SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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
(Exact name of registrant in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
(Zip Code) |
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(Registrant’s telephone number, including area code)
Title of class of registered securities |
Trading symbol |
Name of exchange on which registered |
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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No ☐ |
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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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No ☐ |
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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.
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Accelerated Filer |
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Emerging Growth Company |
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Non-accelerated Filer |
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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 October 24, 2023 there were
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 September 30, 2023 and December 31, 2022 |
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4 |
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5 |
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6 |
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7 |
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9 |
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Notes to Condensed Consolidated Financial Statements (Unaudited) |
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11 |
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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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44 |
3. |
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59 |
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4. |
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62 |
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1. |
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63 |
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1A. |
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63 |
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2. |
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63 |
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3. |
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63 |
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4. |
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63 |
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5. |
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63 |
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6. |
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64 |
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65 |
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Quarterly Report on Form 10-Q (this “Report”) of Acadia Realty Trust, a Maryland real estate investment trust, (the “Company”) may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations are generally identifiable by the use of the words such as “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend” or “project,” or the negative thereof, or other variations thereon or comparable terminology. Forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause our actual results and financial performance to be materially different from future results and financial performance expressed or implied by such forward-looking statements, including, but not limited to: (i) macroeconomic conditions, including due to geopolitical conditions and instability, which may lead to a disruption of or lack of access to the capital markets, disruptions and instability in the banking and financial services industries and rising inflation; (ii) our success in implementing our business strategy and our ability to identify, underwrite, finance, consummate and integrate diversifying acquisitions and investments; (iii) changes in general economic conditions or economic conditions in the markets in which we may, from time to time, compete, and their effect on our revenues, earnings and funding sources; (iv) increases in our borrowing costs as a result of rising inflation, changes in interest rates and other factors, including the discontinuation of USD LIBOR, which was effected on June 30, 2023; (v) our ability to pay down, refinance, restructure or extend our indebtedness as it becomes due; (vi) our investments in joint ventures and unconsolidated entities, including our lack of sole decision-making authority and our reliance on our joint venture partners’ financial condition; (vii) our ability to obtain the financial results expected from our development and redevelopment projects; (viii) our tenants’ ability and willingness to renew their leases with us upon expiration, our ability to re-lease our properties on the same or better terms in the event of nonrenewal or in the event we exercise our right to replace an existing tenant, and obligations we may incur in connection with the replacement of an existing tenant; (ix) our potential liability for environmental matters; (x) damage to our properties from catastrophic weather and other natural events, and the physical effects of climate change; (xi) the economic, political and social impact of, and uncertainty surrounding, any public health crisis, such as the recent COVID-19 Pandemic, which adversely affected the Company and its tenants’ business, financial condition, results of operations and liquidity; (xii) uninsured losses; (xiii) our ability and willingness to maintain our qualification as a real estate investment trust (REIT) in light of economic, market, legal, tax and other considerations; (xiv) information technology security breaches, including increased cybersecurity risks relating to the use of remote technology; (xv) the loss of key executives; and (xvi) the accuracy of our methodologies and estimates regarding environmental, social and governance (“ESG”) metrics, goals and targets, tenant willingness and ability to collaborate towards reporting ESG metrics and meeting ESG goals and targets, and the impact of governmental regulation on our ESG efforts.
The factors described above are not exhaustive and additional factors could adversely affect the Company’s future results and financial performance, including the risk factors discussed under the section captioned “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 and other periodic or current reports the Company files with the SEC, including those set forth under the headings “Item 1A. Risk Factors” and “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Report. These risks and uncertainties should be considered in evaluating any forward-looking statements contained or incorporated by reference herein. Any forward-looking statements speak only as of the date hereof. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any changes in the Company’s expectations with regard thereto or changes in the events, conditions or circumstances on which such forward-looking statements are based.
SPECIAL NOTE REGARDING CERTAIN REFERENCES
All references to “Notes” throughout the document refer to the footnotes to the condensed consolidated financial statements of the registrant referenced in Part I, Item 1. Financial Statements.
3
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
ACADIA REALTY TRUST AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
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September 30, |
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December 31, |
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(dollars in thousands, except share and per share data) |
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2023 |
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2022 |
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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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$ |
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$ |
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Real estate under development |
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Net investments in real estate |
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Notes receivable, net ($ |
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Investments in and advances to unconsolidated affiliates |
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Other assets, net |
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Right-of-use assets - operating leases, net |
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Cash and cash equivalents |
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Restricted cash |
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Marketable securities |
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Rents receivable, net |
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Assets of properties held for sale |
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Total assets (a) |
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$ |
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$ |
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LIABILITIES |
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Mortgage and other notes payable, net |
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$ |
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$ |
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Unsecured notes payable, net |
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Unsecured line of credit |
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Accounts payable and other liabilities |
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Lease liability - operating leases, net |
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Dividends and distributions payable |
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Distributions in excess of income from, and investments in, unconsolidated affiliates |
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Total liabilities (a) |
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Commitments and contingencies (Note 9) |
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EQUITY |
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Acadia Shareholders' Equity |
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Common shares, $ |
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Additional paid-in capital |
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Accumulated other comprehensive income |
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Distributions in excess of accumulated earnings |
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( |
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( |
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Total Acadia shareholders’ equity |
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Noncontrolling interests |
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Total equity |
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Total liabilities, redeemable noncontrolling interests, and equity |
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$ |
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$ |
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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 OPERATIONS (UNAUDITED)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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(in thousands except per share amounts) |
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2023 |
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2022 |
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2023 |
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2022 |
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Revenues |
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Rental income |
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$ |
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$ |
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$ |
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$ |
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Other |
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Total revenues |
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Operating expenses |
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Depreciation and amortization |
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General and administrative |
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Real estate taxes |
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Property operating |
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Impairment charges |
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Total operating expenses |
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Gain on disposition of properties |
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Operating income (loss) |
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( |
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Equity in losses of unconsolidated affiliates |
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( |
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( |
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( |
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Interest and other income |
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Realized and unrealized holding gains (losses) on investments and other |
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( |
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( |
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Interest expense |
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( |
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( |
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( |
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( |
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(Loss) income from continuing operations before income taxes |
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( |
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( |
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( |
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Income tax benefit (provision) |
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( |
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( |
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Net (loss) income |
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( |
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( |
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( |
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Net loss attributable to redeemable noncontrolling interests |
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Net loss attributable to noncontrolling interests |
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Net (loss) income attributable to Acadia shareholders |
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$ |
( |
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$ |
( |
) |
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$ |
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$ |
( |
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Basic (loss) income per share |
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$ |
( |
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$ |
( |
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$ |
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$ |
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Diluted (loss) income per share |
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$ |
( |
) |
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$ |
( |
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$ |
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$ |
( |
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Weighted average shares for basic (loss) income per share |
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Weighted average shares for diluted (loss) income per share |
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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 September 30, |
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Nine Months Ended September 30, |
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(in thousands) |
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2023 |
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2022 |
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2023 |
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2022 |
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Net (loss) income |
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$ |
( |
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$ |
( |
) |
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$ |
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$ |
( |
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Other comprehensive income: |
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Unrealized gain on valuation of swap agreements |
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Reclassification of realized interest on swap agreements |
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( |
) |
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( |
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Other comprehensive income |
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Comprehensive income (loss) |
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( |
) |
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Comprehensive loss attributable to redeemable noncontrolling interests |
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Comprehensive loss (income) attributable to noncontrolling interests |
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( |
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Comprehensive income (loss) attributable to Acadia shareholders |
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$ |
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$ |
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$ |
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$ |
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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 September 30, 2023 and 2022
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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 at July 1, 2023 |
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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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$ |
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Conversion of OP Units to Common Shares by limited partners of the Operating Partnership |
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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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Dividends/distributions declared ($ |
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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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( |
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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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— |
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( |
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Employee and trustee stock compensation, net |
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— |
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— |
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— |
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— |
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Capital call receivable |
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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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( |
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— |
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Noncontrolling interest distributions |
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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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( |
) |
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( |
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Noncontrolling interest contributions |
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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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Comprehensive income (loss) |
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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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Reallocation of noncontrolling interests |
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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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Balance at September 30, 2023 |
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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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$ |
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Balance at July 1, 2022 |
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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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$ |
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Conversion of OP Units to Common Shares by limited partners of the Operating Partnership |
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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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Dividends/distributions declared ($ |
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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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( |
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— |
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Acquisition of noncontrolling 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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City Point Loan |
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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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|
|
— |
|
|
|
— |
|
|
|
( |
) |
City Point Loan accrued interest |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Employee and trustee stock compensation, net |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||||
Noncontrolling interest distributions |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
Noncontrolling interest contributions |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||
Comprehensive income (loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Reclassification of redeemable noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Reallocation of noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
— |
|
|
Balance at September 30, 2022 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
ACADIA REALTY TRUST AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)
Nine Months Ended September 30, 2023 and 2022
|
|
Acadia Shareholders |
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
(in thousands, except per share amounts) |
|
Common |
|
|
Share |
|
|
Additional |
|
|
Accumulated |
|
|
Distributions |
|
|
Total |
|
|
Noncontrolling |
|
|
Total |
|
|
Redeemable Noncontrolling Interest |
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Balance at January 1, 2023 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Conversion of OP Units to Common Shares by limited partners of the Operating Partnership |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|||
Dividends/distributions declared ($ |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
City Point Loan |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
City Point Loan accrued interest |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Employee and trustee stock compensation, net |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||||
Capital call receivable |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
Noncontrolling interest distributions |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Noncontrolling interest contributions |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||
Comprehensive income (loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||||
Reallocation of noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
||
Balance at September 30, 2023 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Balance at January 1, 2022 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||||
Issuance of Common Shares, net |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|||||
Conversion of OP Units to Common Shares by limited partners of the Operating Partnership |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|||
Dividends/distributions declared ($ |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
Acquisition of noncontrolling interest |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
||
City Point Loan |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
City Point Loan accrued interest |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
Employee and trustee stock compensation, net |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||||
Noncontrolling interest distributions |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Noncontrolling interest contributions |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||
Comprehensive income (loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||
Reclassification of redeemable noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Reallocation of noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
— |
|
|
|
— |
|
|
Balance at September 30, 2022 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
8
ACADIA REALTY TRUST AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
|
|
Nine Months Ended September 30, |
|
|||||
(in thousands) |
|
2023 |
|
|
2022 |
|
||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
||
Net income (loss) |
|
$ |
|
|
$ |
( |
) |
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Gain on disposition of properties and other investments |
|
|
|
|
|
( |
) |
|
Net unrealized holding (gains) losses on investments |
|
|
( |
) |
|
|
|
|
Stock compensation expense |
|
|
|
|
|
|
||
Straight-line rents |
|
|
( |
) |
|
|
( |
) |
Equity in losses of unconsolidated affiliates |
|
|
|
|
|
|
||
Distributions of operating income from unconsolidated affiliates |
|
|
|
|
|
|
||
Adjustments to straight-line rent reserves |
|
|
|
|
|
( |
) |
|
Amortization of financing costs |
|
|
|
|
|
|
||
Non-cash lease expense |
|
|
|
|
|
|
||
Adjustments to allowance for credit loss |
|
|
|
|
|
( |
) |
|
Acceleration of below market lease |
|
|
( |
) |
|
|
|
|
Impairment charges |
|
|
|
|
|
|
||
Other, net |
|
|
( |
) |
|
|
( |
) |
Changes in assets and liabilities: |
|
|
|
|
|
|
||
Rents receivable |
|
|
|
|
|
|
||
Other liabilities |
|
|
( |
) |
|
|
( |
) |
Accounts payable and accrued expenses |
|
|
|
|
|
|
||
Prepaid expenses and other assets |
|
|
( |
) |
|
|
|
|
Lease liability - operating leases |
|
|
( |
) |
|
|
( |
) |
Net cash provided by operating activities |
|
|
|
|
|
|
||
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
||
Acquisitions of real estate |
|
|
( |
) |
|
|
( |
) |
Proceeds from the disposition of properties and other investments, net |
|
|
|
|
|
|
||
Investments in and advances to unconsolidated affiliates |
|
|
( |
) |
|
|
( |
) |
Development, construction and property improvement costs |
|
|
( |
) |
|
|
( |
) |
Refund of deposits for properties under purchase contract |
|
|
|
|
|
|
||
Deposits for properties under sale contract |
|
|
|
|
|
|
||
Change in control of previously unconsolidated affiliate |
|
|
|
|
|
|
||
Return of capital from unconsolidated affiliates |
|
|
|
|
|
|
||
Payment of deferred leasing costs |
|
|
( |
) |
|
|
( |
) |
Acquisition of investment interests |
|
|
|
|
|
( |
) |
|
Proceeds from sale of marketable securities |
|
|
|
|
|
|
||
Proceeds from repayment of notes receivable |
|
|
|
|
|
|
||
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
||
Proceeds from unsecured debt |
|
|
|
|
|
|
||
Principal payments on unsecured debt |
|
|
( |
) |
|
|
( |
) |
Proceeds from the sale of Common Shares |
|
|
|
|
|
|
||
Capital contributions from noncontrolling interests |
|
|
|
|
|
|
||
Principal payments on mortgage and other notes |
|
|
( |
) |
|
|
( |
) |
Distributions to noncontrolling interests |
|
|
( |
) |
|
|
( |
) |
Dividends paid to Common Shareholders |
|
|
( |
) |
|
|
( |
) |
Proceeds received from mortgage and other notes |
|
|
|
|
|
|
||
Deferred financing and other costs |
|
|
( |
) |
|
|
( |
) |
Acquisition of noncontrolling interest |
|
|
|
|
|
( |
) |
|
Payments of finance lease obligations |
|
|
( |
) |
|
|
|
|
Net cash (used in) provided by financing activities |
|
|
( |
) |
|
|
|
|
(Decrease) increase in cash and restricted cash |
|
|
( |
) |
|
|
|
|
Cash of $ |
|
|
|
|
|
|
||
Cash of $ |
|
$ |
|
|
$ |
|
||
9
ACADIA REALTY TRUST AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Continued)
|
|
Nine Months Ended September 30, |
|
|||||
(in thousands) |
|
2023 |
|
|
2022 |
|
||
Supplemental disclosure of cash flow information |
|
|
|
|
|
|
||
Cash paid during the period for interest, net of capitalized interest of $ |
|
$ |
|
|
$ |
|
||
Cash paid for income taxes, net of (refunds) |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Supplemental disclosure of non-cash investing and financing activities |
|
|
|
|
|
|
||
Distribution declared and payable on October 13, 2023 and October 14, 2022, respectively |
|
$ |
|
|
$ |
|
||
Assumption of accounts payable and accrued expenses through acquisition of real estate |
|
$ |
|
|
$ |
|
||
Issuance of note receivable used as capital contributions from redeemable noncontrolling interests |
|
$ |
|
|
$ |
|
||
Accrued interest on note receivable recorded to redeemable noncontrolling interest |
|
$ |
|
|
$ |
|
||
Distributions to noncontrolling interests of marketable securities |
|
$ |
|
|
$ |
|
||
Reclassification of investment in unconsolidated affiliate to marketable securities |
|
$ |
|
|
$ |
|
||
Reclassification of noncontrolling interest in excess of amount paid to additional paid-in capital |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Change in control of previously unconsolidated investment |
|
|
|
|
|
|
||
Increase in real estate |
|
$ |
|
|
$ |
( |
) |
|
Increase in mortgage notes payable |
|
|
|
|
|
|
||
Decrease in investments in and advances to unconsolidated affiliates |
|
|
|
|
|
|
||
Decrease in notes receivable |
|
|
|
|
|
|
||
Decrease in reserve on note receivable |
|
|
|
|
|
( |
) |
|
Decrease in accrued interest on notes receivable |
|
|
|
|
|
|
||
Change in other assets and liabilities |
|
|
|
|
|
|
||
Increase in cash and restricted cash upon change of control |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).
