Market Overview

Acadia Realty Trust Reports Second Quarter 2018 Operating Results

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Acadia Realty Trust (NYSE:AKR) ("Acadia" or the "Company") today
reported operating results for the quarter ended June 30, 2018. All per
share amounts are on a fully-diluted basis.

Acadia operates dual platforms, comprised of a high-quality core real
estate portfolio ("Core Portfolio"), which owns and operates assets in
the nation's most dynamic urban and street-retail corridors, and a
series of discretionary, institutional funds ("Funds") that target
opportunistic and value-add investments.

Please refer to the tables and notes accompanying this press release
for further details on operating results and additional disclosures
related to net income, funds from operations ("FFO") and net operating
income ("NOI").

Highlights

  • Earnings: Generated earnings per share of $0.09 for the second
    quarter; FFO per share was $0.34 for the second quarter including
    approximately $0.01 from fund transactional activity
  • Core Portfolio Operating Results: Solid Core operating
    fundamentals
    • Achieved over 75% of our 2018 leasing goals to date based on NOI,
      representing approximately $6.0 million of annualized NOI
    • Rent growth of 8.7% on new and renewal leases for the quarter on a
      cash basis
    • Reported 95.3% leased occupancy as of June 30, 2018
    • Higher than anticipated same-property net operating income growth
      of 0.8% for the second quarter (excluding redevelopment)
  • Fund Acquisition Activity: During July, Fund V completed a
    $59.3 million acquisition
  • Fund Disposition Activity: As previously reported, Fund II
    completed a $26.0 million disposition during the second quarter; Fund
    IV also has $8.1 million of dispositions under contract
  • Balance Sheet: The Company repurchased an additional $23.1
    million of its shares during the three months ended June 30, 2018.
    Aggregate purchases were $55.1 million for the six months ended June
    30, 2018 at an average cost of approximately $24 per share on a
    leverage-neutral basis. As a result of the Company's successful
    capital recycling efforts to date, Core net debt decreased by $19.9
    million during 2018
  • Guidance: Following its continued strong leasing efforts and
    its portfolio performance to date, the Company reaffirms its 2018
    guidance of FFO per share of $1.33 to $1.45 and same-property net
    operating income growth of 1-3%, including 2-7% growth in the second
    half of the year

"Our second-quarter operating results exceeded our expectations but,
more importantly, we continued to put the key drivers of our long-term
growth plan into place," stated Kenneth F. Bernstein, President and CEO
of Acadia Realty Trust. "First, with respect to our core portfolio,
year-to-date, we have made significant progress on both our 2018
lease-up goals and our two key redevelopments. In the fund platform, we
continued to execute on all aspects of our buy-fix-sell mandate and saw
further opportunity in our contrarian purchase of shopping centers in
non-prime markets at higher yields. Looking ahead, we believe that our
significant dry powder, both on balance sheet and in our fund platform,
keeps us well positioned as retailing and retail real estate continue to
evolve."

FINANCIAL RESULTS

A complete reconciliation, in dollars and per share amounts, of net
income to FFO is included in the financial tables of this release.

Net Income

Net income attributable to common shareholders for the quarter ended
June 30, 2018 was $7.7 million, or $0.09 per share. Net income
attributable to common shareholders for the quarter ended June 30, 2017
was $12.1 million, or $0.14 per share, which includes $4.9 million, or
$0.06 per share, of incremental interest income within the Structured
Finance business and the Company's $0.8 million share, or $0.01 per
share, of gains related to the disposition of an unconsolidated Fund
property.

Net income attributable to common shareholders for the six months ended
June 30, 2018 was $15.1 million, or $0.18 per share. Net income
attributable to common shareholders for the six months ended June 30,
2017 was $27.7 million, or $0.33 per share, which includes $10.2
million, or $0.12 per share, of incremental interest income within the
Structured Finance business and the Company's $3.5 million share, or
$0.04 per share, of gains related to the dispositions of unconsolidated
Fund properties.

FFO

Consistent with our expectations, FFO for the quarter ended June 30,
2018 was $29.9 million, or $0.34 per share compared to $33.3 million, or
$0.37 per share for the quarter ended June 30, 2017. The decrease in FFO
for the quarter is due primarily to a decrease of $4.9 million, or $0.06
per share, of interest income following the anticipated repayments
within the Structured Finance business partially offset by the favorable
impact of acquisitions and fund transactional activity.

