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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MARYLAND (State or other jurisdiction of incorporation or organization) |
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23-2715194 (I.R.S. Employer Identification No.) |
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(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 |
Common shares of beneficial interest, par value $0.001 per share |
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The New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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YES ☒ |
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NO ☐ |
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
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YES ☒ |
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NO ☐ |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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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 July 22, 2019 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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Consolidated Balance Sheets as of June 30, 2019 (Unaudited) and December 31, 2018 |
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4 |
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5 |
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6 |
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7 |
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Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2019 and 2018 |
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9 |
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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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45 |
3. |
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57 |
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4. |
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59 |
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1. |
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59 |
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1A. |
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59 |
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2. |
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59 |
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3. |
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59 |
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4. |
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59 |
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5. |
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59 |
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6. |
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60 |
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61 |
2
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Quarterly Report on Form 10-Q (the “Report”) may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), and as such may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend” or “project” or the negative thereof or other variations thereon or comparable terminology. Factors which could have a material adverse effect on our operations and future prospects include, but are not limited to 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.
SPECIAL NOTE REGARDING CERTAIN REFERENCES
All references to “Notes” throughout the document refer to the footnotes to the 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
CONSOLIDATED BALANCE SHEETS
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June 30, |
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December 31, |
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(dollars in thousands, except per share amounts) |
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2019 |
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2018 |
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ASSETS |
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(Unaudited) |
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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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Assets of properties held for sale |
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— |
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Cash and cash equivalents |
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Rents receivable |
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Restricted cash |
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Total assets |
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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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— |
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Accounts payable and other liabilities |
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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 |
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Commitments and contingencies |
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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 (loss) income |
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( |
) |
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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 and equity |
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$ |
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$ |
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The accompanying notes are an integral part of these consolidated financial statements
4
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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(in thousands except per share amounts) |
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2019 |
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2018 |
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2019 |
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2018 |
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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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Expense reimbursements |
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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 charge |
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— |
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— |
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Other operating |
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— |
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— |
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Total operating expenses |
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Gain on disposition of properties |
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— |
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Operating income |
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Equity in earnings of unconsolidated affiliates |
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Interest and other income |
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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 from continuing operations before income taxes |
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( |
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( |
) |
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( |
) |
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( |
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Income tax (provision) benefit |
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( |
) |
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( |
) |
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( |
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Net loss |
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( |
) |
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( |
) |
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( |
) |
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( |
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Net loss attributable to noncontrolling interests |
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Net income attributable to Acadia |
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$ |
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$ |
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$ |
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$ |
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Basic and diluted earnings per share |
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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 consolidated financial statements
5
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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(in thousands) |
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2019 |
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2018 |
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2019 |
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2018 |
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Net loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Other comprehensive (loss) income: |
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Unrealized (loss) income on valuation of swap agreements |
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( |
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( |
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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 (loss) income |
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( |
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( |
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Comprehensive (loss) income |
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( |
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( |
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Comprehensive loss attributable to noncontrolling interests |
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Comprehensive (loss) income attributable to Acadia |
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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 consolidated financial statements.
6
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Three Months Ended June 30, 2019 and 2018
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Acadia Shareholders |
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(in thousands, except per share amounts) |
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Common Shares |
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Share Amount |
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Additional Paid-in Capital |
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Accumulated Other Comprehensive Income (Loss) |
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Distributions in Excess of Accumulated Earnings |
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Total Common Shareholders’ Equity |
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Noncontrolling Interests |
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Total Equity |
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Balance at April 1, 2019 |
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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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Issuance of Common Shares |
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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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Employee and trustee stock compensation, net |
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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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Comprehensive (loss) income |
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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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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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Balance at June 30, 2019 |
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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 April 1, 2018 |
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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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Repurchase of Common Shares |
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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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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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Employee and trustee stock compensation, net |
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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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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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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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Balance at June 30, 2018 |
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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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7
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Continued)
Six Months Ended June 30, 2019 and 2018
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Acadia Shareholders |
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(in thousands, except per share amounts) |
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Common Shares |
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Share Amount |
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Additional Paid-in Capital |
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Accumulated Other Comprehensive Income (Loss) |
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Distributions in Excess of Accumulated Earnings |
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Total Common Shareholders’ Equity |
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Noncontrolling Interests |
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Total Equity |
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Balance at January 1, 2019 |
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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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Issuance of Common Shares |
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— |
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— |
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— |
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|
|
Dividends/distributions declared ($ |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Employee and trustee stock compensation, net |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interest distributions |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Noncontrolling interest contributions |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
Comprehensive (loss) income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Reallocation of noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
|
|
|
Balance at June 30, 2019 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2018 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Conversion of OP Units to Common Shares by limited partners of the Operating Partnership |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
( |
) |
|
|
|
|
Repurchase of Common Shares |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Dividends/distributions declared ($ |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Employee and trustee stock compensation, net |
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interest distributions |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Noncontrolling interest contributions |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
Comprehensive income (loss) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
Reallocation of noncontrolling interests |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
( |
) |
|
|
|
|
Balance at June 30, 2018 |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The accompanying notes are an integral part of these consolidated financial statements.
|
||
|
|
|
8
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
Six Months Ended June 30, |
|
|||||
(in thousands) |
|
2019 |
|
|
2018 |
|
||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
Distributions of operating income from unconsolidated affiliates |
|
|
|
|
|
|
|
|
Equity in earnings and gains of unconsolidated affiliates |
|
|
( |
) |
|
|
( |
) |
Stock compensation expense |
|
|
|
|
|
|
|
|
Amortization of financing costs |
|
|
|
|
|
|
|
|
Impairment charge |
|
|
|
|
|
|
— |
|
Gain on disposition of properties |
|
|
( |
) |
|
|
( |
) |
Other, net |
|
|
( |
) |
|
|
( |
) |
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Other liabilities |
|
|
( |
) |
|
|
|
|
Prepaid expenses and other assets |
|
|
|
|
|
|
( |
) |
Rents receivable |
|
|
|
|
|
|
( |
) |
Accounts payable and accrued expenses |
|
|
|
|
|
|
( |
) |
Net cash provided by operating activities |
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
Acquisition of real estate |
|
|
( |
) |
|
|
( |
) |
Development, construction and property improvement costs |
|
|
( |
) |
|
|
( |
) |
Issuance of or advances on notes receivable |
|
|
— |
|
|
|
( |
) |
Proceeds from the disposition of properties, net |
|
|
|
|
|
|
|
|
Investments in and advances to unconsolidated affiliates and other |
|
|
( |
) |
|
|
( |
) |
Return of capital from unconsolidated affiliates and other |
|
|
|
|
|
|
|
|
Proceeds from notes receivable |
|
|
|
|
|
|
|
|
Return of deposits for properties under contract |
|
|
|
|
|
|
|
|
Payment of deferred leasing costs |
|
|
( |
) |
|
|
( |
) |
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
Principal payments on mortgage and other notes |
|
|
( |
) |
|
|
( |
) |
Principal payments on unsecured debt |
|
|
( |
) |
|
|
( |
) |
Proceeds received on mortgage and other notes |
|
|
|
|
|
|
|
|
Proceeds from unsecured debt |
|
|
|
|
|
|
|
|
Payments for repurchase of Common Shares |
|
|
— |
|
|
|
( |
) |
Payments of finance lease obligations |
|
|
( |
) |
|
|
— |
|
Proceeds from the sale of Common Stock, net |
|
|
|
|
|
|
— |
|
Capital contributions from noncontrolling interests |
|
|
|
|
|
|
|
|
Distributions to noncontrolling interests |
|
|
( |
) |
|
|
( |
) |
Dividends paid to Common Shareholders |
|
|
( |
) |
|
|
( |
) |
Deferred financing and other costs |
|
|
( |
) |
|
|
( |
) |
Net cash provided by (used in) financing activities |
|
|
|
|
|
|
( |
) |
Increase (decrease) in cash and restricted cash |
|
|
|
|
|
|
( |
) |
Cash of $ respectively, beginning of period |
|
|
|
|
|
|
|
|
Cash of $ respectively, end of period |
|
$ |
|
|
|
$ |
|
|
9
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
|
|
Six Months Ended June 30, |
|
|||||
(in thousands) |
|
2019 |
|
|
2018 |
|
||
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 |
|
|
|
|
|
|
|
|
Assumption of accounts payable and accrued expenses through acquisition of real estate |
|
$ |
|
|
|
$ |
|
|
Right-of-use assets, finance leases obtained in exchange for finance lease liabilities |
|
$ |
|
|
|
$ |
— |
|
Right-of-use assets, finance leases obtained in exchange for assets under capital lease |
|
$ |
|
|
|
$ |
— |
|
Right-of-use assets, operating leases obtained in exchange for operating lease liabilities |
|
$ |
|
|
|
$ |
— |
|
Capital lease obligation exchanged for finance lease liability |
|
$ |
|
|
|
$ |
— |
|
Other liabilities exchanged for operating lease liabilities |
|
$ |
|
|
|
$ |
— |
|
Assumption of debt through investments in unconsolidated affiliates |
|
$ |
|
|
|
$ |
— |
|
Acquisition of undivided interest in a property through conversion of notes receivable |
|
$ |
— |
|
|
$ |
|
|
The accompanying notes are an integral part of these consolidated financial statements.
10
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. Organization, Basis of Presentation and Summary of Significant Accounting Policies
Organization
Acadia Realty Trust and subsidiaries (collectively, the “Company”) is a fully-integrated equity real estate investment trust (“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 June 30, 2019 and December 31, 2018, the Company controlled approximately
As of June 30, 2019, 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 Date |
|
Operating Partnership Share of Capital |
|
|
Capital Called as of June 30, 2019 |
|
|
Unfunded Commitment |
|
|
Equity Interest Held By Operating Partnership (a) |
|
|
Preferred Return |
|
|
Total Distributions as of June 30, 2019 (b) |
|
||||||
Fund II and Mervyns II (c) |
|
6/2004 |
|
|
|
% |
|
$ |
|
|
|
$ |
|
|
|
|
|
% |
|
|
|
% |
|
$ |
|
|
Fund III |
|
5/2007 |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
|
% |
|
|
|
|
Fund IV |
|
5/2012 |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
|
% |
|
|
|
|
Fund V |
|
8/2016 |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
|
% |
|
|
|
|
(a) |
Amount represents the current economic ownership at June 30, 2019, which could differ from the stated legal ownership based upon the cumulative preferred returns of the respective Fund. |
(b) |
Represents the total for the Funds, including the Operating Partnership and noncontrolling interests’ shares. |
(c) |
During April 2018, a distribution of $ |
11
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Basis of Presentation
Segments
At June 30, 2019, the Company had
Principles of Consolidation
The interim 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 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.
The interim 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 consolidated financial statements reflects all adjustments that, in the opinion of management, are necessary for a fair presentation of the aforementioned consolidated financial statements for the interim periods. Such adjustments consisted of normal recurring items.
These interim consolidated financial statements should be read in conjunction with the Company’s 2018 Annual Report on Form 10-K, as filed with the SEC on February 19, 2019.
Use of Estimates
GAAP requires the Company’s management to make estimates and assumptions that affect the amounts reported in the interim 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.
Reclassifications
Certain prior period amounts with regard to gains on dispositions of properties have been reclassified to conform to the current period presentation.
Recently Adopted Accounting Pronouncements
Lease Accounting
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). ASU 2016-02 outlines a new model for accounting by lessees, whereby their rights and obligations under substantially all leases, existing and new, will be capitalized and recorded on the balance sheet. For lessors, however, the accounting remains largely unchanged from the former model, with the distinction between operating, sales-type and direct-financing leases retained, but updated to align with certain changes to the lessee model and the new revenue recognition standard, ASC Topic 606, Revenue from Contracts with Customers (“Topic 606”). To ease the transition, the new lease accounting guidance permits companies to utilize certain practical expedients in their implementation of the new standard:
|
• |
A package of three practical expedients that must be elected together for all leases and includes: (i) not reassessing expired or existing contracts as to whether they are or contain leases; (ii) not reassessing lease classification of existing leases and (iii) not reassessing the amount of capitalized initial direct costs for existing leases; |
|
• |
A practical expedient to use hindsight in determining the lease term or assessing purchase options for existing leases and in assessing impairment of right of use assets; |
12
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
• |
Lessees may make an accounting policy election by class of underlying asset not to separate lease components from non-lease components; and |
|
• |
Lessees may make an accounting policy election not to apply the recognition and measurement requirements to short-term leases. |
ASU 2016-02 was modified by the following subsequently issued ASU’s (together with ASU 2016-02, “Topic 842”), many of which provided additional transition practical expedients:
|
• |
ASU 2018-01, Land Easements Practical Expedient for Transition to Topic 842 added a transition practical expedient to not reassess existing or expired land easement agreements not previously accounted for as leases |
|
• |
ASU No. 2018-10, Codification Improvements to Topic 842, Leases. These amendments provide minor clarifications and corrections to ASU 2016-02. |
|
• |
ASU 2018-11, Leases (Topic 842): Targeted Improvements. |
|
o |
The amendments in this Update provide entities with an additional optional transition method to adopt ASU 2016-02. Under this new transition method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Consequently, an entity’s reporting under this additional transition method for the comparative periods presented in the financial statements in which it adopts the new leases standard would continue to be in accordance with former GAAP (Topic 840, Leases). |
|
o |
The amendments in this Update also provide lessors with a practical expedient, by class of underlying asset, to make a policy election to not separate non-lease components from the associated lease component and, instead, to account for those components as a single component if the non-lease components otherwise would be accounted for under the new revenue guidance (Topic 606). Conditions are required to elect the practical expedient, and if met, the single component will be accounted for under either under Topic 842 or Topic 606 depending on which component(s) are predominant. The lessor practical expedient to not separate non-lease components from the associated component must be elected for all existing and new leases. |
|
• |
ASU 2018-20, Leases (Topic 842), Narrow-Scope Improvements for Lessors. This ASU modifies ASU No. 2016-02 to permit lessors, as an accounting policy election, not to evaluate whether certain sales taxes and other similar taxes are lessor costs or lessee costs. Instead, those lessors will account for those costs as if they are lessee costs. Consequently, a lessor making this election will exclude from the consideration in the contract and from variable payments not included in the consideration in the contract all collections from lessees of taxes within the scope of the election and will provide certain disclosures (includes sales, use, value added, and some excise taxes and excludes real estate taxes). |
|
• |
ASU 2019-01, Leases (Topic 842), Codification Improvements. There are three codification updates to Topic 842 covered by this ASU: Issue 1 provides guidance on how to compute fair value of leased items for lessors who are non-dealers or manufacturers; Issue 2 relates to cash flow presentation for lessors of sales-type and direct financing leases; and Issue 3 clarifies that certain transition disclosures will only be required in annual disclosures. |
Under the new leasing guidance, contract consideration shall be allocated to its lease components (such as the lease of retail properties) and non-lease components (such as maintenance). For lessors, any non-lease components will be accounted for under Topic 606 unless the entity elects the lessor practical expedient to not separate the non-lease components from the associated lease component as described above. The new guidance also includes a definition of initial direct costs that is narrower than the prior definition in former GAAP (Topic 840, Leases). Topic 842 was effective for the Company beginning January 1, 2019.
The Company adopted Topic 842 effective January 1, 2019 utilizing the new transition method described in ASU 2018-11 and has availed itself of all the available practical expedients described above except it did not use hindsight in determining the lease term or assessing purchase options for existing leases and in assessing impairment of right of use assets.