10
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, a Maryland real estate investment trust (collectively with its consolidated subsidiaries, the “Company”), 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 September 30, 2023 and December 31, 2022, the Company controlled approximately
As of September 30, 2023, the Company has ownership interests in
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
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,d) |
|
6/2004 |
|
|
% |
|
$ |
|
|
$ |
|
|
|
% |
|
|
% |
|
$ |
|
||||||
Fund III |
|
5/2007 |
|
|
% |
|
|
|
|
|
|
|
|
% |
|
|
% |
|
|
|
||||||
Fund IV |
|
5/2012 |
|
|
% |
|
|
|
|
|
|
|
|
% |
|
|
% |
|
|
|
||||||
Fund V |
|
8/2016 |
|
|
% |
|
|
|
|
|
|
|
|
% |
|
|
% |
|
|
|
||||||
11
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.
These interim condensed consolidated financial statements should be read in conjunction with the Company’s 2022 consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
Segments
At September 30, 2023, the Company had
Principles of Consolidation
The interim condensed consolidated financial statements include the consolidated accounts of the Company and its investments in partnerships and limited liability companies in which the Company has control, including where the Company has been determined to be a primary beneficiary of a variable interest entity ("VIE"), in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810 “Consolidation” (“ASC Topic 810”). The ownership interests of other investors in these entities are recorded as noncontrolling interests. All significant intercompany balances and transactions have been eliminated in consolidation. Investments in entities for which the Company has the ability to exercise significant influence over, but does not have financial or operating control, are accounted for using the equity method of accounting. Accordingly, the Company’s share of the earnings (or losses) of these entities are included in consolidated net income or loss.
Use of Estimates
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.
Recent Accounting Pronouncements
In January 2021, the FASB issued Accounting Standards Update (“ASU”) 2021-01, Reference Rate Reform (Topic 848): Scope, which modifies ASC 848 Reference Rate Reform (”ASC 848”), which was intended to provide relief related to “contracts and transactions that reference the London Interbank Offered Rate (“LIBOR”) or a reference rate that was discontinued effective June 30, 2023 as a result of reference rate reform.” ASU 2021-01 expands the scope of ASC 848 to include all affected derivatives and give reporting entities the ability to apply certain aspects of the contract modification and hedge accounting expedients to derivative contracts affected by the discounting transition. ASU 2021-01, Reference Rate Reform (ASC 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, also adds implementation guidance to clarify which optional expedients in ASC 848 may be applied to derivative instruments that do not reference LIBOR or a reference rate that is expected to be discontinued, but that are being modified as a result of the discounting transition. The Company has elected the optional practical expedient under ASU 2020-04 and 2021-01, which allows entities to account for the modification as if the modification was not substantial. As a result, the implementation of this guidance did not have an effect on the Company’s condensed consolidated financial statements.
In December 2022, the FASB issued ASU 2022-06 Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. The guidance in this update defers the sunset date of ASC 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in Topic 848. The amendments are effective for all entities in scope upon issuance of the ASU. The Company has transitioned all variable rate loans to SOFR or another applicable benchmark index and will apply the relief based Topic 848 in line with the sunset date.
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.
12
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):
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
|
|
|
|
|
|
|
||
Land |
|
$ |
|
|
$ |
|
||
Buildings and improvements |
|
|
|
|
|
|
||
Tenant improvements |
|
|
|
|
|
|
||
Construction in progress |
|
|
|
|
|
|
||
(Note 11) |
|
|
|
|
|
|
||
Total |
|
|
|
|
|
|
||
Less: Accumulated depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
Operating real estate, net |
|
|
|
|
|
|
||
Real estate under development |
|
|
|
|
|
|
||
Net investments in real estate |
|
$ |
|
|
$ |
|
||
Acquisitions
During the nine months ended September 30, 2023, the Company acquired the following consolidated retail property (dollars in thousands):
Property and Location |
|
Percent |
|
Date of |
|
Purchase |
|
|
Fund V 2023 Acquisition |
|
|
|
|
|
|
|
|
Cypress Creek - Tampa, FL |
|
|
July 3, 2023 |
|
$ |
|
||
|
|
|
|
|
|
|
|
|
For the nine months ended September 30, 2023, the Company capitalized $
13
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Purchase Price Allocations
The purchase price for the Fund V 2023 Acquisition were allocated to the acquired assets and assumed liabilities based on their estimated relative fair values at the date of acquisition. The Company determines the fair value of the individual components of income producing real estate asset acquisitions primarily through calculating the "as-if vacant" value of a building, using an income approach, which relies significantly upon internally determined assumptions.
|
|
Nine Months Ended September 30, |
|
|
|
|
2023 |
|
|
Net Assets Acquired |
|
|
|
|
Land |
|
$ |
|
|
Buildings and improvements |
|
|
|
|
Intangible assets (Note 6) |
|
|
|
|
Accounts receivable, prepaids and other assets |
|
|
|
|
Right-of-use asset - finance lease (Note 11) |
|
|
|
|
Lease liability - finance lease (Note 11) |
|
|
( |
) |
Accounts payable and other liabilities |
|
|
|
|
Intangible liabilities (Note 6) |
|
|
( |
) |
Net assets acquired |
|
$ |
|
|
|
|
|
|
|
Consideration |
|
|
|
|
Cash |
|
$ |
|
|
Carrying value of note receivable exchanged in foreclosure (Note 3) |
|
|
|
|
Existing interest in previously unconsolidated investment (Note 4) |
|
|
|
|
Debt assumed |
|
|
|
|
Liabilities assumed |
|
|
|
|
Total consideration |
|
|
|
|
on bargain purchase |
|
|
|
|
|
|
$ |
|
|
The Company determines the fair value of the individual components of income producing real estate asset acquisitions primarily through calculating the "as-if vacant" value of a building, using an income approach, which relies significantly upon internally determined assumptions. The Company has determined that these estimates primarily rely on Level 3 inputs, which are unobservable inputs based on our own assumptions.
|
|
2023 |
|
||||
|
|
Low |
|
High |
|
||
Exit Capitalization Rate |
|
|
% |
|
% |
||
Annual net rental rate per square foot on acquired buildings |
|
$ |
|
$ |
|
||
Annual net rental rate per square foot on acquired ground lease |
|
$ |
|
$ |
|
||
The estimate of the portion of the "as-if vacant" value that is allocated to the land underlying the acquired real estate relies on Level 3 inputs and is primarily determined by reference to recent comparable transactions.
Dispositions
During the nine months ended September 30, 2023, the Company did not dispose of any consolidated retail properties and other real estate investments.
Properties Held for Sale
The Company had one property classified as held for sale at September 30, 2023 and December 31, 2022.
14
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
Assets |
|
|
|
|
|
|
||
Buildings and improvements |
|
$ |
|
|
$ |
|
||
Land |
|
|
|
|
|
|
||
Tenant improvements |
|
|
|
|
|
|
||
Less: Accumulated depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
|
|
$ |
|
|
$ |
|
||
Real Estate Under Development and Construction in Progress
Real estate under development represents the Company’s consolidated properties that have not yet been placed into service while undergoing substantial development or construction.
Development activity for the Company’s consolidated properties comprised the following during the periods presented (dollars in thousands):
|
|
January 1, 2023 |
|
|
Nine Months Ended September 30, 2023 |
|
|
September 30, 2023 |
|
|||||||||||||||||||
|
|
Number of |
|
|
Carrying |
|
|
Transfers In |
|
|
Capitalized |
|
|
Transfers Out |
|
|
Number of |
|
|
Carrying |
|
|||||||
Core |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|||||||
Fund II |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Fund III |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Fund IV |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Total |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
|
$ |
|
|||||||
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. At September 30, 2023, consolidated development projects included: portions of the Henderson 1 & 2 Portfolio in the Core Portfolio, and Broad Hollow Commons in Fund III. In addition, at September 30, 2023, the Company had one Core unconsolidated development project, 1238 Wisconsin Avenue (Note 4).
During the nine months ended September 30, 2023, the Company:
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
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):
|
|
September 30, |
|
|
December 31, |
|
|
September 30, 2023 |
||||||||
Description |
|
2023 |
|
|
2022 |
|
|
Number |
|
|
Maturity Date |
|
Interest Rate |
|||
Core Portfolio (a) |
|
$ |
|
|
$ |
|
|
|
|
|
|
|||||
Allowance for credit losses |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
Notes receivable, net |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|||
15
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Default
One Core Portfolio note aggregating $
Allowance for Credit Losses
The Company monitors the credit quality of its notes receivable on an ongoing basis and considers indicators of credit quality such as loan payment activity, the estimated fair value of the underlying collateral, the seniority of the Company’s loan in relation to other debt secured by the collateral and the prospects of the borrower.
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 (Note 5).
The Company’s estimated allowance for credit losses related to its Structured Financing segment has been computed for its amortized cost basis in the portfolio, including accrued interest (Note 5), factoring historical loss experience in the United States for similar loans, as adjusted for current conditions, as well as the Company’s expectations related to future economic conditions. Due to the lack of comparability across the Structured Financing portfolio, each loan was evaluated separately. As a result, the Company did not elect the collateral-dependent allowance for credit losses practical expedient for three of its loans with a total amortized cost of $
16
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 as it has the ability to exercise significant influence, but does not have financial or operating control over the investment, which is maintained by each of the unaffiliated partners who co-invest with the Company. Certain of the Company’s unconsolidated joint venture agreements include provisions whereby, at certain specified times, each partner has the right to initiate a purchase or sale of its interest in the joint ventures. Under certain of the Company’s joint venture agreements, if certain return thresholds are achieved, the partners or the Company will be entitled to an additional promoted interest or payments.
The Company’s investments in and advances to unconsolidated affiliates consist of the following (dollars in thousands):
|
|
|
|
Ownership Interest |
|
September 30, |
|
|
December 31, |
|
||
Portfolio |
|
Property |
|
September 30, 2023 |
|
2023 |
|
|
2022 |
|
||
|
|
|
|
|
|
|
|
|
|
|
||
Core: |
|
Renaissance Portfolio |
|
|
$ |
|
|
$ |
|
|||
|
|
Gotham Plaza |
|
|
|
|
|
|
|
|||
|
|
Georgetown Portfolio (a) |
|
|
|
|
|
|
|
|||
|
|
1238 Wisconsin Avenue (a, b) |
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
||
Mervyns II: |
|
KLA/ABS (c) |
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
||
Fund IV: |
|
Fund IV Other Portfolio |
|
|
|
|
|
|
|
|||
|
|
650 Bald Hill Road |
|
|
|
|
|
|
|
|||
|
|
Paramus Plaza |
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
||
Fund V: |
|
Family Center at Riverdale (d) |
|
|
|
|
|
|
|
|||
|
|
Tri-City Plaza |
|
|
|
|
|
|
|
|||
|
|
Frederick County Acquisitions |
|
|
|
|
|
|
|
|||
|
|
Wood Ridge Plaza |
|
|
|
|
|
|
|
|||
|
|
La Frontera Village |
|
|
|
|
|
|
|
|||
|
|
Shoppes at South Hills (e) |
|
|
|
|
|
|
|
|||
|
|
Mohawk Commons |
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
||
Various: |
|
Due from (to) Related Parties |
|
|
|
|
|
|
|
|
||
|
|
Other (f) |
|
|
|
|
|
|
|
|
||
|
|
Investments in and advances to |
|
|
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
||
Core: |
|
Crossroads (g) |
|
|
$ |
|
|
$ |
|
|||
|
|
840 N. Michigan Avenue (d, g) |
|
|
|
|
|
|
|
|||
|
|
Distributions in excess of income from, |
|
|
|
$ |
|
|
$ |
|
||
17
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
During the nine months ended September 30, 2023, the Company:
Fees from Unconsolidated Affiliates
The Company earned property management, construction, development, legal and leasing fees from its investments in unconsolidated partnerships totaling $
In addition, the Company's joint ventures paid to certain unaffiliated partners of its joint ventures $
18
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 September 30, 2023, and accordingly exclude the results of any investments disposed of or consolidated prior to that date (in thousands):
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
Combined and Condensed Balance Sheets |
|
|
|
|
|
|
||
Assets: |
|
|
|
|
|
|
||
Rental property, net |
|
$ |
|
|
$ |
|
||
Real estate under development |
|
|
|
|
|
|
||
Other assets |
|
|
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
||
Liabilities and partners’ equity: |
|
|
|
|
|
|
||
Mortgage notes payable |
|
$ |
|
|
$ |
|
||
Other liabilities |
|
|
|
|
|
|
||
Partners’ equity |
|
|
|
|
|
|
||
Total liabilities and partners’ equity |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Company's share of accumulated equity |
|
$ |
|
|
$ |
|
||
Basis differential |
|
|
|
|
|
|
||
Deferred fees, net of portion related to the Company's interest |
|
|
|
|
|
|
||
Amounts receivable/payable by the Company |
|
|
|
|
|
|
||
Investments in and advances to unconsolidated affiliates, net of Company's |
|
|
|
|
|
|
||
Investments carried at fair value or cost |
|
|
|
|
|
|
||
Company's share of distributions in excess of income from and |
|
|
|
|
|
|
||
Investments in and advances to unconsolidated affiliates |
|
$ |
|
|
$ |
|
||
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Combined and Condensed Statements of Operations |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Operating and other expenses |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Interest expense |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Impairment of Investment |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Net loss attributable to unconsolidated affiliates |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Company’s share of equity in net losses of unconsolidated affiliates |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Basis differential amortization |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Company’s equity in losses of unconsolidated affiliates |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
19
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:
|
|
September 30, |
|
|
December 31, |
|
||
(in thousands) |
|
2023 |
|
|
2022 |
|
||
Other Assets, Net: |
|
|
|
|
|
|
||
Lease intangibles, net (Note 6) |
|
$ |
|
|
$ |
|
||
Derivative financial instruments (Note 8) |
|
|
|
|
|
|
||
Deferred charges, net (a) |
|
|
|
|
|
|
||
Accrued interest receivable (Note 3) |
|
|
|
|
|
|
||
Prepaid expenses |
|
|
|
|
|
|
||
Due from seller |
|
|
|
|
|
|
||
Income taxes receivable |
|
|
|
|
|
|
||
Deposits |
|
|
|
|
|
|
||
Corporate assets, net |
|
|
|
|
|
|
||
Other receivables |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
(a) Deferred Charges, Net: |
|
|
|
|
|
|
||
Deferred leasing and other costs (a) |
|
$ |
|
|
$ |
|
||
Deferred financing costs related to line of credit |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Accumulated amortization |
|
|
( |
) |
|
|
( |
) |
Deferred charges, net |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Accounts Payable and Other Liabilities: |
|
|
|
|
|
|
||
|
$ |
|
|
$ |
|
|||
Accounts payable and accrued expenses |
|
|
|
|
|
|
||
Deferred income |
|
|
|
|
|
|
||
Tenant security deposits, escrow and other |
|
|
|
|
|
|
||
|
|
|
|
|
|
|||
Derivative financial instruments (Note 8) |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
20
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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.
