Market Overview

Acadia Realty Trust Reports Fourth Quarter and Full Year 2018 Operating Results

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Acadia Realty Trust (NYSE:AKR) ("Acadia" or the "Company") today
reported operating results for the quarter and year ended December 31,
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 GAAP earnings per share of $0.09 for the
    fourth quarter; FFO per share was $0.34 for the fourth quarter, and
    FFO per share of $0.36 for the fourth quarter before deduction of
    $0.02 per share for retirement related costs.
  • Core Portfolio Operating Results: Solid Core operating
    fundamentals and significant progress towards long-term NOI growth
    goals

◦ Strong same-property net operating income growth of 4.1% for the
fourth quarter (excluding redevelopments) driven by profitable lease up
in its street and urban portfolio

◦ Achieved substantially all (over 95%) of its 2018 leasing goals

◦ Executed key urban leases at its City Center property in San
Francisco, California (Whole Foods) and its State Street property in
Chicago, Illinois (Uniqlo)

◦ Solid rent growth of 16.5% and 9.4% on new leases for the quarter on a
GAAP and cash basis, respectively

◦ Reported 95.2% leased occupancy as of December 31, 2018

  • Fund Acquisition Activity: Fund V completed a $44.4 million
    acquisition during the fourth quarter. Fund acquisition volume for
    2018 totaled $149.0 million; included within the Fund V
    pipeline is over $100.0 million of investments currently under contract
  • Balance Sheet: The Company closed a $50 million ten-year
    financing within its Core Portfolio in the fourth quarter. At December
    31, 2018, over 95% of Core debt was fixed at an average rate of 3.7%
    and maturity of 5.8 years. No shares were issued or purchased during
    the fourth quarter
  • Guidance: The Company has issued its annual 2019 guidance of
    net income per share of $0.35 to $0.46 and FFO per share of $1.34 to
    $1.46. In addition, the Company expects same property net operating
    income growth of 3.0% to 4.0% for 2019, which is comprised of 5% to 7%
    growth within its street/urban portfolio and 0% to 1% within its
    suburban portfolio

"Our fourth quarter and full-year operating results were in line with
our expectations; driven by the strength of our Core Portfolio and a
meaningful improvement in retailer demand for high quality spaces,"
stated Kenneth F. Bernstein, President and CEO of Acadia Realty Trust.
"Following the successful and profitable execution of two important
leases in San Francisco and Chicago, our long-term growth plan remains
well on track as we add these two exciting retailers to our
best-in-class portfolio. We are seeing compelling investment
opportunities as we head into 2019. With significant dry powder, both on
balance sheet and within our Fund business, we are well-positioned in
our highly differentiated dual platform."

FINANCIAL RESULTS

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

Net Income

Net income attributable to common shareholders for the quarter ended
December 31, 2018 was $7.1 million, or $0.09 per share. Net income
attributable to common shareholders for the quarter ended December 31,
2017 was $20.9 million, or $0.25 per share, inclusive of $6.8 million on
a pro rata basis, or $0.08 per share, attributable to an aggregate gain
on dispositions of Fund properties net of related impairment charges and
$5.6 million, or $0.07 per share, attributable to a Core gain on change
in control partially offset by $1.0 million, or $0.01 per share, of
acquisition costs.

Net income attributable to common shareholders for the year ended
December 31, 2018 was $31.4 million, or $0.38 per share. Net income
attributable to common shareholders for the year ended December 31, 2017
was $61.5 million, or $0.73 per share, inclusive of $11.5 million on a
pro rata basis, or $0.14 per share, attributable to an aggregate gain on
dispositions of Fund properties net of related impairment charges and
$5.6 million, or $0.07 per share, attributable to a Core gain on change
in control; partially offset by $1.3 million, or $0.01 per share, of
acquisition expenses.

FFO as Defined by NAREIT

FFO for the quarter ended December 31, 2018 was $29.8 million, or $0.34
per share compared to $33.1 million, or $0.37 per share for the quarter
ended December 31, 2017. The decrease in FFO for the quarter is due
primarily to a decrease $0.05 per share related to a $2.1 million
reduction of interest income (following scheduled repayments within the
Structured Finance business) and a $2.0 million executive retirement
charge, partially offset by an increase of $2.7 million, or $0.03 per
share, of below-market lease adjustments.

FFO for the year ended December 31, 2018 was $118.9 million, or $1.35
per share compared to $134.7 million, or $1.51 per share, for the year
ended December 31, 2017. The decrease in FFO for the year is due
primarily to a decrease of $0.19 per share, related to a $14.8 million
reduction of interest income (following scheduled repayments within the
Structured Finance business) and a $2.0 million executive retirement
charge, partially offset by an increase of $2.7 million, or $0.03 per
share, of below-market lease adjustments.

FFO as Adjusted for Special Items

FFO before the pro rata impact of retirement charges of $2.0 million, or
$0.02 per share, for the quarter ended December 31, 2018 was $31.8
million, or $0.36 per share. FFO before the pro rata impact of
retirement charges, acquisition-related costs and gains/losses on sale
or impairment of depreciated and non-operating properties for the
quarter ended December 31, 2017 was $31.4 million, or $0.35 per share,
which excludes the net $0.02 per share effect of a $5.6 million gain on
change in control partially offset by $3.0 million of impairment charges
and $1.0 million of acquisition expenses.

