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Acadia Realty Trust Reports Second Quarter 2019 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, 2019. 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"), through which the Company 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 $0.11 and FFO per share of $0.36 for the second quarter
  • Core Portfolio Operating Results:

◦ Driven by the strength of its street and urban portfolio, the Company generated higher than expected same-property net operating income growth of 4.8% for the second quarter (excluding redevelopments)

◦ Continued leasing progress across the portfolio including the execution of several key street leases in Chicago and New York City

◦ Reported 94.6% leased occupancy as of June 30, 2019

  • Core Acquisition Activity: During the second quarter, the Company entered into an additional agreement to acquire a property in Soho for $24.8 million. To date, the Company has acquired, or entered into contracts to acquire $121.6 million in properties located in Soho
  • Fund Acquisition Activity: During the second quarter, the Company completed $129.2 million of Fund V investments and $177.8 million year to date. Additionally, Fund V has in excess of $100.0 million of investments under contract and agreements in principle
  • Balance Sheet: Maintained conservative leverage levels by match-funding its acquisitions and pre-funding its acquisitions under contract; raising proceeds through June 30, 2019 of $75.1 million at an average gross issuance price per share of $28.58 through the Company's at-the-market ("ATM") program. At June 30, 2019, substantially all of Core debt was fixed at an average rate of 3.7%
  • Guidance Update: The Company raised its full-year 2019 guidance ranges as follows: same-property net operating income growth 3.5% to 4.5%, earnings per share $0.39 to $0.46 and FFO per share $1.38 to $1.44 up from the previous ranges of 3.0% to 4.0%, $0.35 to $0.46 and $1.34 to $1.46, respectively, to reflect the accretive impact of external growth and the continued strength in its Core Portfolio

"We had another strong and active quarter, with second-quarter operating results exceeding our expectations. We have completed approximately $300.0 million of external growth activity to date with a strong pipeline in excess of $100.0 million," stated Kenneth F. Bernstein, President and CEO of Acadia Realty Trust. "The separation of the haves and the have-nots amongst retailers continues to widen. Given Acadia's unique portfolio of street and urban assets in key gateway markets, we continue to attract both established retailers as well as new and emerging retail brands, reaffirming the power of brick-and-mortar in must have locations."

FINANCIAL RESULTS

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

Net Income

Net income attributable to common shareholders for the quarter ended June 30, 2019 was $9.1 million, or $0.11 per share, reflecting the strength of the Company's Core Portfolio and accretion from new acquisitions. 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 six months ended June 30, 2019 was $21.3 million, or $0.26 per share, including $5.8 million, or $0.07 per share, related to a previously-announced accelerated tenant recapture. Net income attributable to common shareholders for the six months ended June 30, 2018 was $15.1 million, or $0.18 per share.

FFO as Defined by NAREIT

FFO for the quarter ended June 30, 2019 was $31.8 million, or $0.36 per share, compared to $29.9 million, or $0.34 per share for the quarter ended June 30, 2018, reflecting the strength of the Company's Core Portfolio and accretion from new acquisitions.

FFO for the six months ended June 30, 2019 was $66.6 million, or $0.75 per share, including $5.8 million, or $0.07 per share related to a previously-announced accelerated tenant recapture. FFO was $59.0 million, or $0.67 per share, for the six months ended June 30, 2018.

CORE PORTFOLIO

Core Operating Results

Driven by its street and urban portfolio, the Company had strong same-property net operating income growth of 4.8% for the second quarter (before redevelopments). This was driven by the profitable re-leasing of key street/urban properties along with better than expected credit loss and recoveries.

To date, the Company has executed several key leases including Reformation at 56 E Walton (Chicago), Lively at Armitage Avenue (Chicago), Monica Vinader and Orlebar Brown at 991 Madison (New York City).

The Core Portfolio was 93.6% occupied and 94.6% leased as of June 30, 2019 compared to 93.3% occupied and 94.6% leased as of March 31, 2019. The leased rate includes space that is leased but not yet occupied and excludes development and redevelopment properties.

During the second quarter, the Company reported a single, insignificant suburban conforming lease in its rent spreads. Excluded were eight non-conforming leases, the majority of which were in its street and urban portfolio, that were profitably completed with annual base rent of $1.9 million.

Core Acquisitions

Acquired, or Entered into Contracts to Acquire, $121.6 Million of Accretive Core Portfolio Properties

Soho, New York, NY. To date, the Company has acquired, or entered into contracts to acquire $121.6 million of New York City street retail assets in Soho, consisting of the previously announced portfolio of $96.8 million ("Soho Portfolio") and an additional agreement of $24.8 million during the second quarter.