As lessor, the Company has more than 1,000 leases primarily with retail tenants and to a lesser extent with office and residential tenants. A significant majority of its leases are on a triple-net basis. The impact of adoption of ASU 2016-02 for the Company as lessor was as follows:
|
• |
The Company has elected the lessor practical expedient to not separate common area maintenance from the associated lease for all existing and new leases and to account for the combined component as a single lease component. Common area maintenance is considered a non-lease component within the scope of Topic 606 and reimbursements of taxes and insurance are considered contractual payments that do not transfer a good or service to the tenant; however, such revenues related to leases, which were formerly reported as reimbursed expenses, will be reported within lease revenues in the presentation of the statement of income subsequent to the implementation of ASC 842. Prior year classifications under ASC 840 will not be adjusted. |
|
• |
Due to its election of available practical expedients, the Company expects that post-adoption substantially all existing leases, and new leases compared to similar existing leases, will have no change in the timing of revenue recognition. |
|
• |
The Company’s internal leasing costs will be expensed as incurred, as opposed to being capitalized and deferred. Commissions subsequent to successful lease execution will continue to be capitalized. After adoption, the Company will no longer capitalize internal |
13
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
leasing costs that were previously capitalized (the Company capitalized $ |
|
• |
The Company has existing easement arrangements that have not been previously identified as leases. The Company expects that its existing and similar future easement arrangements will not be classified as rental revenue but as other revenues as these arrangements do not transfer control to the counterparty. |
|
• |
The Company makes a policy election to continue to account for only those taxes described under ASU 2018-20 that it pays on behalf of the tenant as reimbursable costs and will not account for those taxes paid directly by the lessee which are considered lessee costs. |
As lessee, the Company was party to 13 ground, office and equipment leases with future payment obligations aggregating $
|
• |
As lessee, the Company has applied the following practical expedients in the implementation ASU 2016-02: (i) to not separate non-lease components from the associated lease component as described above and (ii) to not apply the right-of-use recognition requirements to short-term leases. As such, there were no changes in the timing of recognition of expenses related to its operating leases. |
|
• |
The Company recognized right-of-use assets and lease liabilities of $ |
|
• |
The Company reclassified its existing capital lease asset of $ |
|
• |
Subsequent to the adoption of and in accordance with Topic 842, the Company reassessed the circumstances surrounding three of its operating ground leases and determined that it had made significant leasehold improvements and was now reasonably certain to exercise their purchase options. Accordingly, the Company reclassified the existing right-of-use assets and lease liabilities from operating leases to finance leases and adjusted the leases’ right-of-use assets and corresponding lease liabilities to $ |
|
• |
With the adoption of ASC Topic 842, the Company will first apply the guidance under ASC 842 in assessing its rents receivable: if collection of rents under specific operating leases is not probable, then the Company recognizes the lesser of that lease’s rental income on a straight-line basis or cash received, plus variable rents as earned. Once this initial assessment is completed, the Company may apply a general reserve, as provided under ASC 450-20, if applicable. |
The Company did not record any cumulative effect of change in accounting principle upon the adoption of ASC Topic 842 as lessor or lessee. Consistent with the transition guidance under ASU 2018-11, all prior period disclosures remain in accordance with ASC Topic 840.
Other Accounting Topics
In February 2018, the FASB issued ASU No. 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. These amendments provide financial statement preparers with an option to reclassify stranded tax effects within accumulated other comprehensive income to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recorded. This guidance is effective for fiscal years beginning after December 15, 2018, and interim periods therein. The Company adopted this guidance effective January 1, 2019, which had no effect on the Company’s financial statements.
In July 2018, the FASB issued ASU No. 2018-09, Codification Improvements. These amendments provide clarifications and corrections to certain ASC subtopics including the following: 220-10 (Income Statement - Reporting Comprehensive Income - Overall), 470-50 (Debt - Modifications and Extinguishments), 480-10 (Distinguishing Liabilities from Equity - Overall), 718-740 (Compensation - Stock Compensation - Income Taxes), 805-740 (Business Combinations - Income Taxes), 815-10 (Derivatives and Hedging - Overall), and 820-10 (Fair Value Measurement - Overall). Some of the amendments in ASU 2018-09 do not require transition guidance and were effective upon issuance; however, many of the amendments do have transition guidance with effective dates for annual periods beginning after December 15, 2018. For those amendments that were effective January 1, 2019 or earlier, there was no material effect on the Company’s financial statements.
Recently Issued Accounting Pronouncements
In April 2019, the FASB issued ASU No. 2019-04 Codification Improvements to Topic 326, Financial Instruments — Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, which provides updates and clarifications to three previously-issued ASUs: 2016-01 Financial Instruments — Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities; 2016-13 Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, described further below and which the Company has not yet adopted; and 2017-12 Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which the Company early adopted effective January 1, 2018. The updates related to ASU 2016-13 have the same transition as ASU 2016-13 and are effective for periods beginning after December 15, 2019, with adoption permitted after the issuance of ASU 2019-04. The
14
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
updates related to ASU 2017-12 are effective for the Company on January 1, 2020. The updates related to ASU 2016-01 are effective for fiscal years beginning after December 15, 2019. The Company is currently evaluating the impact of this new standard on its consolidated financial statements.
In May 2019, the FASB issued ASU No. 2019-05 Financial Instruments — Credit Losses (Topic 326) which provides relief to certain entities adopting ASU 2016-13 (discussed below). The amendments accomplish those objectives by providing entities with an option to irrevocably elect the fair value option in Subtopic 825-10, applied on an instrument-by-instrument basis for eligible instruments, that are within the scope of Subtopic 326-20, upon adoption of Topic 326. The fair value option election does not apply to held-to-maturity debt securities. ASU 2019-05 has the same transition as ASU 2016-13 and is effective for periods beginning after December 15, 2019, with adoption permitted after this update. The Company is currently evaluating the impact of this new standard on its consolidated financial statements.
In November 2018, the FASB issued ASU No. 2018-19 Codification Improvements to Topic 326, Financial Instruments — Credit Losses. This ASU modifies ASU 2016-13 (discussed below). The amendment clarifies that receivables arising from operating leases are not within the scope of Subtopic 326-20, Financial Instruments – Credit Losses – Measure at Amortized Cost. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases. ASU 2018-19 is effective for periods beginning after December 15, 2019, with adoption permitted for fiscal years beginning after December 15, 2018. The Company is currently evaluating the impact of this new standard on its consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments — Credit Losses. ASU 2016-13 introduces a new model for estimating credit losses for certain types of financial instruments, including loans receivable, held-to-maturity debt securities, and net investments in direct financing leases, amongst other financial instruments. ASU 2016-13 also modifies the impairment model for available-for-sale debt securities and expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for losses. ASU 2016-13 is effective for periods beginning after December 15, 2019, with adoption permitted for fiscal years beginning after December 15, 2018. Retrospective adjustments shall be applied through a cumulative-effect adjustment to retained earnings. The Company is currently evaluating the impact of this new standard on its consolidated financial statements.
In June 2018, the FASB issued ASU No. 2018-07, Compensation — Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. These amendments provide specific guidance for transactions for acquiring goods and services from nonemployees and specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (i) financing to the issuer or (ii) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers. This guidance is effective for fiscal years beginning after December 15, 2018, and interim periods beginning after December 15, 2020. Early adoption is permitted but not earlier than the adoption of Topic 606. The Company does not believe that this guidance will have a material effect on its consolidated financial statements as it has not historically issued share-based payments in exchange for goods or services to be consumed within its operations.
In August 2018, the FASB issued ASU No. 2018-13, Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement which removes, modifies, and adds certain disclosure requirements related to fair value measurements in ASC 820. This guidance is effective for public companies in fiscal years beginning after December 15, 2019 with early adoption permitted. The Company is currently evaluating the impact of this new standard on its consolidated financial statements.
15
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
2. Real Estate
The Company’s consolidated real estate is comprised of the following (in thousands):
|
|
June 30, 2019 |
|
|
December 31, 2018 |
|
||
Land |
|
$ |
|
|
|
$ |
|
|
Buildings and improvements |
|
|
|
|
|
|
|
|
Tenant improvements |
|
|
|
|
|
|
|
|
Construction in progress |
|
|
|
|
|
|
|
|
Properties under capital lease (Note 11) |
|
|
— |
|
|
|
|
|
Right-of-use assets - finance leases (Note 11) |
|
|
|
|
|
|
— |
|
Right-of-use assets - operating leases (Note 11) |
|
|
|
|
|
|
— |
|
Total |
|
|
|
|
|
|
|
|
Less: Accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Operating real estate, net |
|
|
|
|
|
|
|
|
Real estate under development, at cost |
|
|
|
|
|
|
|
|
Net investments in real estate |
|
$ |
|
|
|
$ |
|
|
16
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Acquisitions and Conversions
During the six months ended June 30, 2019 and the year ended December 31, 2018, the Company acquired the following consolidated retail properties (dollars in thousands):
Property and Location |
|
Percent Acquired |
|
|
Date of Acquisition |
|
Purchase Price |
|
||
2019 Acquisitions |
|
|
|
|
|
|
|
|
|
|
Core |
|
|
|
|
|
|
|
|
|
|
Soho Portfolio - 41, 51 and 53 Greene Street - New York, NY (a) |
|
|
|
|
Mar 15, 2019 Mar 27, 2019 May 29, 2019 |
|
$ |
|
|
|
Subtotal Core |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund V |
|
|
|
|
|
|
|
|
|
|
Palm Coast Landing - Palm Coast, FL |
|
|
|
|
May 6, 2019 |
|
|
|
|
|
Lincoln Commons - Lincoln, RI |
|
|
|
|
June 21, 2019 |
|
|
|
|
|
Subtotal Fund V |
|
|
|
|
|
|
|
|
|
|
Total 2019 Acquisitions |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
2018 Acquisitions and Conversions |
|
|
|
|
|
|
|
|
|
|
Core |
|
|
|
|
|
|
|
|
|
|
Bedford Green Land Parcel - Bedford Hills, NY |
|
|
|
|
Mar 23, 2018 |
|
$ |
|
|
|
Subtotal Core |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund IV |
|
|
|
|
|
|
|
|
|
|
Broughton Street Partners I - Savannah, GA (Conversion) (Note 4) |
|
|
|
|
Oct 11, 2018 |
|
|
|
|
|
Subtotal Fund IV |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund V |
|
|
|
|
|
|
|
|
|
|
Trussville Promenade - Trussville, AL |
|
|
|
|
Feb 21, 2018 |
|
|
|
|
|
Elk Grove Commons - Elk Grove, CA |
|
|
|
|
Jul 18, 2018 |
|
|
|
|
|
Hiram Pavilion - Hiram, GA |
|
|
|
|
Oct 23, 2018 |
|
|
|
|
|
Subtotal Fund V |
|
|
|
|
|
|
|
|
|
|
Total 2018 Acquisitions and Conversions |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
The Soho Portfolio is a collection of |
The 2019 Acquisitions and 2018 Acquisitions and Conversions were considered asset acquisitions based on accounting guidance effective as of January 1, 2018. For the six months ended June 30, 2019 and 2018, the Company capitalized $
17
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Purchase Price Allocations
The purchase prices for the 2019 Acquisitions and the 2018 Acquisitions and Conversions were allocated to the acquired assets and assumed liabilities based on their estimated fair values at the dates of acquisition.
|
|
Six Months Ended June 30, 2019 |
|
|
Year Ended December 31, 2018 |
|
||
Net Assets Acquired |
|
|
|
|
|
|
|
|
Land |
|
$ |
|
|
|
$ |
|
|
Buildings and improvements |
|
|
|
|
|
|
|
|
Acquisition-related intangible assets (Note 6) |
|
|
|
|
|
|
|
|
Acquisition-related intangible liabilities (Note 6) |
|
|
( |
) |
|
|
( |
) |
Net assets acquired |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
Consideration |
|
|
|
|
|
|
|
|
Cash |
|
$ |
|
|
|
$ |
|
|
Liabilities assumed |
|
|
|
|
|
|
|
|
Existing interest in previously unconsolidated investment |
|
|
|
|
|
|
|
|
Total consideration |
|
$ |
|
|
|
$ |
|
|
Dispositions
During the six months ended June 30, 2019 and the year ended December 31, 2018, the Company disposed of the following consolidated properties (in thousands):
Property and Location |
|
Owner |
|
Date Sold |
|
Sale Price |
|
|
Gain on Sale |
|
||
2019 Dispositions |
|
|
|
|
|
|
|
|
|
|
|
|
3104 M Street - Washington, DC (Note 4) |
|
Fund III |
|
|
|
$ |
|
|
|
$ |
|
|
210 Bowery - 1 Residential Condo - New York, NY |
|
Fund IV |
|
|
|
|
|
|
|
|
— |
|
Total 2019 Dispositions |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018 Dispositions |
|
|
|
|
|
|
|
|
|
|
|
|
Sherman Avenue - New York, NY |
|
Fund II |
|
|
|
$ |
|
|
|
$ |
|
|
Lake Montclair - Dumfries, VA |
|
Fund IV |
|
|
|
|
|
|
|
|
|
|
1861 Union Street - San Francisco, CA |
|
Fund IV |
|
|
|
|
|
|
|
|
|
|
210 Bowery - 4 Residential Condos - New York, NY |
|
Fund IV |
|
Nov 30, 2018, Dec 10, 2018, Dec 17, 2018, Dec 21, 2018 |
|
|
|
|
|
|
— |
|
Total 2018 Dispositions |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
18
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
The aggregate rental revenue, expenses and pre-tax income reported within continuing operations for the aforementioned consolidated properties that were sold during the three months ended June 30, 2019 and year ended December 31, 2018 were as follows (in thousands):
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
Revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Expenses |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Gain on disposition of properties |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (income) loss attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Acadia |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Properties Held for Sale
At June 30, 2019, the Company had
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):
|
|
December 31, 2018 |
|
|
Six Months Ended 2019 |
|
|
June 30, 2019 |
|
|||||||||||||||||||
|
|
Number of Properties |
|
|
Carrying Value |
|
|
Transfers In |
|
|
Capitalized Costs |
|
|
Transfers Out |
|
|
Number of Properties |
|
|
Carrying Value |
|
|||||||
Core |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
Fund II |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund III |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund IV |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
The number of properties in the table above refers to projects comprising the entire property; however, certain projects represent a portion of a property. During the six months ended June 30, 2019, the Company placed the following projects into development:
|
• |
a portion of City Center (Core) |
|
• |
a portion of Cortlandt Crossing (Fund III) |
|
• |
its 1238 Wisconsin Avenue property (Core, Note 11) |
|
• |
a portion of 110 University Place (Fund IV, Note 11) |
During the year ended December 31, 2018, the Company placed
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.
