SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period endedSeptember 30, 2017
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 1-12002
ACADIA REALTY TRUST
(Exact name of registrant in its charter)
Maryland (State or other jurisdiction of incorporation or organization) | 23-2715194 (I.R.S. Employer Identification No.) | |
411 THEODORE FREMD AVENUE, SUITE 300, RYE, NY (Address of principal executive offices) | 10580 (Zip Code) | |
(914) 288-8100
(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 | AKR | 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.
Yes☒ | No ☐ | |
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).
Yes☒ | No ☐ | |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” andfiler,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer | ☒ | Accelerated Filer | ☐ | Emerging Growth Company | ☐ |
Non-accelerated Filer | ☐ | Smaller Reporting Company | ☐ |
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
As of October 31, 201728, 2022 there were 83,705,83594,956,716 common shares of beneficial interest, par value $0.001 per share (“Common Shares”), outstanding.
ACADIA REALTY TRUST AND SUBSIDIARIES
FORM 10-Q
INDEX
| Item No. | Description | Page | |
| 1. | |||
| 2. | |||
| 3. | |||
| 4. | |||
| 1. | |||
| 1A. | |||
| 2. | |||
| 3. | |||
| 4. | |||
| 5. | |||
| 6. | |||
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Quarterly Report on Form 10-Q (this “Report”) of Acadia Realty Trust, a Maryland real estate investment trust, (the “Report”“Company”) 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 the use of the words such as “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend” or “project”“project,” or the negative thereof, or other variations thereon or comparable terminology. FactorsForward-looking statements involve known and unknown risks, uncertainties and other factors that could cause our actual results and financial performance to be materially different from future results and financial performance expressed or implied by such forward-looking statements, including, but not limited to: (i) the economic, political and social impact of, and uncertainty surrounding the COVID-19 pandemic (the “COVID-19 Pandemic”), including its impact on our tenants and their ability to make rent and other payments or honor their commitments under existing leases; (ii) macroeconomic conditions, such as a disruption of or lack of access to the capital markets and rising inflation; (iii) our success in implementing our business strategy and our ability to identify, underwrite, finance, consummate and integrate diversifying acquisitions and investments; (iv) changes in general economic conditions or economic conditions in the markets in which could have a material adversewe may, from time to time, compete, and their effect on our operationsrevenues, earnings and future prospects include, butfunding sources; (v) increases in our borrowing costs as a result of changes in interest rates and other factors, including the discontinuation of USD LIBOR, which is currently anticipated to occur in 2023; (vi) our ability to pay down, refinance, restructure or extend our indebtedness as it becomes due; (vii) our investments in joint ventures and unconsolidated entities, including our lack of sole decision-making authority and our reliance on our joint venture partners’ financial condition; (viii) our ability to obtain the financial results expected from our development and redevelopment projects; (ix) our tenants’ ability and willingness to renew their leases with us upon expiration, our ability to re-lease our properties on the same or better terms in the event of nonrenewal or in the event we exercise our right to replace an existing tenant, and obligations we may incur in connection with the replacement of an existing tenant; (x) our potential liability for environmental matters; (xi) damage to our properties from catastrophic weather and other natural events, and the physical effects of climate change; (xii) uninsured losses; (xiii) our ability and willingness to maintain our qualification as a real estate investment trust (REIT) in light of economic, market, legal, tax and other considerations; (xiv) information technology security breaches, including increased cybersecurity risks relating to the use of remote technology during the COVID-19 Pandemic; (xv) the loss of key executives; (xvi) the accuracy of our methodologies and estimates regarding environmental, social and governance (“ESG”) metrics, goals and targets, tenant willingness and ability to collaborate towards reporting ESG metrics and meeting ESG goals and targets, and the impact of governmental regulation on our ESG efforts; and (xvii) the risk that the determination to restate the Prior Period Financial Statements could negatively affect investor confidence and raise reputational issues.
The factors described above are not limited toexhaustive and additional factors could adversely affect the Company’s future results and financial performance, including the risk factors discussed under the section captioned “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 and other periodic or current reports the Company files with the SEC, including those set forth under the headings “
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 below.
3
PART I—I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|
| September 30, |
|
| December 31, |
| ||
(dollars in thousands, except per share amounts) |
| 2022 |
|
| 2021 |
| ||
ASSETS |
|
|
|
|
|
| ||
Investments in real estate, at cost |
|
|
|
|
|
| ||
Operating real estate, net |
| $ | 3,374,453 |
|
| $ | 3,219,373 |
|
Real estate under development |
|
| 186,360 |
|
|
| 203,773 |
|
Net investments in real estate |
|
| 3,560,813 |
|
|
| 3,423,146 |
|
Notes receivable, net |
|
| 123,966 |
|
|
| 153,886 |
|
Investments in and advances to unconsolidated affiliates |
|
| 317,422 |
|
|
| 322,326 |
|
Other assets, net |
|
| 234,558 |
|
|
| 186,509 |
|
Right-of-use assets - operating leases, net |
|
| 38,158 |
|
|
| 40,743 |
|
Cash and cash equivalents |
|
| 18,068 |
|
|
| 17,746 |
|
Restricted cash |
|
| 12,635 |
|
|
| 9,813 |
|
Rents receivable, net |
|
| 46,821 |
|
|
| 43,625 |
|
Assets of properties held for sale |
|
| 11,057 |
|
|
| 63,952 |
|
Total assets (a) |
| $ | 4,363,498 |
|
| $ | 4,261,746 |
|
|
|
|
|
|
|
| ||
LIABILITIES |
|
|
|
|
|
| ||
Mortgage and other notes payable, net |
| $ | 945,235 |
|
| $ | 1,140,293 |
|
Unsecured notes payable, net |
|
| 694,310 |
|
|
| 559,040 |
|
Unsecured line of credit |
|
| 178,287 |
|
|
| 112,905 |
|
Accounts payable and other liabilities |
|
| 201,033 |
|
|
| 236,415 |
|
Lease liability - operating leases, net |
|
| 36,157 |
|
|
| 38,759 |
|
Dividends and distributions payable |
|
| 18,393 |
|
|
| 14,460 |
|
Distributions in excess of income from, and investments in, unconsolidated affiliates |
|
| 8,880 |
|
|
| 9,939 |
|
Total liabilities (a) |
|
| 2,082,295 |
|
|
| 2,111,811 |
|
Commitments and contingencies |
|
|
|
|
|
| ||
Redeemable noncontrolling interests |
|
| 72,352 |
|
|
| — |
|
EQUITY |
|
|
|
|
|
| ||
Acadia Shareholders' Equity |
|
|
|
|
|
| ||
Common shares, $0.001 par value, authorized 200,000,000 shares, issued and outstanding 94,951,297 and 89,303,545 shares, respectively |
|
| 95 |
|
|
| 89 |
|
Additional paid-in capital |
|
| 1,940,033 |
|
|
| 1,754,383 |
|
Accumulated other comprehensive income (loss) |
|
| 49,684 |
|
|
| (36,214 | ) |
Distributions in excess of accumulated earnings |
|
| (287,262 | ) |
|
| (196,645 | ) |
Total Acadia shareholders’ equity |
|
| 1,702,550 |
|
|
| 1,521,613 |
|
Noncontrolling interests |
|
| 506,301 |
|
|
| 628,322 |
|
Total equity |
|
| 2,208,851 |
|
|
| 2,149,935 |
|
Total liabilities, equity and redeemable noncontrolling interests |
| $ | 4,363,498 |
|
| $ | 4,261,746 |
|
| September 30, 2017 | December 31, 2016 | |||||||
| (dollars in thousands, except per share amounts) | ||||||||
| ASSETS | (Unaudited) | |||||||
| Investments in real estate, at cost | ||||||||
| Operating real estate, net | $ | 2,905,000 | $ | 2,551,448 | ||||
| Real estate under development, at cost | 237,434 | 543,486 | ||||||
| Net investments in real estate | 3,142,434 | 3,094,934 | ||||||
| Notes receivable, net | 250,194 | 276,163 | ||||||
| Investments in and advances to unconsolidated affiliates | 270,245 | 272,028 | ||||||
| Other assets, net | 213,018 | 192,786 | ||||||
| Cash and cash equivalents | 48,255 | 71,805 | ||||||
| Rents receivable, net | 53,479 | 43,842 | ||||||
| Restricted cash | 19,473 | 22,904 | ||||||
| Assets of properties held for sale | 95,859 | 21,498 | ||||||
| Total assets | $ | 4,092,957 | $ | 3,995,960 | ||||
| LIABILITIES | ||||||||
| Mortgage and other notes payable, net | $ | 1,045,877 | $ | 1,055,728 | ||||
| Unsecured notes payable, net | 497,970 | 432,990 | ||||||
| Unsecured line of credit | 59,000 | — | ||||||
| Accounts payable and other liabilities | 211,206 | 208,672 | ||||||
| Capital lease obligation | 70,498 | 70,129 | ||||||
| Dividends and distributions payable | 23,350 | 36,625 | ||||||
| Distributions in excess of income from, and investments in, unconsolidated affiliates | 15,262 | 13,691 | ||||||
| Total liabilities | 1,923,163 | 1,817,835 | ||||||
| Commitments and contingencies | ||||||||
| EQUITY | ||||||||
| Acadia Shareholders' Equity | ||||||||
| Common shares, $0.001 par value, authorized 200,000,000 and 100,000,000 shares, issued and outstanding 83,680,337 and 83,597,741 shares, respectively | 84 | 84 | ||||||
| Additional paid-in capital | 1,594,332 | 1,594,926 | ||||||
| Accumulated other comprehensive loss | (553 | ) | (798 | ) | ||||
| Distributions in excess of accumulated earnings | (30,325 | ) | (5,635 | ) | ||||
| Total Acadia shareholders’ equity | 1,563,538 | 1,588,577 | ||||||
| Noncontrolling interests | 606,256 | 589,548 | ||||||
| Total equity | 2,169,794 | 2,178,125 | ||||||
| Total liabilities and equity | $ | 4,092,957 | $ | 3,995,960 | ||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| (in thousands except per share amounts) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Revenues | ||||||||||||||||
| Rental income | $ | 51,707 | $ | 35,710 | $ | 148,760 | $ | 109,486 | ||||||||
| Expense reimbursements | 9,957 | 7,192 | 32,347 | 22,920 | ||||||||||||
| Other | 1,014 | 953 | 3,074 | 3,412 | ||||||||||||
| Total revenues | 62,678 | 43,855 | 184,181 | 135,818 | ||||||||||||
| Operating expenses | ||||||||||||||||
| Depreciation and amortization | 26,652 | 15,217 | 77,245 | 46,744 | ||||||||||||
| General and administrative | 7,953 | 12,869 | 25,286 | 30,742 | ||||||||||||
| Real estate taxes | 8,822 | 6,195 | 27,462 | 18,000 | ||||||||||||
| Property operating | 9,417 | 5,055 | 26,978 | 15,697 | ||||||||||||
| Other operating | 250 | 3,265 | 987 | 4,094 | ||||||||||||
| Impairment of an asset | 3,840 | — | 3,840 | — | ||||||||||||
| Total operating expenses | 56,934 | 42,601 | 161,798 | 115,277 | ||||||||||||
| Operating income | 5,744 | 1,254 | 22,383 | 20,541 | ||||||||||||
| Equity in earnings (losses) and gains (losses) of unconsolidated affiliates inclusive of gains (losses) on disposition of properties of $0, ($726), $14,771 and ($726), respectively | 4,001 | (102 | ) | 21,044 | 3,592 | |||||||||||
| Interest income | 6,461 | 7,245 | 23,648 | 19,298 | ||||||||||||
| Interest expense | (15,428 | ) | (7,982 | ) | (39,666 | ) | (24,917 | ) | ||||||||
| Income from continuing operations before income taxes | 778 | 415 | 27,409 | 18,514 | ||||||||||||
| Income tax provision | (465 | ) | (89 | ) | (1,017 | ) | (123 | ) | ||||||||
| Income from continuing operations before gain on disposition of properties | 313 | 326 | 26,392 | 18,391 | ||||||||||||
| Gain on disposition of properties, net of tax | 12,972 | — | 12,972 | 81,965 | ||||||||||||
| Net income | 13,285 | 326 | 39,364 | 100,356 | ||||||||||||
| Net loss (income) attributable to noncontrolling interests | (418 | ) | 5,786 | 1,194 | (47,401 | ) | ||||||||||
| Net income attributable to Acadia | $ | 12,867 | $ | 6,112 | $ | 40,558 | $ | 52,955 | ||||||||
| Basic and diluted earnings per share | $ | 0.15 | $ | 0.08 | $ | 0.48 | $ | 0.71 | ||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| (in thousands) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Net income | $ | 13,285 | $ | 326 | $ | 39,364 | $ | 100,356 | ||||||||
| Other comprehensive income (loss): | ||||||||||||||||
| Unrealized (loss) income on valuation of swap agreements | (644 | ) | 1,474 | (2,652 | ) | (12,624 | ) | |||||||||
| Reclassification of realized interest on swap agreements | 734 | 1,210 | 2,637 | 3,396 | ||||||||||||
| Other comprehensive income (loss) | 90 | 2,684 | (15 | ) | (9,228 | ) | ||||||||||
| Comprehensive income | 13,375 | 3,010 | 39,349 | 91,128 | ||||||||||||
| Comprehensive (income) loss attributable to noncontrolling interests | (541 | ) | 5,478 | 1,454 | (46,554 | ) | ||||||||||
| Comprehensive income attributable to Acadia | $ | 12,834 | $ | 8,488 | $ | 40,803 | $ | 44,574 | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
4
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)
| Acadia Shareholders | ||||||||||||||||||||||||||||||
| (in thousands, except per share amounts) | Common Shares | Share Amount | Additional Paid-in Capital | Accumulated Other Comprehensive (Loss) Income | (Distributions in Excess of Accumulated Earnings) Retained Earnings | Total Common Shareholders’ Equity | Noncontrolling Interests | Total Equity | ||||||||||||||||||||||
| Balance at January 1, 2017 | 83,598 | $ | 84 | $ | 1,594,926 | $ | (798 | ) | $ | (5,635 | ) | $ | 1,588,577 | $ | 589,548 | $ | 2,178,125 | |||||||||||||
| Conversion of OP Units to Common Shares by limited partners of the Operating Partnership | 61 | — | 1,086 | — | — | 1,086 | (1,086 | ) | — | |||||||||||||||||||||
| Dividends/distributions declared ($0.78 per Common Share/OP Unit) | — | — | — | — | (65,248 | ) | (65,248 | ) | (4,805 | ) | (70,053 | ) | ||||||||||||||||||
| Employee and trustee stock compensation, net | 21 | — | 425 | — | — | 425 | 8,704 | 9,129 | ||||||||||||||||||||||
| Noncontrolling interest distributions | — | — | — | — | — | — | (7,278 | ) | (7,278 | ) | ||||||||||||||||||||
| Noncontrolling interest contributions | — | — | — | — | — | — | 20,522 | 20,522 | ||||||||||||||||||||||
| Reallocation of noncontrolling interests | — | — | (2,105 | ) | — | — | (2,105 | ) | 2,105 | — | ||||||||||||||||||||
| Comprehensive income | — | — | — | 245 | 40,558 | 40,803 | (1,454 | ) | 39,349 | |||||||||||||||||||||
| Balance at September 30, 2017 | 83,680 | $ | 84 | $ | 1,594,332 | $ | (553 | ) | $ | (30,325 | ) | $ | 1,563,538 | $ | 606,256 | $ | 2,169,794 | |||||||||||||
Balance at January 1, 2016 | 70,258 | $ | 70 | $ | 1,092,239 | $ | (4,463 | ) | $ | 12,642 | $ | 1,100,488 | $ | 420,866 | $ | 1,521,354 | ||||||||||||||
| Conversion of OP Units to Common Shares by limited partners of the Operating Partnership | 350 | 1 | 7,874 | — | — | 7,875 | (7,875 | ) | — | |||||||||||||||||||||
| Issuance of Common Shares, net of issuance costs | 10,228 | 10 | 357,252 | — | — | 357,262 | — | 357,262 | ||||||||||||||||||||||
| Issuance of OP Units to acquire real estate | — | — | — | — | — | — | 29,336 | 29,336 | ||||||||||||||||||||||
| Dividends/distributions declared ($0.75 per Common Share/OP Unit) | — | — | — | — | (56,782 | ) | (56,782 | ) | (4,398 | ) | (61,180 | ) | ||||||||||||||||||
| Acquisition of noncontrolling interests | — | — | 7,546 | — | — | 7,546 | (25,925 | ) | (18,379 | ) | ||||||||||||||||||||
| Employee and trustee stock compensation, net | 27 | — | 699 | — | — | 699 | 10,983 | 11,682 | ||||||||||||||||||||||
| Change in control of previously unconsolidated investment | — | — | — | — | — | — | (75,713 | ) | (75,713 | ) | ||||||||||||||||||||
| Noncontrolling interest distributions | — | — | — | — | — | — | (50,849 | ) | (50,849 | ) | ||||||||||||||||||||
| Noncontrolling interest contributions | — | — | — | — | — | — | 204,412 | 204,412 | ||||||||||||||||||||||
| Comprehensive (loss) income | — | — | — | (8,381 | ) | 52,955 | 44,574 | 46,554 | 91,128 | |||||||||||||||||||||
| Reallocation of noncontrolling interests | — | — | 35,254 | — | — | 35,254 | (35,254 | ) | — | |||||||||||||||||||||
| Balance at September 30, 2016 | 80,863 | $ | 81 | $ | 1,500,864 | $ | (12,844 | ) | $ | 8,815 | $ | 1,496,916 | $ | 512,137 | $ | 2,009,053 | ||||||||||||||
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(in thousands except per share amounts) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Revenues |
|
|
|
| (As Restated) |
|
|
|
|
| (As Restated) |
| ||||
Rental income |
| $ | 78,453 |
|
| $ | 70,302 |
|
| $ | 238,479 |
|
| $ | 208,369 |
|
Other |
|
| 1,493 |
|
|
| 1,594 |
|
|
| 7,233 |
|
|
| 4,771 |
|
Total revenues |
|
| 79,946 |
|
|
| 71,896 |
|
|
| 245,712 |
|
|
| 213,140 |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Depreciation and amortization |
|
| 33,744 |
|
|
| 30,064 |
|
|
| 102,428 |
|
|
| 91,244 |
|
General and administrative |
|
| 10,170 |
|
|
| 9,910 |
|
|
| 32,768 |
|
|
| 29,555 |
|
Real estate taxes |
|
| 11,749 |
|
|
| 11,028 |
|
|
| 34,657 |
|
|
| 34,448 |
|
Property operating |
|
| 13,810 |
|
|
| 12,443 |
|
|
| 40,727 |
|
|
| 38,288 |
|
Impairment charges |
|
| 33,311 |
|
|
| 9,925 |
|
|
| 33,311 |
|
|
| 9,925 |
|
Total operating expenses |
|
| 102,784 |
|
|
| 73,370 |
|
|
| 243,891 |
|
|
| 203,460 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Gain on disposition of properties |
|
| 8,885 |
|
|
| — |
|
|
| 49,916 |
|
|
| 10,521 |
|
Operating (loss) income |
|
| (13,953 | ) |
|
| (1,474 | ) |
|
| 51,737 |
|
|
| 20,201 |
|
Equity in (losses) earnings of unconsolidated affiliates |
|
| (50,579 | ) |
|
| 372 |
|
|
| (46,169 | ) |
|
| 3,153 |
|
Interest and other income |
|
| 3,994 |
|
|
| 2,354 |
|
|
| 9,890 |
|
|
| 6,108 |
|
Realized and unrealized holding (losses) gains on investments and other |
|
| (7,862 | ) |
|
| 46,493 |
|
|
| (18,415 | ) |
|
| 53,460 |
|
Interest expense |
|
| (21,162 | ) |
|
| (16,614 | ) |
|
| (58,309 | ) |
|
| (50,302 | ) |
(Loss) income from continuing operations before income taxes |
|
| (89,562 | ) |
|
| 31,131 |
|
|
| (61,266 | ) |
|
| 32,620 |
|
Income tax benefit (provision) |
|
| 17 |
|
|
| (59 | ) |
|
| (7 | ) |
|
| (399 | ) |
Net (loss) income |
|
| (89,545 | ) |
|
| 31,072 |
|
|
| (61,273 | ) |
|
| 32,221 |
|
Net loss attributable to redeemable noncontrolling interests |
|
| 3,193 |
|
|
| — |
|
|
| 3,193 |
|
|
| — |
|
Net loss (income) attributable to noncontrolling interests |
|
| 30,461 |
|
|
| (19,065 | ) |
|
| 18,653 |
|
|
| (11,686 | ) |
Net (loss) income attributable to Acadia |
| $ | (55,891 | ) |
| $ | 12,007 |
|
| $ | (39,427 | ) |
| $ | 20,535 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic (loss) income per share |
| $ | (0.59 | ) |
| $ | 0.13 |
|
| $ | (0.42 | ) |
| $ | 0.23 |
|
Diluted (loss) income per share |
| $ | (0.61 | ) |
| $ | 0.13 |
|
| $ | (0.43 | ) |
| $ | 0.23 |
|
The accompanying notes are an integral part of these consolidated financial statements.
5
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
| Nine Months Ended September 30, | ||||||||
| (in thousands) | 2017 | 2016 | ||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net income | $ | 39,364 | $ | 100,356 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Gain on disposition of properties | (12,972 | ) | (81,965 | ) | ||||
| Depreciation and amortization | 77,245 | 46,744 | ||||||
| Distributions of operating income from unconsolidated affiliates | 7,412 | 4,917 | ||||||
| Equity in earnings and gains of unconsolidated affiliates | (21,044 | ) | (3,592 | ) | ||||
| Stock compensation expense | 9,129 | 9,729 | ||||||
| Amortization of financing costs | 3,996 | 2,025 | ||||||
| Impairment of asset | 3,840 | — | ||||||
| Other, net | (8,435 | ) | (5,577 | ) | ||||
| Changes in assets and liabilities: | ||||||||
| Other liabilities | (1,556 | ) | 134 | |||||
| Prepaid expenses and other assets | (8,723 | ) | (11,642 | ) | ||||
| Rents receivable, net | (6,646 | ) | (4,858 | ) | ||||
| Restricted cash | 3,538 | 1,733 | ||||||
| Accounts payable and accrued expenses | (736 | ) | (1,511 | ) | ||||
| Net cash provided by operating activities | 84,412 | 56,493 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Acquisition of real estate | (138,429 | ) | (292,136 | ) | ||||
| Development and property improvement costs | (84,554 | ) | (94,459 | ) | ||||
| Issuance of or advances on notes receivable | (10,449 | ) | (148,203 | ) | ||||
| Proceeds from the disposition of properties | 47,025 | 150,379 | ||||||
| Investments in and advances to unconsolidated affiliates | (4,555 | ) | (68,153 | ) | ||||
| Return of capital from unconsolidated affiliates | 12,300 | 50,622 | ||||||
| Proceeds from notes receivable | 12,000 | 42,819 | ||||||
| Deposits for properties under contract | — | (8,576 | ) | |||||
| Proceeds from disposition of properties of unconsolidated affiliates | 25,735 | — | ||||||
| Payment of deferred leasing costs | (5,381 | ) | (5,451 | ) | ||||
| Change in control of previously consolidated affiliate | — | (2,578 | ) | |||||
| Net cash used in investing activities | (146,308 | ) | (375,736 | ) | ||||
| Nine Months Ended September 30, | ||||||||
| (Continued) | 2017 | 2016 | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Principal payments on mortgage and other notes | (130,736 | ) | (292,815 | ) | ||||
| Principal payments on unsecured debt | (143,215 | ) | (516,790 | ) | ||||
| Proceeds received on mortgage and other notes | 120,252 | 70,437 | ||||||
| Proceeds from unsecured debt | 267,200 | 616,315 | ||||||
| Proceeds from issuance of Common Shares, net of issuance costs of $0 and $1,654, respectively | — | 357,262 | ||||||
| Capital contributions from noncontrolling interests | 20,522 | 204,412 | ||||||
| Distributions to noncontrolling interests | (12,813 | ) | (74,612 | ) | ||||
| Dividends paid to Common Shareholders | (77,770 | ) | (71,674 | ) | ||||
| Deferred financing and other costs | (4,987 | ) | (5,288 | ) | ||||
| Loan proceeds held as restricted cash | (107 | ) | 8,462 | |||||
| Net cash provided by financing activities | 38,346 | 295,709 | ||||||
| Decrease in cash and cash equivalents | (23,550 | ) | (23,534 | ) | ||||
| Cash and cash equivalents, beginning of the period | 71,805 | 72,776 | ||||||
| Cash and cash equivalents, end of the period | $ | 48,255 | $ | 49,242 | ||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid during the period for interest, net of capitalized interest of $12,246 and $14,936, respectively | $ | 39,626 | $ | 28,116 | ||||
| Cash paid for income taxes, net of (refunds) | $ | 773 | $ | 1,267 | ||||
| Supplemental disclosure of non-cash investing activities | ||||||||
| Acquisition of real estate through assumption of debt | $ | — | $ | 60,668 | ||||
| Acquisition of real estate through issuance of OP Units | $ | — | $ | 29,336 | ||||
| Acquisition of capital lease obligation | $ | — | $ | 76,461 | ||||
| Assumption of accounts payable and accrued expenses through acquisition of real estate | $ | 2,161 | $ | 1,809 | ||||
| Acquisition of real estate through conversion of note receivable | $ | 9,142 | $ | — | ||||
| Acquisition of undivided interest in a property through conversion of notes receivable | $ | 16,005 | $ | — | ||||
| Change in control of previously consolidated investment | ||||||||
| Real estate, net | $ | — | $ | 90,559 | ||||
| Investments in and advances to unconsolidated affiliates | — | (21,421 | ) | |||||
| Other assets and liabilities | — | 3,997 | ||||||
| Noncontrolling interest | — | (75,713 | ) | |||||
| Cash removed in de-consolidation of previously consolidated investment | $ | — | $ | (2,578 | ) | |||
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(in thousands) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
|
|
|
|
| (As Restated) |
|
|
|
|
| (As Restated) |
| ||||
Net (loss) income |
| $ | (89,545 | ) |
| $ | 31,072 |
|
| $ | (61,273 | ) |
| $ | 32,221 |
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Unrealized gain on valuation of swap agreements |
|
| 44,114 |
|
|
| 1,048 |
|
|
| 96,899 |
|
|
| 24,535 |
|
Reclassification of realized interest on swap agreements |
|
| 1,518 |
|
|
| 5,476 |
|
|
| 10,778 |
|
|
| 16,016 |
|
Other comprehensive income |
|
| 45,632 |
|
|
| 6,524 |
|
|
| 107,677 |
|
|
| 40,551 |
|
Comprehensive (loss) income |
|
| (43,913 | ) |
|
| 37,596 |
|
|
| 46,404 |
|
|
| 72,772 |
|
Comprehensive loss attributable to redeemable noncontrolling interests |
|
| 3,193 |
|
|
| — |
|
|
| 3,193 |
|
|
| — |
|
Comprehensive loss (income) attributable to noncontrolling interests |
|
| 23,273 |
|
|
| (20,849 | ) |
|
| (3,126 | ) |
|
| (20,515 | ) |
Comprehensive (loss) income attributable to Acadia |
| $ | (17,447 | ) |
| $ | 16,747 |
|
| $ | 46,471 |
|
| $ | 52,257 |
|
The accompanying notes are an integral part of these consolidated financial statements.
