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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 March 31, 2024
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)
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MARYLAND (State or other jurisdiction of incorporation or organization) |
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23-2715194 (I.R.S. Employer Identification No.) |
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411 THEODORE FREMD AVENUE, SUITE 300, RYE, NY (Address of principal executive offices) |
10580 (Zip Code) |
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(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.
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YES ☒ |
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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).
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YES ☒ |
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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 |
☐ |
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Non-accelerated Filer |
☐ |
Smaller Reporting Company |
☐ |
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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 April 26, 2024 there were 103,181,468 common shares of beneficial interest, par value $0.001 per share (“Common Shares”), outstanding.
ACADIA REALTY TRUST AND SUBSIDIARIES
FORM 10-Q
INDEX
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Item No. |
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Description |
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Page |
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1. |
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4 |
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Condensed Consolidated Balance Sheets (Unaudited) as of March 31, 2024 and December 31, 2023 |
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4 |
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5 |
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6 |
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7 |
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8 |
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Notes to Condensed Consolidated Financial Statements (Unaudited) |
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10 |
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2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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36 |
3. |
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47 |
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4. |
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49 |
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1. |
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50 |
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1A. |
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50 |
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2. |
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50 |
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3. |
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50 |
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4. |
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50 |
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5. |
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50 |
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6. |
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51 |
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52 |
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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; (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 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, 2023 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 Notes to the Condensed Consolidated Financial Statements of the registrant referenced in Part I, Item 1. Financial Statements.
3
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
ACADIA REALTY TRUST AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
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March 31, |
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December 31, |
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(in thousands, except share amounts) |
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2024 |
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2023 |
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ASSETS |
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Investments in real estate, at cost |
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Operating real estate, net |
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$ |
3,499,695 |
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$ |
3,517,281 |
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Real estate under development |
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96,594 |
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94,799 |
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Net investments in real estate |
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3,596,289 |
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3,612,080 |
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Notes receivable, net ($1,416 and $1,279 of allowance for credit losses as of March 31, 2024 and December 31, 2023, respectively) |
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118,877 |
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124,949 |
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Investments in and advances to unconsolidated affiliates |
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198,702 |
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197,240 |
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Other assets, net |
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212,699 |
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208,460 |
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Right-of-use assets - operating leases, net |
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28,348 |
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29,286 |
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Cash and cash equivalents |
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18,795 |
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17,481 |
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Restricted cash |
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8,119 |
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7,813 |
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Marketable securities |
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27,274 |
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33,284 |
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Rents receivable, net |
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51,532 |
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49,504 |
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Assets of properties held for sale |
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11,147 |
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11,057 |
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Total assets (a) |
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$ |
4,271,782 |
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$ |
4,291,154 |
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LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY |
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Liabilities: |
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Mortgage and other notes payable, net |
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$ |
962,468 |
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$ |
930,127 |
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Unsecured notes payable, net |
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646,524 |
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726,727 |
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Unsecured line of credit |
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114,687 |
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213,287 |
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Accounts payable and other liabilities |
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218,116 |
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229,375 |
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Lease liability - operating leases |
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30,620 |
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31,580 |
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Dividends and distributions payable |
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19,978 |
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18,520 |
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Distributions in excess of income from, and investments in, unconsolidated affiliates |
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7,858 |
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7,982 |
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Total liabilities (a) |
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2,000,251 |
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2,157,598 |
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Commitments and contingencies (Note 9) |
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Redeemable noncontrolling interests (Note 10) |
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45,462 |
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50,339 |
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Equity: |
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Acadia Shareholders' Equity |
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Common shares, $0.001 par value per share, authorized 200,000,000 shares, issued and outstanding 103,155,933 and 95,361,676 shares, respectively |
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103 |
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95 |
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Additional paid-in capital |
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2,078,295 |
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1,953,521 |
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Accumulated other comprehensive income |
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46,942 |
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32,442 |
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Distributions in excess of accumulated earnings |
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(364,440 |
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(349,141 |
) |
Total Acadia shareholders’ equity |
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1,760,900 |
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1,636,917 |
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Noncontrolling interests |
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465,169 |
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446,300 |
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Total equity |
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2,226,069 |
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2,083,217 |
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Total liabilities, redeemable noncontrolling interests, and equity |
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$ |
4,271,782 |
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$ |
4,291,154 |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
ACADIA REALTY TRUST AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
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Three Months Ended March 31, |
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(in thousands, except per share amounts) |
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2024 |
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2023 |
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Revenues |
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Rental |
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$ |
86,037 |
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$ |
80,737 |
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Other |
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5,319 |
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1,102 |
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Total revenues |
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91,356 |
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81,839 |
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Expenses |
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Depreciation and amortization |
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34,940 |
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33,173 |
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General and administrative |
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9,768 |
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9,946 |
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Real estate taxes |
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12,346 |
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11,479 |
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Property operating |
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19,096 |
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15,133 |
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Total expenses |
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76,150 |
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69,731 |
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Loss related to a previously disposed property |
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(1,198 |
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— |
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Operating income |
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14,008 |
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12,108 |
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Equity in (losses) earnings of unconsolidated affiliates |
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(312 |
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29 |
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Interest income |
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5,238 |
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4,818 |
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Realized and unrealized holding (losses) gains on investments and other |
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(2,051 |
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26,757 |
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Interest expense |
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(23,709 |
) |
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(21,587 |
) |
(Loss) income from continuing operations before income taxes |
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(6,826 |
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22,125 |
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Income tax provision |
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(31 |
) |
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(123 |
) |
Net (loss) income |
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(6,857 |
) |
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22,002 |
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Net loss attributable to redeemable noncontrolling interests |
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2,554 |
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2,075 |
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Net loss (income) attributable to noncontrolling interests |
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7,572 |
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(10,717 |
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Net income attributable to Acadia shareholders |
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$ |
3,269 |
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$ |
13,360 |
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Basic income per share |
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$ |
0.03 |
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$ |
0.14 |
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Diluted income per share |
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$ |
0.03 |
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$ |
0.14 |
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Weighted average shares for basic income per share |
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102,128 |
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95,189 |
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Weighted average shares for diluted income per share |
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102,128 |
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95,189 |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
5
ACADIA REALTY TRUST AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
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Three Months Ended March 31, |
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(in thousands) |
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2024 |
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2023 |
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Net (loss) income |
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$ |
(6,857 |
) |
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$ |
22,002 |
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Other comprehensive income (loss): |
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Unrealized gain (loss) on valuation of derivatives |
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25,819 |
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(15,242 |
) |
Reclassification of realized interest on swap derivatives |
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(8,833 |
) |
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(6,553 |
) |
Other comprehensive income (loss) |
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16,986 |
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(21,795 |
) |
Comprehensive income |
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10,129 |
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|
207 |
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Comprehensive loss attributable to redeemable noncontrolling interests |
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2,554 |
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|
2,075 |
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Comprehensive loss (income) attributable to noncontrolling interests |
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5,086 |
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(5,736 |
) |
Comprehensive income (loss) attributable to Acadia shareholders |
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$ |
17,769 |
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$ |
(3,454 |
) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
ACADIA REALTY TRUST AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)
Three Months Ended March 31, 2024 and 2023
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Acadia Shareholders |
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(in thousands, except per share amounts) |
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Common |
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Share |
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Additional |
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Accumulated |
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Distributions |
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Total |
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Noncontrolling |
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Total |
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Redeemable Noncontrolling |
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Balance as of January 1, 2024 |
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95,362 |
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$ |
95 |
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$ |
1,953,521 |
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$ |
32,442 |
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$ |
(349,141 |
) |
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$ |
1,636,917 |
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$ |
446,300 |
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$ |
2,083,217 |
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$ |
50,339 |
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Conversion of OP Units to Common Shares by limited partners of the Operating Partnership |
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|
795 |
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1 |
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12,912 |
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— |
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— |
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12,913 |
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(12,913 |
) |
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— |
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— |
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Issuance of Common Shares, net |
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6,987 |
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7 |
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|
113,841 |
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— |
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— |
|
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|
113,848 |
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— |
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|
113,848 |
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Dividends/distributions declared ($0.18 per Common Share/OP Unit) |
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— |
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— |
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— |
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— |
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(18,568 |
) |
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(18,568 |
) |
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(1,453 |
) |
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(20,021 |
) |
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— |
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City Point Loan accrued interest |
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— |
|
|
|
— |
|
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|
— |
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— |
|
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|
— |
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— |
|
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— |
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|
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— |
|
|
|
(2,323 |
) |
Employee and trustee stock compensation, net |
|
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12 |
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|
|
— |
|
|
|
202 |
|
|
|
— |
|
|
|
— |
|
|
|
202 |
|
|
|
4,043 |
|
|
|
4,245 |
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|
|
— |
|
Capital call receivable |
|
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— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(6,153 |
) |
|
|
(6,153 |
) |
|
|
— |
|
Noncontrolling interest distributions |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(5,459 |
) |
|
|
(5,459 |
) |
|
|
— |
|
Noncontrolling interest contributions |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
43,709 |
|
|
|
43,709 |
|
|
|
— |
|
Comprehensive income (loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
14,500 |
|
|
|
3,269 |
|
|
|
17,769 |
|
|
|
(5,086 |
) |
|
|
12,683 |
|
|
|
(2,554 |
) |
Reallocation of noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
(2,181 |
) |
|
|
— |
|
|
|
— |
|
|
|
(2,181 |
) |
|
|
2,181 |
|
|
|
— |
|
|
|
— |
|
Balance as of March 31, 2024 |
|
|
103,156 |
|
|
$ |
103 |
|
|
$ |
2,078,295 |
|
|
$ |
46,942 |
|
|
$ |
(364,440 |
) |
|
$ |
1,760,900 |
|
|
$ |
465,169 |
|
|
$ |
2,226,069 |
|
|
$ |
45,462 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|||||||||
Balance as of 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 |
|
|
37 |
|
|
|
— |
|
|
|
631 |
|
|
|
— |
|
|
|
— |
|
|
|
631 |
|
|
|
(631 |
) |
|
|
— |
|
|
|
— |
|
Dividends/distributions declared ($0.18 per Common Share/OP Unit) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(17,131 |
) |
|
|
(17,131 |
) |
|
|
(1,343 |
) |
|
|
(18,474 |
) |
|
|
— |
|
City Point Loan accrued interest |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,320 |
) |
Employee and trustee stock compensation, net |
|
|
50 |
|
|
|
— |
|
|
|
988 |
|
|
|
— |
|
|
|
— |
|
|
|
988 |
|
|
|
3,897 |
|
|
|
4,885 |
|
|
|
— |
|
Noncontrolling interest distributions |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(70,868 |
) |
|
|
(70,868 |
) |
|
|
— |
|
Noncontrolling interest contributions |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
31,242 |
|
|
|
31,242 |
|
|
|
— |
|
Comprehensive (loss) income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(16,814 |
) |
|
|
13,360 |
|
|
|
(3,454 |
) |
|
|
5,736 |
|
|
|
2,282 |
|
|
|
(2,075 |
) |
Reallocation of noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
(1,784 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1,784 |
) |
|
|
1,784 |
|
|
|
— |
|
|
|
— |
|
Balance as of March 31, 2023 |
|
|
95,208 |
|
|
$ |
95 |
|
|
$ |
1,945,157 |
|
|
$ |
30,003 |
|
|
$ |
(304,173 |
) |
|
$ |
1,671,082 |
|
|
$ |
459,181 |
|
|
$ |
2,130,263 |
|
|
$ |
63,269 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
ACADIA REALTY TRUST AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
|
|
Three Months Ended March 31, |
|
|||||
(in thousands) |
|
2024 |
|
|
2023 |
|
||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
||
Net (loss) income |
|
$ |
(6,857 |
) |
|
$ |
22,002 |
|
Adjustments to reconcile net (loss) income to net cash provided by operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
34,940 |
|
|
|
33,173 |
|
Loss related to a previously disposed property |
|
|
1,198 |
|
|
|
— |
|
Net unrealized holding losses on investments |
|
|
2,015 |
|
|
|
2,059 |
|
Stock compensation expense |
|
|
4,245 |
|
|
|
4,885 |
|
Straight-line rents |
|
|
(76 |
) |
|
|
(767 |
) |
Equity in losses (gains) of unconsolidated affiliates |
|
|
312 |
|
|
|
(29 |
) |
Distributions of operating income from unconsolidated affiliates |
|
|
1,245 |
|
|
|
1,097 |
|
Adjustments to straight-line rent reserves |
|
|
— |
|
|
|
473 |
|
Amortization of financing costs |
|
|
1,766 |
|
|
|
1,647 |
|
Non-cash lease expense |
|
|
938 |
|
|
|
901 |
|
Adjustments to allowance for credit loss |
|
|
(73 |
) |
|
|
326 |
|
Other, net |
|
|
(1,232 |
) |
|
|
(1,568 |
) |
Changes in assets and liabilities: |
|
|
|
|
|
|
||
Rents receivable |
|
|
(3,253 |
) |
|
|
3,562 |
|
Other liabilities |
|
|
(2,844 |
) |
|
|
(1,281 |
) |
Accounts payable and accrued expenses |
|
|
(3,164 |
) |
|
|
(6,256 |
) |
Prepaid expenses and other assets |
|
|
(2,213 |
) |
|
|
118 |
|
Lease liability - operating leases |
|
|
(959 |
) |
|
|
(910 |
) |
Net cash provided by operating activities |
|
|
25,988 |
|
|
|
59,432 |
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
||
Investments in and advances to unconsolidated affiliates |
|
|
(2,532 |
) |
|
|
(24,911 |
) |
Development, construction and property improvement costs |
|
|
(12,775 |
) |
|
|
(12,529 |
) |
Refund of deposits for properties under purchase contract |
|
|
— |
|
|
|
930 |
|
Return of capital from unconsolidated affiliates |
|
|
2,615 |
|
|
|
35,406 |
|
Payment of deferred leasing costs |
|
|
(1,132 |
) |
|
|
(2,508 |
) |
Proceeds from sale of marketable securities |
|
|
3,995 |
|
|
|
— |
|
Proceeds from repayment of notes receivable |
|
|
6,000 |
|
|
|
— |
|
Net cash used in investing activities |
|
|
(3,829 |
) |
|
|
(3,612 |
) |
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
||
Proceeds from unsecured debt |
|
|
31,750 |
|
|
|
43,309 |
|
Principal payments on unsecured debt |
|
|
(210,950 |
) |
|
|
(88,395 |
) |
Proceeds from the sale of Common Shares |
|
|
113,848 |
|
|
|
— |
|
Capital contributions from noncontrolling interests |
|
|
37,556 |
|
|
|
31,242 |
|
Principal payments on mortgage and other notes |
|
|
(12,976 |
) |
|
|
(2,196 |
) |
Distributions to noncontrolling interests |
|
|
(6,790 |
) |
|
|
(22,999 |
) |
Dividends paid to Common Shareholders |
|
|
(17,165 |
) |
|
|
(17,122 |
) |
Proceeds received from mortgage and other notes |
|
|
45,553 |
|
|
|
— |
|
Payment of deferred financing and other costs |
|
|
(1,323 |
) |
|
|
(498 |
) |
Payments of finance lease obligations |
|
|
(42 |
) |
|
|
— |
|
Net cash used in financing activities |
|
|
(20,539 |
) |
|
|
(56,659 |
) |
Increase (decrease) in cash and restricted cash |
|
|
1,620 |
|
|
|
(839 |
) |
Cash and cash equivalents of $17,481 and $17,158 and restricted cash of $7,813 and $15,063, respectively, beginning of period |
|
|
25,294 |
|
|
|
32,221 |
|
Cash and cash equivalents of $18,795 and $17,125 and restricted cash of $8,119 and $14,257, respectively, end of period |
|
$ |
26,914 |
|
|
$ |
31,382 |
|
8
ACADIA REALTY TRUST AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Continued)
|
|
Three Months Ended March 31, |
|
|||||
(in thousands) |
|
2024 |
|
|
2023 |
|
||
Supplemental disclosure of cash flow information |
|
|
|
|
|
|
||
Cash paid during the period for interest, net of capitalized interest of $1,648 and $1,928 respectively (a) |
|
$ |
31,612 |
|
|
$ |
23,107 |
|
Cash paid for income taxes, net of refunds |
|
$ |
31 |
|
|
$ |
123 |
|
|
|
|
|
|
|
|
||
Supplemental disclosure of non-cash investing and financing activities |
|
|
|
|
|
|
||
Dividends/distributions declared and payable |
|
$ |
19,898 |
|
|
$ |
18,351 |
|
Conversion of Common OP Units to Common Shares |
|
$ |
12,913 |
|
|
$ |
631 |
|
Accrued interest on note receivable recorded to redeemable noncontrolling interest |
|
$ |
2,362 |
|
|
$ |
2,307 |
|
Recognition of non-refundable deposit upon expiration of sale agreement |
|
$ |
3,315 |
|
|
$ |
— |
|
Distributions to noncontrolling interests of marketable securities |
|
$ |
— |
|
|
$ |
49,117 |
|
Reclassification of investment in unconsolidated affiliate to marketable securities |
|
$ |
— |
|
|
$ |
32,745 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).
9
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Organization, Basis of Presentation and Summary of Significant Accounting Policies
Organization
Acadia Realty Trust (the “Trust”, collectively with its consolidated subsidiaries, the “Company”), a Maryland real estate investment trust (“REIT”), is a fully-integrated equity REIT focused on the ownership, acquisition, development, and management of retail properties located primarily in high-barrier-to-entry, supply-constrained, densely populated metropolitan areas in the United States.
All of the Company’s assets are held by, and all of its operations are conducted through, Acadia Realty Limited Partnership (the “Operating Partnership”) and entities in which the Operating Partnership owns an interest. As of March 31, 2024 and December 31, 2023, the Trust controlled approximately 95% of the Operating Partnership as the sole general partner and is entitled to share, in proportion to its percentage interest, in the cash distributions and profits and losses of the Operating Partnership. The limited partners primarily represent entities or individuals that contributed their interests in certain properties or entities to the Operating Partnership in exchange for common or preferred units of limited partnership interest (“Common OP Units” or “Preferred OP Units”) and employees who have been awarded restricted Common OP Units (“LTIP Units”) as long-term incentive compensation (Note 13). Limited partners holding Common OP and LTIP Units are generally entitled to exchange their units on a one-for-one basis for common shares of beneficial interest, par value $0.001 per share, of the Company (“Common Shares”). This structure is referred to as an umbrella partnership REIT or “UPREIT.”
