Real Estate

The Company’s consolidated real estate is comprised of the following (in thousands):



	September 30, 2017			December 31, 2016

Land	$	659,547		$	693,252
Buildings and improvements	2,344,370			1,916,288
Tenant improvements	140,027			132,220
Construction in progress	22,052			19,789
Properties under capital lease	76,965			76,965
Total	3,242,961			2,838,514
Less: Accumulated depreciation	(337,961		)	(287,066		)
Operating real estate, net	2,905,000			2,551,448
Real estate under development, at cost	237,434			543,486
Net investments in real estate	$	3,142,434		$	3,094,934

Acquisitions

During the nine months ended September 30, 2017 and the year ended December 31, 2016, the Company acquired the following consolidated retail properties (dollars in thousands):



Property and Location	Percent Acquired	Date of Acquisition	Purchase Price		Debt Assumed
2017 Acquisitions
Fund IV:
Lincoln Place - Fairview Heights, IL	100%	Mar 13, 2017	$	35,350	$	—
Shaw's Plaza - Windham, ME (Note 3)	100%	Jun 30, 2017	9,142		—
Subtotal Fund IV			44,492		—

Fund V:
Plaza Santa Fe - Santa Fe, NM	100%	Jun 5, 2017	35,220		—
Hickory Ridge - Hickory, NC	100%	Jul 27, 2017	44,020		—
New Towne Plaza - Canton, MI	100%	Aug 4, 2017	26,000		—
Subtotal Fund V			105,240		—
Total 2017 Acquisitions			$	149,732	$	—

2016 Acquisitions
Core Portfolio:
991 Madison Avenue - New York, NY ^(a)	100%	Mar 26, 2016	$	76,628	$	—
165 Newbury Street - Boston, MA	100%	May 13, 2016	6,250		—
Concord & Milwaukee - Chicago, IL	100%	Jul 28, 2016	6,000		2,902
151 North State Street - Chicago, IL	100%	Aug 10, 2016	30,500		14,556
State & Washington - Chicago, IL	100%	Aug 22, 2016	70,250		25,650
North & Kingsbury - Chicago, IL	100%	Aug 29, 2016	34,000		13,409
Sullivan Center - Chicago, IL	100%	Aug 31, 2016	146,939		—
California & Armitage - Chicago, IL	100%	Sep 12, 2016	9,250		2,692
555 9th Street - San Francisco, CA	100%	Nov 2, 2016	139,775		60,000
Subtotal Core Portfolio			519,592		119,209

Fund IV:
Restaurants at Fort Point - Boston, MA	100%	Jan 14, 2016	11,500		—
1964 Union Street - San Francisco, CA^(a)	90%	Jan 28, 2016	2,250		1,463
Wake Forest Crossing - Wake Forest, NC	100%	Sep 27, 2016	36,600		—
Airport Mall - Bangor, ME	100%	Oct 28, 2016	10,250		—
Colonie Plaza - Albany, NY	100%	Oct 28, 2016	15,000		—
Dauphin Plaza - Harrisburg, PA	100%	Oct 28, 2016	16,000		—
JFK Plaza - Waterville, ME	100%	Oct 28, 2016	6,500		—
Mayfair Shopping Center - Philadelphia, PA	100%	Oct 28, 2016	16,600		—
Shaw's Plaza - Waterville, ME	100%	Oct 28, 2016	13,800		—
Wells Plaza - Wells, ME	100%	Oct 28, 2016	5,250		—
717 N Michigan - Chicago, IL	100%	Dec 1, 2016	103,500		—
Subtotal Fund IV			237,250		1,463
Total 2016 Acquisitions			$	756,842	$	120,672

__________


(a)	These acquisitions were accounted for as asset acquisitions as the underlying properties did not meet the definition of a business.

All of the above acquisitions were deemed to be business combinations except 991 Madison Avenue and 1964 Union Street. The Company expensed $0.9 million of acquisition costs for the nine months ended September 30, 2017, of which $0.3 million related to the Core Portfolio and $0.6 million related to the Funds and $5.5 million of acquisition costs for the nine months ended September 30, 2016, of which $5.1 million related to the Core Portfolio and $0.4 million related to the Funds.

Purchase Price Allocations

The purchase prices for the business combinations were allocated to the acquired assets and assumed liabilities based on their estimated fair values at the dates of acquisition.