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):
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||||||||||||||||||
|
|
Gross Carrying |
|
|
Accumulated |
|
|
Net Carrying |
|
|
Gross Carrying |
|
|
Accumulated |
|
|
Net Carrying |
|
||||||
Amortizable Intangible Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
In-place lease intangible assets |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Above-market rent |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Amortizable Intangible Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Below-market rent |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Above-market ground lease |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
||
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
During the nine months ended September 30, 2023, the Company:
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 September 30, 2023 is as follows (in thousands):
Years Ending December 31, |
|
Net Increase in |
|
|
Increase to |
|
|
Reduction of |
|
|||
2023 (Remainder) |
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||
2024 |
|
|
|
|
|
( |
) |
|
|
|
||
2025 |
|
|
|
|
|
( |
) |
|
|
|
||
2026 |
|
|
|
|
|
( |
) |
|
|
|
||
2027 |
|
|
|
|
|
( |
) |
|
|
|
||
21
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):
|
|
Interest Rate at |
|
|
|
Carrying Value at |
||||
|
|
September 30, |
|
December 31, |
|
Maturity Date at |
|
September 30, |
|
December 31, |
|
|
2023 |
|
2022 |
|
September 30, 2023 |
|
2023 |
|
2022 |
Mortgages Payable |
|
|
|
|
|
|
|
|
|
|
Core Mortgages Payable |
|
|
|
|
$ |
|
$ |
|||
Fund II Mortgages Payable |
|
SOFR+ |
|
SOFR+ |
|
|
|
|||
Fund III Mortgages Payable |
|
SOFR+ |
|
SOFR+ |
|
|
|
|||
Fund IV Mortgages and Other Notes Payable (a)(d) |
|
SOFR+ |
|
LIBOR+ |
|
|
|
|||
Total Fund V Mortgages Payable |
|
SOFR + |
|
LIBOR + |
|
|
|
|||
Net unamortized debt issuance costs |
|
|
|
|
|
|
|
( |
|
( |
Unamortized premium |
|
|
|
|
|
|
|
|
||
Total Mortgages Payable |
|
|
|
|
|
|
|
$ |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
Unsecured Notes Payable |
|
|
|
|
|
|
|
|
|
|
Core Unsecured Term Loans |
|
SOFR+ |
|
|
|
$ |
|
$ |
||
Fund V Subscription Facility |
|
SOFR+ |
|
SOFR+ |
|
|
|
|||
Net unamortized debt issuance costs |
|
|
|
|
|
|
|
( |
|
( |
Total Unsecured Notes Payable |
|
|
|
|
|
|
|
$ |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
Unsecured Line of Credit |
|
|
|
|
|
|
|
|
|
|
Total Unsecured Line of Credit |
|
SOFR+ |
|
SOFR+ |
|
|
$ |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
Total Debt (b)(c) |
|
|
|
|
|
|
|
$ |
|
$ |
Net unamortized debt issuance costs |
|
|
|
|
|
|
|
( |
|
( |
Unamortized premium |
|
|
|
|
|
|
|
|
||
Total Indebtedness |
|
|
|
|
|
|
|
$ |
|
$ |
22
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Credit Facilities
The Operating Partnership has a $
On April 6, 2022, the Operating Partnership entered into a $
On July 29, 2022, the Operating Partnership entered into the $
The Company has entered into various swap agreements to effectively fix its interest costs on a portion of its Revolver and term loans (Note 8).
Unsecured Revolving Line of Credit
At September 30, 2023 and December 31, 2022, the Company had a total of $
Mortgages and Other Notes Payable
During the nine months ended September 30, 2023, the Company (amounts represent balances at the time of transactions):
At September 30, 2023 and December 31, 2022, the Company’s mortgages were collateralized by
Fund IV also has an outstanding balance and total available credit on its secured bridge facility of $
At September 30, 2023, a Fund V mortgage of $
23
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
On July 15, 2023, the 146 Geary Street, Fund IV non-recourse mortgage loan with an outstanding balance of $
Unsecured Notes Payable
Unsecured notes payable at September 30, 2023 and December 31, 2022 are comprised of the following:
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 September 30, 2023 are as follows (in thousands):
Year Ending December 31, |
|
|
|
|
2023 (Remainder) |
|
$ |
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
Thereafter |
|
|
|
|
|
|
|
|
|
Unamortized premium |
|
|
|
|
Net unamortized debt issuance costs |
|
|
( |
) |
Total indebtedness |
|
$ |
|
|
The table above does not reflect available extension options (subject to customary conditions) on consolidated debt with balances as of September 30, 2023 of $
See Note 4 for information about liabilities of the Company’s unconsolidated affiliates.
8. Financial Instruments and Fair Value Measurements
The fair value of an asset is defined as the exit price, which is the amount that would either be received when an asset is sold or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The guidance establishes a three-tier fair value hierarchy based on the inputs used in measuring fair value. These tiers are: Level 1, for which quoted market prices for identical instruments are available in active markets, such as money market funds, equity securities, and U.S. Treasury securities; Level 2, for which there are inputs other than quoted prices included within Level 1 that are observable for the instrument, such as certain derivative instruments including interest rate caps and interest rate swaps; and Level 3, for financial instruments or other assets/liabilities that do not fall into Level 1 or Level 2 and for which little or no market data exists, therefore requiring the Company to develop its own assumptions.
24
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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. For significant Level 3 items, the Company has also provided the unobservable inputs.
Money Market Funds — The Company has money market funds, which at times have zero balances and are included in Cash and cash equivalents in the condensed consolidated balance sheets, and are comprised of government securities and/or U.S. Treasury bills. These funds were classified as Level 1 as the Company used quoted prices from active markets to determine their fair values.
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 (Note 4). The Company classifies its marketable equity securities as available-for-sale in accordance with the FASB’s Investments-Debt and Equity Securities guidance. In accordance with ASC Topic 825 Financial Instruments: the Company recognizes changes in the fair value of equity investments with readily determinable fair values in net income.
Derivative Assets — The Company has derivative assets, which are included in Other assets, net on the condensed consolidated balance sheets, and are comprised of interest rate swaps and caps. 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.
Derivative Liabilities — The Company has derivative liabilities, which are included in Accounts payable and other liabilities on the condensed consolidated balance sheets, and are comprised of interest rate swaps. These derivative instruments were measured at fair value using readily observable market inputs, such as quotations on interest rates, and were classified as Level 2 because they are custom, over-the-counter contracts with various bank counterparties that are not traded in an active market. See “Derivative Financial Instruments,” below.
The Company did not have any transfers into or out of Level 1, Level 2, and Level 3 measurements during the nine months ended September 30, 2023 or for the year ended December 31, 2022.
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):
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||||||||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Money market funds |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Derivative financial instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Marketable equity securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Derivative financial instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||||
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.
Marketable Equity Securities
During the three months ended September 30, 2023, the Company sold
During the three months ended September 30, 2023 and 2022, the Company recognized dividend income from marketable securities of $
These amounts are included in Realized and unrealized holding gains on investments and other on the Company's condensed consolidated statements of operations.
25
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 gains on investments and other on the Company's condensed consolidated statements of operations (in thousands):
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Realized gain on marketable securities, net |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Less: previously recognized unrealized gains on marketable securities sold during the period |
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Unrealized gains on marketable securities still held at the end of the period and through the disposition date on marketable securities sold during the period |
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Gain on Marketable securities, net |
$ |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
||
Items Measured at Fair Value on a Nonrecurring Basis
Impairment Charges
During the nine months ended September 30, 2023, the Company reduced its holding period and intended use at a property as a result of a loan in maturity default and deed-in-lieu foreclosure (Note 7, Note 16).
|
|
|
|
|
|
|
|
Impairment Charge (a) |
|
|||||
Property and Location |
|
Owner |
|
Triggering Event |
|
Effective Date |
|
Total |
|
|
Acadia's Share |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||
2023 Impairment Charges |
|
|
|
|
|
|
|
|
|
|
|
|
||
146 Geary Street, |
|
Fund IV |
|
|
Sept 30, 2023 |
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
||
2022 Impairment Charges |
|
|
|
|
|
|
|
|
|
|
|
|
||
146 Geary Street, |
|
Fund IV |
|
|
Sept 30, 2022 |
|
$ |
|
|
$ |
|
|||
717 N. Michigan Avenue, |
|
Fund IV |
|
|
Sept 30, 2022 |
|
|
|
|
|
|
|||
Total 2022 Impairment Charges |
|
|
|
|
|
|
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||
26
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Derivative Financial Instruments
The Company had the following interest rate swaps and caps for the periods presented (dollars in thousands):
|
|
|
|
|
|
|
|
|
Strike Rate |
|
|
|
Fair Value |
|
||||||||||
Derivative |
|
Aggregate Notional Amount |
|
|
Effective Date |
|
Maturity Date |
|
Low |
|
|
High |
|
Balance Sheet |
|
September 30, |
|
|
December 31, |
|
||||
Core |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest Rate Swaps |
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
( |
) |
|||
Interest Rate Swaps |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|||||||
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fund II |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest Rate Swap |
|
$ |
|
|
|
|
|
— |
|
|
|
$ |
|
|
$ |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fund III |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest Rate Cap |
|
$ |
|
|
|
|
|
— |
|
|
|
$ |
|
|
$ |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fund IV |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest Rate Cap |
|
$ |
|
|
|
|
|
— |
|
|
|
$ |
|
|
$ |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fund V |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest Rate Swaps |
|
$ |
|
|
|
|
|
|
— |
|
|
|
$ |
|
|
$ |
|
|||||||
Interest Rate Caps |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
||||||||
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total asset derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
||||||
Total liability derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
( |
) |
|||||
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 $
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.
27
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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):
|
|
|
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
|||||||||||
|
|
Level |
|
|
Carrying |
|
|
Estimated |
|
|
Carrying |
|
|
Estimated |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Notes Receivable (a) |
|
|
3 |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
City Point Loan (a) |
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Mortgage and Other Notes Payable (a) |
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Investment in non-traded equity securities (b) |
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Unsecured notes payable and Unsecured line of credit (c) |
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
The Company’s cash and cash equivalents, restricted cash, rents receivable, accounts payable and certain financial instruments included in other assets and other liabilities had fair values that approximated their carrying values due to their short maturity profiles at September 30, 2023.
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 $
Additionally, in connection with the refinancing of the La Frontera Village mortgage loan of $
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 $
28
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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.
Common Shares and Units
In addition to the ATM Program activity discussed below, the Company completed the following transactions in its Common Shares during the nine months ended September 30, 2023:
ATM Program
The Company has an at-the-market equity issuance program (“ATM Program”) that provides the Company an efficient vehicle for raising public equity capital to fund its needs. The Company entered into its current $
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 $
Dividends and Distributions
The following table sets forth the distributions declared and/or paid during the periods presented:
Date Declared |
|
Amount Per Share |
|
|
Record Date |
|
Payment Date |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
||||
|
$ |
|
|
|
||||
|
$ |
|
|
|
||||
|
$ |
|
|
|
||||
|
$ |
|
|
|
||||
|
$ |
|
|
|
||||
|
$ |
|
|
|
||||
29
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Accumulated Other Comprehensive Income (Loss)
The following tables set forth the activity in accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2023 and 2022 (in thousands):
|
|
Acadia's Share |
|
|
Balance at July 1, 2023 |
|
$ |
|
|
|
|
|
|
|
Other comprehensive income before reclassifications - swap agreements |
|
|
|
|
Reclassification of realized interest on swap agreements |
|
|
( |
) |
Net current period other comprehensive income |
|
|
|
|
Net current period other comprehensive income attributable to noncontrolling |
|
|
( |
) |
Balance at September 30, 2023 |
|
$ |
|
|
|
|
|
|
|
Balance at July 1, 2022 |
|
$ |
|
|
|
|
|
|
|
Other comprehensive income before reclassifications - swap agreements |
|
|
|
|
Reclassification of realized interest on swap agreements |
|
|
|
|
Net current period other comprehensive income |
|
|
|
|
Net current period other comprehensive income attributable to noncontrolling |
|
|
( |
) |
Balance at September 30, 2022 |
|
$ |
|
|
|
|
Acadia's Share |
|
|
Balance at January 1, 2023 |
|
$ |
|
|
|
|
|
|
|
Other comprehensive income before reclassifications - swap agreements |
|
|
|
|
Reclassification of realized interest on swap agreements |
|
|
( |
) |
Net current period other comprehensive income |
|
|
|
|
Net current period other comprehensive income attributable to noncontrolling |
|
|
( |
) |
Balance at September 30, 2023 |
|
$ |
|
|
|
|
|
|
|
Balance at January 1, 2022 |
|
$ |
( |
) |
|
|
|
|
|
Other comprehensive income before reclassifications - swap agreements |
|
|
|
|
Reclassification of realized interest on swap agreements |
|
|
|
|
Net current period other comprehensive income |
|
|
|
|
Net current period other comprehensive income attributable to noncontrolling |
|
|
( |
) |
Balance at September 30, 2022 |
|
$ |
|
|
30
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 and nine months ended September 30, 2023 and 2022 (dollars in thousands):
|
|
Noncontrolling |
|
|
Noncontrolling |
|
|
Total |
|
|
Redeemable Noncontrolling Interests (c) |
|
||||
Balance at July 1, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Distributions declared of $ |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Net income (loss) for the three months ended September 30, 2023 |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Conversion of |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Other comprehensive income - unrealized gain on valuation of swap agreements |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Reclassification of realized interest expense on swap agreements |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
City Point Loan accrued interest |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Capital call receivable |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||
Noncontrolling interest contributions |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Noncontrolling interest distributions |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Employee Long-term Incentive Plan Unit Awards |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Reallocation of noncontrolling interests (d) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Balance at September 30, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Balance at July 1, 2022 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Distributions declared of $ |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Net loss for the three months ended September 30, 2022 |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Conversion of |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Other comprehensive income - unrealized gain on valuation of swap agreements |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Reclassification of realized interest expense on swap agreements |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Acquisition of noncontrolling interest (e) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||
City Point Loan |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
City Point Loan accrued interest |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Noncontrolling interest contributions |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Noncontrolling interest distributions |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||
Employee Long-term Incentive Plan Unit Awards |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Reclassification of redeemable noncontrolling interests(f) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||
Reallocation of noncontrolling interests (d) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Balance at September 30, 2022 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
31
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
|
Noncontrolling |
|
|
Noncontrolling |
|
|
Total |
|
|
Redeemable Noncontrolling Interests (c) |
|
||||
Balance at January 1, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Distributions declared of $ |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Net income (loss) for the nine months ended September 30, 2023 |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Conversion of |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Other comprehensive income - unrealized gain on valuation of swap agreements |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Reclassification of realized interest expense on swap agreements |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
City Point Loan |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
City Point Loan accrued interest |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Capital call receivable |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||
Noncontrolling interest contributions |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Noncontrolling interest distributions |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Employee Long-term Incentive Plan Unit Awards |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Reallocation of noncontrolling interests (d) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Balance at September 30, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Balance at January 1, 2022 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Distributions declared of $ |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Net loss for the nine months ended September 30, 2022 |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Conversion of |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Other comprehensive income - unrealized gain on valuation of swap agreements |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Reclassification of realized interest expense on swap agreements |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Acquisition of noncontrolling interest (e) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||
City Point Loan |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
City Point Loan accrued interest |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Noncontrolling interest contributions |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Noncontrolling interest distributions |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||
Employee Long-term Incentive Plan Unit Awards |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Reclassification of redeemable noncontrolling interests(f) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
||
Reallocation of noncontrolling interests (d) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Balance at September 30, 2022 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
32
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Preferred OP Units
There were
In 1999, the Operating Partnership issued
During 2016, the Operating Partnership issued
Redeemable Noncontrolling Interests
Williamsburg Portfolio
In connection with the Williamsburg Portfolio acquisition in February 2022 (Note 2), the Company evaluated the Williamsburg Noncontrolling Interest ("NCI"), which represents the venture partner's one-time right to put its
City Point Loan
In August 2022, the Company provided a loan, through a separate lending subsidiary, to other Fund II investors in City Point, through a separate borrower subsidiary, to fund the investors' pro rata contribution necessary to complete the refinancing of the City Point debt (Note 7), of which $
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 plus either (i) a fixed cash amount or (ii) a cash amount equal to the value of fixed number of Common Shares of the Company on the trading day prior to the election, which began in August 2023 ("redemption value"). As a result of granting these redemption rights, the City Point NCI, net of the City Point Loan, has been reclassified and presented as redeemable noncontrolling interests on the Company's condensed consolidated balance sheets. Given the carrying value of the City Point NCI at the time of the transaction exceeded the maximum redemption value, the Company did not recognize any initial adjustment to accrete the City Point NCI to the redemption value. The Company is required to periodically evaluate the maximum redemption amount of the NCI interest and recognize an increase in the carrying value of the City Point NCI if the redemption value exceeds the then current carrying value. At September 30, 2023 and December 31, 2022, the Company determined that the carrying value exceeded the maximum redemption value and no adjustment was required.