As of March 31, 2024, the Company has ownership interests in 149 properties within its core portfolio, which consist 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 its funds (“Core Portfolio”). The Company also has ownership interests in 52 properties within its opportunity funds, Acadia Strategic Opportunity Fund II, LLC (“Fund II”), Acadia Strategic Opportunity Fund III LLC (“Fund III”), Acadia Strategic Opportunity Fund IV LLC (“Fund IV”), and Acadia Strategic Opportunity Fund V LLC (“Fund V” and, collectively with Fund II, Fund III and Fund IV, the “Funds”). The 201 Core Portfolio and Fund properties primarily consist of street and urban retail and suburban shopping centers. In addition, the Company, together with the investors in the Funds, invested in operating companies through Acadia Mervyn Investors II, LLC (“Mervyns II”), all on a non-recourse basis.
The Operating Partnership is the sole general partner or managing member of the Funds and Mervyns II and earns fees or priority distributions for asset management, property management, construction, development, leasing, and legal services. Cash flows from the Funds and Mervyns II are distributed pro-rata to their respective partners and members (including the Operating Partnership) until each receives a certain cumulative return (“Preferred Return”) and the return of all capital contributions. Thereafter, remaining cash flow is distributed 20% to the Operating Partnership (“Promote”) and 80% to the partners or members (including the Operating Partnership). All transactions between the Funds and the Operating Partnership have been eliminated in consolidation.
The following table summarizes the general terms and Operating Partnership’s equity interests in the Funds and Mervyns II (dollars in millions):
Entity |
|
Formation |
|
Operating |
|
|
Capital Called |
|
|
Unfunded |
|
|
Equity Interest |
|
|
Preferred |
|
|
Total |
|
||||||
Fund II and Mervyns II (c) |
|
6/2004 |
|
|
61.67 |
% |
|
$ |
559.4 |
|
|
$ |
0.0 |
|
|
|
61.67 |
% |
|
|
8 |
% |
|
$ |
172.9 |
|
Fund III |
|
5/2007 |
|
|
24.54 |
% |
|
|
448.1 |
|
|
|
1.9 |
|
|
|
24.54 |
% |
|
|
6 |
% |
|
|
603.5 |
|
Fund IV |
|
5/2012 |
|
|
23.12 |
% |
|
|
506.0 |
|
|
|
24.0 |
|
|
|
23.12 |
% |
|
|
6 |
% |
|
|
221.4 |
|
Fund V |
|
8/2016 |
|
|
20.10 |
% |
|
|
459.6 |
|
|
|
60.4 |
|
|
|
20.10 |
% |
|
|
6 |
% |
|
|
112.6 |
|
10
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Basis of Presentation
The interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the full fiscal year. The information furnished in the accompanying condensed consolidated financial statements reflects all adjustments that, in the opinion of management, are necessary for a fair presentation of the aforementioned condensed consolidated financial statements for the interim periods. Such adjustments consisted of normal recurring items.
GAAP requires the Company’s management to make estimates and assumptions that affect the amounts reported in the interim condensed consolidated financial statements and accompanying notes. The most significant assumptions and estimates relate to the valuation of real estate, depreciable lives, revenue recognition and the collectability of notes receivable and rents receivable. Application of these estimates and assumptions requires the exercise of judgment as to future uncertainties and, as a result, actual results could differ from these estimates.
These interim condensed consolidated financial statements should be read in conjunction with the Company’s 2023 consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.
Recent Accounting Pronouncements
In August 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ASU 2023-05, “Business Combinations - Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement” (“ASU 2023-05”). ASU 2023-05 addresses the accounting for contributions made to a joint venture, upon formation, in a joint venture’s separate financial statements. Prior to the amendment, the FASB did not provide specific authoritative guidance on the initial measurement of assets and liabilities assumed by a joint venture upon its formation. ASU 2023-05 requires a joint venture to recognize and initially measure its assets and liabilities at fair value (with exceptions to fair value measurement that are consistent with the business combinations guidance). ASU 2023-05 is effective for all joint venture formations with a formation date on or after January 1, 2025, with early adoption permitted. The Company has elected not to early adopt ASU 2023-05 and does not expect the adoption will have a significant impact on our consolidated financial statements.
In November 2023, the FASB issued ASU 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”). ASU 2023-07 provides for additional disclosures as it relates to the Company’s segments. Additional requirements per the update include disclosures for significant segment expenses, measures of profit or loss used by the Chief Operating Decision Maker and how these measures are used to allocate resources and assess segment performance. The amendments in ASU 2023-07 will also apply to entities with a single reportable segment. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023. The Company is evaluating the impact of this update on its disclosures and will adopt the amendments in its December 31, 2024 Annual Report on Form 10-K.
In March 2024, the SEC issued final climate-disclosure rules to enhance and standardize climate-related disclosures by public companies. With regards to financial statements, the rules requires disclosure of (i) capitalized costs, expenditures expensed, charges, and losses incurred as a result of severe weather events and other natural conditions, subject to applicable 1% and de minimis disclosure thresholds; (ii) capitalized costs, expenditures expensed, and losses related to carbon offsets and renewable energy credits or certificates (RECs) if used as a material component of a company’s plans to achieve its disclosed climate-related targets or goals; and (iii) if the estimates and assumptions the company uses to produce the financial statements were materially impacted by risks and uncertainties associated with severe weather events and other natural conditions or any disclosed climate-related targets or transition plans, a qualitative description of how the development of such estimates and assumptions was impacted. The rules are effective for annual periods beginning January 1, 2025 and are to be applied prospectively. On April 4, 2024, the SEC voluntarily stayed the rules pending judicial review as a result of litigation.
Any other recently issued accounting standards or pronouncements not disclosed above have been excluded as they are not relevant to the Company, or they are not expected to have a material impact on the condensed consolidated financial statements.
11
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
2. Real Estate
The Company’s consolidated real estate is comprised of the following for the periods presented (in thousands):
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
|
|
|
|
|
|
|
||
Land |
|
$ |
871,084 |
|
|
$ |
872,228 |
|
Buildings and improvements |
|
|
3,137,273 |
|
|
|
3,128,650 |
|
Tenant improvements |
|
|
264,548 |
|
|
|
257,955 |
|
Construction in progress |
|
|
22,884 |
|
|
|
23,250 |
|
Right-of-use assets - finance leases (Note 11) |
|
|
58,637 |
|
|
|
58,637 |
|
Total |
|
|
4,354,426 |
|
|
|
4,340,720 |
|
Less: Accumulated depreciation and amortization |
|
|
(854,731 |
) |
|
|
(823,439 |
) |
Operating real estate, net |
|
|
3,499,695 |
|
|
|
3,517,281 |
|
Real estate under development |
|
|
96,594 |
|
|
|
94,799 |
|
Net investments in real estate |
|
$ |
3,596,289 |
|
|
$ |
3,612,080 |
|
Acquisitions
During the three months ended March 31, 2024, the Company did not acquire any consolidated retail properties or other real estate investments.
Dispositions
During the three months ended March 31, 2024, the Company did not dispose of any consolidated retail properties or other real estate investments. The Company recorded a $1.2 million loss related to a Fund IV property that was sold in 2019 in connection with a post-closing dispute.
Properties Held for Sale
The Company had two properties classified as held for sale as of March 31, 2024 and one property classified as held for sale as of December 31, 2023. The property as of December 31, 2023 was moved to Investments in real estate, at cost during the first quarter of 2024, as the Company no longer believes it is probable the asset will be disposed within the next twelve months. The Company sold the two properties held for sale as of March 31, 2024 in April 2024 and repaid the related debt upon disposition (Note 16). Assets of the held for sale properties consisted of the following:
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Assets |
|
|
|
|
|
|
||
Land |
|
$ |
4,524 |
|
|
$ |
3,380 |
|
Buildings and improvements |
|
|
8,412 |
|
|
|
12,562 |
|
Tenant improvements |
|
|
44 |
|
|
|
1,010 |
|
Less: Accumulated depreciation and amortization |
|
|
(1,833 |
) |
|
|
(5,895 |
) |
|
|
$ |
11,147 |
|
|
$ |
11,057 |
|
Real Estate Under Development
Real estate under development represents the Company’s consolidated properties that have not yet been placed into service while undergoing substantial development or construction.
12
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Development activity for the Company’s consolidated properties comprised the following during the periods presented (dollars in thousands):
|
|
January 1, 2024 |
|
|
Three Months Ended March 31, 2024 |
|
|
March 31, 2024 |
|
|||||||||||||||||||
|
|
Number of |
|
|
Carrying |
|
|
Transfers In |
|
|
Capitalized |
|
|
Transfers Out |
|
|
Number of |
|
|
Carrying |
|
|||||||
Core |
|
|
2 |
|
|
$ |
66,083 |
|
|
$ |
— |
|
|
$ |
1,615 |
|
|
$ |
— |
|
|
|
2 |
|
|
|
67,698 |
|
Fund III |
|
|
1 |
|
|
|
28,716 |
|
|
|
— |
|
|
|
180 |
|
|
|
— |
|
|
|
1 |
|
|
|
28,896 |
|
Total |
|
|
3 |
|
|
$ |
94,799 |
|
|
$ |
— |
|
|
$ |
1,795 |
|
|
$ |
— |
|
|
|
3 |
|
|
$ |
96,594 |
|
The number of properties in the tables above refers to projects comprising the entire property under development; however, certain projects represent a portion of a property. As of March 31, 2024, consolidated development projects included: portions of the Henderson 1 & 2 Portfolio in the Core Portfolio, and Broad Hollow Commons in Fund III.
During the three months ended March 31, 2024, the Company did not place any assets into service.
Construction in progress pertains to construction activity at the Company’s operating properties that are in service and continue to operate during the construction period.
3. Notes Receivable, Net
Earnings from these notes and mortgages receivable are reported within the Company’s Structured Financing segment (Note 12). Interest receivable is included in Other assets, net (Note 5). The Company’s notes receivable, net are generally collateralized either by the underlying properties or the borrowers’ ownership interests in the entities that own the properties, and were as follows (dollars in thousands):
|
|
March 31, |
|
|
December 31, |
|
|
March 31, 2024 |
||||||||
Description |
|
2024 |
|
|
2023 |
|
|
Number |
|
|
Maturity Date |
|
Interest Rate |
|||
Core Portfolio (a) |
|
$ |
120,293 |
|
|
$ |
126,228 |
|
|
|
5 |
|
|
Apr 2020 - Dec 2027 |
|
4.65% - 10.00% |
Allowance for credit losses |
|
|
(1,416 |
) |
|
|
(1,279 |
) |
|
|
|
|
|
|
|
|
Notes receivable, net |
|
$ |
118,877 |
|
|
$ |
124,949 |
|
|
|
5 |
|
|
|
|
|
Changes in the Company’s credit allowance were as follows (in thousands):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
|
|
|
|
|
|
|
||
Allowance for credit losses as of beginning of periods |
|
$ |
1,279 |
|
|
$ |
898 |
|
Provision of loan losses |
|
|
137 |
|
|
|
(64 |
) |
Total - credit losses and reserves |
|
$ |
1,416 |
|
|
$ |
834 |
|
Due to the lack of comparability across the Structured Financing portfolio, each note was evaluated separately. As a result, the Company did not elect the collateral-dependent allowance for credit losses practical expedient for four of its notes with a total amortized cost of $122.9 million, inclusive of accrued interest of $20.5 million, for which an allowance for credit losses has been recorded aggregating $1.4 million as of March 31, 2024. For one note in this portfolio, aggregating $21.6 million, inclusive of accrued interest of $3.8 million as of March 31, 2024, the Company has elected to apply the practical expedient in accordance with ASC 326 and did not establish an allowance for credit losses because (i) this note is a collateral-dependent note, which due to their settlement terms is not expected to be settled in cash but rather by the Company’s possession of the real estate collateral; and (ii) as of March 31, 2024, the Company determined that the estimated fair value of the collateral at the expected realization date for this loans was sufficient to cover the carrying value of its investments in this note receivable.
13
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
One Core Portfolio note aggregating $21.6 million including accrued interest (exclusive of default interest and other amounts due on the loan that have not been recognized) was in default as of March 31, 2024 and December 31, 2023. On April 1, 2020, the loan matured and was not repaid. The Company expects to take appropriate actions to recover the amounts due under the loan and has issued a reservation of rights letter to the borrowers and guarantor, reserving all of its rights and remedies under the applicable loan documents and otherwise. The Company has determined that the collateral for this loan is sufficient to cover the loan’s carrying value as of March 31, 2024 and December 31, 2023.
During the three months ended March 31, 2024, the Company:
14
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
4. Investments in and Advances to Unconsolidated Affiliates
The Company accounts for its investments in and advances to unconsolidated affiliates primarily under the equity method of accounting. The Company’s investments in and advances to unconsolidated affiliates consist of the following (dollars in thousands):
|
|
|
|
Ownership Interest |
|
March 31, |
|
|
December 31, |
|
||
Portfolio |
|
Property |
|
March 31, 2024 |
|
2024 |
|
|
2023 |
|
||
|
|
|
|
|
|
|
|
|
|
|
||
Core: |
|
Renaissance Portfolio |
|
20% |
|
$ |
30,552 |
|
|
$ |
30,745 |
|
|
|
Gotham Plaza |
|
49% |
|
|
30,650 |
|
|
|
30,772 |
|
|
|
Georgetown Portfolio (a) |
|
50% |
|
|
4,235 |
|
|
|
4,230 |
|
|
|
1238 Wisconsin Avenue (a, b) |
|
80% |
|
|
19,346 |
|
|
|
19,719 |
|
|
|
840 N. Michigan Avenue (c) |
|
91.85% |
|
|
18,964 |
|
|
|
15,761 |
|
|
|
|
|
|
|
|
103,747 |
|
|
|
101,227 |
|
|
|
|
|
|
|
|
|
|
|
|
||
Fund IV: |
|
Fund IV Other Portfolio |
|
90% |
|
|
4,924 |
|
|
|
5,221 |
|
|
|
650 Bald Hill Road |
|
90% |
|
|
9,438 |
|
|
|
9,486 |
|
|
|
Paramus Plaza |
|
50% |
|
|
— |
|
|
|
70 |
|
|
|
|
|
|
|
|
14,362 |
|
|
|
14,777 |
|
|
|
|
|
|
|
|
|
|
|
|
||
Fund V: |
|
Family Center at Riverdale (c) |
|
89.42% |
|
|
2,260 |
|
|
|
2,552 |
|
|
|
Tri-City Plaza |
|
90% |
|
|
6,094 |
|
|
|
6,452 |
|
|
|
Frederick County Acquisitions |
|
90% |
|
|
12,560 |
|
|
|
11,345 |
|
|
|
Wood Ridge Plaza |
|
90% |
|
|
10,475 |
|
|
|
10,313 |
|
|
|
La Frontera Village |
|
90% |
|
|
16,574 |
|
|
|
17,483 |
|
|
|
Shoppes at South Hills |
|
90% |
|
|
10,684 |
|
|
|
11,707 |
|
|
|
Mohawk Commons |
|
90% |
|
|
15,669 |
|
|
|
16,434 |
|
|
|
|
|
|
|
|
74,316 |
|
|
|
76,286 |
|
|
|
|
|
|
|
|
|
|
|
|
||
Various: |
|
Due from (to) Related Parties |
|
|
|
|
1,764 |
|
|
|
396 |
|
|
|
Other (d) |
|
|
|
|
4,513 |
|
|
|
4,554 |
|
|
|
Investments in and advances to |
|
|
|
$ |
198,702 |
|
|
$ |
197,240 |
|
|
|
|
|
|
|
|
|
|
|
|
||
Core: |
|
Crossroads (e) |
|
49% |
|
$ |
7,680 |
|
|
$ |
7,982 |
|
|
|
|
|
|
|
|
|
|
|
|
||
Fund IV: |
|
Paramus Plaza (e) |
|
50% |
|
|
178 |
|
|
|
— |
|
|
|
Distributions in excess of income from, |
|
|
|
$ |
7,858 |
|
|
$ |
7,982 |
|
Fees from Unconsolidated Affiliates
The Company earned property management, construction, development, legal and leasing fees from its investments in unconsolidated affiliates totaling $0.1 million for each of the three months ended March 31, 2024 and 2023, which are included in Other revenues in the Condensed Consolidated Statements of Operations.
In addition, the Company's joint ventures paid third party fees of $1.1 million and $0.6 million for the three months ended March 31, 2024 and 2023, for leasing commissions, development, management, construction and overhead fees.