FFO for the six months ended June 30, 2018 was $59.0 million, or $0.67
per share compared to $68.7 million, or $0.77 per share, for the six
months ended June 30, 2017. The decrease in FFO for the six months is
due primarily to a decrease of $10.2 million, or $0.12 per share, of
interest income following the anticipated repayments within the
Structured Finance business.

CORE PORTFOLIO

Core Operating Results

As previously discussed, the Company's 2018 leasing goal is to execute
leases comprising approximately $8 million of NOI on a run rate basis.
To date, the Company has executed leases comprising approximately $6.0
million of annualized NOI at its key street and urban locations on
Madison Avenue (New York), Armitage Avenue (Lincoln Park, Chicago), M
Street (Georgetown, Washington DC) and Greenwich Avenue (Greenwich, CT).
As such, the Company has achieved over 75% of its leasing goals at rents
in line with its expectations.

The Company experienced higher-than-anticipated same-property net
operating income growth of 0.8% for the second quarter (excluding
redevelopment), driven by better than expected portfolio performance. As
projected, the first half of 2018 continued to reflect the impact of the
previously-reported recapture of occupancy during 2017.

The Core Portfolio was 94.8% occupied and 95.3% leased as of June 30,
2018, compared to 94.4% occupied and 95.3% leased as of March 31, 2018.
The leased rate includes space that is leased but not yet occupied and
excludes development and redevelopment properties.

During the second quarter, the Company generated an 8.7% increase in
rent on a cash basis on 25 conforming new and renewal leases aggregating
279,000 square feet primarily within our suburban portfolio.

Redevelopment Update

City Center, San Francisco, CA. The Company has commenced
construction on the 40,000-square foot expansion of City Center, its
Target-anchored urban shopping center located in San Francisco. The
expansion space is approximately 80% pre-leased, with anticipated tenant
delivery and rent commencement in 2019.

Clark and Diversey, Lincoln Park, Chicago, IL. Construction is
currently underway on the Company's 30,000-square foot development
located at the corner of Clark Street and Diversey Parkway in Lincoln
Park, Chicago. During June, Blue Mercury opened its 2,100 square foot
store. The Company anticipates construction completion and delivery of
the remaining leasable space to T.J. Maxx in the second half of 2018.

FUND PLATFORM

Fund Acquisitions

Fund V completed a $45.2 million acquisition during the six months ended
June 30, 2018, which closed in the first quarter. In July 2018, Fund V
completed a $59.3 million acquisition as follows:

Elk Grove Commons, Elk Grove, CA (Fund V). In July 2018, Fund V
acquired a 242,000-square foot shopping center, located in Elk Grove, CA
(Sacramento MSA), for $59.3 million. The property is anchored by Trader
Joe's, HomeGoods and Kohl's. During its hold period, the fund expects to
have an opportunity to re-anchor certain spaces to further strengthen
the tenancy at this high-performing shopping center. This investment
combines the Fund platform's "high-yield opportunistic" and "value-add"
strategies.

Fund Dispositions

Through June 30, 2018, the Company has completed $34.0 million of Fund
dispositions including $26.0 million completed during the second quarter
as follows:

Sherman Plaza, New York, NY (Fund II). As previously reported,
Fund II completed the sale of Sherman Plaza, located in upper Manhattan,
to a residential developer for $26.0 million in April 2018. Following
this sale, Fund II's sole real estate investment is City Point.

Fund IV also has $8.1 million of dispositions under contract.

BALANCE SHEET

The Company has maintained its solid, low-leveraged balance sheet.

The Company repurchased an additional $23.1 million (1.0 million shares)
of its common stock during the three months ended June 30, 2018.
Aggregate purchases were $55.1 million (2.3 million shares) for the six
months ended June 30, 2018 at an average cost of approximately $24 per
share on a leverage-neutral basis. As a result of the Company's
successful capital recycling efforts to date, Core net debt decreased by
$19.9 million during 2018. As of June 30, 2018, the Company's net debt
to EBITDA ratio for the Core Portfolio was 5.0x.

2018 GUIDANCE

The Company reaffirms that its 2018 annual earnings per share will range
from $0.37 to $0.48 and 2018 FFO per share will range from $1.33 to
$1.45.