6
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Three Months Ended September 30, 2022 and 2021 (As Restated)
|
| Acadia Shareholders |
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
(in thousands, except per share amounts) |
| Common |
|
| Share |
|
| Additional |
|
| Accumulated |
|
| Distributions |
|
| Total |
|
| Noncontrolling |
|
| Total |
|
| Redeemable Noncontrolling |
| |||||||||
Balance at July 1, 2022 |
|
| 94,929 |
|
| $ | 95 |
|
| $ | 1,895,556 |
|
| $ | 11,240 |
|
| $ | (214,279 | ) |
| $ | 1,692,612 |
|
| $ | 670,606 |
|
| $ | 2,363,218 |
|
| $ | — |
|
Conversion of OP Units to Common Shares by limited partners of the Operating Partnership |
|
| 20 |
|
|
| — |
|
|
| 333 |
|
|
| — |
|
|
| — |
|
|
| 333 |
|
|
| (333 | ) |
|
| — |
|
|
| — |
|
Dividends/distributions declared ($0.18 per Common Share/OP Unit) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (17,092 | ) |
|
| (17,092 | ) |
|
| (1,276 | ) |
|
| (18,368 | ) |
|
| — |
|
Acquisition of noncontrolling interest |
|
| — |
|
|
| — |
|
|
| 44,605 |
|
|
| — |
|
|
| — |
|
|
| 44,605 |
|
|
| (50,435 | ) |
|
| (5,830 | ) |
|
| — |
|
City Point Loan |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (65,405 | ) |
City Point Loan accrued interest |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,564 | ) |
Employee and trustee stock compensation, net |
|
| 2 |
|
|
| — |
|
|
| 183 |
|
|
| — |
|
|
| — |
|
|
| 183 |
|
|
| 1,997 |
|
|
| 2,180 |
|
|
| — |
|
Noncontrolling interest distributions |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (24,632 | ) |
|
| (24,632 | ) |
|
| — |
|
Noncontrolling interest contributions |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 9,572 |
|
|
| 9,572 |
|
|
| 65,945 |
|
Comprehensive income (loss) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 38,444 |
|
|
| (55,891 | ) |
|
| (17,447 | ) |
|
| (23,273 | ) |
|
| (40,720 | ) |
|
| (3,193 | ) |
Reclassification of redeemable noncontrolling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (76,569 | ) |
|
| (76,569 | ) |
|
| 76,569 |
|
Reallocation of noncontrolling interests |
|
| — |
|
|
| — |
|
|
| (644 | ) |
|
| — |
|
|
| — |
|
|
| (644 | ) |
|
| 644 |
|
|
| — |
|
|
| — |
|
Balance at September 30, 2022 |
|
| 94,951 |
|
| $ | 95 |
|
| $ | 1,940,033 |
|
| $ | 49,684 |
|
| $ | (287,262 | ) |
| $ | 1,702,550 |
|
| $ | 506,301 |
|
| $ | 2,208,851 |
|
| $ | 72,352 |
|
(As Restated) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Balance at July 1, 2021 |
|
| 88,419 |
|
| $ | 88 |
|
| $ | 1,730,686 |
|
| $ | (47,909 | ) |
| $ | (185,001 | ) |
| $ | 1,497,864 |
|
| $ | 619,098 |
|
| $ | 2,116,962 |
|
| $ | — |
|
Conversion of OP Units to Common Shares by limited partners of the Operating Partnership |
|
| 18 |
|
|
| — |
|
|
| 288 |
|
|
| — |
|
|
| — |
|
|
| 288 |
|
|
| (288 | ) |
|
| — |
|
|
| — |
|
Cancellation of OP Units |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (479 | ) |
|
| (479 | ) |
|
| — |
|
Issuance of Common Shares |
|
| 13 |
|
|
| — |
|
|
| 189 |
|
|
| — |
|
|
| — |
|
|
| 189 |
|
|
| — |
|
|
| 189 |
|
|
| — |
|
Dividends/distributions declared ($0.15 per Common Share/OP Unit) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (13,268 | ) |
|
| (13,268 | ) |
|
| (1,046 | ) |
|
| (14,314 | ) |
|
| — |
|
Employee and trustee stock compensation, net |
|
| 2 |
|
|
| — |
|
|
| 225 |
|
|
| — |
|
|
| — |
|
|
| 225 |
|
|
| 2,419 |
|
|
| 2,644 |
|
|
| — |
|
Noncontrolling interest distributions |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (10,127 | ) |
|
| (10,127 | ) |
|
| — |
|
Noncontrolling interest contributions |
|
| �� |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 9,518 |
|
|
| 9,518 |
|
|
| — |
|
Comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,740 |
|
|
| 12,007 |
|
|
| 16,747 |
|
|
| 20,849 |
|
|
| 37,596 |
|
|
| — |
|
Reallocation of noncontrolling interests |
|
| — |
|
|
| — |
|
|
| 2,060 |
|
|
| — |
|
|
| — |
|
|
| 2,060 |
|
|
| (2,060 | ) |
|
| — |
|
|
| — |
|
Balance at September 30, 2021 |
|
| 88,452 |
|
| $ | 88 |
|
| $ | 1,733,448 |
|
| $ | (43,169 | ) |
| $ | (186,262 | ) |
| $ | 1,504,105 |
|
| $ | 637,884 |
|
| $ | 2,141,989 |
|
| $ | — |
|
The accompanying notes are an integral part of these consolidated financial statements.
7
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Nine Months Ended September 30, 2022 and 2021 (As Restated)
|
| Acadia Shareholders |
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
(in thousands, except per share amounts) |
| Common |
|
| Share |
|
| Additional |
|
| Accumulated |
|
| Distributions |
|
| Total |
|
| Noncontrolling |
|
| Total |
|
| Redeemable Noncontrolling Interest |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Balance at January 1, 2022 |
|
| 89,304 |
|
| $ | 89 |
|
| $ | 1,754,383 |
|
| $ | (36,214 | ) |
| $ | (196,645 | ) |
| $ | 1,521,613 |
|
| $ | 628,322 |
|
| $ | 2,149,935 |
|
| $ | — |
|
Issuance of Common Shares, net |
|
| 5,525 |
|
|
| 6 |
|
|
| 119,479 |
|
|
| — |
|
|
| — |
|
|
| 119,485 |
|
|
| — |
|
|
| 119,485 |
|
|
| — |
|
Conversion of OP Units to Common Shares by limited partners of the Operating Partnership |
|
| 71 |
|
|
| — |
|
|
| 1,147 |
|
|
| — |
|
|
| — |
|
|
| 1,147 |
|
|
| (1,147 | ) |
|
| — |
|
|
| — |
|
Dividends/distributions declared ($0.54 per Common Share/OP Unit) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (51,190 | ) |
|
| (51,190 | ) |
|
| (3,846 | ) |
|
| (55,036 | ) |
|
| — |
|
Acquisition of noncontrolling interest |
|
| — |
|
|
| — |
|
|
| 67,475 |
|
|
| — |
|
|
| — |
|
|
| 67,475 |
|
|
| (91,811 | ) |
|
| (24,336 | ) |
|
| — |
|
City Point Loan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| — |
|
|
| (65,405 | ) | |||||||
City Point Loan accrued interest |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,564 | ) |
Employee and trustee stock compensation, net |
|
| 51 |
|
|
| — |
|
|
| 871 |
|
|
| — |
|
|
| — |
|
|
| 871 |
|
|
| 7,669 |
|
|
| 8,540 |
|
|
| — |
|
Noncontrolling interest distributions |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (72,187 | ) |
|
| (72,187 | ) |
|
| — |
|
Noncontrolling interest contributions |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 109,422 |
|
|
| 109,422 |
|
|
| 65,945 |
|
Comprehensive income (loss) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 85,898 |
|
|
| (39,427 | ) |
|
| 46,471 |
|
|
| 3,126 |
|
|
| 49,597 |
|
|
| (3,193 | ) |
Reclassification of redeemable noncontrolling interests |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (76,569 | ) |
|
| (76,569 | ) |
|
| 76,569 |
|
Reallocation of noncontrolling interests |
|
| — |
|
|
| — |
|
|
| (3,322 | ) |
|
| — |
|
|
| — |
|
|
| (3,322 | ) |
|
| 3,322 |
|
|
| — |
|
|
| — |
|
Balance at September 30, 2022 |
|
| 94,951 |
|
| $ | 95 |
|
| $ | 1,940,033 |
|
| $ | 49,684 |
|
| $ | (287,262 | ) |
| $ | 1,702,550 |
|
| $ | 506,301 |
|
| $ | 2,208,851 |
|
| $ | 72,352 |
|
As Restated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Balance at January 1, 2021 |
|
| 86,269 |
|
| $ | 86 |
|
| $ | 1,683,165 |
|
| $ | (74,891 | ) |
| $ | (167,321 | ) |
| $ | 1,441,039 |
|
| $ | 609,165 |
|
| $ | 2,050,204 |
|
| $ | — |
|
Conversion of OP Units to Common Shares by limited partners of the Operating Partnership |
|
| 44 |
|
|
| — |
|
|
| 697 |
|
|
| — |
|
|
| — |
|
|
| 697 |
|
|
| (697 | ) |
|
| — |
|
|
| — |
|
Cancellation of OP Units |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (479 | ) |
|
| (479 | ) |
|
| — |
|
Issuance of Common Shares |
|
| 2,085 |
|
|
| 2 |
|
|
| 45,863 |
|
|
| — |
|
|
| — |
|
|
| 45,865 |
|
|
| — |
|
|
| 45,865 |
|
|
| — |
|
Dividends/distributions declared ($0.45 per Common Share/OP Unit) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (39,476 | ) |
|
| (39,476 | ) |
|
| (3,146 | ) |
|
| (42,622 | ) |
|
| — |
|
Employee and trustee stock compensation, net |
|
| 54 |
|
|
| — |
|
|
| 914 |
|
|
| — |
|
|
| — |
|
|
| 914 |
|
|
| 8,866 |
|
|
| 9,780 |
|
|
| — |
|
Noncontrolling interest distributions |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (20,158 | ) |
|
| (20,158 | ) |
|
| — |
|
Noncontrolling interest contributions |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 26,627 |
|
|
| 26,627 |
|
|
| — |
|
Comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 31,722 |
|
|
| 20,535 |
|
|
| 52,257 |
|
|
| 20,515 |
|
|
| 72,772 |
|
|
| — |
|
Reallocation of noncontrolling interests |
|
| — |
|
|
| — |
|
|
| 2,809 |
|
|
| — |
|
|
| — |
|
|
| 2,809 |
|
|
| (2,809 | ) |
|
| — |
|
|
| — |
|
Balance at September 30, 2021 |
|
| 88,452 |
|
| $ | 88 |
|
| $ | 1,733,448 |
|
| $ | (43,169 | ) |
| $ | (186,262 | ) |
| $ | 1,504,105 |
|
| $ | 637,884 |
|
| $ | 2,141,989 |
|
| $ | — |
|
The accompanying notes are an integral part of these consolidated financial statements.
8
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
| Nine Months Ended September 30, |
| |||||
(in thousands) |
| 2022 |
|
| 2021 |
| ||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
| (As Restated) |
| ||
Net (loss) income |
| $ | (61,273 | ) |
| $ | 32,221 |
|
Adjustments to reconcile net (loss) income to net cash provided by operating activities: |
|
|
|
|
|
| ||
Depreciation and amortization |
|
| 102,428 |
|
|
| 91,244 |
|
Gain on disposition of properties and other investments |
|
| (51,389 | ) |
|
| (10,521 | ) |
Net unrealized holding losses (gains) on investments |
|
| 20,786 |
|
|
| (55,796 | ) |
Stock compensation expense |
|
| 8,540 |
|
|
| 9,780 |
|
Straight-line rents |
|
| (7,246 | ) |
|
| (4,107 | ) |
Equity in losses (earnings) of unconsolidated affiliates |
|
| 46,169 |
|
|
| (3,153 | ) |
Distributions of operating income from unconsolidated affiliates |
|
| 8,192 |
|
|
| 2,004 |
|
Adjustments to straight-line rent reserves |
|
| (79 | ) |
|
| 320 |
|
Amortization of financing costs |
|
| 4,100 |
|
|
| 3,662 |
|
Non-cash lease expense |
|
| 2,584 |
|
|
| 2,887 |
|
Adjustments to allowance for credit loss |
|
| (779 | ) |
|
| 773 |
|
Impairment charges |
|
| 33,311 |
|
|
| 9,925 |
|
Termination of ground lease |
|
| — |
|
|
| (3,615 | ) |
Other, net |
|
| (6,361 | ) |
|
| (2,259 | ) |
Changes in assets and liabilities: |
|
|
|
|
|
| ||
Rents receivable |
|
| 3,523 |
|
|
| 4,118 |
|
Other liabilities |
|
| (817 | ) |
|
| 1,748 |
|
Accounts payable and accrued expenses |
|
| 93 |
|
|
| 489 |
|
Prepaid expenses and other assets |
|
| 1,296 |
|
|
| (5,681 | ) |
Lease liability - operating leases |
|
| (2,600 | ) |
|
| (2,653 | ) |
Net cash provided by operating activities |
|
| 100,478 |
|
|
| 71,386 |
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
| ||
Acquisitions of real estate |
|
| (242,633 | ) |
|
| (63,425 | ) |
Proceeds from the disposition of properties and other investments, net |
|
| 195,367 |
|
|
| 63,901 |
|
Investments in and advances to unconsolidated affiliates and other |
|
| (148,430 | ) |
|
| (7,032 | ) |
Development, construction and property improvement costs |
|
| (36,863 | ) |
|
| (25,935 | ) |
Refund of deposits for properties under contract |
|
| 350 |
|
|
| — |
|
Change in control of previously unconsolidated affiliate |
|
| 3,592 |
|
|
| — |
|
Return of capital from unconsolidated affiliates and other |
|
| 63,661 |
|
|
| 12,071 |
|
Payment of deferred leasing costs |
|
| (4,996 | ) |
|
| (3,191 | ) |
Acquisition of investment interests |
|
| (4,527 | ) |
|
| — |
|
Proceeds from notes receivable |
|
| 29,530 |
|
|
| — |
|
Issuance of notes receivable |
|
| — |
|
|
| (57,957 | ) |
Net cash used in investing activities |
|
| (144,949 | ) |
|
| (81,568 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
| ||
Proceeds from unsecured debt |
|
| 823,262 |
|
|
| 211,854 |
|
Principal payments on unsecured debt |
|
| (621,180 | ) |
|
| (160,387 | ) |
Proceeds from the sale of Common Shares |
|
| 119,485 |
|
|
| 45,865 |
|
Capital contributions from noncontrolling interests |
|
| 109,423 |
|
|
| 26,627 |
|
Principal payments on mortgage and other notes |
|
| (429,301 | ) |
|
| (69,766 | ) |
Distributions to noncontrolling interests |
|
| (75,796 | ) |
|
| (22,381 | ) |
Dividends paid to Common Shareholders |
|
| (47,494 | ) |
|
| (26,208 | ) |
Proceeds received on mortgage and other notes |
|
| 202,743 |
|
|
| 9,664 |
|
Deferred financing and other costs |
|
| (9,191 | ) |
|
| (7,296 | ) |
Acquisition of noncontrolling interest |
|
| (24,336 | ) |
|
| — |
|
Payments of finance lease obligations |
|
| — |
|
|
| (63 | ) |
Net cash provided by financing activities |
|
| 47,615 |
|
|
| 7,909 |
|
Increase (decrease) in cash and restricted cash |
|
| 3,144 |
|
|
| (2,273 | ) |
Cash of $17,746 and $18,699 and restricted cash of $9,813 and $11,096, respectively, beginning of period |
|
| 27,559 |
|
|
| 29,795 |
|
Cash of $18,068 and $16,158 and restricted cash of $12,635 and $11,364, respectively, end of period |
| $ | 30,703 |
|
| $ | 27,522 |
|
9
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
|
| Nine Months Ended September 30, |
| |||||
(in thousands) |
| 2022 |
|
| 2021 |
| ||
Supplemental disclosure of cash flow information |
|
|
|
| (As Restated) |
| ||
Cash paid during the period for interest, net of capitalized interest of $2,331 and $6,270 respectively |
| $ | 41,922 |
|
| $ | 31,807 |
|
Cash paid for income taxes, net of (refunds) |
| $ | 6 |
|
| $ | 253 |
|
|
|
|
|
|
|
| ||
Supplemental disclosure of non-cash investing and financing activities |
|
|
|
|
|
| ||
Distribution declared and payable on October 14, 2022, and October 15, 2021, respectively |
| $ | 18,372 |
|
| $ | 14,314 |
|
Assumption of accounts payable and accrued expenses through acquisition of real estate |
| $ | 4,062 |
|
| $ | 523 |
|
Right-of-use assets, operating leases exchanged for operating lease liabilities |
| $ | — |
|
| $ | 412 |
|
Issuance of note receivable used as capital contributions from noncontrolling interests |
| $ | 65,945 |
|
| $ | — |
|
Accrued interest on note receivable recorded to noncontrolling interest |
| $ | 1,564 |
|
| $ | — |
|
Reclassification of non-controlling interest in excess of amount paid to additional paid-in capital |
| $ | 67,475 |
|
| $ | — |
|
Acquisition of real estate through assumption of debt |
| $ | — |
|
| $ | 31,802 |
|
Settlement of note receivable through cancellation of OP Units |
| $ | — |
|
| $ | 479 |
|
|
|
|
|
|
|
| ||
Change in control of previously unconsolidated investment |
|
|
|
|
|
| ||
Increase in real estate |
| $ | (55,791 | ) |
| $ | — |
|
Increase in mortgage notes payable |
|
| 35,970 |
|
|
| — |
|
Decrease in investments in and advances to unconsolidated affiliates |
|
| 17,822 |
|
|
| — |
|
Decrease in notes receivable |
|
| 5,306 |
|
|
| — |
|
Decrease in reserve on note receivable |
|
| (4,582 | ) |
|
| — |
|
Decrease in accrued interest on notes receivable |
|
| 4,691 |
|
|
| — |
|
Change in other assets and liabilities |
|
| 176 |
|
|
| — |
|
Increase in cash and restricted cash upon change of control |
| $ | 3,592 |
|
| $ | — |
|
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
The Company is a fully-integrated equity real estate investment trust (“REIT”)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 September 30, 20172022 and December 31, 2016,2021, the Company controlled approximately 95%95% of the Operating Partnership as the sole general partner and is entitled to share, in proportion to its percentage interest, in the cash distributions and profits and losses of the Operating Partnership. The limited partners primarily represent entities or individuals that contributed their interests in certain properties or entities to the Operating Partnership in exchange for common or preferred units of limited partnership interest (“Common OP Units” or “Preferred OP Units”) and employees who have been awarded restricted Common OP Units (“LTIP Units”) as long-term incentive compensation (
As of September 30, 2017,2022, the Company has ownership interests in 118151 properties within its core portfolio, which consist of those properties either 100%100% owned, or partially owned through joint venture interests, by the Operating Partnership, or subsidiaries thereof, not including those properties owned through its funds (“Core Portfolio”). The Company also has ownership interests in 6451 properties within its opportunity funds, Acadia Strategic Opportunity Fund II, LLC (“Fund II”), Acadia Strategic Opportunity Fund III LLC (“Fund III”), Acadia Strategic Opportunity Fund IV LLC (“Fund IV”), and Acadia Strategic Opportunity Fund V LLC (“Fund V”). Acadia Strategic Opportunityand, collectively with Fund I, LP (“II, Fund I,” together with Funds II, III IV, and V,Fund IV, the “Funds”) was liquidated in 2015.. The 182202 Core Portfolio and Fund properties primarily consist of street and urban retail and suburban shopping centers. In addition, the Company, together with the investors in the Funds, investinvested in operating companies through Acadia Mervyn Investors I, LLC (“Mervyns I”),I,” which was liquidated in 2018) and Acadia Mervyn Investors II, LLC (“Mervyns II”) and Fund II,, all on a non-recourse basis. The Company consolidates the Funds as it has (i) the power to direct the activities that most significantly impact the Funds’ economic performance, (ii) is obligated to absorb the Funds’ losses and (iii) has the right to receive benefits from the Funds that could potentially be significant.
The Operating Partnership is the sole general partner or managing member of the Funds and Mervyns I and 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 I and 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 |
| Operating |
|
| Capital Called |
|
| Unfunded |
|
| Equity Interest |
|
| Preferred |
|
| Total |
| ||||||
Fund II and Mervyns II (c,d) |
| 6/2004 |
|
| 61.67 | % |
| $ | 557.3 |
|
| $ | — |
|
|
| 61.67 | % |
|
| 8 | % |
| $ | 172.5 |
|
Fund III |
| 5/2007 |
|
| 24.54 | % |
|
| 448.1 |
|
|
| 1.9 |
|
|
| 24.54 | % |
|
| 6 | % |
|
| 603.5 |
|
Fund IV |
| 5/2012 |
|
| 23.12 | % |
|
| 488.1 |
|
|
| 41.9 |
|
|
| 23.12 | % |
|
| 6 | % |
|
| 221.4 |
|
Fund V (e) |
| 8/2016 |
|
| 20.10 | % |
|
| 347.9 |
|
|
| 172.1 |
|
|
| 20.10 | % |
|
| 6 | % |
|
| 79.6 |
|
| Entity | Formation Date | Operating Partnership Share of Capital | Capital Called as of September 30, 2017 | Unfunded Commitment | Equity Interest Held By Operating Partnership (a) | Preferred Return | Total Distributions as of September 30, 2017 (b) | ||||||
| Fund II and Mervyns II | 6/2004 | 28.33% | $ | 347.1 | $ | — | 28.33% | 8% | $ | 131.6 | |||
| Fund III | 5/2007 | 24.54% | 396.7 | 53.3 | 39.63% | 6% | 553.7 | ||||||
| Fund IV | 5/2012 | 23.12% | 390.7 | 139.3 | 23.12% | 6% | 101.9 | ||||||
| Fund V | 8/2016 | 20.10% | — | 520.0 | 20.10% | 6% | — | ||||||
| Represents the total for the Funds, including the Operating Partnership and noncontrolling interests’ shares. |
11
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Basis of Presentation
Restatement of Prior Year Amounts
As discussed in the Company's 2021 consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2021 (the "Annual Report"), the Company restated each of the quarterly and year-to-date periods ended March 31, 2021, June 30, 2021 and September 30, 2021. Amounts as of or for the period ended September 30, 2021 depicted in these interim consolidated financial statements as "As Restated" are taken from the Company's restatement disclosures in the Annual Report on Form 10-K for the year ended December 31, 2021. See the 2021 consolidated financial statements included in the Annual Report for details of the restatement adjustments.
Segments
At September 30, 2017,2022, the Company had three reportable operating segments: Core Portfolio, Funds and Structured Financing. The Company’s chief operating decision maker may review operational and financial data on a propertyproperty-level basis and does not differentiate properties on a geographical basis for purposes of allocating resources or capital. Each property is considered a separate operating segment; however, each property on a stand-alone basis represents less than 10% of revenues, profit or loss, and assets of the combined reported operating segment and meets the majority of the aggregations criteria under the applicable standard.
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, including where the Company has been determined to be a primary beneficiary of a variable interest entity ("VIE"), 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.
The Company consolidates a VIE in which it is considered the primary beneficiary. The primary beneficiary is the entity that has (i) the power to direct the activities that most significantly impact the entity's economic performance and (ii) the obligation to absorb losses of the VIE or the right to receive benefits from the VIE that could be significant to the VIE. The Company assesses the accounting treatment and determines whether it is the primary beneficiary of a VIE at the time it becomes involved with a VIE and continuously reconsiders that conclusion. In determining whether the Company is the primary beneficiary, it evaluates its control rights as well as economic interests in the entity held either directly or indirectly by the Company. Each entity is assessed on an individual basis to determine the rights provided to each party and whether those rights are protective or participating. For all VIEs, the Company reviews such agreements in order to determine which party has the power to direct the activities that most significantly impact the entity's economic performance.
For those entities evaluated under the voting interest model, the Company consolidates the entity if it has a controlling financial interest. The Company has a controlling financial interest in a voting interest entity (“VOE”) if it owns a majority voting interest in the entity. Investments in entities for which the Company has the ability to exercise significant influence over, but does not have financial or operating control through its voting interest and entities which are VIEs but where the Company is not the primary beneficiary, 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 with 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 20162021 consolidated financial statements included in the Annual ReportReport.
Variable Interest Entities
The Operating Partnership is considered a VIE in which the Company is the primary beneficiary because the limited partners do not have substantive kick-out or participating rights. As of September 30, 2022 and December 31, 2021, the Operating Partnership held interests in the Funds and two consolidated entities owning properties that were determined to be VIEs in which the Company is the primary beneficiary as it has (i) the power to direct the activities of the entity that most significantly impact the entity's economic performance, and (ii) the obligation to absorb the entity's losses or receive benefits from the entity that could potentially be significant to the entity. The majority of the operations of
12
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
these VIEs are funded with fees earned from investment opportunities or cash flows generated from the properties. The Company has not provided financial support to any of these VIEs that it was not previously contractually required to provide, which consists primarily of funding any capital commitments and capital expenditures, which are deemed necessary to continue to operate the entity and any operating cash shortfalls the entity may experience.
Since the Company conducts its business through and substantially all of its interests are held by the Operating Partnership, the assets and liabilities on Form 10-K, as filed with the SEC on February 24, 2017consolidated balance sheets represent the assets and amended on Februaryliabilities of the Operating Partnership. As of September 30, 2022 and December 31, 2021, the consolidated balance sheets include the following assets and liabilities of consolidated VIEs of the Operating Partnership:
(dollars in thousands) |
| September 30, 2022 |
|
| December 31, 2021 |
| ||
VIE ASSETS |
|
|
|
|
|
| ||
Operating real estate, net |
| $ | 1,468,831 |
|
| $ | 1,482,636 |
|
Real estate under development |
|
| 132,612 |
|
|
| 161,485 |
|
Notes receivable, net |
|
| — |
|
|
| 725 |
|
Investments in and advances to unconsolidated affiliates |
|
| 241,641 |
|
|
| 200,827 |
|
Other assets, net |
|
| 97,025 |
|
|
| 94,303 |
|
Right-of-use assets - operating leases, net |
|
| 2,636 |
|
|
| 2,935 |
|
Cash and cash equivalents |
|
| 14,629 |
|
|
| 9,761 |
|
Restricted cash |
|
| 12,573 |
|
|
| 9,757 |
|
Rents receivable, net |
|
| 17,076 |
|
|
| 16,126 |
|
Total VIE assets (a) |
| $ | 1,987,023 |
|
| $ | 1,978,555 |
|
|
|
|
|
|
|
| ||
VIE LIABILITIES |
|
|
|
|
|
| ||
Mortgage and other notes payable, net |
| $ | 766,935 |
|
| $ | 948,045 |
|
Unsecured notes payable, net |
|
| 49,697 |
|
|
| 162,828 |
|
Accounts payable and other liabilities |
|
| 98,694 |
|
|
| 96,212 |
|
Lease liability - operating leases, net |
|
| 2,764 |
|
|
| 3,077 |
|
Total VIE liabilities (a) |
| $ | 918,090 |
|
| $ | 1,210,162 |
|
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.
Recently IssuedAdopted Accounting Pronouncements
In August 2015,2020, the FASB issued ASU 2015-14, which defers the effective date of2020-06—Debt with conversion and other options (Subtopic 470-20) and derivatives and hedging—contracts in entity's own equity (Subtopic 815-40)—accounting for convertible instruments and contracts in an entity's own equity. This ASU 2014-09 for all entities by one year, until years beginning in 2018, with early adoption permitted but not before 2017. Entities may adopt ASU 2014-09 using either a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients or a retrospective approach with the cumulative effect recognized at the date of adoption. Management believes the majority of the Company’s revenue falls outside of the scope of this guidance and does not anticipate any significant changes to the timing of the Company’s revenue recognition. The Company intends to implement the standard retrospectively with the cumulative effect recognized in retained earnings at the date of application.