15
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Summarized Financial Information of Unconsolidated Affiliates
The following combined and condensed balance sheets and statements of operations, in each period, summarize the financial information of the Company’s investments in unconsolidated affiliates that were held as of March 31, 2024, and accordingly exclude the results of any investments disposed of or consolidated prior to that date (in thousands):
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
Combined and Condensed Balance Sheets |
|
|
|
|
|
|
||
Assets: |
|
|
|
|
|
|
||
Rental property, net |
|
$ |
720,004 |
|
|
$ |
723,411 |
|
Other assets |
|
|
116,100 |
|
|
|
125,699 |
|
Total assets |
|
$ |
836,104 |
|
|
$ |
849,110 |
|
Liabilities and partners’ equity: |
|
|
|
|
|
|
||
Mortgage notes payable |
|
$ |
659,692 |
|
|
$ |
662,552 |
|
Other liabilities |
|
|
90,189 |
|
|
|
100,270 |
|
Partners’ equity |
|
|
86,223 |
|
|
|
86,288 |
|
Total liabilities and partners’ equity |
|
$ |
836,104 |
|
|
$ |
849,110 |
|
|
|
|
|
|
|
|
||
Company's share of accumulated equity |
|
$ |
129,231 |
|
|
$ |
128,690 |
|
Basis differential |
|
|
51,580 |
|
|
|
51,824 |
|
Deferred fees, net of portion related to the Company's interest |
|
|
3,756 |
|
|
|
3,794 |
|
Amounts receivable/payable by the Company |
|
|
1,764 |
|
|
|
396 |
|
Investments in and advances to unconsolidated affiliates, net of Company's |
|
|
186,331 |
|
|
|
184,704 |
|
Investments carried at fair value or cost |
|
|
4,513 |
|
|
|
4,554 |
|
Company's share of distributions in excess of income from and |
|
|
7,858 |
|
|
|
7,982 |
|
Investments in and advances to unconsolidated affiliates |
|
$ |
198,702 |
|
|
$ |
197,240 |
|
|
|
Three Months Ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Combined and Condensed Statements of Operations |
|
|
|
|
|
|
||
Total revenues |
|
$ |
28,004 |
|
|
$ |
28,218 |
|
Operating and other expenses |
|
|
(9,986 |
) |
|
|
(8,632 |
) |
Interest expense |
|
|
(10,414 |
) |
|
|
(9,233 |
) |
Depreciation and amortization |
|
|
(11,666 |
) |
|
|
(8,901 |
) |
Gain on extinguishment of debt |
|
|
1,158 |
|
|
|
— |
|
Net (loss) gain attributable to unconsolidated affiliates |
|
$ |
(2,904 |
) |
|
$ |
1,452 |
|
|
|
|
|
|
|
|
||
Company’s share of equity in net (losses) earnings of unconsolidated affiliates |
|
$ |
(68 |
) |
|
$ |
276 |
|
Basis differential amortization |
|
|
(244 |
) |
|
|
(247 |
) |
Company’s equity in (losses) earnings of unconsolidated affiliates |
|
$ |
(312 |
) |
|
$ |
29 |
|
16
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
5. Other Assets, Net and Accounts Payable and Other Liabilities
Other assets, net and accounts payable and other liabilities are comprised of the following for the periods presented:
|
|
March 31, |
|
|
December 31, |
|
||
(in thousands) |
|
2024 |
|
|
2023 |
|
||
Other Assets, Net: |
|
|
|
|
|
|
||
Lease intangibles, net (Note 6) |
|
$ |
93,679 |
|
|
$ |
100,594 |
|
Derivative financial instruments (Note 8) |
|
|
40,841 |
|
|
|
28,989 |
|
Deferred charges, net (A) |
|
|
30,617 |
|
|
|
31,074 |
|
Accrued interest receivable (Note 3) |
|
|
27,004 |
|
|
|
25,553 |
|
Prepaid expenses |
|
|
12,802 |
|
|
|
15,204 |
|
Due from seller |
|
|
2,389 |
|
|
|
2,631 |
|
Income taxes receivable |
|
|
1,839 |
|
|
|
1,141 |
|
Deposits |
|
|
574 |
|
|
|
575 |
|
Corporate assets, net |
|
|
833 |
|
|
|
924 |
|
Other receivables |
|
|
2,121 |
|
|
|
1,775 |
|
|
|
$ |
212,699 |
|
|
$ |
208,460 |
|
|
|
|
|
|
|
|
||
(A) Deferred Charges, Net: |
|
|
|
|
|
|
||
Deferred leasing and other costs |
|
$ |
74,955 |
|
|
$ |
73,908 |
|
Deferred financing costs related to line of credit |
|
|
9,879 |
|
|
|
9,829 |
|
|
|
|
84,834 |
|
|
|
83,737 |
|
Accumulated amortization |
|
|
(54,217 |
) |
|
|
(52,663 |
) |
Deferred charges, net |
|
$ |
30,617 |
|
|
$ |
31,074 |
|
|
|
|
|
|
|
|
||
Accounts Payable and Other Liabilities: |
|
|
|
|
|
|
||
Lease intangibles, net (Note 6) |
|
$ |
72,136 |
|
|
$ |
73,994 |
|
Accounts payable and accrued expenses |
|
|
58,163 |
|
|
|
61,425 |
|
Deferred income |
|
|
36,248 |
|
|
|
34,386 |
|
Tenant security deposits, escrow and other |
|
|
14,181 |
|
|
|
17,939 |
|
Lease liability - finance leases, net (Note 11) |
|
|
32,696 |
|
|
|
32,739 |
|
Derivative financial instruments (Note 8) |
|
|
4,692 |
|
|
|
8,892 |
|
|
|
$ |
218,116 |
|
|
$ |
229,375 |
|
6. Lease Intangibles
Upon acquisitions of real estate (Note 2), the Company assesses the relative fair value of acquired assets (including land, buildings and improvements, and identified intangibles such as above- and below-market leases, including below-market options and acquired in-place leases) and assumed liabilities. The lease intangibles are amortized over the remaining terms of the respective leases, including option periods where applicable.
17
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Intangible assets and liabilities are included in Other assets, net and Accounts payable and other liabilities (Note 5) on the Condensed Consolidated Balance Sheets and summarized as follows (in thousands):
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||||||||||||||||||
|
|
Gross Carrying |
|
|
Accumulated |
|
|
Net Carrying |
|
|
Gross Carrying |
|
|
Accumulated |
|
|
Net Carrying |
|
||||||
Amortizable Intangible Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
In-place lease intangible assets |
|
$ |
327,484 |
|
|
$ |
(241,194 |
) |
|
$ |
86,290 |
|
|
$ |
327,484 |
|
|
$ |
(234,808 |
) |
|
$ |
92,676 |
|
Above-market rent |
|
|
27,294 |
|
|
|
(19,905 |
) |
|
|
7,389 |
|
|
|
27,294 |
|
|
|
(19,376 |
) |
|
|
7,918 |
|
|
|
$ |
354,778 |
|
|
$ |
(261,099 |
) |
|
$ |
93,679 |
|
|
$ |
354,778 |
|
|
$ |
(254,184 |
) |
|
$ |
100,594 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Amortizable Intangible Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Below-market rent |
|
$ |
(188,098 |
) |
|
$ |
116,234 |
|
|
$ |
(71,864 |
) |
|
$ |
(188,098 |
) |
|
$ |
114,393 |
|
|
$ |
(73,705 |
) |
Above-market ground lease |
|
|
(671 |
) |
|
|
399 |
|
|
|
(272 |
) |
|
|
(671 |
) |
|
|
382 |
|
|
|
(289 |
) |
|
|
$ |
(188,769 |
) |
|
$ |
116,633 |
|
|
$ |
(72,136 |
) |
|
$ |
(188,769 |
) |
|
$ |
114,775 |
|
|
$ |
(73,994 |
) |
Amortization of in-place lease intangible assets is recorded in depreciation and amortization expense and amortization of above-market rent and below-market rent is recorded as a reduction to and increase to rental income, respectively, in the Condensed Consolidated Statements of Operations. Amortization of above-market ground leases are recorded as a reduction to rent expense in the Condensed Consolidated Statements of Operations.
The scheduled amortization of acquired lease intangible assets and assumed liabilities as of March 31, 2024 is as follows (in thousands):
Years Ending December 31, |
|
Net Increase in |
|
|
Increase to |
|
|
Reduction of |
|
|||
2024 (Remainder) |
|
$ |
3,860 |
|
|
$ |
(17,180 |
) |
|
$ |
44 |
|
2025 |
|
|
4,751 |
|
|
|
(17,914 |
) |
|
|
58 |
|
2026 |
|
|
4,523 |
|
|
|
(14,430 |
) |
|
|
58 |
|
2027 |
|
|
4,452 |
|
|
|
(11,159 |
) |
|
|
58 |
|
2028 |
|
|
4,536 |
|
|
|
(7,299 |
) |
|
|
54 |
|
18
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
7. Debt
A summary of the Company’s consolidated indebtedness is as follows (dollars in thousands):
|
|
|
|
|
Carrying Value as of |
|||
|
|
Interest Rate as of |
Maturity Date as of |
|
March 31, |
|
December 31, |
|
|
|
March 31, 2024 |
|
March 31, 2024 |
|
2024 |
|
2023 |
Mortgages Payable |
|
|
|
|
|
|
|
|
Core |
|
3.99% - 5.89% |
|
Jan 2025 - Apr 2035 |
|
$184,035 |
|
$191,830 |
Fund II (a) |
|
SOFR+2.61% |
|
Aug 2025 |
|
137,485 |
|
137,485 |
Fund III |
|
SOFR+3.75% |
|
Oct 2025 |
|
33,000 |
|
33,000 |
Fund IV (b) |
|
SOFR+2.25% - SOFR+3.33% |
|
March 2025 - Jun 2028 |
|
115,896 |
|
115,925 |
Fund V |
|
SOFR+1.80% - SOFR+2.85% |
|
Jul 2024 - Jun 2028 |
|
499,360 |
|
458,960 |
Net unamortized debt issuance costs |
|
|
|
|
|
(7,536) |
|
(7,313) |
Unamortized premium |
|
|
|
|
|
228 |
|
240 |
Total Mortgages Payable |
|
|
|
|
|
$962,468 |
|
$930,127 |
|
|
|
|
|
|
|
|
|
Unsecured Notes Payable |
|
|
|
|
|
|
|
|
Core Term Loans (c) |
|
SOFR+1.60% - SOFR+1.95% |
|
Jun 2026 - Jul 2029 |
|
$650,000 |
|
$650,000 |
Fund V Subscription Line (d) |
|
|
|
|
|
— |
|
80,600 |
Net unamortized debt issuance costs |
|
|
|
|
|
(3,476) |
|
(3,873) |
Total Unsecured Notes Payable |
|
|
|
|
|
$646,524 |
|
$726,727 |
|
|
|
|
|
|
|
|
|
Unsecured Line of Credit |
|
|
|
|
|
|
|
|
Revolving Credit Facility (c) |
|
SOFR+1.45% |
|
Jun 2025 |
|
$114,687 |
|
$213,287 |
|
|
|
|
|
|
|
|
|
Total Debt (e)(f) |
|
|
|
|
|
$1,734,463 |
|
$1,881,087 |
Net unamortized debt issuance costs |
|
|
|
|
|
(11,012) |
|
(11,186) |
Unamortized premium |
|
|
|
|
|
228 |
|
240 |
Total Indebtedness |
|
|
|
|
|
$1,723,679 |
|
$1,870,141 |
Unsecured Debt
Credit Facility
The Operating Partnership has a $700.0 million senior unsecured credit facility, as amended (the “Credit Facility”), with Bank of America, N.A. as administrative agent, comprised of a $300.0 million senior unsecured revolving credit facility (the “Revolver”) which bears interest at a floating rate based on SOFR with margins based on leverage or credit rating, and a $400.0 million senior unsecured term loan (the “Term Loan”) which bears interest at a floating rate based on SOFR with margins based on leverage or credit rating. The Credit Facility provides for an accordion feature, which allows for one or more increases in the revolving credit facility or term loan facility, for a maximum aggregate principal amount not to exceed $900.0 million. The Credit Facility is guaranteed by the Trust and certain subsidiaries of the Trust (Note 9). In April 2024, the Company amended the existing Credit Facility (Note 16).
Revolving Credit Facility
As of March 31, 2024, the Revolver bears interest at SOFR + 1.45% and matures on June 29, 2025, subject to two six-month extension options. The outstanding balance and total available credit of the Revolver was $114.7 million and $185.3 million, respectively, as of March 31, 2024, reflecting no letters of credit outstanding. The outstanding balance and total available credit of the Revolver was $213.3 million and $86.7 million, respectively, as of December 31, 2023, reflecting no letters of credit outstanding.
19
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Core Term Loans
As of March 31, 2024, the Term Loan bears interest at SOFR + 1.60% and matures on June 29, 2026.
The Operating Partnership has a $175.0 million term loan facility (the “$175.0 Million Term Loan”), with Bank of America, N.A. as administrative agent, which bears interest at a floating rate based on SOFR with margins based on leverage or credit rating, matures on April 6, 2027, and is guaranteed by the Trust and certain subsidiaries of the Trust (Note 9). As of March 31, 2024, the $175.0 Million Term Loan bears interest at SOFR + 1.60%.
The Operating Partnership has a $75.0 million term loan (the “$75.0 Million Term Loan”), with TD Bank, N.A. as administrative agent, which bears interest at a floating rate based on SOFR with margins based on leverage or credit rating, matures on July 29, 2029, and is guaranteed by the Trust and certain subsidiaries of the Trust (Note 9). As of March 31, 2024, the $75.0 Million Term Loan bears interest at SOFR + 1.95%.
Mortgages and Other Notes Payable
During the three months ended March 31, 2024, the Company (amounts represent balances at the time of transactions):
A portion of the Company’s variable-rate mortgage debt has been effectively fixed through certain cash flow hedge transactions (Note 8).
As of both March 31, 2024 and December 31, 2023, the Company’s mortgages were collateralized by 33 properties and the related tenant leases. Certain loans are cross-collateralized and contain cross-default provisions. The loan agreements contain customary representations, covenants and events of default. Certain loan agreements require the Company to comply with affirmative and negative covenants, including the maintenance of debt service coverage and leverage ratios. The Company was in compliance with its debt covenants as of March 31, 2024.
Fund IV also has an outstanding balance and total available credit on its secured bridge facility of $36.2 million and $0.0 million, respectively, as of both March 31, 2024 and December 31, 2023. The Operating Partnership has guaranteed up to $22.5 million of the Fund IV secured bridge facility (Note 9).
Scheduled Debt Principal Payments
The scheduled principal repayments, without regard to available extension options (described further below), of the Company’s consolidated indebtedness, as of March 31, 2024 are as follows (in thousands):
Year Ending December 31, |
|
Principal Repayments |
|
|
2024 (Remainder) |
|
$ |
222,787 |
|
2025 |
|
|
583,887 |
|
2026 |
|
|
454,398 |
|
2027 |
|
|
246,226 |
|
2028 |
|
|
130,959 |
|
Thereafter |
|
|
96,206 |
|
|
|
|
1,734,463 |
|
Unamortized premium |
|
|
228 |
|
Net unamortized debt issuance costs |
|
|
(11,012 |
) |
Total indebtedness |
|
$ |
1,723,679 |
|
20
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The table above does not reflect available extension options (subject to customary conditions) on consolidated debt with balances as of March 31, 2024. The Company has debt balances of $40.1 million contractually due in 2024, $438.7 million due in 2025, $27.6 million due in 2026 and $69.4 million contractually due in 2027, all of which the Company has available options to extend by up to 12 months, and for some an additional 12 months thereafter. However, there can be no assurance that the Company will be able to successfully execute any or all of its available extension options.
8. Financial Instruments and Fair Value Measurements
Items Measured at Fair Value on a Recurring Basis
The methods and assumptions described below were used to estimate the fair value of each class of financial instrument.
Marketable Equity Securities — The Company has an investment in marketable equity securities of Albertsons, which has a readily determinable market value (traded on an exchange) and is being accounted for as a Level 1 investment. This investment was included in Marketable securities on the Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023.
Derivative Financial Instruments — The Company has derivative assets, which are included in Other assets, net on the Consolidated Balance Sheets, and are comprised of interest rate swaps and caps. The Company has derivative liabilities, which are included in Accounts payable and other liabilities on the Consolidated Balance Sheets and are comprised of interest rate swaps. The derivative instruments were measured at fair value using readily observable market inputs, such as quotations on interest rates, and were classified as Level 2 as these instruments are custom, over-the-counter contracts with various bank counterparties that are not traded in an active market. See “Derivative Financial Instruments,” below.
The following table presents the Company’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis (in thousands):
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||||||||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Marketable equity securities |
|
$ |
27,274 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
33,284 |
|
|
$ |
— |
|
|
$ |
— |
|
Derivative financial instruments |
|
|
— |
|
|
|
40,841 |
|
|
|
— |
|
|
|
— |
|
|
|
28,989 |
|
|
|
— |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Derivative financial instruments |
|
|
— |
|
|
|
(4,692 |
) |
|
|
— |
|
|
|
— |
|
|
|
(8,892 |
) |
|
|
— |
|
In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
The Company did not have any transfers into or out of Level 1, Level 2, and Level 3 measurements during the three months ended March 31, 2024, and 2023.
Marketable Equity Securities
During the three months ended March 31, 2024, the Company sold 175,000 shares of Albertsons, generating net proceeds of $4.0 million. As of March 31, 2024, the Company held 1.3 million shares of Albertsons which had a fair value of $27.3 million.
During the three months ended March 31, 2024 and 2023, the Company recognized dividend income from marketable securities of $0.2 million and $28.5 million, of which the Company's share was $0.2 million and $11.4 million, respectively. These amounts are included in Realized and unrealized holding (losses) gains on investments and other on the Company's Condensed Consolidated Statements of Operations.
21
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following table represents the realized and unrealized gain (loss) on marketable securities included in Realized and unrealized holding (losses) gains on investments and other on the Company's Condensed Consolidated Statements of Operations (in thousands):
|
Three Months Ended March 31, |
|
|||||
|
2024 |
|
|
2023 |
|
||
Realized gain on marketable securities, net |
$ |
3,994 |
|
|
$ |
— |
|
Less: previously recognized unrealized gains on marketable securities sold during the period |
|
(3,994 |
) |
|
|
— |
|
Unrealized losses on marketable securities still held as of the end of the period and through the disposition date on marketable securities sold during the period |
|
(2,015 |
) |
|
|
(2,059 |
) |
Loss on Marketable securities, net |
$ |
(2,015 |
) |
|
$ |
(2,059 |
) |
Items Measured at Fair Value on a Nonrecurring Basis
Impairment Charges
The Company did not recognize any impairments during the three months ended March 31, 2024, and 2023.
Redeemable Noncontrolling Interests
The Company has redeemable noncontrolling interests related to certain properties. The Company is required to periodically review these redeemable noncontrolling interests to in order to compare the redemption value to the carrying value. See Note 10 for further discussion regarding these interests.
Derivative Financial Instruments
The Company had the following interest rate swaps and caps for the periods presented (information is as of March 31, 2024, unless otherwise noted, and dollars in thousands):
|
|
|
|
|
|
|
|
|
Strike Rate |
|
|
|
Fair Value |
|
||||||||||
Derivative |
|
Aggregate Notional Amount |
|
|
Effective Date |
|
Maturity Date |
|
Low |
|
|
High |
|
Balance Sheet |
|
March 31, |
|
|
December 31, |
|
||||
Core |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest Rate Swaps |
|
$ |
175,000 |
|
|
Oct 2023 |
|
Jul 2027 - Jul 2029 |
|
4.59% |
|
— |
|
4.69% |
|
Accounts payable and other liabilities |
|
$ |
(4,692 |
) |
|
$ |
(8,807 |
) |
Interest Rate Swaps |
|
|
681,000 |
|
|
May 2022 - May 2023 |
|
Mar 2025 - Jul 2030 |
|
1.98% |
|
— |
|
3.61% |
|
Other Assets |
|
|
33,440 |
|
|
|
22,675 |
|
|
|
$ |
856,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
28,748 |
|
|
$ |
13,868 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fund II |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest Rate Swap |
|
$ |
50,000 |
|
|
Jan 2023 |
|
Dec 2029 |
|
3.23% |
|
— |
|
3.23% |
|
Other Assets |
|
$ |
1,631 |
|
|
$ |
634 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fund III |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest Rate Cap |
|
$ |
33,000 |
|
|
Sep 2023 |
|
Oct 2025 |
|
5.50% |
|
— |
|
5.50% |
|
Other Assets |
|
$ |
25 |
|
|
$ |
26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fund IV |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest Rate Cap |
|
$ |
54,500 |
|
|
Dec 2023 |
|
Dec 2025 |
|
6.00% |
|
— |
|
6.00% |
|
Other Assets |
|
$ |
28 |
|
|
$ |
29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fund V |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest Rate Swaps |
|
$ |
342,940 |
|
|
Apr 2022 - Mar 2024 |
|
Sep 2024- Dec 2027 |
|
1.14% |
|
— |
|
4.49% |
|
Other Assets |
|
$ |
5,445 |
|
|
$ |
5,523 |
|
Interest Rate Caps |
|
|
72,307 |
|
|
Aug 2023 - Feb 2024 |
|
Jan 2025 - Sep 2025 |
|
4.50% |
|
— |
|
5.00% |
|
Other Assets |
|
|
272 |
|
|
|
102 |
|
Interest Rate Swaps |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and other liabilities |
|
|
— |
|
|
|
(85 |
) |
|
|
|
$ |
415,247 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
5,717 |
|
|
$ |
5,540 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total asset derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
40,841 |
|
|
$ |
28,989 |
|
||||
Total liability derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(4,692 |
) |
|
$ |
(8,892 |
) |
||||
22
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
All of the Company’s derivative instruments have been designated as cash flow hedges and hedge the future cash outflows on variable-rate debt (Note 7). It is estimated that approximately $24.7 million included in Accumulated other comprehensive income related to derivatives will be reclassified as a reduction to interest expense within the next twelve months. As of March 31, 2024 and December 31, 2023, no derivatives were designated as fair value hedges or hedges of net investments in foreign operations. Additionally, the Company does not use derivatives for trading or speculative purposes and currently does not have any derivatives that are not designated hedges.