33
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
8833 Beverly Boulevard
In July 2023, the Company entered into a limited partnership agreement to own and operate the 8833 Beverly Boulevard property, which agreement was effective retroactively as of the date the Company acquired the property in March 2022. Following the formation of the partnership, the Company retained a
11. Leases
As Lessor
The Company is engaged in the operation of shopping centers and other retail properties that are either owned or, with respect to certain shopping centers, operated under long-term ground leases (see below) that expire at various dates through December 31, 2121, with renewal options. Space in the shopping centers is leased to tenants pursuant to agreements that provide for terms ranging generally from
Reserve Analysis
The Company estimates the collectability of its accrued rent and accounts receivable balances related to lease revenue. Management exercises judgment in assessing collectability and considers customer creditworthiness, assessment of risk associated with the tenant, and current economic trends, among other factors. If the Company determines that the accrued rent and/or accounts receivable balances are no longer probable of collection then the balances are written-off and the lease is recognized on a cash basis. During the three months ended September 30, 2023 and 2022, the Company recorded a decrease in its general allowance for credit losses of $
During the nine months ended September 30, 2023, Fund II received $
As Lessee
During the nine months ended September 30, 2023, the Company:
34
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Additional disclosures regarding the Company’s leases as lessee are as follows:
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Lease Cost |
|
|
|
|
|
|
|
|
|
|
|
||||
Finance lease cost: |
|
|
|
|
|
|
|
|
|
|
|
||||
Amortization of right-of-use assets |
$ |
|
|
|
|
|
$ |
|
|
$ |
|
||||
Interest on lease liabilities |
|
|
|
|
|
|
|
|
|
|
|
||||
Subtotal |
|
|
|
|
|
|
|
|
|
|
|
||||
Operating lease cost |
|
|
|
|
|
|
|
|
|
|
|
||||
Variable lease cost |
|
|
|
|
|
|
|
|
|
|
|
||||
Total lease cost |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other Information |
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average remaining lease term - finance leases (years) |
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average remaining lease term - operating leases (years) |
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average discount rate - finance leases |
|
|
|
|
|
|
|
% |
|
|
% |
||||
Weighted-average discount rate - operating leases |
|
|
|
|
|
|
|
% |
|
|
% |
||||
Right-of-use assets – finance leases are included in Operating real estate (Note 2) in the condensed consolidated balance sheets. Lease liabilities – finance leases are included in Accounts payable and other liabilities in the condensed consolidated balance sheets (Note 5). Operating lease cost comprises amortization of right-of-use assets for operating properties (related to ground rents) or amortization of right-of-use assets for office and corporate assets and is included in Property operating expense or General and administrative expense, respectively, in the condensed consolidated statements of operations. Finance lease cost comprises amortization of right-of-use assets for certain ground leases, which is included in Property operating expense, as well as interest on lease liabilities, which is included in Interest expense in the condensed consolidated statements of operations.
Lease Obligations
The scheduled future minimum (i) rental revenues from rental properties under the terms of non-cancelable tenant leases greater than one year (assuming no new or renegotiated leases for such premises) and (ii) rental payments under the terms of all non-cancelable operating and finance leases in which the Company is the lessee, principally for office space, land and equipment, as of September 30, 2023, are summarized as follows (in thousands):
|
|
|
|
|
Minimum Rental Payments |
|
||||||
Year Ending December 31, |
|
Minimum Rental |
|
|
Operating Leases (b) |
|
|
Finance |
|
|||
2023 (Remainder) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
2024 |
|
|
|
|
|
|
|
|
|
|||
2025 |
|
|
|
|
|
|
|
|
|
|||
2026 |
|
|
|
|
|
|
|
|
|
|||
2027 |
|
|
|
|
|
|
|
|
|
|||
Thereafter |
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Interest |
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|||
During the three and nine months ended September 30, 2023 and 2022, no single tenant or property collectively comprised more than
35
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
12. Segment Reporting
The Company has
The following tables set forth certain segment information for the Company (in thousands):
|
|
For the Three Months Ended September 30, 2023 |
|
|||||||||||||||||
|
|
Core |
|
|
Funds |
|
|
Structured |
|
|
Unallocated |
|
|
Total |
|
|||||
Revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||
Property operating expenses and real estate taxes |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||
General and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|||
Impairment charges |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|||
Gain on disposition of properties |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating income |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Interest and other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Realized and unrealized holding gains (losses) on investments and other |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
||||
Equity in losses of unconsolidated affiliates |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||
Interest expense |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||
Income tax benefit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income (loss) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
||
Net loss attributable to redeemable noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net (income) loss attributable to noncontrolling interests |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income attributable to Acadia |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|||
|
|
For the Three Months Ended September 30, 2022 |
|
|||||||||||||||||
|
|
Core |
|
|
Funds |
|
|
Structured |
|
|
Unallocated |
|
|
Total |
|
|||||
Revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||
Property operating expenses and real estate taxes |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||
General and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|||
Impairment charges |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|||
Gain on disposition of properties |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating income (loss) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
||
Interest and other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Realized and unrealized holding (losses) gains on investments and other |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Equity in losses of unconsolidated affiliates |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||
Interest expense |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||
Income tax benefit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net income (loss) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Net loss attributable to redeemable noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net loss attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net loss attributable to Acadia |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
36
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
|
As of or for the Nine Months Ended September 30, 2023 |
|
|||||||||||||||||
|
|
Core |
|
|
Funds |
|
|
Structured |
|
|
Unallocated |
|
|
Total |
|
|||||
Revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||
Property operating expenses and real estate taxes |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||
General and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|||
Impairment charges |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|||
Operating income |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Interest and other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Realized and unrealized holding gains on investments and other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Equity in earnings (losses) of unconsolidated affiliates |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|||
Interest expense |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||
Income tax provision |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|||
Net income |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Net loss attributable to redeemable noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net (income) loss attributable to noncontrolling interests |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income attributable to Acadia |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Real estate at cost (a) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Total assets (a) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Cash paid for acquisition of real estate |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Cash paid for development and property improvement costs |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
|
|
As of or for the Nine Months Ended September 30, 2022 |
|
|||||||||||||||||
|
|
Core |
|
|
Funds |
|
|
Structured |
|
|
Unallocated |
|
|
Total |
|
|||||
Revenues |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||
Property operating expenses and real estate taxes |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||
General and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|||
Impairment charges |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|||
Gain on disposition of properties |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Operating income |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Interest and other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Realized and unrealized holding gains (losses) on investments and other |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Equity in (losses) earnings of unconsolidated affiliates |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Interest expense |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||
Income tax provision |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|||
Net income |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Net loss attributable to redeemable noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net loss attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net (loss) income attributable to Acadia |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Real estate at cost (a) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Total assets (a) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Cash paid for acquisition of real estate |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Cash paid for development and property improvement costs |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
37
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
Restricted Shares and LTIP Units - Employees
During the nine months ended September 30, 2023, the Company issued
For valuation of the 2023 and 2022 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
The total fair value of the above Restricted Share Units and LTIP Units as of the grant date was $
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 nine months ended September 30, 2023, the Company issued
38
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
fees. Vesting with respect to
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
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 at each reporting period in accordance with ASC Topic 718, Compensation– Stock Compensation. The awards in connection with Fund IV were determined to have
The Company recognized $
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 at December 31, 2021 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Vested |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Forfeited |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Unvested at December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Vested |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Forfeited |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Unvested at September 30, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
The weighted-average grant date fair value for Restricted Shares and LTIP Units granted for the nine months ended September 30, 2023 and the year ended December 31, 2022 were $
39
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Other Plans
On a combined basis, the Company incurred a total of $
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
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
40
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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.
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
(dollars in thousands) |
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net (loss) income attributable to Acadia shareholders |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Less: earnings attributable to unvested participating securities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
(Loss) income from continuing operations net of income attributable to participating securities for basic earnings per share |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Impact of City Point Loan share conversion option (a) |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Income from continuing operations net of income attributable to participating securities for diluted earnings per share |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average shares for basic earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Series A Preferred OP Units |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Employee unvested restricted shares |
|
|
|
|
|
|
|
|
|
|
|
|
||||
City Point Loan common stock conversion option (Note 10) (a) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average shares for diluted earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic (loss) earnings per Common Share from continuing operations attributable to Acadia |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
Diluted (loss) earnings per Common Share from continuing operations attributable to Acadia |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Anti-Dilutive Shares Excluded from Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Series A Preferred OP Units |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Series A Preferred OP Units - Common share equivalent |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Series C Preferred OP Units |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Series C Preferred OP Units - Common share equivalent |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restricted shares |
|
|
|
|
|
|
|
|
|
|
|
|
||||
41
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
15. Variable Interest Entities
Pursuant to GAAP consolidation guidance, the Company consolidates certain VIEs for which the Company is the primary beneficiary. As of September 30, 2023 and December 31, 2022, the Company has identified eight 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.
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.
(dollars in thousands) |
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
VIE ASSETS |
|
|
|
|
|
|
||
Operating real estate, net |
|
$ |
|
|
$ |
|
||
Real estate under development |
|
|
|
|
|
|
||
Investments in and advances to unconsolidated affiliates |
|
|
|
|
|
|
||
Other assets, net |
|
|
|
|
|
|
||
Right-of-use assets - operating leases, net |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
|
|
|
|
|
||
Restricted cash |
|
|
|
|
|
|
||
Rents receivable, net |
|
|
|
|
|
|
||
Total VIE assets (a) |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
VIE LIABILITIES |
|
|
|
|
|
|
||
Mortgage and other notes payable, net |
|
$ |
|
|
$ |
|
||
Unsecured notes payable, net |
|
|
|
|
|
|
||
Accounts payable and other liabilities |
|
|
|
|
|
|
||
Lease liability - operating leases, net |
|
|
|
|
|
|
||
Total VIE liabilities (a) |
|
$ |
|
|
$ |
|
||
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 September 30, 2023 and December 31, 2022, 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
42
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
equity investment, (ii) the $
16. Subsequent Events
On October 27, 2023, the Company transferred 146 Geary Street, a Fund IV property, to its lender through a deed-in-lieu foreclosure. The property was a vacant building located in San Francisco, California. On July 15, 2023, the Fund IV non-recourse mortgage loan on the property, with an outstanding principal balance of $
On October 30, 2023, the Renaissance Portfolio, which the Company holds a
43
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
OVERVIEW
As of September 30, 2023, we own or have an ownership interest in 201 properties held through our Core Portfolio and Funds. Our Core Portfolio consists of those properties either 100% owned, or partially owned through joint venture interests, by the Operating Partnership, or subsidiaries thereof, not including those properties owned through our Funds. These properties primarily consist of street and urban retail, and suburban shopping centers. Our Funds are investment vehicles through which our Operating Partnership and outside institutional investors invest in primarily opportunistic and value-add retail real estate. Currently, we have active investments in four Funds. A summary of our wholly-owned and partially-owned retail properties and their physical occupancies at September 30, 2023 is as follows:
|
|
Number of Properties |
|
|
Operating Properties |
|
||||||||||
|
|
Development or |
|
|
Operating |
|
|
GLA |
|
|
Occupancy |
|
||||
Core Portfolio: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Chicago Metro |
|
|
3 |
|
|
|
36 |
|
|
|
576,977 |
|
|
|
85.7 |
% |
New York Metro |
|
|
— |
|
|
|
29 |
|
|
|
394,557 |
|
|
|
91.4 |
% |
Los Angeles Metro |
|
|
— |
|
|
|
2 |
|
|
|
23,757 |
|
|
|
100.0 |
% |
San Francisco Metro |
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
0.0 |
% |
Dallas Metro |
|
|
2 |
|
|
|
14 |
|
|
|
121,386 |
|
|
|
85.6 |
% |
Washington DC Metro |
|
|
1 |
|
|
|
31 |
|
|
|
344,590 |
|
|
|
87.4 |
% |
Boston Metro |
|
|
— |
|
|
|
1 |
|
|
|
1,050 |
|
|
|
100.0 |
% |
Suburban |
|
|
3 |
|
|
|
25 |
|
|
|
3,910,213 |
|
|
|
93.4 |
% |
Total Core Portfolio |
|
|
11 |
|
|
|
138 |
|
|
|
5,372,530 |
|
|
|
91.9 |
% |
Acadia Share of Total Core Portfolio |
|
|
11 |
|
|
|
138 |
|
|
|
5,011,251 |
|
|
|
92.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fund Portfolio: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Fund II |
|
|
— |
|
|
|
1 |
|
|
|
536,198 |
|
|
|
70.0 |
% |
Fund III |
|
|
1 |
|
|
|
1 |
|
|
|
4,637 |
|
|
|
91.6 |
% |
Fund IV |
|
|
1 |
|
|
|
26 |
|
|
|
696,627 |
|
|
|
89.1 |
% |
Fund V |
|
|
— |
|
|
|
22 |
|
|
|
7,358,804 |
|
|
|
92.5 |
% |
Total Fund Portfolio |
|
|
2 |
|
|
|
50 |
|
|
|
8,596,266 |
|
|
|
90.8 |
% |
Acadia Share of Total Fund Portfolio |
|
|
2 |
|
|
|
50 |
|
|
|
1,872,458 |
|
|
|
88.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Core and Funds |
|
|
13 |
|
|
|
188 |
|
|
|
13,968,796 |
|
|
|
91.3 |
% |
Acadia Share of Total Core and Funds |
|
|
13 |
|
|
|
188 |
|
|
|
6,883,710 |
|
|
|
91.3 |
% |
The majority of our operating income is derived from rental revenues from operating properties, including expense recoveries from tenants, offset by operating and overhead expenses.
44
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:
45
SIGNIFICANT DEVELOPMENTS DURING THE NINE MONTHS ENDED SEPTEMBER 30, 2023 AND SUBSEQUENT EVENTS
Investments
During the nine months ended September 30, 2023, Fund V acquired one unconsolidated property and one consolidated property totaling $111.5 million, inclusive of transaction costs, as described below (Note 2, Note 4):
On January 20, 2023, through Mervyns II, we received a special cash dividend of $28.2 million from our investment in Albertsons, of which our share was $11.3 million. Additionally, following the expiration of the lock-up period and distribution of 2.5 million shares of Albertsons to our partners, we received 1.6 million shares of Albertsons (Note 4, Note 8).
Financing Activity
During the nine months ended September 30, 2023, we (Note 7, Note 4):
On July 15, 2023, the 146 Geary Street, Fund IV non-recourse mortgage loan with an outstanding balance of $19.3 million, or $4.5 million at the Company’s share, matured with no further extension options and was in default (Note 7). The property securing the mortgage is a vacant building located in San Francisco, California. The loan accrued default interest at a rate of 4.00% per annum in excess of the interest rate of SOFR + 3.65%. On October 27, 2023, the Company completed the transfer of the property to its lender through a deed-in-lieu foreclosure (Note 16). The Company has recorded an impairment charge related to such loan default and transfer of the property (Note 8).
Structured Financing Investments
During the nine months ended September 30, 2023, we funded $4.6 million of a $12.8 million construction loan commitment to an unconsolidated venture (Note 4). Through Fund V, we refinanced a $31.7 million bridge loan at an unconsolidated property that was originated by Fund V at acquisition with the a new mortgage loan at an unconsolidated property.