During the second quarter, the Company closed on 41 Greene Street for $17.4 million as part of the Soho Portfolio. The property is leased to Stone Island.

Of the $121.6 million, $49.6 million have closed and $72.0 million remains under contract at June 30, 2019. The Company expects to complete the remaining properties under contract in phases through 2020.

The Company has further expanded its presence and influence on these high demand streets in Soho. These acquisitions are concentrated exclusively on Greene and Mercer streets in Soho. From the combination of contractual rental growth and lease up, these accretive acquisitions have an expected NOI growth in excess of 5% over the next several years.

Acquisitions completed to date, along with the remaining assets under contract, were match-funded with equity raised under the Company's ATM program at an average gross price per share of $28.58.

No assurance can be given that the Company will successfully close on the remaining acquisitions under contract, which are subject to customary closing conditions.

FUND PLATFORM

Fund Acquisitions

The Company completed the following acquisitions during the second quarter 2019. Amounts below are inclusive of transaction costs.

Tri-City Plaza, Vernon, CT (Fund V). In May, Fund V, in partnership with DLC Management Corp., purchased Tri-City Plaza, a 300,000-square foot center located in Vernon, CT, for $36.7 million. The joint venture intends to redevelop the TJ Maxx and HomeGoods-anchored center. The redevelopment plan includes bringing in a new best-in-class grocer, which will drive additional traffic to this high-quality asset. Fund V is a 90% partner in the joint venture.

Palm Coast Landing, Palm Coast, FL (Fund V). In May, Fund V completed the acquisition of Palm Coast Landing, a 171,000-square foot shopping center, located in Palm Coast, FL, for $36.6 million. This property, anchored by Ross Dress for Less, TJ Maxx and Michael's, is the dominant shopping center in its market.

Lincoln Commons, Lincoln, RI (Fund V). In June, Fund V completed the acquisition of a 450,000-square foot shopping center, located in Lincoln, RI, for $55.9 million. The property is located eight miles from downtown Providence and is anchored by Stop & Shop, Target (shadow), Marshalls and HomeGoods. As the dominant center in the region, this higher-yielding asset has a diverse mix of necessity, entertainment, food and soft goods retailers to complement the strong anchor tenancy.

110 University Place, New York, NY (Fund IV). In May, Fund IV closed on a ground lease interest in the commercial portion of a newly-constructed, high-end condominium building located at 110 University Place in the Union Square submarket of Manhattan, for $10.5 million. Located immediately south of Union Square Park, 110 University Place is well-located on a high-foot-traffic, high-energy corridor. The Company is already in discussions with several retailers to lease the available space. This acquisition was identified during Fund IV's investment period, which concluded in 2016.

Fund Disposition

During the second quarter, Fund IV monetized its $15.3 million preferred equity investment in 900 W Randolph generating a 16% IRR and 1.7x multiple.

BALANCE SHEET

By match-funding its Core acquisition activity, the Company has further strengthened its already-solid, low-leveraged balance sheet. As of June 30, 2019, the Company's net debt to EBITDA ratio for the Core Portfolio was 4.7x, with substantially all of its Core Portfolio debt fixed at an average rate of 3.7%.

The Company raised proceeds of $75.1 million at an average gross price per share of $28.58 through the Company's ATM program through June 30, 2019.

2019 GUIDANCE

The Company raised its annual 2019 guidance ranges as follows: earnings per share $0.39 to $0.46, FFO per share $1.38 to $1.44 and same property net operating income growth 3.5% to 4.5% for 2019 (excluding redevelopments) up from the previous ranges of $0.35 to $0.46, $1.34 to $1.46 and 3.0% to 4.0%, respectively.

  • Presented below is the revised annual 2019 guidance reflecting the accretive impact of its external growth described above and the continued strength in its Core Portfolio:

 

 

2019 Guidance

 

 

 

Revised

 

 

Prior

 

 

 

 

 

 

 

 

 

 

Net income per share attributable to Common Shareholders

 

$0.39 to $0.46

 

 

$0.35 to $0.46

 

Impact of transactional activity and tenant recapture

 

(0.09) to (0.12)

 

 

(0.08) to (0.13)

 

Depreciation of real estate and amortization of leasing costs

 

 

 

 

 

 

 

 

(net of noncontrolling interests' share)

 

0.96

 

 

0.96

 

Gain on disposition of properties (net of noncontrolling interests' share)

 

 

 

 

 

 

Noncontrolling interest in Operating Partnership

 

0.02

 

 

0.02

 

Funds from operations, prior to

additional transactional activity, per share

 

1.28 to 1.32

 

 

1.25 to 1.31

 

 

 

 

 

 

 

 

 

 

Fund acquisitions and related fees

 

0.01 to 0.02

 

 

0.01 to 0.03

 

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