19
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
3. Notes Receivable, Net
The Company’s notes receivable, net were generally collateralized either by the underlying properties or the borrower’s ownership interest in the entities that own the properties, and were as follows (dollars in thousands):
|
|
June 30, |
|
|
December 31, |
|
|
June 30, 2019 |
|
|||||||||
Description |
|
2019 |
|
|
2018 |
|
|
Number |
|
|
Maturity Date |
|
Interest Rate |
|
||||
Core Portfolio |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
Oct 2019 - Apr 2020 |
|
6.0% - 8.1% |
|
|
Fund II |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund III |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund IV |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
During the six months ended June 30, 2019, the Company:
|
• |
increased the balance of a Fund II note receivable by the interest accrued of $ |
|
• |
redeemed its $ |
|
• |
stopped accruing interest on one loan, due to the estimated market value of the collateral. The note had $ |
|
• |
extended the maturity for Brandywine’s note receivable to October 31, 2019. |
During the year ended December 31, 2018, the Company:
|
• |
exchanged $ |
|
• |
received full payment on $ |
|
• |
funded an additional $ |
|
• |
advanced an additional $ |
|
• |
increased the balance of a Fund II note receivable by the interest accrued of $ |
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).
20
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO 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.
|
|
|
|
Nominal Ownership Interest |
|
|
June 30, |
|
|
December 31, |
|
|||
Portfolio |
|
Property |
|
June 30, 2019 |
|
|
2019 |
|
|
2018 |
|
|||
Core: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
840 N. Michigan (a) |
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
Renaissance Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gotham Plaza |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Town Center (a, b) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Georgetown Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mervyns I & II: |
|
KLA/Mervyn's, LLC (c) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund III: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund III Other Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Self Storage Management (d) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund IV: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broughton Street Portfolio (e) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund IV Other Portfolio |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
650 Bald Hill Road |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund V: |
|
Family Center at Riverdale (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tri-City Plaza |
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Various Funds: |
|
Due (to) from Related Parties |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
Other (f) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in and advances to unconsolidated affiliates |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crossroads (g) |
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
Distributions in excess of income from, and investments in, unconsolidated affiliates |
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
(a) |
Represents a tenancy-in-common interest. |
|
(b) |
During November 2017 and March 2018, as discussed below, the Company increased its ownership in Town Center. |
|
(c) |
Distributions, discussed below, have exceeded the Company’s non-recourse investment, therefore the carrying value is |
|
(d) |
Represents a variable interest entity for which the Company was determined not to be the primary beneficiary. |
|
(e) |
The Company is entitled to a |
|
(f) |
Includes a cost-method investment in Albertson’s (Note 8), Storage Post and other investments. |
|
(g) |
Distributions have exceeded the Company’s investment; however, the Company recognizes a liability balance as it may be required to return distributions to fund future obligations of the entity. |
21
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Core Portfolio
2019 Acquisition of Unconsolidated Investments
On January 24, 2019, the Renaissance Portfolio, in which the Company owns a
Brandywine Portfolio, Market Square and Town Center
The Company owns an interest in an approximately one million square foot retail portfolio (the “Brandywine Portfolio” joint venture) located in Wilmington, Delaware, which includes two properties referred to as “Market Square” and “Town Center.” Prior to the second quarter of 2016, the Company had a controlling interest in the Brandywine Portfolio, and it was therefore consolidated within the Company’s financial statements. During April 2016, the arrangement with the partners of the Brandywine Portfolio was modified to change the legal ownership from a partnership to a tenancy-in-common interest, as well as to provide certain participating rights to the outside partners. As a result of these modifications, the Company de-consolidated the Brandywine Portfolio and accounted for its interest under the equity method of accounting effective May 1, 2016. Furthermore, as the owners of the Brandywine Portfolio had consistent ownership interests before and after the modification and the underlying net assets were unchanged, the Company reflected the change from consolidation to equity method based upon its historical cost. The Brandywine Portfolio and Market Square ventures do not include the property held by Brandywine Holdings, an entity consolidated by the Company.
Additionally, in April 2016, the Company repaid the outstanding balance of $
On November 16, 2017, the Company exchanged $
On March 28, 2018, the Company exchanged $
At June 30, 2019, $
22
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Fund Investments
2019 Acquisitions of Unconsolidated Investments
On March 19, 2019, Fund V acquired an interest in a venture which invested in a
On April 30, 2019, Fund V acquired an interest in a venture which invested in a
Broughton Street Portfolio
During 2014, Fund IV acquired
Storage Post
On June 29, 2019, Fund III’s Storage Post venture, which is a cost-method investment with
2018 Dispositions of Unconsolidated Investments
On January 18, 2018, Fund IV’s Broughton Street Portfolio venture sold
On June 29, 2018, Fund IV’s Broughton Street Portfolio venture terminated its master leases on
On August 29, 2018, Fund IV’s Broughton Street Portfolio venture sold a property for proceeds of $
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 paid to certain unaffiliated partners of its joint ventures, $
23
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Summarized Financial Information of Unconsolidated Affiliates
The following combined and condensed Balance Sheets and Statements of Income, in each period, summarize the financial information of the Company’s investments in unconsolidated affiliates (in thousands):
|
|
June 30, 2019 |
|
|
December 31, 2018 |
|
||
Combined and Condensed Balance Sheets |
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
Rental property, net |
|
$ |
|
|
|
$ |
|
|
Investment in unconsolidated affiliates |
|
|
|
|
|
|
|
|
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 payable by the Company |
|
|
( |
) |
|
|
( |
) |
Investments in and advances to unconsolidated affiliates, net of Company's share of distributions in excess of income from and investments in unconsolidated affiliates |
|
|
|
|
|
|
|
|
Company's share of distributions in excess of income from and investments in unconsolidated affiliates |
|
|
|
|
|
|
|
|
Investments in and advances to unconsolidated affiliates |
|
$ |
|
|
|
$ |
|
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
Combined and Condensed Statements of Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Operating and other expenses |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Interest expense |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Loss on disposition of properties |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Net income attributable to unconsolidated affiliates |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company’s share of equity in net income of unconsolidated affiliates |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Basis differential amortization |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Company’s equity in earnings of unconsolidated affiliates |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
24
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO 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:
(in thousands) |
|
June 30, 2019 |
|
|
December 31, 2018 |
|
||
Other Assets, Net: |
|
|
|
|
|
|
|
|
Lease intangibles, net (Note 6) |
|
$ |
|
|
|
$ |
|
|
Deferred charges, net (a) |
|
|
|
|
|
|
|
|
Prepaid expenses |
|
|
|
|
|
|
|
|
Other receivables |
|
|
|
|
|
|
|
|
Accrued interest receivable |
|
|
|
|
|
|
|
|
Deposits |
|
|
|
|
|
|
|
|
Due from seller |
|
|
|
|
|
|
|
|
Deferred tax assets |
|
|
|
|
|
|
|
|
Derivative financial instruments (Note 8) |
|
|
|
|
|
|
|
|
Due from related parties |
|
|
|
|
|
|
|
|
Corporate assets |
|
|
|
|
|
|
|
|
Income taxes receivable |
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
(a) Deferred Charges, Net: |
|
|
|
|
|
|
|
|
Deferred leasing and other costs |
|
$ |
|
|
|
$ |
|
|
Deferred financing costs related to line of credit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated amortization |
|
|
( |
) |
|
|
( |
) |
Deferred charges, net |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
Accounts Payable and Other Liabilities: |
|
|
|
|
|
|
|
|
Lease intangibles, net (Note 6) |
|
$ |
|
|
|
$ |
|
|
Capital lease obligations (Note 11) |
|
|
— |
|
|
|
|
|
Lease liability - finance leases, net (Note 11) |
|
|
|
|
|
|
— |
|
Lease liability - operating leases, net (Note 11) |
|
|
|
|
|
|
— |
|
Accounts payable and accrued expenses |
|
|
|
|
|
|
|
|
Deferred income |
|
|
|
|
|
|
|
|
Tenant security deposits, escrow and other |
|
|
|
|
|
|
|
|
Derivative financial instruments (Note 8) |
|
|
|
|
|
|
|
|
Income taxes payable |
|
|
— |
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
25
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
6. Lease Intangibles
Upon acquisitions of real estate (Note 2), the Company assesses the 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 and other liabilities (Note 5) on the consolidated balance sheet and summarized as follows (in thousands):
|
|
June 30, 2019 |
|
|
December 31, 2018 |
|
||||||||||||||||||
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net Carrying Amount |
|
|
Gross Carrying Amount |
|
|
Accumulated Amortization |
|
|
Net Carrying Amount |
|
||||||
Amortizable Intangible Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In-place lease intangible assets |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
Above-market rent |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortizable Intangible Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Below-market rent |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
Above-market ground lease |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
During the six months ended June 30, 2019, the Company acquired in-place lease intangible assets of $
During the year ended December 31, 2018, the Company acquired in-place lease intangible assets of $
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 consolidated statements of income. Amortization of above-market ground leases are recorded as a reduction to rent expense in the consolidated statements of income.
The scheduled amortization of acquired lease intangible assets and assumed liabilities as of June 30, 2019 is as follows (in thousands):
Years Ending December 31, |
|
Net Increase in Lease Revenues |
|
|
Increase to Amortization |
|
|
Reduction of Rent Expense |
|
|
Net (Expense) Income |
|
||||
2019 (Remainder) |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
2020 |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
2021 |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
2022 |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
2023 |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
Thereafter |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
( |
) |
26
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO 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 |
|
||||||||||
|
|
June 30, |
|
|
December 31, |
|
|
Maturity Date at |
|
|
June 30, |
|
|
December 31, |
|
|||||
|
|
2019 |
|
|
2018 |
|
|
June 30, 2019 |
|
|
2019 |
|
|
2018 |
|
|||||
Mortgages Payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core Fixed Rate |
|
3.88%-6.00% |
|
|
3.88%-6.00% |
|
|
Feb 2024 - Apr 2035 |
|
|
$ |
|
|
|
$ |
|
|
|||
Core Variable Rate - Swapped (a) |
|
3.41%-5.67% |
|
|
3.41%-5.67% |
|
|
Jan 2023 - Nov 2028 |
|
|
|
|
|
|
|
|
|
|||
Total Core Mortgages Payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund II Fixed Rate |
|
1.00%-4.75% |
|
|
1.00%-4.75% |
|
|
May 2020 - Aug 2042 |
|
|
|
|
|
|
|
|
|
|||
Fund II Variable Rate |
|
LIBOR+1.39%-LIBOR+3.00% |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
— |
|
||
Fund II Variable Rate - Swapped (a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Total Fund II Mortgages Payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund III Variable Rate |
|
LIBOR+2.65%-LIBOR+4.65% |
|
|
Prime+0.50%-LIBOR+4.65% |
|
|
Jun 2020 - Jul 2020 |
|
|
|
|
|
|
|
|
|
|||
Fund IV Fixed Rate |
|
3.40%-4.50% |
|
|
3.40%-4.50% |
|
|
Oct 2025 - Jun 2026 |
|
|
|
|
|
|
|
|
|
|||
Fund IV Variable Rate |
|
LIBOR+1.60%-LIBOR+3.40% |
|
|
LIBOR+1.60%-LIBOR+3.95% |
|
|
July 2019 - Apr 2022 |
|
|
|
|
|
|
|
|
|
|||
Fund IV Variable Rate - Swapped (a) |
|
3.67%-4.81% |
|
|
3.67%-4.23% |
|
|
Mar 2020 - Dec 2022 |
|
|
|
|
|
|
|
|
|
|||
Total Fund IV Mortgages Payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund V Variable Rate |
|
LIBOR+2.15%-LIBOR+2.25% |
|
|
LIBOR+2.25% |
|
|
Oct 2020 - Jan 2021 |
|
|
|
|
|
|
|
|
|
|||
Fund V Variable Rate - Swapped (a) |
|
4.01%-4.78% |
|
|
4.61%-4.78% |
|
|
Feb 2021 - Mar 2024 |
|
|
|
|
|
|
|
|
|
|||
Total Fund V Mortgage Payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unamortized debt issuance costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Unamortized premium |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Mortgages Payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
Unsecured Notes Payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core Term Loans |
|
|
— |
|
|
LIBOR+1.25% |
|
|
|
|
|
$ |
— |
|
|
$ |
|
|
||
Core Variable Rate Unsecured Term Loans - Swapped (a) |
|
2.49%-5.02% |
|
|
2.54%-3.59% |
|
|
|
|
|
|
|
|
|
|
|
|
|||
Total Core Unsecured Notes Payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
350,000 |
|
|
|
350,000 |
|
Fund II Unsecured Notes Payable |
|
LIBOR+1.65% |
|
|
LIBOR+1.40% |
|
|
|
|
|
|
|
|
|
|
|
|
|||
Fund IV Term Loan/Subscription Facility |
|
LIBOR+1.65%-LIBOR+2.00% |
|
|
LIBOR+1.65%-LIBOR+2.75% |
|
|
Dec 2019 - June 2021 |
|
|
|
|
|
|
|
|
|
|||
Fund V Subscription Facility |
|
LIBOR+1.60% |
|
|
LIBOR+1.60% |
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unamortized debt issuance costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Total Unsecured Notes Payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
Unsecured Line of Credit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core Unsecured Line of Credit |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
|
|
|
$ |
— |
|
Core Unsecured Line of Credit - Swapped (a) |
|
2.49%-5.02% |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
— |
|
||
Total Unsecured Line of Credit |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Debt - Fixed Rate (b)(c) |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
Total Debt - Variable Rate (d) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unamortized debt issuance costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Unamortized premium |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Indebtedness |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
(a) |
At June 30, 2019, the stated rates ranged from LIBOR + 1.50% to LIBOR +1.90% for Core variable-rate debt; LIBOR + 1.39% for Fund II variable-rate debt; LIBOR + 2.65% to LIBOR + 4.65% for Fund III variable-rate debt; LIBOR + 1.60% to LIBOR +3.40% for Fund IV variable-rate debt; LIBOR + 2.15% to LIBOR + 2.25% for Fund V variable-rate debt; LIBOR + 1.25% for Core variable-rate unsecured term loans; and LIBOR + |
|
(b) |
Includes $ |
|
(c) |
Fixed-rate debt at June 30, 2019 includes $ |
|
(d) |
Includes $ |
27
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Credit Facility
On February 20, 2018, the Company entered into a $
Mortgages Payable
During the six months ended June 30, 2019:
|
• |
The Company obtained |
|
• |
The Company drew down $ |
|
• |
Fund III mortgage, which had a balance of $ |
|
• |
The Company modified one Core loan to provide for a temporary prepayment of $ |
|
• |
The Company entered into interest rate swap contracts to effectively fix the variable portion of the interest rates of four of the new obligations with a notional value of $ |
|
• |
The Company made scheduled principal payments of $ |
At June 30, 2019 and December 31, 2018, the Company’s mortgages were collateralized by
The mortgage loan related to Brandywine Holdings in the Company’s Core Portfolio, which was originated in June 2006 and had an original principal amount of $
Unsecured Notes Payable
Unsecured notes payable for which total availability was $
|
• |
As discussed above, the Core unsecured term loans totaling $ |
|
• |
Fund II has a $ |
|
• |
At Fund IV there is a $ |
28
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
facility was $ |
|
• |
Fund V has a $ |
Unsecured Revolving Line of Credit
As discussed above, the Core unsecured revolving line of credit was refinanced in February 2018. The Company had a total of $
Scheduled Debt Principal Payments
The scheduled principal repayments of the Company’s consolidated indebtedness, as of June 30, 2019 are as follows (in thousands):
Year Ending December 31, |
|
|
|
|
2019 (Remainder) |
|
$ |
|
|
2020 |
|
|
|
|
2021 |
|
|
|
|
2022 |
|
|
|
|
2023 |
|
|
|
|
Thereafter |
|
|
|
|
|
|
|
|
|
Unamortized premium |
|
|
|
|
Net unamortized debt issuance costs |
|
|
( |
) |
Total indebtedness |
|
$ |
|
|
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.