Economic and Other Considerations
The year ended December 31, 2022 and nine months ended September 30, 2023 were impacted by significant volatility in global markets, largely driven by rising inflation, rising interest rates, slowing economic growth, geopolitical uncertainty and instability in the banking sector following multiple bank failures. The rate hikes enacted by the Federal Reserve have had a significant impact on interest rate indexes such as LIBOR, SOFR and the Prime Rate and cost of borrowing. We manage our exposure to fluctuations in interest rates primarily through the use of fixed-rate debt and interest rate swap and cap agreements. We believe we manage our properties in a cost-conscious manner to minimize recurring operational expenses and utilize multi-year contracts to alleviate the impact of inflation on our business and our tenants. We also continue to see consumer confidence and we expect to continue to add value to our portfolio by executing on our current leasing momentum, our active development and redevelopment projects, and leasing pipeline. Except for increased interest costs, we have not experienced any material negative impacts at this time and we intend to actively manage our business to respond to the ongoing economic and social impact from such events.
On April 23, 2023, Bed Bath and Beyond, Inc. (“Bed Bath and Beyond”) filed Chapter 11 bankruptcy protection. Bed Bath and Beyond had leases at two locations within our Core Portfolio and three locations in our Fund Portfolio, with aggregate GLA of 124,432 square feet and 59,391 square feet, representing 2.1% and 0.7% of Core and Fund GLA, respectively. In our Core Portfolio, we recaptured and re-leased one of the spaces to an existing tenant that is expanding a flagship store under a new 15-year lease. We are actively seeking a tenant for the remaining Core
46
Portfolio location. In our Fund Portfolio, one lease was assumed by a new tenant and we have regained possession of the other two locations; we have one signed lease and identified a future tenant at the remaining Fund locations. As a result of the bankruptcy filing, for the nine months ended September 30, 2023, we accelerated the amortization of the below-market lease intangibles of $8.1 million related to the Bed Bath and Beyond lease terminations. We did not experience any material negative impacts on our cash flows or property values as a result of the bankruptcy.
47
RESULTS OF OPERATIONS
See Note 12 in the Notes to Condensed Consolidated Financial Statements for an overview of our three reportable segments.
Comparison of Results for the Three Months Ended September 30, 2023 to the Three Months Ended September 30, 2022
The results of operations by reportable segment for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 are summarized in the table below (in millions, totals may not add due to rounding):
|
|
Three Months Ended |
|
|
Three Months Ended |
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
|
|
September 30, 2023 |
|
|
September 30, 2022 |
|
|
Increase (Decrease) |
|
|||||||||||||||||||||||||||||||||||||||
|
|
Core |
|
|
Funds |
|
|
SF |
|
|
Total |
|
|
Core |
|
|
Funds |
|
|
SF |
|
|
Total |
|
|
Core |
|
|
Funds |
|
|
SF |
|
|
Total |
|
||||||||||||
Revenues |
|
$ |
47.3 |
|
|
$ |
34.1 |
|
|
$ |
— |
|
|
$ |
81.4 |
|
|
$ |
50.1 |
|
|
$ |
29.9 |
|
|
$ |
— |
|
|
$ |
79.9 |
|
|
$ |
(2.8 |
) |
|
$ |
4.2 |
|
|
$ |
— |
|
|
$ |
1.5 |
|
Depreciation and amortization |
|
|
(18.8 |
) |
|
|
(14.9 |
) |
|
|
— |
|
|
|
(33.7 |
) |
|
|
(18.8 |
) |
|
|
(14.9 |
) |
|
|
— |
|
|
|
(33.7 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Property operating expenses and real estate taxes |
|
|
(15.6 |
) |
|
|
(11.4 |
) |
|
|
— |
|
|
|
(27.0 |
) |
|
|
(14.8 |
) |
|
|
(10.8 |
) |
|
|
— |
|
|
|
(25.6 |
) |
|
|
0.8 |
|
|
|
0.6 |
|
|
|
— |
|
|
|
1.4 |
|
General and administrative expenses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(10.3 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(10.2 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.1 |
|
Impairment charges |
|
|
— |
|
|
|
(3.7 |
) |
|
|
— |
|
|
|
(3.7 |
) |
|
|
— |
|
|
|
(33.3 |
) |
|
|
— |
|
|
|
(33.3 |
) |
|
|
— |
|
|
|
(29.6 |
) |
|
|
— |
|
|
|
(29.6 |
) |
Gain on disposition of properties |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
8.9 |
|
|
|
— |
|
|
|
8.9 |
|
|
|
— |
|
|
|
(8.9 |
) |
|
|
— |
|
|
|
(8.9 |
) |
Operating income |
|
|
12.9 |
|
|
|
4.1 |
|
|
|
— |
|
|
|
6.7 |
|
|
|
16.5 |
|
|
|
(20.2 |
) |
|
|
— |
|
|
|
(14.0 |
) |
|
|
(3.6 |
) |
|
|
24.3 |
|
|
|
— |
|
|
|
20.7 |
|
Interest and other income |
|
|
— |
|
|
|
— |
|
|
|
5.1 |
|
|
|
5.1 |
|
|
|
— |
|
|
|
— |
|
|
|
4.0 |
|
|
|
4.0 |
|
|
|
— |
|
|
|
— |
|
|
|
1.1 |
|
|
|
1.1 |
|
Realized and unrealized holding gains (losses) on investments and other |
|
|
1.7 |
|
|
|
— |
|
|
|
(0.1 |
) |
|
|
1.7 |
|
|
|
— |
|
|
|
(7.3 |
) |
|
|
(0.6 |
) |
|
|
(7.9 |
) |
|
|
1.7 |
|
|
|
7.3 |
|
|
|
0.5 |
|
|
|
9.6 |
|
Equity in earnings (losses) of unconsolidated affiliates |
|
|
(0.8 |
) |
|
|
(4.0 |
) |
|
|
— |
|
|
|
(4.9 |
) |
|
|
(49.8 |
) |
|
|
(0.8 |
) |
|
|
— |
|
|
|
(50.6 |
) |
|
|
49.0 |
|
|
|
(3.2 |
) |
|
|
— |
|
|
|
45.7 |
|
Interest expense |
|
|
(11.4 |
) |
|
|
(13.5 |
) |
|
|
— |
|
|
|
(24.9 |
) |
|
|
(10.4 |
) |
|
|
(10.7 |
) |
|
|
— |
|
|
|
(21.2 |
) |
|
|
1.0 |
|
|
|
2.8 |
|
|
|
— |
|
|
|
3.7 |
|
Income tax (provision) benefit |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net income (loss) |
|
|
2.5 |
|
|
|
(13.5 |
) |
|
|
5.0 |
|
|
|
(16.3 |
) |
|
|
(43.8 |
) |
|
|
(39.0 |
) |
|
|
3.4 |
|
|
|
(89.5 |
) |
|
|
46.3 |
|
|
|
25.5 |
|
|
|
1.6 |
|
|
|
73.2 |
|
Net loss attributable to redeemable noncontrolling interests |
|
|
— |
|
|
|
2.5 |
|
|
|
— |
|
|
|
2.5 |
|
|
|
— |
|
|
|
3.2 |
|
|
|
— |
|
|
|
3.2 |
|
|
|
— |
|
|
|
(0.7 |
) |
|
|
— |
|
|
|
(0.7 |
) |
Net (income) loss attributable to noncontrolling interests |
|
|
(0.2 |
) |
|
|
12.5 |
|
|
|
— |
|
|
|
12.3 |
|
|
|
2.9 |
|
|
|
27.6 |
|
|
|
— |
|
|
|
30.5 |
|
|
|
(3.1 |
) |
|
|
(15.1 |
) |
|
|
— |
|
|
|
(18.2 |
) |
Net income attributable to Acadia |
|
$ |
2.3 |
|
|
$ |
1.5 |
|
|
$ |
5.0 |
|
|
$ |
(1.4 |
) |
|
$ |
(40.9 |
) |
|
$ |
(8.2 |
) |
|
$ |
3.4 |
|
|
$ |
(55.9 |
) |
|
$ |
43.2 |
|
|
$ |
9.7 |
|
|
$ |
1.6 |
|
|
$ |
54.5 |
|
Core Portfolio
The results of operations for our Core Portfolio segment are depicted in the table above under the headings labeled “Core.” Segment net income attributable to Acadia for our Core Portfolio increased $43.2 million for the three months ended September 30, 2023 compared to the prior year period as a result of the changes further described below.
Revenues for our Core Portfolio decreased $2.8 million for the three months ended September 30, 2023 compared to the prior year period primarily due to the bankruptcy of Bed, Bath and Beyond.
Realized and unrealized holding gains (losses) on investments and other for our Core Portfolio increased $1.7 million for the three months ended September 30, 2023 compared to the prior year period primarily due to the mark-to-market adjustment on the Investment in Albertsons in 2023. In January 2023, following the expiration of the lock-up period and distribution of approximately 2.5 million shares by Mervyns II to its partners, the Company received 1.6 million shares of Albertsons, which are now included in the Core portfolio (Note 4, Note 8).
Equity in earnings (losses) of unconsolidated affiliates for our Core Portfolio increased $49.0 million for the three months ended September 30, 2023 compared to the prior year period primarily due to an impairment charge for 840 N. Michigan Avenue in 2022
Interest expense for our Core Portfolio increased $1.0 million for the three months ended September 30, 2023 compared to the prior year period primarily due to higher average outstanding borrowings and interest rates in 2023 (Note 7).
Net income attributable to noncontrolling interests for our Core Portfolio decreased $3.1 million for the three months ended September 30, 2023 compared to the prior year period based on the noncontrolling interests’ share of the variances discussed above.
Funds (all amounts below are consolidated amounts and are not representative of our proportionate share)
The results of operations for our Funds segment are depicted in the table above under the headings labeled “Funds.” Segment net income attributable to Acadia for the Funds increased $9.7 million for the three months ended September 30, 2023 compared to the prior year period as a result of the changes described below.
48
Revenues for the Funds increased $4.2 million for the three months ended September 30, 2023 compared to the prior year period primarily due to (i) $2.9 million from new tenant lease up in 2022 and 2023 and (ii) $1.6 million from Fund property acquisitions. These increases were offset by $0.5 million from Fund property dispositions in 2022.
Impairment charges for the Funds decreased $29.6 million for the three months ended September 30, 2023 compared to the prior year period. Impairment charges totaling $3.7 million during 2023 for the Funds related to 146 Geary Street in Fund IV. Impairment charges totaling $33.3 million during 2022 for the Funds related to 146 Geary Street and 717 N. Michigan Avenue in Fund IV.
Gain on disposition of properties for the Funds decreased $8.9 million for the three months ended September 30, 2023 compared to the prior year period due to the sale of Wake Forest Crossing at Fund IV in 2022 (Note 2).
Realized and unrealized holding gains on investments and other for the Funds increased $7.3 million for the three months ended September 30, 2023 compared to the prior year period primarily due to the $7.3 million mark-to-market adjustment on the Investment in Albertsons in 2023. In January 2023, following the expiration of the lock-up period and distribution of approximately 2.5 million shares by Mervyns II to its partners, the Company received 1.6 million shares of Albertsons, which are now included in the Core portfolio (Note 4, Note 8).
Equity in earnings (losses) of unconsolidated affiliates for the Funds decreased $3.2 million for the three months ended September 30, 2023 compared to the prior year period primarily due to new unconsolidated Fund acquisitions in 2022 and 2023 (Note 4).
Interest expense for the Funds increased $2.8 million for the three months ended September 30, 2023 compared to the prior year period primarily due to $4.5 million from higher average interest rates in 2023, offset by $1.6 million from lower average outstanding borrowings in 2023.
Net (income) loss attributable to noncontrolling interests for the Funds decreased $15.1 million for the three months ended September 30, 2023 compared to the prior year period based on the noncontrolling interests’ share of the variances discussed above. Net income attributable to noncontrolling interests in the Funds includes asset management fees earned by the Company of $2.4 million and $2.3 million for the three months ended September 30, 2023 and 2022, respectively.
Structured Financing
Interest and other income for the Structured Financing portfolio increased $1.1 million for the three months ended September 30, 2023 compared to the prior year period primarily due to the City Point loan issued during 2022 (Note 10).
Unallocated
The Company does not allocate general and administrative expenses and income taxes to its reportable segments. These unallocated amounts are depicted in the table above under the headings labeled “Total.”
49
Comparison of Results for the Nine Months Ended September 30, 2023 to the Nine Months Ended September 30, 2022
The results of operations by reportable segment for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022 are summarized in the table below (in millions, totals may not add due to rounding):
|
|
Nine Months Ended |
|
|
Nine Months Ended |
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
|
|
September 30, 2023 |
|
|
September 30, 2022 |
|
|
Increase (Decrease) |
|
|||||||||||||||||||||||||||||||||||||||
|
|
Core |
|
|
Funds |
|
|
SF |
|
|
Total |
|
|
Core |
|
|
Funds |
|
|
SF |
|
|
Total |
|
|
Core |
|
|
Funds |
|
|
SF |
|
|
Total |
|
||||||||||||
Revenues |
|
$ |
153.5 |
|
|
$ |
99.7 |
|
|
$ |
— |
|
|
$ |
253.2 |
|
|
$ |
151.7 |
|
|
$ |
94.1 |
|
|
$ |
— |
|
|
$ |
245.7 |
|
|
$ |
1.8 |
|
|
$ |
5.6 |
|
|
$ |
— |
|
|
$ |
7.5 |
|
Depreciation and amortization |
|
|
(57.5 |
) |
|
|
(43.4 |
) |
|
|
— |
|
|
|
(101.0 |
) |
|
|
(56.5 |
) |
|
|
(45.9 |
) |
|
|
— |
|
|
|
(102.4 |
) |
|
|
1.0 |
|
|
|
(2.5 |
) |
|
|
— |
|
|
|
(1.4 |
) |
Property operating expenses and real estate taxes |
|
|
(46.7 |
) |
|
|
(32.5 |
) |
|
|
— |
|
|
|
(79.2 |
) |
|
|
(44.4 |
) |
|
|
(31.0 |
) |
|
|
— |
|
|
|
(75.4 |
) |
|
|
2.3 |
|
|
|
1.5 |
|
|
|
— |
|
|
|
3.8 |
|
General and administrative expenses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(30.9 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(32.8 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1.9 |
) |
Impairment charges |
|
|
— |
|
|
|
(3.7 |
) |
|
|
— |
|
|
|
(3.7 |
) |
|
|
— |
|
|
|
(33.3 |
) |
|
|
— |
|
|
|
(33.3 |
) |
|
|
— |
|
|
|
(29.6 |
) |
|
|
— |
|
|
|
(29.6 |
) |
Gain on disposition of properties |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
49.9 |
|
|
|
— |
|
|
|
49.9 |
|
|
|
— |
|
|
|
(49.9 |
) |
|
|
— |
|
|
|
(49.9 |
) |
Operating income (loss) |
|
|
49.2 |
|
|
|
20.1 |
|
|
|
— |
|
|
|
38.5 |
|
|
|
50.7 |
|
|
|
33.8 |
|
|
|
— |
|
|
|
51.7 |
|
|
|
(1.5 |
) |
|
|
(13.7 |
) |
|
|
— |
|
|
|
(13.2 |
) |
Interest and other income |
|
|
— |
|
|
|
— |
|
|
|
14.9 |
|
|
|
14.9 |
|
|
|
— |
|
|
|
— |
|
|
|
9.9 |
|
|
|
9.9 |
|
|
|
— |
|
|
|
— |
|
|
|
5.0 |
|
|
|
5.0 |
|
Realized and unrealized holding gains (losses) on investments and other |
|
|
5.2 |
|
|
|
25.0 |
|
|
|
— |
|
|
|
30.2 |
|
|
|
1.2 |
|
|
|
(19.1 |
) |
|
|
(0.5 |
) |
|
|
(18.4 |
) |
|
|
4.0 |
|
|
|
44.1 |
|
|
|
0.5 |
|
|
|
48.6 |
|
Equity in (losses) earnings of unconsolidated affiliates |
|
|
1.9 |
|
|
|
(8.2 |
) |
|
|
— |
|
|
|
(6.3 |
) |
|
|
(47.4 |
) |
|
|
1.2 |
|
|
|
— |
|
|
|
(46.2 |
) |
|
|
49.3 |
|
|
|
(9.4 |
) |
|
|
— |
|
|
|
39.9 |
|
Interest expense |
|
|
(33.0 |
) |
|
|
(35.5 |
) |
|
|
— |
|
|
|
(68.6 |
) |
|
|
(26.5 |
) |
|
|
(31.8 |
) |
|
|
— |
|
|
|
(58.3 |
) |
|
|
6.5 |
|
|
|
3.7 |
|
|
|
— |
|
|
|
10.3 |
|
Income tax benefit (provision) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(0.2 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
- |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(0.2 |
) |
Net income (loss) |
|
|
23.3 |
|
|
|
1.4 |
|
|
|
14.9 |
|
|
|
8.5 |
|
|
|
(22.1 |
) |
|
|
(15.8 |
) |
|
|
9.4 |
|
|
|
(61.3 |
) |
|
|
45.4 |
|
|
|
17.2 |
|
|
|
5.5 |
|
|
|
69.8 |
|
Net loss attributable to redeemable noncontrolling interests |
|
|
— |
|
|
|
5.7 |
|
|
|
— |
|
|
|
5.7 |
|
|
|
— |
|
|
|
3.2 |
|
|
|
— |
|
|
|
3.2 |
|
|
|
— |
|
|
|
2.5 |
|
|
|
— |
|
|
|
2.5 |
|
Net income attributable to noncontrolling interests |
|
|
(1.8 |
) |
|
|
8.9 |
|
|
|
— |
|
|
|
7.1 |
|
|
|
1.4 |
|
|
|
17.3 |
|
|
|
— |
|
|
|
18.7 |
|
|
|
(3.2 |
) |
|
|
(8.4 |
) |
|
|
— |
|
|
|
(11.6 |
) |
Net income (loss) attributable to Acadia |
|
$ |
21.5 |
|
|
$ |
16.0 |
|
|
$ |
14.9 |
|
|
$ |
21.2 |
|
|
$ |
(20.7 |
) |
|
$ |
4.6 |
|
|
$ |
9.4 |
|
|
$ |
(39.4 |
) |
|
$ |
42.2 |
|
|
$ |
11.4 |
|
|
$ |
5.5 |
|
|
$ |
60.6 |
|
Core Portfolio
The results of operations for our Core Portfolio segment are depicted in the table above under the headings labeled “Core.” Segment net income attributable to Acadia for our Core Portfolio increased $42.2 million for the nine months ended September 30, 2023 compared to the prior year period as a result of the changes further described below.