In May 2021, the FASB issued ASU 2021-04 Modification of Equity-Classified Written Call Options — Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options — to codify how an issuer should account for modifications made to equity-classified written call options (a
13
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
warrant to purchase the issuer’s common stock). The guidance in the ASU requires the issuer to treat a modification of an equity-classified warrant that does not cause the warrant to become liability-classified as an exchange whether structured as an amendment or reissuance and is effective for all periods beginning after December 15, 2021 with early adoption, including adoption in an interim period,application permitted. The Company plans to adoptdoes not currently have any outstanding equity awards with written call options. As a result, the implementation of this guidance did not have an effect on the Company’s consolidated financial statements.
In July 2021, the FASB issued ASU 2017-12 effective January 1, 2018. ASU 2017-122021-05 Leases (Topic 842): Lessors—Certain Leases with Variable Lease Payments. This Update requires a lessor to classify a lease with entirely or partially variable payments that do not depend on an index or rate as an operating lease if another classification (i.e. sales-type or direct financing) would trigger a commencement date selling loss. The guidance in the ASU is effective for all periods beginning after December 15, 2021 with early application permitted and may be applied either retrospectively or prospectively. The Company does not currently have any sales-type or direct financing leases as lessor. As a result, the implementation of this guidance did not have an effect on the Company’s consolidated financial statements.
In January 2021, the FASB issued ASU 2021-01 Reference Rate Reform (Topic 848) which modifies ASC 848, which was intended to provide relief related to “contracts and transactions that reference LIBOR or a reference rate that is expected to be discontinued as a result of reference rate reform.” ASU 2021-01 expands the scope of ASC 848 to include all affected derivatives and give reporting entities the ability to apply certain aspects of the contract modification and hedge accounting expedients to derivative contracts affected by the discounting transition. ASU 2021-01 also adds implementation guidance to clarify which optional expedients in ASC 848 may be applied to derivative instruments that do not reference LIBOR or a reference rate that is expected to be discontinued, but that are being modified retrospective transition methodas a result of the discounting transition. Currently, the Company does not anticipate the need to modify any existing debt agreements as a result of reference rate reform in whichthe current year. If any modification is executed as a result of reference rate reform, the Company will recognizeelect the cumulative effectoptional practical expedient under ASU 2020-04 and 2021-01, which allows entities to account for the modification as if the modification was not substantial. As a result, the implementation of the change on the opening balance of each affected component of equity in the statement of financial position as of the date of adoption. While the Company continues to assess all potential impacts of the standard, the adoptionthis guidance is not expected to have a material impactan effect on the Company’s consolidated financial statements.
Recently Issued Accounting Pronouncements
In March 2022, the FASB issued ASU 2022-01 Derivatives and Hedging (Topic 815) Fair Value Hedging—Portfolio Layer Method. The amendments in this Update allow non-prepayable financial assets also to be included in a closed portfolio hedged using the portfolio layer method. That expanded scope permits an entity to apply the same portfolio hedging method to both prepayable and non-prepayable financial assets, thereby allowing consistent accounting for similar hedges. The guidance in the ASU is effective for all periods beginning after December 15, 2022 with early application permitted and may be applied prospectively. The Company does not currently utilize the portfolio layer method. As a result, the implementation of this guidance is not expected to have an effect on the Company’s consolidated financial statements.
In March 2022, the FASB issued ASU 2022-02 Financial Instruments—Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures. Rather than applying the recognition and measurement guidance for Troubled Debt Restructurings ("TDRs"), an entity must apply the loan refinancing and restructuring guidance in ASC 310-20-35-9 through 35-11 to determine whether a modification results in a new loan or a continuation of an existing loan. In addition, this Update requires that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments—Credit Losses—Measured at Amortized Cost. The guidance in the ASU is effective for all periods beginning after December 15, 2022 with early application permitted and may be applied prospectively. The Company does not currently have any financial instruments that meet the definition of a TDR. As a result, the implementation of this guidance is not expected to have an effect on the Company’s consolidated financial statements.
In June 2022, the FASB issued ASU 2022-03 Fair Value Measurement (Topic 820)—Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The guidance in this update clarifies how the fair value of equity securities subject to contractual sale restrictions is determined, and amends ASC 820 to clarify that a contractual sale restriction should not be considered in measuring fair value. It also requires entities with investments in equity securities subject to contractual sale restrictions to disclose certain qualitative and quantitative information about such securities. The guidance in the ASU is effective for all periods beginning after December 15, 2023 with early application permitted and may be applied prospectively. The Company's investment in Albertsons is subject to a contractual sale restriction, however, the Company does not consider this sale restriction in measuring its fair value (Note 8). As a result, the implementation of this guidance is not expected to have an effect on the Company’s consolidated financial statements.
14
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 for the periods presented (in thousands):
|
| September 30, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
|
|
|
|
|
|
| ||
Land |
| $ | 829,313 |
|
| $ | 739,641 |
|
Buildings and improvements |
|
| 2,998,230 |
|
|
| 2,892,051 |
|
Tenant improvements |
|
| 213,316 |
|
|
| 199,925 |
|
Construction in progress |
|
| 13,117 |
|
|
| 11,131 |
|
Right-of-use assets - finance leases (Note 11) |
|
| 25,086 |
|
|
| 25,086 |
|
Total |
|
| 4,079,062 |
|
|
| 3,867,834 |
|
Less: Accumulated depreciation and amortization |
|
| (704,609 | ) |
|
| (648,461 | ) |
Operating real estate, net |
|
| 3,374,453 |
|
|
| 3,219,373 |
|
Real estate under development |
|
| 186,360 |
|
|
| 203,773 |
|
Net investments in real estate |
| $ | 3,560,813 |
|
| $ | 3,423,146 |
|
Acquisitions and Foreclosure
| September 30, 2017 | December 31, 2016 | |||||||
| Land | $ | 659,547 | $ | 693,252 | ||||
| Buildings and improvements | 2,344,370 | 1,916,288 | ||||||
| Tenant improvements | 140,027 | 132,220 | ||||||
| Construction in progress | 22,052 | 19,789 | ||||||
| Properties under capital lease | 76,965 | 76,965 | ||||||
| Total | 3,242,961 | 2,838,514 | ||||||
| Less: Accumulated depreciation | (337,961 | ) | (287,066 | ) | ||||
| Operating real estate, net | 2,905,000 | 2,551,448 | ||||||
| Real estate under development, at cost | 237,434 | 543,486 | ||||||
| Net investments in real estate | $ | 3,142,434 | $ | 3,094,934 | ||||
During the nine months ended September 30, 20172022 and the year ended December 31, 2016,2021, the Company acquired (through purchase, investment or foreclosure) the following consolidated retail properties and other real estate investments (dollars in thousands):
Property and Location |
| Percent |
| Date of |
| Purchase |
| |
2022 Acquisitions and Foreclosure |
|
|
|
|
|
|
| |
Core |
|
|
|
|
|
|
| |
121 Spring Street - New York, NY |
| 100% |
| Jan 12, 2022 |
| $ | 39,637 |
|
Williamsburg Collection - Brooklyn, NY (a) |
| (a) |
| Feb 18, 2022 |
|
| 97,750 |
|
8833 Beverly Boulevard - West Hollywood, CA |
| 100% |
| Mar 2, 2022 |
|
| 24,117 |
|
Henderson Avenue Portfolio - Dallas, TX (b) |
| 100% |
| Apr 18, 2022 |
|
| 85,192 |
|
Subtotal Core |
|
|
|
|
|
| 246,696 |
|
|
|
|
|
|
|
|
| |
Fund III |
|
|
|
|
|
|
| |
640 Broadway - New York, NY (Foreclosure) (c) |
| 100% |
| Jan 26, 2022 |
|
| 59,207 |
|
Subtotal Fund III |
|
|
|
|
|
| 59,207 |
|
Total 2022 Acquisitions and Foreclosure |
|
|
|
|
| $ | 305,903 |
|
|
|
|
|
|
|
|
| |
2021 Acquisitions |
|
|
|
|
|
|
| |
Core |
|
|
|
|
|
|
| |
14th Street Portfolio - Washington, DC |
| 100% |
| Dec 23, 2021 |
| $ | 26,320 |
|
Subtotal Core |
|
|
|
|
|
| 26,320 |
|
|
|
|
|
|
|
|
| |
Fund V |
|
|
|
|
|
|
| |
Canton Marketplace - Canton, GA |
| 100% |
| Aug 20, 2021 |
|
| 50,954 |
|
Monroe Marketplace - Selinsgrove, PA |
| 100% |
| Sept 9, 2021 |
|
| 44,796 |
|
Monroe Marketplace (Parcel) - Selinsgrove, PA |
| 100% |
| Nov 12, 2021 |
|
| 1,029 |
|
Midstate - East Brunswick, NJ |
| 100% |
| Dec 14, 2021 |
|
| 71,867 |
|
Subtotal Fund V |
|
|
|
|
|
| 168,646 |
|
Total 2021 Acquisitions |
|
|
|
|
| $ | 194,966 |
|
|
|
|
|
|
|
|
| |
| Property and Location | Percent Acquired | Date of Acquisition | Purchase Price | Debt Assumed | |||||
| 2017 Acquisitions | |||||||||
| Fund IV: | |||||||||
| Lincoln Place - Fairview Heights, IL | 100% | Mar 13, 2017 | $ | 35,350 | $ | — | |||
Shaw's Plaza - Windham, ME (Note 3) | 100% | Jun 30, 2017 | 9,142 | — | |||||
| Subtotal Fund IV | 44,492 | �� | |||||||
| Fund V: | |||||||||
| Plaza Santa Fe - Santa Fe, NM | 100% | Jun 5, 2017 | 35,220 | — | |||||
| Hickory Ridge - Hickory, NC | 100% | Jul 27, 2017 | 44,020 | — | |||||
| New Towne Plaza - Canton, MI | 100% | Aug 4, 2017 | 26,000 | — | |||||
| Subtotal Fund V | 105,240 | — | |||||||
| Total 2017 Acquisitions | $ | 149,732 | $ | — | |||||
| 2016 Acquisitions | |||||||||
| Core Portfolio: | |||||||||
991 Madison Avenue - New York, NY (a) | 100% | Mar 26, 2016 | $ | 76,628 | $ | — | |||
| 165 Newbury Street - Boston, MA | 100% | May 13, 2016 | 6,250 | — | |||||
| Concord & Milwaukee - Chicago, IL | 100% | Jul 28, 2016 | 6,000 | 2,902 | |||||
| 151 North State Street - Chicago, IL | 100% | Aug 10, 2016 | 30,500 | 14,556 | |||||
| State & Washington - Chicago, IL | 100% | Aug 22, 2016 | 70,250 | 25,650 | |||||
| North & Kingsbury - Chicago, IL | 100% | Aug 29, 2016 | 34,000 | 13,409 | |||||
| Sullivan Center - Chicago, IL | 100% | Aug 31, 2016 | 146,939 | — | |||||
| California & Armitage - Chicago, IL | 100% | Sep 12, 2016 | 9,250 | 2,692 | |||||
| 555 9th Street - San Francisco, CA | 100% | Nov 2, 2016 | 139,775 | 60,000 | |||||
| Subtotal Core Portfolio | 519,592 | 119,209 | |||||||
| Fund IV: | |||||||||
| Restaurants at Fort Point - Boston, MA | 100% | Jan 14, 2016 | 11,500 | — | |||||
1964 Union Street - San Francisco, CA (a) | 90% | Jan 28, 2016 | 2,250 | 1,463 | |||||
| Wake Forest Crossing - Wake Forest, NC | 100% | Sep 27, 2016 | 36,600 | — | |||||
| Airport Mall - Bangor, ME | 100% | Oct 28, 2016 | 10,250 | — | |||||
| Colonie Plaza - Albany, NY | 100% | Oct 28, 2016 | 15,000 | — | |||||
| Dauphin Plaza - Harrisburg, PA | 100% | Oct 28, 2016 | 16,000 | — | |||||
| JFK Plaza - Waterville, ME | 100% | Oct 28, 2016 | 6,500 | — | |||||
| Mayfair Shopping Center - Philadelphia, PA | 100% | Oct 28, 2016 | 16,600 | — | |||||
| Shaw's Plaza - Waterville, ME | 100% | Oct 28, 2016 | 13,800 | — | |||||
| Wells Plaza - Wells, ME | 100% | Oct 28, 2016 | 5,250 | — | |||||
| 717 N Michigan - Chicago, IL | 100% | Dec 1, 2016 | 103,500 | — | |||||
| Subtotal Fund IV | 237,250 | 1,463 | |||||||
| Total 2016 Acquisitions | $ | 756,842 | $ | 120,672 | |||||
15
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
For the nine months ended September 30, The purchase prices for the Nine Months Ended September 30, Year Ended December 31, 2022 2021 Net Assets Acquired Land $ 119,898 $ 37,290 Buildings and improvements 168,862 134,065 Acquisition-related intangible assets (Note 6) 29,016 39,953 Accounts receivable, prepaids and other assets 4,077 — Accounts payable and other liabilities (661 ) — Acquisition-related intangible liabilities (Note 6) (14,126 ) (16,342 ) Net assets acquired $ 307,066 $ 194,966 Consideration Cash $ 242,633 $ 161,846 Carrying value of note receivable exchanged in foreclosure (Note 3) 5,416 — Existing interest in previously unconsolidated investment (Note 4) 17,822 — Debt assumed 35,970 31,801 Liabilities assumed 4,062 1,319 Total consideration 305,903 194,966 Gain on bargain purchase 1,163 — $ 307,066 $ 194,966 16 ACADIA REALTY TRUST AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Dispositions During the nine months ended September 30, Property and Location Owner Date Sold Sale Price Gain 2022 Dispositions NE Grocer Portfolio (Selected Assets) - Pennsylvania Fund IV Jan 26, 2022 Mar 4, 2022 $ 45,350 $ 13,784 New Towne (Parcel) - Canton, MI Fund V Feb 1, 2022 2,231 1,776 Cortlandt Crossing - Westchester County, NY Fund III Feb 9, 2022 65,533 13,255 Lincoln Place - Fairview Heights, IL Fund IV May 25, 2022 40,670 12,216 Wake Forest Crossing - Wake Forest, NC Fund IV Aug 24, 2022 38,919 8,885 Total 2022 Dispositions $ 192,703 $ 49,916 2021 Dispositions 60 Orange St - Bloomfield, NJ Core Jan 29, 2021 $ 16,400 $ 4,612 654 Broadway - New York, NY Fund III May 19, 2021 10,000 111 NE Grocer Portfolio (Selected Assets) - ME Fund IV Jun 18, 2021 39,925 5,064 Total 2021 Dispositions (a) $ 66,325 $ 9,787 Properties Held for Sale or Sold At September 30, 2022, the Company had one property under contract for sale with assets totaling $11.1 million, which was probable of disposition. The property was classified as "held for sale" on the Company's consolidated balance sheets at September 30, 2022. The aggregate rental revenue, expenses and pre-tax income reported within continuing operations for the aforementioned consolidated properties that were sold Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Revenues $ 929 $ 4,335 $ 5,429 $ 15,997 Expenses (620 ) (3,815 ) (4,112 ) (14,658 ) Gain on disposition of properties 8,885 — 49,916 10,521 Net income attributable to noncontrolling interests (7,069 ) (401 ) (39,251 ) (5,583 ) Net income attributable to Acadia $ 2,125 $ 119 $ 11,982 $ 6,277 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.2017, of which $0.32022 and the year ended December 31, 2021, the Company capitalized $1.2 million related to the Core Portfolio and $0.6 million related to the Funds and $5.5$3.6 million of acquisition costs forin connection with the 2022 Acquisitions and Foreclosure and the 2021 Acquisitions, respectively. In addition, during the nine months ended September 30, 2016,2022, the Company expensed $2.0 million of which $5.1acquisition costs (including a $1.5 million relatedacquisition fee paid to an affiliate of a joint venture partner). Acquisition costs that were expensed are included in General and administrative expenses in the Core Portfolioconsolidated statements of operations. During the nine months ended September 30, 2022, the Company assumed a $36.0 million mortgage with the consolidation of 640 Broadway and $0.4during the year ended December 31, 2021, the Company assumed a $31.8 million related tomortgage with the Funds.business combinations2022 Acquisitions and Foreclosure and 2021 Acquisitions were allocated to the acquired assets and assumed liabilities based on their estimated fair values at the dates of acquisition.nine months ended September 30, 2017 and the year ended December 31, 2016periods presented (in thousands): Nine Months Ended
September 30, 2017 Year Ended December 31, 2016 Net Assets Acquired: Land $ 21,917 $ 225,729 Buildings and improvements 104,729 458,525 Other assets — 3,481 Acquisition-related intangible assets (in Acquired lease intangibles, net) 31,378 63,606 Acquisition-related intangible liabilities (in Acquired lease intangibles, net) (8,292 ) (72,985 ) Above and below market debt assumed (included in Mortgages and other notes payable, net) — (119,601 ) Net assets acquired $ 149,732 $ 558,755 Consideration: Cash $ 138,429 $ 439,546 Conversion of note receivable 9,142 — Debt assumed — 119,209 Liabilities assumed 2,161 — Total Consideration $ 149,732 $ 558,755 Dispositions20172022 and the year ended December 31, 2016,2021, the Company disposed of the following consolidated properties and other real estate investments (in thousands):
on SaleProperty and Location Owner Date Sold Sale Price Gain on Sale 2017 Dispositions: New Hyde Park Shopping Center - New Hyde Park, NY Fund III Jul 6, 2017 $ 22,075 $ 6,433 216th Street - New York, NY Fund II Sep 11, 2017 30,579 6,539 Total 2017 Dispositions $ 52,654 $ 12,972 2016 Dispositions: Fund III Jan 28, 2016 $ 107,250 $ 65,393 Heritage Shops - Chicago, IL Fund III Apr 26, 2016 46,500 16,572 Total 2016 Dispositions $ 153,750 $ 81,965 15ACADIA REALTY TRUST AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)duringas well as the nine months ended September 30, 2017 and year ended December 31, 2016 were as follows (in thousands): Three Months Ended September 30, 2017 2016 2017 2016 Rental revenues $ 503 $ 1,122 $ 2,136 $ 7,378 Expenses (523 ) (1,095 ) (2,343 ) (4,745 ) Loss on extinguishment of debt (10 ) — (10 ) (15 ) Income from continuing operations of
disposed properties before gain on disposition of properties (30 ) 27 (217 ) 2,618 Gain on disposition of properties, net of tax 12,972 — 12,972 81,965 Net income attributable to noncontrolling interests (9,166 ) (18 ) (9,034 ) (70,410 ) Net income attributable to Acadia $ 3,776 $ 9 $ 3,721 $ 14,173 Properties Held For SaleAt December 31, 2016, the Company had one property in Fund II classified as held-for-sale with total assets of $21.5 million and subject to a mortgage of $25.5 million.At September 30, 2017, the Company had one property in Fund II classified as held-for-sale, City Point Condominium Tower I, with total assets of $95.9 million and subject to mortgages aggregating $81.0 million, which will be repaid at closing. Upon classification as held for sale, the Company recognized an impairment charge of approximately $3.8 millionlease that was terminated (Note 811) relating to expected transaction costs associated with the sale. Additionally, the Company recognized a charge to income attributable to Acadia of approximately $1.1 million to adjust the non-controlling interest holder’s ownership in this property to its estimated redemption amount as a result of the sale at September 30, 2017. This property had a net loss of $4.3 million excluding losses attributable to noncontrolling interests of $3.9 million forduring the three and nine months ended September 30, 2017. On October 13, 2017, this property was sold2022 and the associated mortgage was repaid (Note 15).Pro Forma Financial InformationThe following unaudited pro forma consolidated operating data is presented for the three and nine months ended September 30, 2017,2021 were as if the acquisitions of the properties acquired during that period were completed on January 1, 2016 and as if the acquisition of the properties acquired during the nine months ended September 30, 2016 were completed on January 1, 2015. The related acquisition expenses of $0.9 million and $5.5 million reported during the nine months ended September 30, 2017 and 2016, respectively have been reflected as pro forma charges at January 1, 2016 and January 1, 2015, respectively. The unaudited supplemental pro forma operating data is not necessarily indicative of what the actual results of operations of the Company would have been, assuming the transactions had been completed as set forth above, nor do they purport to represent the Company’s results of operations for future periods.follows (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Pro forma revenues $ 63,253 $ 51,871 $ 191,673 $ 164,410 Pro forma income from continuing operations 368 1,092 26,439 19,504 Pro forma net income attributable to Acadia 12,912 6,839 40,608 54,201 Pro forma basic and diluted earnings per share 0.15 0.08 0.48 0.66 16
17
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Development activity for the nine months ended September 30, 2017 includes $2.0 million of accelerated depreciation related to a building under development that was demolished.
|
| January 1, 2022 |
|
| Nine Months Ended September 30, 2022 |
|
| September 30, 2022 |
| |||||||||||||||||||
|
| Number of |
|
| Carrying |
|
| Transfers In |
|
| Capitalized |
|
| Transfers Out |
|
| Number of |
|
| Carrying |
| |||||||
Core |
|
| — |
|
| $ | 42,517 |
|
| $ | 9,610 |
|
| $ | 1,854 |
|
| $ | — |
|
|
| 2 |
|
| $ | 53,981 |
|
Fund II |
|
| — |
|
|
| 35,125 |
|
|
| — |
|
|
| 1,487 |
|
|
| — |
|
|
| — |
|
|
| 36,612 |
|
Fund III |
|
| 1 |
|
|
| 24,296 |
|
|
| — |
|
|
| 1,077 |
|
|
| — |
|
|
| 1 |
|
|
| 25,373 |
|
Fund IV (a) |
|
| 1 |
|
|
| 101,835 |
|
|
| — |
|
|
| 82 |
|
|
| 31,523 |
|
|
| 1 |
|
|
| 70,394 |
|
Total |
|
| 2 |
|
| $ | 203,773 |
|
| $ | 9,610 |
|
| $ | 4,500 |
|
| $ | 31,523 |
|
|
| 4 |
|
| $ | 186,360 |
|
|
| January 1, 2021 |
|
| Year Ended December 31, 2021 |
|
| December 31, 2021 |
| |||||||||||||||||||
|
| Number of |
|
| Carrying |
|
| Transfers In |
|
| Capitalized |
|
| Transfers Out |
|
| Number of |
|
| Carrying |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Core |
|
| — |
|
| $ | 63,875 |
|
| $ | — |
|
| $ | 1,855 |
|
| $ | 23,213 |
|
|
| — |
|
| $ | 42,517 |
|
Fund II |
|
| — |
|
|
| 74,657 |
|
|
| — |
|
|
| 3,921 |
|
|
| 43,453 |
|
|
| — |
|
|
| 35,125 |
|
Fund III |
|
| 1 |
|
|
| 23,104 |
|
|
| — |
|
|
| 1,192 |
|
|
| — |
|
|
| 1 |
|
|
| 24,296 |
|
Fund IV (a) |
|
| 2 |
|
|
| 85,565 |
|
|
| 29,758 |
|
|
| 2,026 |
|
|
| 15,514 |
|
|
| 1 |
|
|
| 101,835 |
|
Total |
|
| 3 |
|
| $ | 247,201 |
|
| $ | 29,758 |
|
| $ | 8,994 |
|
| $ | 82,180 |
|
|
| 2 |
|
| $ | 203,773 |
|
| December 31, 2016 | Nine Months Ended September 30, 2017 | September 30, 2017 | |||||||||||||||||||||||
| Number of Properties | Carrying Value | Transfers In | Capitalized Costs | Transfers Out | Number of Properties | Carrying Value | |||||||||||||||||||
| Core | 1 | $ | 2,530 | $ | 7,258 | $ | 3,852 | $ | 5,441 | 2 | $ | 8,199 | |||||||||||||
| Fund II | 2 | 443,012 | — | 7,677 | 414,000 | 1 | 36,689 | ||||||||||||||||||
| Fund III | 3 | 51,421 | — | 13,838 | 8,146 | 2 | 57,113 | ||||||||||||||||||
| Fund IV | 8 | 46,523 | 79,624 | 13,883 | 4,597 | 8 | 135,433 | ||||||||||||||||||
| Total | 14 | $ | 543,486 | $ | 86,882 | $ | 39,250 | $ | 432,184 | 13 | $ | 237,434 | |||||||||||||
The number of properties in the tables above refers to projects comprising the entire property under development; however, certain projects represent a portion of a property. At September 30, 2022, consolidated development projects included: a portion of City Center and the Henderson Portfolio for the Core Portfolio, portions of City Point Phase I and II at Fund II, Broad Hollow Commons at Fund III, and a portion of 717 N. Michigan Avenue at Fund IV. In addition, at September 30, 2022, the Company had one Core unconsolidated development project, 1238 Wisconsin Avenue.
During the nine months ended September 30, 2017,2022, the Company:
At December 31, 2021, consolidated development projects included: a portion of City Center for Core, portions of City Point Phase I and II at Fund II, Broad Hollow Commons at Fund III and 717 N. Michigan Avenue at Fund IV. In addition, at December 31, 2021, the Company had one Core unconsolidated development project, 1238 Wisconsin Avenue. During the year ended December 31, 2021, the Company:
Construction in progress pertains to construction activity at the Company’s operating properties whichthat are in service and continue to operate during the construction period.
18
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
3. Notes Receivable, Net
The Company’s notes receivable, net wereare generally collateralized either by the underlying properties or the borrower’sborrowers’ ownership interestinterests in the entities that own the properties, and were as follows (dollars in thousands):
|
| September 30, |
|
| December 31, |
|
| September 30, 2022 |
| |||||||||||
Description |
| 2022 |
|
| 2021 |
|
| Number |
|
| Maturity Date |
|
| Interest Rate |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Core Portfolio (a) |
| $ | 124,801 |
|
| $ | 154,332 |
|
|
| 5 |
|
| Apr 2020 - Dec 2027 |
|
| 4.65% - 9.00% |
| ||
Fund III |
|
| — |
|
|
| 5,306 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total notes receivable |
|
| 124,801 |
|
|
| 159,638 |
|
|
|
|
|
|
|
|
|
| |||
Allowance for credit loss |
|
| (835 | ) |
|
| (5,752 | ) |
|
|
|
|
|
|
|
|
| |||
Notes receivable, net |
| $ | 123,966 |
|
| $ | 153,886 |
|
|
| 5 |
|
|
|
|
|
|
| ||
| September 30, | December 31, | September 30, 2017 | ||||||||||||
| Description | 2017 | 2016 | Number | Maturity Date | Interest Rate | |||||||||
| Core Portfolio | $ | 198,395 | $ | 216,400 | 4 | June 2018 - September 2019 | 6.0% - 8.7% | |||||||
| Fund II | 31,593 | 31,007 | 1 | May 2020 | 2.5% | |||||||||
| Fund III | 4,956 | 4,506 | 1 | July 2020 | 18.0% | |||||||||
| Fund IV | 15,250 | 24,250 | 1 | February 2021 | 15.3% | |||||||||
| $ | 250,194 | $ | 276,163 | 7 | ||||||||||
During the nine months ended September 30, 2017,2022, the Company:
During the year ended December 31, 2016,2021, the Company:
Default
One Core Portfolio note aggregating $21.6 million including accrued interest (exclusive of default interest and other amounts due on the loanthat have not been recognized) was in default at September 30, 2022and December 31, 2021. On April 1, 2020, the loan matured and was not repaid. The Company expects to take appropriate actions to recover the amounts due under the loan and has issued a reservation of rights letter to the borrowers and guarantor, reserving all of its rights and remedies under the applicable loan documents and otherwise. The Company has determined that the collateral for this note. The winning bid was in excess ofloan is sufficient to cover the Company’sloan’s carrying value at September 30, 2022and accrued interest. The sale of this property was approved by Order of the Bankruptcy Court confirming the Chapter 11 Plan of Reorganization of the note issuer and closed during the second quarter of 2017. In connection with this sale, the Company recovered its full carrying value of principal and interest and recognized additional interest income and expense reimbursements of $2.2 million in the first quarter of 2017 and $1.4 million in the second quarter of 2017 upon settlement of this transaction.