Risk Management Objective of Using Derivatives
The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company manages economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources and duration of its debt funding and, from time to time, through the use of derivative financial instruments. The Company enters into derivative financial instruments to manage exposures that result in the receipt or payment of future known and uncertain cash amounts, the values of which are determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s investments and borrowings.
The Company is exposed to credit risk in the event of non-performance by the counterparties to the swaps if the derivative position has a positive balance. The Company believes it mitigates its credit risk by entering into swaps with major financial institutions. The Company continually monitors and actively manages interest costs on its variable-rate debt portfolio and may enter into additional interest rate swap positions or other derivative interest rate instruments based on market conditions.
Credit Risk-Related Contingent Features
The Company has agreements with each of its swap counterparties that contain a provision whereby if the Company defaults on certain of its unsecured indebtedness, the Company could also be declared in default on its swaps, resulting in an acceleration of payment under the swaps.
Other Financial Instruments
The Company’s other financial instruments had the following carrying values and fair values as of the dates shown (dollars in thousands, inclusive of amounts attributable to noncontrolling interests where applicable):
|
|
|
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
|||||||||||
|
|
Level |
|
|
Carrying |
|
|
Estimated |
|
|
Carrying |
|
|
Estimated |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Notes Receivable (a) |
|
|
3 |
|
|
$ |
118,877 |
|
|
$ |
118,577 |
|
|
$ |
124,949 |
|
|
$ |
124,789 |
|
City Point Loan (a) |
|
|
3 |
|
|
|
66,741 |
|
|
|
65,306 |
|
|
|
66,741 |
|
|
|
66,017 |
|
Mortgage and Other Notes Payable (a) |
|
|
3 |
|
|
|
969,776 |
|
|
|
953,467 |
|
|
|
937,200 |
|
|
|
921,563 |
|
Investment in non-traded equity securities (b) |
|
|
3 |
|
|
|
4,358 |
|
|
|
4,358 |
|
|
|
4,398 |
|
|
|
4,702 |
|
Unsecured notes payable and Unsecured line of credit (c) |
|
|
2 |
|
|
|
764,687 |
|
|
|
757,603 |
|
|
|
943,887 |
|
|
|
937,153 |
|
The Company’s cash and cash equivalents, restricted cash, rents receivable, accounts payable and certain financial instruments (classified as Level 1) included in other assets and other liabilities had fair values that approximated their carrying values due to their short maturity profiles as of March 31, 2024 and December 31, 2023.
23
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
9. Commitments and Contingencies
The Company is involved in various matters of litigation arising out of, or incidental to, its business. While the Company is unable to predict with certainty the outcome of any particular matter, management does not expect, when such litigation is resolved, that the Company’s resulting exposure to loss contingencies, if any, will have a material adverse effect on its consolidated financial position or results of operations.
Commitments and Guaranties
From time to time, the Company (or ventures in which the Company has an ownership interest) has agreed, and may in the future agree, to guarantee portions of the principal, interest and other amounts in connection with their borrowings, provide customary environmental indemnifications and nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) in connection with their borrowings and provide guarantees to lenders, tenants and other third parties for the completion of development projects.
With respect to borrowings of our consolidated entities, the Company and certain subsidiaries of the Company have guaranteed $72.5 million of principal payment guarantees on various property mortgage loans and the Fund IV secured bridge facility (Note 7). As of March 31, 2024 and December 31, 2023, no amounts related to the guarantees were recorded as liabilities in the Company’s condensed consolidated financial statements. As of March 31, 2024, the Company had no Core or Fund letters of credit outstanding, and as of December 31, 2023, the Company had no Core letters of credit and Fund letters of credit of $2.0 million. The Company has not recorded any obligation associated with these letters of credit. The majority of the letters of credit are collateral for existing indebtedness and other obligations of the Company.
Additionally, in connection with the refinancing of the La Frontera Village mortgage loan of $57.0 million, which is collateralized by the investment property, Fund V guaranteed the joint venture’s obligation under the loan. Fund V earned a fee from the joint venture for providing the guarantee. As of March 31, 2024, $0.2 million related to the guarantee was recorded as a liability in the Company’s condensed consolidated financial statements (Note 4).
In conjunction with the development and expansion of various properties, the Company has entered into agreements with general contractors for the construction or development of properties aggregating approximately $14.5 million and $15.8 million, of which the Company’s share is $11.8 million and $12.5 million as of March 31, 2024 and December 31, 2023, respectively. The Company has committed client-related obligations for tenant improvements based on executed leases aggregating approximately $21.7 million and $25.7 million, of which the Company’s share is $11.6 million and $14.6 million, as of March 31, 2024 and December 31, 2023, respectively. The timing and amounts of payments for tenant-related obligations are uncertain and may only be due upon satisfactory performance of certain conditions.
Forfeiture of Deposits
The Company entered into a purchase and sale agreement (together with subsequent amendments thereto) to sell its West Shore Expressway property in the Core Portfolio. At the request of the former potential buyer, the Company extended the closing date numerous times in exchange for additional non-refundable deposits and contributions towards the carrying costs of the property. The agreement terminated and expired by its terms in August 2023, and the deposit was forfeited to an affiliate of the Company, when, among other things, the former potential buyer failed to close on the property pursuant to the terms of the agreement. During the third quarter of 2023, the former potential buyer filed for Chapter 11 bankruptcy, which bankruptcy was dismissed during the fourth quarter, and as of March 31, 2024 is no longer subject to appeal. The Company recorded income of $3.5 million in Other revenues on the Condensed Consolidated Statements of Income for the three months ended March 31, 2024, related to the forfeiture of the non-refundable payments.
Insurance Coverage
We carry insurance coverage on our properties of different types and in amounts with deductibles that we believe are in line with coverage customarily obtained by owners of similar properties.
24
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Common Shares and Units
In January 2024, the Company completed an underwritten offering of 6,900,000 Common Shares (inclusive of the underwriters’ option to purchase 900,000 additional shares) for net proceeds of $113.0 million.
In addition to the ATM Program activity discussed below, the Company completed the following transactions in its Common Shares during the three months ended March 31, 2024:
ATM Program
The Company has an at-the-market equity issuance program (“ATM Program”) that provides the Company with an efficient vehicle for raising public equity capital to fund its needs. The Company entered into its current $250.0 million ATM Program, which includes an optional “forward sale” component, in the first quarter of 2022. The Company had approximately $220.9 million of availability under the ATM program as of March 31, 2024. The Company did not sell or issue any Common Shares on a forward basis for the three months ended March 31, 2024 or 2023. The Company sold 87,139 Common Shares under its ATM Program during the three months ended March 31, 2024 generating $1.5 million of net proceeds after related issuance costs. No such sales were made during the three months ended March 31, 2023.
Share Repurchase Program
During 2018, the Company’s board of trustees (the “Board”) approved a new share repurchase program, which authorizes management, at its discretion, to repurchase up to $200.0 million of its outstanding Common Shares. The program does not obligate the Company to repurchase any specific number of Common Shares and may be discontinued or extended at any time. The Company did not repurchase any shares during the three months ended March 31, 2024 or 2023. Under the share repurchase program $122.5 million remains available as of March 31, 2024.
Dividends and Distributions
On February 28, 2024, the Company declared the first quarter 2024 dividend of $0.18 per Common Share for holders of record as of March 28, 2024. The Company paid the first quarter dividend on April 15, 2024.
25
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Noncontrolling Interests
The following tables summarize the change in the noncontrolling interests for the three months ended March 31, 2024 and 2023 (dollars in thousands, except per unit data):
|
|
Noncontrolling |
|
|
Noncontrolling |
|
|
Total |
|
|
Redeemable Noncontrolling Interests (c) |
|
||||
Balance as of January 1, 2024 |
|
$ |
99,718 |
|
|
$ |
346,582 |
|
|
$ |
446,300 |
|
|
$ |
50,339 |
|
Distributions declared of $0.18 per Common OP Unit and distributions on Preferred OP Units |
|
|
(1,453 |
) |
|
|
— |
|
|
|
(1,453 |
) |
|
|
|
|
Net income (loss) for the three months ended March 31, 2024 |
|
|
326 |
|
|
|
(7,898 |
) |
|
|
(7,572 |
) |
|
|
(2,554 |
) |
Conversion of 795,145 Common OP Units to Common Shares by limited partners of the Operating Partnership |
|
|
(12,913 |
) |
|
|
— |
|
|
|
(12,913 |
) |
|
|
— |
|
Other comprehensive income - unrealized gain on valuation of swap agreements |
|
|
859 |
|
|
|
5,378 |
|
|
|
6,237 |
|
|
|
— |
|
Reclassification of realized interest expense on swap agreements |
|
|
(54 |
) |
|
|
(3,697 |
) |
|
|
(3,751 |
) |
|
|
— |
|
City Point Loan accrued interest |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,323 |
) |
Capital call receivable |
|
|
— |
|
|
|
(6,153 |
) |
|
|
(6,153 |
) |
|
|
— |
|
Noncontrolling interest contributions |
|
|
— |
|
|
|
43,709 |
|
|
|
43,709 |
|
|
|
— |
|
Noncontrolling interest distributions |
|
|
— |
|
|
|
(5,459 |
) |
|
|
(5,459 |
) |
|
|
— |
|
Employee Long-term Incentive Plan Unit Awards |
|
|
4,043 |
|
|
|
— |
|
|
|
4,043 |
|
|
|
— |
|
Reallocation of noncontrolling interests (d) |
|
|
2,181 |
|
|
|
— |
|
|
|
2,181 |
|
|
|
— |
|
Balance as of March 31, 2024 |
|
$ |
92,707 |
|
|
$ |
372,462 |
|
|
$ |
465,169 |
|
|
$ |
45,462 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Balance as of January 1, 2023 |
|
$ |
99,554 |
|
|
$ |
389,810 |
|
|
$ |
489,364 |
|
|
$ |
67,664 |
|
Distributions declared of $0.18 per Common OP Unit and distributions on Preferred OP Units |
|
|
(1,343 |
) |
|
|
— |
|
|
|
(1,343 |
) |
|
|
— |
|
Net income (loss) for the three months ended March 31, 2023 |
|
|
917 |
|
|
|
9,800 |
|
|
|
10,717 |
|
|
|
(2,075 |
) |
Conversion of 37,393 Common OP Units to Common Shares by limited partners of the Operating Partnership |
|
|
(631 |
) |
|
|
— |
|
|
|
(631 |
) |
|
|
— |
|
Other comprehensive income - unrealized gain on valuation of swap agreements |
|
|
(914 |
) |
|
|
(1,347 |
) |
|
|
(2,261 |
) |
|
|
— |
|
Reclassification of realized interest expense on swap agreements |
|
|
(45 |
) |
|
|
(2,675 |
) |
|
|
(2,720 |
) |
|
|
— |
|
City Point Loan accrued interest |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,320 |
) |
Noncontrolling interest contributions |
|
|
— |
|
|
|
31,242 |
|
|
|
31,242 |
|
|
|
— |
|
Noncontrolling interest distributions |
|
|
— |
|
|
|
(70,868 |
) |
|
|
(70,868 |
) |
|
|
— |
|
Employee Long-term Incentive Plan Unit Awards |
|
|
3,897 |
|
|
|
— |
|
|
|
3,897 |
|
|
|
— |
|
Reallocation of noncontrolling interests (d) |
|
|
1,784 |
|
|
|
— |
|
|
|
1,784 |
|
|
|
— |
|
Balance as of March 31, 2023 |
|
$ |
103,219 |
|
|
$ |
355,962 |
|
|
$ |
459,181 |
|
|
$ |
63,269 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
26
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Redeemable Noncontrolling Interests
Williamsburg Portfolio
In connection with the Williamsburg Portfolio acquisition in February 2022, the venture partner has a one-time right to put its 50.01% interest in the property to the Company for redemption at fair value at a future date (“Williamsburg NCI”). As it was unlikely as of the acquisition date that the venture partner would receive any consideration on redemption due to the Company’s preferential returns, the initial fair value of the Williamsburg NCI was determined to be zero. As of March 31, 2024, the Company determined there was no change in the fair value of the Williamsburg NCI.
City Point Loan
In August 2022, the Company provided a loan to other Fund II investors in City Point to fund the investors' pro rata contribution necessary to complete the refinancing of the City Point debt, of which $65.9 million was funded at closing ("City Point Loan"). The City Point Loan is collateralized by the investors' equity in City Point ("City Point NCI"). The City Point Loan, net of a $0.7 million allowance for credit loss as of March 31, 2024, is presented as a reduction of the City Point NCI balance. In connection with the City Point Loan, each partner has a one-time right to put its City Point NCI to the Company for redemption in exchange for the settlement of its proportion of the City Point Loan amount. As of March 31, 2024, the Company determined that the carrying value of the City Point NCI exceeded the maximum redemption value and no adjustment was required.
8833 Beverly Boulevard
In July 2023, the Company entered into a limited partnership agreement to own and operate the 8833 Beverly Boulevard property. Following the formation of the partnership, the Company retained a 97.0% controlling interest. At a future point in time, either party may elect a buy-out right, where either the Company may purchase the venture partner’s interest, or the venture partner may sell its 3.0% interest in the partnership (the "8833 Beverly NCI") to the Company for fair value. As a result of these redemption rights, the 8833 Beverly NCI was initially recorded at fair value. As of March 31, 2024, the redemption value of the 8833 Beverly NCI was $0.1 million. As of March 31, 2024, the Company determined that the carrying value exceeded the maximum redemption value and no adjustment was required.
Preferred OP Units
During 2016, the Operating Partnership issued 442,478 Common OP Units and 141,593 Series C Preferred OP Units to a third party to acquire Gotham Plaza (Note 4). The Series C Preferred OP Units have a value of $100.00 per unit and are entitled to a preferred quarterly distribution of $0.9375 per unit and are convertible into Common OP Units at a rate based on the share price at the time of conversion. If the share price is below $28.80 on the conversion date, each Series C Preferred OP Unit will be convertible into 3.4722 Common OP Units. If the share price is between $28.80 and $35.20 on the conversion date, each Series C Preferred OP Unit will be convertible into a number of Common OP Units equal to $100.00 divided by the closing share price. If the share price is above $35.20 on the conversion date, each Series C Preferred OP Unit will be convertible into 2.8409 Common OP Units. The Series C Preferred OP Units have a mandatory conversion date of December 31, 2025, at which time all units that have not been converted will automatically be converted into Common OP Units based on the same calculations. Through March 31, 2024, 15,209 Series C Preferred OP Units were converted into 52,613 Common OP Units and then into Common Shares.
In 1999, the Operating Partnership issued 1,580 Series A Preferred OP Units in connection with the acquisition of a property, which have a stated value of $1,000 per unit, and are entitled to a preferred quarterly distribution of the greater of (i) $22.50 (9% annually) per Series A Preferred OP Unit or (ii) the quarterly distribution attributable to a Series A Preferred OP Unit if such unit was converted into a Common OP Unit. Through March 31, 2024, 1,392 Series A Preferred OP Units were converted into 185,600 Common OP Units and then into Common Shares. The 188 remaining Series A Preferred OP Units are currently convertible into Common OP Units based on the stated value divided by $7.50. Either the Company or the holders can currently call for the conversion of the Series A Preferred OP Units at the lesser of $7.50 or the market price of the Common Shares as of the conversion date.
27
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
11. Leases
As Lessor
The Company has approximately 1,000 leases in the leasing of shopping centers and other retail properties that are either owned or, with respect to certain shopping centers, leased under long-term ground leases (see below) that expire at various dates through December 31, 2121, with renewal options. Certain leases may allow for the tenants to terminate the leases before the expiration of the lease term. Space in the properties is leased to tenants pursuant to agreements that generally provide for terms ranging from one month to sixty years and for additional rents based on certain operating expenses as well as tenants’ sales volumes.
The components of rental revenue are as follows (in thousands):
|
Three Months Ended March 31, |
|
|||||
|
2024 |
|
|
2023 |
|
||
Fixed lease revenue |
$ |
68,657 |
|
|
$ |
64,882 |
|
Variable lease revenue |
|
17,380 |
|
|
|
15,855 |
|
Total rental revenue |
$ |
86,037 |
|
|
$ |
80,737 |
|
The scheduled future minimum rental revenues from rental properties under the terms of non-cancelable tenant leases greater than one year (assuming no new or renegotiated leases or option extensions for such premises) as of March 31, 2024, are summarized as follows (in thousands):
|
|
|
|
|
Year Ending December 31, |
|
Minimum Rental |
|
|
2024 (Remainder) |
|
$ |
180,170 |
|
2025 |
|
|
240,000 |
|
2026 |
|
|
217,554 |
|
2027 |
|
|
193,180 |
|
2028 |
|
|
163,307 |
|
Thereafter |
|
|
702,061 |
|
Total |
|
$ |
1,696,272 |
|
During the three months ended March 31, 2024 and 2023, no single tenant or property collectively comprised more than 10% of the Company’s consolidated total revenues.