The Company's 2018 operating assumptions are reaffirmed as follows:

  • 2018 annual growth of 1% to 3% in same-property NOI (excluding
    redevelopments), with quarterly SSNOI growth in the second half
    ranging from 2% - 7%:
  • The variability and range of estimates for the third and fourth
    quarter are primarily dependent upon the rent commencement dates of
    certain executed key leases

CONFERENCE CALL

Management will conduct a conference call on Wednesday, July 25, 2018 at
12:00 PM ET to review the Company's earnings and operating results.
Dial-in and webcast information is listed below.

Live Conference Call:

Date:       Wednesday, July 25, 2018
Time: 12:00 PM ET
Dial#: 844-309-6711
Passcode: "Acadia Realty" or "2664047"
Webcast (Listen-only):

www.acadiarealty.com
under Investors, Presentations
& Events

 

Phone Replay:

Dial#: 855-859-2056
Passcode: "2664047"
Available Through: Wednesday, August 1, 2018
 

Webcast Replay:

www.acadiarealty.com
under Investors, Presentations
& Events

 

About Acadia Realty Trust

Acadia Realty Trust is an equity real estate investment trust focused on
delivering long-term, profitable growth via its dual - Core and Fund -
operating platforms and its disciplined, location-driven investment
strategy. Acadia Realty Trust is accomplishing this goal by building a
best-in-class core real estate portfolio with meaningful concentrations
of assets in the nation's most dynamic urban and street-retail
corridors; making profitable opportunistic and value-add investments
through its series of discretionary, institutional funds; and
maintaining a strong balance sheet. For further information, please
visit www.acadiarealty.com.

Safe Harbor Statement

Certain matters in this press release may constitute forward-looking
statements within the meaning of federal securities law and as such may
involve known and unknown risks, uncertainties and other factors that
may cause the actual results, performances or achievements of Acadia to
be materially different from any future results, performances or
achievements expressed or implied by such forward-looking statements.
These forward-looking statements include statements regarding Acadia's
future financial results and its ability to capitalize on potential
investment opportunities. Factors that could cause the Company's
forward-looking statements to differ from its future results include,
but are not limited to, those discussed under the headings "Risk
Factors" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the Company's most recent annual
report on Form 10-K filed with the SEC on February 27, 2018 ("Form
10-K") and other periodic reports filed with the SEC, including risks
related to: (i) political and economic uncertainty; (ii) the Company's
reliance on revenues derived from major tenants; (iii) the Company's
limited control over joint venture investments; (iv) the Company's
partnership structure; (v) real estate and the geographic concentration
of the Company's properties; (vi) market interest rates; (vii) leverage;
(viii) liability for environmental matters; (ix) the Company's growth
strategy; (x) the Company's status as a REIT; (xi) uninsured losses;
(xii) information technology security threats and (xiii) the loss of key
executives. Copies of the Form 10-K and the other periodic reports
Acadia files with the SEC are available on the Company's website at www.acadiarealty.com.
Any forward-looking statements in this press release speak only as of
the date hereof. Acadia expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any
forward-looking statements contained herein to reflect any change in
Acadia's expectations with regard thereto or change in events,
conditions or circumstances on which any such statement is based.

         

ACADIA REALTY TRUST AND SUBSIDIARIES

 

Consolidated Statements of Operations (a)

(dollars and Common Shares in thousands, except per share data)

 
 
Three Months Ended June 30, Six Months Ended June 30,
2018     2017 2018     2017
Revenues
Rental income $ 51,322 $ 48,468 $ 102,101 $ 97,053
Expense reimbursements 10,598 10,074 21,806 22,390
Other 1,649   962   2,786   2,060  
Total revenues 63,569   59,504   126,693   121,503  
Operating expenses
Depreciation and amortization 29,503 26,057 58,079 50,593
General and administrative 7,907 8,864 16,377 17,333
Real estate taxes 7,031 8,034 15,990 18,640
Property operating 12,524 9,364 22,862 17,561
Other operating 305   443   385   737  
Total operating expenses 57,270   52,762   113,693   104,864  
 