Allowance for Credit Losses
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.
19
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Earnings from these notes and mortgages receivable are reported within the Company’s Structured Financing segment (
Note 12). Interest receivable is included in Other assets (Note 5).The Company’s estimated allowance for credit losses related to its Structured Financing segment has been computed for its amortized cost basis in the portfolio, including accrued interest (Note 5), factoring historical loss experience in the United States for similar loans, as adjusted for current conditions, as well as the Company’s expectations related to future economic conditions. Due to the lack of comparability across the Structured Financing portfolio, each loan was evaluated separately. As a result, there were three non-collateral-dependent loans with a total amortized cost of $111.3 million, inclusive of accrued interest of $10.3 million, for which an allowance for credit losses has been recorded aggregating $0.8 million at September 30, 2022. For two loans in this portfolio, aggregating $27.9 million, inclusive of accrued interest of $4.1 million at September 30, 2022, the Company has elected to apply a practical expedient in accordance with ASC 326 and did not establish an allowance for credit losses because (i) these loans are collateral-dependent loans, which due to their settlement terms are not expected to be settled in cash but rather by the Company’s possession of the real estate collateral; and (ii) at September 30, 2022, the Company determined that the estimated fair value of the collateral at the expected realization date for these loans was sufficient to cover the carrying value of its investments in these notes receivable. Impairment charges may be required if and when such amounts are estimated to be nonrecoverable upon a realization event, which is generally at the time a loan is repaid, or in the case of foreclosure, when the underlying asset is sold; however, non-recoverability may also be concluded if it is reasonably certain that all amounts due will not be collected.
20
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
4. Investments Inin 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. The Company’s investments in and advances to unconsolidated affiliates consist of the following (dollars in thousands):
|
|
|
| Ownership Interest |
| September 30, |
|
| December 31, |
| ||
Portfolio |
| Property |
| September 30, 2022 |
| 2022 |
|
| 2021 |
| ||
|
|
|
|
|
|
|
|
|
|
| ||
Core: |
| 840 N. Michigan Avenue (a) |
| 88.43% |
| $ | 341 |
|
| $ | 51,513 |
|
|
| Renaissance Portfolio |
| 20% |
|
| 28,904 |
|
|
| 28,466 |
|
|
| Gotham Plaza |
| 49% |
|
| 29,666 |
|
|
| 29,187 |
|
|
| Georgetown Portfolio (b) |
| 50% |
|
| 4,109 |
|
|
| 4,089 |
|
|
| 1238 Wisconsin Avenue (b) |
| 80% |
|
| 10,993 |
|
|
| 5,895 |
|
|
|
|
|
|
|
| 74,013 |
|
|
| 119,150 |
|
|
|
|
|
|
|
|
|
|
|
| ||
Mervyns II: |
| KLA/ABS (c) |
| 36.7% |
|
| 102,368 |
|
|
| 124,316 |
|
|
|
|
|
|
|
|
|
|
|
| ||
Fund III: |
| Self Storage Management (b) |
| 0% |
|
| — |
|
|
| 207 |
|
|
| 640 Broadway (d) |
| 100% |
|
| — |
|
|
| 17,825 |
|
|
|
|
|
|
|
| — |
|
|
| 18,032 |
|
|
|
|
|
|
|
|
|
|
|
| ||
Fund IV: |
| Fund IV Other Portfolio |
| 98.57% |
|
| 11,877 |
|
|
| 12,675 |
|
|
| 650 Bald Hill Road |
| 90% |
|
| 10,220 |
|
|
| 11,677 |
|
|
| Paramus Plaza |
| 50% |
|
| 1,022 |
|
|
| 1,975 |
|
|
|
|
|
|
|
| 23,119 |
|
|
| 26,327 |
|
|
|
|
|
|
|
|
|
|
|
| ||
Fund V: |
| Family Center at Riverdale (a) |
| 89.42% |
|
| 11,852 |
|
|
| 12,449 |
|
|
| Tri-City Plaza |
| 90% |
|
| 8,983 |
|
|
| 6,827 |
|
|
| Frederick County Acquisitions |
| 90% |
|
| 13,096 |
|
|
| 10,748 |
|
|
| Wood Ridge Plaza |
| 90% |
|
| 13,289 |
|
|
| — |
|
|
| La Frontera Village |
| 90% |
|
| 21,097 |
|
|
| — |
|
|
| Shoppes at South Hills |
| 90% |
|
| 45,436 |
|
|
| — |
|
|
|
|
|
|
|
| 113,753 |
|
|
| 30,024 |
|
|
|
|
|
|
|
|
|
|
|
| ||
Various: |
| Due from (to) Related Parties |
|
|
|
| 175 |
|
|
| 666 |
|
|
| Other (e) |
|
|
|
| 3,994 |
|
|
| 3,811 |
|
|
| Investments in and advances to |
|
|
| $ | 317,422 |
|
| $ | 322,326 |
|
|
|
|
|
|
|
|
|
|
|
| ||
Core: |
| Crossroads (f) |
| 49% |
| $ | 8,880 |
|
| $ | 9,939 |
|
|
| Distributions in excess of income from, |
|
|
| $ | 8,880 |
|
| $ | 9,939 |
|
| Nominal Ownership Interest | September 30, 2017 | December 31, 2016 | ||||||||
| Fund | Property | September 30, 2017 | ||||||||
| Core: | ||||||||||
840 N. Michigan (a) | 88.43% | $ | 70,859 | $ | 74,131 | |||||
| Renaissance Portfolio | 20% | 35,139 | 36,437 | |||||||
| Gotham Plaza | 49% | 29,196 | 29,421 | |||||||
Brandywine Market Square (a, b) | 61.11% | 20,642 | 5,469 | |||||||
Brandywine Portfolio (a, b) | 22.22% | 15,948 | 15,286 | |||||||
| Georgetown Portfolio | 50% | 3,751 | 4,287 | |||||||
| 175,535 | 165,031 | |||||||||
| Mervyns I & II: | KLA/Mervyn's, LLC (c) | 10.5% | — | — | ||||||
| Fund III: | ||||||||||
| Fund III Other Portfolio | 90% | 168 | 8,108 | |||||||
Self Storage Management (d) | 95% | 241 | 241 | |||||||
| 409 | 8,349 | |||||||||
| Fund IV: | ||||||||||
Broughton Street Portfolio (e) | 50% | 57,368 | 54,839 | |||||||
| Fund IV Other Portfolio | 90% | 20,392 | 21,817 | |||||||
| 650 Bald Hill Road | 90% | 13,642 | 18,842 | |||||||
| 91,402 | 95,498 | |||||||||
| Various Funds: | Due from Related Parties (f) | 2,343 | 2,193 | |||||||
Other (g) | 556 | 957 | ||||||||
| Investments in and advances to unconsolidated affiliates | $ | 270,245 | $ | 272,028 | ||||||
| Core: | ||||||||||
Crossroads (h) | 49% | $ | 15,262 | $ | 13,691 | |||||
| Distributions in excess of income from, and investments in, unconsolidated affiliates | $ | 15,262 | $ | 13,691 | ||||||
| Represents |
21
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
During the nine months ended September 30, 2022, the Company:
During the year ended December 31, 2021, the Company:
Fees from Unconsolidated Affiliates
The Company earned property management, construction, development, legal and leasing fees from its investments in unconsolidated partnerships totaling $0.4$0.1 million, $0.3 million, $0.1 million and $0.3$0.4 million for each of the three months ended September 30, 2017 and 2016, respectively, and $1.0 million and $0.9 million for the nine months ended September 30, 20172022 and 2016,2021, respectively, which isare included in otherOther revenues in the consolidated financial statements.
In addition, the CompanyCompany's joint ventures paid to certain unaffiliated partners of its joint ventures, $0.5$0.5 million, $1.1 million, $0.3 million and $0.6$1.0 million duringfor the three months ended September 30, 2017 and 2016, respectively, and $1.4 million and $1.8 million during the nine months ended September 30, 20172022 and 2016,2021, respectively, for leasing commissions, development, management, construction and overhead fees.
22
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,operations, in each period, summarize the financial information of the Company’s investments in unconsolidated affiliates that were held as of September 30, 2022, and accordingly exclude the results of any investments disposed of or consolidated prior to that date (in thousands):
|
| September 30, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
Combined and Condensed Balance Sheets |
|
|
|
|
|
| ||
Assets: |
|
|
|
|
|
| ||
Rental property, net |
| $ | 681,799 |
|
| $ | 631,661 |
|
Real estate under development |
|
| 14,387 |
|
|
| 8,112 |
|
Other assets |
|
| 133,731 |
|
|
| 78,300 |
|
Total assets |
| $ | 829,917 |
|
| $ | 718,073 |
|
Liabilities and partners’ equity: |
|
|
|
|
|
| ||
Mortgage notes payable |
| $ | 624,043 |
|
| $ | 571,461 |
|
Other liabilities |
|
| 99,566 |
|
|
| 69,166 |
|
Partners’ equity |
|
| 106,308 |
|
|
| 77,446 |
|
Total liabilities and partners’ equity |
| $ | 829,917 |
|
| $ | 718,073 |
|
|
|
|
|
|
|
| ||
Company's share of accumulated equity |
| $ | 145,270 |
|
| $ | 113,285 |
|
Basis differential |
|
| 53,061 |
|
|
| 66,031 |
|
Deferred fees, net of portion related to the Company's interest |
|
| 3,674 |
|
|
| 4,071 |
|
Amounts receivable/payable by the Company |
|
| 175 |
|
|
| 666 |
|
Investments in and advances to unconsolidated affiliates, net of Company's |
|
| 202,180 |
|
|
| 184,053 |
|
Investments carried at fair value or cost |
|
| 106,362 |
|
|
| 128,334 |
|
Company's share of distributions in excess of income from and |
|
| 8,880 |
|
|
| 9,939 |
|
Investments in and advances to unconsolidated affiliates |
| $ | 317,422 |
|
| $ | 322,326 |
|
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Combined and Condensed Statements of Operations |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total revenues |
| $ | 25,096 |
|
| $ | 18,974 |
|
| $ | 72,167 |
|
| $ | 59,090 |
|
Operating and other expenses |
|
| (8,443 | ) |
|
| (7,174 | ) |
|
| (23,768 | ) |
|
| (21,584 | ) |
Interest expense |
|
| (7,130 | ) |
|
| (4,978 | ) |
|
| (18,458 | ) |
|
| (15,799 | ) |
Depreciation and amortization |
|
| (9,708 | ) |
|
| (6,785 | ) |
|
| (24,867 | ) |
|
| (23,154 | ) |
Impairment of Investments |
|
| (57,423 | ) |
|
| — |
|
|
| (57,423 | ) |
|
| — |
|
Gain on disposition of properties (a) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,206 |
|
Net (loss) income attributable to unconsolidated affiliates |
| $ | (57,608 | ) |
| $ | 37 |
|
| $ | (52,349 | ) |
| $ | 1,759 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Company’s share of equity in net (loss) income of unconsolidated affiliates |
| $ | (50,331 | ) |
| $ | 910 |
|
| $ | (45,416 | ) |
| $ | 4,951 |
|
Income attributable to unconsolidated affiliates recently sold or consolidated |
|
| — |
|
|
| (283 | ) |
|
| — |
|
|
| (845 | ) |
Basis differential amortization |
|
| (248 | ) |
|
| (255 | ) |
|
| (753 | ) |
|
| (953 | ) |
Company’s equity in (losses) earnings of unconsolidated affiliates |
| $ | (50,579 | ) |
| $ | 372 |
|
| $ | (46,169 | ) |
| $ | 3,153 |
|
| September 30, | December 31, | |||||||
| 2017 | 2016 | |||||||
| Combined and Condensed Balance Sheets | ||||||||
| Assets: | ||||||||
| Rental property, net | $ | 540,609 | $ | 576,505 | ||||
| Real estate under development | 22,359 | 18,884 | ||||||
| Investment in unconsolidated affiliates | 6,854 | 6,853 | ||||||
| Other assets | 103,335 | 75,254 | ||||||
| Total assets | $ | 673,157 | $ | 677,496 | ||||
| Liabilities and partners’ equity: | ||||||||
| Mortgage notes payable | $ | 401,768 | $ | 407,344 | ||||
| Other liabilities | 57,125 | 30,117 | ||||||
| Partners’ equity | 214,264 | 240,035 | ||||||
| Total liabilities and partners’ equity | $ | 673,157 | $ | 677,496 | ||||
| Company's share of accumulated equity | $ | 177,251 | $ | 191,049 | ||||
| Basis differential | 69,728 | 61,827 | ||||||
| Deferred fees, net of portion related to the Company's interest | 5,662 | 3,268 | ||||||
| Amounts receivable by the Company | 2,342 | 2,193 | ||||||
| Investments in and advances to unconsolidated affiliates, net of Company's share of distributions in excess of income from and investments in unconsolidated affiliates | $ | 254,983 | $ | 258,337 | ||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Combined and Condensed Statements of Income | ||||||||||||||||
| Total revenues | $ | 20,883 | $ | 26,590 | $ | 63,460 | $ | 58,984 | ||||||||
| Operating and other expenses | (6,847 | ) | (7,066 | ) | (18,985 | ) | (18,082 | ) | ||||||||
| Interest expense | (4,788 | ) | (5,242 | ) | (13,967 | ) | (11,355 | ) | ||||||||
| Depreciation and amortization | (6,208 | ) | (15,398 | ) | (18,720 | ) | (24,262 | ) | ||||||||
| Loss on debt extinguishment | — | — | (154 | ) | — | |||||||||||
| (Loss) gain on disposition of properties | — | (1,452 | ) | 17,778 | (1,452 | ) | ||||||||||
| Net income attributable to unconsolidated affiliates | $ | 3,040 | $ | (2,568 | ) | $ | 29,412 | $ | 3,833 | |||||||
| Company’s share of equity in net income of unconsolidated affiliates | $ | 4,544 | $ | 377 | $ | 23,156 | $ | 4,267 | ||||||||
| Basis differential amortization | (543 | ) | (479 | ) | (2,112 | ) | (675 | ) | ||||||||
| Company’s equity in earnings (losses) of unconsolidated affiliates | $ | 4,001 | $ | (102 | ) | $ | 21,044 | $ | 3,592 | |||||||
23
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:
|
| September 30, |
|
| December 31, |
| ||
(in thousands) |
| 2022 |
|
| 2021 |
| ||
Other Assets, Net: |
|
|
|
|
|
| ||
Lease intangibles, net (Note 6) |
| $ | 110,620 |
|
| $ | 108,918 |
|
Deferred charges, net (a) |
|
| 26,899 |
|
|
| 28,438 |
|
Derivative financial instruments (Note 8) |
|
| 56,578 |
|
|
| 7 |
|
Prepaid expenses |
|
| 17,077 |
|
|
| 17,230 |
|
Accrued interest receivable (Note 3) |
|
| 15,098 |
|
|
| 21,148 |
|
Due from seller |
|
| 3,036 |
|
|
| 3,364 |
|
Income taxes receivable |
|
| 1,826 |
|
|
| 2,279 |
|
Other receivables |
|
| 1,527 |
|
|
| 1,830 |
|
Corporate assets, net |
|
| 1,376 |
|
|
| 1,648 |
|
Deposits |
|
| 521 |
|
|
| 1,647 |
|
|
| $ | 234,558 |
|
| $ | 186,509 |
|
|
|
|
|
|
|
| ||
(a) Deferred Charges, Net: |
|
|
|
|
|
| ||
Deferred leasing and other costs |
| $ | 60,695 |
|
| $ | 58,281 |
|
Deferred financing costs related to line of credit |
|
| 9,502 |
|
|
| 9,953 |
|
|
|
| 70,197 |
|
|
| 68,234 |
|
Accumulated amortization |
|
| (43,298 | ) |
|
| (39,796 | ) |
Deferred charges, net |
| $ | 26,899 |
|
| $ | 28,438 |
|
|
|
|
|
|
|
| ||
Accounts Payable and Other Liabilities: |
|
|
|
|
|
| ||
Lease intangibles, net (Note 6) |
| $ | 80,544 |
|
| $ | 76,778 |
|
Accounts payable and accrued expenses |
|
| 62,984 |
|
|
| 56,580 |
|
Deferred income |
|
| 36,073 |
|
|
| 38,373 |
|
Tenant security deposits, escrow and other |
|
| 14,509 |
|
|
| 13,045 |
|
Lease liability - finance leases, net (Note 11) |
|
| 6,917 |
|
|
| 6,612 |
|
Derivative financial instruments (Note 8) |
|
| 6 |
|
|
| 45,027 |
|
|
| $ | 201,033 |
|
| $ | 236,415 |
|
| (in thousands) | September 30, 2017 | December 31, 2016 | ||||||
| Other assets, net: | ||||||||
Lease intangibles, net (Note 6) | $ | 123,593 | $ | 114,584 | ||||
Deferred charges, net (a) | 28,365 | 25,221 | ||||||
| Prepaid expenses | 18,173 | 14,351 | ||||||
| Other receivables | 9,440 | 9,514 | ||||||
| Accrued interest receivable | 12,030 | 9,354 | ||||||
| Deposits | 4,422 | 4,412 | ||||||
| Due from seller | 4,300 | 4,300 | ||||||
| Deferred tax assets | 3,719 | 3,733 | ||||||
Derivative financial instruments (Note 8) | 2,661 | 2,921 | ||||||
| Due from related parties | 1,773 | 1,655 | ||||||
| Corporate assets | 2,408 | 1,241 | ||||||
| Income taxes receivable | 2,134 | 1,500 | ||||||
| $ | 213,018 | $ | 192,786 | |||||
| (a) Deferred charges, net: | ||||||||
| Deferred leasing and other costs | $ | 44,484 | $ | 40,728 | ||||
| Deferred financing costs | 7,678 | 5,915 | ||||||
| 52,162 | 46,643 | |||||||
| Accumulated amortization | (23,797 | ) | (21,422 | ) | ||||
| Deferred charges, net | $ | 28,365 | $ | 25,221 | ||||
| Accounts payable and other liabilities: | ||||||||
Lease intangibles, net (Note 6) | $ | 104,663 | $ | 105,028 | ||||
| Accounts payable and accrued expenses | 57,326 | 48,290 | ||||||
| Deferred income | 32,717 | 35,267 | ||||||
| Tenant security deposits, escrow and other | 11,214 | 14,975 | ||||||
Derivative financial instruments (Note 8) | 3,468 | 3,590 | ||||||
| Income taxes payable | 1,818 | 1,287 | ||||||
| Other | — | 235 | ||||||
| $ | 211,206 | $ | 208,672 | |||||
24
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
6. Lease Intangibles
Upon acquisitions of real estate accounted for as business combinations,(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- marketbelow-market options and acquired in-place leases) and assumed liabilities in accordance with ASC Topic 805.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, net and Accounts payable and other liabilities (Note 5) on the consolidated balance sheet and summarized as follows (in thousands):
|
| September 30, 2022 |
|
| December 31, 2021 |
| ||||||||||||||||||
|
| Gross Carrying |
|
| Accumulated |
|
| Net Carrying |
|
| Gross Carrying |
|
| Accumulated |
|
| Net Carrying |
| ||||||
Amortizable Intangible Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
In-place lease intangible assets |
| $ | 303,140 |
|
| $ | (199,808 | ) |
| $ | 103,332 |
|
| $ | 290,819 |
|
| $ | (189,981 | ) |
| $ | 100,838 |
|
Above-market rent |
|
| 24,064 |
|
|
| (16,776 | ) |
|
| 7,288 |
|
|
| 24,191 |
|
|
| (16,111 | ) |
|
| 8,080 |
|
|
| $ | 327,204 |
|
| $ | (216,584 | ) |
| $ | 110,620 |
|
| $ | 315,010 |
|
| $ | (206,092 | ) |
| $ | 108,918 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Amortizable Intangible Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Below-market rent |
| $ | (181,202 | ) |
| $ | 101,018 |
|
| $ | (80,184 | ) |
| $ | (171,245 | ) |
| $ | 94,871 |
|
| $ | (76,374 | ) |
Above-market ground lease |
|
| (671 | ) |
|
| 311 |
|
|
| (360 | ) |
|
| (671 | ) |
|
| 267 |
|
|
| (404 | ) |
|
| $ | (181,873 | ) |
| $ | 101,329 |
|
| $ | (80,544 | ) |
| $ | (171,916 | ) |
| $ | 95,138 |
|
| $ | (76,778 | ) |
| September 30, 2017 | December 31, 2016 | ||||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | ||||||||||||||||||
| Amortizable Intangible Assets | |||||||||||||||||||||||
| In-place lease intangible assets | $ | 185,273 | $ | (67,747 | ) | $ | 117,526 | $ | 156,420 | $ | (47,827 | ) | $ | 108,593 | |||||||||
| Above-market rent | 18,239 | (12,172 | ) | 6,067 | 16,649 | (10,658 | ) | 5,991 | |||||||||||||||
| $ | 203,512 | $ | (79,919 | ) | $ | 123,593 | $ | 173,069 | $ | (58,485 | ) | $ | 114,584 | ||||||||||
| Amortizable Intangible Liabilities | |||||||||||||||||||||||
| Below-market rent | $ | (144,218 | ) | $ | 40,207 | $ | (104,011 | ) | $ | (137,032 | ) | $ | 32,004 | $ | (105,028 | ) | |||||||
| Above-market ground lease | (671 | ) | 19 | (652 | ) | — | — | — | |||||||||||||||
| $ | (144,889 | ) | $ | 40,226 | $ | (104,663 | ) | $ | (137,032 | ) | $ | 32,004 | $ | (105,028 | ) | ||||||||
During the nine months ended September 30, 2017,2022, the Company Company:
During the year ended December 31, 2021, the Company:
25
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
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.operations. 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 September 30, 20172022 is as follows (in thousands):
Years Ending December 31, |
| Net Increase in |
|
| Increase to |
|
| Reduction of |
|
| Net (Expense) Income |
| ||||
2022 (Remainder) |
| $ | 1,688 |
|
| $ | (9,484 | ) |
| $ | 15 |
|
| $ | (7,781 | ) |
2023 |
|
| 6,397 |
|
|
| (31,875 | ) |
|
| 58 |
|
|
| (25,420 | ) |
2024 |
|
| 6,209 |
|
|
| (23,616 | ) |
|
| 58 |
|
|
| (17,349 | ) |
2025 |
|
| 5,792 |
|
|
| (17,184 | ) |
|
| 58 |
|
|
| (11,334 | ) |
2026 |
|
| 5,440 |
|
|
| (12,920 | ) |
|
| 58 |
|
|
| (7,422 | ) |
Thereafter |
|
| 47,370 |
|
|
| (8,253 | ) |
|
| 113 |
|
|
| 39,230 |
|
Total |
| $ | 72,896 |
|
| $ | (103,332 | ) |
| $ | 360 |
|
| $ | (30,076 | ) |
| Years Ending December 31, | Net Increase in Lease Revenues | Increase to Amortization | Reduction of Rent Expense | Net Income (Expense) | ||||||||||||
| 2017 (Remainder) | $ | 3,046 | $ | (7,596 | ) | $ | 15 | $ | (4,535 | ) | ||||||
| 2018 | 9,874 | (26,009 | ) | 58 | (16,077 | ) | ||||||||||
| 2019 | 9,512 | (18,849 | ) | 58 | (9,279 | ) | ||||||||||
| 2020 | 7,860 | (14,011 | ) | 58 | (6,093 | ) | ||||||||||
| 2021 | 7,457 | (11,286 | ) | 58 | (3,771 | ) | ||||||||||
| Thereafter | 60,195 | (39,775 | ) | 405 | 20,825 | |||||||||||
| Total | $ | 97,944 | $ | (117,526 | ) | $ | 652 | $ | (18,930 | ) | ||||||
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 | ||||
|
| September 30, |
| December 31, |
| Maturity Date at |
| September 30, |
| December 31, |
|
| 2022 |
| 2021 |
| September 30, 2022 |
| 2022 |
| 2021 |
Mortgages Payable |
|
|
|
|
|
|
|
|
|
|
Core Fixed Rate |
| 3.88%-5.89% |
| 3.88%-5.89% |
| Feb 2024 - Apr 2035 |
| $144,326 |
| $145,464 |
Core Variable Rate - Swapped (a) |
| 3.41%-4.54% |
| 3.41%-4.54% |
| Jun 2026 - Nov 2028 |
| 60,390 |
| 72,957 |
Total Core Mortgages Payable |
|
|
|
|
|
|
| 204,716 |
| 218,421 |
Fund II Variable Rate |
| SOFR+2.61% |
| LIBOR+2.75% - PRIME+2.00% |
| Aug 2025 |
| 132,259 |
| 255,978 |
Fund III Variable Rate |
| SOFR+3.35% |
| LIBOR+2.75% |
| Jul 2023 |
| 35,970 |
| 34,728 |
Fund IV Fixed Rate |
| 4.50% |
| 4.50% |
| Oct 2025 |
| 1,120 |
| 1,120 |
Fund IV Variable Rate |
| LIBOR+1.75%-LIBOR+3.65% |
| LIBOR+1.60%-LIBOR+3.65% |
| Oct 2022 - Jun 2026 |
| 151,735 |
| 221,832 |
Fund IV Variable Rate - Swapped (a) |
|
|
| 3.48%-4.61% |
|
|
| — |
| 23,316 |
Total Fund IV Mortgages and Other Notes Payable |
|
|
|
|
|
|
| 152,855 |
| 246,268 |
Fund V Fixed Rate |
| 3.35% |
| 3.35% |
| May 2023 |
| 31,801 |
| 31,801 |
Fund V Variable Rate |
| LIBOR + 1.85% - SOFR + 2.76% |
| LIBOR + 1.85% - SOFR + 2.76% |
| Jun 2023 - Nov 2026 |
| 58,136 |
| 58,878 |
Fund V Variable Rate - Swapped (a) |
| 2.51%-5.11% |
| 2.43%-4.78% |
| Jan 2023 - Apr 2025 |
| 337,481 |
| 297,731 |
Total Fund V Mortgages Payable |
|
|
|
|
|
|
| 427,418 |
| 388,410 |
Net unamortized debt issuance costs |
|
|
|
|
|
|
| (8,352) |
| (3,958) |
Unamortized premium |
|
|
|
|
|
|
| 369 |
| 446 |
Total Mortgages Payable |
|
|
|
|
|
|
| $945,235 |
| $1,140,293 |
Unsecured Notes Payable |
|
|
|
|
|
|
|
|
|
|
Core Variable Rate Unsecured |
| 3.65%-5.32% |
| 3.65%-5.32% |
| Jun 2026 - Jul 2029 |
| $650,000 |
| $400,000 |
Fund II Unsecured Notes Payable |
|
|
| LIBOR+2.25% |
|
|
| — |
| 40,000 |
Fund IV Subscription Facility |
| SOFR+2.01% |
| SOFR+2.01% |
| Dec 2022 |
| — |
| 5,000 |
Fund V Subscription Facility |
| SOFR+1.86% |
| LIBOR+1.90% |
| May 2023 |
| 49,726 |
| 118,028 |
|
|
|
|
|
|
|
|
|
|
|
Net unamortized debt issuance costs |
|
|
|
|
|
|
| (5,416) |
| (3,988) |
Total Unsecured Notes Payable |
|
|
|
|
|
|
| $694,310 |
| $559,040 |
Unsecured Line of Credit |
|
|
|
|
|
|
|
|
|
|
Core Unsecured Line of Credit - Variable Rate |
| LIBOR + 1.40% |
| LIBOR + 1.40% |
| Jun 2025 |
| $62,050 |
| $46,491 |
Core Unsecured Line of Credit -Swapped (a) |
| 3.65%-5.32% |
| 3.65%-5.32% |
| Jun 2025 |
| 116,237 |
| 66,414 |
Total Unsecured Line of Credit |
|
|
|
|
|
|
| $178,287 |
| $112,905 |
|
|
|
|
|
|
|
|
|
|
|
Total Debt - Fixed Rate (b) |
|
|
|
|
|
|
| $1,341,355 |
| $1,038,803 |
Total Debt - Variable Rate (c) |
|
|
|
|
|
|
| 489,876 |
| 780,935 |
Total Debt |
|
|
|
|
|
|
| 1,831,231 |
| 1,819,738 |
Net unamortized debt issuance costs |
|
|
|
|
|
|
| (13,768) |
| (7,946) |
Unamortized premium |
|
|
|
|
|
|
| 369 |
| 446 |
Total Indebtedness |
|
|
|
|
|
|
| $1,817,832 |
| $1,812,238 |
| Interest Rate | Maturity Date at September 30, 2017 | Carrying Value | |||||||||||
| September 30, 2017 | December 31, 2016 | September 30, 2017 | December 31, 2016 | ||||||||||
| Mortgages Payable | |||||||||||||
| Core Fixed Rate | 3.88%-5.89% | 3.88%-5.89% | February 2024 - April 2035 | $ | 180,259 | $ | 234,875 | ||||||
Core Variable Rate - Swapped (a) | 1.71%-3.77% | 1.71%-3.77% | June 2018 - June 2026 | 80,492 | 82,250 | ||||||||
| Total Core Mortgages Payable | 260,751 | 317,125 | |||||||||||
| Fund II Fixed Rate | 1.00%-4.75% | 1.00%-5.80% | October 2017 - May 2020 | 224,262 | 249,762 | ||||||||
| Fund II Variable Rate | LIBOR+0.79% -LIBOR+2.50% | LIBOR+0.62% -LIBOR+2.50% | December 2017 - November 2021 | 126,077 | 142,750 | ||||||||
Fund II Variable Rate - Swapped (a) | 2.88% | 2.88% | November 2021 | 19,616 | 19,779 | ||||||||
| Total Fund II Mortgages Payable | 369,955 | 412,291 | |||||||||||
| Fund III Variable Rate | Prime+0.50% -LIBOR+4.65% | Prime+0.50% -LIBOR+4.65% | March 2018 - December 2021 | 69,632 | 83,467 | ||||||||
| Fund IV Fixed Rate | 3.40%-4.50% | 3.40%-4.50% | October 2025-June 2026 | 10,503 | 10,503 | ||||||||
| Fund IV Variable Rate | LIBOR+1.70% -LIBOR+3.95% | LIBOR+1.70% - LIBOR+3.95% | October 2017 - April 2022 | 268,554 | 233,139 | ||||||||
Fund IV Variable Rate - Swapped (a) | 1.78% | 1.78% | May 2019 - April 2022 | 81,156 | 14,509 | ||||||||
| Total Fund IV Mortgages Payable | 360,213 | 258,151 | |||||||||||
| Net unamortized debt issuance costs | (15,555 | ) | (16,642 | ) | |||||||||
| Unamortized premium | 881 | 1,336 | |||||||||||
| Total Mortgages Payable | $ | 1,045,877 | $ | 1,055,728 | |||||||||
| Unsecured Notes Payable | |||||||||||||
| Core Unsecured Term Loans | LIBOR+1.30% -LIBOR+1.60% | LIBOR+1.30% -LIBOR+1.60% | July 2020 - December 2022 | $ | 26,459 | $ | 51,194 | ||||||
Core Variable Rate Unsecured Term Loans - Swapped (a) | 1.24%-3.77% | 1.24%-3.77% | July 2018 - March 2025 | 273,541 | 248,806 | ||||||||
| Total Core Unsecured Notes Payable | 300,000 | 300,000 | |||||||||||
| Fund II Unsecured Notes Payable | LIBOR+1.65% | September 2020 | 31,500 | — | |||||||||
| Fund IV Term Loan/Subscription Facility | LIBOR+1.65% -LIBOR+2.75% | LIBOR+1.65% -LIBOR+2.75% | October 2017- December 2017 | 54,920 | 134,636 | ||||||||
| Fund V Subscription Facility | LIBOR+1.60% | LIBOR+1.60% | May 2020 | 113,200 | — | ||||||||
| Net unamortized debt issuance costs | (1,650 | ) | (1,646 | ) | |||||||||
| Total Unsecured Notes Payable | $ | 497,970 | $ | 432,990 | |||||||||
| Unsecured Line of Credit | |||||||||||||
| Core Unsecured Line of Credit | LIBOR+1.40% | LIBOR+1.40% | June 2020 | $ | 59,000 | $ | — | ||||||
| Total Unsecured Line of Credit | $ | 59,000 | $ | — | |||||||||
Total Debt - Fixed Rate (b) | $ | 869,829 | $ | 860,484 | |||||||||
| Total Debt - Variable Rate | 749,342 | 645,186 | |||||||||||
| Total Debt | 1,619,171 | 1,505,670 | |||||||||||
| Net unamortized debt issuance costs | (17,205 | ) | (18,288 | ) | |||||||||
| Unamortized premium | 881 | 1,336 | |||||||||||
| Total Indebtedness | $ | 1,602,847 | $ | 1,488,718 | |||||||||
27
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Credit Facilities
The Company has a $700.0 million senior unsecured credit facility, as amended (the “Credit Facility”), comprised of a $300.0 million senior unsecured revolving credit facility (the “Revolver”) which bears interest at LIBOR + 1.40%, and a $400.0 million senior unsecured term loan (the “Term Loan”) which bears interest at LIBOR + 1.55%. The Revolver matures on June 29, 2025, subject to two six-month extension options, and the Term Loan matures on June 29, 2026. The Credit Facility provides for an accordion feature, which allows for one or more increases in the revolving credit facility or term loan facility, for a maximum aggregate principal amount not to exceed $900.0 million. The Revolver and Term Loan were swapped to fixed rates at September 30, 2022.