28
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
As Lessee
The Company has properties in its portfolio that are currently owned by third parties. We also lease real estate for equipment and office space. We lease these properties pursuant to ground leases that provide us the right to operate each such property, and generally provide terms ranging from five months to 97 years.
|
|
Minimum Rental Payments |
|
|||||
Year Ending December 31, |
|
Operating Leases (a) |
|
|
Finance |
|
||
2024 (Remainder) |
|
$ |
4,059 |
|
|
$ |
2,829 |
|
2025 |
|
|
5,329 |
|
|
|
2,311 |
|
2026 |
|
|
5,173 |
|
|
|
1,264 |
|
2027 |
|
|
4,373 |
|
|
|
1,264 |
|
2028 |
|
|
4,157 |
|
|
|
1,310 |
|
Thereafter |
|
|
15,912 |
|
|
|
154,018 |
|
|
|
|
39,003 |
|
|
|
162,996 |
|
Interest |
|
|
(8,383 |
) |
|
|
(130,300 |
) |
Total |
|
$ |
30,620 |
|
|
$ |
32,696 |
|
Additional disclosures regarding the Company’s leases as lessee are as follows (dollars in thousands):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Lease Cost |
|
|
|
|
|
|
||
Finance lease cost: |
|
|
|
|
|
|
||
Amortization of right-of-use assets |
|
$ |
249 |
|
|
$ |
226 |
|
Interest on lease liabilities |
|
|
522 |
|
|
|
106 |
|
Subtotal |
|
|
771 |
|
|
|
332 |
|
Operating lease cost |
|
|
1,331 |
|
|
|
1,337 |
|
Variable lease cost |
|
|
75 |
|
|
|
20 |
|
Total lease cost |
|
$ |
2,177 |
|
|
$ |
1,689 |
|
|
|
|
|
|
|
|
||
Other Information |
|
|
|
|
|
|
||
Weighted-average remaining lease term - finance leases (years) |
|
|
58.2 |
|
|
|
31.8 |
|
Weighted-average remaining lease term - operating leases (years) |
|
|
9.5 |
|
|
|
13.4 |
|
Weighted-average discount rate - finance leases |
|
|
6.5 |
% |
|
|
6.3 |
% |
Weighted-average discount rate - operating leases |
|
|
5.1 |
% |
|
|
5.1 |
% |
12. Segment Reporting
The Company has three reportable segments: Core Portfolio, Funds and Structured Financing. The Company’s Core Portfolio consists primarily of high-quality retail properties located primarily in high-barrier-to-entry, densely-populated metropolitan areas with a long-term investment horizon. The Company’s Funds hold primarily retail real estate in which the Company co-invests with high-quality institutional investors. The Company’s Structured Financing segment consists of earnings and expenses related to notes and mortgages receivable which are held within the Core Portfolio or the Funds (Note 3). Fees earned by the Company as the general partner or managing member of the Funds are eliminated in the Company’s condensed consolidated financial statements and are not presented in the Company’s segments.
29
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following tables set forth certain segment information for the Company (in thousands):
|
|
As of or for the Three Months Ended March 31, 2024 |
|
|||||||||||||||||
|
|
Core |
|
|
Funds |
|
|
Structured |
|
|
Unallocated |
|
|
Total |
|
|||||
Total Revenues |
|
$ |
53,538 |
|
|
$ |
37,818 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
91,356 |
|
Depreciation and amortization expenses |
|
|
(18,267 |
) |
|
|
(16,673 |
) |
|
|
— |
|
|
|
— |
|
|
|
(34,940 |
) |
General and administrative expenses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(9,768 |
) |
|
|
(9,768 |
) |
Property operating expenses, other operating and real estate taxes |
|
|
(17,919 |
) |
|
|
(13,523 |
) |
|
|
— |
|
|
|
— |
|
|
|
(31,442 |
) |
Loss related to a previously disposed property |
|
|
— |
|
|
|
(1,198 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1,198 |
) |
Operating income |
|
|
17,352 |
|
|
|
6,424 |
|
|
|
— |
|
|
|
(9,768 |
) |
|
|
14,008 |
|
Equity in earnings (losses) of unconsolidated affiliates |
|
|
2,107 |
|
|
|
(2,419 |
) |
|
|
— |
|
|
|
— |
|
|
|
(312 |
) |
Interest income |
|
|
— |
|
|
|
— |
|
|
|
5,238 |
|
|
|
— |
|
|
|
5,238 |
|
Realized and unrealized holding (losses) gains on investments and other |
|
|
(1,862 |
) |
|
|
— |
|
|
|
(189 |
) |
|
|
— |
|
|
|
(2,051 |
) |
Interest expense |
|
|
(10,037 |
) |
|
|
(13,672 |
) |
|
|
— |
|
|
|
— |
|
|
|
(23,709 |
) |
Income (loss) from continuing operations before income taxes |
|
|
7,560 |
|
|
|
(9,667 |
) |
|
|
5,049 |
|
|
|
(9,768 |
) |
|
|
(6,826 |
) |
Income tax provision |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(31 |
) |
|
|
(31 |
) |
Net income (loss) |
|
|
7,560 |
|
|
|
(9,667 |
) |
|
|
5,049 |
|
|
|
(9,799 |
) |
|
|
(6,857 |
) |
Net loss attributable to redeemable noncontrolling interests |
|
|
— |
|
|
|
2,554 |
|
|
|
— |
|
|
|
— |
|
|
|
2,554 |
|
Net (income) loss attributable to noncontrolling interests |
|
|
(366 |
) |
|
|
7,938 |
|
|
|
— |
|
|
|
— |
|
|
|
7,572 |
|
Net income attributable to Acadia shareholders |
|
$ |
7,194 |
|
|
$ |
825 |
|
|
$ |
5,049 |
|
|
$ |
(9,799 |
) |
|
$ |
3,269 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Real estate at cost (a) |
|
$ |
2,652,732 |
|
|
$ |
1,798,288 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
4,451,020 |
|
Total assets (a) |
|
$ |
2,564,745 |
|
|
$ |
1,588,160 |
|
|
$ |
118,877 |
|
|
$ |
— |
|
|
$ |
4,271,782 |
|
Cash paid for development and property improvement costs |
|
$ |
8,079 |
|
|
$ |
4,696 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
12,775 |
|
|
|
As of or for the Three Months Ended March 31, 2023 |
|
|||||||||||||||||
|
|
Core |
|
|
Funds |
|
|
Structured |
|
|
Unallocated |
|
|
Total |
|
|||||
Total Revenues |
|
$ |
49,796 |
|
|
$ |
32,043 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
81,839 |
|
Depreciation and amortization expenses |
|
|
(18,659 |
) |
|
|
(14,514 |
) |
|
|
— |
|
|
|
— |
|
|
|
(33,173 |
) |
General and administrative expenses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(9,946 |
) |
|
|
(9,946 |
) |
Property operating expenses, other operating and real estate taxes |
|
|
(16,109 |
) |
|
|
(10,503 |
) |
|
|
— |
|
|
|
— |
|
|
|
(26,612 |
) |
Operating income |
|
|
15,028 |
|
|
|
7,026 |
|
|
|
— |
|
|
|
(9,946 |
) |
|
|
12,108 |
|
Equity in earnings (losses) of unconsolidated affiliates |
|
|
1,800 |
|
|
|
(1,771 |
) |
|
|
— |
|
|
|
— |
|
|
|
29 |
|
Interest income |
|
|
— |
|
|
|
— |
|
|
|
4,818 |
|
|
|
— |
|
|
|
4,818 |
|
Realized and unrealized holding gains on investments and other |
|
|
1,482 |
|
|
|
24,995 |
|
|
|
280 |
|
|
|
— |
|
|
|
26,757 |
|
Interest expense |
|
|
(10,670 |
) |
|
|
(10,917 |
) |
|
|
— |
|
|
|
— |
|
|
|
(21,587 |
) |
Income (loss) from continuing operations before income taxes |
|
|
7,640 |
|
|
|
19,333 |
|
|
|
5,098 |
|
|
|
(9,946 |
) |
|
|
22,125 |
|
Income tax provision |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(123 |
) |
|
|
(123 |
) |
Net income |
|
|
7,640 |
|
|
|
19,333 |
|
|
|
5,098 |
|
|
|
(10,069 |
) |
|
|
22,002 |
|
Net loss attributable to redeemable noncontrolling interests |
|
|
— |
|
|
|
2,075 |
|
|
|
— |
|
|
|
— |
|
|
|
2,075 |
|
Net income attributable to noncontrolling interests |
|
|
(923 |
) |
|
|
(9,794 |
) |
|
|
— |
|
|
|
— |
|
|
|
(10,717 |
) |
Net income attributable to Acadia shareholders |
|
$ |
6,717 |
|
|
$ |
11,614 |
|
|
$ |
5,098 |
|
|
$ |
(10,069 |
) |
|
$ |
13,360 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Real estate at cost (a) |
|
$ |
2,604,244 |
|
|
$ |
1,664,665 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
4,268,909 |
|
Total assets (a) |
|
$ |
2,568,946 |
|
|
$ |
1,501,297 |
|
|
$ |
123,967 |
|
|
$ |
— |
|
|
$ |
4,194,210 |
|
Cash paid for development and property improvement costs |
|
$ |
6,686 |
|
|
$ |
5,843 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
12,529 |
|
30
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Share Incentive Plan
In March and May of 2020, respectively, the Board and the Company’s shareholders, approved the 2020 Share Incentive Plan (the “2020 Plan”), which increased the number of Common Shares authorized for issuance by 2,650,000 shares to an aggregate of 2,829,953 shares. On March 22, 2023 and May 4, 2023, respectively, the Board and the Company’s shareholders approved the Amended and Restated 2020 Share Incentive Plan (the "Amended and Restated 2020 Plan") which further increased the number of Common Shares authorized for issuance by 3,100,000 to an aggregate of 3,883,564 shares. In this report, references to issuances, compensation arrangements and expenses under the Amended and Restated 2020 Plan include issuances, compensation arrangements and expenses under the originally adopted 2020 Plan, as applicable. The 2020 Plan and the Amended and Restated 2020 Plan authorize the Company to issue options, Restricted Shares, LTIP Units and other securities (collectively “Awards”) to, among others, the Company’s officers, trustees, and employees. As of March 31, 2024 a total of 3,114,272 shares remained available to be issued under the Amended and Restated 2020 Plan.
A summary of the status of the Company’s unvested Restricted Shares and LTIP Units is presented below:
Unvested Restricted Shares and LTIP Units |
|
Common |
|
|
Weighted |
|
|
LTIP Units |
|
|
Weighted |
|
||||
Unvested as of December 31, 2022 |
|
|
92,735 |
|
|
$ |
17.31 |
|
|
|
1,465,398 |
|
|
$ |
18.59 |
|
Granted |
|
|
70,629 |
|
|
|
14.11 |
|
|
|
780,193 |
|
|
|
15.00 |
|
Vested |
|
|
(41,268 |
) |
|
|
19.09 |
|
|
|
(354,343 |
) |
|
|
20.35 |
|
Forfeited |
|
|
(8,187 |
) |
|
|
21.07 |
|
|
|
(92,589 |
) |
|
|
30.78 |
|
Unvested as of December 31, 2023 |
|
|
113,909 |
|
|
|
14.41 |
|
|
|
1,798,659 |
|
|
|
16.03 |
|
Granted |
|
|
25,423 |
|
|
|
17.03 |
|
|
|
724,045 |
|
|
|
16.13 |
|
Vested |
|
|
(12,193 |
) |
|
|
17.50 |
|
|
|
(416,713 |
) |
|
|
18.97 |
|
Forfeited |
|
|
(171 |
) |
|
|
28.06 |
|
|
|
(62,258 |
) |
|
|
26.51 |
|
Unvested as of March 31, 2024 |
|
|
126,968 |
|
|
$ |
14.62 |
|
|
|
2,043,733 |
|
|
$ |
15.15 |
|
The weighted-average grant date fair value for Restricted Shares and LTIP Units granted for the three months ended March 31, 2024 and the year ended December 31, 2023 were $16.16 and $14.93, respectively. As of March 31, 2024, there was $24.4 million of total unrecognized compensation cost related to unvested share-based compensation arrangements granted under the Amended and Restated 2020 Plan. That cost is expected to be recognized over a weighted-average period of 1.7 years. The total fair value of Restricted Shares that vested during the three months ended March 31, 2024 and the year ended December 31, 2023, was $0.2 million and $0.8 million, respectively.
Restricted Shares and LTIP Units - Employees
During the three months ended March 31, 2024, the Company issued 724,045 LTIP Units and 25,423 restricted share units (“Restricted Share Units”), to employees of the Company pursuant to the Amended and Restated 2020 Plan. These awards were measured at their fair value on the grant date, incorporating the following factors:
31
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
For valuation of the 2024 and 2023 Performance Shares, a Monte Carlo simulation was used to estimate the fair values of the Relative TSR portion based on probability of satisfying the market conditions and the projected share prices at the time of payments, discounted to the valuation dates over the three-year performance periods. The assumptions include volatility (43.0% and 48.0%) and risk-free interest rates of (4.8% and 4.3%) for 2024 and 2023, respectively. The total fair value of the 2024 and 2023 Performance Shares will be expensed over the vesting period.
The total fair value of the above Restricted Share Units and LTIP Units as of the grant date was $12.1 million for the three months ended March 31, 2024 and $11.5 million for the year ended December 31, 2023. Total long-term incentive compensation expense, including the expense related to the Amended and Restated 2020 Plan, was $2.1 million and $2.9 million for the three months ended March 31, 2024, and 2023, and is recorded in General and administrative in the Condensed Consolidated Statements of Operations.
Restricted Shares and LTIP Units - Board of Trustees
In addition, members of the Board have been issued shares and units under the Amended and Restated 2020 Plan. During the three months ended March 31, 2024, there were no LTIP Units or Restricted Shares issued to Trustees of the Company. The Restricted Shares do not carry voting rights or other rights of Common Shares until vesting and may not be transferred, assigned or pledged until the recipients have a vested non-forfeitable right to such shares. Dividends are not paid currently on unvested Restricted Shares but are paid cumulatively from the issuance date through the applicable vesting date of such Restricted Shares. Total trustee fee expense, including the expense related to the Amended and Restated 2020 Plan, was $0.4 million and $0.6 million for the three months ended March 31, 2024 and 2023, respectively, and is recorded in General and administrative in the Condensed Consolidated Statements of Operations.
Long-Term Investment Alignment Program
In 2009, the Company adopted the Long-Term Investment Alignment Program (the “Program”) pursuant to which the Company may grant awards to employees, entitling them to receive up to 25% of any potential future payments of Promote to the Operating Partnership from Funds III, IV and V. The Company has granted such awards to employees representing 25% of the potential Promote payments from Fund III to the Operating Partnership, 23.1% of the potential Promote payments from Fund IV to the Operating Partnership and 21.3% of the potential Promote payments from Fund V to the Operating Partnership. Payments to senior executives under the Program require further Board approval at the time any potential payments are due pursuant to these grants. Compensation relating to these awards will be recognized in each reporting period in which Board approval is granted.
As payments to other employees are not subject to further Board approval, compensation relating to these awards will be recorded based on the estimated fair value as of each reporting period in accordance with ASC Topic 718, Compensation– Stock Compensation. The awards in connection with Fund IV were determined to have no intrinsic value as of March 31, 2024 or December 31, 2023.
The Company did not recognize any compensation expense related to the Program for the three months ended March 31, 2024 and 2023, respectively, related to Funds III and V.
32
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Other Plans
On a combined basis, the Company incurred a total of $0.2 million of compensation expense related to the following employee benefit plans for each of the three months ended March 31, 2024 and 2023, respectively.
Employee Share Purchase Plan
The Acadia Realty Trust Employee Share Purchase Plan (the “Purchase Plan”) allows eligible employees of the Company to purchase Common Shares through payroll deductions for a maximum aggregate issuance of 200,000 Common Shares. The Purchase Plan provides for employees to purchase Common Shares on a quarterly basis at a 15% discount to the closing price of the Company’s Common Shares on either the first day or the last day of the quarter, whichever is lower. A participant may not purchase more than $25,000 in Common Shares per year. Compensation expense will be recognized by the Company to the extent of the above discount to the closing price of the Common Shares with respect to the applicable quarter. A total of 3,322 and 2,837 Common Shares were purchased by employees under the Purchase Plan for the three months ended March 31, 2024 and 2023, respectively, and 172,144 shares remained available to be issued under the Purchase Plan.
Deferred Share Plan
The Company maintains a Trustee Deferral and Distribution Election program, under which the participating Trustees earn deferred compensation.
Employee 401(k) Plan
The Company maintains a 401(k) plan for employees under which the Company currently matches 50% of a plan participant’s contribution up to 6% of the employee’s annual salary. A plan participant may contribute up to a maximum of 15% of their compensation, up to $23,000, for the year ending December 31, 2024.
Basic earnings per Common Share is computed by dividing net income attributable to Common Shareholders by the weighted-average Common Shares outstanding (Note 10). During the periods presented, the Company had unvested LTIP Units which provide for non-forfeitable rights to dividend equivalent payments. Accordingly, these unvested LTIP Units are considered participating securities and are included in the computation of basic earnings per Common Share pursuant to the two-class method.
Diluted earnings per Common Share reflects the potential dilution of the conversion of obligations and the assumed exercises of securities including the effects of Restricted Share Units issued under the Company’s Amended and Restated 2020 Plan (Note 13). The effect of such shares is excluded from the calculation of earnings per share when anti-dilutive as indicated in the table below.
The effect of the conversion of Common OP Units is not reflected in the computation of basic and diluted earnings per share, as they are exchangeable for Common Shares on a one-for-one basis. The income allocable to such units is allocated on this same basis and reflected as noncontrolling interests in the accompanying condensed consolidated financial statements. As such, the assumed conversion of these units would have no net impact on the determination of diluted earnings per share.
