three months ended September 30, 2023 compared to the prior year period due to the sale of Wake Forest Crossing at Fund IV in 2022 (Note 2).

Realized and unrealized holding gains on investments and other for the Funds increased $7.3 million for the three months ended September 30, 2023 compared to the prior year period primarily due to the $7.3 million mark-to-market adjustment on the Investment in Albertsons in 2023. In January 2023, following the expiration of the lock-up period and distribution of approximately 2.5 million shares by Mervyns II to its partners, the Company received 1.6 million shares of Albertsons, which are now included in the Core portfolio (Note 4, Note 8).

Equity in earnings (losses) of unconsolidated affiliates for the Funds decreased $3.2 million for the three months ended September 30, 2023 compared to the prior year period primarily due to new unconsolidated Fund acquisitions in 2022 and 2023 (Note 4).

Interest expense for the Funds increased $2.8 million for the three months ended September 30, 2023 compared to the prior year period primarily due to $4.5 million from higher average interest rates in 2023, offset by $1.6 million from lower average outstanding borrowings in 2023.

Net (income) loss attributable to noncontrolling interests for the Funds decreased $15.1 million for the three months ended September 30, 2023 compared to the prior year period based on the noncontrolling interests’ share of the variances discussed above. Net income attributable to noncontrolling interests in the Funds includes asset management fees earned by the Company of $2.4 million and $2.3 million for the three months ended September 30, 2023 and 2022, respectively.

Structured Financing

Interest and other income for the Structured Financing portfolio increased $1.1 million for the three months ended September 30, 2023 compared to the prior year period primarily due to the City Point loan issued during 2022 (Note 10).

Unallocated

The Company does not allocate general and administrative expenses and income taxes to its reportable segments. These unallocated amounts are depicted in the table above under the headings labeled “Total.”

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Comparison of Results for the Nine Months Ended September 30, 2023 to the Nine Months Ended September 30, 2022

The results of operations by reportable segment for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 are summarized in the table below (in millions, totals may not add due to rounding):

 

		Nine Months Ended																Nine Months Ended
		September 30, 2023																September 30, 2022																Increase (Decrease)
		Core				Funds				SF				Total				Core				Funds				SF				Total				Core				Funds				SF				Total
Revenues		$	153.5			$	99.7			$	—			$	253.2			$	151.7			$	94.1			$	—			$	245.7			$	1.8			$	5.6			$	—			$	7.5
Depreciation and amortization			(57.5	)			(43.4	)			—				(101.0	)			(56.5	)			(45.9	)			—				(102.4	)			1.0				(2.5	)			—				(1.4	)
Property operating expenses and real estate taxes			(46.7	)			(32.5	)			—				(79.2	)			(44.4	)			(31.0	)			—				(75.4	)			2.3				1.5				—				3.8
General and administrative expenses			—				—				—				(30.9	)			—				—				—				(32.8	)			—				—				—				(1.9	)
Impairment charges			—				(3.7	)			—				(3.7	)			—				(33.3	)			—				(33.3	)			—				(29.6	)			—				(29.6	)
Gain on disposition of properties			—				—				—				—				—				49.9				—				49.9				—				(49.9	)			—				(49.9	)
Operating income (loss)			49.2				20.1				—				38.5				50.7				33.8				—				51.7				(1.5	)			(13.7	)			—				(13.2	)
Interest and other income			—				—				14.9				14.9				—				—				9.9				9.9				—				—				5.0				5.0
Realized and unrealized holding gains (losses) on investments and other			5.2				25.0				—				30.2				1.2				(19.1	)			(0.5	)			(18.4	)			4.0				44.1				0.5				48.6
Equity in (losses) earnings of unconsolidated affiliates			1.9				(8.2	)			—				(6.3	)			(47.4	)			1.2				—				(46.2	)			49.3				(9.4	)			—				39.9
Interest expense			(33.0	)			(35.5	)			—				(68.6	)			(26.5	)			(31.8	)			—				(58.3	)			6.5				3.7				—				10.3
Income tax benefit (provision)			—				—				—				(0.2	)			—				—				—				-				—				—				—				(0.2	)
Net income (loss)			23.3				1.4				14.9				8.5				(22.1	)			(15.8	)			9.4				(61.3	)			45.4				17.2				5.5				69.8
Net loss attributable to redeemable noncontrolling interests			—				5.7				—				5.7				—				3.2				—				3.2				—				2.5				—				2.5
Net income attributable to noncontrolling interests			(1.8	)			8.9				—				7.1				1.4				17.3				—				18.7				(3.2	)			(8.4	)			—				(11.6	)
Net income (loss) attributable to Acadia		$	21.5			$	16.0			$	14.9			$	21.2			$	(20.7	)		$	4.6			$	9.4			$	(39.4	)		$	42.2			$	11.4			$	5.5			$	60.6

 

Core Portfolio

The results of operations for our Core Portfolio segment are depicted in the table above under the headings labeled “Core.” Segment net income attributable to Acadia for our Core Portfolio increased $42.2 million for the nine months ended September 30, 2023 compared to the prior year period as a result of the changes further described below.

Revenues for our Core Portfolio increased $1.8 million for the nine months ended September 30, 2023 compared to the prior year period primarily due to (i) a $7.8 million acceleration of a below market lease for a bankrupt tenant, (ii) a $2.8 million increase from Core Portfolio property acquisitions in 2022 (Note 2), and (iii) $3.6 million from lease up within the Core Portfolio. These increases were offset by (i) $5.4 million from vacating tenants, (ii) $3.5 million from additional termination income received in 2022, and (iii) a $2.7 million increase associated with revenues deemed uncollectible in 2023.