On April 6, 2022, the Company entered into a term loan (the "$175.0 Million Term Loan"). The $175.0 Million Term Loan bears interest at SOFR plus 1.5% and matures on April 6, 2027. In addition, during the second quarter of 2022, the Company entered into swaps totaling $150.0 million (Note 8) to fix SOFR at an average rate of 2.5% for borrowings under the $175.0 Million Term Loan. The proceeds of the $175.0 Million Term Loan were used to pay down the Revolver. On July 29, 2022, the Company entered into an additional term loan (the "$75.0 Million Term Loan"). The $75.0 Million Term Loan bears interest at SOFR plus 2.05% and matures on July 29, 2029. The proceeds of the $75.0 Million Term Loan were used to pay down the Revolver. During the third quarter, the Company entered into seven swap agreements with an aggregate notional amount of $175.0 million to fix SOFR at an average rate of 2.5% to hedge its variable interest rate exposure.
Mortgages and Other Notes Payable
During the nine months ended September 30, 2017,2022, the Company obtained nine(amounts represent balances at the time of transactions):
During the year ended December 31, 2021, the Company (amounts represent balances at the time of transactions):
28
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
At September 30, 20172022 and December 31, 2016,2021, the Company’s mortgages were collateralized by 45 34and 3937 properties, respectively, and the related tenant leases. Certain loans are cross-collateralized and contain cross-default provisions. The loan agreements contain customary representations, covenants and events of default. Certain loan agreements require the Company to comply with affirmative and negative covenants, including the maintenance of debt service coverage and leverage ratios. The Operating Partnership has guaranteed up to $50.0 million of the Fund IV Bridge loan. The Company was not in default on any of its loan agreements at September 30, 2022. A portion of the Company’s variable-rate mortgage debt has been effectively fixed through certain cash flow hedge transactions (
Unsecured Notes Payable
Unsecured notes payable for which total availability was $85.3 million and was in default at September 30, 2017 and December 31, 2016. This loan bears interest at 5.99%, excluding default interest of 5%, and is collateralized by a property, in which the Company holds a 22% controlling interest. In April 2017, the lender on this mortgage initiated a lawsuit against the Company for the full balance of the principal, accrued interest as well as penalties and fees aggregating approximately $31.0 million. The Company’s management believes that the mortgage is not recourse to the Company and that the suit is without merit.
Unsecured Revolving Line of Credit
At September 30, 20172022 and December 31, 2016,2021, the Company had a total of $79.7$121.7 million and $147.5$183.1 million respectively available under its unsecured lineRevolver, reflecting borrowings of credit. The Company completed the following transactions related to its unsecured line$178.3 million and $112.9 million and letters of credit during the nine months endedof $0.0 and $4.0 million, respectively. At September 30, 2017:
29
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Scheduled Debt Principal Payments
The scheduled principal repayments, without regard to available extension options (described further below), of the Company’s consolidated indebtedness, as of September 30, 20172022 are as follows (in thousands):
Year Ending December 31, |
|
|
| |
2022 (Remainder) |
| $ | 85,273 |
|
2023 |
|
| 302,526 |
|
2024 |
|
| 211,448 |
|
2025 |
|
| 417,902 |
|
2026 |
|
| 445,818 |
|
Thereafter |
|
| 368,264 |
|
|
|
| 1,831,231 |
|
Unamortized premium |
|
| 369 |
|
Net unamortized debt issuance costs |
|
| (13,768 | ) |
Total indebtedness |
| $ | 1,817,832 |
|
| Year Ending December 31, | |||
| 2017 (Remainder) | $ | 174,707 | |
| 2018 | 88,308 | ||
| 2019 | 228,523 | ||
| 2020 | 573,807 | ||
| 2021 | 255,055 | ||
| Thereafter | 298,771 | ||
| 1,619,171 | |||
| Unamortized fair market value of assumed debt | 881 | ||
| Net unamortized debt issuance costs | (17,205 | ) | |
| Total indebtedness | $ | 1,602,847 | |
The table above does not reflect available extension options (subject to customary conditions) on consolidated debt with balances as of September 30, 2022 of $57.9 million contractually due in the remainder of 2022 and $41.1 million contractually due in 2023; most for which the Company has available options to extend by up to 12 months and for some an additional 12 months thereafter. However, there can be no assurance that the Company will be able to successfully execute any or all of its available extension options.
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 at times have zero balances and are included in Cash and cash equivalents in the consolidatedEquity Investments –Albertsons became publicly traded during 2020 (Note 4). Upon Albertsons’ IPO, the Company’s Investment in Albertsons has a readily determinable market value (traded on an exchange) and is being accounted for as a Level 1 investment.
Derivative Assets
— The Company has derivative assets, which are included in Other assets, netDerivative Liabilities
— The Company has derivative liabilities, which are included in Accounts payable and other liabilities30
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
The Company did not have any transfers into or out of Level 1, Level 2, and Level 3 measurements during the nine months ended September 30, 20172022 or 2016.
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):
|
| September 30, 2022 |
|
| December 31, 2021 |
| ||||||||||||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
| ||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Money market funds |
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Derivative financial instruments |
|
| — |
|
|
| 56,578 |
|
|
| — |
|
|
| — |
|
|
| 7 |
|
|
| — |
|
Investment in Albertsons (Note 4) |
|
| 102,368 |
|
|
| — |
|
|
| — |
|
|
| 124,316 |
|
|
| — |
|
|
| — |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Derivative financial instruments |
|
| — |
|
|
| (6 | ) |
|
| — |
|
|
| — |
|
|
| (45,027 | ) |
|
| — |
|
| September 30, 2017 | December 31, 2016 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 | |||||||||||||||||||
| Assets | ||||||||||||||||||||||||
| Money Market Funds | $ | 3 | $ | — | $ | — | $ | 20,001 | $ | — | $ | — | ||||||||||||
| Derivative financial instruments | — | 2,661 | — | — | 2,921 | — | ||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||
| Derivative financial instruments | — | 3,468 | — | — | 3,590 | — | ||||||||||||||||||
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.
31
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Items Measured at Fair Value on a Nonrecurring Basis (Including
Impairment Charges)
During the three and nine months ended September 30, 2017,2022, the Company recognized an impairment charge of $3.8 million, inclusive of an amount attributable to a noncontrolling interest of $2.7 million, on a property classified as held for salereduced its holding period and intended use, and projected operating income at September 30, 2017 (
|
|
|
|
|
|
|
|
|
| Impairment Charge |
| |||||
Property and Location |
| Owner |
| Triggering Event |
| Level 3 Inputs |
| Effective Date |
| Total |
|
| Acadia's Share |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
2022 Impairment Charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
146 Geary Street, |
| Fund IV |
| Reduced projected operating income |
| Projections of: holding period, net operating income, cap rate, incremental costs |
| Sept 30, 2022 |
| $ | 12,435 |
|
| $ | 2,875 |
|
717 N. Michigan Avenue, |
| Fund IV |
| Reduced holding period and intended use |
| Offering price |
| Sept 30, 2022 |
|
| 20,876 |
|
|
| 4,827 |
|
Total 2022 Impairment Charges |
|
|
|
|
|
|
|
|
| $ | 33,311 |
|
| $ | 7,702 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
2021 Impairment Charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
210 Bowery commercial unit, |
| Fund IV |
| Reduced projected operating income |
| Projections of: holding period, net operating income, cap rate, incremental costs |
| Sept 30, 2021 |
| $ | 3,016 |
|
| $ | 697 |
|
27 E. 61st Street |
| Fund IV |
| Reduced projected operating income |
| Projections of: holding period, net operating income, cap rate, incremental costs |
| Sept 30, 2021 |
|
| 6,909 |
|
|
| 1,597 |
|
Total 2021 Impairment Charges |
|
|
|
|
|
|
|
|
| $ | 9,925 |
|
| $ | 2,294 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
32
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 |
| Aggregate Notional Amount |
|
| Effective Date |
| Maturity Date |
| Low |
|
|
| High |
|
| Balance Sheet |
| September 30, |
|
| December 31, |
| ||||||
Core |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Interest Rate Swaps |
| $ | 10,237 |
|
| Dec 2012 |
| Dec 2022 |
|
| 3.77 | % |
| — |
|
| 3.77 | % |
| Other Liabilities |
| $ | (6 | ) |
| $ | (40,650 | ) |
Interest Rate Swap |
|
| 816,390 |
|
| Mar 2015 - Aug 2022 |
| Mar 2023 - Jul 2030 |
|
| 1.71 | % |
| — |
|
| 3.05 | % |
| Other Assets |
|
| 45,045 |
|
|
| — |
|
|
| $ | 826,627 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 45,039 |
|
| $ | (40,650 | ) | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Fund III |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Interest Rate Caps |
| $ | 35,970 |
|
| Jul 2022 |
| Jul 2023 |
|
| 3.50 | % |
| — |
|
| 3.50 | % |
| Other Assets |
| $ | 196 |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Fund IV |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Interest Rate Swaps |
| $ | — |
|
| Mar 2017 - Jan 2019 |
| Apr 2022 |
|
| 1.97 | % |
| — |
|
| 2.61 | % |
| Other Assets |
| $ | — |
|
| $ | — |
|
Interest Rate Swaps |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
| Other Liabilities |
|
| — |
|
|
| (167 | ) | |||
Interest Rate Caps |
|
| 71,338 |
|
| Dec 2020 - Jul 2021 |
| Dec 2022-Jul 2023 |
|
| 3.00 | % |
| — |
|
| 3.50 | % |
| Other Assets |
|
| 179 |
|
|
| 7 |
|
|
| $ | 71,338 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 179 |
|
| $ | (160 | ) | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Fund V |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Interest Rate Swaps |
| $ | 337,481 |
|
| Jun 2018 - Apr 2022 |
| Oct 2022 - Apr 2025 |
|
| 0.91 | % |
| — |
|
| 2.88 | % |
| Other Assets |
| $ | 11,158 |
|
| $ | — |
|
Interest Rate Swaps |
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
| Other Liabilities |
|
| — |
|
|
| (4,210 | ) | |||
|
| $ | 337,481 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 11,158 |
|
| $ | (4,210 | ) | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total asset derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 56,578 |
|
| $ | 7 |
| ||||||
Total liability derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | (6 | ) |
| $ | (45,027 | ) | ||||||
| Aggregate Notional Amount | Strike Rate | Balance Sheet Location | Fair Value | |||||||||||||
| Derivative Instrument | Effective Date | Maturity Date | Low | High | September 30, 2017 | December 31, 2016 | ||||||||||
| Core | ||||||||||||||||
| Interest Rate Swaps | $ | 149,440 | Oct 2011 - March 2015 | July 2018 - Mar 2025 | 1.38% | — | 3.77% | Other Liabilities | $ | (2,936 | ) | $ | (3,218 | ) | ||
| Interest Rate Swaps | 204,593 | Sep 2012 - July 2017 | July 2020 - July 2027 | 1.24% | — | 3.77% | Other Assets | 2,622 | 2,609 | |||||||
| $ | 354,033 | $ | (314 | ) | $ | (609 | ) | |||||||||
| Fund II | ||||||||||||||||
| Interest Rate Swap | $ | 19,616 | October 2014 | November 2021 | 2.88% | — | 2.88% | Other Liabilities | $ | (168 | ) | $ | (228 | ) | ||
| Interest Rate Cap | 29,500 | April 2013 | April 2018 | 4.00% | — | 4.00% | Other Assets | — | — | |||||||
| $ | 49,116 | $ | (168 | ) | $ | (228 | ) | |||||||||
| Fund III | ||||||||||||||||
| Interest Rate Cap | $ | 58,000 | Dec 2016 | Jan 2020 | 3.00% | — | 3.00% | Other Assets | $ | 17 | $ | 127 | ||||
| Fund IV | ||||||||||||||||
| Interest Rate Swaps | $ | 81,156 | May 2014 - March 2017 | May 2019 - April 2022 | 1.78% | — | 1.98% | Other Liabilities | $ | (364 | ) | $ | (144 | ) | ||
| Interest Rate Caps | 108,900 | July 2016 - November 2016 | August 2019 - December 2019 | 3.00% | — | 3.00% | Other Assets | 22 | 185 | |||||||
| $ | 190,056 | $ | (342 | ) | $ | 41 | ||||||||||
| Total asset derivatives | $ | 2,661 | $ | 2,921 | ||||||||||||
| Total liability derivatives | $ | (3,468 | ) | $ | (3,590 | ) | ||||||||||
All of the Company’s derivative instruments have been designated as cash flow hedges and hedge the future cash outflows on variablevariable-rate debt (Note 7). It is estimated that approximately $19.3 million included in Accumulated other comprehensive income related to derivatives will be reclassified to interest expense within the next twelve months. As of September 30, 2022 and December 31, 2021, no derivatives were designated as fair value hedges or hedges of net investments in foreign operations. Additionally, the Company does not use derivatives for trading or speculative purposes and currently does not have any derivatives that are not designated hedges.
During the first quarter of 2021, the Company terminated two interest rate mortgage debt (
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.
The Company is exposed to credit risk in the event of non-performance by the counterparties to the Swapsswaps if the derivative position has a positive balance. The Company believes it mitigates its credit risk by entering into Swapsswaps 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. The Company has not entered, and does not plan to enter, into any derivative financial instruments for trading or speculative purposes.
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Amount of (loss) income related to the effective portion recognized in other comprehensive income | $ | (644 | ) | $ | 1,474 | $ | (2,652 | ) | (12,624 | ) | |||||
| Amount of loss related to the effective portion subsequently reclassified to earnings | $ | — | $ | — | $ | — | $ | — | |||||||
| Amount of gain (loss) related to the ineffective portion and amount excluded from effectiveness testing | $ | — | $ | — | $ | — | $ | — | |||||||
Credit Risk-Related Contingent Features
The Company has agreements with each of its Swapswap 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.
33
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
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)thousands, inclusive of amounts attributable to noncontrolling interests where applicable):
|
|
|
|
| September 30, 2022 |
|
| December 31, 2021 |
| |||||||||||
|
| Level |
|
| Carrying |
|
| Estimated |
|
| Carrying |
|
| Estimated |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Notes Receivable (a) |
|
| 3 |
|
| $ | 123,966 |
|
| $ | 123,439 |
|
| $ | 153,886 |
|
| $ | 154,093 |
|
City Point Loan (a) |
|
| 3 |
|
|
| 65,945 |
|
|
| 65,809 |
|
|
| — |
|
|
| — |
|
Mortgage and Other Notes Payable (a) |
|
| 3 |
|
|
| 953,218 |
|
|
| 913,758 |
|
|
| 1,143,805 |
|
|
| 1,125,571 |
|
Investment in non-traded equity securities (b) |
|
| 3 |
|
|
| 3,839 |
|
|
| 5,790 |
|
|
| 3,656 |
|
|
| 4,062 |
|
Unsecured notes payable and Unsecured line of credit (c) |
|
| 2 |
|
|
| 878,013 |
|
|
| 869,530 |
|
|
| 675,933 |
|
|
| 680,171 |
|
| September 30, 2017 | December 31, 2016 | |||||||||||||||||
| Level | Carrying Amount | Estimated Fair Value | Carrying Amount | Estimated Fair Value | ||||||||||||||
Notes Receivable (a) | 3 | $ | 250,194 | $ | 247,143 | $ | 276,163 | $ | 272,052 | |||||||||
Mortgage and Other Notes Payable, net (a) | 3 | 1,060,550 | 1,066,539 | 1,071,034 | 1,077,926 | |||||||||||||
Investment in non-traded equity securities (b) | 3 | — | 22,904 | 802 | 25,194 | |||||||||||||
Unsecured notes payable and Unsecured line of credit, net (c) | 2 | 558,620 | 559,978 | 434,636 | 435,779 | |||||||||||||
The Company’s cash and cash equivalents, restricted cash, accountsrents receivable, accounts payable and certain financial instruments included in other assets and other liabilities had fair values that approximated their carrying values due to their short maturity profiles at September 30, 2017.2022.
9. Commitments and Contingencies
The Company is involved in various matters of litigation arising out of, or incidental to, its business. While the Company is unable to predict with certainty the outcome of any particular matter, management does not expect, when such litigation is resolved, that the Company’s resulting exposure to loss contingencies, if any, will have a material adverse effect on its consolidated financial position.
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 $93.1$37.2 million and $85.4$38.1 million as of September 30, 20172022 and December 31, 2016,2021, respectively.
At each of September 30, 20172022 and December 31, 2016,2021, the Company had Core and Fund letters of credit outstanding of $11.3 million.$7.0 million and $19.7 million, respectively (Note 7). The Company has not recorded any obligation associated with these letters of credit. The majority of the letters of credit are collateral for existing indebtedness and other obligations of the Company.
34
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Common Shares
In addition to the ATM Program activity discussed below, the Company completed the following transactions in its common sharesCommon Shares during the nine months ended September 30, 2017:
In addition to the ATM Program activity discussed below, the Company completed the following transactions in its Common Shares during the year ended December 31, 2021:
ATM Program
The Company has an amendment to the Company’s Declaration of Trust to increase the authorized share capital ofat-the-market equity issuance program (“ATM Program”) that provides the Company from 100 million shares of beneficial interestan efficient vehicle for raising public equity capital to 200 million shares which became effective on July 24, 2017.
Share Repurchase Program
During 2018, the Company’s board of Common Shares, replacing its $200.0 million program that was launched in 2014. As of December 31, 2016 and September 30, 2017, there was $218.0 million remaining under this $250.0 million program.