33
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
|
Three Months Ended March 31, |
|
|||||
(dollars in thousands, except per share data) |
|
2024 |
|
|
2023 |
|
||
Numerator: |
|
|
|
|
|
|
||
Net income attributable to Acadia shareholders |
|
$ |
3,269 |
|
|
$ |
13,360 |
|
Less: earnings attributable to unvested participating securities |
|
|
(288 |
) |
|
|
(243 |
) |
Income from continuing operations net of income attributable to participating securities for basic earnings per share |
|
$ |
2,981 |
|
|
$ |
13,117 |
|
|
|
|
|
|
|
|
||
Denominator: |
|
|
|
|
|
|
||
Weighted average shares for basic earnings per share |
|
|
102,127,715 |
|
|
|
95,189,490 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
||
Series A Preferred OP Units |
|
|
— |
|
|
|
— |
|
Employee unvested restricted shares |
|
|
— |
|
|
|
— |
|
Weighted average shares for diluted earnings per share |
|
|
102,127,715 |
|
|
|
95,189,490 |
|
|
|
|
|
|
|
|
||
Basic earnings per Common Share from continuing operations attributable to Acadia |
|
$ |
0.03 |
|
|
$ |
0.14 |
|
Diluted earnings per Common Share from continuing operations attributable to Acadia |
|
$ |
0.03 |
|
|
$ |
0.14 |
|
|
|
|
|
|
|
|
||
Anti-Dilutive Shares Excluded from Denominator: |
|
|
|
|
|
|
||
Series A Preferred OP Units |
|
|
188 |
|
|
|
188 |
|
Series A Preferred OP Units - Common share equivalent |
|
|
25,067 |
|
|
|
25,067 |
|
|
|
|
|
|
|
|
||
Series C Preferred OP Units |
|
|
126,384 |
|
|
|
126,384 |
|
Series C Preferred OP Units - Common share equivalent |
|
|
438,831 |
|
|
|
438,831 |
|
Restricted shares |
|
|
103,065 |
|
|
|
78,060 |
|
15. Variable Interest Entities
Pursuant to GAAP consolidation guidance, the Company consolidates certain VIEs for which the Company is the primary beneficiary. As of March 31, 2024 and December 31, 2023, the Company has identified seven consolidated VIEs, including the Operating Partnership and the Funds. Excluding the Operating Partnership and the Funds, the VIEs consisted of three in-service core properties: the Williamsburg Portfolio, 239 Greenwich Avenue, and 8833 Beverly Boulevard. The Operating Partnership is considered a VIE in which the Company is the primary beneficiary because the limited partners do not have substantive kick-out or participating rights. The Company consolidates these VIEs because it is the primary beneficiary in which the Company has (i) the power to direct the activities of the entity that most significantly impact the entity's economic performance, and (ii) the obligation to absorb the entity's losses or receive benefits from the entity that could potentially be significant to the entity. The third parties’ interests in these consolidated entities are reflected as noncontrolling interests in the accompanying condensed consolidated financial statements and in Note 10.
The majority of the operations of these VIEs are funded with fees earned from investment opportunities or cash flows generated from the properties. The Company has not provided financial support to any of these VIEs that it was not previously contractually required to provide, which consists primarily of funding any capital commitments and capital expenditures, which are deemed necessary to continue to operate the entity and any operating cash shortfalls the entity may experience.
34
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Since the Company conducts its business through and substantially all of its interests are held by the Operating Partnership, substantially all of the assets and liabilities on the Condensed Consolidated Balance Sheets represent the assets and liabilities of the Operating Partnership. As of March 31, 2024 and December 31, 2023, the Condensed Consolidated Balance Sheets include the following assets and liabilities of the consolidated VIEs of the Operating Partnership:
(in thousands) |
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||
VIE ASSETS |
|
|
|
|
|
|
||
Operating real estate, net |
|
$ |
1,672,427 |
|
|
$ |
1,679,779 |
|
Real estate under development |
|
|
29,031 |
|
|
|
28,851 |
|
Investments in and advances to unconsolidated affiliates |
|
|
90,221 |
|
|
|
92,802 |
|
Other assets, net |
|
|
96,673 |
|
|
|
101,679 |
|
Right-of-use assets - operating leases, net |
|
|
2,003 |
|
|
|
2,112 |
|
Cash and cash equivalents |
|
|
15,497 |
|
|
|
10,787 |
|
Restricted cash |
|
|
6,635 |
|
|
|
7,048 |
|
Rents receivable, net |
|
|
22,462 |
|
|
|
21,427 |
|
Total VIE assets (a) |
|
$ |
1,934,949 |
|
|
$ |
1,944,485 |
|
|
|
|
|
|
|
|
||
VIE LIABILITIES |
|
|
|
|
|
|
||
Mortgage and other notes payable, net |
|
$ |
804,746 |
|
|
$ |
764,614 |
|
Unsecured notes payable, net |
|
|
— |
|
|
|
80,473 |
|
Accounts payable and other liabilities |
|
|
130,544 |
|
|
|
127,162 |
|
Lease liability - operating leases, net |
|
|
2,098 |
|
|
|
2,213 |
|
Total VIE liabilities (a) |
|
$ |
937,388 |
|
|
$ |
974,462 |
|
Unconsolidated VIEs
The Company holds variable interests in certain VIEs which are not consolidated. While the Company may be responsible for managing the day-to-day operations of these investees, it is not the primary beneficiary of these VIEs, as the Company does not hold unilateral power over activities that, when taken together, most significantly impact the respective VIE's economic performance. The Company accounts for investments in these entities under the equity method (Note 4). As of March 31, 2024 and December 31, 2023, the Company has determined that the following entities are VIEs: 1238 Wisconsin Avenue and the Georgetown Portfolio. The Company's involvement with these entities is in the form of direct and indirect equity interests and fee arrangements. The maximum exposure to loss in these entities is limited to: (i) the amount of the Company's equity investment and (ii) debt guarantees (Note 9). The Company's aggregate investment in the unconsolidated VIEs assets was $45.1 million and $45.8 million as of March 31, 2024 and December 31, 2023, respectively. The Company's aggregate investment in unconsolidated VIEs liabilities was $39.6 million and $40.1 million as of March 31, 2024 and December 31, 2023, respectively.
16. Subsequent Events
On April 3, 2024, the Company disposed of two Fund IV street retail assets in San Francisco, CA, 2207 Fillmore and 2208-2216 Fillmore, for a total sales price of $14.1 million, and paid off $6.4 million of mortgages payable at closing.
On April 15, 2024, the Operating Partnership entered into a Third Amended and Restated Credit Agreement, with Bank of America, N.A., as administrative agent, to amend the existing Credit Facility (“Amended Credit Facility”). The Amended Credit Facility provides for an increase in the existing Revolver from $300.0 million to $350.0 million, which includes the capacity to issue letters of credit in an amount up to $60.0 million, and the extension of the term from June 29, 2025 to April 15, 2028, with two additional six-month extension options. The Amended Credit Facility also provides for the extension of the Term Loan from June 29, 2026 to April 15, 2028, with two additional six-month extension options. The Amended Credit Facility has an accordion feature to increase its capacity up to $900.0 million at the option of the Operating Partnership, subject to customary conditions. Borrowings under the Revolver and Term Loan will accrue interest at a floating rate based on SOFR with margins based on leverage or credit rating.
35
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
OVERVIEW
As of March 31, 2024, 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 as of March 31, 2024 is as follows:
|
|
Number of Properties |
|
|
Operating Properties |
|
||||||||||
|
|
Development or |
|
|
Operating |
|
|
GLA |
|
|
Occupancy |
|
||||
Core Portfolio: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Chicago Metro |
|
|
3 |
|
|
|
36 |
|
|
|
576,799 |
|
|
|
84.3 |
% |
New York Metro |
|
|
— |
|
|
|
29 |
|
|
|
394,301 |
|
|
|
92.6 |
% |
Los Angeles Metro |
|
|
— |
|
|
|
2 |
|
|
|
23,757 |
|
|
|
100.0 |
% |
San Francisco Metro |
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
0.0 |
% |
Dallas Metro |
|
|
2 |
|
|
|
14 |
|
|
|
121,386 |
|
|
|
86.0 |
% |
Washington DC Metro |
|
|
— |
|
|
|
32 |
|
|
|
358,182 |
|
|
|
87.0 |
% |
Boston Metro |
|
|
— |
|
|
|
1 |
|
|
|
1,050 |
|
|
|
100.0 |
% |
Suburban |
|
|
3 |
|
|
|
25 |
|
|
|
3,910,343 |
|
|
|
93.1 |
% |
Total Core Portfolio |
|
|
10 |
|
|
|
139 |
|
|
|
5,385,818 |
|
|
|
91.6 |
% |
Acadia Share of Total Core Portfolio |
|
|
10 |
|
|
|
139 |
|
|
|
5,018,615 |
|
|
|
91.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fund Portfolio: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fund II |
|
|
— |
|
|
|
1 |
|
|
|
538,097 |
|
|
|
76.1 |
% |
Fund III |
|
|
1 |
|
|
|
1 |
|
|
|
4,637 |
|
|
|
77.6 |
% |
Fund IV |
|
|
1 |
|
|
|
25 |
|
|
|
686,023 |
|
|
|
89.1 |
% |
Fund V |
|
|
— |
|
|
|
23 |
|
|
|
7,757,907 |
|
|
|
92.0 |
% |
Total Fund Portfolio |
|
|
2 |
|
|
|
50 |
|
|
|
8,986,664 |
|
|
|
90.8 |
% |
Acadia Share of Total Fund Portfolio |
|
|
2 |
|
|
|
50 |
|
|
|
1,946,772 |
|
|
|
89.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Core and Funds |
|
|
12 |
|
|
|
189 |
|
|
|
14,372,482 |
|
|
|
91.1 |
% |
Acadia Share of Total Core and Funds |
|
|
12 |
|
|
|
189 |
|
|
|
6,965,387 |
|
|
|
91.1 |
% |
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.
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:
36
SIGNIFICANT DEVELOPMENTS DURING THE THREE MONTHS ENDED MARCH 31, 2024 AND SUBSEQUENT EVENTS
Financing Activity
In April 2024, the Operating Partnership entered into a Third Amended and Restated Credit Agreement, with Bank of America, N.A., as administrative agent, to amend its existing senior unsecured credit facility (the “Amended Credit Facility”). The Amended Credit Facility provides for an increase in the existing unsecured revolving credit facility from $300.0 million to $350.0 million, which includes the capacity to issue letters of credit in an amount up to $60.0 million, and the extension of the term from June 29, 2025 to April 15, 2028, with two additional six-month extension options. The Amended Credit Facility also provides for the extension of the term on the existing $400.0 million unsecured term loan from June 29, 2026 to April 15, 2028, with two additional six-month extension options. The Amended Credit Facility has an accordion feature to increase its capacity up to $900 million at the option of the Operating Partnership, subject to customary conditions. Borrowings under the revolving credit facility and the term loan will accrue interest at a floating rate based on SOFR with margins based on leverage or credit rating.
During the three months ended March 31, 2024, we (Note 7):
Economic and Other Considerations
The three months ended March 31, 2024 and the year ended December 31, 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 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.
37
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 of operations by reportable segment for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 are summarized in the table below (in millions, totals may not add due to rounding):
|
|
Three Months Ended |
|
|
Three Months Ended |
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
|
|
March 31, 2024 |
|
|
March 31, 2023 |
|
|
Increase (Decrease) |
|
|||||||||||||||||||||||||||||||||||||||
|
|
Core |
|
|
Funds |
|
|
SF |
|
|
Total |
|
|
Core |
|
|
Funds |
|
|
SF |
|
|
Total |
|
|
Core |
|
|
Funds |
|
|
SF |
|
|
Total |
|
||||||||||||
Revenues |
|
$ |
53.5 |
|
|
$ |
37.8 |
|
|
$ |
— |
|
|
$ |
91.4 |
|
|
$ |
49.8 |
|
|
$ |
32.0 |
|
|
$ |
— |
|
|
$ |
81.8 |
|
|
$ |
3.7 |
|
|
$ |
5.8 |
|
|
$ |
— |
|
|
$ |
9.6 |
|
Depreciation and amortization |
|
|
(18.3 |
) |
|
|
(16.7 |
) |
|
|
— |
|
|
|
(34.9 |
) |
|
|
(18.7 |
) |
|
|
(14.5 |
) |
|
|
— |
|
|
|
(33.2 |
) |
|
|
(0.4 |
) |
|
|
2.2 |
|
|
|
— |
|
|
|
1.7 |
|
Property operating expenses and real estate taxes |
|
|
(17.9 |
) |
|
|
(13.5 |
) |
|
|
— |
|
|
|
(31.4 |
) |
|
|
(16.1 |
) |
|
|
(10.5 |
) |
|
|
— |
|
|
|
(26.6 |
) |
|
|
1.8 |
|
|
|
3.0 |
|
|
|
— |
|
|
|
4.8 |
|
General and administrative expenses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(9.8 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(9.9 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(0.1 |
) |
Loss related to a previously disposed property |
|
|
— |
|
|
|
(1.2 |
) |
|
|
— |
|
|
|
(1.2 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1.2 |
) |
|
|
— |
|
|
|
(1.2 |
) |
Operating income |
|
|
17.4 |
|
|
|
6.4 |
|
|
|
— |
|
|
|
14.0 |
|
|
|
15.0 |
|
|
|
7.0 |
|
|
|
— |
|
|
|
12.1 |
|
|
|
2.4 |
|
|
|
(0.6 |
) |
|
|
— |
|
|
|
1.9 |
|
Equity in earnings (losses) of unconsolidated affiliates |
|
|
2.1 |
|
|
|
(2.4 |
) |
|
|
— |
|
|
|
(0.3 |
) |
|
|
1.8 |
|
|
|
(1.8 |
) |
|
|
— |
|
|
|
— |
|
|
|
0.3 |
|
|
|
(0.6 |
) |
|
|
— |
|
|
|
(0.3 |
) |
Interest income |
|
|
— |
|
|
|
— |
|
|
|
5.2 |
|
|
|
5.2 |
|
|
|
— |
|
|
|
— |
|
|
|
4.8 |
|
|
|
4.8 |
|
|
|
— |
|
|
|
— |
|
|
|
0.4 |
|
|
|
0.4 |
|
Realized and unrealized holding (losses) gains on investments and other |
|
|
(1.9 |
) |
|
|
— |
|
|
|
(0.2 |
) |
|
|
(2.1 |
) |
|
|
1.5 |
|
|
|
25.0 |
|
|
|
0.3 |
|
|
|
26.8 |
|
|
|
(3.4 |
) |
|
|
(25.0 |
) |
|
|
(0.5 |
) |
|
|
(28.9 |
) |
Interest expense |
|
|
(10.0 |
) |
|
|
(13.7 |
) |
|
|
— |
|
|
|
(23.7 |
) |
|
|
(10.7 |
) |
|
|
(10.9 |
) |
|
|
— |
|
|
|
(21.6 |
) |
|
|
(0.7 |
) |
|
|
2.8 |
|
|
|
— |
|
|
|
2.1 |
|
Income (loss) from continuing operations before income taxes |
|
|
7.6 |
|
|
|
(9.7 |
) |
|
|
5.0 |
|
|
|
(6.8 |
) |
|
|
7.6 |
|
|
|
19.3 |
|
|
|
5.1 |
|
|
|
22.1 |
|
|
|
— |
|
|
|
29.0 |
|
|
|
0.1 |
|
|
|
28.9 |
|
Income tax (provision) benefit |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(0.1 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.1 |
|
Net income (loss) |
|
|
7.6 |
|
|
|
(9.7 |
) |
|
|
5.0 |
|
|
|
(6.9 |
) |
|
|
7.6 |
|
|
|
19.3 |
|
|
|
5.1 |
|
|
|
22.0 |
|
|
|
— |
|
|
|
(29.0 |
) |
|
|
(0.1 |
) |
|
|
(28.9 |
) |
Net loss attributable to redeemable noncontrolling interests |
|
|
— |
|
|
|
2.6 |
|
|
|
— |
|
|
|
2.6 |
|
|
|
— |
|
|
|
2.1 |
|
|
|
— |
|
|
|
2.1 |
|
|
|
— |
|
|
|
0.5 |
|
|
|
— |
|
|
|
0.5 |
|
Net (income) loss attributable to noncontrolling interests |
|
|
(0.4 |
) |
|
|
7.9 |
|
|
|
— |
|
|
|
7.6 |
|
|
|
(0.9 |
) |
|
|
(9.8 |
) |
|
|
— |
|
|
|
(10.7 |
) |
|
|
0.5 |
|
|
|
17.7 |
|
|
|
— |
|
|
|
18.3 |
|
Net income attributable to Acadia |
|
$ |
7.2 |
|
|
$ |
0.8 |
|
|
$ |
5.0 |
|
|
$ |
3.3 |
|
|
$ |
6.7 |
|
|
$ |
11.6 |
|
|
$ |
5.1 |
|
|
$ |
13.4 |
|
|
$ |
0.5 |
|
|
$ |
(10.8 |
) |
|
$ |
(0.1 |
) |
|
$ |
(10.1 |
) |
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 $0.5 million for the three months ended March 31, 2024 compared to the prior year period as a result of the changes further described below.
Revenues for our Core Portfolio increased $3.7 million for the three months ended March 31, 2024 compared to the prior year period primarily due to the recognition of a forfeited deposit within Other revenues in the Condensed Consolidated Statements of Income for a property previously under contract for sale.
Property operating expenses and real estate taxes increased $1.8 million for the three months ended March 31, 2024 compared to the prior year period primarily due to a $1.0 million reserve for increased legal expenses along with higher non-recurring operating expenses throughout the Core Portfolio.
Realized and unrealized holding (losses) gains on investments and other for our Core Portfolio decreased $3.4 million for the three months ended March 31, 2024 compared to the prior year period primarily due to a change in the mark-to-market adjustment on the Investment in Albertsons. 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, the remaining amount of which are now included in the Core Portfolio (Note 4, Note 8).
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 decreased $10.8 million for the three months ended March 31, 2024 compared to the prior year period as a result of the changes described below.
Revenues for the Funds increased $5.8 million for the three months ended March 31, 2024 compared to the prior year period primarily due (i) $4.8 million from Fund property acquisitions and (ii) $1.7 million from new tenant lease up within the Funds in 2024 and 2023.
38
Depreciation and amortization for the Funds increased $2.2 million for the three months ended March 31, 2024 compared to the prior year period primarily due to Fund property acquisitions. Property operating expenses and real estate taxes for the Funds increased $3.0 million for the three months ended March 31, 2024 compared to the prior year period primarily due to Fund property acquisitions and non-recurring property operating expenses within the Fund Portfolio.
Loss on disposition of property for the Funds increased $1.2 million for the three months ended March 31, 2024 compared to the prior year period due to a loss related to a previously disposed property (Note 2).
Realized and unrealized holding (losses) gains on investments and other for the Funds decreased $25.0 million for the three months ended March 31, 2024 compared to the prior year period primarily due to a $28.2 million increase in dividend income from Albertsons in 2023 offset by a $2.0 million mark-to-market loss in 2023.
Interest expense for the Funds increased $2.8 million for the three months ended March 31, 2024 compared to the prior year period primarily due to higher average interest rates in 2024.
Net (income) loss attributable to noncontrolling interests for the Funds increased $17.7 million for the three months ended March 31, 2024 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 $2.5 million for the three months ended March 31, 2024 and 2023, respectively.
Structured Financing
Interest and other income for the Structured Financing portfolio increased $0.4 million for the three months ended March 31, 2024 compared to the prior year period primarily due to new loans issued during the three months ended March 31, 2024.
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.”
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.