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 along with their weighted-average ranges.
Money Market Funds — The Company has money market funds, which are included in Cash and cash equivalents in the consolidated financial statements, are comprised of government securities and/or U.S. Treasury bills. These funds were classified as Level 1 as we used quoted prices from active markets to determine their fair values.
Derivative Assets — The Company has derivative assets, which are included in Other assets, net in the consolidated financial statements, are comprised of interest rate swaps and caps. The derivative instruments were measured at fair value using readily observable market inputs, such as
29
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
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 in the consolidated financial statements, 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 six months ended June 30, 2019 or 2018.
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):
|
|
June 30, 2019 |
|
|
December 31, 2018 |
|
||||||||||||||||||
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money Market Funds |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Derivative financial instruments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
Items Measured at Fair Value on a Nonrecurring Basis (Including Impairment Charges)
During 2018, the Company began selling the residential units of its 210 Bowery property in Fund IV. As the projected aggregate selling prices net of selling costs were in line with the carrying amount of the property through the first quarter 2019,
The Company did
30
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO 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 Instrument |
|
Aggregate Notional Amount |
|
|
Effective Date |
|
|
Maturity Date |
|
|
Low |
|
|
|
|
High |
|
|
Balance Sheet Location |
|
June 30, 2019 |
|
|
December 31, 2018 |
|
|||||||
Core |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Swaps |
|
$ |
|
|
|
Dec 2012-July 2020 |
|
|
Mar 2022-July 2030 |
|
|
|
|
% |
|
— |
|
|
|
% |
|
Other Liabilities (a) |
|
$ |
( |
) |
|
$ |
( |
) |
||
Interest Rate Swaps |
|
|
|
|
|
Oct 2014 - July 2016 |
|
|
Nov 2019-June 2021 |
|
|
|
|
% |
|
— |
|
|
|
% |
|
Other Assets |
|
|
|
|
|
|
|
|
||
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund II |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Swap |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
% |
|
— |
|
|
|
% |
|
Other Liabilities |
|
$ |
( |
) |
|
$ |
|
|
||
Interest Rate Swap |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
Other Assets |
|
|
|
|
|
|
|
|
Interest Rate Cap |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
— |
|
|
|
% |
|
Other Assets |
|
|
|
|
|
|
|
|
||
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund III |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Cap |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
% |
|
— |
|
|
|
% |
|
Other Assets |
|
$ |
|
|
|
$ |
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund IV |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Swaps |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
% |
|
— |
|
|
|
% |
|
Other Assets |
|
$ |
|
|
|
$ |
|
|
||
Interest Rate Swap |
|
|
|
|
|
Mar 2017 - May 2019 |
|
|
Apr 2022 - Dec 2022 |
|
|
|
|
% |
|
— |
|
|
|
% |
|
Other Liabilities |
|
|
( |
) |
|
|
|
|
||
Interest Rate Caps |
|
|
|
|
|
July 2016 - Nov 2016 |
|
|
Aug 2019 - Dec 2019 |
|
|
|
|
% |
|
— |
|
|
|
% |
|
Other Assets |
|
|
|
|
|
|
|
|
||
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund V |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Swap |
|
$ |
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
Other Assets |
|
$ |
|
|
|
$ |
|
|
Interest Rate Swaps |
|
|
|
|
|
Jan 2018-Mar 2019 |
|
|
Feb 2021-Mar 2024 |
|
|
|
|
% |
|
— |
|
|
|
% |
|
Other Liabilities |
|
|
( |
) |
|
|
( |
) |
||
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total asset derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|||
Total liability derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
(a) |
Includes |
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.
31
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
The Company is exposed to credit risk in the event of non-performance by the counterparties to the swaps if the derivative position has a positive balance. The Company believes it mitigates its credit risk by entering into swaps with major financial institutions. The Company continually monitors and actively manages interest costs on its variable-rate debt portfolio and may enter into additional interest rate swap positions or other derivative interest rate instruments based on market conditions.
Credit Risk-Related Contingent Features
The Company has agreements with each of its swap counterparties that contain a provision whereby if the Company defaults on certain of its unsecured indebtedness, the Company could also be declared in default on its swaps, resulting in an acceleration of payment under the swaps.
Other Financial Instruments
The Company’s other financial instruments had the following carrying values and fair values as of the dates shown (dollars in thousands, inclusive of amounts attributable to noncontrolling interests where applicable):
|
|
|
|
|
|
June 30, 2019 |
|
|
December 31, 2018 |
|
||||||||||
|
|
Level |
|
|
Carrying Amount |
|
|
Estimated Fair Value |
|
|
Carrying Amount |
|
|
Estimated Fair Value |
|
|||||
Notes Receivable (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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
The Company determined the estimated fair value of these financial instruments using a discounted cash flow model with rates that take into account the credit of the borrower or tenant, where applicable, and interest rate risk. The Company also considered the value of the underlying collateral, taking into account the quality of the collateral, the credit quality of the borrower, the time until maturity and the current market interest rate environment. |
(b) |
Represents Fund II’s cost-method investment in Albertson’s supermarkets (Note 4). |
(c) |
The Company determined the estimated fair value of the unsecured notes payable and unsecured line of credit using quoted market prices in an open market with limited trading volume where available. In cases where there was no trading volume, the Company determined the estimated fair value using a discounted cash flow model using a rate that reflects the average yield of similar market participants. |
The Company’s cash and cash equivalents, restricted cash, accounts receivable, accounts payable and certain financial instruments included in other assets and other liabilities had fair values that approximated their carrying values at June 30, 2019.
9. Commitments and Contingencies
The Company is involved in various matters of litigation arising in the normal course of business. While the Company is unable to predict with certainty the amounts involved, the Company’s management and counsel are of the opinion that, when such litigation is resolved, the Company’s resulting liability, if any, will not have a significant effect on the Company’s consolidated financial position, results of operations, or liquidity. The Company's policy is to accrue legal expenses as they are incurred.
Commitments and Guaranties
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 $
At June 30, 2019 and December 31, 2018, the Company had letters of credit outstanding of $
32
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
10. Shareholders’ Equity, Noncontrolling Interests and Other Comprehensive Income
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 six months ended June 30, 2019:
|
• |
The Company withheld |
|
• |
The Company recognized Common Share and Common OP Unit-based compensation totaling $ |
In addition to the share repurchase activity discussed below, the Company completed the following transactions in its common shares during the year ended December 31, 2018:
|
• |
The Company withheld |
|
• |
The Company recognized Common Share and Common OP Unit-based compensation totaling $ |
ATM Program
The Company has an at-the-market (“ATM”) equity issuance program which provides the Company an efficient and low-cost vehicle for raising public equity to fund its capital needs. During the three months ended June 30, 2019, the Company sold
Share Repurchase Program
During 2018, the Company’s board of trustees 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 dividends declared and/or paid during the six months ended June 30, 2019:
Date Declared |
|
Amount Per Share |
|
|
Record Date |
|
Payment Date |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Accumulated Other Comprehensive Income
The following tables set forth the activity in accumulated other comprehensive income for the three and six months ended June 30, 2019 and 2018 (in thousands):
|
|
Gains or Losses on Derivative Instruments |
|
|
Balance at April 1, 2019 |
|
$ |
( |
) |
|
|
|
|
|
Other comprehensive loss before reclassifications |
|
|
( |
) |
Reclassification of realized interest on swap agreements |
|
|
( |
) |
Net current period other comprehensive loss |
|
|
( |
) |
Net current period other comprehensive loss attributable to noncontrolling interests |
|
|
|
|
Balance at June 30, 2019 |
|
$ |
( |
) |
|
|
|
|
|
Balance at April 1, 2018 |
|
$ |
|
|
|
|
|
|
|
Other comprehensive income before reclassifications |
|
|
|
|
Reclassification of realized interest on swap agreements |
|
|
|
|
Net current period other comprehensive income |
|
|
|
|
Net current period other comprehensive income attributable to noncontrolling interests |
|
|
( |
) |
Balance at June 30, 2018 |
|
$ |
|
|
|
|
Gains or Losses on Derivative Instruments |
|
|
Balance at January 1, 2019 |
|
$ |
|
|
|
|
|
|
|
Other comprehensive loss before reclassifications |
|
|
( |
) |
Reclassification of realized interest on swap agreements |
|
|
( |
) |
Net current period other comprehensive loss |
|
|
( |
) |
Net current period other comprehensive loss attributable to noncontrolling interests |
|
|
|
|
Balance at June 30, 2019 |
|
$ |
( |
) |
|
|
|
|
|
Balance at January 1, 2018 |
|
$ |
|
|
|
|
|
|
|
Other comprehensive income before reclassifications |
|
|
|
|
Reclassification of realized interest on swap agreements |
|
|
|
|
Net current period other comprehensive income |
|
|
|
|
Net current period other comprehensive income attributable to noncontrolling interests |
|
|
( |
) |
Balance at June 30, 2018 |
|
$ |
|
|
34
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Noncontrolling Interests
The following tables summarize the change in the noncontrolling interests for the three and six months ended June 30, 2019 and 2018 (dollars in thousands):
|
|
Noncontrolling Interests in Operating Partnership (a) |
|
|
Noncontrolling Interests in Partially-Owned Affiliates (b) |
|
|
Total |
|
|||
Balance at April 1, 2019 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Distributions declared of $ |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
Net income (loss) for the three months ended June 30, 2019 |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Conversion of |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
Other comprehensive loss - unrealized loss on valuation of swap agreements |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Reclassification of realized interest expense on swap agreements |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Noncontrolling interest distributions |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Employee Long-term Incentive Plan Unit Awards |
|
|
|
|
|
|
|
|
|
|
|
|
Reallocation of noncontrolling interests (c) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
Balance at June 30, 2019 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at April 1, 2018 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Distributions declared of $ |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
Net income (loss) for the three months ended June 30, 2018 |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Conversion of |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Other comprehensive income - unrealized gain on valuation of swap agreements |
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification of realized interest expense on swap agreements |
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interest contributions |
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interest distributions |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Employee Long-term Incentive Plan Unit Awards |
|
|
|
|
|
|
|
|
|
|
|
|
Reallocation of noncontrolling interests (c) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
Balance at June 30, 2018 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
|
Noncontrolling Interests in Operating Partnership (a) |
|
|
Noncontrolling Interests in Partially-Owned Affiliates (b) |
|
|
Total |
|
|||
Balance at January 1, 2019 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Distributions declared of $ |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
Net income (loss) for the six months ended June 30, 2019 |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Conversion of |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
Other comprehensive loss - unrealized loss on valuation of swap agreements |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Reclassification of realized interest expense on swap agreements |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Noncontrolling interest contributions |
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interest distributions |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Employee Long-term Incentive Plan Unit Awards |
|
|
|
|
|
|
|
|
|
|
|
|
Reallocation of noncontrolling interests (c) |
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2019 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2018 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Distributions declared of $ |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
Net income (loss) for the six months ended June 30, 2018 |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Conversion of |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
Other comprehensive income - unrealized gain on valuation of swap agreements |
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification of realized interest expense on swap agreements |
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interest contributions |
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interest distributions |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Employee Long-term Incentive Plan Unit Awards |
|
|
|
|
|
|
|
|
|
|
|
|
Reallocation of noncontrolling interests (c) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
Balance at June 30, 2018 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
Noncontrolling interests in the Operating Partnership are comprised of (i) the limited partners’ |
(b) |
Noncontrolling interests in partially-owned affiliates comprise third-party interests in Funds II, III, IV and V, and Mervyns II, and six other subsidiaries. |
(c) |
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. |
Preferred OP Units
There were
36
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
In 1999 the Operating Partnership issued
During 2016, the Operating Partnership issued
11. Leases
As Lessor
The Company implemented ASC Topic 842, Leases, effective January 1, 2019 (Note 1). As lessor, there were no accounting adjustments required, however, the presentation of the Company’s lease revenues in 2019 includes amounts previously reported as reimbursed expenses. There was
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 June 20, 2066, with renewal options. Space in the shopping centers is leased to tenants pursuant to agreements that provide for terms ranging generally from
As Lessee
As lessee, upon implementation of ASC Topic 842, the Company recorded right-of-use assets and corresponding lease liabilities of $
During the three months ended June 30, 2019, the Company entered into two new master leases, one of which is a finance lease, (1238 Wisconsin Avenue, acquired on May 2, 2019) and one of which was an operating lease (110 University Place, acquired on May 1, 2019 by Fund IV for $
37
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
||||||||
|
2019 |
|
|
2018 |
|
2019 |
|
|
2018 |
||
Lease Cost |
|
|
|
|
(Not applicable) |
|
|
|
|
|
(Not applicable) |
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) |
|
|
|
|
|
|
|
45.4 |
|
|
|
Weighted-average remaining lease term - operating leases (years) |
|
|
|
|
|
|
|
33.8 |
|
|
|
Weighted-average discount rate - finance leases |
|
|
|
|
|
|
|
|
% |
|
|
Weighted-average discount rate - operating leases |
|
|
|
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Right-of-use assets are included in Operating real estate (Note 2) in the consolidated balance sheet. Lease liabilities are included in Accounts payable and other liabilities in the consolidated balance sheet (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 consolidated statements of income. 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 consolidated statements of income.
Lease Disclosures Related to Prior Periods
The Company leased land at
During 2016, the Company entered into a
38
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
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 or option extensions 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 June 30, 2019, are summarized as follows (in thousands):
Year Ending December 31, |
|
Minimum Rental Revenues |
|
|
Minimum Rental Payments (a, b) |
|
||
2019 (Remainder) |
|
$ |
|
|
|
$ |
|
|
2020 |
|
|
|
|
|
|
|
|
2021 |
|
|
|
|
|
|
|
|
2022 |
|
|
|
|
|
|
|
|
2023 |
|
|
|
|
|
|
|
|
Thereafter |
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
(a) |
A ground lease expiring during 2078 provides the Company with an option to purchase the underlying land during 2031. If the Company does not exercise the option, the rents that will be due are based on future values and as such are not determinable at this time. Accordingly, the above table does not include rents for this lease beyond 2031. |
(b) |
Minimum rental payments include $ |
During the three and six months ended June 30, 2019 and 2018, no single tenant or property collectively comprised more than 10% of the Company’s consolidated total revenues.
