Shareholders' Equity, Noncontrolling Interests and Other Comprehensive Loss

9 Months Ended

Sep. 30, 2023

Equity, Including Portion Attributable to Noncontrolling Interest [Abstract]

Shareholders' Equity, Noncontrolling Interests and Other Comprehensive Loss

10. Shareholders’ Equity, Noncontrolling Interests and Other Comprehensive Loss

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:

•The Company withheld 3,251 shares of its restricted Common Shares (“Restricted Shares”) to pay the employees’ statutory minimum income taxes due on the value of the portion of their Restricted Shares that vested.

•The Company recognized Common Share and Common OP Unit-based compensation expense in connection with Restricted Shares and Units (Note 13) totaling $2.3 million and $1.9 million for the three months ended September 30, 2023 and 2022, respectively, and $6.9 million and $5.1 million for the nine months ended September 30, 2023 and 2022, respectively.

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 $250.0 million ATM Program, which includes an optional “forward sale” component, in the first quarter of 2022. The Company sold 5,150,832 Common Shares under its ATM Program during the three months ended March 31, 2022 generating $115.6 million of gross proceeds and $111.5 million of net proceeds after related issuance costs at a weighted-average price per share of $22.44 and $21.65, respectively. No such sales were made during the nine months ended September 30, 2023. The Company did not sell or issue any Common Shares on a forward basis for the nine months ended September 30, 2023 or the year ended December 31, 2022, and at September 30, 2023 had approximately $222.3 million of availability under the ATM program.

Share Repurchase Program

During 2018, the Company’s board of trustees (the “Board”) approved a new share repurchase program, which authorizes management, at its discretion, to repurchase up to $200.0 million of its outstanding Common Shares. The program does not obligate the Company to repurchase any specific number of Common Shares and may be discontinued or extended at any time. The Company did not repurchase any shares during the nine months ended September 30, 2023 or 2022. Under the share repurchase program $122.5 million remains available as of September 30, 2023.

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
February 15, 2022	$	0.18	March 31, 2022	April 14, 2022
May 4, 2022	$	0.18	June 30, 2022	July 15, 2022
August 10, 2022	$	0.18	September 30, 2022	October 14, 2022
November 9, 2022	$	0.18	December 30, 2022	January 13, 2023
January 17, 2023	$	0.18	March 31, 2023	April 14, 2023
May 3, 2023	$	0.18	June 30, 2023	July 14, 2023
August 9, 2023	$	0.18	September 29, 2023	October 13, 2023

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	$	49,855
Other comprehensive income before reclassifications - swap agreements		26,763
Reclassification of realized interest on swap agreements		(9,478	)
Net current period other comprehensive income		17,285
Net current period other comprehensive income attributable to noncontrolling    interests		(1,580	)
Balance at September 30, 2023	$	65,560
Balance at July 1, 2022	$	11,240
Other comprehensive income before reclassifications - swap agreements		44,114
Reclassification of realized interest on swap agreements		1,518
Net current period other comprehensive income		45,632
Net current period other comprehensive income attributable to noncontrolling    interests		(7,188	)
Balance at September 30, 2022	$	49,684

	Acadia's Share
Balance at January 1, 2023	$	46,817
Other comprehensive income before reclassifications - swap agreements		45,034
Reclassification of realized interest on swap agreements		(24,293	)
Net current period other comprehensive income		20,741
Net current period other comprehensive income attributable to noncontrolling    interests		(1,998	)
Balance at September 30, 2023	$	65,560
Balance at January 1, 2022	$	(36,214	)
Other comprehensive income before reclassifications - swap agreements		96,899
Reclassification of realized interest on swap agreements		10,778
Net current period other comprehensive income		107,677
Net current period other comprehensive income attributable to noncontrolling    interests		(21,779	)
Balance at September 30, 2022	$	49,684