Depreciation and amortization for our Core Portfolio increased $1.0 million for the nine months ended September 30, 2023 compared to the prior year period primarily due to Core Portfolio property acquisitions in 2022.

Property operating expenses and real estate taxes for our Core Portfolio increased $2.3 million for the nine months ended September 30, 2023 compared to the prior year period primarily due to an increase in non-recurring repair and maintenance and utility and insurance costs in 2023.

Realized and unrealized holding gains (losses) on investments and other for our Core Portfolio includes a $4.9 million mark-to-market adjustment on the Investment in Albertsons in 2023 and a $1.2 million bargain purchase gain on the acquisition of the Williamsburg Collection in 2022 (Note 2). In January 2023, following the expiration of the lock-up period and distribution of approximately 2.5 million shares by Mervyns II to its partners, the Company received 1.6 million shares of Albertsons, which are now included in the Core portfolio (Note 4, Note 8).

Equity in earnings (losses) of unconsolidated affiliates for our Core Portfolio increased $49.3 million for the nine months ended September 30, 2023 compared to the prior year period primarily due to an impairment charge for 840 N. Michigan Avenue in 2022.

Interest expense for our Core Portfolio increased $6.5 million for the nine months ended September 30, 2023 compared to the prior year period due to (i) $4.4 million from higher average outstanding borrowings in 2023, and (ii) $3.4 million from higher average interest rates in 2023. These increases were partially offset by $0.7 million from higher capitalized interest in 2023.

Net income attributable to noncontrolling interests for our Core Portfolio decreased $3.2 million for the nine months ended September 30, 2023 compared to the prior year period based on the noncontrolling interests’ share of the variances discussed above.

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Funds

The results of operations for our Funds segment are depicted in the table above under the headings labeled “Funds.” Segment net income attributable to Acadia for the Funds increased $11.4 million for the nine months ended September 30, 2023 compared to the prior year period as a result of the changes described below.

Revenues for the Funds increased $5.6 million for the nine months ended September 30, 2023 compared to the prior year period primarily due to (i) $7.5 million from new tenant lease up in 2022 and 2023, (ii) $2.0 million from settlement income related to a tenant. and (iii) $1.6 million from Fund property acquisitions in 2023. These increases were offset by (i) $4.1 million from Fund property dispositions in 2022 (Note 2) and (ii) a $1.3 million increase associated with revenues deemed uncollectible in 2023.

Depreciation and amortization for the Funds decreased $2.5 million for the nine months ended September 30, 2023 compared to the prior year period primarily due to Fund property dispositions in 2022.

Impairment charges for the Funds decreased $29.6 million for the nine months ended September 30, 2023 compared to the prior year period. Impairment charges totaling $3.7 million during 2023 for the Funds related to 146 Geary Street in Fund IV. Impairment charges totaling $33.3 million during 2022 for the Funds related to 146 Geary Street and 717 N. Michigan Avenue in Fund IV.

Gain on disposition of properties for the Funds decreased $49.9 million for the nine months ended September 30, 2023 compared to the prior year period due to the sales of Cortlandt Crossing at Fund III, Lincoln Place, Mayfair, Dauphin and Wake Forest Crossing in Fund IV and a New Towne outparcel in Fund V in 2022 (Note 2).

Realized and unrealized holding gains (losses) on investments and other for the Funds increased $44.1 million for the nine months ended September 30, 2023 compared to the prior year period, primarily due to (i) a $28.2 million increase in dividend income from Albertsons in 2023 and by (ii) a $21.6 million decrease in the mark-to-market adjustment on the Investment in Albertsons in 2022, offset by (i) a $2.0 million decrease in the mark-to-market adjustment on the Investment in Albertsons in 2023, and (ii) a $1.4 million distribution from the Storage Post Management Company in 2022. (Note 4).

Equity in earnings (losses) of unconsolidated affiliates for the Funds decreased $9.4 million for the nine months ended September 30, 2023 compared to the prior year period primarily due to new unconsolidated Fund acquisitions in 2022 and 2023 (Note 4).

Interest expense for the Funds increased $3.7 million for the nine months ended September 30, 2023 compared to the prior year period primarily due to $12.9 million from higher average interest rates in 2023 offset by $7.1 million from lower average outstanding borrowings in 2023 and $2.4 million from higher capitalized interest in 2023.

Net loss attributable to redeemable noncontrolling interests for the Funds increased $2.5 million for the nine months ended September 30, 2023 compared to the prior year period due to the City Point Loan in August 2022 (Note 10). The Company did not allocate any income to redeemable noncontrolling interests for the Funds for the nine months ended September 30, 2022.

Net (income) loss attributable to noncontrolling interests for the Funds decreased $8.4 million for the nine months ended September 30, 2023 compared to the prior year period based on the noncontrolling interests’ share of the variances discussed above. Net loss attributable to noncontrolling interests in the Funds includes asset management fees earned by the Company of $7.2 million and $7.2 million for the nine months ended September 30, 2023 and 2022, respectively.

Structured Financing

The results of operations for our Structured Financing segment are depicted in the table above under the headings labeled “SF.” Interest and other income for the Structured Financing portfolio increased $5.0 million for the nine months ended September 30, 2023 compared to the prior year period primarily due to the City Point Loan in 2022.

Unallocated

The Company does not allocate general and administrative expense and income taxes to its reportable segments. These unallocated amounts are depicted in the table above under the headings labeled “Total.” Unallocated general and administrative expenses decreased $1.9 million for the nine months ended September 30, 2023 compared to the prior year period due to $2.0 million related to acquisition costs in the prior year but not the current year (Note 2).