12. Segment Reporting
The Company has
The following tables set forth certain segment information for the Company (in thousands):
|
|
For the Three Months Ended June 30, 2019 |
|
|||||||||||||||||
|
|
Core Portfolio |
|
|
Funds |
|
|
Structured Financing |
|
|
Unallocated |
|
|
Total |
|
|||||
Revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
Property operating expenses, other operating and real estate taxes |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
General and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Impairment charge |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
Operating income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
Interest and other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of unconsolidated affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
Income tax provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Net income (loss) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Net loss attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Acadia |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
39
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
|
For the Three Months Ended June 30, 2018 |
|
|||||||||||||||||
|
|
Core Portfolio |
|
|
Funds |
|
|
Structured Financing |
|
|
Unallocated |
|
|
Total |
|
|||||
Revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
Property operating expenses, other operating and real estate taxes |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
General and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Gain on disposition of properties |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
Interest and other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of unconsolidated affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
Income tax benefit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Net loss attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Acadia |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
As of or for the Six Months Ended June 30, 2019 |
|
|||||||||||||||||
|
|
Core Portfolio |
|
|
Funds |
|
|
Structured Financing |
|
|
Unallocated |
|
|
Total |
|
|||||
Revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
Property operating expenses, other operating and real estate taxes |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
General and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Impairment charge |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
Gain on disposition of properties |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
Interest and other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of unconsolidated affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
Income tax provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Net income (loss) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Net loss attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Acadia |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate at cost |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Total assets |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Cash paid for acquisition of real estate |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Cash paid for development and property improvement costs |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
40
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
|
As of or for the Six Months Ended June 30, 2018 |
|
|||||||||||||||||
|
|
Core Portfolio |
|
|
Funds |
|
|
Structured Financing |
|
|
Unallocated |
|
|
Total |
|
|||||
Revenues |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
Property operating expenses, other operating and real estate taxes |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
General and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Gain on disposition of properties |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
Interest and other income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of unconsolidated affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
( |
) |
Income tax provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Net income (loss) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Net loss attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Acadia |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate at cost |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Total assets |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Cash paid for acquisition of real estate |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Cash paid for development and property improvement costs |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
13. Share Incentive and Other Compensation
Share Incentive Plan
The Second Amended and Restated 2006 Incentive Plan (the “Share Incentive Plan”) authorizes the Company to issue options, Restricted Shares, LTIP Units and other securities (collectively “Awards”) to, among others, the Company’s officers, trustees and employees. At June 30, 2019 a total of
Restricted Shares and LTIP Units
During the six months ended June 30, 2019, the Company issued
|
• |
A portion of these annual equity awards is granted in performance-based Restricted Share Units or LTIP Units that may be earned based on the Company’s attainment of specified relative total shareholder returns (“Relative TSR”) hurdles. |
|
• |
In the event the Relative TSR percentile falls between the 25th percentile and the 50th percentile, Relative TSR vesting percentage is determined using a straight-line linear interpolation between |
|
• |
Two-thirds (2/3) of the performance-based LTIP Units will vest based on the Company’s total shareholder return (“TSR”) for the three-year forward-looking performance period ending December 31, 2021 relative to the constituents of the SNL U.S. REIT Retail Shopping Center Index and one-third (1/3) on the Company’s TSR for the three-year forward-looking performance period as compared to the constituents of the SNL U.S. REIT Retail Index (both on a non-weighted basis). |
|
• |
If the Company’s performance fails to achieve the aforementioned hurdles at the culmination of the three -year performance period, all performance-based shares will be forfeited. Any earned performance-based shares vest |
41
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
For valuation of the 2019 Performance Shares, a Monte Carlo simulation was used to estimate the fair values based on probability of satisfying the market conditions and the projected share prices at the time of payments, discounted to the valuation dates over the three-year performance periods. The assumptions include volatility (
The total value of the above Restricted Share Units and LTIP Units as of the grant date was $
In addition, members of the Board of Trustees (the “Board”) have been issued shares and units under the Share Incentive Plan. During 2019, the Company issued
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 and Fund V were determined to have
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 Restricted Shares |
|
|
Weighted Grant-Date Fair Value |
|
|
LTIP Units |
|
|
Weighted Grant-Date Fair Value |
|
||||
Unvested at January 1, 2018 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
Unvested at December 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
Unvested at June 30, 2019 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
The weighted-average grant date fair value for Restricted Shares and LTIP Units granted for the six months ended June 30, 2019 and the year ended December 31, 2018 were $
42
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO 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. The Purchase Plan provides for employees to purchase Common Shares on a quarterly basis at a
Deferred Share Plan
During 2006, the Company adopted a Trustee Deferral and Distribution Election, 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
14. Earnings Per Common Share
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 (“Restricted Share Units”) issued under the Company’s Share Incentive Plans (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.
43
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
(dollars in thousands) |
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Acadia |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Less: net income attributable to participating securities |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Income from continuing operations net of income attributable to participating securities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares for basic earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee unvested restricted shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for diluted earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted 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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15. Subsequent Events
Fund Equity
Effective in July 2019, Funds III, IV and V called $
Disposition
On July 24, 2019, the Company sold its Fund IV JFK Plaza property for $
Financing
On July 15, 2019, the Company modified the terms of one of its Fund IV mortgages and paid down the balance by $
44
ITEM 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. |
OVERVIEW
As of June 30, 2019, we own or have an ownership interest in 180 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 its subsidiaries, not including those properties owned through our Funds. These properties primarily consist of street and urban retail, and dense 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 June 30, 2019 is as follows:
|
|
Number of Properties |
|
|
Operating Properties |
|
||||||||||
|
|
Development or Redevelopment |
|
|
Operating |
|
|
GLA |
|
|
Occupancy |
|
||||
Core Portfolio: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chicago Metro |
|
|
2 |
|
|
|
33 |
|
|
|
695,898 |
|
|
|
87.8 |
% |
New York Metro |
|
|
— |
|
|
|
23 |
|
|
|
330,907 |
|
|
|
92.2 |
% |
San Francisco Metro |
|
|
1 |
|
|
|
1 |
|
|
|
148,832 |
|
|
|
100.0 |
% |
Washington DC Metro |
|
|
1 |
|
|
|
28 |
|
|
|
323,189 |
|
|
|
93.6 |
% |
Boston Metro |
|
|
— |
|
|
|
3 |
|
|
|
55,276 |
|
|
|
100.0 |
% |
Suburban |
|
|
2 |
|
|
|
29 |
|
|
|
4,258,176 |
|
|
|
93.8 |
% |
Total Core Portfolio |
|
|
6 |
|
|
|
117 |
|
|
|
5,812,278 |
|
|
|
93.2 |
% |
Acadia Share of Total Core Portfolio |
|
|
6 |
|
|
|
117 |
|
|
|
5,191,538 |
|
|
|
93.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund Portfolio: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund II |
|
|
— |
|
|
|
1 |
|
|
|
469,518 |
|
|
|
64.7 |
% |
Fund III |
|
|
1 |
|
|
|
4 |
|
|
|
173,638 |
|
|
|
78.4 |
% |
Fund IV |
|
|
2 |
|
|
|
38 |
|
|
|
2,664,552 |
|
|
|
85.5 |
% |
Fund V |
|
|
— |
|
|
|
11 |
|
|
|
3,453,924 |
|
|
|
95.2 |
% |
Total Fund Portfolio |
|
|
3 |
|
|
|
54 |
|
|
|
6,761,632 |
|
|
|
88.9 |
% |
Acadia Share of Total Fund Portfolio |
|
|
3 |
|
|
|
54 |
|
|
|
1,447,390 |
|
|
|
88.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Core and Funds |
|
|
9 |
|
|
|
171 |
|
|
|
12,573,910 |
|
|
|
90.9 |
% |
Acadia Share of Total Core and Funds |
|
|
9 |
|
|
|
171 |
|
|
|
6,638,928 |
|
|
|
92.4 |
% |
The majority of our operating income is derived from rental revenues from operating properties, including expense recoveries from tenants, offset by operating and overhead expenses.
Our primary business objective is to acquire and manage commercial retail properties that will provide cash for distributions to shareholders while also creating the potential for capital appreciation to enhance investor returns. We focus on the following fundamentals to achieve this objective:
|
• |
Own and operate a Core Portfolio of high-quality retail properties located primarily in high-barrier-to-entry, densely-populated metropolitan areas and create value through accretive development and re-tenanting activities coupled with the acquisition of high-quality assets that have the long-term potential to outperform the asset class as part of our Core asset recycling and acquisition initiative. |
|
• |
Generate additional external growth through an opportunistic yet disciplined acquisition program within our Funds. We target transactions with high inherent opportunity for the creation of additional value through: |
|
• |
value-add investments in street retail properties, located in established and “next generation” submarkets, with re-tenanting or repositioning opportunities, |
|
• |
opportunistic acquisitions of well-located real-estate anchored by distressed retailers, and |
|
• |
other opportunistic acquisitions which may include high-yield acquisitions and purchases of distressed debt. |
45
Some of these investments historically have also included, and may in the future include, joint ventures with private equity investors for the purpose of making investments in operating retailers with significant embedded value in their real estate assets.
|
• |
Maintain a strong and flexible balance sheet through conservative financial practices while ensuring access to sufficient capital to fund future growth. |
SIGNIFICANT DEVELOPMENTS DURING THE SIX MONTHS ENDED JUNE 30, 2019
Investments
During the six months ended June 30, 2019, within our Core portfolio we invested in five properties as follows:
|
• |
On January 24, 2019, our unconsolidated Renaissance Portfolio venture acquired Fund III’s 3104 M Street property located in Washington, D.C. for $10.7 million (Note 4) as discussed further below. |
|
• |
On March 15, March 27, and May 29, 2019, we acquired three retail condominiums located in the Soho section of New York City for a total of $49.6 million as part of a collection of six properties referred to as the “Soho Portfolio” with an aggregate purchase price of approximately $96.0 million (Note 2). The acquisitions of the remaining three properties are expected to be finalized through early 2020. No assurance can be given that we will successfully close on the remaining acquisitions under contract, which are subject to customary closing conditions. |
|
• |
On May 2, 2019, we entered into a ground lease (Note 11) on a development property in Washington, D.C. referred to as “1238 Wisconsin Avenue.” |
During the six months ended June 30, 2019, within our Fund portfolio we invested in five properties as follows (Note 2):
|
• |
On March 19, 2019, Fund V acquired an interest in an unconsolidated (Note 4) suburban shopping center in Riverdale, Utah for $48.5 million referred to as “Family Center at Riverdale.” |
|
• |
On April 30, 2019, Fund V acquired an interest in an unconsolidated (Note 4) suburban shopping center in Vernon, Connecticut for $36.7 million referred to as “Tri-City Plaza.” |
|
• |
On May 1, 2019, Fund IV acquired a leasehold interest (Note 11) in a retail and parking condominium in a building in New York, New York for $10.5 million referred to as “110 University Place.” |
|
• |
On May 6, 2019, Fund V acquired a suburban shopping center (Note 2) in Palm Coast, Florida for $36.6 million referred to as “Palm Coast Landing.” |
|
• |
On June 21, 2019, Fund V acquired a suburban shopping center (Note 2) in Lincoln, Rhode Island for $54.3 million referred to as “Lincoln Commons.” |
Dispositions of Real Estate
During the six months ended June 30, 2019, we sold one property from our Fund Portfolio for $10.5 million as follows:
On January 24, 2019, a venture in which Fund III holds an 80% interest (Note 2) sold its consolidated 3104 M Street property located in Washington, D.C. to an unconsolidated venture (Note 4) in which the Core Portfolio holds a 20% interest for $10.5 million. Fund III’s share of the gain was $2.0 million and our share was $0.4 million, net of noncontrolling interests. The acquiring venture assumed the property’s mortgage in the amount of $4.7 million.
In addition, during the second quarter of 2019, Fund IV entered into an agreement to sell its JFK Plaza property (Note 2).
Financings
During the six months ended June 30, 2019, we obtained aggregate new financing of $137.2 million including (Note 7):
|
• |
An aggregate of $70.3 million in financings with two new mortgages for Fund V. |
|
• |
An aggregate of $21.9 million in financings, with one new mortgage of $3.0 million and a refinancing of an $18.9 million mortgage for Fund IV. |
|
• |
A $45.0 million loan for Fund II, of which $23.6 million was drawn at June 30, 2019. |
46
Structured Financing
During the six months ended June 30, 2019, the Company redeemed its $15.3 million Fund IV Structured Financing investment (Note 3).
Equity Issuance
During the three months ended June 30, 2019, the Company sold 1,696,516 shares under its ATM program (Note 10) for gross proceeds of $48.0 million, or $47.3 million net of issuance costs, at a weighted-average gross price per share of $28.29. During the six months ended June 30, 2019, the Company sold 2,667,351 shares under its ATM program for gross proceeds of $76.2 million, or $75.1 million net of issuance costs, at a weighted-average gross price per share of $28.58.
RESULTS OF OPERATIONS
See Note 12 in the Notes to Consolidated Financial Statements for an overview of our three reportable segments.
Comparison of Results for the Three Months Ended June 30, 2019 to the Three Months Ended June 30, 2018
The results of operations by reportable segment for the three months ended June 30, 2019 compared to the three months ended June 30, 2018 are summarized in the table below (in millions, totals may not add due to rounding):
|
|
Three Months Ended |
|
|
Three Months Ended |
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
|
|
June 30, 2019 |
|
|
June 30, 2018 |
|
|
Increase (Decrease) |
|
|||||||||||||||||||||||||||||||||||||||
|
|
Core |
|
|
Funds |
|
|
SF |
|
|
Total |
|
|
Core |
|
|
Funds |
|
|
SF |
|
|
Total |
|
|
Core |
|
|
Funds |
|
|
SF |
|
|
Total |
|
||||||||||||
Revenues |
|
$ |
43.2 |
|
|
$ |
27.9 |
|
|
$ |
— |
|
|
$ |
71.1 |
|
|
$ |
40.5 |
|
|
$ |
23.0 |
|
|
$ |
— |
|
|
$ |
63.6 |
|
|
$ |
2.7 |
|
|
$ |
4.9 |
|
|
$ |
— |
|
|
$ |
7.5 |
|
Depreciation and amortization |
|
|
(15.1 |
) |
|
|
(15.2 |
) |
|
|
— |
|
|
|
(30.3 |
) |
|
|
(14.9 |
) |
|
|
(14.6 |
) |
|
|
— |
|
|
|
(29.5 |
) |
|
|
0.2 |
|
|
|
0.6 |
|
|
|
— |
|
|
|
0.8 |
|
Property operating expenses, other operating and real estate taxes |
|
|
(12.2 |
) |
|
|
(11.0 |
) |
|
|
— |
|
|
|
(23.2 |
) |
|
|
(10.5 |
) |
|
|
(9.4 |
) |
|
|
— |
|
|
|
(19.9 |
) |
|
|
1.7 |
|
|
|
1.6 |
|
|
|
— |
|
|
|
3.3 |
|
General and administrative expenses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(9.0 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(7.9 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1.1 |
|
Impairment charge |
|
|
— |
|
|
|
(1.4 |
) |
|
|
— |
|
|
|
(1.4 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1.4 |
|
|
|
— |
|
|
|
1.4 |
|
Operating income (loss) |
|
|
15.9 |
|
|
|
0.2 |
|
|
|
— |
|
|
|
7.1 |
|
|
|
15.1 |
|
|
|
(0.9 |
) |
|
|
— |
|
|
|
6.3 |
|
|
|
0.8 |
|
|
|
1.1 |
|
|
|
— |
|
|
|
0.8 |
|
Interest and other income |
|
|
0.3 |
|
|
|
1.6 |
|
|
|
2.2 |
|
|
|
4.1 |
|
|
|
— |
|
|
|
— |
|
|
|
3.3 |
|
|
|
3.3 |
|
|
|
0.3 |
|
|
|
1.6 |
|
|
|
(1.1 |
) |
|
|
0.8 |
|
Equity in earnings of unconsolidated affiliates |
|
|
3.3 |
|
|
|
0.3 |
|
|
|
— |
|
|
|
3.6 |
|
|
|
1.7 |
|
|
|
3.3 |
|
|
|
— |
|
|
|
5.0 |
|
|
|
1.6 |
|
|
|
(3.0 |
) |
|
|
— |
|
|
|
(1.4 |
) |
Interest expense |
|
|
(6.8 |
) |
|
|
(12.9 |
) |
|
|
— |
|
|
|
(19.8 |
) |
|
|
(7.0 |
) |
|
|
(9.9 |
) |
|
|
— |
|
|
|
(16.9 |
) |
|
|
(0.2 |
) |
|
|
3.0 |
|
|
|
— |
|
|
|
2.9 |
|
Income tax provision |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(0.3 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(0.3 |
) |
Net income (loss) |
|
|
12.6 |
|
|
|
(10.8 |
) |
|
|
2.2 |
|
|
|
(5.2 |
) |
|
|
9.8 |
|
|
|
(7.5 |
) |
|
|
3.3 |
|
|
|
(2.3 |
) |
|
|
2.8 |
|
|
|
(3.3 |
) |
|
|
(1.1 |
) |
|
|
(2.9 |
) |
Net loss attributable to noncontrolling interests |
|
|
0 |
|
|
|
13.9 |
|
|
|
— |
|
|
|
14.3 |
|
|
|
0.2 |
|
|
|
9.7 |
|
|
|
— |
|
|
|
9.9 |
|
|
|
(0.2 |
) |
|
|
(4.2 |
) |
|
|
— |
|
|
|
(4.4 |
) |
Net income attributable to Acadia |
|
$ |
13.1 |
|
|
$ |
3.1 |
|
|
$ |
2.2 |
|
|
$ |
9.1 |
|
|
$ |
10.0 |
|
|
$ |
2.3 |
|
|
$ |
3.3 |
|
|
$ |
7.7 |
|
|
$ |
3.1 |
|
|
$ |
0.8 |
|
|
$ |
(1.1 |
) |
|
$ |
1.4 |
|
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 $3.1 million for the three months ended June 30, 2019 compared to the prior year period as a result of the changes further described below.