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 Interests in Operating Partnership (a)			Noncontrolling Interests in Partially-Owned Affiliates (b)			Total			Redeemable Noncontrolling Interests (c)
Balance at July 1, 2023	$	103,813		$	348,624		$	452,437		$	59,833
Distributions declared of $0.18 per Common OP Unit and distributions on Preferred OP Units		(1,338	)		—			(1,338	)
Net income (loss) for the three months ended September 30, 2023		79			(12,426	)		(12,347	)		(2,495	)
Conversion of 10,828 Common OP Units to Common Shares by limited partners of the Operating Partnership		(182	)		—			(182	)		—
Other comprehensive income - unrealized gain on valuation of swap agreements		950			4,212			5,162			—
Reclassification of realized interest expense on swap agreements		(56	)		(3,526	)		(3,582	)		—
City Point Loan accrued interest		—			—			—			(2,332	)
Capital call receivable		—			(16,300	)		(16,300	)		—
Noncontrolling interest contributions		—			16,600			16,600			315
Noncontrolling interest distributions		—			(1,754	)		(1,754	)		(37	)
Employee Long-term Incentive Plan Unit Awards		2,353			—			2,353			—
Reallocation of noncontrolling interests (d)		(2,039	)		—			(2,039	)		—
Balance at September 30, 2023	$	103,580		$	335,430		$	439,010		$	55,284
Balance at July 1, 2022	$	103,068		$	567,538		$	670,606		$	—
Distributions declared of $0.18 per Common OP Unit and distributions on Preferred OP Units		(1,276	)		—			(1,276	)		—
Net loss for the three months ended September 30, 2022		(2,958	)		(27,503	)		(30,461	)		(3,193	)
Conversion of 20,000 Common OP Units to Common Shares by limited partners of the Operating Partnership		(333	)		—			(333	)		—
Other comprehensive income - unrealized gain on valuation of swap agreements		2,145			4,877			7,022			—
Reclassification of realized interest expense on swap agreements		5			161			166			—
Acquisition of noncontrolling interest (e)		—			(50,435	)		(50,435	)		—
City Point Loan		—			—			—			(65,405	)
City Point Loan accrued interest		—			—			—			(1,564	)
Noncontrolling interest contributions		—			9,572			9,572			65,945
Noncontrolling interest distributions		—			(24,632	)		(24,632	)		—
Employee Long-term Incentive Plan Unit Awards		1,997			—			1,997			—
Reclassification of redeemable noncontrolling interests(f)		-			(76,569	)		(76,569	)		76,569
Reallocation of noncontrolling interests (d)		644			—			644			—
Balance at September 30, 2022	$	103,292		$	403,009		$	506,301		$	72,352

	Noncontrolling Interests in Operating Partnership (a)			Noncontrolling Interests in Partially-Owned Affiliates (b)			Total			Redeemable Noncontrolling Interests (c)
Balance at January 1, 2023	$	99,554		$	389,810		$	489,364		$	67,664
Distributions declared of $0.54 per Common OP Unit and distributions on Preferred OP Units		(4,022	)		—			(4,022	)		—
Net income (loss) for the nine months ended September 30, 2023		1,693			(8,756	)		(7,063	)		(5,661	)
Conversion of 102,261 Common OP Units to Common Shares by limited partners of the Operating Partnership		(1,715	)		—			(1,715	)		—
Other comprehensive income - unrealized gain on valuation of swap agreements		1,205			10,732			11,937			—
Reclassification of realized interest expense on swap agreements		(155	)		(9,784	)		(9,939	)		—
City Point Loan		—			—			—			(796	)
City Point Loan accrued interest		—			—			—			(6,995	)
Capital call receivable		—			(16,300	)		(16,300	)		—
Noncontrolling interest contributions		—			47,842			47,842			1,110
Noncontrolling interest distributions		—			(78,114	)		(78,114	)		(38	)
Employee Long-term Incentive Plan Unit Awards		8,719			—			8,719			—
Reallocation of noncontrolling interests (d)		(1,699	)		—			(1,699	)		—
Balance at September 30, 2023	$	103,580		$	335,430		$	439,010		$	55,284
Balance at January 1, 2022	$	94,120		$	534,202		$	628,322		$	—
Distributions declared of $0.54 per Common OP Unit and distributions on Preferred OP Units		(3,846	)		—			(3,846	)		—
Net loss for the nine months ended September 30, 2022		(1,686	)		(16,967	)		(18,653	)		(3,193	)
Conversion of 71,307 Common OP Units to Common Shares by limited partners of the Operating Partnership		(1,147	)		—			(1,147	)		—
Other comprehensive income - unrealized gain on valuation of swap agreements		4,780			13,840			18,620			—
Reclassification of realized interest expense on swap agreements		80			3,079			3,159			—
Acquisition of noncontrolling interest (e)		—			(91,811	)		(91,811	)		—
City Point Loan		—			—			—			(65,405	)
City Point Loan accrued interest		—			—			—			(1,564	)
Noncontrolling interest contributions		—			109,422			109,422			65,945
Noncontrolling interest distributions		—			(72,187	)		(72,187	)		—
Employee Long-term Incentive Plan Unit Awards		7,669			—			7,669			—
Reclassification of redeemable noncontrolling interests(f)		—			(76,569	)		(76,569	)		76,569
Reallocation of noncontrolling interests (d)		3,322			—			3,322			—
Balance at September 30, 2022	$	103,292		$	403,009		$	506,301		$	72,352

(a)Noncontrolling interests in the Operating Partnership are comprised of (i) the limited partners’ 2,864,074 and 3,062,108 Common OP Units at September 30, 2023 and 2022, respectively; (ii) 188 Series A Preferred OP Units at each of September 30, 2023 and 2022; (iii) 126,384 and 126,593 Series C Preferred OP Units at September 30, 2023 and 2022, respectively; and (iv) 4,287,550 and 3,666,989 LTIP units at September 30, 2023 and 2022, respectively, as discussed in the Amended and Restated 2020 Plan (Note 13). Distributions declared for Preferred OP Units are reflected in net income (loss) in the table above.