The following table summarizes the allocation of the purchase price of properties acquired during the nine months ended September 30, 2017 and the year ended December 31, 2016 (in thousands):



	Nine Months Ended September 30, 2017			Year Ended December 31, 2016
	Nine Months Ended September 30, 2017			Year Ended December 31, 2016
Net Assets Acquired:
Land	$	21,917		$	225,729
Buildings and improvements	104,729			458,525
Other assets	—			3,481
Acquisition-related intangible assets (in Acquired lease intangibles, net)	31,378			63,606
Acquisition-related intangible liabilities (in Acquired lease intangibles, net)	(8,292		)	(72,985		)
Above and below market debt assumed (included in Mortgages and other notes payable, net)	—			(119,601		)
Net assets acquired	$	149,732		$	558,755



Consideration:
Cash	$	138,429	$	439,546
Conversion of note receivable	9,142		—
Debt assumed	—		119,209
Liabilities assumed	2,161		—
Total Consideration	$	149,732	$	558,755

Dispositions

During the nine months ended September 30, 2017 and year ended December 31, 2016, the Company disposed of the following consolidated properties (in thousands):



Property and Location	Owner	Date Sold	Sale Price		Gain on Sale
2017 Dispositions:
New Hyde Park Shopping Center - New Hyde Park, NY	Fund III	Jul 6, 2017	$	22,075	$	6,433
216th Street - New York, NY	Fund II	Sep 11, 2017	30,579		6,539
Total 2017 Dispositions			$	52,654	$	12,972

2016 Dispositions:
Cortlandt Town Center (65%) - Mohegan Lake, NY (Note 4)	Fund III	Jan 28, 2016	$	107,250	$	65,393
Heritage Shops - Chicago, IL	Fund III	Apr 26, 2016	46,500		16,572
Total 2016 Dispositions			$	153,750	$	81,965

The aggregate rental revenue, expenses and pre-tax income reported within continuing operations for the aforementioned consolidated properties that were sold during the nine months ended September 30, 2017 and year ended December 31, 2016 were as follows (in thousands):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Rental revenues	$	503		$	1,122		$	2,136		$	7,378
Expenses	(523		)	(1,095		)	(2,343		)	(4,745		)
Loss on extinguishment of debt	(10		)	—			(10		)	(15		)
Income from continuing operations of disposed properties before gain on disposition of properties	(30		)	27			(217		)	2,618
Gain on disposition of properties, net of tax	12,972			—			12,972			81,965
Net income attributable to noncontrolling interests	(9,166		)	(18		)	(9,034		)	(70,410		)
Net income attributable to Acadia	$	3,776		$	9		$	3,721		$	14,173

Properties Held For Sale

At December 31, 2016, the Company had one property in Fund II classified as held-for-sale with total assets of $21.5 million and subject to a mortgage of $25.5 million.

At September 30, 2017, the Company had one property in Fund II classified as held-for-sale, City Point Condominium Tower I, with total assets of $95.9 million and subject to mortgages aggregating $81.0 million, which will be repaid at closing. Upon classification as held for sale, the Company recognized an impairment charge of approximately $3.8 million (Note 8) relating to expected transaction costs associated with the sale. Additionally, the Company recognized a charge to income attributable to Acadia of approximately $1.1 million to adjust the non-controlling interest holder’s ownership in this property to its estimated redemption amount as a result of the sale at September 30, 2017. This property had a net loss of $4.3 million excluding losses attributable to noncontrolling interests of $3.9 million for the three and nine months ended September 30, 2017. On October 13, 2017, this property was sold and the associated mortgage was repaid (Note 15).

Pro Forma Financial Information

The following unaudited pro forma consolidated operating data is presented for the three and nine months ended September 30, 2017, as if the acquisitions of the properties acquired during that period were completed on January 1, 2016 and as if the acquisition of the properties acquired during the nine months ended September 30, 2016 were completed on January 1, 2015. The related acquisition expenses of $0.9 million and $5.5 million reported during the nine months ended September 30, 2017 and 2016, respectively have been reflected as pro forma charges at January 1, 2016 and January 1, 2015, respectively. The unaudited supplemental pro forma operating data is not necessarily indicative of what the actual results of operations of the Company would have been, assuming the transactions had been completed as set forth above, nor do they purport to represent the Company’s results of operations for future periods.



	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Pro forma revenues	$	63,253	$	51,871	$	191,673	$	164,410
Pro forma income from continuing operations	368		1,092		26,439		19,504
Pro forma net income attributable to Acadia	12,912		6,839		40,608		54,201
Pro forma basic and diluted earnings per share	0.15		0.08		0.48		0.66

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.

Depreciation and amortization expense for the nine months ended September 30, 2017 includes $2.0 million of accelerated depreciation related to a building under development that was demolished.

Development activity comprised the following during the periods presented (dollars in thousands):



	December 31, 2016			Nine Months Ended September 30, 2017						September 30, 2017
	Number of Properties	Carrying Value		Transfers In		Capitalized Costs		Transfers Out		Number of Properties	Carrying Value

Core	1	$	2,530	$	7,258	$	3,852	$	5,441	2	$	8,199
Fund II	2	443,012		—		7,677		414,000		1	36,689
Fund III	3	51,421		—		13,838		8,146		2	57,113
Fund IV	8	46,523		79,624		13,883		4,597		8	135,433

Total	14	$	543,486	$	86,882	$	39,250	$	432,184	13	$	237,434

During the nine months ended September 30, 2017, the Company placed substantially all of the City Point project into service.

Construction in progress pertains to construction activity at the Company’s operating properties which are in service and continue to operate during the construction period.