Revenues for our Core Portfolio increased $1.8 million for the nine months ended September 30, 2023 compared to the prior year period primarily due to (i) a $7.8 million acceleration of a below market lease for a bankrupt tenant, (ii) a $2.8 million increase from Core Portfolio property acquisitions in 2022 (Note 2), and (iii) $3.6 million from lease up within the Core Portfolio. These increases were offset by (i) $5.4 million from vacating tenants, (ii) $3.5 million from additional termination income received in 2022, and (iii) a $2.7 million increase associated with revenues deemed uncollectible in 2023.
Depreciation and amortization for our Core Portfolio increased $1.0 million for the nine months ended September 30, 2023 compared to the prior year period primarily due to Core Portfolio property acquisitions in 2022.
Property operating expenses and real estate taxes for our Core Portfolio increased $2.3 million for the nine months ended September 30, 2023 compared to the prior year period primarily due to an increase in non-recurring repair and maintenance and utility and insurance costs in 2023.
Realized and unrealized holding gains (losses) on investments and other for our Core Portfolio includes a $4.9 million mark-to-market adjustment on the Investment in Albertsons in 2023 and a $1.2 million bargain purchase gain on the acquisition of the Williamsburg Collection in 2022 (Note 2). In January 2023, following the expiration of the lock-up period and distribution of approximately 2.5 million shares by Mervyns II to its partners, the Company received 1.6 million shares of Albertsons, which are now included in the Core portfolio (Note 4, Note 8).
Equity in earnings (losses) of unconsolidated affiliates for our Core Portfolio increased $49.3 million for the nine months ended September 30, 2023 compared to the prior year period primarily due to an impairment charge for 840 N. Michigan Avenue in 2022.
Interest expense for our Core Portfolio increased $6.5 million for the nine months ended September 30, 2023 compared to the prior year period due to (i) $4.4 million from higher average outstanding borrowings in 2023, and (ii) $3.4 million from higher average interest rates in 2023. These increases were partially offset by $0.7 million from higher capitalized interest in 2023.
Net income attributable to noncontrolling interests for our Core Portfolio decreased $3.2 million for the nine months ended September 30, 2023 compared to the prior year period based on the noncontrolling interests’ share of the variances discussed above.
50
Funds
The results of operations for our Funds segment are depicted in the table above under the headings labeled “Funds.” Segment net income attributable to Acadia for the Funds increased $11.4 million for the nine months ended September 30, 2023 compared to the prior year period as a result of the changes described below.
Revenues for the Funds increased $5.6 million for the nine months ended September 30, 2023 compared to the prior year period primarily due to (i) $7.5 million from new tenant lease up in 2022 and 2023, (ii) $2.0 million from settlement income related to a tenant. and (iii) $1.6 million from Fund property acquisitions in 2023. These increases were offset by (i) $4.1 million from Fund property dispositions in 2022 (Note 2) and (ii) a $1.3 million increase associated with revenues deemed uncollectible in 2023.
Depreciation and amortization for the Funds decreased $2.5 million for the nine months ended September 30, 2023 compared to the prior year period primarily due to Fund property dispositions in 2022.
Impairment charges for the Funds decreased $29.6 million for the nine months ended September 30, 2023 compared to the prior year period. Impairment charges totaling $3.7 million during 2023 for the Funds related to 146 Geary Street in Fund IV. Impairment charges totaling $33.3 million during 2022 for the Funds related to 146 Geary Street and 717 N. Michigan Avenue in Fund IV.
Gain on disposition of properties for the Funds decreased $49.9 million for the nine months ended September 30, 2023 compared to the prior year period due to the sales of Cortlandt Crossing at Fund III, Lincoln Place, Mayfair, Dauphin and Wake Forest Crossing in Fund IV and a New Towne outparcel in Fund V in 2022 (Note 2).
Realized and unrealized holding gains (losses) on investments and other for the Funds increased $44.1 million for the nine months ended September 30, 2023 compared to the prior year period, primarily due to (i) a $28.2 million increase in dividend income from Albertsons in 2023 and by (ii) a $21.6 million decrease in the mark-to-market adjustment on the Investment in Albertsons in 2022, offset by (i) a $2.0 million decrease in the mark-to-market adjustment on the Investment in Albertsons in 2023, and (ii) a $1.4 million distribution from the Storage Post Management Company in 2022. (Note 4).
Equity in earnings (losses) of unconsolidated affiliates for the Funds decreased $9.4 million for the nine months ended September 30, 2023 compared to the prior year period primarily due to new unconsolidated Fund acquisitions in 2022 and 2023 (Note 4).
Interest expense for the Funds increased $3.7 million for the nine months ended September 30, 2023 compared to the prior year period primarily due to $12.9 million from higher average interest rates in 2023 offset by $7.1 million from lower average outstanding borrowings in 2023 and $2.4 million from higher capitalized interest in 2023.
Net loss attributable to redeemable noncontrolling interests for the Funds increased $2.5 million for the nine months ended September 30, 2023 compared to the prior year period due to the City Point Loan in August 2022 (Note 10). The Company did not allocate any income to redeemable noncontrolling interests for the Funds for the nine months ended September 30, 2022.
Net (income) loss attributable to noncontrolling interests for the Funds decreased $8.4 million for the nine months ended September 30, 2023 compared to the prior year period based on the noncontrolling interests’ share of the variances discussed above. Net loss attributable to noncontrolling interests in the Funds includes asset management fees earned by the Company of $7.2 million and $7.2 million for the nine months ended September 30, 2023 and 2022, respectively.
Structured Financing
The results of operations for our Structured Financing segment are depicted in the table above under the headings labeled “SF.” Interest and other income for the Structured Financing portfolio increased $5.0 million for the nine months ended September 30, 2023 compared to the prior year period primarily due to the City Point Loan in 2022.
Unallocated
The Company does not allocate general and administrative expense and income taxes to its reportable segments. These unallocated amounts are depicted in the table above under the headings labeled “Total.” Unallocated general and administrative expenses decreased $1.9 million for the nine months ended September 30, 2023 compared to the prior year period due to $2.0 million related to acquisition costs in the prior year but not the current year (Note 2).
51
NON-GAAP FINANCIAL MEASURES
Net Property Operating Income
The following discussion of net property operating income (“NOI”) and rent spreads on new and renewal leases includes the activity from both our consolidated and our pro-rata share of unconsolidated properties within our Core Portfolio. Our Funds invest primarily in properties that typically require significant leasing and development. Given that the Funds are finite-life investment vehicles, these properties are sold following stabilization. For these reasons, we believe NOI and rent spreads are not meaningful measures for our Fund investments.
NOI represents property revenues less property expenses. We consider NOI and rent spreads on new and renewal leases for our Core Portfolio to be appropriate supplemental disclosures of portfolio operating performance due to their widespread acceptance and use within the REIT investor and analyst communities. NOI and rent spreads on new and renewal leases are presented to assist investors in analyzing our property performance, however, our method of calculating these may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.
A reconciliation of consolidated operating income to net operating income - Core Portfolio follows (in thousands):
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Consolidated operating income |
|
$ |
6,691 |
|
|
$ |
(13,953 |
) |
|
$ |
38,457 |
|
|
$ |
51,737 |
|
Add back: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative |
|
|
10,309 |
|
|
|
10,170 |
|
|
|
30,898 |
|
|
|
32,768 |
|
Depreciation and amortization |
|
|
33,726 |
|
|
|
33,744 |
|
|
|
100,955 |
|
|
|
102,428 |
|
Impairment charges |
|
|
3,686 |
|
|
|
33,311 |
|
|
|
3,686 |
|
|
|
33,311 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Above/below-market rent, straight-line rent and other adjustments (a) |
|
|
(3,336 |
) |
|
|
(4,864 |
) |
|
|
(18,666 |
) |
|
|
(17,469 |
) |
Gain on disposition of properties |
|
|
— |
|
|
|
(8,885 |
) |
|
|
— |
|
|
|
(49,916 |
) |
Consolidated NOI |
|
|
51,076 |
|
|
|
49,523 |
|
|
|
155,330 |
|
|
|
152,859 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Redeemable noncontrolling interest in consolidated NOI |
|
|
(861 |
) |
|
|
(517 |
) |
|
|
(3,260 |
) |
|
|
(517 |
) |
Noncontrolling interest in consolidated NOI |
|
|
(14,927 |
) |
|
|
(13,753 |
) |
|
|
(43,132 |
) |
|
|
(45,010 |
) |
Less: Operating Partnership's interest in Fund NOI included above |
|
|
(4,656 |
) |
|
|
(3,800 |
) |
|
|
(14,458 |
) |
|
|
(11,278 |
) |
Add: Operating Partnership's share of unconsolidated joint ventures NOI (b) |
|
|
3,163 |
|
|
|
3,397 |
|
|
|
11,263 |
|
|
|
10,451 |
|
Core Portfolio NOI |
|
$ |
33,795 |
|
|
$ |
34,850 |
|
|
$ |
105,743 |
|
|
$ |
106,505 |
|
Same-Property NOI includes Core Portfolio properties that we owned for both the current and prior periods presented, but excludes those properties that we acquired, sold or expected to sell, redeveloped and developed during these periods. The following table summarizes Same-Property NOI for our Core Portfolio (in thousands):
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Core Portfolio NOI |
|
$ |
33,795 |
|
|
$ |
34,850 |
|
|
$ |
105,743 |
|
|
$ |
106,505 |
|
Less properties excluded from Same-Property NOI |
|
|
(6,071 |
) |
|
|
(8,644 |
) |
|
|
(21,305 |
) |
|
|
(26,772 |
) |
Same-Property NOI |
|
$ |
27,724 |
|
|
$ |
26,206 |
|
|
$ |
84,438 |
|
|
$ |
79,733 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Percent change from prior year period |
|
|
5.8 |
% |
|
|
|
|
|
5.9 |
% |
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Components of Same-Property NOI: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Same-Property Revenues |
|
$ |
39,714 |
|
|
$ |
37,756 |
|
|
$ |
120,755 |
|
|
$ |
114,982 |
|
Same-Property Operating Expenses |
|
|
(11,990 |
) |
|
|
(11,550 |
) |
|
|
(36,317 |
) |
|
|
(35,249 |
) |
Same-Property NOI |
|
$ |
27,724 |
|
|
$ |
26,206 |
|
|
$ |
84,438 |
|
|
$ |
79,733 |
|
52
Rent Spreads on Core Portfolio New and Renewal Leases
The following table summarizes rent spreads on both a cash basis and straight-line basis for new and renewal leases based on leases executed within our Core Portfolio for the periods presented. Cash basis represents a comparison of rent most recently paid on the previous lease as compared to the initial rent paid on the new lease. Straight-line basis represents a comparison of rents as adjusted for contractual escalations, abated rent, and lease incentives for the same comparable leases. The table below includes embedded option renewals for which the renewed rent was equal to or approximated existing base rent.
|
|
Three Months Ended September 30, 2023 |
|
|
Nine Months Ended September 30, 2023 |
|
||||||||||
Core Portfolio New and Renewal Leases |
|
Cash Basis |
|
|
Straight- |
|
|
Cash Basis |
|
|
Straight- |
|
||||
Number of new and renewal leases executed |
|
|
17 |
|
|
|
17 |
|
|
|
53 |
|
|
|
53 |
|
GLA commencing |
|
|
85,899 |
|
|
|
85,899 |
|
|
|
374,813 |
|
|
|
374,813 |
|
New base rent |
|
$ |
82.29 |
|
|
$ |
87.15 |
|
|
$ |
36.90 |
|
|
$ |
38.58 |
|
Expiring base rent |
|
$ |
63.53 |
|
|
$ |
62.55 |
|
|
$ |
30.63 |
|
|
$ |
29.62 |
|
Percent growth in base rent |
|
|
29.5 |
% |
|
|
39.3 |
% |
|
|
20.5 |
% |
|
|
30.3 |
% |
Average cost per square foot (a) |
|
$ |
59.99 |
|
|
$ |
59.99 |
|
|
$ |
17.15 |
|
|
$ |
17.15 |
|
Weighted average lease term (years) |
|
|
6.8 |
|
|
|
6.8 |
|
|
|
6.6 |
|
|
|
6.6 |
|
(a) The average cost per square foot includes tenant improvement costs, leasing commissions and tenant allowances.