Operating income 6,299 6,742 13,000 16,639
 
Equity in earnings of unconsolidated affiliates inclusive of gain on
disposition of properties of $0, $3,285, $0 and $14,771, respectively
5,019 4,340 6,703 17,043
Interest income 3,289 8,203 7,026 17,187
Interest expense (16,915 ) (12,750 ) (32,805 ) (24,238 )
(Loss) income from continuing operations before income taxes (2,308 ) 6,535 (6,076 ) 26,631
Income tax benefit (provision) 5   (427 ) (387 ) (552 )
(Loss) income from continuing operations before gain
on
disposition of properties
(2,303 ) 6,108 (6,463 ) 26,079
Gain on disposition of properties, net of tax 33     33    
Net (loss) income (2,270 ) 6,108 (6,430 ) 26,079
Net loss attributable to noncontrolling interests 9,935   5,952   21,514   1,612  
Net income attributable to Acadia $ 7,665   $ 12,060   $ 15,084   $ 27,691  
 
Less: net income attributable to participating securities (47 ) (126 ) (91 ) (372 )
Net income attributable to Common Shareholders - basic and diluted
earnings per share
$ 7,618   $ 11,934   $ 14,993   $ 27,319  
 
Weighted average shares for diluted earnings per share 81,756   83,662   82,592   83,654  
 
Net Earnings per share - basic and diluted (b) $ 0.09   $ 0.14   $ 0.18   $ 0.33  
 
         

ACADIA REALTY TRUST AND SUBSIDIARIES

 

Reconciliation of Consolidated Net Income to Funds From
Operations
(a, c)

(dollars and Common Shares and Units in thousands, except per
share data)

 
 
Three Months Ended June 30, Six Months Ended June 30,
2018     2017 2018     2017
 
Net income attributable to Acadia $ 7,665 $ 12,060 $ 15,084 $ 27,691
 
Depreciation of real estate and amortization of leasing costs (net
of noncontrolling interests' share)
21,586 21,093 42,671 42,626
Gain on sale (net of noncontrolling interests' share) (753 ) (3,495 )
Income attributable to Common OP Unit holders 498 719 975 1,642
Distributions - Preferred OP Units 135   138   270   277  
Funds from operations attributable to Common Shareholders

and Common OP Unit holders

$ 29,884   $ 33,257   $ 59,000   $ 68,741  
 

Funds From Operations per Share - Diluted

Weighted average number of Common Shares and Common OP Units (d) 87,485   88,973   88,272   88,998  
Diluted Funds from operations, per Common Share and Common OP Unit $ 0.34   $ 0.37   $ 0.67   $ 0.77  
         

ACADIA REALTY TRUST AND SUBSIDIARIES

 

Reconciliation of Consolidated Operating Income to Net Property
Operating Income ("NOI")
(a)

(dollars in thousands)

 
 
Three Months Ended June 30, Six Months Ended June 30,
2018     2017 2018     2017
 
Consolidated operating income $ 6,299 $ 6,742 $ 13,000 $ 16,639
Add back:
General and administrative 7,907 8,864 16,377 17,333
Depreciation and amortization 29,503 26,057 58,079 50,593
Less:
Above/below market rent, straight-line rent and other adjustments (5,577 ) (3,956 ) (11,104 ) (9,943 )
Consolidated NOI 38,132 37,707 76,352 74,622
 
Noncontrolling interest in consolidated NOI (8,804 ) (7,046 ) (17,431 ) (13,585 )
Less: Operating Partnership's interest in Fund NOI included above (2,304 ) (2,029 ) (4,461 ) (3,976 )
Add: Operating Partnership's share of unconsolidated joint ventures
NOI (e)
6,428   4,980   12,076   9,687  
NOI - Core Portfolio $ 33,452   $ 33,612   $ 66,536   $ 66,748  
 
     

ACADIA REALTY TRUST AND SUBSIDIARIES

 

Consolidated Balance Sheets (a)

(dollars in thousands)

 
 
As of
June 30, 2018     December 31, 2017
ASSETS
Investments in real estate, at cost
Land $ 667,759 $ 658,835
Buildings and improvements 2,583,665 2,538,338
Construction in progress 27,439 18,642
Properties under capital lease 76,965   76,965  
3,355,828 3,292,780
Less: accumulated depreciation (378,272 ) (339,862 )
Operating real estate, net 2,977,556 2,952,918
Real estate under development 192,215   173,702  
Net investments in real estate 3,169,771 3,126,620
Notes receivable, net 109,209 153,829
Investments in and advances to unconsolidated affiliates 306,616 302,070
Other assets, net 207,583 214,959
Cash and cash equivalents 17,330 74,823
Rents receivable, net 56,503 51,738
Restricted cash 13,756 10,846
Assets of properties held for sale   25,362  
Total assets $ 3,880,768   $ 3,960,247  
 