Revenues for our Core Portfolio increased $2.7 million for the three months ended June 30, 2019 compared to the prior year period due primarily to $1.7 million from increased real estate tax recovery related to a reduced real estate tax reassessment in 2018 at City Center along with $1.0 million of settlement income from bankrupt tenants in 2019.
Property operating expenses, other operating and real estate taxes for our Core Portfolio increased $1.7 million for the three months ended June 30, 2019 compared to the prior year period primarily due to a reduced real estate tax assessment at City Center in 2018.
Equity in earnings of unconsolidated affiliates for our Core Portfolio increased $1.6 million for the three months ended June 30, 2019 compared to the prior year period primarily due to the write-off of a below-market lease related to a tenant that vacated in 2019.
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 $0.8 million for the three months ended June 30, 2019 compared to the prior year period as a result of the changes described below.
47
Revenues for the Funds increased $4.9 million for the three months ended June 30, 2019 compared to the prior year period primarily due to Fund property acquisitions in 2019 and 2018.
Property operating expenses, other operating and real estate taxes for the Funds increased $1.6 million for the three months ended June 30, 2019 compared to the prior year period primarily due to a $1.7 million increase from Fund property acquisitions in 2019 and 2018.
The $1.4 million impairment charge in 2019 relates to residential condos at 210 Bowery (Note 8).
Interest and other income for the Funds increased $1.6 million for the three months ended June 30, 2019 compared to the prior year period primarily due to an incentive fee earned by Fund III’s Storage Post investment.
Equity in earnings of unconsolidated affiliates for our Funds decreased $3.0 million primarily due to a distribution from Fund III’s Storage Post venture in 2018 (Note 4).
Interest expense for the Funds increased $3.0 million for the three months ended June 30, 2019 compared to the prior year period due to a $2.1 million increase related to higher average outstanding borrowings in 2019, a $1.2 million increase related to higher average interest rates during 2019 and $1.0 million from higher loan cost amortization in 2019. These increases were partially offset by $1.3 million of additional interest capitalized in 2019.
Net loss attributable to noncontrolling interests for the Funds increased $4.2 million for the three months ended June 30, 2019 compared to the prior year period based on the noncontrolling interests’ share of the variances discussed above. Income attributable to noncontrolling interests in the Funds includes asset management fees earned by the Company of $4.4 million and $4.6 million for the three months ended June 30, 2019 and 2018, respectively.
Structured Financing
The results of operations for our Structured Financing segment are depicted in the table above under the headings labeled “SF.” Interest income for the Structured Financing portfolio decreased $1.1 million for the three months ended June 30, 2019 compared to the prior year period primarily due to a conversion of a portion of two notes receivable into increased ownership in the real estate in 2019 (Note 4).
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 expense increased $1.1 million for the six months ended June 30, 2019 compared to the prior year period due to internal leasing salaries no longer being capitalized in 2019.
Comparison of Results for the Six Months Ended June 30, 2019 to the Six Months Ended June 30, 2018
The results of operations by reportable segment for the six months ended June 30, 2019 compared to the six months ended June 30, 2018 are summarized in the table below (in millions, totals may not add due to rounding):
|
|
Six Months Ended |
|
|
Six Months Ended |
|
|
|
|
|||||||||||||||||||||||||||||||||||||||
|
|
June 30, 2019 |
|
|
June 30, 2018 |
|
|
Increase (Decrease) |
|
|||||||||||||||||||||||||||||||||||||||
|
|
Core |
|
|
Funds |
|
|
SF |
|
|
Total |
|
|
Core |
|
|
Funds |
|
|
SF |
|
|
Total |
|
|
Core |
|
|
Funds |
|
|
SF |
|
|
Total |
|
||||||||||||
Revenues |
|
$ |
89.9 |
|
|
$ |
56.0 |
|
|
$ |
— |
|
|
$ |
145.9 |
|
|
$ |
82.2 |
|
|
$ |
44.5 |
|
|
$ |
— |
|
|
$ |
126.7 |
|
|
$ |
7.7 |
|
|
$ |
11.5 |
|
|
$ |
— |
|
|
$ |
19.2 |
|
Depreciation and amortization |
|
|
(30.8 |
) |
|
|
(29.9 |
) |
|
|
— |
|
|
|
(60.6 |
) |
|
|
(30.4 |
) |
|
|
(27.7 |
) |
|
|
— |
|
|
|
(58.1 |
) |
|
|
0.4 |
|
|
|
2.2 |
|
|
|
— |
|
|
|
2.5 |
|
Property operating expenses, other operating and real estate taxes |
|
|
(24.2 |
) |
|
|
(21.0 |
) |
|
|
— |
|
|
|
(45.2 |
) |
|
|
(21.4 |
) |
|
|
(17.8 |
) |
|
|
— |
|
|
|
(39.2 |
) |
|
|
2.8 |
|
|
|
3.2 |
|
|
|
— |
|
|
|
6.0 |
|
General and administrative expenses |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(17.4 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(16.4 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1.0 |
|
Impairment charge |
|
|
— |
|
|
|
(1.4 |
) |
|
|
— |
|
|
|
(1.4 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1.4 |
|
|
|
— |
|
|
|
1.4 |
|
Gain on disposition of properties |
|
|
— |
|
|
|
2.0 |
|
|
|
— |
|
|
|
2.0 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2.0 |
|
|
|
— |
|
|
|
2.0 |
|
Operating income (loss) |
|
|
34.9 |
|
|
|
5.7 |
|
|
|
— |
|
|
|
23.3 |
|
|
|
30.3 |
|
|
|
(0.9 |
) |
|
|
— |
|
|
|
13.0 |
|
|
|
4.6 |
|
|
|
6.6 |
|
|
|
— |
|
|
|
10.3 |
|
Interest and other income |
|
|
0.3 |
|
|
|
1.6 |
|
|
|
4.5 |
|
|
|
6.4 |
|
|
|
— |
|
|
|
— |
|
|
|
7.0 |
|
|
|
7.0 |
|
|
|
0.3 |
|
|
|
1.6 |
|
|
|
(2.5 |
) |
|
|
(0.6 |
) |
Equity in earnings of unconsolidated affiliates |
|
|
5.5 |
|
|
|
0.3 |
|
|
|
— |
|
|
|
5.8 |
|
|
|
3.2 |
|
|
|
3.6 |
|
|
|
— |
|
|
|
6.7 |
|
|
|
2.3 |
|
|
|
(3.3 |
) |
|
|
— |
|
|
|
(0.9 |
) |
Interest expense |
|
|
(13.5 |
) |
|
|
(24.1 |
) |
|
|
— |
|
|
|
(37.6 |
) |
|
|
(13.5 |
) |
|
|
(19.3 |
) |
|
|
— |
|
|
|
(32.8 |
) |
|
|
— |
|
|
|
4.8 |
|
|
|
— |
|
|
|
4.8 |
|
Income tax provision |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(0.2 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(0.4 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
0.2 |
|
Net income (loss) |
|
|
27.2 |
|
|
|
(16.5 |
) |
|
|
4.5 |
|
|
|
(2.3 |
) |
|
|
20.0 |
|
|
|
(16.7 |
) |
|
|
7.0 |
|
|
|
(6.4 |
) |
|
|
7.2 |
|
|
|
0.2 |
|
|
|
(2.5 |
) |
|
|
4.1 |
|
Net loss attributable to noncontrolling interests |
|
|
0.4 |
|
|
|
23.2 |
|
|
|
— |
|
|
|
23.6 |
|
|
|
0.1 |
|
|
|
21.4 |
|
|
|
— |
|
|
|
21.5 |
|
|
|
(0.3 |
) |
|
|
(1.8 |
) |
|
|
— |
|
|
|
(2.1 |
) |
Net income attributable to Acadia |
|
$ |
27.6 |
|
|
$ |
6.7 |
|
|
$ |
4.5 |
|
|
$ |
21.3 |
|
|
$ |
20.1 |
|
|
$ |
4.7 |
|
|
$ |
7.0 |
|
|
$ |
15.1 |
|
|
$ |
7.5 |
|
|
$ |
2.0 |
|
|
$ |
(2.5 |
) |
|
$ |
6.2 |
|
48
Core Portfolio
Segment net income attributable to Acadia for our Core Portfolio increased $7.5 million for the six months ended June 30, 2019 compared to the prior year period as a result of the changes further described below.
Revenues for our Core Portfolio increased $7.7 million for the six months ended June 30, 2019 compared to the prior year period primarily due to $5.8 million from the write-off of a below market lease related to a tenant that vacated in 2019, a $1.7 million from increased real estate tax recovery related to a reduced tax reassessment in 2018 at City Center, and $1.0 million of settlement income from bankrupt tenants.
Property operating expenses, other operating and real estate taxes for our Core Portfolio increased $2.8 million for the six months ended June 30, 2019 compared to the prior year period primarily due to $1.7 million from a reduced real estate tax assessment at City Center in 2018 and $1.1 million from increased real estate taxes in the portfolio.
Equity in earnings of unconsolidated affiliates for our Core Portfolio increased $2.3 million for the six months ended June 30, 2019 compared to the prior year period due to $1.3 million from lease up at various joint ventures along with $1.0 million from the conversion of a portion of a note receivable into increased ownership in real estate.
Funds
Segment net income attributable to Acadia for the Funds increased $2.0 million for the six months ended June 30, 2019 compared to the prior year period as a result of the changes described below.
Revenues for the Funds increased $11.5 million for the six months ended June 30, 2019 compared to the prior year period due to $6.0 million from Fund property acquisitions in 2019 and 2018, $3.6 million from lease up at City Point and 938 W North, $1.5 million from the consolidation of the Broughton Street Portfolio and $1.3 million from Cortlandt Crossing being placed in service.
Depreciation and amortization for the Funds increased $2.2 million for the six months ended June 30, 2019 compared to the prior year period due to Fund property acquisitions in 2019 and 2018.
Property operating expenses, other operating and real estate taxes for the Funds increased $3.2 million for the six months ended June 30, 2019 compared to the prior year period due to Fund property acquisitions in 2019 and 2018.
The $1.4 million impairment charge in 2019 relates to residential condos at 210 Bowery (Note 8).
Gain on disposition of properties for the Funds increased $2.0 million for the six months ended June 30, 2019 compared to the prior year period due to the sale of 3104 M Street in Fund III during 2019 (Note 2, Note 4).
Interest and other income for the Funds increased $1.6 million for the six months ended June 30, 2019 compared to the prior year period primarily due to an incentive fee earned by Fund III’s Storage Post investment.
Equity in earnings of unconsolidated affiliates for the Funds decreased $3.3 million for the six months ended June 30, 2019 compared to the prior year period due to a distribution from Fund III’s Storage Post venture in 2018 (Note 4).
Interest expense for the Funds increased $4.8 million for the six months ended June 30, 2019 compared to the prior year period due to a $3.6 million increase related to higher average outstanding borrowings in 2019, a $1.4 million increase related to higher average interest rates during 2019 and $1.1 million from higher loan cost amortization in 2019. These increases were partially offset by $1.3 million more interest capitalized in 2019.
Net loss attributable to noncontrolling interests for the Funds decreased $1.8 million for the six months ended June 30, 2019 compared to the prior year period based on the noncontrolling interests’ share of the variances discussed above. Income attributable to noncontrolling interests in the Funds includes asset management fees earned by the Company of $8.9 million and $9.0 million for the six months ended June 30, 2019 and 2018, respectively.
49
Structured Financing
Interest income for the Structured Financing portfolio decreased $2.5 million for the six months ended June 30, 2019 compared to the prior year period due to the conversion of a portion of two notes receivable into increased ownership in the real estate (Note 4).
Unallocated
Unallocated general and administrative expense increased $1.0 million for the six months ended June 30, 2019 compared to the prior year period due to internal leasing salaries no longer being capitalized in 2019.