53
Funds from Operations
We consider funds from operations (“FFO”) as defined by the National Association of Real Estate Investment Trusts (“NAREIT”) to be an appropriate supplemental disclosure of operating performance due to its widespread acceptance and use within the REIT investor and analyst communities. FFO is presented to assist investors in analyzing our performance. It is helpful as it excludes various items included in net income that are not indicative of the operating performance, such as gains (losses) from sales of depreciated property, depreciation and amortization, and impairment of real estate. Our method of calculating FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. FFO does not represent cash generated from operations as defined by GAAP and is not indicative of cash available to fund all cash needs, including distributions. It should not be considered as an alternative to net income for the purpose of evaluating our performance or to cash flows as a measure of liquidity. Consistent with the NAREIT definition, we define FFO as net income (computed in accordance with GAAP), excluding gains (losses) from sales of depreciated property and impairment of depreciable real estate, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Also consistent with NAREIT’s definition of FFO, the Company has elected to include gains and losses incidental to its main business (including those related to its RCP investments, such as Albertsons) in FFO. A reconciliation of net income (loss) attributable to Acadia to FFO follows (dollars in thousands, except per share amounts):
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net (loss) income attributable to Acadia |
|
$ |
(1,426 |
) |
|
$ |
(55,891 |
) |
|
$ |
21,210 |
|
|
$ |
(39,427 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation of real estate and amortization of leasing costs (net of |
|
|
27,351 |
|
|
|
27,097 |
|
|
|
82,043 |
|
|
|
78,007 |
|
Impairment charges (net of noncontrolling interests' share) |
|
|
852 |
|
|
|
58,481 |
|
|
|
852 |
|
|
|
58,481 |
|
Gain on disposition of properties (net of noncontrolling interests' share) |
|
|
— |
|
|
|
(2,055 |
) |
|
|
— |
|
|
|
(11,892 |
) |
Income attributable to Common OP Unit holders |
|
|
(55 |
) |
|
|
(3,083 |
) |
|
|
1,313 |
|
|
|
(2,057 |
) |
Distributions - Preferred OP Units |
|
|
123 |
|
|
|
123 |
|
|
|
369 |
|
|
|
369 |
|
Funds from operations attributable to Common Shareholders and |
|
$ |
26,845 |
|
|
$ |
24,672 |
|
|
$ |
105,787 |
|
|
$ |
83,481 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Less: Impact of City Point share conversion (a) |
|
|
— |
|
|
|
(906 |
) |
|
|
— |
|
|
|
(906 |
) |
Funds from operations attributable to Common Shareholders and |
|
$ |
26,845 |
|
|
$ |
23,766 |
|
|
$ |
105,787 |
|
|
$ |
82,575 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Funds From Operations per Share - Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic weighted-average shares outstanding, GAAP earnings |
|
|
95,319,958 |
|
|
|
94,980,333 |
|
|
|
95,256,703 |
|
|
|
94,757,678 |
|
Weighted-average OP Units outstanding |
|
|
6,962,435 |
|
|
|
5,307,160 |
|
|
|
6,980,766 |
|
|
|
5,311,460 |
|
Basic weighted-average shares and OP Units outstanding, FFO |
|
|
102,282,393 |
|
|
|
100,287,493 |
|
|
|
102,237,469 |
|
|
|
100,069,138 |
|
Assumed conversion of Preferred OP Units to Common Shares |
|
|
463,898 |
|
|
|
25,067 |
|
|
|
463,898 |
|
|
|
464,623 |
|
Assumed conversion of LTIP units and Restricted Share Units to |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Diluted weighted-average number of Common Shares and Common |
|
|
102,746,291 |
|
|
|
100,312,560 |
|
|
|
102,701,367 |
|
|
|
100,533,761 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Diluted Funds from operations, per Common Share and Common OP Unit |
|
$ |
0.26 |
|
|
$ |
0.24 |
|
|
$ |
1.03 |
|
|
$ |
0.82 |
|
54
LIQUIDITY AND CAPITAL RESOURCES
Uses of Liquidity and Cash Requirements
Generally, our principal uses of liquidity are (i) distributions to our shareholders and OP unit holders, (ii) investments, which include the funding of our capital committed to the Funds and property acquisitions and development/re-tenanting activities within our Core Portfolio, (iii) distributions to our Fund investors, (iv) debt service and loan repayments and (v) share repurchases.
Distributions
In order to qualify as a REIT for federal income tax purposes, we must distribute at least 90% of our taxable income to our shareholders. During the nine months ended September 30, 2023, we paid dividends and distributions on our Common Shares and Preferred OP Units totaling $51.5 million.
Investments
During the nine months ended September 30, 2023, Fund V acquired one unconsolidated property and one consolidated property totaling $111.5 million, inclusive of transaction costs, as described below (Note 2, Note 4):
Structured Financing Investments
During the nine months ended September 30, 2023, we funded $4.6 million of a $12.8 million construction loan commitment to an unconsolidated venture (Note 4). Through Fund V, we refinanced a $31.7 million bridge loan at an unconsolidated property that was originated by Fund V at acquisition with a new mortgage loan at an unconsolidated property.
Capital Commitments
During the nine months ended September 30, 2023, we made capital contributions aggregating $8.7 million to our Funds, including $2.0 million to Fund II for City Point. In October 2023, we made an additional Fund V capital contribution of $4.1 million.
At September 30, 2023, our share of the remaining capital commitments to our Funds aggregated $36.9 million as follows:
55
Development Activities
During the nine months ended September 30, 2023, capitalized costs associated with development activities totaled $12.7 million (Note 2). At September 30, 2023, we had a total of twelve consolidated and one unconsolidated project under development or redevelopment, for which the estimated total cost to complete these projects through 2025 was $50.6 million to $77.0 million, and our estimated share was approximately $28.7 million to $45.1 million. Substantially all remaining development and redevelopment costs are discretionary, which could be affected by various risks and uncertainties, including, but not limited to, the effects of the current inflationary environment, rising interest rates, and other risks detailed in Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2022.
Debt
A summary of our consolidated debt, which includes the full amount of Fund related obligations and excludes our pro rata share of debt at our unconsolidated subsidiaries, is as follows (in thousands):
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
|
|
|
|
|
|
|
||
Total Debt - Fixed and Effectively Fixed Rate |
|
$ |
1,456,226 |
|
|
$ |
1,440,773 |
|
Total Debt - Variable Rate |
|
|
376,043 |
|
|
|
364,641 |
|
|
|
|
1,832,269 |
|
|
|
1,805,414 |
|
Net unamortized debt issuance costs |
|
|
(12,449 |
) |
|
|
(12,697 |
) |
Unamortized premium |
|
|
266 |
|
|
|
343 |
|
Total Indebtedness |
|
$ |
1,820,086 |
|
|
$ |
1,793,060 |
|
As of September 30, 2023, our consolidated indebtedness aggregated $1,832.3 million, excluding unamortized premium of $0.3 million and net unamortized loan costs of $12.4 million, and were collateralized by 33 properties and related tenant leases. Stated interest rates on our outstanding indebtedness ranged from 3.99% to SOFR + 3.75% with maturities that ranged from November 1, 2023 to April 15, 2035, without regard to available extension options and the Fund IV mortgage loan in maturity default. With respect to the debt maturing in October and November 2023, we are actively pursuing refinancing the remaining obligations, though there can be no assurance that we can refinance on favorable terms or at all. One non-recourse Fund IV mortgage loan with an outstanding balance of $19.3 million, or $4.5 million at our share, was in default at September 30, 2023. On July 15, 2023 the loan matured and was not repaid and accrues default interest at a rate of 4.00% per annum in excess of the interest rate of SOFR + 3.65%. Taking into consideration $1,250.8 million of notional principal under variable to fixed-rate swap agreements currently in effect, $1,456.2 million of the portfolio debt, or 79.50%, was fixed at a 4.73% weighted-average interest rate and $376.0 million, or 20.50% was floating at a 7.30% weighted average interest rate as of September 30, 2023. Our variable-rate debt includes $154.1 million of debt subject to interest rate caps.
Without regard to available extension options, at September 30, 2023 there was $133.1 million of debt maturing in 2023 at a weighted-average interest rate of 8.36%; there was $1.9 million of scheduled principal amortization due in the remainder of 2023; and our share of scheduled remaining 2023 principal payments and maturities on our unconsolidated debt was $40.9 million. In addition, $75.7 million of our total consolidated debt and $6.3 million of our pro-rata share of unconsolidated debt will come due by September 30, 2024. With respect to the debt maturing in 2023 and 2024, we have options to extend consolidated debt aggregating $20.3 million and $0.0 million at September 30, 2023, respectively; however, there can be no assurance that the Company will be able to successfully execute any or all of its available extension options. For the remaining indebtedness, we may not have sufficient cash on hand to repay such indebtedness, and, therefore, we expect to refinance at least a portion of this indebtedness or select other alternatives based on market conditions as these loans mature; however, there can be no assurance that we will be able to obtain financing on acceptable terms or at all. Our ability to obtain financing could be affected by various risks and uncertainties, including, but not limited to, the effects of the current inflationary environment, rising interest rates, and other risks detailed in Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2022.
Share Repurchase Program
We maintain a share repurchase program under which $122.5 million remains available as of September 30, 2023 (Note 10). We did not repurchase any shares under this program during the nine months ended September 30, 2023.
Sources of Liquidity
Our primary sources of capital for funding our short-term (less than 12 months) and long-term (12 months and longer) liquidity needs include (i) the issuance of both public equity and OP Units, (ii) the issuance of both secured and unsecured debt, (iii) unfunded capital commitments from noncontrolling interests within our Funds, (iv) future sales of existing properties, (v) repayments of structured financing investments, (vi) liquidation of marketable securities, and (vii) cash on hand and future cash flow from operating activities. Our cash on hand in our consolidated subsidiaries at September 30, 2023 totaled $19.3 million. Our remaining sources of liquidity are described further below.
56
ATM Program
We have an ATM Program (Note 10) that provides us with an efficient and low-cost vehicle for raising capital through public equity issuances on an as-we-go basis to fund our capital needs. Through this program, we have been able to effectively “match-fund” the required capital for our Core Portfolio and our share of Fund acquisitions through the issuance of Common Shares over extended periods employing a price averaging strategy. In addition, from time to time, we have issued and may issue, equity in follow-on offerings separate from our ATM Program. Net proceeds raised through our ATM Program and follow-on offerings are primarily used for acquisitions, both for our Core Portfolio and our pro-rata share of Fund acquisitions, and for general corporate purposes. We did not make any sales under the ATM program during the nine months ended September 30, 2023.
Fund Capital
During the nine months ended September 30, 2023, Fund V called for capital contributions of $39.1 million, of which our aggregate share was $8.7 million. In October, Fund V called for capital contributions of $20.4 million, of which our aggregate share was $4.1 million. At September 30, 2023, unfunded capital commitments from noncontrolling interests within Funds II, III, IV and V were zero, $1.4 million, $32.2 million and $106.3 million, respectively.
Other Transactions
The contractual lock-up restrictions on our investment in Albertsons expired in January 2023, and we received 1.6 million shares. During the three months ended September 30, 2023, we sold 100,000 shares of Albertsons, generating net proceeds of $2.4 million. At September 30, 2023, we held 1.5 million shares which had a fair value of $35.2 million (Note 4, Note 8). In addition, during the nine months ended September 30, 2023, we recognized dividend income of $28.9 million (inclusive of the $28.2 million special dividend received from Mervyns II investment in Albertsons prior to the expiration of the lockup), of which the Company's share was $11.8 million (Note 8).
In April and June 2023, Fund II received $2.0 million, or $1.1 million at the Company’s share, of proceeds from the Century 21 Department Stores LLC bankruptcy claim (Note 11).
Structured Financing Repayments
During the nine months ended September 30, 2023, Fund V refinanced a $31.7 million bridge loan at an unconsolidated property that was originated by Fund V at acquisition. We also have one Structured Financing investment in the amount of $21.6 million including accrued interest (exclusive of default interest and other amounts due on the loan that have not been recognized) that previously matured and has not been repaid (Note 3).
Financing and Debt
As of September 30, 2023, we had $180.4 million of additional capacity under existing Core Portfolio and Fund revolving debt facilities. In addition, at that date within our Core and Fund portfolios, we had 93 unleveraged consolidated properties with an aggregate carrying value of approximately $1.8 billion, although there can be no assurance that we would be able to obtain financing for these properties at favorable terms, if at all.
Inflation and Economic Condition Considerations
The year ended December 31, 2022 and nine months ended September 30, 2023 were impacted by significant volatility in global markets, largely driven by rising inflation, rising interest rates, slowing economic growth, geopolitical uncertainty and instability in the banking sector following multiple bank failures. Central banks have responded to rapidly rising inflation by tightening monetary policies that are likely to create headwinds to economic growth. The Federal Reserve has raised interest rates eleven times since January 2022, and has signaled that further interest rate increases may be forthcoming throughout 2023 and into 2024. The rate hikes enacted by the Federal Reserve have had a significant impact on interest rate indexes such as SOFR and the Prime Rate. As of September 30, 2023, approximately 79.5% of our outstanding debt is fixed or effectively fixed rate with the remaining 20.5% indexed to LIBOR, SOFR or Prime plus an applicable margin per the loan agreement. As of September 30, 2023, we were counterparty to 36 interest rate swap agreements and four interest rate cap agreements, all of which qualify for and are designated as hedging instruments, which helps to alleviate the impact of rising interest rates on our operations.
We believe we manage our properties in a cost-conscious manner to minimize recurring operational expenses and utilize multi-year contracts to alleviate the impact of inflation on our business and our tenants. Most of our leases require tenants to pay their share of operating expenses, including common area maintenance, real estate taxes and insurance, thereby reducing our exposure to increases in costs and operating expenses resulting from inflation. These provisions are designed to partially mitigate the impact of inflation; however, current inflation levels are much greater than the contractual rent increases we obtain from our tenant base. We also continue to see consumer confidence and we expect to continue to add value to our portfolio through executing on our current leasing momentum, our active development and redevelopment projects, and leasing pipeline.
57
On April 23, 2023, Bed Bath and Beyond filed Chapter 11 bankruptcy protection causing them to reject their leases at several of our properties. Bed Bath and Beyond’s leases represents two locations within our Core Portfolio and three locations in our Fund Portfolio. The bankruptcy of any of our tenants, which may cause them to reject their leases, or not to renew their leases as they expire, could have an adverse effect on our cash flows or property values. For the nine months ended September 30, 2023, we accelerated the amortization of the below-market lease intangible of $8.1 million related to the Bed Bath and Beyond lease termination.
While we have not experienced any material negative impacts at this time, we intend to actively manage our business to respond to the ongoing economic and social impact from such events. See Risk Factors in Part I, Item 1A, of our Annual Report on Form 10-K for the year ended December 31, 2022.
HISTORICAL CASH FLOW
The following table compares the historical cash flow for the nine months ended September 30, 2023 with the cash flow for the nine months ended September 30, 2022 (in millions, totals may not add due to rounding):
|
|
Nine Months Ended September 30, |
|
|||||||||
|
|
2023 |
|
|
2022 |
|
|
Variance |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Net cash provided by operating activities |
|
$ |
115.2 |
|
|
$ |
100.5 |
|
|
$ |
14.7 |
|
Net cash used in investing activities |
|
|
(90.1 |
) |
|
|
(144.9 |
) |
|
|
54.8 |
|
Net cash (used in) provided by financing activities |
|
|
(30.1 |
) |
|
|
47.6 |
|
|
|
(77.7 |
) |
(Decrease) increase in cash and restricted cash |
|
$ |
(5.0 |
) |
|
$ |
3.1 |
|
|
$ |
(8.1 |
) |
Operating Activities
Net cash provided by operating activities primarily consists of cash inflows from dividend income and rental revenue, and cash outflows for property operating expenses, general and administrative expenses and interest and debt expense.
Our operating activities provided $14.7 million more cash for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022, primarily due to the $28.2 million dividend received from our investment in Albertsons in 2023, offset by higher payments of interest in 2023.
Investing Activities
Net cash used in investing activities is impacted by our investments in and advances to unconsolidated affiliates, the timing and extent of our real estate development, capital improvements, and acquisition and disposition activities during the period.
Our investing activities used $54.8 million less cash for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022, primarily due to (i) $194.4 million less cash used for the acquisition of properties, and (ii) $117.9 million less cash used in our investments in and advances to unconsolidated affiliates. These sources of cash were primarily offset by (i) $195.4 million less cash received from the disposition of properties, (ii) $21.7 million less cash received from return of capital from unconsolidated affiliates, (iii) $29.5 million less cash received from repayment of notes receivable, and (iv) $14.4 million more cash used in development, construction, and property improvements.