 

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NON-GAAP FINANCIAL MEASURES

Net Property Operating Income

The following discussion of net property operating income (“NOI”) and rent spreads on new and renewal leases includes the activity from both our consolidated and our pro-rata share of unconsolidated properties within our Core Portfolio. Our Funds invest primarily in properties that typically require significant leasing and development. Given that the Funds are finite-life investment vehicles, these properties are sold following stabilization. For these reasons, we believe NOI and rent spreads are not meaningful measures for our Fund investments.

NOI represents property revenues less property expenses. We consider NOI and rent spreads on new and renewal leases for our Core Portfolio to be appropriate supplemental disclosures of portfolio operating performance due to their widespread acceptance and use within the REIT investor and analyst communities. NOI and rent spreads on new and renewal leases are presented to assist investors in analyzing our property performance, however, our method of calculating these may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.

A reconciliation of consolidated operating income to net operating income - Core Portfolio follows (in thousands):

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2023				2022				2023				2022
Consolidated operating income		$	6,691			$	(13,953	)		$	38,457			$	51,737
Add back:
General and administrative			10,309				10,170				30,898				32,768
Depreciation and amortization			33,726				33,744				100,955				102,428
Impairment charges			3,686				33,311				3,686				33,311
Less:
Above/below-market rent, straight-line rent and other adjustments (a)			(3,336	)			(4,864	)			(18,666	)			(17,469	)
Gain on disposition of properties			—				(8,885	)			—				(49,916	)
Consolidated NOI			51,076				49,523				155,330				152,859
Redeemable noncontrolling interest in consolidated NOI			(861	)			(517	)			(3,260	)			(517	)
Noncontrolling interest in consolidated NOI			(14,927	)			(13,753	)			(43,132	)			(45,010	)
Less: Operating Partnership's interest in Fund NOI included above			(4,656	)			(3,800	)			(14,458	)			(11,278	)
Add: Operating Partnership's share of unconsolidated joint ventures NOI (b)			3,163				3,397				11,263				10,451
Core Portfolio NOI		$	33,795			$	34,850			$	105,743			$	106,505

 

Same-Property NOI includes Core Portfolio properties that we owned for both the current and prior periods presented, but excludes those properties that we acquired, sold or expected to sell, redeveloped and developed during these periods. The following table summarizes Same-Property NOI for our Core Portfolio (in thousands):

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2023				2022				2023				2022
Core Portfolio NOI		$	33,795			$	34,850			$	105,743			$	106,505
Less properties excluded from Same-Property NOI			(6,071	)			(8,644	)			(21,305	)			(26,772	)
Same-Property NOI		$	27,724			$	26,206			$	84,438			$	79,733
Percent change from prior year period			5.8	%							5.9	%
Components of Same-Property NOI:
Same-Property Revenues		$	39,714			$	37,756			$	120,755			$	114,982
Same-Property Operating Expenses			(11,990	)			(11,550	)			(36,317	)			(35,249	)
Same-Property NOI		$	27,724			$	26,206			$	84,438			$	79,733

 

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Rent Spreads on Core Portfolio New and Renewal Leases

The following table summarizes rent spreads on both a cash basis and straight-line basis for new and renewal leases based on leases executed within our Core Portfolio for the periods presented. Cash basis represents a comparison of rent most recently paid on the previous lease as compared to the initial rent paid on the new lease. Straight-line basis represents a comparison of rents as adjusted for contractual escalations, abated rent, and lease incentives for the same comparable leases. The table below includes embedded option renewals for which the renewed rent was equal to or approximated existing base rent.

 

		Three Months Ended September 30, 2023								Nine Months Ended September 30, 2023
Core Portfolio New and Renewal Leases		Cash Basis				Straight- Line Basis				Cash Basis				Straight- Line Basis
Number of new and renewal leases executed			17				17				53				53
GLA commencing			85,899				85,899				374,813				374,813
New base rent		$	82.29			$	87.15			$	36.90			$	38.58
Expiring base rent		$	63.53			$	62.55			$	30.63			$	29.62
Percent growth in base rent			29.5	%			39.3	%			20.5	%			30.3	%
Average cost per square foot (a)		$	59.99			$	59.99			$	17.15			$	17.15
Weighted average lease term (years)			6.8				6.8				6.6				6.6

 

(a) The average cost per square foot includes tenant improvement costs, leasing commissions and tenant allowances.

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Funds from Operations

We consider funds from operations (“FFO”) as defined by the National Association of Real Estate Investment Trusts (“NAREIT”) to be an appropriate supplemental disclosure of operating performance due to its widespread acceptance and use within the REIT investor and analyst communities. FFO is presented to assist investors in analyzing our performance. It is helpful as it excludes various items included in net income that are not indicative of the operating performance, such as gains (losses) from sales of depreciated property, depreciation and amortization, and impairment of real estate. Our method of calculating FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. FFO does not represent cash generated from operations as defined by GAAP and is not indicative of cash available to fund all cash needs, including distributions. It should not be considered as an alternative to net income for the purpose of evaluating our performance or to cash flows as a measure of liquidity. Consistent with the NAREIT definition, we define FFO as net income (computed in accordance with GAAP), excluding gains (losses) from sales of depreciated property and impairment of depreciable real estate, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Also consistent with NAREIT’s definition of FFO, the Company has elected to include gains and losses incidental to its main business (including those related to its RCP investments, such as Albertsons) in FFO. A reconciliation of net income (loss) attributable to Acadia to FFO follows (dollars in thousands, except per share amounts):

 