35
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Dividends and Distributions
The following table sets forth the regular quarterly dividend. The special dividend is a result ofdistributions declared and/or paid during the taxable capital gains for 2016 arising from property dispositions within the Funds.periods presented:
Date Declared |
| Amount Per Share |
|
| Record Date |
| Payment Date | |
|
|
|
|
|
|
|
| |
March 15, 2021 |
| $ | 0.15 |
|
| March 31, 2021 |
| April 15, 2021 |
May 5, 2021 |
| $ | 0.15 |
|
| June 30, 2021 |
| July 15, 2021 |
August 5, 2021 |
| $ | 0.15 |
|
| September 30, 2021 |
| October 15, 2021 |
November 3, 2021 |
| $ | 0.15 |
|
| December 31, 2021 |
| January 14, 2022 |
February 15, 2022 |
| $ | 0.18 |
|
| March 31, 2022 |
| April 14, 2022 |
May 4, 2022 |
| $ | 0.18 |
|
| June 30, 2022 |
| July 15, 2022 |
August 10, 2022 |
| $ | 0.18 |
|
| September 30, 2022 |
| October 14, 2022 |
Accumulated Other Comprehensive Income
The following table setstables set forth the activity in accumulated other comprehensive income (loss) income for the three and nine months ended September 30, 20172022 and 20162021 (in thousands):
| Gains or Losses on Derivative Instruments | |||
| Balance at January 1, 2017 | $ | (798 | ) |
| Other comprehensive loss before reclassifications | (2,652 | ) | |
| Reclassification of realized interest on swap agreements | 2,637 | ||
| Net current period other comprehensive loss | (15 | ) | |
| Net current period other comprehensive loss attributable to noncontrolling interests | 260 | ||
| Balance at September 30, 2017 | $ | (553 | ) |
| Balance at January 1, 2016 | $ | (4,463 | ) |
| Other comprehensive loss before reclassifications | (12,624 | ) | |
| Reclassification of realized interest on swap agreements | 3,396 | ||
| Net current period other comprehensive loss | (9,228 | ) | |
| Net current period other comprehensive loss attributable to noncontrolling interests | 847 | ||
| Balance at September 30, 2016 | $ | (12,844 | ) |
|
| Gains or Losses |
| |
Balance at July 1, 2022 |
| $ | 11,240 |
|
|
|
|
| |
Other comprehensive income before reclassifications - swap agreements |
|
| 44,114 |
|
Reclassification of realized interest on swap agreements |
|
| 1,518 |
|
Net current period other comprehensive income |
|
| 45,632 |
|
Net current period other comprehensive loss attributable to redeemable noncontrolling |
|
| — |
|
Net current period other comprehensive income attributable to noncontrolling |
|
| (7,188 | ) |
Balance at September 30, 2022 |
| $ | 49,684 |
|
|
|
|
| |
Balance at July 1, 2021 |
| $ | (47,909 | ) |
|
|
|
| |
Other comprehensive income before reclassifications - swap agreements |
|
| 1,048 |
|
Reclassification of realized interest on swap agreements |
|
| 5,476 |
|
Net current period other comprehensive income |
|
| 6,524 |
|
Net current period other comprehensive income attributable to noncontrolling |
|
| (1,784 | ) |
Balance at September 30, 2021 |
| $ | (43,169 | ) |
36
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
| Acadia's Share |
| |
Balance at January 1, 2022 |
| $ | (36,214 | ) |
|
|
|
| |
Other comprehensive income before reclassifications - swap agreements |
|
| 96,899 |
|
Reclassification of realized interest on swap agreements |
|
| 10,778 |
|
Net current period other comprehensive income |
|
| 107,677 |
|
Net current period other comprehensive loss attributable to redeemable noncontrolling |
|
| — |
|
Net current period other comprehensive income attributable to noncontrolling |
|
| (21,779 | ) |
Balance at September 30, 2022 |
| $ | 49,684 |
|
|
|
|
| |
Balance at January 1, 2021 |
| $ | (74,891 | ) |
|
|
|
| |
Other comprehensive income before reclassifications - swap agreements |
|
| 24,535 |
|
Reclassification of realized interest on swap agreements |
|
| 16,016 |
|
Net current period other comprehensive income |
|
| 40,551 |
|
Net current period other comprehensive income attributable to noncontrolling |
|
| (8,829 | ) |
Balance at September 30, 2021 |
| $ | (43,169 | ) |
37
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Noncontrolling Interests
The following table summarizestables summarize the change in the noncontrolling interests for the three and nine months ended September 30, 20172022 and 20162021 (dollars in thousands):
Noncontrolling Interests in Operating Partnership (a) | Noncontrolling Interests in Partially-Owned Affiliates (b) | Total | |||||||||
| Balance at January 1, 2017 | $ | 95,422 | $ | 494,126 | $ | 589,548 | |||||
| Distributions declared of $0.78 per Common OP Unit | (4,805 | ) | — | (4,805 | ) | ||||||
| Net income (loss) for the period January 1 through September 30, 2017 | 2,816 | (4,010 | ) | (1,194 | ) | ||||||
| Conversion of 61,150 Common OP Units to Common Shares by limited partners of the Operating Partnership | (1,086 | ) | — | (1,086 | ) | ||||||
| Other comprehensive income - unrealized loss on valuation of swap agreements | (68 | ) | (726 | ) | (794 | ) | |||||
| Reclassification of realized interest expense on swap agreements | 116 | 418 | 534 | ||||||||
| Noncontrolling interest contributions | — | 20,522 | 20,522 | ||||||||
| Noncontrolling interest distributions | — | (7,278 | ) | (7,278 | ) | ||||||
| Employee Long-term Incentive Plan Unit Awards | 8,704 | — | 8,704 | ||||||||
Rebalancing adjustment (d) | 2,105 | — | 2,105 | ||||||||
| Balance at September 30, 2017 | $ | 103,204 | $ | 503,052 | $ | 606,256 | |||||
| Balance at January 1, 2016 | $ | 96,340 | $ | 324,526 | $ | 420,866 | |||||
| Distributions declared of $0.75 per Common OP Unit | (4,398 | ) | — | (4,398 | ) | ||||||
| Net income for the period January 1 through September 30, 2016 | 3,757 | 43,644 | 47,401 | ||||||||
| Conversion of 350,240 Common OP Units to Common Shares by limited partners of the Operating Partnership | (7,875 | ) | — | (7,875 | ) | ||||||
| Issuance of Common and Preferred OP Units to acquire real estate | 29,336 | — | 29,336 | ||||||||
Acquisition of noncontrolling interests (c) | — | (25,925 | ) | (25,925 | ) | ||||||
| Other comprehensive income - unrealized loss on valuation of swap agreements | (640 | ) | (633 | ) | (1,273 | ) | |||||
| Change in control of previously unconsolidated investment | — | (75,713 | ) | (75,713 | ) | ||||||
| Reclassification of realized interest expense on swap agreements | 166 | 260 | 426 | ||||||||
| Noncontrolling interest contributions | — | 204,412 | 204,412 | ||||||||
| Noncontrolling interest distributions | — | (50,849 | ) | (50,849 | ) | ||||||
| Employee Long-term Incentive Plan Unit Awards | 10,983 | — | 10,983 | ||||||||
Rebalancing adjustment (d) | (35,254 | ) | — | (35,254 | ) | ||||||
| Balance at September 30, 2016 | $ | 92,415 | $ | 419,722 | $ | 512,137 | |||||
|
| Noncontrolling |
|
| Noncontrolling |
|
| Total |
|
| Redeemable Noncontrolling Interests (c) |
| ||||
Balance at July 1, 2022 |
| $ | 103,068 |
|
| $ | 567,538 |
|
| $ | 670,606 |
|
| $ | - |
|
Distributions declared of $0.18 per Common OP Unit and distributions on Preferred OP Units |
|
| (1,276 | ) |
|
| — |
|
|
| (1,276 | ) |
|
|
| |
Net loss for the three months ended September 30, 2022 |
|
| (2,958 | ) |
|
| (27,503 | ) |
|
| (30,461 | ) |
|
| (3,193 | ) |
Conversion of 20,000 Common OP Units to Common Shares by limited partners of the Operating Partnership |
|
| (333 | ) |
|
| — |
|
|
| (333 | ) |
|
| — |
|
Other comprehensive income - unrealized gain on valuation of swap agreements |
|
| 2,145 |
|
|
| 4,877 |
|
|
| 7,022 |
|
|
| — |
|
Reclassification of realized interest expense on swap agreements |
|
| 5 |
|
|
| 161 |
|
|
| 166 |
|
|
| — |
|
Acquisition of noncontrolling interest (d) |
|
| — |
|
|
| (50,435 | ) |
|
| (50,435 | ) |
|
| — |
|
City Point Loan |
|
| — |
|
|
| — |
|
|
| - |
|
|
| (65,405 | ) |
City Point Loan accrued interest |
|
| — |
|
|
| — |
|
|
| - |
|
|
| (1,564 | ) |
Noncontrolling interest contributions |
|
| — |
|
|
| 9,572 |
|
|
| 9,572 |
|
|
| 65,945 |
|
Noncontrolling interest distributions |
|
| — |
|
|
| (24,632 | ) |
|
| (24,632 | ) |
|
| — |
|
Employee Long-term Incentive Plan Unit Awards |
|
| 1,997 |
|
|
| — |
|
|
| 1,997 |
|
|
| — |
|
Reclassification of redeemable noncontrolling interests(e) |
|
| — |
|
|
| (76,569 | ) |
|
| (76,569 | ) |
|
| 76,569 |
|
Reallocation of noncontrolling interests (f) |
|
| 644 |
|
|
| — |
|
|
| 644 |
|
|
| — |
|
Balance at September 30, 2022 |
| $ | 103,292 |
|
| $ | 403,009 |
|
| $ | 506,301 |
|
| $ | 72,352 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Balance at July 1, 2021 |
| $ | 95,088 |
|
| $ | 524,010 |
|
| $ | 619,098 |
|
| $ | — |
|
Distributions declared of $0.15 per Common OP Unit and distributions on Preferred OP Units |
|
| (1,046 | ) |
|
| — |
|
|
| (1,046 | ) |
|
| — |
|
Net income for the three months ended September 30, 2021 |
|
| 872 |
|
|
| 18,193 |
|
|
| 19,065 |
|
|
| — |
|
Conversion of 18,000 Common OP Units to Common Shares by limited partners of the Operating Partnership |
|
| (288 | ) |
|
| — |
|
|
| (288 | ) |
|
| — |
|
Cancellation of OP units(g) |
|
| (479 | ) |
|
| — |
|
|
| (479 | ) |
|
| — |
|
Other comprehensive loss - unrealized gain (loss) on valuation of swap agreements |
|
| 227 |
|
|
| (258 | ) |
|
| (31 | ) |
|
| — |
|
Reclassification of realized interest expense on swap agreements |
|
| 53 |
|
|
| 1,762 |
|
|
| 1,815 |
|
|
| — |
|
Noncontrolling interest contributions |
|
| — |
|
|
| 9,518 |
|
|
| 9,518 |
|
|
| — |
|
Noncontrolling interest distributions |
|
| — |
|
|
| (10,127 | ) |
|
| (10,127 | ) |
|
| — |
|
Employee Long-term Incentive Plan Unit Awards |
|
| 2,419 |
|
|
| — |
|
|
| 2,419 |
|
|
| — |
|
Reallocation of noncontrolling interests (f) |
|
| (2,060 | ) |
|
| — |
|
|
| (2,060 | ) |
|
| — |
|
Balance at September 30, 2021 |
| $ | 94,786 |
|
| $ | 543,098 |
|
| $ | 637,884 |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
38
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
| Noncontrolling |
|
| Noncontrolling |
|
| Total |
|
| Redeemable Noncontrolling Interests (c) |
| ||||
Balance at January 1, 2022 |
| $ | 94,120 |
|
| $ | 534,202 |
|
| $ | 628,322 |
|
| $ | — |
|
Distributions declared of $0.54 per Common OP Unit and distributions on Preferred OP Units |
|
| (3,846 | ) |
|
| — |
|
|
| (3,846 | ) |
|
| — |
|
Net loss for the nine months ended September 30, 2022 |
|
| (1,686 | ) |
|
| (16,967 | ) |
|
| (18,653 | ) |
|
| (3,193 | ) |
Conversion of 71,307 Common OP Units to Common Shares by limited partners of the Operating Partnership |
|
| (1,147 | ) |
|
| — |
|
|
| (1,147 | ) |
|
| — |
|
Other comprehensive income - unrealized gain on valuation of swap agreements |
|
| 4,780 |
|
|
| 13,840 |
|
|
| 18,620 |
|
|
| — |
|
Reclassification of realized interest expense on swap agreements |
|
| 80 |
|
|
| 3,079 |
|
|
| 3,159 |
|
|
| — |
|
Acquisition of noncontrolling interest (d) |
|
| — |
|
|
| (91,811 | ) |
|
| (91,811 | ) |
|
| — |
|
City Point Loan |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (65,405 | ) |
City Point Loan accrued interest |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,564 | ) |
Noncontrolling interest contributions |
|
| — |
|
|
| 109,422 |
|
|
| 109,422 |
|
|
| 65,945 |
|
Noncontrolling interest distributions |
|
| — |
|
|
| (72,187 | ) |
|
| (72,187 | ) |
|
| — |
|
Employee Long-term Incentive Plan Unit Awards |
|
| 7,669 |
|
|
| — |
|
|
| 7,669 |
|
|
| — |
|
Reclassification of redeemable noncontrolling interests(e) |
|
| — |
|
|
| (76,569 | ) |
|
| (76,569 | ) |
|
| 76,569 |
|
Reallocation of noncontrolling interests (f) |
|
| 3,322 |
|
|
| — |
|
|
| 3,322 |
|
|
| — |
|
Balance at September 30, 2022 |
| $ | 103,292 |
|
| $ | 403,009 |
|
| $ | 506,301 |
|
| $ | 72,352 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Balance at January 1, 2021 |
| $ | 89,431 |
|
| $ | 519,734 |
|
| $ | 609,165 |
|
| $ | — |
|
Distributions declared of $0.45 per Common OP Unit |
|
| (3,146 | ) |
|
| — |
|
|
| (3,146 | ) |
|
| — |
|
Net income for the nine months ended September 30, 2021 |
|
| 1,738 |
|
|
| 9,948 |
|
|
| 11,686 |
|
|
| — |
|
Conversion of 43,973 Common OP Units to Common Shares by limited partners of the Operating Partnership |
|
| (697 | ) |
|
| — |
|
|
| (697 | ) |
|
| — |
|
Cancellation of OP units(g) |
|
| (479 | ) |
|
| — |
|
|
| (479 | ) |
|
| — |
|
Other comprehensive income - unrealized gain on valuation of swap agreements |
|
| 1,723 |
|
|
| 1,630 |
|
|
| 3,353 |
|
|
| — |
|
Reclassification of realized interest expense on swap agreements |
|
| 159 |
|
|
| 5,317 |
|
|
| 5,476 |
|
|
| — |
|
Noncontrolling interest contributions |
|
| — |
|
|
| 26,627 |
|
|
| 26,627 |
|
|
| — |
|
Noncontrolling interest distributions |
|
| — |
|
|
| (20,158 | ) |
|
| (20,158 | ) |
|
| — |
|
Employee Long-term Incentive Plan Unit Awards |
|
| 8,866 |
|
|
| — |
|
|
| 8,866 |
|
|
| — |
|
Reallocation of noncontrolling interests (f) |
|
| (2,809 | ) |
|
| — |
|
|
| (2,809 | ) |
|
| — |
|
Balance at September 30, 2021 |
| $ | 94,786 |
|
| $ | 543,098 |
|
| $ | 637,884 |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
(a)
39
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Preferred OP Units
There were no issuances of Preferred OP Units In 1999, the Operating Partnership issued 1,580 Series A Preferred OP Units in connection with the acquisition of a property, which have a stated value of During Redeemable Noncontrolling Interests Williamsburg Portfolio In connection with the Williamsburg Portfolio acquisition in February 2022 (Note 2), the Company evaluated the Williamsburg Noncontrolling Interest ("NCI"), which represents the venture partner's one-time right to put its 50.01% interest in the property to the Company for redemption at fair value at a future date. As it was unlikely as of the acquisition date that the venture partner would receive any consideration on redemption due to the Company’s preferential returns, the amount of the senior debt that would accrue and the estimated fair value of the property, the initial fair value of the Williamsburg NCI was determined to be zero. The Company is required to periodically evaluate the NCI and adjust it to fair value, should it become likely that the venture partner would receive consideration for exercising its put right. At September 30, 2022, the Company determined that the fair value of the Williamsburg NCI was zero. City Point Loan In August 2022, the Company provided a loan, through a separate lending subsidiary, to other Fund II investors in City Point, through a separate borrower subsidiary, to fund the investors' pro rata contribution necessary to complete the refinancing of the City Point debt (Note 7), of which $65.9 million was funded at closing ("City Point Loan"). The City Point Loan has a five-year term which matures on August 1, 2027, and is collateralized by the investors' equity in City Point ("City Point NCI"). Because the City Point Loan was granted in return for a capital contribution from the investors, and is collateralized by the City Point NCI, the City Point Loan, net of a $0.5 million allowance for credit loss, and accrued interest are presented as a reduction of the City Point NCI balance. The borrower subsidiary of the City Point Loan was determined to be a variable interest entity ("VIE") for which the Company is not the primary beneficiary. The maximum loss in the VIE is limited to the amount of the City Point Loan. In connection with the City Point Loan, each partner has a one-time right to put its City Point NCI to the Company for redemption in exchange for the settlement of its proportion of the City Point Loan amount plus either (i) a fixed cash amount or (ii) a cash amount equal to the value of fixed number of common shares of the Company on the trading day prior to the election, at a future point in time beginning in August 2023 ("redemption value"). As a result of granting these redemption rights, the City Point NCI, net of the City Point Loan, has been reclassified and presented as redeemable noncontrolling interests on the Company's consolidated balance sheets. Given the carrying value of the City Point NCI at the time of the transaction exceeded the maximum redemption value, the Company did not recognize any initial adjustment to accrete the City Point NCI to the redemption value. The Company is required to periodically evaluate the maximum redemption amount of the NCI interest and recognize an increase in the carrying value of the City Point NCI if the redemption value exceeds the then current carrying value. At September 30, 2022, the Company determined that the carrying value exceeded the maximum redemption value and no adjustment was required. 40 ACADIA REALTY TRUST AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 11. Leases As Lessor 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 that expire at various dates through June 20, 2066, with renewal Reserve Analysis The Nine Months Ended September 30, 2022 Balance at Provision (Recovery), Net Adjustments Write-Offs Balance at Allowance for credit loss - billed rents $ 23,586 $ (779 ) $ — $ (4,383 ) $ 18,424 Straight-line rent reserves 14,885 (79 ) — (1,347 ) 13,459 Total - rents receivable $ 38,471 $ (858 ) $ — $ (5,730 ) $ 31,883 Tenant Settlement On September 24, 2021, the Company entered into a conditional settlement agreement with its former tenant ("Former Tenant") and lease guarantor at one of its Core properties for the payment by Former Tenant and guarantor of a minimum of $5.4 million in accordance with a payment schedule set forth and subject to the terms in the conditional settlement agreement. The payments relate to the Former Tenant’s default under the and 1,250 Series C Preferred OP Units were exchanged for common shares of the Company during the nine months ended September 30, 2017.$1,000$1,000 per unit, and are entitled to a preferred quarterly distribution of the greater of (i) $22.50 (9%$22.50 (9% annually) per Series A Preferred OP Unit or (ii) the quarterly distribution attributable to a Series A Preferred OP Unit if such unit was converted into a Common OP Unit. Through December 31, 2016, $7.50$7.50 or the market price of the Common Shares as of the conversion date. the first quarter of 2016, the Operating Partnership issued 442,478 Common OP Units and 141,593 Series C Preferred OP Units to a third party to acquire Gotham Plaza ($100.00$100.00 per unit and are entitled to a preferred quarterly distribution of $0.9375$0.9375 per unit and are convertible into Common OP Units at a rate based on the share price at the time of conversion. If the share price is below $28.80 on the conversion date, each Series C Preferred OP Unit will be convertible into 3.4722 Common OP Units. If the share price is between $28.80$28.80 and $35.20$35.20 on the conversion date, each Series C Preferred OP Unit will be convertible into a number of Common OP Units equal to $100.00 divided by the closing share price. If the share price is above $35.20 on the conversion date, each Series C Preferred OP Unit will be convertible into 2.8409 Common OP Units. The Series C Preferred OP Units have a mandatory conversion date of December 31, 2025, at which time all units that have not been converted will automatically be converted into Common OP Units based on the same calculations. Through September 30, 2022, 15,000 Series C Preferred OP Units were converted into 51,887 Common OP Units and then into Common Shares.Operating Leasesoptions.options (as discussed further below). Space in the shopping centers isare leased to tenants pursuant to agreements that provide for terms ranging generally from one month to ninety-ninesixty years and generally provide for additional rents based on certain operating expenses as well as tenants’ sales volumes.The Company leases land at seven of its shopping centers, which are accounted for as operating leases and generally provide the Company with renewal options. Ground rent expense was $2.8 million and $1.7 million (including capitalized ground rent at properties under development of $0.4 million and $0.2 million) for the nine months ended September 30, 2017 and 2016, respectively. The leases terminate at various dates between 2020 and 2066. These leases provide the Company with options to renew for additional terms aggregating from 25 to 71 years. The Company also leases space for its corporate office. Office rent expense under this lease was $0.7 million for each of the nine months ended September 30, 2017 and 2016, respectively.Capital LeaseDuring 2016, the Company entered into a 49-year master lease at 991 Madison Avenue, which is accounted for as a capital lease. During the nine months ended September 30, 20172022 and 2016, lease expense totaled $1.92021, the Company earned $44.3 million and $1.0$42.1 million, respectively in variable lease revenues, primarily for this lease. real estate taxes and common area maintenance charges, which are included in rental income in the consolidated statements of operations.lease was initially valued at $76.6 million, which representsactivity for the total discounted paymentsreserves related to billed rents and straight-line rents (including those under specific operating leases where the collection of rents is assessed to be madenot probable) is as follows:
Beginning of
Period
to Valuation
Accounts
End of Periodlease. The property underlease and its subsequent termination by the capital lease isCompany. Given the inherent uncertainties involving collectability, the Company has deferred any amounts not received in its consolidated financial statements and such amounts will be recognized when realized. Through September 30, 2022 the Company had received a total of $2.4 million, of which $0 and $2.4 million was recognized as credit loss recoveries and included in Note 2.34
41
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
As Lessee
During the nine months ended September 30, 2022, there were no leasing transactions where the Company acted as lessee.
During the year ended December 31, 2021, the Company:
•Additional disclosures regarding the Company’s leases as lessee are as follows:
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Lease Cost |
|
|
|
|
|
|
|
|
|
|
| ||||
Finance lease cost: |
|
|
|
|
|
|
|
|
|
|
| ||||
Amortization of right-of-use assets | $ | 226 |
|
|
| 226 |
|
| $ | 677 |
|
| $ | 677 |
|
Interest on lease liabilities |
| 103 |
|
|
| 97 |
|
|
| 305 |
|
|
| 289 |
|
Subtotal |
| 329 |
|
|
| 323 |
|
|
| 982 |
|
|
| 966 |
|
Operating lease cost |
| 1,334 |
|
|
| 1,334 |
|
|
| 4,004 |
|
|
| 5,850 |
|
Variable lease cost |
| 21 |
|
|
| 23 |
|
|
| 63 |
|
|
| 57 |
|
Total lease cost | $ | 1,684 |
|
| $ | 1,680 |
|
| $ | 5,049 |
|
| $ | 6,873 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Other Information |
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted-average remaining lease term - finance leases (years) |
|
|
|
|
|
|
| 32.1 |
|
|
| 32.8 |
| ||
Weighted-average remaining lease term - operating leases (years) |
|
|
|
|
|
|
| 13.6 |
|
|
| 14.2 |
| ||
Weighted-average discount rate - finance leases |
|
|
|
|
|
|
| 6.3 | % |
|
| 6.3 | % | ||
Weighted-average discount rate - operating leases |
|
|
|
|
|
|
| 5.1 | % |
|
| 5.1 | % | ||
Right-of-use assets – finance leases are included in Operating real estate (Note 2) in the consolidated balance sheets. Lease liabilities – finance leases are included in Accounts payable and other liabilities in the consolidated balance sheets (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 operations. 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 operations.
42
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 all non-cancelable tenant leases assuminggreater than one year (assuming no new or renegotiated leases or option extensions for such premisespremises) and (ii) rental payments under the terms of all non-cancelable operating and capitalfinance leases in which the Company is the lessee, principally for office space, land and ground leases,equipment, as of September 30, 2017,2022, are summarized as follows (in thousands):
|
|
|
|
| Minimum Rental Payments |
| ||||||
Year Ending December 31, |
| Minimum Rental |
|
| Operating Leases (b) |
|
| Finance |
| |||
2022 (Remainder) |
| $ | 53,052 |
|
| $ | 1,343 |
|
| $ | — |
|
2023 |
|
| 225,554 |
|
|
| 5,389 |
|
|
| — |
|
2024 |
|
| 210,504 |
|
|
| 5,414 |
|
|
| — |
|
2025 |
|
| 179,257 |
|
|
| 5,329 |
|
|
| — |
|
2026 |
|
| 152,019 |
|
|
| 5,173 |
|
|
| — |
|
Thereafter |
|
| 638,628 |
|
|
| 24,437 |
|
|
| 12,549 |
|
|
|
| 1,459,014 |
|
|
| 47,085 |
|
|
| 12,549 |
|
Interest |
|
| — |
|
|
| (10,928 | ) |
|
| (5,632 | ) |
Total |
| $ | 1,459,014 |
|
| $ | 36,157 |
|
| $ | 6,917 |
|
| Year Ending December 31, | Minimum Rental Revenues | Minimum Rental Payments | ||||||
| 2017 (Remainder) | $ | 37,492 | $ | 1,144 | ||||
| 2018 | 158,612 | 4,478 | ||||||
| 2019 | 153,722 | 4,488 | ||||||
| 2020 | 141,485 | 4,283 | ||||||
| 2021 | 125,794 | 4,240 | ||||||
| Thereafter | 666,865 | 189,051 | ||||||
| Total | $ | 1,283,970 | $ | 207,684 | ||||
During the three and nine months ended September 30, 20172022 and 2016,2021, no single tenant or property collectively comprised more than 10%10% of the Company’s consolidated total revenues.