39
A reconciliation of consolidated operating income to net operating income - Core Portfolio follows (in thousands):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
|
|
|
|
|
|
|
||
Consolidated operating income |
|
$ |
14,008 |
|
|
$ |
12,108 |
|
Add back: |
|
|
|
|
|
|
||
General and administrative |
|
|
9,768 |
|
|
|
9,946 |
|
Depreciation and amortization |
|
|
34,940 |
|
|
|
33,173 |
|
Loss related to a previously disposed property |
|
|
1,198 |
|
|
|
— |
|
|
|
|
|
|
|
|
||
Less: |
|
|
|
|
|
|
||
Above/below-market rent, straight-line rent and other adjustments (a) |
|
|
(4,608 |
) |
|
|
(2,242 |
) |
Consolidated NOI |
|
|
55,306 |
|
|
|
52,985 |
|
|
|
|
|
|
|
|
||
Redeemable noncontrolling interest in consolidated NOI |
|
|
(204 |
) |
|
|
(1,217 |
) |
Noncontrolling interest in consolidated NOI |
|
|
(17,768 |
) |
|
|
(14,475 |
) |
Less: Operating Partnership's interest in Fund NOI included above |
|
|
(5,341 |
) |
|
|
(5,037 |
) |
Add: Operating Partnership's share of unconsolidated joint ventures NOI (b) |
|
|
3,961 |
|
|
|
3,959 |
|
Core Portfolio NOI |
|
$ |
35,954 |
|
|
$ |
36,215 |
|
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 (dollars in thousands):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Core Portfolio NOI |
|
$ |
35,954 |
|
|
$ |
36,215 |
|
Less properties excluded from Same-Property NOI |
|
|
(3,926 |
) |
|
|
(5,900 |
) |
Same-Property NOI |
|
$ |
32,028 |
|
|
$ |
30,315 |
|
|
|
|
|
|
|
|
||
Percent change from prior year period |
|
|
5.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
||
Components of Same-Property NOI: |
|
|
|
|
|
|
||
Same-Property Revenues |
|
$ |
46,143 |
|
|
$ |
43,782 |
|
Same-Property Operating Expenses |
|
|
(14,115 |
) |
|
|
(13,467 |
) |
Same-Property NOI |
|
$ |
32,028 |
|
|
$ |
30,315 |
|
40
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 March 31, 2024 |
|
|||||
Core Portfolio New and Renewal Leases |
|
Cash Basis |
|
|
Straight- |
|
||
Number of new and renewal leases executed |
|
|
22 |
|
|
|
22 |
|
GLA commencing |
|
|
187,851 |
|
|
|
187,851 |
|
New base rent |
|
$ |
22.49 |
|
|
$ |
22.85 |
|
Expiring base rent |
|
$ |
21.37 |
|
|
$ |
20.64 |
|
Percent growth in base rent |
|
|
5.2 |
% |
|
|
10.7 |
% |
Average cost per square foot (a) |
|
$ |
1.35 |
|
|
$ |
1.35 |
|
Weighted average lease term (years) |
|
|
4.7 |
|
|
|
4.7 |
|
(a) The average cost per square foot includes tenant improvement costs, leasing commissions and tenant allowances.
41
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 data):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
|
|
|
|
|
|
|
||
Net income attributable to Acadia |
|
$ |
3,269 |
|
|
$ |
13,360 |
|
|
|
|
|
|
|
|
||
Depreciation of real estate and amortization of leasing costs (net of |
|
|
27,087 |
|
|
|
26,444 |
|
Loss on disposition of property (net of noncontrolling interests' share) |
|
|
275 |
|
|
|
— |
|
Income attributable to Common OP Unit holders |
|
|
203 |
|
|
|
794 |
|
Distributions - Preferred OP Units |
|
|
123 |
|
|
|
123 |
|
Funds from operations attributable to Common Shareholders and |
|
$ |
30,957 |
|
|
$ |
40,721 |
|
|
|
|
|
|
|
|
||
Funds From Operations per Share - Diluted |
|
|
|
|
|
|
||
Basic weighted-average shares outstanding, GAAP earnings |
|
|
102,127,715 |
|
|
|
95,189,490 |
|
Weighted-average OP Units outstanding |
|
|
7,717,578 |
|
|
|
6,885,106 |
|
Basic weighted-average shares and OP Units outstanding, FFO |
|
|
109,845,293 |
|
|
|
102,074,596 |
|
Assumed conversion of Preferred OP Units to Common Shares |
|
|
463,898 |
|
|
|
463,898 |
|
Assumed conversion of LTIP units and Restricted Share Units to |
|
|
741,888 |
|
|
|
858 |
|
Diluted weighted-average number of Common Shares and Common |
|
|
111,051,079 |
|
|
|
102,539,352 |
|
|
|
|
|
|
|
|
||
Diluted Funds from operations, per Common Share and Common OP Unit |
|
$ |
0.28 |
|
|
$ |
0.40 |
|
42
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 three months ended March 31, 2024, we paid dividends and distributions on our Common Shares and Preferred OP Units totaling $18.6 million.
Capital Commitments
During the three months ended March 31, 2024, we made capital contributions aggregating $11.1 million to our Funds.
As of March 31, 2024, our share of the remaining capital commitments to our Funds aggregated $18.1 million as follows:
Development Activities
During the three months ended March 31, 2024, capitalized costs associated with development activities totaled $1.8 million (Note 2). As of March 31, 2024, we had a total of thirteen consolidated projects under development or redevelopment, for which the estimated total cost to complete these projects through 2025 was $44.8 million to $71.2 million, and our estimated share was approximately $23.8 million to $40.2 million. Substantially all remaining development and redevelopment costs are discretionary, and 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, 2023.
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):
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2024 |
|
|
2023 |
|
||
|
|
|
|
|
|
|
||
Total Debt - Fixed and Effectively Fixed Rate |
|
$ |
1,404,644 |
|
|
$ |
1,454,707 |
|
Total Debt - Variable Rate |
|
|
329,819 |
|
|
|
426,380 |
|
|
|
|
1,734,463 |
|
|
|
1,881,087 |
|
Net unamortized debt issuance costs |
|
|
(11,012 |
) |
|
|
(11,186 |
) |
Unamortized premium |
|
|
228 |
|
|
|
240 |
|
Total Indebtedness |
|
$ |
1,723,679 |
|
|
$ |
1,870,141 |
|
43
As of March 31, 2024, our consolidated indebtedness aggregated $1,734.5 million, excluding unamortized premium of $0.2 million and net unamortized loan costs of $11.0 million, and was 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 January 1, 2025 to April 15, 2035, without regard to available extension options. With respect to the debt maturing in 2024, we are actively pursuing refinancing the remaining obligations, though there can be no assurance that we can refinance such obligations on favorable terms or at all. Taking into consideration $1,207.6 million of notional principal under variable to fixed-rate swap agreements currently in effect, $1,404.6 million of the portfolio debt, or 81.0%, was fixed at a 4.77% weighted average interest rate and $329.8 million, or 19.0%, was floating at a 8.09% weighted average interest rate as of March 31, 2024. Our variable-rate debt includes $151.3 million of debt subject to interest rate caps.
Without regard to available extension options, as of March 31, 2024, we had $218.4 million of debt maturing in 2024 at a weighted-average interest rate of 4.27%; $4.4 million of scheduled principal amortization due in the remainder of 2024; and our share of scheduled remaining 2024 principal payments and maturities on our unconsolidated debt was $65.6 million. In addition, $309.8 million of our total consolidated debt and $61.0 million of our pro-rata share of unconsolidated debt will come due by March 31, 2025. With respect to the debt maturing in 2024 and 2025, we have options to extend consolidated debt aggregating $40.1 million and $438.7 million as of March 31, 2024 and; 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, 2023.
Share Repurchase Program
We maintain a share repurchase program under which $122.5 million remains available as of March 31, 2024 (Note 10). We did not repurchase any shares under this program during the three months ended March 31, 2024.
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 as of March 31, 2024 totaled $18.8 million. Our remaining sources of liquidity are described further below.
Issuance of Common Shares
In January 2024, the Company completed an underwritten offering of 6,900,000 Common Shares (inclusive of the underwriters’ option to purchase 900,000 additional shares) for net proceeds of $113.0 million.
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. The Company sold 87,139 Common Shares under its ATM Program during the three months ended March 31, 2024 generating $1.5 million of net proceeds.
Fund Capital
During the three months ended March 31, 2024, Fund V called for capital contributions of $52.2 million, of which our aggregate share was $11.1 million. As of March 31, 2024, unfunded capital commitments from noncontrolling interests within Funds II, III, IV and V were zero, $1.4 million, $18.5 million and $48.3 million, respectively.
44
Other Transactions
During the three months ended March 31, 2024, we sold 175,000 shares of Albertsons, generating net proceeds of $4.0 million. As of March 31, 2024, we held 1.3 million shares with a fair value of $27.3 million (Note 8). In addition, during the three months ended March 31, 2024, we recognized dividend income of $0.2 million (Note 8).
Structured Financing Repayments
During the three months ended March 31, 2024, the Company received full payment on a $6.0 million Core Portfolio note.
Financing and Debt
As of March 31, 2024, we had $185.3 million of additional capacity under existing Core Portfolio debt facilities. In addition, as of that date within our Core and Fund portfolios, we had 92 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 three months ended March 31, 2024, and the year ended December 31, 2023, were impacted by significant volatility in global markets, largely driven by rising inflation and 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 in 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 March 31, 2024, approximately 81.0% of our outstanding debt is fixed or effectively fixed rate with the remaining 19.0% indexed to SOFR or Prime plus an applicable margin per the loan agreement. As of March 31, 2024, 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.
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, 2023.
HISTORICAL CASH FLOW
The following table compares the historical cash flow for the three months ended March 31, 2024 with the cash flow for the three months ended March 31, 2023 (in millions, totals may not add due to rounding):
|
|
Three Months Ended March 31, |
|
|||||||||
|
|
2024 |
|
|
2023 |
|
|
Variance |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Net cash provided by operating activities |
|
$ |
26.0 |
|
|
$ |
59.4 |
|
|
$ |
(33.4 |
) |
Net cash used in investing activities |
|
|
(3.8 |
) |
|
|
(3.6 |
) |
|
|
(0.2 |
) |
Net cash used in financing activities |
|
|
(20.5 |
) |
|
|
(56.7 |
) |
|
|
36.2 |
|
Increase (decrease) in cash and restricted cash |
|
$ |
1.6 |
|
|
$ |
(0.8 |
) |
|
$ |
2.4 |
|
Operating Activities
Net cash provided by operating activities primarily consists of cash inflows from rental revenue, and cash outflows for property operating expenses, general and administrative expenses and interest and debt expense.
Our operating activities provided $33.4 million less cash for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, primarily due to the $28.2 million dividend received from our investment in Albertsons in 2023.
45
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 $0.2 million more cash for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, primarily due to $32.8 million less cash received from return of capital from unconsolidated affiliates. This use of cash was offset by (i) $22.4 million less cash used in our investments in and advances to unconsolidated affiliates, (ii) $6.0 million more received from proceeds from notes receivable and (iii) $4.0 million more cash received from the sale of marketable securities.
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 $36.2 million less cash during the three months ended March 31, 2024 as compared to the three months ended March 31, 2023, primarily from (i) $113.8 million more cash provided by the sale of Common Shares, (ii) $16.2 million less cash distributed to noncontrolling interests, and (iii) $6.3 million more cash provided by contributions from noncontrolling interests. These increases were offset by $99.4 million more cash used to pay debt.
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 |
|
|
March 31, 2024 |
|||||||||
Investment |
|
Ownership |
|
|
Pro-rata Share of |
|
|
Effective Interest Rate (a) |
|
|
Maturity Date |
|||
Gotham Plaza |
|
|
49.0 |
% |
|
$ |
8.4 |
|
|
|
9.32 |
% |
|
Jun 2024 |
Eden |
|
|
20.8 |
% |
|
|
5.0 |
|
|
|
7.60 |
% |
|
Sep 2024 |
Crossroads |
|
|
49.0 |
% |
|
|
28.9 |
|
|
|
3.94 |
% |
|
Oct 2024 |
Tri City Plaza(b) |
|
|
18.1 |
% |
|
|
6.9 |
|
|
|
3.04 |
% |
|
Oct 2024 |
Frederick Crossing(b) |
|
|
18.1 |
% |
|
|
4.3 |
|
|
|
3.27 |
% |
|
Dec 2024 |
Paramus Plaza(c) |
|
|
11.6 |
% |
|
|
3.2 |
|
|
|
7.67 |
% |
|
Dec 2024 |
Frederick County Square(b) |
|
|
18.1 |
% |
|
|
4.3 |
|
|
|
5.56 |
% |
|
Jan 2025 |
650 Bald Hill |
|
|
20.8 |
% |
|
|
3.2 |
|
|
|
3.75 |
% |
|
Jun 2026 |
Renaissance(c) |
|
|
20.0 |
% |
|
|
30.4 |
|
|
|
7.15 |
% |
|
Nov 2026 |
840 N Michigan |
|
|
91.9 |
% |
|
|
47.4 |
|
|
|
6.50 |
% |
|
Dec 2026 |
3104 M Street(c) |
|
|
20.0 |
% |
|
|
0.8 |
|
|
|
8.50 |
% |
|
Jan 2027 |
Wood Ridge Plaza |
|
|
18.1 |
% |
|
|
6.2 |
|
|
|
7.22 |
% |
|
Mar 2027 |
La Frontera |
|
|
18.1 |
% |
|
|
10.0 |
|
|
|
6.11 |
% |
|
Jun 2027 |
Riverdale |
|
|
18.0 |
% |
|
|
6.9 |
|
|
|
7.27 |
% |
|
Nov 2027 |
Georgetown |
|
|
50.0 |
% |
|
|
7.2 |
|
|
|
4.72 |
% |
|
Dec 2027 |
Mohawk Commons |
|
|
18.1 |
% |
|
|
7.2 |
|
|
|
5.80 |
% |
|
Mar 2028 |
Shoppes at South Hills(b) |
|
|
18.1 |
% |
|
|
5.8 |
|
|
|
5.95 |
% |
|
Mar 2028 |
Total |
|
|
|
|
$ |
186.1 |
|
|
|
|
|
|
||
46
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 2023 Annual Report on Form 10-K.
Recently Issued and Adopted Accounting Pronouncements
Reference is made to Note 1 in the Notes to Condensed Consolidated Financial Statements for information about recently issued accounting pronouncements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Information as of March 31, 2024
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.
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 March 31, 2024, we had total mortgage and other notes payable of $1,734.5 million, excluding the unamortized premium of $0.2 million and net unamortized debt issuance costs of $11.0 million, of which $1,404.6 million, or 81.0% was fixed-rate, inclusive of debt with rates fixed through the use of derivative financial instruments, and $329.8 million, or 19.0%, was variable-rate based upon LIBOR, SOFR or Prime rates plus certain spreads. As of March 31, 2024, 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 $1,207.6 million and $151.3 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, 2023 — 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 March 31, 2024 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 |
|
|
Maturities |
|
|
Total |
|
|
Weighted Average |
|
||||
2024 (Remainder) |
|
$ |
1.3 |
|
|
$ |
— |
|
|
$ |
1.3 |
|
|
|
— |
% |
2025 |
|
|
2.0 |
|
|
|
174.7 |
|
|
|
176.7 |
|
|
|
4.1 |
% |
2026 |
|
|
2.4 |
|
|
|
400.0 |
|
|
|
402.4 |
|
|
|
4.7 |
% |
2027 |
|
|
2.3 |
|
|
|
200.1 |
|
|
|
202.4 |
|
|
|
4.6 |
% |
2028 |
|
|
1.8 |
|
|
|
67.9 |
|
|
|
69.7 |
|
|
|
4.5 |
% |
Thereafter |
|
|
2.5 |
|
|
|
93.7 |
|
|
|
96.2 |
|
|
|
5.5 |
% |
|
|
$ |
12.3 |
|
|
$ |
936.4 |
|
|
$ |
948.7 |
|
|
|
|
|
47
Fund Consolidated Mortgage and Other Debt
Year |
|
Scheduled |
|
|
Maturities |
|
|
Total |
|
|
Weighted Average |
|
||||
2024 (Remainder) |
|
$ |
3.1 |
|
|
$ |
218.4 |
|
|
$ |
221.5 |
|
|
|
4.3 |
% |
2025 |
|
|
1.2 |
|
|
|
406.0 |
|
|
|
407.2 |
|
|
|
7.3 |
% |
2026 |
|
|
0.3 |
|
|
|
51.7 |
|
|
|
52.0 |
|
|
|
6.5 |
% |
2027 |
|
|
0.4 |
|
|
|
43.4 |
|
|
|
43.8 |
|
|
|
8.2 |
% |
2028 |
|
|
0.2 |
|
|
|
61.1 |
|
|
|
61.3 |
|
|
|
6.0 |
% |
Thereafter |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
% |
|
|
$ |
5.2 |
|
|
$ |
780.6 |
|
|
$ |
785.8 |
|
|
|
|
|
Mortgage Debt in Unconsolidated Partnerships (at our Pro-Rata Share)
Year |
|
Scheduled |
|
|
Maturities |
|
|
Total |
|
|
Weighted Average |
|
||||
2024 (Remainder) |
|
$ |
9.5 |
|
|
$ |
56.1 |
|
|
$ |
65.6 |
|
|
|
5.1 |
% |
2025 |
|
|
6.0 |
|
|
|
4.3 |
|
|
|
10.3 |
|
|
|
5.6 |
% |
2026 |
|
|
6.1 |
|
|
|
61.5 |
|
|
|
67.6 |
|
|
|
6.7 |
% |
2027 |
|
|
0.6 |
|
|
|
29.7 |
|
|
|
30.3 |
|
|
|
6.3 |
% |
2028 |
|
|
— |
|
|
|
12.3 |
|
|
|
12.3 |
|
|
|
5.9 |
% |
Thereafter |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
% |
|
|
$ |
22.2 |
|
|
$ |
163.9 |
|
|
$ |
186.1 |
|
|
|
|
|
Without regard to available extension options, in the remainder of 2024, $222.8 million of our total consolidated debt and $65.6 million of our pro-rata share of unconsolidated outstanding debt will become due. In addition, $583.9 million of our total consolidated debt and $10.3 million of our pro-rata share of unconsolidated debt will become due in 2025. As it relates to the aforementioned maturing debt in 2024 and 2025, we have options to extend consolidated debt aggregating $40.1 million and $438.7 million, respectively; however, there can be no assurance that the Company will be able successfully execute any or all of its available extension options. 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 $8.7 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 $4.3 million. Interest expense on our variable-rate debt of $329.8 million, net of variable to fixed-rate swap agreements currently in effect, as of March 31, 2024, would increase $3.3 million if corresponding rate indices increased by 100 basis points. After giving effect to noncontrolling interests, our share of this increase would be $1.0 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 March 31, 2024, the fair value of our total consolidated outstanding debt would decrease by approximately $5.7 million if interest rates increased by 1%. Conversely, if interest rates decreased by 1%, the fair value of our total outstanding debt would increase by approximately $5.9 million.