		Three Months Ended September 30,								Nine Months Ended September 30,
		2023				2022				2023				2022
Net (loss) income attributable to Acadia		$	(1,426	)		$	(55,891	)		$	21,210			$	(39,427	)
Depreciation of real estate and amortization of leasing costs (net of    noncontrolling interests' share)			27,351				27,097				82,043				78,007
Impairment charges (net of noncontrolling interests' share)			852				58,481				852				58,481
Gain on disposition of properties (net of noncontrolling interests' share)			—				(2,055	)			—				(11,892	)
Income attributable to Common OP Unit holders			(55	)			(3,083	)			1,313				(2,057	)
Distributions - Preferred OP Units			123				123				369				369
Funds from operations attributable to Common Shareholders and    Common OP Unit holders - Basic		$	26,845			$	24,672			$	105,787			$	83,481
Less: Impact of City Point share conversion (a)			—				(906	)			—				(906	)
Funds from operations attributable to Common Shareholders and    Common OP Unit holders - Diluted		$	26,845			$	23,766			$	105,787			$	82,575
Funds From Operations per Share - Diluted
Basic weighted-average shares outstanding, GAAP earnings			95,319,958				94,980,333				95,256,703				94,757,678
Weighted-average OP Units outstanding			6,962,435				5,307,160				6,980,766				5,311,460
Basic weighted-average shares and OP Units outstanding, FFO			102,282,393				100,287,493				102,237,469				100,069,138
Assumed conversion of Preferred OP Units to Common Shares			463,898				25,067				463,898				464,623
Assumed conversion of LTIP units and Restricted Share Units to    Common Shares			—				—				—				—
Diluted weighted-average number of Common Shares and Common    OP Units outstanding, FFO			102,746,291				100,312,560				102,701,367				100,533,761
Diluted Funds from operations, per Common Share and Common OP Unit		$	0.26			$	0.24			$	1.03			$	0.82

 

 

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LIQUIDITY AND CAPITAL RESOURCES

Uses of Liquidity and Cash Requirements

Generally, our principal uses of liquidity are (i) distributions to our shareholders and OP unit holders, (ii) investments, which include the funding of our capital committed to the Funds and property acquisitions and development/re-tenanting activities within our Core Portfolio, (iii) distributions to our Fund investors, (iv) debt service and loan repayments and (v) share repurchases.

Distributions

In order to qualify as a REIT for federal income tax purposes, we must distribute at least 90% of our taxable income to our shareholders. During the nine months ended September 30, 2023, we paid dividends and distributions on our Common Shares and Preferred OP Units totaling $51.5 million.

Investments

During the nine months ended September 30, 2023, Fund V acquired one unconsolidated property and one consolidated property totaling $111.5 million, inclusive of transaction costs, as described below (Note 2, Note 4):

Structured Financing Investments

During the nine months ended September 30, 2023, we funded $4.6 million of a $12.8 million construction loan commitment to an unconsolidated venture (Note 4). Through Fund V, we refinanced a $31.7 million bridge loan at an unconsolidated property that was originated by Fund V at acquisition with a new mortgage loan at an unconsolidated property.

Capital Commitments

During the nine months ended September 30, 2023, we made capital contributions aggregating $8.7 million to our Funds, including $2.0 million to Fund II for City Point. In October 2023, we made an additional Fund V capital contribution of $4.1 million.

At September 30, 2023, our share of the remaining capital commitments to our Funds aggregated $36.9 million as follows:

 

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Development Activities

During the nine months ended September 30, 2023, capitalized costs associated with development activities totaled $12.7 million (Note 2). At September 30, 2023, we had a total of twelve consolidated and one unconsolidated project under development or redevelopment, for which the estimated total cost to complete these projects through 2025 was $50.6 million to $77.0 million, and our estimated share was approximately $28.7 million to $45.1 million. Substantially all remaining development and redevelopment costs are discretionary, which could be affected by various risks and uncertainties, including, but not limited to, the effects of the current inflationary environment, rising interest rates, and other risks detailed in Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2022.

Debt

A summary of our consolidated debt, which includes the full amount of Fund related obligations and excludes our pro rata share of debt at our unconsolidated subsidiaries, is as follows (in thousands):

 

		September 30,				December 31,
		2023				2022
Total Debt - Fixed and Effectively Fixed Rate		$	1,456,226			$	1,440,773
Total Debt - Variable Rate			376,043				364,641
			1,832,269				1,805,414
Net unamortized debt issuance costs			(12,449	)			(12,697	)
Unamortized premium			266				343
Total Indebtedness		$	1,820,086			$	1,793,060

As of September 30, 2023, our consolidated indebtedness aggregated $1,832.3 million, excluding unamortized premium of $0.3 million and net unamortized loan costs of $12.4 million, and were collateralized by 33 properties and related tenant leases. Stated interest rates on our outstanding indebtedness ranged from 3.99% to SOFR + 3.75% with maturities that ranged from November 1, 2023 to April 15, 2035, without regard to available extension options and the Fund IV mortgage loan in maturity default. With respect to the debt maturing in October and November 2023, we are actively pursuing refinancing the remaining obligations, though there can be no assurance that we can refinance on favorable terms or at all. One non-recourse Fund IV mortgage loan with an outstanding balance of $19.3 million, or $4.5 million at our share, was in default at September 30, 2023. On July 15, 2023 the loan matured and was not repaid and accrues default interest at a rate of 4.00% per annum in excess of the interest rate of SOFR + 3.65%. Taking into consideration $1,250.8 million of notional principal under variable to fixed-rate swap agreements currently in effect, $1,456.2 million of the portfolio debt, or 79.50%, was fixed at a 4.73% weighted-average interest rate and $376.0 million, or 20.50% was floating at a 7.30% weighted average interest rate as of September 30, 2023. Our variable-rate debt includes $154.1 million of debt subject to interest rate caps.