43
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
12. Segment Reporting
The Company has three reportable segments: Core Portfolio, Funds and Structured Financing. The Company’s Core Portfolio consists primarily of high-quality retail properties located primarily in high-barrier-to-entry, densely-populated metropolitan areas with a long-term investment horizon. The Company’s Funds hold primarily retail real estate in which the Company co-invests with high-quality institutional investors. The Company’s Structured Financing segment consists of earnings and expenses related to notes and mortgages receivable which are held within the Core Portfolio or the Funds (
Note 3). Fees earned by the Company as the general partner or managing member of the Funds are eliminated in the Company’s consolidated financial statements and are not presented in the Company’s segments.The following tables set forth certain segment information for the Company (in thousands):
| As of or for the Three Months Ended September 30, 2017 | ||||||||||||||||||||
| Core Portfolio | Funds | Structured Financing | Unallocated | Total | ||||||||||||||||
| Revenues | $ | 41,196 | $ | 21,482 | $ | — | $ | — | $ | 62,678 | ||||||||||
| Depreciation and amortization | (14,746 | ) | (11,906 | ) | — | — | (26,652 | ) | ||||||||||||
| Property operating expenses, other operating and real estate taxes | (10,327 | ) | (8,162 | ) | — | — | (18,489 | ) | ||||||||||||
| Impairment of an asset | — | (3,840 | ) | — | — | (3,840 | ) | |||||||||||||
| General and administrative expenses | — | — | — | (7,953 | ) | (7,953 | ) | |||||||||||||
| Operating income (loss) | 16,123 | (2,426 | ) | — | (7,953 | ) | 5,744 | |||||||||||||
| Gain on disposition of properties | — | 12,972 | — | — | 12,972 | |||||||||||||||
| Interest income | — | — | 6,461 | — | 6,461 | |||||||||||||||
| Equity in earnings (losses) of unconsolidated affiliates | 805 | 3,196 | — | — | 4,001 | |||||||||||||||
| Interest expense | (6,695 | ) | (8,733 | ) | — | — | (15,428 | ) | ||||||||||||
| Income tax provision | — | — | — | (465 | ) | (465 | ) | |||||||||||||
| Net income (loss) | 10,233 | 5,009 | 6,461 | (8,418 | ) | 13,285 | ||||||||||||||
| Net (income) loss attributable to noncontrolling interests | (353 | ) | (65 | ) | — | — | (418 | ) | ||||||||||||
| Net income attributable to Acadia | $ | 9,880 | $ | 4,944 | $ | 6,461 | $ | (8,418 | ) | $ | 12,867 | |||||||||
| Real estate at cost | $ | 1,987,501 | $ | 1,492,894 | $ | — | $ | — | $ | 3,480,395 | ||||||||||
| Total assets | $ | 2,237,334 | $ | 1,605,429 | $ | 250,194 | $ | — | $ | 4,092,957 | ||||||||||
| Acquisition of real estate | $ | — | $ | 70,020 | $ | — | $ | — | $ | 70,020 | ||||||||||
| Development and property improvement costs | $ | 3,359 | $ | 54,180 | $ | — | $ | — | $ | 57,539 | ||||||||||
| As of or for the Three Months Ended September 30, 2016 | ||||||||||||||||||||
| Core Portfolio | Funds | Structured Financing | Unallocated | Total | ||||||||||||||||
| Revenues | $ | 36,376 | $ | 7,479 | $ | — | $ | — | $ | 43,855 | ||||||||||
| Depreciation and amortization | (12,428 | ) | (2,789 | ) | — | — | (15,217 | ) | ||||||||||||
| Property operating expenses, other operating and real estate taxes | (11,612 | ) | (2,903 | ) | — | — | (14,515 | ) | ||||||||||||
| General and administrative expenses | — | — | — | (12,869 | ) | (12,869 | ) | |||||||||||||
| Operating income | 12,336 | 1,787 | — | (12,869 | ) | 1,254 | ||||||||||||||
| Interest income | — | — | 7,245 | — | 7,245 | |||||||||||||||
| Equity in earnings (losses) of unconsolidated affiliates | 1,495 | (1,597 | ) | — | — | (102 | ) | |||||||||||||
| Interest expense | (6,431 | ) | (1,551 | ) | — | — | (7,982 | ) | ||||||||||||
| Income tax provision | — | — | — | (89 | ) | (89 | ) | |||||||||||||
| Net income | 7,400 | (1,361 | ) | 7,245 | (12,958 | ) | 326 | |||||||||||||
| Net income attributable to noncontrolling interests | 60 | 5,726 | — | — | 5,786 | |||||||||||||||
| Net income attributable to Acadia | $ | 7,460 | $ | 4,365 | $ | 7,245 | $ | (12,958 | ) | $ | 6,112 | |||||||||
| Real estate at cost | $ | 1,832,863 | $ | 1,186,926 | $ | — | $ | — | $ | 3,019,789 | ||||||||||
| Total assets | $ | 2,097,386 | $ | 1,214,317 | $ | 266,816 | $ | — | $ | 3,578,519 | ||||||||||
| Acquisition of real estate | $ | 237,729 | $ | 36,600 | $ | — | $ | — | $ | 274,329 | ||||||||||
| Development and property improvement costs | $ | 7,296 | $ | 31,235 | $ | — | $ | — | $ | 38,531 | ||||||||||
|
| For the Three Months Ended September 30, 2022 |
| |||||||||||||||||
|
| Core |
|
| Funds |
|
| Structured |
|
| Unallocated |
|
| Total |
| |||||
Revenues |
| $ | 50,076 |
|
| $ | 29,870 |
|
| $ | — |
|
| $ | — |
|
| $ | 79,946 |
|
Depreciation and amortization |
|
| (18,811 | ) |
|
| (14,933 | ) |
|
| — |
|
|
| — |
|
|
| (33,744 | ) |
Property operating expenses and real estate taxes |
|
| (14,808 | ) |
|
| (10,751 | ) |
|
| — |
|
|
| — |
|
|
| (25,559 | ) |
General and administrative expenses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (10,170 | ) |
|
| (10,170 | ) |
Impairment charges |
|
| — |
|
|
| (33,311 | ) |
|
| — |
|
|
| — |
|
|
| (33,311 | ) |
Gain on disposition of properties |
|
| — |
|
|
| 8,885 |
|
|
| — |
|
|
| — |
|
|
| 8,885 |
|
Operating income (loss) |
|
| 16,457 |
|
|
| (20,240 | ) |
|
| — |
|
|
| (10,170 | ) |
|
| (13,953 | ) |
Interest and other income |
|
| — |
|
|
| — |
|
|
| 3,994 |
|
|
| — |
|
|
| 3,994 |
|
Realized and unrealized holding losses on investments and other |
|
| — |
|
|
| (7,257 | ) |
|
| (605 | ) |
|
| — |
|
|
| (7,862 | ) |
Equity in losses of unconsolidated affiliates |
|
| (49,806 | ) |
|
| (773 | ) |
|
| — |
|
|
| — |
|
|
| (50,579 | ) |
Interest expense |
|
| (10,428 | ) |
|
| (10,734 | ) |
|
| — |
|
|
| — |
|
|
| (21,162 | ) |
Income tax benefit |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 17 |
|
|
| 17 |
|
Net loss |
|
| (43,777 | ) |
|
| (39,004 | ) |
|
| 3,389 |
|
|
| (10,153 | ) |
|
| (89,545 | ) |
Net loss attributable to redeemable noncontrolling interests |
|
| — |
|
|
| 3,193 |
|
|
| — |
|
|
| — |
|
|
| 3,193 |
|
Net loss attributable to noncontrolling interests |
|
| 2,884 |
|
|
| 27,577 |
|
|
| — |
|
|
| — |
|
|
| 30,461 |
|
Net loss attributable to Acadia |
| $ | (40,893 | ) |
| $ | (8,234 | ) |
| $ | 3,389 |
|
| $ | (10,153 | ) |
| $ | (55,891 | ) |
|
| For the Three Months Ended September 30, 2021 (As Restated) |
| |||||||||||||||||
|
| Core |
|
| Funds |
|
| Structured |
|
| Unallocated |
|
| Total |
| |||||
Revenues |
| $ | 45,942 |
|
| $ | 25,954 |
|
| $ | — |
|
| $ | — |
|
| $ | 71,896 |
|
Depreciation and amortization |
|
| (17,678 | ) |
|
| (12,386 | ) |
|
| — |
|
|
| — |
|
|
| (30,064 | ) |
Property operating expenses and real estate taxes |
|
| (13,911 | ) |
|
| (9,560 | ) |
|
| — |
|
|
| — |
|
|
| (23,471 | ) |
General and administrative expenses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (9,910 | ) |
|
| (9,910 | ) |
Impairment charges |
|
| — |
|
|
| (9,925 | ) |
|
| — |
|
|
| — |
|
|
| (9,925 | ) |
Operating income (loss) |
|
| 14,353 |
|
|
| (5,917 | ) |
|
| — |
|
|
| (9,910 | ) |
|
| (1,474 | ) |
Interest and other income |
|
| — |
|
|
| — |
|
|
| 2,354 |
|
|
| — |
|
|
| 2,354 |
|
Realized and unrealized holding gains (losses) on investments and other |
|
| — |
|
|
| 47,643 |
|
|
| (1,150 | ) |
|
| — |
|
|
| 46,493 |
|
Equity in (losses) earnings of unconsolidated affiliates |
|
| (485 | ) |
|
| 857 |
|
|
| — |
|
|
| — |
|
|
| 372 |
|
Interest expense |
|
| (7,322 | ) |
|
| (9,292 | ) |
|
| — |
|
|
| — |
|
|
| (16,614 | ) |
Income tax provision |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (59 | ) |
|
| (59 | ) |
Net income |
|
| 6,546 |
|
|
| 33,291 |
|
|
| 1,204 |
|
|
| (9,969 | ) |
|
| 31,072 |
|
Net income attributable to noncontrolling interests |
|
| (912 | ) |
|
| (18,153 | ) |
|
| — |
|
|
| — |
|
|
| (19,065 | ) |
Net income attributable to Acadia |
| $ | 5,634 |
|
| $ | 15,138 |
|
| $ | 1,204 |
|
| $ | (9,969 | ) |
| $ | 12,007 |
|
44
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
|
| As of or for the Nine Months Ended September 30, 2022 |
| |||||||||||||||||
|
| Core |
|
| Funds |
|
| Structured |
|
| Unallocated |
|
| Total |
| |||||
Revenues |
| $ | 151,650 |
|
| $ | 94,062 |
|
| $ | — |
|
| $ | — |
|
| $ | 245,712 |
|
Depreciation and amortization |
|
| (56,547 | ) |
|
| (45,881 | ) |
|
| — |
|
|
| — |
|
|
| (102,428 | ) |
Property operating expenses and real estate taxes |
|
| (44,379 | ) |
|
| (31,005 | ) |
|
| — |
|
|
| — |
|
|
| (75,384 | ) |
General and administrative expenses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (32,768 | ) |
|
| (32,768 | ) |
Impairment charges |
|
| — |
|
|
| (33,311 | ) |
|
| — |
|
|
| — |
|
|
| (33,311 | ) |
Gain on disposition of properties |
|
| — |
|
|
| 49,916 |
|
|
| — |
|
|
| — |
|
|
| 49,916 |
|
Operating income |
|
| 50,724 |
|
|
| 33,781 |
|
|
| — |
|
|
| (32,768 | ) |
|
| 51,737 |
|
Interest and other income |
|
| — |
|
|
| — |
|
|
| 9,890 |
|
|
| — |
|
|
| 9,890 |
|
Realized and unrealized holding gains (losses) on investments and other |
|
| 1,163 |
|
|
| (19,073 | ) |
|
| (505 | ) |
|
| — |
|
|
| (18,415 | ) |
Equity in (losses) earnings of unconsolidated affiliates |
|
| (47,402 | ) |
|
| 1,233 |
|
|
| — |
|
|
| — |
|
|
| (46,169 | ) |
Interest expense |
|
| (26,543 | ) |
|
| (31,766 | ) |
|
| — |
|
|
| — |
|
|
| (58,309 | ) |
Income tax provision |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (7 | ) |
|
| (7 | ) |
Net loss |
|
| (22,058 | ) |
|
| (15,825 | ) |
|
| 9,385 |
|
|
| (32,775 | ) |
|
| (61,273 | ) |
Net loss attributable to redeemable noncontrolling interests |
|
| — |
|
|
| 3,193 |
|
|
| — |
|
|
| — |
|
|
| 3,193 |
|
Net loss attributable to noncontrolling interests |
|
| 1,398 |
|
|
| 17,255 |
|
|
| — |
|
|
| — |
|
|
| 18,653 |
|
Net (loss) income attributable to Acadia |
| $ | (20,660 | ) |
| $ | 4,623 |
|
| $ | 9,385 |
|
| $ | (32,775 | ) |
| $ | (39,427 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Real estate at cost (a) |
| $ | 2,614,103 |
|
| $ | 1,651,319 |
|
| $ | — |
|
| $ | — |
|
| $ | 4,265,422 |
|
Total assets (a) |
| $ | 2,636,041 |
|
| $ | 1,603,491 |
|
| $ | 123,966 |
|
| $ | — |
|
| $ | 4,363,498 |
|
Cash paid for acquisition of real estate |
| $ | 242,633 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
| $ | 242,633 |
|
Cash paid for development and property improvement costs |
| $ | 22,325 |
|
| $ | 14,538 |
|
| $ | — |
|
| $ | — |
|
| $ | 36,863 |
|
|
| As of or for the Nine Months Ended September 30, 2021 As Restated |
| |||||||||||||||||
|
| Core |
|
| Funds |
|
| Structured |
|
| Unallocated |
|
| Total |
| |||||
Revenues |
| $ | 134,292 |
|
| $ | 78,848 |
|
| $ | — |
|
| $ | — |
|
| $ | 213,140 |
|
Depreciation and amortization |
|
| (51,898 | ) |
|
| (39,346 | ) |
|
| — |
|
|
| — |
|
|
| (91,244 | ) |
Property operating expenses and real estate taxes |
|
| (41,773 | ) |
|
| (30,963 | ) |
|
| — |
|
|
| — |
|
|
| (72,736 | ) |
General and administrative expenses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (29,555 | ) |
|
| (29,555 | ) |
Impairment charges |
|
| — |
|
|
| (9,925 | ) |
|
| — |
|
|
| — |
|
|
| (9,925 | ) |
Gain on disposition of properties |
|
| 4,612 |
|
|
| 5,909 |
|
|
| — |
|
|
| — |
|
|
| 10,521 |
|
Operating income |
|
| 45,233 |
|
|
| 4,523 |
|
|
| — |
|
|
| (29,555 | ) |
|
| 20,201 |
|
Interest and other income |
|
| — |
|
|
| — |
|
|
| 6,108 |
|
|
| — |
|
|
| 6,108 |
|
Realized and unrealized holding gains (losses) on investments and other |
|
| — |
|
|
| 57,031 |
|
|
| (3,571 | ) |
|
| — |
|
|
| 53,460 |
|
Equity in (losses) earnings of unconsolidated affiliates |
|
| (944 | ) |
|
| 4,097 |
|
|
| — |
|
|
| — |
|
|
| 3,153 |
|
Interest expense |
|
| (21,863 | ) |
|
| (28,439 | ) |
|
| — |
|
|
| — |
|
|
| (50,302 | ) |
Income tax provision |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (399 | ) |
|
| (399 | ) |
Net income |
|
| 22,426 |
|
|
| 37,212 |
|
|
| 2,537 |
|
|
| (29,954 | ) |
|
| 32,221 |
|
Net income attributable to noncontrolling interests |
|
| (1,926 | ) |
|
| (9,760 | ) |
|
| — |
|
|
| — |
|
|
| (11,686 | ) |
Net income attributable to Acadia |
| $ | 20,500 |
|
| $ | 27,452 |
|
| $ | 2,537 |
|
| $ | (29,954 | ) |
| $ | 20,535 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Real estate at cost (a) |
| $ | 2,328,208 |
|
| $ | 1,737,786 |
|
| $ | — |
|
| $ | — |
|
| $ | 4,065,994 |
|
Total assets (a) |
| $ | 2,201,871 |
|
| $ | 1,827,565 |
|
| $ | 154,849 |
|
| $ | — |
|
| $ | 4,184,285 |
|
Cash paid for acquisition of real estate |
| $ | — |
|
| $ | 63,425 |
|
| $ | — |
|
| $ | — |
|
| $ | 63,425 |
|
Cash paid for development and property improvement costs |
| $ | 11,601 |
|
| $ | 14,334 |
|
| $ | — |
|
| $ | — |
|
| $ | 25,935 |
|
| As of or for the Nine Months Ended September 30, 2017 | ||||||||||||||||||||
| Core Portfolio | Funds | Structured Financing | Unallocated | Total | ||||||||||||||||
| Revenues | $ | 127,130 | $ | 57,051 | $ | — | $ | — | $ | 184,181 | ||||||||||
| Depreciation and amortization | (46,719 | ) | (30,526 | ) | — | — | (77,245 | ) | ||||||||||||
| Property operating expenses, other operating and real estate taxes | (33,339 | ) | (22,088 | ) | — | — | (55,427 | ) | ||||||||||||
| Impairment of an asset | — | (3,840 | ) | — | — | (3,840 | ) | |||||||||||||
| General and administrative expenses | — | — | — | (25,286 | ) | (25,286 | ) | |||||||||||||
| Operating income | 47,072 | 597 | — | (25,286 | ) | 22,383 | ||||||||||||||
| Gain on disposition of properties | — | 12,972 | — | — | 12,972 | |||||||||||||||
| Interest income | — | — | 23,648 | — | 23,648 | |||||||||||||||
| Equity in earnings of unconsolidated affiliates | 2,348 | 18,696 | — | — | 21,044 | |||||||||||||||
| Interest expense | (20,783 | ) | (18,883 | ) | — | — | (39,666 | ) | ||||||||||||
| Income tax provision | — | — | — | (1,017 | ) | (1,017 | ) | |||||||||||||
| Net income | 28,637 | 13,382 | 23,648 | (26,303 | ) | 39,364 | ||||||||||||||
| Net (income) loss attributable to noncontrolling interests | (1,157 | ) | 2,351 | — | — | 1,194 | ||||||||||||||
| Net income attributable to Acadia | $ | 27,480 | $ | 15,733 | $ | 23,648 | $ | (26,303 | ) | $ | 40,558 | |||||||||
| Real estate at cost | $ | 1,987,501 | $ | 1,492,894 | $ | — | $ | — | $ | 3,480,395 | ||||||||||
| Total assets | $ | 2,237,334 | $ | 1,605,429 | $ | 250,194 | $ | — | $ | 4,092,957 | ||||||||||
| Acquisition of real estate | $ | — | $ | 138,429 | $ | — | $ | — | $ | 138,429 | ||||||||||
| Development and property improvement costs | $ | 4,355 | $ | 80,199 | $ | — | $ | — | $ | 84,554 | ||||||||||
| As of or for the Nine Months Ended September 30, 2016 | ||||||||||||||||||||
| Core Portfolio | Funds | Structured Financing | Unallocated | Total | ||||||||||||||||
| Revenues | $ | 109,176 | $ | 26,642 | $ | — | $ | — | $ | 135,818 | ||||||||||
| Depreciation and amortization | (37,629 | ) | (9,115 | ) | — | — | (46,744 | ) | ||||||||||||
| Property operating expenses, other operating and real estate taxes | (28,460 | ) | (9,331 | ) | — | — | (37,791 | ) | ||||||||||||
| General and administrative expenses | — | — | — | (30,742 | ) | (30,742 | ) | |||||||||||||
| Operating income | 43,087 | 8,196 | — | (30,742 | ) | 20,541 | ||||||||||||||
| Gain on disposition of properties | — | 81,965 | — | — | 81,965 | |||||||||||||||
| Interest income | — | — | 19,298 | — | 19,298 | |||||||||||||||
| Equity in earnings of unconsolidated affiliates | 2,668 | 924 | — | — | 3,592 | |||||||||||||||
| Interest expense | (20,308 | ) | (4,609 | ) | — | — | (24,917 | ) | ||||||||||||
| Income tax provision | — | — | — | (123 | ) | (123 | ) | |||||||||||||
| Net income | 25,447 | 86,476 | 19,298 | (30,865 | ) | 100,356 | ||||||||||||||
| Net income attributable to noncontrolling interests | (2,771 | ) | (44,630 | ) | — | — | (47,401 | ) | ||||||||||||
| Net income attributable to Acadia | $ | 22,676 | $ | 41,846 | $ | 19,298 | $ | (30,865 | ) | $ | 52,955 | |||||||||
| Real estate at cost | $ | 1,832,863 | $ | 1,186,926 | $ | — | $ | — | $ | 3,019,789 | ||||||||||
| Total assets | $ | 2,097,386 | $ | 1,214,317 | $ | 266,816 | $ | — | $ | 3,578,519 | ||||||||||
| Acquisition of real estate | $ | 244,022 | $ | 48,887 | $ | — | $ | — | $ | 292,909 | ||||||||||
| Development and property improvement costs | $ | 17,518 | $ | 76,903 | $ | — | $ | — | $ | 94,421 | ||||||||||
45
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
a)
Share Incentive Plan
The Second Amended and Restated 20062020 Share 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 September 30, 20172022 a total of 1,756,2881,551,407 shares remained available to be issued under the Share Incentive Plan.
Restricted Shares and LTIP Units
During the nine months ended September 30, 2017,2022, and the year ended December 31, 2021, the Company issued 306,635600,672 and 636,646 LTIP Units and 7,628 13,178 and 11,244 restricted share units (“Restricted Share UnitsUnits”), respectively, to employees of the Company pursuant to the Share Incentive Plan. These awards were measured at their fair value on the grant date, whichincorporating the following factors:
For valuation of the 2022 and 2021 Performance Shares, a Monte Carlo simulation was established asused to estimate the fair values based on probability of satisfying the market priceconditions 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 (49.0% and 48.0%) and risk-free interest rates of (1.7% and 0.2%) for 2022 and 2021, respectively. The total value of the 2022 and 2021 Performance Shares will be expensed over the vesting period regardless of the Company’s Common Shares as of the close of trading on the day preceding the grant date. performance.
The total value of the above Restricted Share Units and LTIP Units as of the grant date was $9.0$13.0 million of which $2.2during the nine months ended September 30, 2022 and $12.6 million was recognized as compensation expense in 2016, and $6.8 million will be recognized as compensation expense overduring the remaining vesting period.year ended December 31, 2021. Total long-term incentive compensation expense, including the expense related to the Share Incentive Plan, was $6.5$1.9 million and $9.1$2.3 million for the three months ended September 30, 2022 and 2021, and $5.1 million and $7.1 million for the nine months ended September 30, 20172022 and 2016,2021, respectively and is recorded in General and Administrative onadministrative expense in the Consolidated Statementsconsolidated statements of Income.
Restricted Shares and LTIP Units - Board of Trustees
In addition, members of the Board of Trustees (the “Board”) have been issued shares and units under the Share Incentive Plan. During 2017,the nine months ended September 30, 2022, the Company issued 11,814 Restricted Shares and 11,10528,555 LTIP Units and 29,935 Restricted Share Units as compensation to the Trustees of the Company in connection with Trustee fees. Vesting with respect to 3,864 of the Restricted Shares and 5,805Company. A portion of the LTIP Units will be on the first anniversary of the date of issuance and 7,950 of the Restricted Shares and 5,300 of the LTIPShare Units vest over three years with 33%33% vesting May 9, 2023 and the remaining amount vesting ratably on each of the next three anniversaries of the issuance date.May 9, 2024 and May 9, 2025. The remaining awards vest on May 9, 2023. The Restricted Shares do not carry voting rights or other rights of Common Shares until vesting and may not be transferred, assigned or pledged until the recipients have a vested non-forfeitable right to such shares. Dividends are not paid currently on unvested Restricted Shares, but are paid cumulatively from the issuance date through the applicable vesting date of such Restricted Shares. Total trustee fee expense, including the expense related to the Share Incentive Plan, was $0.7$1.2 million and $0.6 million for each of the nine months ended September 30, 20172022 and 2016, respectively.
46
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Long-Term Incentive Alignment Program
In 2009, the Company adopted the Long Term InvestmentLong-Term Incentive Alignment Program (the “Program”) pursuant to which the Company may grant awards to employees, entitling them to receive up to 25%25% of any potential future payments of Promote to the Operating Partnership from Funds III, IV and IV.V. The Company has granted such awards to employees representing 25%25% of the potential Promote payments from Fund III to the Operating Partnership, and 14.4%23.1% of the potential Promote payments from Fund IV to the Operating Partnership and 10.7% of the potential Promote payments from Fund V to the Operating Partnership. Payments to senior executives under the Program require further Board approval at the time any potential payments are due pursuant to these grants. Compensation relating to these awards will be recognized in each reporting period in which Board approval is granted.
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 were determined to have no intrinsic value as of September 30,The Company recognized $0.4 million and $1.5$0.1 million was recognizedof compensation expense for Funds III and V, respectively for the nine months ended September 30, 2017 and 2016, respectively,2022 related to the Program in connection with Fund III.
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 |
|
| Weighted |
|
| LTIP Units |
|
| Weighted |
| ||||
Unvested at December 31, 2020 |
|
| 89,911 |
|
| $ | 15.42 |
|
|
| 1,122,889 |
|
| $ | 24.38 |
|
Granted |
|
| 43,078 |
|
|
| 19.94 |
|
|
| 666,967 |
|
|
| 19.48 |
|
Vested |
|
| (43,084 | ) |
|
| 16.85 |
|
|
| (283,024 | ) |
|
| 26.66 |
|
Forfeited |
|
| (159 | ) |
|
| 36.22 |
|
|
| (91,637 | ) |
|
| 36.22 |
|
Unvested at December 31, 2021 |
|
| 89,746 |
|
|
| 16.87 |
|
|
| 1,415,195 |
|
|
| 20.85 |
|
Granted |
|
| 43,113 |
|
|
| 21.36 |
|
|
| 629,227 |
|
|
| 21.16 |
|
Vested |
|
| (38,194 | ) |
|
| 20.10 |
|
|
| (308,608 | ) |
|
| 22.88 |
|
Forfeited |
|
| (1,930 | ) |
|
| 31.82 |
|
|
| (278,332 | ) |
|
| 31.16 |
|
Unvested at September 30, 2022 |
|
| 92,735 |
|
| $ | 17.31 |
|
|
| 1,457,482 |
|
| $ | 18.59 |
|
| 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, 2016 | 49,899 | $ | 25.90 | 1,020,121 | $ | 23.92 | ||||||||
| Granted | 24,583 | 33.35 | 359,484 | 34.40 | ||||||||||
| Vested | (24,886 | ) | 29.17 | (522,680 | ) | 26.08 | ||||||||
| Forfeited | (189 | ) | 35.37 | (48 | ) | 35.37 | ||||||||
| Unvested at December 31, 2016 | 49,407 | 27.92 | 856,877 | 26.99 | ||||||||||
| Granted | 19,442 | 29.85 | 317,740 | 29.12 | ||||||||||
| Vested | (21,771 | ) | 30.91 | (257,515 | ) | 28.58 | ||||||||
| Forfeited | (356 | ) | 35.56 | — | — | |||||||||
| Unvested at September 30, 2017 | 46,722 | $ | 27.28 | 917,102 | $ | 27.29 | ||||||||
The weighted-average grant date fair value for Restricted Shares and LTIP Units granted for the nine months ended September 30, 20172022 and the year ended December 31, 20162021 were $32.18$21.17 and $34.50,$19.51, respectively. As of September 30, 2017,2022, there was $16.3$18.2 million of total unrecognized compensation cost related to unvested share-based compensation arrangements granted under the Share Incentive Plan. That cost is expected to be recognized over a weighted-average period of 2.21.6 years. The total fair value of Restricted Shares that vested for each ofduring the nine months ended September 30, 20172022 and the year ended December 31, 2016,2021, was $0.7 million.$0.8 million and $0.8 million, respectively. The total fair value of LTIP Units that vested (LTIP units vest primarily during the first quarter) during the nine months ended September 30, 20172022 and the year ended December 31, 2016,2021, was $7.4$7.1 million and $13.6$7.5 million, respectively.
Other Plans
On a combined basis, the Company incurred a total of $0.3$0.4 million and $0.3 million of compensation expense related to the following employee benefit plans for each of the nine months ended September 30, 20172022 and 2016, respectively:
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 15%15% discount to the closing price of the Company’s Common Shares on either the first day or the last day of the quarter, whichever is lower. A participant may not purchase more the $25,000than $25,000 in Common Shares per year. Compensation expense will be recognized by the Company to the extent of the above discount to the closing price of the Common Shares with respect to the applicable quarter. During the nine months ended September 30, 2017 and 2016, aA total of 3,3926,188 and 3,1436,111 Common Shares respectively, were purchased by employees under the Purchase Plan.
47
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Deferred Share Plan
The Company adoptedmaintains a Trustee Deferral and Distribution Election program, 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 50%50% of a plan participant’s contribution up to 6%6% of the employee’s annual salary. A plan participant may contribute up to a maximum of 15%15% of their compensation, up to $18,000,$20,500, for the year endedending December 31, 2017.2022.
48
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Basic earnings per Common Share is computed by dividing net income attributable to Common Shareholders by the weighted averageweighted-average Common Shares outstanding.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”) and share option awardsUnits issued under the Company’s Share Incentive Plans (
The effect of the conversion of Common OP Units is not reflected in the computation of basic and diluted earnings per share, as they are exchangeable for Common Shares on a one-for-one basis.one-for-one basis. The income allocable to such units is allocated on this same basis and reflected as noncontrolling interests in the accompanying consolidated financial statements. As such, the assumed conversion of these units would have no net impact on the determination of diluted earnings per share.
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(dollars in thousands) |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Numerator: |
|
|
|
| (As Restated) |
|
|
|
|
| (As Restated) |
| ||||
Net (loss) income attributable to Acadia |
| $ | (55,891 | ) |
| $ | 12,007 |
|
| $ | (39,427 | ) |
| $ | 20,535 |
|
Less: net income attributable to participating securities |
|
| (198 | ) |
|
| (156 | ) |
|
| — |
|
|
| (468 | ) |
(Loss) income from continuing operations net of income attributable to participating securities for basic (loss) earnings per share |
|
| (56,089 | ) |
|
| 11,851 |
|
|
| (39,427 | ) |
|
| 20,067 |
|
Impact of City Point Loan share conversion option (a) |
|
| (1,804 | ) |
|
| — |
|
|
| (1,804 | ) |
|
| — |
|
(Loss) income from continuing operations net of income attributable to participating securities for diluted (loss) earnings per share |
| $ | (57,893 | ) |
| $ | 11,851 |
|
| $ | (41,231 | ) |
| $ | 20,067 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted average shares for basic earnings per share |
|
| 94,980,333 |
|
|
| 88,480,844 |
|
|
| 94,757,678 |
|
|
| 87,217,422 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Series A Preferred OP Units |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Employee unvested restricted shares |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
City Point Loan common stock conversion option (Note 10) (a) |
|
| 270,635 |
|
|
| — |
|
|
| 91,203 |
|
|
| — |
|
Denominator for diluted earnings per share |
|
| 95,250,968 |
|
|
| 88,480,844 |
|
|
| 94,848,881 |
|
|
| 87,217,422 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic (loss) earnings per Common Share from continuing operations attributable to Acadia |
| $ | (0.59 | ) |
| $ | 0.13 |
|
| $ | (0.42 | ) |
| $ | 0.23 |
|
Diluted (loss) earnings per Common Share from continuing operations attributable to Acadia |
| $ | (0.61 | ) |
| $ | 0.13 |
|
| $ | (0.43 | ) |
| $ | 0.23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Anti-Dilutive Shares Excluded from Denominator: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Series A Preferred OP Units |
|
| 188 |
|
|
| 188 |
|
|
| 188 |
|
|
| 188 |
|
Series A Preferred OP Units - Common share equivalent |
|
| 25,067 |
|
|
| 25,067 |
|
|
| 25,067 |
|
|
| 25,067 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Series C Preferred OP Units |
|
| 126,593 |
|
|
| 126,593 |
|
|
| 126,593 |
|
|
| 126,593 |
|
Series C Preferred OP Units - Common share equivalent |
|
| 439,556 |
|
|
| 439,556 |
|
|
| 439,556 |
|
|
| 439,556 |
|
Restricted shares |
|
| 69,832 |
|
|
| 70,827 |
|
|
| 69,832 |
|
|
| 70,827 |
|
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| (dollars in thousands) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
| Numerator: | ||||||||||||||||
| Net income attributable to Acadia | $ | 12,867 | $ | 6,112 | $ | 40,558 | $ | 52,955 | ||||||||
| Less: net income attributable to participating securities | (135 | ) | (58 | ) | (488 | ) | (617 | ) | ||||||||
| Income from continuing operations net of income attributable to participating securities | $ | 12,732 | $ | 6,054 | $ | 40,070 | $ | 52,338 | ||||||||
| Denominator: | ||||||||||||||||
| Weighted average shares for basic earnings per share | 83,699,850 | 78,448,643 | 83,665,749 | 74,049,523 | ||||||||||||
| Effect of dilutive securities: | ||||||||||||||||
| Employee unvested restricted shares | — | 3,034 | 3,577 | 7,861 | ||||||||||||
| Future equity issuance | — | 169,020 | — | 75,582 | ||||||||||||
| Denominator for diluted earnings per share | 83,699,850 | 78,620,697 | 83,669,326 | 74,132,966 | ||||||||||||
| Basic and diluted earnings per Common Share from continuing operations attributable to Acadia | $ | 0.15 | $ | 0.08 | $ | 0.48 | $ | 0.71 | ||||||||
| Anti-Dilutive Shares Excluded from Denominator: | ||||||||||||||||
| Series A Preferred OP Units | 188 | 188 | 188 | 188 | ||||||||||||
| Series A Preferred OP Units - Common share equivalent | 25,067 | 25,067 | 25,067 | 25,067 | ||||||||||||
| Series C Preferred OP Units | 140,343 | 141,593 | 140,343 | 141,593 | ||||||||||||
| Series C Preferred OP Units - Common share equivalent | 487,299 | 402,252 | 481,878 | 402,519 | ||||||||||||
49
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
15. Subsequent Events
Dispositions
On October 20, 2017,7, the Company sold a land parcel in its Henderson Avenue Portfolio in Dallas, Texas, for $3.0 million.