LIABILITIES
Mortgage and other notes payable, net $ 981,567 $ 909,174
Unsecured notes payable, net 465,687 473,735
Unsecured line of credit 14,000 41,500
Accounts payable and other liabilities 197,181 210,052
Capital lease obligation 70,857 70,611
Dividends and distributions payable 23,719 24,244
Distributions in excess of income from, and investments in,
unconsolidated affiliates
15,208   15,292  
Total liabilities 1,768,219   1,744,608  
Commitments and contingencies
EQUITY
Acadia Shareholders' Equity
Common shares, $0.001 par value, authorized 200,000,000 shares,
issued and outstanding 81,502,812 and 83,708,140 shares, respectively
82 84
Additional paid-in capital 1,543,651 1,596,514
Accumulated other comprehensive income 10,138 2,614
Distributions in excess of accumulated earnings (61,196 ) (32,013 )
Total Acadia shareholders' equity 1,492,675 1,567,199
Noncontrolling interests 619,874   648,440  
Total equity 2,112,549   2,215,639  
Total liabilities and equity $ 3,880,768   $ 3,960,247  

ACADIA REALTY TRUST AND SUBSIDIARIES

Notes to Financial Highlights:

 
(a)    

For additional information and analysis concerning the Company's
results of operations, reference is made to the Company's
Quarterly Supplemental Disclosure furnished on Form 8-K to the SEC
and included on the Company's website at www.acadiarealty.com.

 
(b) Diluted earnings per share reflects the potential dilution that
could occur if securities or other contracts to issue Common Shares
were exercised or converted into Common Shares. The effect of the
conversion of Common OP Units is not reflected in the above table as
they are exchangeable for Common Shares on a one-for-one basis. The
income allocable to such units is allocated on the same basis and
reflected as noncontrolling interests in the consolidated financial
statements. As such, the assumed conversion of these units would
have no net impact on the determination of diluted earnings per
share.
 
(c) The Company considers funds from operations ("FFO") as defined by
the National Association of Real Estate Investment Trusts ("NAREIT")
and net property operating income ("NOI") to be appropriate
supplemental disclosures of operating performance for an equity REIT
due to their widespread acceptance and use within the REIT and
analyst communities. FFO and NOI are presented to assist investors
in analyzing the performance of the Company. They are helpful as
they exclude 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. In addition, NOI excludes
interest expense. The Company's method of calculating FFO and NOI
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 the Company's performance or to cash flows as a measure
of liquidity. Consistent with the NAREIT definition, the Company
defines FFO as net income (computed in accordance with GAAP),
excluding gains (losses) from sales of depreciated property, plus
depreciation and amortization, impairment of depreciable real
estate, and after adjustments for unconsolidated partnerships and
joint ventures.
 
(d) In addition to the weighted-average Common Shares outstanding, basic
and diluted FFO also assume full conversion of a weighted-average
4,966 thousand and 4,755 thousand OP Units into Common Shares for
the quarters ended June 30, 2018 and 2017 and 4,966 thousand and
4,755 thousand OP Units into Common Shares for the six months ended
June 30, 2018 and 2017, respectively. Diluted FFO also includes: (i)
the assumed conversion of Preferred OP Units into 499 thousand and
512 thousand Common Shares for the quarters ended June 30, 2018 and
2017 and 499 thousand and 504 thousand Common Shares for the six
months ended June 30, 2018 and 2017, respectively; and (ii) the
effect of 264 thousand and 44 thousand restricted share units and
LTIP units for the quarters ended June 30, 2018 and 2017 and 216
thousand and 91 thousand for the six months ended June 30, 2018 and
2017, respectively.
 
(e)

The Pro-rata share of NOI is based upon our stated ownership
percentages in each operating agreement. Does not include the
Operating Partnership's share of NOI from unconsolidated joint
ventures within the Funds.

 

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