Without regard to available extension options, at September 30, 2023 there was $133.1 million of debt maturing in 2023 at a weighted-average interest rate of 8.36%; there was $1.9 million of scheduled principal amortization due in the remainder of 2023; and our share of scheduled remaining 2023 principal payments and maturities on our unconsolidated debt was $40.9 million. In addition, $75.7 million of our total consolidated debt and $6.3 million of our pro-rata share of unconsolidated debt will come due by September 30, 2024. With respect to the debt maturing in 2023 and 2024, we have options to extend consolidated debt aggregating $20.3 million and $0.0 million at September 30, 2023, respectively; however, there can be no assurance that the Company will be able to successfully execute any or all of its available extension options. For the remaining indebtedness, we may not have sufficient cash on hand to repay such indebtedness, and, therefore, we expect to refinance at least a portion of this indebtedness or select other alternatives based on market conditions as these loans mature; however, there can be no assurance that we will be able to obtain financing on acceptable terms or at all. Our ability to obtain financing could be affected by various risks and uncertainties, including, but not limited to, the effects of the current inflationary environment, rising interest rates, and other risks detailed in Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2022.

Share Repurchase Program

We maintain a share repurchase program under which $122.5 million remains available as of September 30, 2023 (Note 10). We did not repurchase any shares under this program during the nine months ended September 30, 2023.

Sources of Liquidity

Our primary sources of capital for funding our short-term (less than 12 months) and long-term (12 months and longer) liquidity needs include (i) the issuance of both public equity and OP Units, (ii) the issuance of both secured and unsecured debt, (iii) unfunded capital commitments from noncontrolling interests within our Funds, (iv) future sales of existing properties, (v) repayments of structured financing investments, (vi) liquidation of marketable securities, and (vii) cash on hand and future cash flow from operating activities. Our cash on hand in our consolidated subsidiaries at September 30, 2023 totaled $19.3 million. Our remaining sources of liquidity are described further below.

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ATM Program

We have an ATM Program (Note 10) that provides us with an efficient and low-cost vehicle for raising capital through public equity issuances on an as-we-go basis to fund our capital needs. Through this program, we have been able to effectively “match-fund” the required capital for our Core Portfolio and our share of Fund acquisitions through the issuance of Common Shares over extended periods employing a price averaging strategy. In addition, from time to time, we have issued and may issue, equity in follow-on offerings separate from our ATM Program. Net proceeds raised through our ATM Program and follow-on offerings are primarily used for acquisitions, both for our Core Portfolio and our pro-rata share of Fund acquisitions, and for general corporate purposes. We did not make any sales under the ATM program during the nine months ended September 30, 2023.

Fund Capital

During the nine months ended September 30, 2023, Fund V called for capital contributions of $39.1 million, of which our aggregate share was $8.7 million. In October, Fund V called for capital contributions of $20.4 million, of which our aggregate share was $4.1 million. At September 30, 2023, unfunded capital commitments from noncontrolling interests within Funds II, III, IV and V were zero, $1.4 million, $32.2 million and $106.3 million, respectively.

Other Transactions

The contractual lock-up restrictions on our investment in Albertsons expired in January 2023, and we received 1.6 million shares. During the three months ended September 30, 2023, we sold 100,000 shares of Albertsons, generating net proceeds of $2.4 million. At September 30, 2023, we held 1.5 million shares which had a fair value of $35.2 million (Note 4, Note 8). In addition, during the nine months ended September 30, 2023, we recognized dividend income of $28.9 million (inclusive of the $28.2 million special dividend received from Mervyns II investment in Albertsons prior to the expiration of the lockup), of which the Company's share was $11.8 million (Note 8).

In April and June 2023, Fund II received $2.0 million, or $1.1 million at the Company’s share, of proceeds from the Century 21 Department Stores LLC bankruptcy claim (Note 11).

Structured Financing Repayments

During the nine months ended September 30, 2023, Fund V refinanced a $31.7 million bridge loan at an unconsolidated property that was originated by Fund V at acquisition. We also have one Structured Financing investment in the amount of $21.6 million including accrued interest (exclusive of default interest and other amounts due on the loan that have not been recognized) that previously matured and has not been repaid (Note 3).

Financing and Debt

As of September 30, 2023, we had $180.4 million of additional capacity under existing Core Portfolio and Fund revolving debt facilities. In addition, at that date within our Core and Fund portfolios, we had 93 unleveraged consolidated properties with an aggregate carrying value of approximately $1.8 billion, although there can be no assurance that we would be able to obtain financing for these properties at favorable terms, if at all.

Inflation and Economic Condition Considerations

The year ended December 31, 2022 and nine months ended September 30, 2023 were impacted by significant volatility in global markets, largely driven by rising inflation, rising interest rates, slowing economic growth, geopolitical uncertainty and instability in the banking sector following multiple bank failures. Central banks have responded to rapidly rising inflation by tightening monetary policies that are likely to create headwinds to economic growth. The Federal Reserve has raised interest rates eleven times since January 2022, and has signaled that further interest rate increases may be forthcoming throughout 2023 and into 2024. The rate hikes enacted by the Federal Reserve have had a significant impact on interest rate indexes such as SOFR and the Prime Rate. As of September 30, 2023, approximately 79.5% of our outstanding debt is fixed or effectively fixed rate with the remaining 20.5% indexed to LIBOR, SOFR or Prime plus an applicable margin per the loan agreement. As of September 30, 2023, we were counterparty to 36 interest rate swap agreements and four interest rate cap agreements, all of which qualify for and are designated as hedging instruments, which helps to alleviate the impact of rising interest rates on our operations.