Financing Activities
Net cash used in financing activities is impacted by the timing and extent of issuances of debt and equity securities, distributions paid to common shareholders and unitholders of the Operating Partnership as well as principal and other payments associated with our outstanding indebtedness.
Our financing activities used $77.7 million more cash during the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022, primarily from (i) $119.5 million less cash provided by the sale of Common Shares, (ii) $77.6 million less cash provided by contributions from noncontrolling interests, and (iii) $3.9 million more cash used in dividends paid to Common shareholders. These decreases were offset by (i) $51.3 million more cash received in proceeds from debt, (ii) $42.8 million less cash used for distributions to noncontrolling interests, (iii) $24.3 million less cash used for the acquisition of noncontrolling interests, and (iv) $5.4 million from lower financing costs.
58
OFF-BALANCE SHEET ARRANGEMENTS
We have the following investments made through joint ventures (that may include, among others, tenancy-in common and other similar investments) for the purpose of investing in operating properties. We account for these investments using the equity method of accounting. As such, our financial statements reflect our investment and our share of income and loss from, but not the individual assets and liabilities, of these joint ventures.
See Note 4 in the Notes to Condensed Consolidated Financial Statements, for a discussion of our unconsolidated investments. The Operating Partnership’s pro-rata share of unconsolidated non-recourse debt related to those investments is as follows (dollars in millions):
|
|
Operating Partnership |
|
|
September 30, 2023 |
|||||||||
Investment |
|
Ownership |
|
|
Pro-rata Share of |
|
|
Effective Interest Rate (a) |
|
|
Maturity Date |
|||
Renaissance |
|
|
20.0 |
% |
|
$ |
32.0 |
|
|
|
7.68 |
% |
|
Oct 2023 |
Gotham(c) |
|
|
49.0 |
% |
|
|
8.5 |
|
|
|
8.33 |
% |
|
Dec 2023 |
3104 M Street |
|
|
20.0 |
% |
|
|
0.8 |
|
|
|
8.50 |
% |
|
Jan 2024 |
Eden |
|
|
22.8 |
% |
|
|
5.5 |
|
|
|
7.60 |
% |
|
Sep 2024 |
Crossroads |
|
|
49.0 |
% |
|
|
29.3 |
|
|
|
3.94 |
% |
|
Oct 2024 |
Tri City Plaza(c) |
|
|
18.1 |
% |
|
|
6.9 |
|
|
|
2.94 |
% |
|
Oct 2024 |
Frederick Crossing(c) |
|
|
18.1 |
% |
|
|
4.3 |
|
|
|
3.26 |
% |
|
Dec 2024 |
Paramus Plaza(b) |
|
|
11.6 |
% |
|
|
3.3 |
|
|
|
7.66 |
% |
|
Dec 2024 |
Frederick County Square(c) |
|
|
18.1 |
% |
|
|
4.2 |
|
|
|
4.11 |
% |
|
Jan 2025 |
840 N Michigan |
|
|
88.4 |
% |
|
|
65.0 |
|
|
|
4.36 |
% |
|
Feb 2025 |
Wood Ridge Plaza(b) |
|
|
18.1 |
% |
|
|
5.8 |
|
|
|
8.63 |
% |
|
Mar 2025 |
650 Bald Hill |
|
|
20.8 |
% |
|
|
3.2 |
|
|
|
3.75 |
% |
|
Jun 2026 |
La Frontera |
|
|
18.1 |
% |
|
|
10.0 |
|
|
|
6.11 |
% |
|
Jun 2027 |
Riverdale |
|
|
18.0 |
% |
|
|
6.9 |
|
|
|
7.79 |
% |
|
Nov 2027 |
Georgetown |
|
|
50.0 |
% |
|
|
7.3 |
|
|
|
4.72 |
% |
|
Dec 2027 |
Mohawk Commons |
|
|
18.1 |
% |
|
|
7.2 |
|
|
|
5.80 |
% |
|
Mar 2028 |
Shoppes at South Hills(c) |
|
|
18.1 |
% |
|
|
5.8 |
|
|
|
5.95 |
% |
|
Mar 2028 |
Total |
|
|
|
|
$ |
206.0 |
|
|
|
|
|
|
||
CRITICAL ACCOUNTING POLICIES
Management’s discussion and analysis of financial condition and results of operations is based upon our Condensed Consolidated Financial Statements, which have been prepared in accordance with GAAP. The preparation of Condensed Consolidated Financial Statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We base our estimates on historical experience and assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe there have been no material changes to the items that we disclosed as our critical accounting policies under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our 2022 Annual Report on Form 10-K.
Recently Issued and Adopted Accounting Pronouncements
Reference is made to Note 1 of the condensed consolidated financial statements for information about recently issued accounting pronouncements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Information as of September 30, 2023
Our primary market risk exposure is to changes in interest rates related to our mortgage and other debt. See Note 7 in the Notes to Condensed Consolidated Financial Statements, for certain quantitative details related to our mortgage and other debt.
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Currently, we manage our exposure to fluctuations in interest rates primarily through the use of fixed-rate debt and interest rate swap and cap agreements. As of September 30, 2023, we had total mortgage and other notes payable of $1,832.3 million, excluding the unamortized premium of $0.3 million and net unamortized debt issuance costs of $12.4 million, of which $1,456.2 million, or 79.5% was fixed-rate, inclusive of debt with rates fixed through the use of derivative financial instruments, and $376.0 million, or 20.5%, was variable-rate based upon LIBOR, SOFR or Prime rates plus certain spreads. As of September 30, 2023, we were party to 36 interest rate swaps and four interest rate cap agreements to hedge our exposure to changes in interest rates with respect to $1,250.8 million and $154.1 million of variable-rate debt, respectively. For a discussion of the risks associated with the discontinuation of LIBOR, see Item 1A. “Risk Factors—Risks Related to Our Liquidity and Indebtedness on our Annual Report on Form 10-K for the year ended December 31, 2022 — If we decided to employ higher leverage levels, we would be subject to increased debt service requirements and a higher risk of default on our debt obligations, which could adversely affect our financial conditions, cash flows and ability to make distributions to our shareholders. In addition, increases or changes in interest rates could cause our borrowing costs to rise and may limit our ability to refinance debt”.
The following table sets forth information as of September 30, 2023 concerning our long-term debt obligations, including principal cash flows by scheduled maturity (without regard to available extension options) and weighted average effective interest rates of maturing amounts (dollars in millions):
Core Consolidated Mortgage and Other Debt
Year |
|
Scheduled |
|
|
Maturities |
|
|
Total |
|
|
Weighted-Average |
|
||||
2023 (Remainder) |
|
$ |
0.5 |
|
|
$ |
— |
|
|
$ |
0.5 |
|
|
|
— |
% |
2024 |
|
|
1.8 |
|
|
|
7.3 |
|
|
|
9.1 |
|
|
|
4.7 |
% |
2025 |
|
|
2.1 |
|
|
|
252.3 |
|
|
|
254.4 |
|
|
|
4.2 |
% |
2026 |
|
|
2.4 |
|
|
|
400.0 |
|
|
|
402.4 |
|
|
|
4.2 |
% |
2027 |
|
|
2.2 |
|
|
|
200.1 |
|
|
|
202.3 |
|
|
|
4.1 |
% |
Thereafter |
|
|
4.3 |
|
|
|
161.6 |
|
|
|
165.9 |
|
|
|
4.6 |
% |
|
|
$ |
13.3 |
|
|
$ |
1,021.3 |
|
|
$ |
1,034.6 |
|
|
|
|
|
Fund Consolidated Mortgage and Other Debt
Year |
|
Scheduled |
|
|
Maturities |
|
|
Total |
|
|
Weighted-Average |
|
||||
2023 (Remainder) |
|
$ |
1.4 |
|
|
$ |
133.1 |
|
|
$ |
134.5 |
|
|
|
8.4 |
% |
2024 |
|
|
3.9 |
|
|
|
239.7 |
|
|
|
243.6 |
|
|
|
4.1 |
% |
2025 |
|
|
0.6 |
|
|
|
322.8 |
|
|
|
323.4 |
|
|
|
7.0 |
% |
2026 |
|
|
0.3 |
|
|
|
34.0 |
|
|
|
34.3 |
|
|
|
8.0 |
% |
2027 |
|
|
0.4 |
|
|
|
— |
|
|
|
0.4 |
|
|
|
— |
% |
Thereafter |
|
|
0.2 |
|
|
|
61.3 |
|
|
|
61.5 |
|
|
|
6.0 |
% |
|
|
$ |
6.8 |
|
|
$ |
790.9 |
|
|
$ |
797.7 |
|
|
|
|
|
Mortgage Debt in Unconsolidated Partnerships (at our Pro-Rata Share)
Year |
|
Scheduled |
|
|
Maturities |
|
|
Total |
|
|
Weighted-Average |
|
||||
2023 (Remainder) |
|
$ |
0.4 |
|
|
$ |
40.5 |
|
|
$ |
40.9 |
|
|
|
7.8 |
% |
2024 |
|
|
1.4 |
|
|
|
49.0 |
|
|
|
50.4 |
|
|
|
4.5 |
% |
2025 |
|
|
0.6 |
|
|
|
74.8 |
|
|
|
75.4 |
|
|
|
4.7 |
% |
2026 |
|
|
0.6 |
|
|
|
3.0 |
|
|
|
3.6 |
|
|
|
3.8 |
% |
2027 |
|
|
0.6 |
|
|
|
22.8 |
|
|
|
23.4 |
|
|
|
6.2 |
% |
Thereafter |
|
|
— |
|
|
|
12.3 |
|
|
|
12.3 |
|
|
|
5.9 |
% |
|
|
$ |
3.6 |
|
|
$ |
202.4 |
|
|
$ |
206.0 |
|
|
|
|
|
Without regard to available extension options, in the remainder of 2023, $135.0 million of our total consolidated debt and $40.9 million of our pro-rata share of unconsolidated outstanding debt will become due. In addition, $252.8 million of our total consolidated debt and $50.4 million of our pro-rata share of unconsolidated debt will become due in 2024. As it relates to the aforementioned maturing debt in 2023 and 2024, we
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have options to extend consolidated debt aggregating $20.3 million and $0.0 million, respectively; however, there can be no assurance that the Company will be able successfully execute any or all of its available extension options. As we intend on refinancing some or all of such debt at the then-existing market interest rates, which may be greater than the current interest rates, our interest expense would increase by approximately $4.8 million annually if the interest rate on the refinanced debt increased by 100 basis points. After giving effect to noncontrolling interests, our share of this increase would be $0.9 million. Interest expense on our variable-rate debt of $376.0 million, net of variable to fixed-rate swap agreements currently in effect, as of September 30, 2023, would increase $3.8 million if corresponding rate indices increased by 100 basis points. After giving effect to noncontrolling interests, our share of this increase would be $1.5 million. We may seek additional variable-rate financing if and when pricing and other commercial and financial terms warrant. As such, we would consider hedging against the interest rate risk related to such additional variable-rate debt through interest rate swaps and protection agreements, or other means.
Based on our outstanding debt balances as of September 30, 2023, the fair value of our total consolidated outstanding debt would decrease by approximately $6.8 million if interest rates increase by 1%. Conversely, if interest rates decrease by 1%, the fair value of our total outstanding debt would increase by approximately $6.2 million.
As of September 30, 2023, and December 31, 2022, we had consolidated notes receivable of $123.8 million and $123.9 million, respectively. We determined the estimated fair value of our notes receivable by discounting future cash receipts utilizing a discount rate equivalent to the rate at which similar notes receivable would be originated under conditions then existing.
Based on our outstanding notes receivable balances as of September 30, 2023, the fair value of our total outstanding notes receivable would decrease by approximately $0.9 million if interest rates increase by 1%. Conversely, if interest rates decrease by 1%, the fair value of our total outstanding notes receivable would increase by approximately $0.8 million.
Summarized Information as of December 31, 2022
As of December 31, 2022, we had total mortgage and other notes payable of $1,805.4 million, excluding the unamortized premium of $0.3 million and unamortized debt issuance costs of $12.7 million, of which $1,440.8 million, or 79.8% was fixed-rate, inclusive of debt with rates fixed through the use of derivative financial instruments, and $364.6 million, or 20.2%, was variable-rate based upon LIBOR rates plus certain spreads. As of December 31, 2022, we were party to 36 interest rate swap and three interest rate cap agreements to hedge our exposure to changes in interest rates with respect to $1,264.0 million and $103.8 million of LIBOR or SOFR-based variable-rate debt, respectively.
Interest expense on our variable-rate debt of $364.6 million as of December 31, 2022, would have increased $3.6 million if corresponding rate indices increased by 100 basis points. Based on our outstanding debt balances as of December 31, 2022, the fair value of our total outstanding debt would have decreased by approximately $0.4 million if interest rates increased by 1%. Conversely, if interest rates decreased by 1%, the fair value of our total outstanding debt would have increased by approximately $2.6 million.
Changes in Market Risk Exposures from December 31, 2022 to September 30, 2023
Our interest rate risk exposure from December 31, 2022, to September 30, 2023, has increased on an absolute basis, as the $364.6 million of variable-rate debt as of December 31, 2022 has increased to $376.0 million as of September 30, 2023. As a percentage of our overall debt, our interest rate exposure has increased as our variable-rate debt accounted for 20.2% of our consolidated debt as of December 31, 2022 compared to 20.5% as of September 30, 2023.
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ITEM 4. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
Our disclosure controls and procedures include internal controls and other procedures designed to provide reasonable assurance that information required to be disclosed in this and other reports filed under the Exchange Act, is recorded, processed, summarized, and reported within the required time periods specified in the SEC’s rules and forms; and that such information is accumulated and communicated to management, including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosures. It should be noted that no system of controls can provide complete assurance of achieving a company’s objectives and that future events may impact the effectiveness of a system of controls. Our chief executive officer and chief financial officer, after conducting an evaluation, together with members of our management, of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2023, have concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) were effective as of September 30, 2023, at a reasonable level of assurance.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.
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PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
From time to time, we are a party to various legal proceedings, claims or regulatory inquiries and investigations arising out of, or incident to, our ordinary course of business. While we are unable to predict with certainty the outcome of any particular matter, management does not expect, when such matters are resolved, that our resulting exposure to loss contingencies, if any, will have a material adverse effect on our consolidated financial position.
ITEM 1A. RISK FACTORS.
Except to the extent additional factual information disclosed elsewhere in this Report relates to such risk factors (including, without limitation, the matters discussed in Part I, “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations”), there were no material changes to the risk factors disclosed in Part I, “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2022.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
Trading Arrangements
During the three months ended September 30, 2023, none of our officers or trustees (as defined in Rule 16a-1(f) of the Exchange Act)
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ITEM 6. EXHIBITS.
The following is an index to all exhibits including (i) those filed with this Quarterly Report on Form 10-Q and (ii) those incorporated by reference herein:
Exhibit No. |
|
Description |
|
Method of Filing |
||
|
|
|
|
|
||
31.1 |
|
|
Filed herewith
|
|||
|
|
|
|
|
||
31.2 |
|
|
Filed herewith |
|||
|
|
|
|
|
||
32.1 |
|
|
Furnished herewith |
|||
|
|
|
|
|
||
32.2 |
|
|
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 |
||
64
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.
|
|
ACADIA REALTY TRUST |
|
|
(Registrant) |
|
|
|
By: |
|
/s/ Kenneth F. Bernstein |
|
|
Kenneth F. Bernstein |
|
|
Chief Executive Officer, |
|
|
President and Trustee |
|
|
|
By: |
|
/s/ John Gottfried |
|
|
John Gottfried |
|
|
Executive Vice President and |
|
|
Chief Financial Officer |
|
|
|
By: |
|
/s/ Richard Hartmann |
|
|
Richard Hartmann |
|
|
Senior Vice President and |
|
|
Chief Accounting Officer |
Dated: October 31, 2023
65