(b)Noncontrolling interests in partially-owned affiliates comprise third-party interests in Funds II, III, IV and V, and Mervyns II, and seven other subsidiaries.

(c)Redeemable noncontrolling interests comprise third-party interests that have been granted put rights, as further described below.

(d)Adjustment reflects the difference between the fair value of the consideration received or paid and the book value of the Common Shares, Common OP Units, Preferred OP Units, and LTIP Units involving changes in ownership.

(e)Represents the acquisition of the 11.67% noncontrolling interest in Fund II and Mervyns II acquired on June 27, 2022 for $18.5 million and of a 21.67% interest in Fund II on August 1, 2022 for $5.8 million (Note 1).

(f)Represents the reclassification of redeemable noncontrolling interests related to the City Point Loan in the third quarter of 2022.

Preferred OP Units

There were no issuances of Preferred OP Units during the nine months ended September 30, 2023 or the year ended December 31, 2022.

In 1999, the Operating Partnership issued 1,580 Series A Preferred OP Units in connection with the acquisition of a property, which have a stated value of $1,000 per unit, and are entitled to a preferred quarterly distribution of the greater of (i) $22.50 (9% annually) per Series A Preferred OP Unit or (ii) the quarterly distribution attributable to a Series A Preferred OP Unit if such unit was converted into a Common OP Unit. Through September 30, 2023, 1,392 Series A Preferred OP Units were converted into 185,600 Common OP Units and then into Common Shares. The 188 remaining Series A Preferred OP Units are currently convertible into Common OP Units based on the stated value divided by $7.50. Either the Company or the holders can currently call for the conversion of the Series A Preferred OP Units at the lesser of $7.50 or the market price of the Common Shares as of the conversion date.

During 2016, the Operating Partnership issued 442,478 Common OP Units and 141,593 Series C Preferred OP Units to a third party to acquire Gotham Plaza (Note 4). The Series C Preferred OP Units have a value of $100.00 per unit and are entitled to a preferred quarterly distribution of $0.9375 per unit and are convertible into Common OP Units at a rate based on the share price at the time of conversion. If the share price is below $28.80 on the conversion date, each Series C Preferred OP Unit will be convertible into 3.4722 Common OP Units. If the share price is between $28.80 and $35.20 on the conversion date, each Series C Preferred OP Unit will be convertible into a number of Common OP Units equal to $100.00 divided by the closing share price. If the share price is above $35.20 on the conversion date, each Series C Preferred OP Unit will be convertible into 2.8409 Common OP Units. The Series C Preferred OP Units have a mandatory conversion date of December 31, 2025, at which time all units that have not been converted will automatically be converted into Common OP Units based on the same calculations. Through September 30, 2023, 15,209 Series C Preferred OP Units were converted into 52,613 Common OP Units and then into Common Shares.

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 50.01% interest in the property to the Company for redemption at fair value at a future date. As it was unlikely as of the acquisition date that the venture partner would receive any consideration on redemption due to the Company’s preferential returns, the initial fair value of the Williamsburg NCI was determined to be zero. The Company is required to periodically evaluate the NCI and adjust it to redemption value. At September 30, 2023 and December 31, 2022, the Company determined that the fair value of the Williamsburg NCI was zero.

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 $65.9 million was funded at closing ("City Point Loan"). The City Point Loan has a five-year term which matures on August 1, 2027 and is collateralized by the investors' equity in City Point ("City Point NCI"). Because the City Point Loan was granted in return for a capital contribution from the investors, and is collateralized by the City Point NCI, the City Point Loan, net of a $0.5 million allowance for credit loss, and accrued interest are presented as a reduction of the City Point NCI balance. The borrower subsidiary of the City Point Loan was determined to be a VIE for which the Company is not the primary beneficiary. The maximum loss in the VIE is limited to the amount of the City Point Loan and any accrued interest.

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.

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 97.0% controlling interest. At a future point in time, subject to certain criteria, either party may elect a buy-out right, where either the Company may purchase the venture partner’s interest or the venture partner may sell its 3.0% interest in the partnership (the "8833 Beverly NCI") to the Company for fair value. As a result of these redemption rights, the 8833 Beverly NCI was initially recorded at fair value and presented as redeemable noncontrolling interests in the Company’s condensed consolidated balance sheets. At September 30, 2023, the redemption value of the 8833 Beverly NCI was $0.3 million. On a quarterly basis, the Company will recognize changes in the redemption value as an adjustment to the carrying amount of the redeemable 8833 Beverly NCI.