We believe we manage our properties in a cost-conscious manner to minimize recurring operational expenses and utilize multi-year contracts to alleviate the impact of inflation on our business and our tenants. Most of our leases require tenants to pay their share of operating expenses, including common area maintenance, real estate taxes and insurance, thereby reducing our exposure to increases in costs and operating expenses resulting from inflation. These provisions are designed to partially mitigate the impact of inflation; however, current inflation levels are much greater than the contractual rent increases we obtain from our tenant base. We also continue to see consumer confidence and we expect to continue to add value to our portfolio through executing on our current leasing momentum, our active development and redevelopment projects, and leasing pipeline.

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On April 23, 2023, Bed Bath and Beyond filed Chapter 11 bankruptcy protection causing them to reject their leases at several of our properties. Bed Bath and Beyond’s leases represents two locations within our Core Portfolio and three locations in our Fund Portfolio. The bankruptcy of any of our tenants, which may cause them to reject their leases, or not to renew their leases as they expire, could have an adverse effect on our cash flows or property values. For the nine months ended September 30, 2023, we accelerated the amortization of the below-market lease intangible of $8.1 million related to the Bed Bath and Beyond lease termination.

While we have not experienced any material negative impacts at this time, we intend to actively manage our business to respond to the ongoing economic and social impact from such events. See Risk Factors in Part I, Item 1A, of our Annual Report on Form 10-K for the year ended December 31, 2022.

HISTORICAL CASH FLOW

The following table compares the historical cash flow for the nine months ended September 30, 2023 with the cash flow for the nine months ended September 30, 2022 (in millions, totals may not add due to rounding):

 

		Nine Months Ended September 30,
		2023				2022				Variance
Net cash provided by operating activities		$	115.2			$	100.5			$	14.7
Net cash used in investing activities			(90.1	)			(144.9	)			54.8
Net cash (used in) provided by financing activities			(30.1	)			47.6				(77.7	)
(Decrease) increase in cash and restricted cash		$	(5.0	)		$	3.1			$	(8.1	)

Operating Activities

Net cash provided by operating activities primarily consists of cash inflows from dividend income and rental revenue, and cash outflows for property operating expenses, general and administrative expenses and interest and debt expense.

Our operating activities provided $14.7 million more cash for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022, primarily due to the $28.2 million dividend received from our investment in Albertsons in 2023, offset by higher payments of interest in 2023.

Investing Activities

Net cash used in investing activities is impacted by our investments in and advances to unconsolidated affiliates, the timing and extent of our real estate development, capital improvements, and acquisition and disposition activities during the period.

Our investing activities used $54.8 million less cash for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022, primarily due to (i) $194.4 million less cash used for the acquisition of properties, and (ii) $117.9 million less cash used in our investments in and advances to unconsolidated affiliates. These sources of cash were primarily offset by (i) $195.4 million less cash received from the disposition of properties, (ii) $21.7 million less cash received from return of capital from unconsolidated affiliates, (iii) $29.5 million less cash received from repayment of notes receivable, and (iv) $14.4 million more cash used in development, construction, and property improvements.

Financing Activities

Net cash used in financing activities is impacted by the timing and extent of issuances of debt and equity securities, distributions paid to common shareholders and unitholders of the Operating Partnership as well as principal and other payments associated with our outstanding indebtedness.

Our financing activities used $77.7 million more cash during the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022, primarily from (i) $119.5 million less cash provided by the sale of Common Shares, (ii) $77.6 million less cash provided by contributions from noncontrolling interests, and (iii) $3.9 million more cash used in dividends paid to Common shareholders. These decreases were offset by (i) $51.3 million more cash received in proceeds from debt, (ii) $42.8 million less cash used for distributions to noncontrolling interests, (iii) $24.3 million less cash used for the acquisition of noncontrolling interests, and (iv) $5.4 million from lower financing costs.

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OFF-BALANCE SHEET ARRANGEMENTS

We have the following investments made through joint ventures (that may include, among others, tenancy-in common and other similar investments) for the purpose of investing in operating properties. We account for these investments using the equity method of accounting. As such, our financial statements reflect our investment and our share of income and loss from, but not the individual assets and liabilities, of these joint ventures.

See Note 4 in the Notes to Condensed Consolidated Financial Statements, for a discussion of our unconsolidated investments. The Operating Partnership’s pro-rata share of unconsolidated non-recourse debt related to those investments is as follows (dollars in millions):

 

		Operating Partnership								September 30, 2023
Investment		Ownership Percentage				Pro-rata Share of Mortgage Debt				Effective Interest Rate (a)				Maturity Date
Renaissance			20.0	%		$	32.0				7.68	%		Oct 2023
Gotham(c)			49.0	%			8.5				8.33	%		Dec 2023
3104 M Street			20.0	%			0.8				8.50	%		Jan 2024
Eden			22.8	%			5.5				7.60	%		Sep 2024
Crossroads			49.0	%			29.3				3.94	%		Oct 2024
Tri City Plaza(c)			18.1	%			6.9				2.94	%		Oct 2024
Frederick Crossing(c)			18.1	%			4.3				3.26	%		Dec 2024
Paramus Plaza(b)			11.6	%			3.3				7.66	%		Dec 2024
Frederick County Square(c)			18.1	%			4.2				4.11	%		Jan 2025
840 N Michigan			88.4	%			65.0				4.36	%		Feb 2025
Wood Ridge Plaza(b)			18.1	%			5.8				8.63	%		Mar 2025
650 Bald Hill			20.8	%			3.2				3.75	%		Jun 2026
La Frontera			18.1	%			10.0				6.11	%		Jun 2027
Riverdale			18.0	%			6.9				7.79	%		Nov 2027
Georgetown			50.0	%			7.3				4.72	%		Dec 2027
Mohawk Commons			18.1	%			7.2				5.80	%		Mar 2028
Shoppes at South Hills(c)			18.1	%			5.8				5.95	%		Mar 2028
Total						$	206.0