FFO before the pro rata impact of retirement charges for the year ended
December 31, 2018 was $120.9 million, or $1.38 per share, which excludes
an executive retirement charge of $2.0 million, or $0.02 per share. FFO
before the pro rata impact of retirement charges, acquisition-related
costs and gains/losses on sale or impairment of depreciated and
non-operating properties for the year ended December 31, 2017 was $133.4
million, or $1.50 per share, which excludes the net $0.01 per share
effect of a $5.6 million gain on change in control partially offset by
$3.0 million of impairment charges and $1.3 million of acquisition
expenses.

CORE PORTFOLIO

Core Operating Results

The Company experienced strong same-property net operating income growth
of 4.1% for the fourth quarter (before redevelopment), driven by the
profitable re-leasing of key street and urban properties.

The Company successfully completed substantially all (over 95%) of its
projected 2018 leasing activities.

In addition to the successful execution of its 2018 leasing goals, the
Company signed two key leases that were an integral part of the
Company's Core NOI growth plan:

  • City Center (San Francisco): The Company signed a lease with
    Whole Foods Market for approximately 56,000 square feet, which is
    subject to certain approvals. City Center is a Target-anchored
    property located in one of San Francisco's busiest and most prominent
    corridors surrounded by a dense and affluent trade area. As previously
    announced, the Company has commenced a 40,000 square foot expansion of
    City Center, which is approximately 90% pre-leased.
  • State Street (Chicago): The Company signed a lease with Uniqlo
    for approximately 28,000 square feet for space that is currently
    occupied by H&M. State Street is a 79,000 square foot property that
    features Nordstrom Rack and is located within the primary urban retail
    corridor for Chicago's Loop.

The Core Portfolio was 94.2% occupied and 95.2% leased as of
December 31, 2018, compared to 94.7% occupied and 95.5% leased as of
September 30, 2018. The leased rate includes space that is leased but
not yet occupied and excludes development and redevelopment properties.

During the fourth quarter, the Company generated a 16.5% and 9.4%
increase in rent on a GAAP and cash basis, respectively, on 5 conforming
new leases aggregating approximately 39,000 square feet primarily within
its street and urban portfolio.

The Company had renewals on less than 15,000 square feet, primarily
within its suburban portfolio that were effectively flat for the fourth
quarter on a cash and GAAP basis.

FUND PLATFORM

Fund Acquisitions

During 2018, the Company completed $149.0 million in acquisitions
including $44.4 million completed during fourth quarter 2018 as follows:

Hiram Pavilion, Hiram, GA (Fund V). In October 2018, Fund V
acquired a 363,000-square foot shopping center, located in greater
Atlanta, GA for $44.4 million. The property is anchored by Kohl's,
Marshalls and Ross Dress for Less.

The Company, on behalf of Fund V, has an acquisition pipeline with
over $100.0 million of investments currently under contract.

Fund Dispositions

During 2018, the Company completed $76.6 million of Fund dispositions
including $12.1 million completed during the fourth quarter as follows:

210 Bowery, New York, NY (Fund IV). In November and December,
Fund IV sold four residential units within its 210 Bowery property
located in New York City, NY for $12.1 million.

Acadia does not report return metrics for partial sales of its
investments.

BALANCE SHEET

The Company has maintained its solid, low-leveraged balance sheet, with
over 95% of its Core Portfolio debt fixed at an average rate of 3.7%. As
of December 31, 2018, the Company's net debt to EBITDA ratio for the
Core Portfolio was 5.0x.

During the quarter, the Company closed on a $73.5 million non-recourse
mortgage, of which $50 million was drawn at December 31, 2018. The loan
matures in November 2028 with interest only at LIBOR plus 1.5%. The
proceeds were used to repay outstanding indebtedness.

The Company repurchased $55.1 million of its common shares (2.3 million
shares) during the year ended December 31, 2018 at an average cost of
approximately $24 per share on a leverage-neutral basis. No shares were
issued or purchased during the fourth quarter.

2019 GUIDANCE

The following guidance is based upon our current view of existing market
conditions and assumptions for the year ending December 31, 2019. The
Company forecasts that its 2019 annual earnings per share will range
from $0.35 to $0.46 and 2019 FFO per share will range from $1.34 to
$1.46. These forecasts, and the comparable 2018 FFO, both presented
below, are before acquisition and gains/losses on sale or impairment of
depreciated and non-operating assets:

  2019 Guidance       2018 Actual
 
Net income per share attributable to Common Shareholders $0.35 to $0.46 $ 0.38
Impact of transactional activity and tenant recapture (0.08) to (0.13) (0.04 )
Depreciation of real estate and amortization of leasing costs
(net of noncontrolling interests' share) 0.96 0.98
Gain on disposition of properties (net of noncontrolling interests'
share)
- (0.01 )
Noncontrolling interest in Operating Partnership 0.02   0.03
Funds from operations, prior to transactional activity, per share $1.25 to $1.31 $ 1.34
 
Fund acquisitions and related fees 0.01 to 0.03 -
Net Promote and other transactional income 0.01 to 0.05 0.01
Accelerated tenant recapture - GAAP adjustments 0.07   0.03

Funds from operations per share attributable to Common
Shareholders
and Common OP Unit holders

$1.34 to $1.46 $
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