SUPPLEMENTAL 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 June 30, |
|
|
|
|
Six Months Ended June 30, |
|
||||||||||||||
|
|
2019 |
|
|
|
|
2018 |
|
|
|
|
2019 |
|
|
|
|
2018 |
|
||||
Consolidated operating income |
|
$ |
7,086 |
|
|
|
|
$ |
6,332 |
|
|
|
|
$ |
23,294 |
|
|
|
|
$ |
13,033 |
|
Add back: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
|
9,034 |
|
|
|
|
|
7,907 |
|
|
|
|
|
17,357 |
|
|
|
|
|
16,377 |
|
Depreciation and amortization |
|
|
30,304 |
|
|
|
|
|
29,503 |
|
|
|
|
|
60,637 |
|
|
|
|
|
58,079 |
|
Impairment charge |
|
|
1,400 |
|
|
|
|
|
— |
|
|
|
|
|
1,400 |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Above/below market rent, straight-line rent and other adjustments |
|
|
(3,331 |
) |
|
|
|
|
(5,577 |
) |
|
|
|
|
(12,629 |
) |
|
|
|
|
(11,104 |
) |
Gain on disposition of properties |
|
|
— |
|
|
|
|
|
(33 |
) |
|
|
|
|
(2,014 |
) |
|
|
|
|
(33 |
) |
Consolidated NOI |
|
|
44,493 |
|
|
|
|
|
38,132 |
|
|
|
|
|
88,045 |
|
|
|
|
|
76,352 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interest in consolidated NOI |
|
|
(12,084 |
) |
|
|
|
|
(8,804 |
) |
|
|
|
|
(25,062 |
) |
|
|
|
|
(17,431 |
) |
Less: Operating Partnership's interest in Fund NOI included above |
|
|
(3,309 |
) |
|
|
|
|
(2,304 |
) |
|
|
|
|
(6,813 |
) |
|
|
|
|
(4,461 |
) |
Add: Operating Partnership's share of unconsolidated joint ventures NOI (a) |
|
|
6,670 |
|
|
|
|
|
6,428 |
|
|
|
|
|
13,265 |
|
|
|
|
|
12,076 |
|
NOI - Core Portfolio |
|
$ |
35,770 |
|
|
|
|
$ |
33,452 |
|
|
|
|
$ |
69,435 |
|
|
|
|
$ |
66,536 |
|
(a) |
Does not include the Operating Partnership’s share of NOI from unconsolidated joint ventures within the Funds. |
50
Same-Property NOI includes Core Portfolio properties that we owned for both the current and prior periods presented, but excludes those properties which we acquired, sold or expected to sell, and developed during these periods. The following table summarizes Same-Property NOI for our Core Portfolio (in thousands):
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
||||
Core Portfolio NOI |
|
$ |
35,770 |
|
|
$ |
33,452 |
|
|
$ |
69,435 |
|
|
$ |
66,536 |
|
Less properties excluded from Same-Property NOI |
|
|
(4,713 |
) |
|
|
(3,824 |
) |
|
|
(7,691 |
) |
|
|
(7,559 |
) |
Same-Property NOI |
|
$ |
31,057 |
|
|
$ |
29,628 |
|
|
$ |
61,744 |
|
|
$ |
58,977 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent change from prior year period |
|
|
4.8 |
% |
|
|
|
|
|
|
4.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of Same-Property NOI: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same-Property Revenues |
|
$ |
42,441 |
|
|
$ |
40,403 |
|
|
$ |
84,527 |
|
|
$ |
80,106 |
|
Same-Property Operating Expenses |
|
|
(11,384 |
) |
|
|
(10,775 |
) |
|
|
(22,783 |
) |
|
|
(21,129 |
) |
Same-Property NOI |
|
$ |
31,057 |
|
|
$ |
29,628 |
|
|
$ |
61,744 |
|
|
$ |
58,977 |
|
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 three months ended June 30, 2019. 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.
|
|
Three Months Ended June 30, 2019 |
|
|
Six Months Ended June 30, 2019 |
|
||||||||||
Core Portfolio New and Renewal Leases |
|
Cash Basis |
|
|
Straight- Line Basis |
|
|
Cash Basis |
|
|
Straight- Line Basis |
|
||||
Number of new and renewal leases executed |
|
|
8 |
|
|
|
8 |
|
|
|
16 |
|
|
|
16 |
|
GLA commencing |
|
|
115,442 |
|
|
|
115,442 |
|
|
|
237,913 |
|
|
|
237,913 |
|
New base rent |
|
$ |
15.56 |
|
|
$ |
15.83 |
|
|
$ |
10.78 |
|
|
$ |
10.97 |
|
Expiring base rent |
|
$ |
14.72 |
|
|
$ |
14.68 |
|
|
$ |
10.28 |
|
|
$ |
10.14 |
|
Percent growth in base rent |
|
|
5.7 |
% |
|
|
7.8 |
% |
|
|
4.9 |
% |
|
|
8.2 |
% |
Average cost per square foot (a) |
|
$ |
2.19 |
|
|
$ |
2.19 |
|
|
$ |
2.30 |
|
|
$ |
2.30 |
|
Weighted average lease term (years) |
|
|
5.9 |
|
|
|
5.9 |
|
|
|
5.4 |
|
|
|
5.4 |
|
(a) |
The average cost per square foot includes tenant improvement costs, leasing commissions and tenant allowances. |
51
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 for an equity REIT due to its widespread acceptance and use within the REIT 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 depreciable 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 generally accepted accounting principles (“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. A reconciliation of net income attributable to Acadia to FFO follows (dollars in thousands, except per share amounts):
|
|
Three Months Ended June 30, |
|
|
|
|
Six Months Ended June 30, |
|
||||||||||||||
(dollars in thousands except per share data) |
|
2019 |
|
|
|
|
2018 |
|
|
|
|
2019 |
|
|
|
|
2018 |
|
||||
Net income attributable to Acadia |
|
$ |
9,080 |
|
|
|
|
$ |
7,665 |
|
|
|
|
$ |
21,277 |
|
|
|
|
$ |
15,084 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation of real estate and amortization of leasing costs (net of noncontrolling interests' share) |
|
|
21,722 |
|
|
|
|
|
21,586 |
|
|
|
|
|
43,721 |
|
|
|
|
|
42,671 |
|
Impairment charge (net of noncontrolling interests' share) |
|
|
321 |
|
|
|
|
|
— |
|
|
|
|
|
321 |
|
|
|
|
|
— |
|
Gain on disposition of properties (net of noncontrolling interests’ share) |
|
|
— |
|
|
|
|
|
— |
|
|
|
|
|
(384 |
) |
|
|
|
|
— |
|
Income attributable to Common OP Unit holders |
|
|
587 |
|
|
|
|
|
498 |
|
|
|
|
|
1,382 |
|
|
|
|
|
975 |
|
Distributions - Preferred OP Units |
|
|
135 |
|
|
|
|
|
135 |
|
|
|
|
|
270 |
|
|
|
|
|
270 |
|
Funds from operations attributable to Common Shareholders and Common OP Unit holders |
|
$ |
31,845 |
|
|
|
|
$ |
29,884 |
|
|
|
|
$ |
66,587 |
|
|
|
|
$ |
59,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds From Operations per Share - Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted-average shares outstanding, GAAP earnings |
|
|
83,703,886 |
|
|
|
|
|
81,755,702 |
|
|
|
|
|
82,872,977 |
|
|
|
|
|
82,590,256 |
|
Weighted-average OP Units outstanding |
|
|
5,123,765 |
|
|
|
|
|
4,966,272 |
|
|
|
|
|
5,168,698 |
|
|
|
|
|
4,966,213 |
|
Basic weighted-average shares outstanding, FFO |
|
|
88,827,651 |
|
|
|
|
|
86,721,974 |
|
|
|
|
|
88,041,675 |
|
|
|
|
|
87,556,469 |
|
Assumed conversion of Preferred OP Units to common shares |
|
|
499,345 |
|
|
|
|
|
499,345 |
|
|
|
|
|
499,345 |
|
|
|
|
|
499,345 |
|
Assumed conversion of LTIP units and restricted share units to common shares |
|
|
202,714 |
|
|
|
|
|
263,954 |
|
|
|
|
|
202,714 |
|
|
|
|
|
215,937 |
|
Diluted weighted-average number of Common Shares and Common OP Units outstanding, FFO |
|
|
89,529,710 |
|
|
|
|
|
87,485,273 |
|
|
|
|
|
88,743,734 |
|
|
|
|
|
88,271,751 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Funds from operations, per Common Share and Common OP Unit |
|
$ |
0.36 |
|
|
|
|
$ |
0.34 |
|
|
|
|
$ |
0.75 |
|
|
|
|
$ |
0.67 |
|
52
LIQUIDITY AND CAPITAL RESOURCES
Uses of Liquidity and Cash Requirements
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 six months ended June 30, 2019, we paid dividends and distributions on our Common Shares, Common OP Units and Preferred OP Units totaling $49.5 million.
Investments in Real Estate
During the six months ended June 30, 2019, within our Core portfolio we invested in four new properties and one existing property and within our Fund portfolio we invested in five new properties as follows:
|
• |
On January 24, 2019, our unconsolidated Renaissance portfolio venture acquired Fund III’s 3104 M Street property located in Washington, D.C. for $10.7 million (Note 4). |
|
• |
On March 15, March 27, and May 29, 2019, we acquired three retail condominiums located in the Soho section of New York City for a total of $49.6 million as part of a collection of six properties referred to as the “Soho Portfolio” with an aggregate purchase price of approximately $96.0 million (Note 2). The acquisitions of the remaining three properties are expected to be finalized through early 2020. No assurance can be given that we will successfully close on the remaining acquisitions under contract, which are subject to customary closing conditions. |
|
• |
On March 19, 2019, Fund V acquired an interest in an unconsolidated suburban shopping center (Note 4) in Riverdale, Utah for $48.5 million. |
|
• |
On May 2, 2019, we entered into a ground lease (Note 11) on a development property in Washington, D.C. |
|
• |
On April 30, 2019, Fund V acquired an interest in an unconsolidated (Note 4) suburban shopping center in Vernon, Connecticut for $36.7 million. |
|
• |
On May 1, 2019, Fund IV acquired a leasehold interest (Note 11) in a retail and parking condominium in a building in New York, New York for $10.5 million. |
|
• |
On May 6, 2019, Fund V acquired a suburban shopping center (Note 2) in Palm Coast, Florida for $36.6 million. |
|
• |
On June 21, 2019, Fund V acquired a suburban shopping center (Note 2) in Lincoln, Rhode Island for $54.3 million. |
Capital Commitments
During the six months ended June 30, 2019, we made capital contributions aggregating $8.3 million to our Funds. At June 30, 2019, our share of the remaining capital commitments to our Funds aggregated $110.7 million as follows:
|
• |
$5.8 million to Fund III. Fund III was launched in May 2007 with total committed capital of $450.0 million, of which our original share was $89.6 million. During 2015, we acquired an additional interest, which had an original capital commitment of $20.9 million. |
|
• |
$24.2 million to Fund IV. Fund IV was launched in May 2012 with total committed capital of $530.0 million, of which our original share was $122.5 million. |
|
• |
$80.7 million to Fund V. Fund V was launched in August 2016 with total committed capital of $520.0 million, of which our initial share is $104.5 million. |
During April 2018, a distribution was made to the Fund II investors, including $4.3 million to the Operating Partnership, which amount remains subject to re-contribution to Fund II until April 2021.
53
Development Activities
During the six months ended June 30, 2019, capitalized costs associated with development activities totaled $12.1 million. At June 30, 2019, we had a total of nine consolidated properties under development and redevelopment and the estimated total cost to complete these projects through 2020 was $146.5 million to $183.8 million and our estimated share was approximately $65.8 million to $83.2 million.
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):
|
|
June 30, |
|
|
|
|
December 31, |
|
||
|
|
2019 |
|
|
|
|
2018 |
|
||
Total Debt - Fixed and Effectively Fixed Rate |
|
$ |
1,198,592 |
|
|
|
|
$ |
1,001,658 |
|
Total Debt - Variable Rate |
|
|
497,110 |
|
|
|
|
|
558,675 |
|
|
|
|
1,695,702 |
|
|
|
|
|
1,560,333 |
|
Net unamortized debt issuance costs |
|
|
(11,328 |
) |
|
|
|
|
(10,541 |
) |
Unamortized premium |
|
|
702 |
|
|
|
|
|
753 |
|
Total Indebtedness |
|
$ |
1,685,076 |
|
|
|
|
$ |
1,550,545 |
|
As of June 30, 2019, our consolidated outstanding mortgage and notes payable aggregated $1,695.7 million, excluding unamortized premium of $0.7 million and unamortized loan costs of $11.3 million, and were collateralized by 44 properties and related tenant leases. Interest rates on our outstanding indebtedness ranged from 1.00% to 6.00% with maturities that ranged from July 14, 2019, to August 23, 2042. Taking into consideration $691.4 million of notional principal under variable to fixed-rate swap agreements currently in effect, $1,198.6 million of the portfolio debt, or 70.7%, was fixed at a 3.53% weighted-average interest rate and $497.1 million, or 29.3% was floating at a 4.78% weighted average interest rate as of June 30, 2019. Our variable-rate debt includes $157.5 million of debt subject to interest rate caps.
There is $162.3 million of debt maturing in 2019 at a weighted-average interest rate of 5.60%; there is $3.0 million of scheduled principal amortization due in 2019; and our share of scheduled remaining 2019 principal payments and maturities on our unconsolidated debt was $0.5 million at June 30, 2019. In addition, $573.4 million of our total consolidated debt and $10.2 million of our pro-rata share of unconsolidated debt will come due in 2020. As it relates to the maturing debt in 2019 and 2020, 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 at acceptable terms.
A mortgage loan in the Company’s Core Portfolio for $26.3 million was in default and subject to litigation at June 30, 2019 and December 31, 2018 (Note 7).
Share Repurchase Program
During the six months ended June 30, 2019, we made no repurchases under the share repurchase program (Note 10), under which $144.9 million currently remains available.
Sources of Liquidity
Our primary sources of capital for funding our 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, and (vi) cash on hand and future cash flow from operating activities. Our cash on hand in our consolidated subsidiaries at June 30, 2019 totaled $33.7 million. Our remaining sources of liquidity are described further below.
ATM Program
We have an ATM equity issuance program (Note 10) which provides us an efficient and low-cost vehicle for raising public equity to fund our capital needs. Through this program, we have been able to effectively “match-fund” the required equity for our Core Portfolio and 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 intend to continue to 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. During the three months ended June 30, 2019, the Company sold 1,696,516 shares under its ATM program for
54
gross proceeds of $48.0 million, or $47.3 million net of issuance costs, at a weighted-average gross price per share of $28.29. During the six months ended June 30, 2019, the Company sold 2,667,351 shares under its ATM program for gross proceeds of $76.2 million, or $75.1 million net of issuance costs, at a weighted-average gross price per share of $28.58.
Fund Capital
During the six months ended June 30, 2019, Funds III, IV and V called capital contributions of $2.4 million, $4.7 million and $33.2 million, respectively, of which our aggregate share was $8.3 million. At June 30, 2019, unfunded capital commitments from noncontrolling interests within our Funds III, IV and V were $17.9 million, $80.4 million and $321.0 million, respectively.
Asset Sales
As previously discussed, during the six months ended June 30, 2019, within our Fund portfolio, Fund III sold one consolidated property for $10.5 million to an unconsolidated Core portfolio venture and Fund IV sold one condominium unit at a consolidated property (Note 2, Note 4).
Structured Financing Repayments
During the six months ended June 30, 2019, Fund IV received full payment of $15.3 million plus accrued interest of $10.0 million on its Structured Financing investment. Notes receivable aggregating $38.7 million are scheduled to be redeemed or converted during the remainder of 2019.
Financing and Debt
As of June 30, 2019, we had $105.9 million of additional capacity under existing Core and Fund revolving debt facilities. In addition, at that date within our Core and Fund portfolios, we had 75 unleveraged consolidated properties with an aggregate carrying value of approximately $1.5 billion and one unleveraged unconsolidated property for which our share of the carrying value was $101.1 million, although there can be no assurance that we would be able to obtain financing for these properties at favorable terms, if at all.
HISTORICAL CASH FLOW
The following table compares the historical cash flow for the six months ended June 30, 2019 with the cash flow for the six months ended June 30, 2018 (in millions):
|
|
Six Months Ended June 30, |
|
|||||||||
|
|
2019 |
|
|
2018 |
|
|
Variance |
|
|||
Net cash provided by operating activities |
|
$ |
62.2 |
|
|
$ |
49.0 |
|
|
$ |
13.2 |
|
Net cash used in investing activities |
|
|
(233.5 |
) |
|
|
(22.5 |
) |
|
|
(211.0 |
) |
Net cash provided by (used in) financing activities |
|
|
182.6 |
|
|
|
(81.1 |
) |
|
|
263.7 |
|
Increase (decrease) in cash and restricted cash |
|
$ |
11.3 |
|
|
$ |
(54.6 |
) |
|
$ |
65.9 |
|
Operating Activities
Our operating activities provided $13.2 million more cash during the six months ended June 30, 2019 as compared to the six months ended June 30, 2018, primarily due to the collection of accrued interest on a note receivable.