 

 

CRITICAL ACCOUNTING POLICIES

Management’s discussion and analysis of financial condition and results of operations is based upon our Condensed Consolidated Financial Statements, which have been prepared in accordance with GAAP. The preparation of Condensed Consolidated Financial Statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We base our estimates on historical experience and assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe there have been no material changes to the items that we disclosed as our critical accounting policies under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our 2022 Annual Report on Form 10-K.

Recently Issued and Adopted Accounting Pronouncements

Reference is made to Note 1 of the condensed consolidated financial statements for information about recently issued accounting pronouncements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Information as of September 30, 2023

Our primary market risk exposure is to changes in interest rates related to our mortgage and other debt. See Note 7 in the Notes to Condensed Consolidated Financial Statements, for certain quantitative details related to our mortgage and other debt.

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Currently, we manage our exposure to fluctuations in interest rates primarily through the use of fixed-rate debt and interest rate swap and cap agreements. As of September 30, 2023, we had total mortgage and other notes payable of $1,832.3 million, excluding the unamortized premium of $0.3 million and net unamortized debt issuance costs of $12.4 million, of which $1,456.2 million, or 79.5% was fixed-rate, inclusive of debt with rates fixed through the use of derivative financial instruments, and $376.0 million, or 20.5%, was variable-rate based upon LIBOR, SOFR or Prime rates plus certain spreads. As of September 30, 2023, we were party to 36 interest rate swaps and four interest rate cap agreements to hedge our exposure to changes in interest rates with respect to $1,250.8 million and $154.1 million of variable-rate debt, respectively. For a discussion of the risks associated with the discontinuation of LIBOR, see Item 1A. “Risk Factors—Risks Related to Our Liquidity and Indebtedness on our Annual Report on Form 10-K for the year ended December 31, 2022 — If we decided to employ higher leverage levels, we would be subject to increased debt service requirements and a higher risk of default on our debt obligations, which could adversely affect our financial conditions, cash flows and ability to make distributions to our shareholders. In addition, increases or changes in interest rates could cause our borrowing costs to rise and may limit our ability to refinance debt”.

The following table sets forth information as of September 30, 2023 concerning our long-term debt obligations, including principal cash flows by scheduled maturity (without regard to available extension options) and weighted average effective interest rates of maturing amounts (dollars in millions):

Core Consolidated Mortgage and Other Debt

 

Year		Scheduled Amortization				Maturities				Total				Weighted-Average Interest Rate
2023 (Remainder)		$	0.5			$	—			$	0.5				—	%
2024			1.8				7.3				9.1				4.7	%
2025			2.1				252.3				254.4				4.2	%
2026			2.4				400.0				402.4				4.2	%
2027			2.2				200.1				202.3				4.1	%
Thereafter			4.3				161.6				165.9				4.6	%
		$	13.3			$	1,021.3			$	1,034.6

 

Fund Consolidated Mortgage and Other Debt

 

Year		Scheduled Amortization				Maturities				Total				Weighted-Average Interest Rate
2023 (Remainder)		$	1.4			$	133.1			$	134.5				8.4	%
2024			3.9				239.7				243.6				4.1	%
2025			0.6				322.8				323.4				7.0	%
2026			0.3				34.0				34.3				8.0	%
2027			0.4				—				0.4				—	%
Thereafter			0.2				61.3				61.5				6.0	%
		$	6.8			$	790.9			$	797.7

 

Mortgage Debt in Unconsolidated Partnerships (at our Pro-Rata Share)

 

Year		Scheduled Amortization				Maturities				Total				Weighted-Average Interest Rate
2023 (Remainder)		$	0.4			$	40.5			$	40.9				7.8	%
2024			1.4				49.0				50.4				4.5	%
2025			0.6				74.8				75.4				4.7	%
2026			0.6				3.0				3.6				3.8	%
2027			0.6				22.8				23.4				6.2	%
Thereafter			—				12.3				12.3				5.9	%
		$	3.6			$	202.4			$	206.0

 

Without regard to available extension options, in the remainder of 2023, $135.0 million of our total consolidated debt and $40.9 million of our pro-rata share of unconsolidated outstanding debt will become due. In addition, $252.8 million of our total consolidated debt and $50.4 million of our pro-rata share of unconsolidated debt will become due in 2024. As it relates to the aforementioned maturing debt in 2023 and 2024, we have options to extend consolidated debt aggregating $20.3 million and $0.0 million, respectively; however, there can be no assurance that the Company will be able successfully execute any or all of its available extension options.

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As we intend on refinancing some or all of such debt at the then-existing market interest rates, which may be greater than the current interest rates, our interest expense would increase by approximately $4.8 million annually if the interest rate on the refinanced debt increased by 100 basis points. After giving effect to noncontrolling interests, our share of this increase would be $0.9 million. Interest expense on our variable-rate debt of $376.0 million, net of variable to fixed-rate swap agreements currently in effect, as of September 30, 2023, would increase $3.8 million if corresponding rate indices increased by 100 basis points. After giving effect to noncontrolling interests, our share of this increase would be $1.5 million. We may seek additional variable-rate financing if and when pricing and other commercial and financial terms warrant. As such, we would consider hedging against the interest rate risk related to such additional variable-rate debt through interest rate swaps and protection agreements, or other means.