As of March 31, 2024, and December 31, 2023, we had consolidated notes receivable of $118.9 million and $124.9 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 March 31, 2024, the fair value of our total outstanding notes receivable would decrease by approximately $0.8 million if interest rates increased by 1%. Conversely, if interest rates decreased by 1%, the fair value of our total outstanding notes receivable would increase by approximately $0.8 million.
48
Summarized Information as of December 31, 2023
As of December 31, 2023, we had total mortgage and other notes payable of $1,881.1 million, excluding the unamortized premium of $0.2 million and unamortized debt issuance costs of $11.2 million, of which $1,454.7 million, or 77.3%, was fixed-rate, inclusive of debt with rates fixed through the use of derivative financial instruments, and $426.4 million, or 22.7%, was variable-rate based upon LIBOR rates plus certain spreads. As of December 31, 2023, 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 $1,249.8 million and $151.4 million of LIBOR or SOFR-based variable-rate debt, respectively.
Interest expense on our variable-rate debt of $426.4 million as of December 31, 2023, would have increased $4.3 million if corresponding rate indices increased by 100 basis points. Based on our outstanding debt balances as of December 31, 2023, the fair value of our total outstanding debt would have decreased by approximately $6.9 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 $6.6 million.
Changes in Market Risk Exposures from December 31, 2023 to March 31, 2024
Our interest rate risk exposure from December 31, 2023, to March 31, 2024, has decreased on an absolute basis, as the $426.4 million of variable-rate debt as of December 31, 2023 has decreased to $329.8 million as of March 31, 2024. As a percentage of our overall debt, our interest rate exposure has decreased as our variable-rate debt accounted for 22.7% of our consolidated debt as of December 31, 2023 compared to 19.0% as of March 31, 2024.
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 March 31, 2024, have concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) were effective as of March 31, 2024, 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.
49
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, 2023.
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 March 31, 2024, 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).
50
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 |
||
|
|
|
|
|
||
|
Form of Long-Term Incentive Plan Award Agreement (Time-Based) (SVP/EVP) |
|
Filed herewith |
|||
|
|
|
|
|
||
|
Form of Long-Term Incentive Plan Award Agreement (Time- and Performance- Based) (SVP/EVP) |
|
Filed herewith |
|||
|
|
|
|
|
||
|
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
|
|||
|
|
|
|
|
||
|
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 |
|||
|
|
|
|
|
||
|
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 |
|||
|
|
|
|
|
||
|
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 |
||
* Management contract or compensation plan or arrangement.
51
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: April 30, 2024
52
ACADIA REALTY TRUST
[ ] LONG-TERM INCENTIVE PLAN
AWARD AGREEMENT
[ ] LONG-TERM INCENTIVE PLAN AWARD AGREEMENT made as of the date set forth on Schedule A hereto between Acadia Realty Trust, a Maryland real estate investment trust (the “Company”), its subsidiary Acadia Realty Limited Partnership, a Delaware limited partnership and the entity through which the Company conducts substantially all of its operations (the “Partnership”), and the party listed on Schedule A (the “Grantee”).
RECITALS
NOW, THEREFORE, the Company, the Partnership and the Grantee agree as follows:
“Award LTIP Units” has the meaning set forth in Section 3.
“Cause” means the Grantee has: (A) deliberately made a misrepresentation in connection with, or willfully failed to cooperate with, a bona fide internal investigation or an investigation by regulatory or law enforcement authorities, after being instructed by the Company to cooperate, or willfully destroyed or failed to preserve documents or other materials known to be relevant to such investigation, or willfully induced others to fail to cooperate or to produce documents or other materials; (B) materially breached (other than as a result of the Grantee’s incapacity due to physical or mental illness or death) his/her material duties hereunder, which breach is demonstrably willful and deliberate on the Grantee’s part, is committed in bad faith or without reasonable belief that such breach is in the best interests of the Company and such breach is not cured within a reasonable period of time after written notice from the Company specifying such Breach (but in any event, no less than ninety (90) days thereafter) in which Grantee is diligently pursuing cure; (C) engaged in conduct constituting a material act of willful misconduct in connection with the performance of his/her duties, including, without limitation, misappropriation of funds or property of the Company other than the occasional customary and de minimis use of Company property for personal purposes; (D) materially violated a material Company policy, including but not limited to a policy set forth in the Company’s employee handbook; (E) disparaged the Company, its officers, trustees, employees or partners; (F) committed a felony or misdemeanor involving moral turpitude, deceit, dishonesty or fraud.
“Change of Control” means that any of the following events has occurred: (A) any Person or “group” of Persons, as such terms are used in Sections 13 and 14 of the Exchange Act, other than any employee benefit plan sponsored by the Company, becomes the “beneficial owner,” as such term is used in Section 13 of the Exchange Act (irrespective of any vesting or waiting periods) of (i) the Company’s Common Shares in an amount equal to thirty percent (30%) or more of the sum total of the Common Shares issued and outstanding immediately prior to such acquisition as if they were a single class and disregarding any equity raise in connection with the financing of such transaction; provided, however, that in determining whether a Change of Control has occurred, Common Shares which are acquired in an acquisition by (i) the Company or any of its subsidiaries or (ii) an employee benefit plan (or a trust forming a part thereof) maintained by the Company or any of its subsidiaries shall not constitute an acquisition which can cause a Change of Control; or (B) the approval of the dissolution or liquidation of the Company by the Board of Trustees of the Company (the “Board”); or (C) the approval of the sale or other disposition of all or substantially all of its assets in one or more transactions (including, without limitation, the approval of a transaction or series of transactions to sell or dispose of all or substantially all of the assets in the Company’s core business line to any Person or “group” of Persons, as such terms are used in Sections 13 and 14 of the Exchange Act); or (D) a turnover, during any two-year
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period, of the majority of the members of the Board, without the consent of the majority of the members of the Board as to the appointment of the new Board members.
“Code” means the Internal Revenue Code of 1986, as amended.
“Common Shares” means shares of beneficial ownership of the Company, par value $0.001 per share, either currently existing or authorized hereafter.
“Disability” means (i) if the Grantee is a party to a Service Agreement (as defined in Section 5(b) below), and “Disability” is defined therein, such definition, or (ii) if the Grantee is not party to a Service Agreement that defines “Disability,” a reasonable determination by the Company that the Grantee has become physically or mentally incapable of performing his duties to the Company and/or Partnership and such disability has disabled the Grantee for a cumulative period of one hundred eighty (180) days within a twelve (12) month period.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Good Reason” means the Grantee shall have the right to terminate his/her employment within the 90-day period following the Company’s failure to cure any of the following events that shall constitute “Good Reason” if not cured within the 30-day period following written notice of such default to the Company by the Grantee (the “Good Reason Cure Period”): (A) upon the occurrence of any material breach of this Agreement by the Company; (B) without the Grantee’s consent, a material, adverse alteration in the nature of the Grantee’s duties, responsibilities or authority, or in the 18-month period following a Change of Control only, upon the determination by the Grantee (which determination will be conclusive and binding upon the parties hereto provided it has been made in good faith and in all events will be presumed to have been made in good faith unless otherwise shown clear and convincing evidence) that a material negative change in circumstances has occurred following a Change of Control; (C) without the Grantee’s consent, upon a reduction in the Grantee’s base salary or a reduction of ten percent (10%) or greater in Grantee’s other compensation and employee benefits (which includes a ten percent (10%) or greater reduction in target cash and equity bonus, or a ten percent (10%) or greater reduction in total bonus opportunity, but in all cases excludes any grants made under the Long-Term Incentive Alignment Program); or (D) if the Company relocates the Grantee’s office requiring the Grantee to increase his/her commuting time by more than one hour, or in the 18-month period following a Change of Control only, upon the Company requiring the Grantee to travel away from the Grantee’s office in the course of discharging the Grantee’s responsibilities or duties hereunder at least twenty percent (20%) more than was required of the Grantee in any of the three (3) full years immediately prior to the Change of Control, without, in either case, the Grantee’s prior written consent. Any notice hereunder by the Grantee must be made within ninety (90) days after the Grantee first knows or has reason to know about the occurrence of the event alleged to be Good Reason.
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“LTIP Units” means units of limited partnership interest of the Partnership designated as “LTIP Units” in the Partnership Agreement awarded under the LTIP, having the rights, voting powers, restrictions, limitations as to distributions, qualifications and terms and conditions of redemption set forth in the Partnership Agreement.
“Partnership Agreement” means the Second Amended and Restated Limited Partnership Agreement of the Partnership, effective as of December 31, 2018, among the Company, as general partner, and the limited partners who are parties thereto, as amended from time to time.
“Person” means an individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization, other entity or “group” (as defined in the Exchange Act).
“Securities Act” means the Securities Act of 1933, as amended.
“Units” means OP Units (as defined in the Partnership Agreement) that are outstanding or are issuable upon the conversion, exercise, exchange or redemption of any securities of any kind convertible, exercisable, exchangeable or redeemable for OP Units.
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[Signature page follows]
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IN WITNESS WHEREOF, the undersigned have caused this Award Agreement to be executed as of the [ ].
ACADIA REALTY TRUST
By:
ACADIA REALTY LIMITED PARTNERSHIP
By: Acadia Realty Trust, its general partner
By:
GRANTEE
[Name]
[Signature Page to LTIP Award Agreement]
ACADIA REALTY TRUST
[ ] LONG-TERM INCENTIVE PLAN
AWARD AGREEMENT
[ ] LONG-TERM INCENTIVE PLAN AWARD AGREEMENT made as of the date set forth on Schedule A hereto between Acadia Realty Trust, a Maryland real estate investment trust (the “Company”), its subsidiary Acadia Realty Limited Partnership, a Delaware limited partnership and the entity through which the Company conducts substantially all of its operations (the “Partnership”), and the party listed on Schedule A (the “Grantee”).
RECITALS
NOW, THEREFORE, the Company, the Partnership and the Grantee agree as follows:
“Award LTIP Units” has the meaning set forth in Section 3.
“Cause” means the Grantee has: (A) deliberately made a misrepresentation in connection with, or willfully failed to cooperate with, a bona fide internal investigation or an investigation by regulatory or law enforcement authorities, after being instructed by the Company to cooperate, or willfully destroyed or failed to preserve documents or other materials known to be relevant to such investigation, or willfully induced others to fail to cooperate or to produce documents or other materials; (B) materially breached (other than as a result of the Grantee’s incapacity due to physical or mental illness or death) his/her material duties hereunder, which breach is demonstrably willful and deliberate on the Grantee’s part, is committed in bad faith or without reasonable belief that such breach is in the best interests of the Company and such breach is not cured within a reasonable period of time after written notice from the Company specifying such Breach (but in any event, no less than ninety (90) days thereafter) in which Grantee is diligently pursuing cure; (C) engaged in conduct constituting a material act of willful misconduct in connection with the performance of his/her duties, including, without limitation, misappropriation of funds or property of the Company other than the occasional customary and de minimis use of Company property for personal purposes; (D) materially violated a material Company policy, including but not limited to a policy set forth in the Company’s employee handbook; (E) disparaged the Company, its officers, trustees, employees or partners; (F) committed a felony or misdemeanor involving moral turpitude, deceit, dishonesty or fraud.
“Change of Control” means that any of the following events has occurred: (A) any Person or “group” of Persons, as such terms are used in Sections 13 and 14 of the Exchange Act, other than any employee benefit plan sponsored by the Company, becomes the “beneficial owner,” as such term is used in Section 13 of the Exchange Act (irrespective of any vesting or waiting periods) of (i) the Company’s Common Shares in an amount equal to thirty percent (30%) or more of the sum total of the Common Shares issued and outstanding immediately prior to such acquisition as if they were a single class and disregarding any equity raise in connection with the financing of such transaction; provided, however, that in determining whether a Change of Control has occurred, Common Shares which are acquired in an acquisition by (i) the Company or any of its subsidiaries or (ii) an employee benefit plan (or a trust forming a part thereof) maintained by the Company or any of its subsidiaries shall not constitute an acquisition which can cause a Change of Control; or (B) the approval of the dissolution or liquidation of the Company by the Board of Trustees of the Company (the “Board”); or (C) the approval of the sale or other disposition of all or substantially all of its assets in one or more transactions (including, without limitation, the approval of a transaction or series of transactions to sell or dispose of all or substantially all of the assets in the Company’s core business line to any Person or “group” of Persons, as such terms are used in Sections 13 and 14 of the Exchange Act); or (D) a turnover, during any two-year
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period, of the majority of the members of the Board, without the consent of the majority of the members of the Board as to the appointment of the new Board members.
“Code” means the Internal Revenue Code of 1986, as amended.
“Common Shares” means shares of beneficial ownership of the Company, par value $0.001 per share, either currently existing or authorized hereafter.
“Disability” means (i) if the Grantee is a party to a Service Agreement (as defined in Section 5(b) below), and “Disability” is defined therein, such definition, or (ii) if the Grantee is not party to a Service Agreement that defines “Disability,” a reasonable determination by the Company that the Grantee has become physically or mentally incapable of performing his duties to the Company and/or Partnership and such disability has disabled the Grantee for a cumulative period of one hundred eighty (180) days within a twelve (12) month period.
“Effective Date” means [ ].
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Fair Market Value” means, as of a particular date, the “Fair Market Value” (as defined in the Plan) of one Common Share; provided, however, if such date is the date of a Public Announcement with respect to a Change of Control, then the fair market value shall be, as determined by the Board, t
he total consideration payable for one Common Share in the transaction that ultimately results in a Change of Control.
“Good Reason” means the Grantee shall have the right to terminate his/her employment within the 90-day period following the Company’s failure to cure any of the following events that shall constitute “Good Reason” if not cured within the 30-day period following written notice of such default to the Company by the Grantee (the “Good Reason Cure Period”): (A) upon the occurrence of any material breach of this Agreement by the Company; (B) without the Grantee’s consent, a material, adverse alteration in the nature of the Grantee’s duties, responsibilities or authority, or in the 18-month period following a Change of Control only, upon the determination by the Grantee (which determination will be conclusive and binding upon the parties hereto provided it has been made in good faith and in all events will be presumed to have been made in good faith unless otherwise shown clear and convincing evidence) that a material negative change in circumstances has occurred following a Change of Control; (C) without the Grantee’s consent, upon a reduction in the Grantee’s base salary or a reduction of ten percent (10%) or greater in Grantee’s other compensation and employee benefits (which includes a ten percent (10%) or greater reduction in target cash and equity bonus, or a ten percent (10%) or greater reduction in total bonus opportunity, but in all cases excludes any grants made under the Long-Term Incentive Alignment Program); or (D) if the Company relocates the Grantee’s office requiring the Grantee to increase his/her commuting time by more than one hour, or in the 18-month period following a Change of Control only, upon the Company requiring the Grantee to travel away from the Grantee’s office in the course of discharging the Grantee’s responsibilities or duties hereunder at least twenty percent (20%) more than was required of the Grantee in any of the three (3) full years immediately prior to the Change of Control, without, in either case, the Grantee’s prior written consent.
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Any notice hereunder by the Grantee must be made within ninety (90) days after the Grantee first knows or has reason to know about the occurrence of the event alleged to be Good Reason.
“LTIP Units” means units of limited partnership interest of the Partnership designated as “LTIP Units” in the Partnership Agreement awarded under the LTIP, having the rights, voting powers, restrictions, limitations as to distributions, qualifications and terms and conditions of redemption set forth in the Partnership Agreement.
“Partnership Agreement” means the Second Amended and Restated Limited Partnership Agreement of the Partnership, effective as of December 31, 2018, among the Company, as general partner, and the limited partners who are parties thereto, as amended from time to time.
“Performance Period” means the period beginning on the Effective Date and ending on the Valuation Date.
“Person” means an individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization, other entity or “group” (as defined in the Exchange Act).
“Public Announcement” means, with respect to a Change of Control, the earliest press release, filing with the Securities and Exchange Commission, or other publicly available or widely disseminated communication issued by the Company or another Person who is a party to such transaction which discloses the consideration payable in connection with and other material terms of the transaction that ultimately results in the Change of Control; provided, however, that if such consideration is subsequently increased or decreased, then the term “Public Announcement” shall be deemed to refer to the most recent such press release, filing or communication disclosing a change in the consideration whereby the final consideration and material terms of the transaction that ultimately results in the Change of Control are announced.
“Securities Act” means the Securities Act of 1933, as amended.
“Special LTIP Units” means LTIP Units as defined in the Partnership Agreement and designated as Special LTIP Units pursuant to Section 8 of this Agreement.
“Units” means OP Units (as defined in the Partnership Agreement) that are outstanding or are issuable upon the conversion, exercise, exchange or redemption of any securities of any kind convertible, exercisable, exchangeable or redeemable for OP Units.
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“Valuation Date” means [ ].
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[Signature page follows]
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IN WITNESS WHEREOF, the undersigned have caused this Award Agreement to be executed as of [ ].
ACADIA REALTY TRUST
By:
ACADIA REALTY LIMITED PARTNERSHIP
By: Acadia Realty Trust, its general partner
By:
GRANTEE
[Name]
[Signature Page to LTIP Award Agreement]
EXHIBIT 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO RULE 13a - 14(a)
(SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002)
I, Kenneth F. Bernstein, certify that:
/s/ Kenneth F. Bernstein |
Kenneth F. Bernstein |
President and Chief Executive Officer |
April 30, 2024 |
EXHIBIT 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO RULE 13a - 14(a)
(SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002)
I, John Gottfried, certify that:
/s/ John Gottfried |
John Gottfried |
Executive Vice President and |
Chief Financial Officer |
April 30, 2024 |
EXHIBIT 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350
(SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)
In connection with the Quarterly Report on Form 10-Q of Acadia Realty Trust (the “Company”) for the quarter ended March 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kenneth F. Bernstein, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
/s/ Kenneth F. Bernstein |
Kenneth F. Bernstein |
President and Chief Executive Officer |
April 30, 2024 |
EXHIBIT 32.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350
(SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)
In connection with the Quarterly Report on Form 10-Q of Acadia Realty Trust (the “Company”) for the quarter ended March 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John Gottfried, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
/s/ John Gottfried |
John Gottfried |
Executive Vice President and |
Chief Financial Officer |
April 30, 2024 |