Investing Activities
During the six months ended June 30, 2019 as compared to the six months ended June 30, 2018, our investing activities used $211.0 million more cash, primarily due to (i) $93.7 million more cash used in acquisition of properties, (ii) $97.3 million more cash used in investments in unconsolidated affiliates, (iii) $10.8 million less cash received from repayments of notes receivable, (iv) $13.9 million more cash used in development, construction and property improvement costs and (v) $13.0 million less cash received from disposition of properties. These uses of cash were partially offset by $16.9 million more cash received from return of capital from unconsolidated affiliates.
Financing Activities
Our financing activities provided $263.7 million more cash during the six months ended June 30, 2019 as compared to the six months ended June 30, 2018, primarily from (i) $100.9 million more cash provided from net borrowings (ii) $75.1 million more cash received from the sale of
55
Common Shares, (iii) $55.1 million less cash used to repurchase Common Shares, (iv) an increase of $25.6 million of cash provided from contributions from noncontrolling interests, and (v) $10.6 million less cash used in distributions to noncontrolling interests.
CONTRACTUAL OBLIGATIONS
The following table summarizes: (i) principal and interest obligations under mortgage and other notes, (ii) rents due under non-cancelable operating and capital leases, which includes ground leases at seven of our properties and the lease for our corporate office and (iii) construction commitments as of June 30, 2019 (in millions):
|
|
Payments Due by Period |
|
|||||||||||||||||
Contractual Obligations |
|
Total |
|
|
Less than 1 Year |
|
|
1 to 3 Years |
|
|
3 to 5 Years |
|
|
More than 5 Years |
|
|||||
Principal obligations on debt |
|
$ |
1,695.7 |
|
|
$ |
658.1 |
|
|
$ |
424.9 |
|
|
$ |
456.6 |
|
|
$ |
156.1 |
|
Interest obligations on debt |
|
|
238.3 |
|
|
|
79.9 |
|
|
|
87.4 |
|
|
|
38.4 |
|
|
|
32.6 |
|
Lease obligations (a) |
|
|
366.7 |
|
|
|
3.6 |
|
|
|
14.2 |
|
|
|
14.1 |
|
|
|
334.8 |
|
Construction commitments (b) |
|
|
52.1 |
|
|
|
52.1 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
$ |
2,352.8 |
|
|
$ |
793.7 |
|
|
$ |
526.5 |
|
|
$ |
509.1 |
|
|
$ |
523.5 |
|
(a) |
A ground lease expiring during 2078 provides the Company with an option to purchase the underlying land during 2031. If we do not exercise the option, the rents that will be due are based on future values and as such are not determinable at this time. Accordingly, the above table does not include rents for this lease beyond 2020. |
(b) |
In conjunction with the development of our Core Portfolio and Fund properties, we have entered into construction commitments with general contractors. We intend to fund these requirements with existing liquidity. |
OFF-BALANCE SHEET ARRANGEMENTS
We have the following investments made through joint ventures 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 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 |
|
|
June 30, 2019 |
|||||||||
Investment |
|
Ownership Percentage |
|
|
Pro-rata Share of Mortgage Debt |
|
|
Interest Rate |
|
|
Maturity Date |
|||
650 Bald Hill |
|
|
20.8 |
% |
|
$ |
3.5 |
|
|
|
5.08 |
% |
|
Apr 2020 |
Eden Square (a) |
|
|
22.8 |
% |
|
|
5.6 |
|
|
|
4.58 |
% |
|
Jun 2020 |
Promenade at Manassas (b) |
|
|
22.8 |
% |
|
|
5.9 |
|
|
|
4.18 |
% |
|
Dec 2021 |
3104 M Street |
|
|
20.0 |
% |
|
|
0.9 |
|
|
|
6.00 |
% |
|
Dec 2021 |
Family Center at Riverdale (c) |
|
|
18.0 |
% |
|
|
5.8 |
|
|
|
4.13 |
% |
|
May 2022 |
Gotham Plaza (d) |
|
|
49.0 |
% |
|
|
9.6 |
|
|
|
4.03 |
% |
|
Jun 2023 |
Renaissance Portfolio |
|
|
20.0 |
% |
|
|
32.0 |
|
|
|
4.13 |
% |
|
Aug 2023 |
Crossroads |
|
|
49.0 |
% |
|
|
32.1 |
|
|
|
3.94 |
% |
|
Oct 2024 |
840 N. Michigan |
|
|
88.4 |
% |
|
|
65.0 |
|
|
|
4.36 |
% |
|
Feb 2025 |
Georgetown Portfolio |
|
|
50.0 |
% |
|
|
8.2 |
|
|
|
4.72 |
% |
|
Dec 2027 |
Total |
|
|
|
|
|
$ |
168.6 |
|
|
|
|
|
|
|
(a) |
Our unconsolidated affiliate is a party to two interest rate LIBOR caps. One of the interest rate LIBOR caps effectively fixes the interest rate at 3.00%. The second interest rate LIBOR cap effectively fixes the interest rate at 3.85%. |
(b) |
Our unconsolidated affiliate is a party to an interest rate LIBOR swap, which effectively fixes the all-in interest rate at 4.57%. |
(c) |
Our unconsolidated affiliate is a party to an interest rate LIBOR swap, which effectively fixes the all-in interest rate at 3.68%. |
(d) |
Our unconsolidated affiliate is a party to an interest rate LIBOR swap, which effectively fixes the all-in interest rate at 5.09%. |
56
CRITICAL ACCOUNTING POLICIES
Management’s discussion and analysis of financial condition and results of operations is based upon our Consolidated Financial Statements, which have been prepared in accordance with U.S. GAAP. The preparation of these 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 2018 Annual Report on Form 10-K.
Recently Issued and Adopted Accounting Pronouncements
Reference is made to Note 1 for information about recently issued accounting pronouncements.
ITEM 3. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. |
Information as of June 30, 2019
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 Consolidated Financial Statements, for certain quantitative details related to our mortgage and other debt.
Currently, we manage our exposure to fluctuations in interest rates primarily through the use of fixed-rate debt and interest rate swap and cap agreements. As of June 30, 2019, we had total mortgage and other notes payable of $1,695.7 million, excluding the unamortized premium of $0.7 million and unamortized debt issuance costs of $11.3 million, of which $1,198.6 million, or 70.7% was fixed-rate, inclusive of debt with rates fixed through the use of derivative financial instruments, and $497.1 million, or 29.3%, was variable-rate based upon LIBOR or Prime rates plus certain spreads. As of June 30, 2019, we were party to 37 interest rate swap and four interest rate cap agreements to hedge our exposure to changes in interest rates with respect to $691.4 million and $157.5 million of LIBOR-based variable-rate debt, respectively.
The following table sets forth information as of June 30, 2019 concerning our long-term debt obligations, including principal cash flows by scheduled maturity and weighted average interest rates of maturing amounts (dollars in millions):
Core Consolidated Mortgage and Other Debt
Year |
|
Scheduled Amortization |
|
|
Maturities |
|
|
Total |
|
|
Weighted-Average Interest Rate |
|
||||
2019 (Remainder) |
|
$ |
1.6 |
|
|
$ |
26.3 |
|
|
$ |
27.9 |
|
|
|
6.0 |
% |
2020 |
|
|
3.2 |
|
|
|
— |
|
|
|
3.2 |
|
|
|
— |
% |
2021 |
|
|
3.4 |
|
|
|
— |
|
|
|
3.4 |
|
|
|
— |
% |
2022 |
|
|
3.5 |
|
|
|
39.0 |
|
|
|
42.5 |
|
|
|
3.8 |
% |
2023 |
|
|
2.9 |
|
|
|
367.8 |
|
|
|
370.7 |
|
|
|
3.7 |
% |
Thereafter |
|
|
15.4 |
|
|
|
136.2 |
|
|
|
151.6 |
|
|
|
4.1 |
% |
|
|
$ |
30.0 |
|
|
$ |
569.3 |
|
|
$ |
599.3 |
|
|
|
|
|
Fund Consolidated Mortgage and Other Debt
Year |
|
Scheduled Amortization |
|
|
Maturities |
|
|
Total |
|
|
Weighted-Average Interest Rate |
|
||||
2019 (Remainder) |
|
$ |
1.4 |
|
|
$ |
136.0 |
|
|
$ |
137.4 |
|
|
|
5.5 |
% |
2020 |
|
|
2.4 |
|
|
|
567.8 |
|
|
|
570.2 |
|
|
|
4.7 |
% |
2021 |
|
|
1.7 |
|
|
|
212.8 |
|
|
|
214.5 |
|
|
|
4.4 |
% |
2022 |
|
|
1.5 |
|
|
|
90.1 |
|
|
|
91.6 |
|
|
|
4.7 |
% |
2023 |
|
|
0.7 |
|
|
|
40.9 |
|
|
|
41.6 |
|
|
|
3.9 |
% |
Thereafter |
|
|
27.6 |
|
|
|
13.5 |
|
|
|
41.1 |
|
|
|
2.6 |
% |
|
|
$ |
35.3 |
|
|
$ |
1,061.1 |
|
|
$ |
1,096.4 |
|
|
|
|
|
57
Mortgage Debt in Unconsolidated Partnerships (at our Pro-Rata Share)
Year |
|
Scheduled Amortization |
|
|
Maturities |
|
|
Total |
|
|
Weighted-Average Interest Rate |
|
||||
2019 (Remainder) |
|
$ |
0.5 |
|
|
$ |
— |
|
|
$ |
0.5 |
|
|
|
0.0 |
% |
2020 |
|
|
1.1 |
|
|
|
9.1 |
|
|
|
10.2 |
|
|
|
4.8 |
% |
2021 |
|
|
1.1 |
|
|
|
6.8 |
|
|
|
7.9 |
|
|
|
4.4 |
% |
2022 |
|
|
1.2 |
|
|
|
5.8 |
|
|
|
7.0 |
|
|
|
4.1 |
% |
2023 |
|
|
1.0 |
|
|
|
40.6 |
|
|
|
41.6 |
|
|
|
4.1 |
% |
Thereafter |
|
|
1.6 |
|
|
|
99.8 |
|
|
|
101.4 |
|
|
|
4.3 |
% |
|
|
$ |
6.5 |
|
|
$ |
162.1 |
|
|
$ |
168.6 |
|
|
|
|
|
In 2019, $165.3 million of our total consolidated debt and $0.5 million of our pro-rata share of unconsolidated outstanding debt will become due. In addition, $573.4 million of our total consolidated debt and $10.2 million of our pro-rata share of unconsolidated debt will become due in 2020. 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 rate, our interest expense would increase by approximately $7.5 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 $1.8 million. Interest expense on our variable-rate debt of $497.1 million, net of variable to fixed-rate swap agreements currently in effect, as of June 30, 2019, would increase $5.0 million if LIBOR increased by 100 basis points. After giving effect to noncontrolling interests, our share of this increase would be $1.0 million. We may seek additional variable-rate financing if and when pricing and other commercial and financial terms warrant. As such, we would consider hedging against the interest rate risk related to such additional variable-rate debt through interest rate swaps and protection agreements, or other means.
Based on our outstanding debt balances as of June 30, 2019, the fair value of our total consolidated outstanding debt would decrease by approximately $12.5 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 $14.3 million.
As of June 30, 2019, and December 31, 2018, we had consolidated notes receivable of $94.7 million and $109.6 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 June 30, 2019, the fair value of our total outstanding notes receivable would decrease by approximately $0.7 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 $0.7 million.
Summarized Information as of December 31, 2018
As of December 31, 2018, we had total mortgage and other notes payable of $1,560.3 million, excluding the unamortized premium of $0.8 million and unamortized debt issuance costs of $10.5 million, of which $1,001.7 million, or 64.2% was fixed-rate, inclusive of debt with rates fixed through the use of derivative financial instruments, and $558.7 million, or 35.8%, was variable-rate based upon LIBOR or Prime rates plus certain spreads. As of December 31, 2018, we were party to 29 interest rate swap and three interest rate cap agreements to hedge our exposure to changes in interest rates with respect to $609.9 million and $143.8 million of LIBOR-based variable-rate debt, respectively.
Interest expense on our variable-rate debt of $558.7 million as of December 31, 2018, would have increased $5.6 million if LIBOR increased by 100 basis points. Based on our outstanding debt balances as of December 31, 2018, the fair value of our total outstanding debt would have decreased by approximately $13.5 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 $14.7 million.
Changes in Market Risk Exposures from December 31, 2018 to June 30, 2019
Our interest rate risk exposure from December 31, 2018, to June 30, 2019, has decreased on an absolute basis, as the $558.7 million of variable-rate debt as of December 31, 2018, has decreased to $497.1 million as of June 30, 2019. As a percentage of our overall debt, our interest rate risk exposure has decreased as our variable-rate debt accounted for 35.8% of our consolidated debt as of December 31, 2018 compared to 29.3% as of June 30, 2019.
58
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 June 30, 2019, have concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) were effective as of June 30, 2019, 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.
PART II – OTHER INFORMATION
ITEM 1. |
LEGAL PROCEEDINGS. |
We are involved in various matters of litigation arising in the normal course of business. While we are unable to predict with certainty the outcome of any particular matter. Management is of the opinion that, when such litigation is resolved, our resulting exposure to loss contingencies, if any, will not have a significant effect on our consolidated financial position, results of operations, or liquidity.
ITEM 1A. |
RISK FACTORS. |
The most significant risk factors applicable to us are described in Item 1A. of our 2018 Annual Report on Form 10-K. There have been no material changes to those previously-disclosed risk factors.
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. |
Not applicable.
59
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 |
||
10.1 |
|
|
Incorporated by reference to the copy thereof filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q filed for the quarter ended March 31, 2019. |
|||
|
|
|
|
|
||
10.2 |
|
Second Amended and Restated Limited Partnership Agreement dated July 23, 2019 |
|
Filed herewith |
||
|
|
|
|
|
||
31.1 |
|
|
Filed herewith
|
|||
|
|
|
|
|
||
31.2 |
|
|
Filed herewith |
|||
|
|
|
|
|
||
32.1 |
|
|
Filed herewith |
|||
|
|
|
|
|
||
32.2 |
|
|
Filed 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 |
|
XBRL Taxonomy Extension Schema Document |
|
Filed herewith |
||
|
|
|
|
|
||
101.CAL |
|
XBRL Taxonomy Extension Calculation Document |
|
Filed herewith |
||
|
|
|
|
|
||
101.DEF |
|
XBRL Taxonomy Extension Definitions Document |
|
Filed herewith |
||
|
|
|
|
|
||
101.LAB |
|
XBRL Taxonomy Extension Labels Document |
|
Filed herewith |
||
|
|
|
|
|
||
101.PRE |
|
XBRL Taxonomy Extension Presentation Document |
|
Filed herewith |
60
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, 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 |
|
|
Senior Vice President and |
|
|
Chief Financial Officer |
|
|
|
By: |
|
/s/ Richard Hartmann |
|
|
Richard Hartmann |
|
|
Senior Vice President and |
|
|
Chief Accounting Officer |
Dated: July 25, 2019
61