Based on our outstanding debt balances as of September 30, 2023, the fair value of our total consolidated outstanding debt would decrease by approximately $6.8 million if interest rates increase by 1%. Conversely, if interest rates decrease by 1%, the fair value of our total outstanding debt would increase by approximately $6.2 million.

As of September 30, 2023, and December 31, 2022, we had consolidated notes receivable of $123.8 million and $123.9 million, respectively. We determined the estimated fair value of our notes receivable by discounting future cash receipts utilizing a discount rate equivalent to the rate at which similar notes receivable would be originated under conditions then existing.

Based on our outstanding notes receivable balances as of September 30, 2023, the fair value of our total outstanding notes receivable would decrease by approximately $0.9 million if interest rates increase by 1%. Conversely, if interest rates decrease by 1%, the fair value of our total outstanding notes receivable would increase by approximately $0.8 million.

Summarized Information as of December 31, 2022

As of December 31, 2022, we had total mortgage and other notes payable of $1,805.4 million, excluding the unamortized premium of $0.3 million and unamortized debt issuance costs of $12.7 million, of which $1,440.8 million, or 79.8% was fixed-rate, inclusive of debt with rates fixed through the use of derivative financial instruments, and $364.6 million, or 20.2%, was variable-rate based upon LIBOR rates plus certain spreads. As of December 31, 2022, we were party to 36 interest rate swap and three interest rate cap agreements to hedge our exposure to changes in interest rates with respect to $1,264.0 million and $103.8 million of LIBOR or SOFR-based variable-rate debt, respectively.

Interest expense on our variable-rate debt of $364.6 million as of December 31, 2022, would have increased $3.6 million if corresponding rate indices increased by 100 basis points. Based on our outstanding debt balances as of December 31, 2022, the fair value of our total outstanding debt would have decreased by approximately $0.4 million if interest rates increased by 1%. Conversely, if interest rates decreased by 1%, the fair value of our total outstanding debt would have increased by approximately $2.6 million.

Changes in Market Risk Exposures from December 31, 2022 to September 30, 2023

Our interest rate risk exposure from December 31, 2022, to September 30, 2023, has increased on an absolute basis, as the $364.6 million of variable-rate debt as of December 31, 2022 has increased to $376.0 million as of September 30, 2023. As a percentage of our overall debt, our interest rate exposure has increased as our variable-rate debt accounted for 20.2% of our consolidated debt as of December 31, 2022 compared to 20.5% as of September 30, 2023.

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ITEM 4. CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

Our disclosure controls and procedures include internal controls and other procedures designed to provide reasonable assurance that information required to be disclosed in this and other reports filed under the Exchange Act, is recorded, processed, summarized, and reported within the required time periods specified in the SEC’s rules and forms; and that such information is accumulated and communicated to management, including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosures. It should be noted that no system of controls can provide complete assurance of achieving a company’s objectives and that future events may impact the effectiveness of a system of controls. Our chief executive officer and chief financial officer, after conducting an evaluation, together with members of our management, of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2023, have concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) were effective as of September 30, 2023, at a reasonable level of assurance.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

 

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PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

From time to time, we are a party to various legal proceedings, claims or regulatory inquiries and investigations arising out of, or incident to, our ordinary course of business. While we are unable to predict with certainty the outcome of any particular matter, management does not expect, when such matters are resolved, that our resulting exposure to loss contingencies, if any, will have a material adverse effect on our consolidated financial position.

ITEM 1A. RISK FACTORS.

Except to the extent additional factual information disclosed elsewhere in this Report relates to such risk factors (including, without limitation, the matters discussed in Part I, “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations”), there were no material changes to the risk factors disclosed in Part I, “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2022.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Not applicable.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

Trading Arrangements

During the three months ended September 30, 2023, none of our officers or trustees (as defined in Rule 16a-1(f) of the Exchange Act) adopted, terminated, or modified any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any non-Rule 10b5-1 trading arrangement (as defined in Item 408 of Regulation S-K).

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ITEM 6. EXHIBITS.

The following is an index to all exhibits including (i) those filed with this Quarterly Report on Form 10-Q and (ii) those incorporated by reference herein:

 

Exhibit No.			Description			Method of Filing
31.1		Certification of Chief Executive Officer pursuant to rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002			Filed herewith
31.2		Certification of Chief Financial Officer pursuant to rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002			Filed herewith
32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002			Furnished herewith
32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002			Furnished herewith
101.INS		XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.			Filed herewith
101.SCH		Inline XBRL Taxonomy Extension Schema Document			Filed herewith
101.CAL		Inline XBRL Taxonomy Extension Calculation Document			Filed herewith
101.DEF		Inline XBRL Taxonomy Extension Definitions Document			Filed herewith
101.LAB		Inline XBRL Taxonomy Extension Labels Document			Filed herewith
101.PRE		Inline XBRL Taxonomy Extension Presentation Document			Filed herewith
104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)			Filed herewith

 

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.

 

		ACADIA REALTY TRUST
		(Registrant)
By:		/s/ Kenneth F. Bernstein
		Kenneth F. Bernstein
		Chief Executive Officer,
		President and Trustee
By:		/s/ John Gottfried
		John Gottfried
		Executive Vice President and
		Chief Financial Officer
By:		/s/ Richard Hartmann
		Richard Hartmann
		Senior Vice President and
		Chief Accounting Officer

 

Dated: October 31, 2023

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