On October 13, 2022, Fund V obtained mortgage financingIV disposed of $28.6 millionan unconsolidated property for its recently acquired Hickory Ridge property (
Financing Activities
On October 31, 2017,2022, Fund IV refinanced its bridge facility (
50
ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
OVERVIEW
As of September 30, 2017, we owned 182 properties, which2022, we own or have an ownership interest in within202 properties held through our Core Portfolio orand 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, thereof, not including those properties owned through our Funds. These properties primarily consist of street and urban retail, and dense suburban shopping centers. The following sets forth aOur 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 September 30, 2017:
| Number of Properties | Operating Properties | ||||||||||
| Development | Operating | GLA | Occupancy | ||||||||
| Core Portfolio: | |||||||||||
| Chicago Metro | 2 | 33 | 696,646 | 93.1 | % | ||||||
| New York Metro | — | 20 | 322,171 | 95.3 | % | ||||||
| San Francisco Metro | — | 2 | 353,480 | 98.9 | % | ||||||
| Washington DC Metro | — | 28 | 319,380 | 82.4 | % | ||||||
| Boston Metro | — | 3 | 55,276 | 100.0 | % | ||||||
| Suburban | — | 30 | 4,581,885 | 93.8 | % | ||||||
| Total Core Portfolio | 2 | 116 | 6,328,838 | 93.6 | % | ||||||
| Acadia Share of Total Core Portfolio | 2 | 116 | 5,279,121 | 94.2 | % | ||||||
| Fund Portfolio: | |||||||||||
| Fund II | 1 | 2 | 740,667 | 64.6 | % | ||||||
| Fund III | 2 | 4 | 53,379 | 80.8 | % | ||||||
| Fund IV | 8 | 44 | 2,626,378 | 85.3 | % | ||||||
| Fund V | — | 3 | 795,318 | 95.2 | % | ||||||
| Total Fund Portfolio | 11 | 53 | 4,215,742 | 83.5 | % | ||||||
| Acadia Share of Total Fund Portfolio | 11 | 53 | 4,041,652 | 83.8 | % | ||||||
| Total Core and Funds | 13 | 169 | 10,544,580 | 89.6 | % | ||||||
| Acadia Share of Total Core and Funds | 13 | 169 | 9,320,773 | 89.7 | % | ||||||
|
| Number of Properties |
|
| Operating Properties |
| ||||||||||
|
| Development or |
|
| Operating |
|
| GLA |
|
| Occupancy |
| ||||
Core Portfolio: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Chicago Metro |
|
| 1 |
|
|
| 38 |
|
|
| 693,999 |
|
|
| 85.0 | % |
New York Metro |
|
| — |
|
|
| 29 |
|
|
| 394,032 |
|
|
| 89.9 | % |
Los Angeles Metro |
|
| — |
|
|
| 2 |
|
|
| 23,757 |
|
|
| 100.0 | % |
San Francisco Metro |
|
| 2 |
|
|
| — |
|
|
| — |
|
|
| 0.0 | % |
Dallas Metro |
|
| 2 |
|
|
| 14 |
|
|
| 121,715 |
|
|
| 90.2 | % |
Washington DC Metro |
|
| 1 |
|
|
| 31 |
|
|
| 343,086 |
|
|
| 77.9 | % |
Boston Metro |
|
| — |
|
|
| 3 |
|
|
| 55,276 |
|
|
| 100.0 | % |
Suburban |
|
| 2 |
|
|
| 26 |
|
|
| 4,004,480 |
|
|
| 91.0 | % |
Total Core Portfolio |
|
| 8 |
|
|
| 143 |
|
|
| 5,636,345 |
|
|
| 89.5 | % |
Acadia Share of Total Core Portfolio |
|
| 8 |
|
|
| 143 |
|
|
| 5,265,384 |
|
|
| 91.2 | % |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Fund Portfolio: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Fund II |
|
| — |
|
|
| 1 |
|
|
| 541,070 |
|
|
| 51.7 | % |
Fund III |
|
| 1 |
|
|
| 1 |
|
|
| 4,637 |
|
|
| 91.6 | % |
Fund IV |
|
| 1 |
|
|
| 27 |
|
|
| 978,152 |
|
|
| 91.6 | % |
Fund V |
|
| — |
|
|
| 20 |
|
|
| 6,726,859 |
|
|
| 90.2 | % |
Total Fund Portfolio |
|
| 2 |
|
|
| 49 |
|
|
| 8,250,718 |
|
|
| 87.8 | % |
Acadia Share of Total Fund Portfolio |
|
| 2 |
|
|
| 49 |
|
|
| 1,820,858 |
|
|
| 83.8 | % |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total Core and Funds |
|
| 10 |
|
|
| 192 |
|
|
| 13,887,063 |
|
|
| 88.5 | % |
Acadia Share of Total Core and Funds |
|
| 10 |
|
|
| 192 |
|
|
| 7,086,242 |
|
|
| 89.3 | % |
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. As our RCP Venture invests in operating companies, we consider these investments to be private-equity style, as opposed to real estate, investments. Since these are not traditional investments in operating rental real estate but investments in operating businesses, the Operating Partnership typically invests in these through a taxable REIT subsidiary (“TRS”).
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. WeGenerally, we focus on the following fundamentals to achieve this objective:
51
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.
SIGNIFICANT DEVELOPMENTS DURING THE NINE MONTHS ENDED SEPTEMBER 30, 2017
Investments
During the nine months ended September 30, 2017, within2022, we made four new consolidated investments in our Core Portfolio and Fund portfoliosV acquired three unconsolidated properties totaling $425.0 million, as described below (Note 2, Note 4):
On March 13, 2017June 27, 2022, we made an $18.5 million investment in Fund IV acquiredII and Mervyns II increasing our ownership in each by 11.67% to 40.00%. On August 1, 2022, we made an additional $5.8 million investment in City Point and increased our ownership in Fund II by 21.67% to 61.67% (Note1).
In addition and as discussed below, Fund III obtained the venture partner's interest in its 640 Broadway investment through a foreclosure proceeding and subsequently consolidated shopping center for $35.4 million referred to as “Lincoln Place.”
During the nine months ended September 30, 2017, within our Funds2022, we disposed of five consolidated Fund properties, one land parcel and one unconsolidated investment as follows:
We recognized aggregate gains of $49.9 million on the sales of the above properties, excluding the gain recognized on the sale of our unconsolidated interest in Self Storage Management, during the nine months ended September 30, 2022, of which our share was $1.6 million net of amounts attributable to noncontrolling interests.
Financing Activity
During the nine months ended September 30, 2017,2022, we obtained aggregate financing(Note 7):
Structured Financing Investments
In January 2022, as discussed above, Fund III foreclosed upon its $5.3 million note receivable, which had previously been in default. In addition, one Core Portfolio loan receivable remains in default at September 30, 2017,2022. In May and July 2022, the Company received full payment on a $16.0 million and a $13.5 million first mortgage loan, respectively (Note 3). In August 2022, the Company originated a loan to other Fund II closed on a new $40.0investors ("City Point Loan") of $65.9 million loan.
53
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 theThree Months Ended September 30, 2017 2022to theThree Months Ended September 30, 2016
The results of operations by reportable segment for the three months ended September 30, 20172022 compared to the three months ended September 30, 20162021 are summarized in the table below (in millions, totals may not add due to rounding):
| Three Months Ended September 30, 2017 | Three Months Ended September 30, 2016 | Increase (Decrease) | ||||||||||||||||||||||||||||||||||||||||||||||
| Core | Funds | SF | Total | Core | Funds | SF | Total | Core | Funds | SF | Total | |||||||||||||||||||||||||||||||||||||
| Revenues | $ | 41.2 | $ | 21.5 | $ | — | $ | 62.7 | $ | 36.4 | $ | 7.5 | $ | — | $ | 43.9 | $ | 4.8 | $ | 14.0 | $ | — | $ | 18.8 | ||||||||||||||||||||||||
| Depreciation and amortization | (14.7 | ) | (11.9 | ) | — | (26.7 | ) | (12.4 | ) | (2.8 | ) | — | (15.2 | ) | 2.3 | 9.1 | — | 11.5 | ||||||||||||||||||||||||||||||
| Property operating expenses, other operating and real estate taxes | (10.3 | ) | (8.2 | ) | — | (18.5 | ) | (11.6 | ) | (2.9 | ) | — | (14.5 | ) | (1.3 | ) | 5.3 | — | 4.0 | |||||||||||||||||||||||||||||
| Impairment of an asset | — | (3.8 | ) | — | (3.8 | ) | — | — | — | — | — | 3.8 | — | 3.8 | ||||||||||||||||||||||||||||||||||
| General and administrative expenses | — | — | — | (8.0 | ) | — | — | — | (12.9 | ) | — | — | — | (4.9 | ) | |||||||||||||||||||||||||||||||||
| Operating income (loss) | 16.1 | (2.4 | ) | — | 5.7 | 12.3 | 1.8 | — | 1.3 | 3.8 | (4.2 | ) | — | 4.4 | ||||||||||||||||||||||||||||||||||
| Gain on disposition of properties | — | 13.0 | — | 13.0 | — | — | — | — | — | 13.0 | — | 13.0 | ||||||||||||||||||||||||||||||||||||
| Interest income | — | — | 6.5 | 6.5 | — | — | 7.2 | 7.2 | — | — | (0.7 | ) | (0.7 | ) | ||||||||||||||||||||||||||||||||||
| Equity in earnings (losses) of unconsolidated affiliates | 0.8 | 3.2 | — | 4.0 | 1.5 | (1.6 | ) | — | (0.1 | ) | (0.7 | ) | 4.8 | — | 4.1 | |||||||||||||||||||||||||||||||||
| Interest expense | (6.7 | ) | (8.7 | ) | — | (15.4 | ) | (6.4 | ) | (1.6 | ) | — | (8.0 | ) | 0.3 | 7.1 | — | 7.4 | ||||||||||||||||||||||||||||||
| Income tax provision | — | — | — | (0.5 | ) | — | — | — | (0.1 | ) | — | — | — | (0.4 | ) | |||||||||||||||||||||||||||||||||
| Net income (loss) | 10.2 | 5.0 | 6.5 | 13.3 | 7.4 | (1.4 | ) | 7.2 | 0.3 | 2.8 | 6.4 | (0.7 | ) | 13.0 | ||||||||||||||||||||||||||||||||||
| Net (income) loss attributable to noncontrolling interests | (0.4 | ) | (0.1 | ) | — | (0.4 | ) | 0.1 | 5.7 | — | 5.8 | 0.5 | 5.8 | — | 6.2 | |||||||||||||||||||||||||||||||||
| Net income attributable to Acadia | $ | 9.9 | $ | 4.9 | $ | 6.5 | $ | 12.9 | $ | 7.5 | $ | 4.4 | $ | 7.2 | $ | 6.1 | $ | 2.4 | $ | 0.5 | $ | (0.7 | ) | $ | 6.8 | |||||||||||||||||||||||
|
| Three Months Ended |
|
| Three Months Ended |
|
|
|
| |||||||||||||||||||||||||||||||||||||||
|
| September 30, 2022 |
|
| September 30, 2021 |
|
| Increase (Decrease) |
| |||||||||||||||||||||||||||||||||||||||
|
| Core |
|
| Funds |
|
| SF |
|
| Total |
|
| Core |
|
| Funds |
|
| SF |
|
| Total |
|
| Core |
|
| Funds |
|
| SF |
|
| Total |
| ||||||||||||
Revenues |
| $ | 50.1 |
|
| $ | 29.9 |
|
| $ | — |
|
| $ | 79.9 |
|
| $ | 45.9 |
|
| $ | 26.0 |
|
| $ | — |
|
| $ | 71.9 |
|
| $ | 4.2 |
|
| $ | 3.9 |
|
| $ | — |
|
| $ | 8.0 |
|
Depreciation and amortization |
|
| (18.8 | ) |
|
| (14.9 | ) |
|
| — |
|
|
| (33.7 | ) |
|
| (17.7 | ) |
|
| (12.4 | ) |
|
| — |
|
|
| (30.1 | ) |
|
| 1.1 |
|
|
| 2.5 |
|
|
| — |
|
|
| 3.6 |
|
Property operating expenses and real estate taxes |
|
| (14.8 | ) |
|
| (10.8 | ) |
|
| — |
|
|
| (25.6 | ) |
|
| (13.9 | ) |
|
| (9.6 | ) |
|
| — |
|
|
| (23.5 | ) |
|
| 0.9 |
|
|
| 1.2 |
|
|
| — |
|
|
| 2.1 |
|
General and administrative expenses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (10.2 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (9.9 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 0.3 |
|
Impairment charges |
|
| — |
|
|
| (33.3 | ) |
|
| — |
|
|
| (33.3 | ) |
|
| — |
|
|
| (9.9 | ) |
|
| — |
|
|
| (9.9 | ) |
|
| — |
|
|
| 23.4 |
|
|
| — |
|
|
| 23.4 |
|
Gain on disposition of properties |
|
| — |
|
|
| 8.9 |
|
|
| — |
|
|
| 8.9 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 8.9 |
|
|
| — |
|
|
| 8.9 |
|
Operating income (loss) |
|
| 16.5 |
|
|
| (20.2 | ) |
|
| — |
|
|
| (14.0 | ) |
|
| 14.4 |
|
|
| (5.9 | ) |
|
| — |
|
|
| (1.5 | ) |
|
| 2.1 |
|
|
| (14.3 | ) |
|
| — |
|
|
| (12.5 | ) |
Interest and other income |
|
| — |
|
|
| — |
|
|
| 4.0 |
|
|
| 4.0 |
|
|
| — |
|
|
| — |
|
|
| 2.4 |
|
|
| 2.4 |
|
|
| — |
|
|
| — |
|
|
| 1.6 |
|
|
| 1.6 |
|
Realized and unrealized holding (losses) gains on investments and other |
|
| — |
|
|
| (7.3 | ) |
|
| (0.6 | ) |
|
| (7.9 | ) |
|
| — |
|
|
| 47.6 |
|
|
| (1.2 | ) |
|
| 46.5 |
|
|
| — |
|
|
| (54.9 | ) |
|
| 0.6 |
|
|
| (54.4 | ) |
Equity in (losses) earnings of unconsolidated affiliates |
|
| (49.8 | ) |
|
| (0.8 | ) |
|
| — |
|
|
| (50.6 | ) |
|
| (0.5 | ) |
|
| 0.9 |
|
|
| — |
|
|
| 0.4 |
|
|
| (49.3 | ) |
|
| (1.7 | ) |
|
| — |
|
|
| (51.0 | ) |
Interest expense |
|
| (10.4 | ) |
|
| (10.7 | ) |
|
| — |
|
|
| (21.2 | ) |
|
| (7.3 | ) |
|
| (9.3 | ) |
|
| — |
|
|
| (16.6 | ) |
|
| 3.1 |
|
|
| 1.4 |
|
|
| — |
|
|
| 4.6 |
|
Income tax benefit (provision) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (0.1 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 0.1 |
|
Net (loss) income |
|
| (43.8 | ) |
|
| (39.0 | ) |
|
| 3.4 |
|
|
| (89.5 | ) |
|
| 6.5 |
|
|
| 33.3 |
|
|
| 1.2 |
|
|
| 31.1 |
|
|
| (50.3 | ) |
|
| (72.3 | ) |
|
| 2.2 |
|
|
| (120.6 | ) |
Net loss attributable to redeemable noncontrolling interests |
|
| — |
|
|
| 3.2 |
|
|
| — |
|
|
| 3.2 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3.2 |
|
|
| — |
|
|
| 3.2 |
|
Net loss (income) attributable to noncontrolling interests |
|
| 2.9 |
|
|
| 27.6 |
|
|
| — |
|
|
| 30.5 |
|
|
| (0.9 | ) |
|
| (18.2 | ) |
|
| — |
|
|
| (19.1 | ) |
|
| 3.8 |
|
|
| 45.8 |
|
|
| — |
|
|
| 49.6 |
|
Net (loss) income attributable to Acadia |
| $ | (40.9 | ) |
| $ | (8.2 | ) |
| $ | 3.4 |
|
| $ | (55.9 | ) |
| $ | 5.6 |
|
| $ | 15.1 |
|
| $ | 1.2 |
|
| $ | 12.0 |
|
| $ | (46.5 | ) |
| $ | (23.3 | ) |
| $ | 2.2 |
|
| $ | (67.9 | ) |
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 by $2.4decreased $46.5 million for the three months ended September 30, 20172022 compared to the prior year period as a result of the changes as further described below.
Revenues fromfor our Core Portfolio increased by
Depreciation and amortization for our Core Portfolio increased $1.1 million for the three months ended September 30, 2022 compared to the prior year period primarily due to Core Portfolio property acquisitions in 2021 and 2022.
Equity in (losses) earnings of unconsolidated affiliates for our Core Portfolio decreased $49.3 million for the three months ended September 30, 2022 compared to the prior year period primarily due to an impairment charge for 840 N. Michigan Avenue in 2022 (Note 8).
Interest expense for our Core Portfolio increased $3.1 million for the three months ended September 30, 2022 compared to the prior year period primarily due to higher average outstanding borrowings and higher average interest rates in 2022.
Net loss (income) attributable to noncontrolling interests for our Core Portfolio increased $3.8 million for the three months ended September 30, 2022 compared to the prior year period based on the noncontrolling interests’ share of the variances discussed above.
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 by
54
Revenues fromfor the Funds increased by
Depreciation and amortization for the Funds increased by
Property operating, other operating expenses and real estate taxes for the Funds increased by
Impairment of an asset duringcharges for the Funds increased $23.4 million for the three months ended September 30, 2017 was comprised of a $3.82022 compared to the prior year period (Note 8). Impairment charges totaling $33.3 million charge relatedduring 2022 for the Funds relate to a property classified as held146 Geary Street and 717 N. Michigan Avenue in Fund IV. Impairment charges totaling $9.9 million for salethe Funds in 2017 (
Gain on disposition of properties for the Funds increased by
Realized and New Hyde Park Shopping Center in Fund III in 2017 (
Equity in (losses) earnings of our carrying value related to Fund II’s investment in Mervyns and Albertson’s.
Interest expense for the Funds increased $1.4 million for the three months ended September 30, 2022 compared to the prior year period primarily due to $2.3 million from higher average interest rates offset by $1.1 million from lower average outstanding borrowings in 2022.
Net loss attributable to redeemable noncontrolling interests for the Funds increased $3.2 million for the three months ended September 30, 2022 compared to the prior year period due to $2.6the City Point Loan in 2022 (Note 10).
Net loss (income) attributable to noncontrolling interests for the Funds increased $45.8 million less interest capitalized in 2017, a $2.4 million increase relatedfor the three months ended September 30, 2022 compared to higher average outstanding borrowings in 2017, a $1.4 million increase related to higher average interest rates in 2017, and $0.7 million increase related to amortizationthe prior year period based on the noncontrolling interests’ share of higher loan costs in 2017.
Structured Financing
Interest and other income for the Structured Financing portfolio increased $1.6 million for the three months ended September 30, 2022 compared to the prior year period due to new loans issued during 2021 and 2022.
Unallocated
The Company does not allocate general and administrative expenses and income taxes to its reportable segments. These unallocated amounts are depicted in the table above under the headings labeled “Total.”
55
Comparison of Results for theNineMonths Ended September 30, 2022to theNine Months Ended September 30, 2021
The results of operations by reportable segment for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 are summarized in the table below (in millions, totals may not add due to rounding):
|
| Nine Months Ended |
|
| Nine Months Ended |
|
|
|
| |||||||||||||||||||||||||||||||||||||||
|
| September 30, 2022 |
|
| September 30, 2021 |
|
| Increase (Decrease) |
| |||||||||||||||||||||||||||||||||||||||
|
| Core |
|
| Funds |
|
| SF |
|
| Total |
|
| Core |
|
| Funds |
|
| SF |
|
| Total |
|
| Core |
|
| Funds |
|
| SF |
|
| Total |
| ||||||||||||
Revenues |
| $ | 151.7 |
|
| $ | 94.1 |
|
| $ | — |
|
| $ | 245.7 |
|
| $ | 134.3 |
|
| $ | 78.8 |
|
| $ | — |
|
| $ | 213.1 |
|
| $ | 17.4 |
|
| $ | 15.3 |
|
| $ | — |
|
| $ | 32.6 |
|
Depreciation and amortization |
|
| (56.5 | ) |
|
| (45.9 | ) |
|
| — |
|
|
| (102.4 | ) |
|
| (51.9 | ) |
|
| (39.3 | ) |
|
| — |
|
|
| (91.2 | ) |
|
| 4.6 |
|
|
| 6.6 |
|
|
| — |
|
|
| 11.2 |
|
Property operating expenses and real estate taxes |
|
| (44.4 | ) |
|
| (31.0 | ) |
|
| — |
|
|
| (75.4 | ) |
|
| (41.8 | ) |
|
| (31.0 | ) |
|
| — |
|
|
| (72.7 | ) |
|
| 2.6 |
|
|
| — |
|
|
| — |
|
|
| 2.7 |
|
General and administrative expenses |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (32.8 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (29.6 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3.2 |
|
Impairment charges |
|
| — |
|
|
| (33.3 | ) |
|
| — |
|
|
| (33.3 | ) |
|
| — |
|
|
| (9.9 | ) |
|
| — |
|
|
| (9.9 | ) |
|
| — |
|
|
| (23.4 | ) |
|
| — |
|
|
| (23.4 | ) |
Gain on disposition of properties |
|
| — |
|
|
| 49.9 |
|
|
| — |
|
|
| 49.9 |
|
|
| 4.6 |
|
|
| 5.9 |
|
|
| — |
|
|
| 10.5 |
|
|
| (4.6 | ) |
|
| 44.0 |
|
|
| — |
|
|
| 39.4 |
|
Operating income (loss) |
|
| 50.7 |
|
|
| 33.8 |
|
|
| — |
|
|
| 51.7 |
|
|
| 45.2 |
|
|
| 4.5 |
|
|
| — |
|
|
| 20.2 |
|
|
| 5.5 |
|
|
| 29.3 |
|
|
| — |
|
|
| 31.5 |
|
Interest and other income |
|
| — |
|
|
| — |
|
|
| 9.9 |
|
|
| 9.9 |
|
|
| — |
|
|
| — |
|
|
| 6.1 |
|
|
| 6.1 |
|
|
| — |
|
|
| — |
|
|
| 3.8 |
|
|
| 3.8 |
|
Realized and unrealized holding (losses) gains on investments and other |
|
| 1.2 |
|
|
| (19.1 | ) |
|
| (0.5 | ) |
|
| (18.4 | ) |
|
| — |
|
|
| 57.0 |
|
|
| (3.6 | ) |
|
| 53.5 |
|
|
| 1.2 |
|
|
| (76.1 | ) |
|
| 3.1 |
|
|
| (71.9 | ) |
Equity in (losses) earnings of unconsolidated affiliates |
|
| (47.4 | ) |
|
| 1.2 |
|
|
| — |
|
|
| (46.2 | ) |
|
| (0.9 | ) |
|
| 4.1 |
|
|
| — |
|
|
| 3.2 |
|
|
| (46.5 | ) |
|
| (2.9 | ) |
|
| — |
|
|
| (49.4 | ) |
Interest expense |
|
| (26.5 | ) |
|
| (31.8 | ) |
|
| — |
|
|
| (58.3 | ) |
|
| (21.9 | ) |
|
| (28.4 | ) |
|
| — |
|
|
| (50.3 | ) |
|
| 4.6 |
|
|
| 3.4 |
|
|
| — |
|
|
| 8.0 |
|
Income tax benefit (provision) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (0.4 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 0.4 |
|
Net (loss) income |
|
| (22.1 | ) |
|
| (15.8 | ) |
|
| 9.4 |
|
|
| (61.3 | ) |
|
| 22.4 |
|
|
| 37.2 |
|
|
| 2.5 |
|
|
| 32.2 |
|
|
| (44.5 | ) |
|
| (53.0 | ) |
|
| 6.9 |
|
|
| (93.5 | ) |
Net loss attributable to redeemable noncontrolling interests |
|
| — |
|
|
| 3.2 |
|
|
| — |
|
|
| 3.2 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3.2 |
|
|
| — |
|
|
| 3.2 |
|
Net loss (income) attributable to noncontrolling interests |
|
| 1.4 |
|
|
| 17.3 |
|
|
| — |
|
|
| 18.7 |
|
|
| (1.9 | ) |
|
| (9.8 | ) |
|
| — |
|
|
| (11.7 | ) |
|
| 3.3 |
|
|
| 27.1 |
|
|
| — |
|
|
| 30.4 |
|
Net (loss) income attributable to Acadia |
| $ | (20.7 | ) |
| $ | 4.6 |
|
| $ | 9.4 |
|
| $ | (39.4 | ) |
| $ | 20.5 |
|
| $ | 27.5 |
|
| $ | 2.5 |
|
| $ | 20.5 |
|
| $ | (41.2 | ) |
| $ | (22.9 | ) |
| $ | 6.9 |
|
| $ | (59.9 | ) |
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 decreased $41.2 million for the nine months ended September 30, 2022 compared to the prior year period as a result of the changes further described below.
Revenues for our Core Portfolio increased $17.4 million for the nine months ended September 30, 2022 compared to the prior year period primarily due to (i) $10.2 million from Core Portfolio property acquisitions in 2021 and 2022, (ii) $2.2 million from lease up within the Core Portfolio, (iii) $1.8 million from the write off of two tenant's below market leases, (iv) $1.5 million collection of cash for a fully reserved tenant, (v) $1.1 million from tenant termination income, and (vi) $0.9 million from the conversion of tenants from cash to accrual basis. These increases were offset by a $0.9 million credit loss benefit related to the collection or previously reserved tenants accounts in 2021.
Depreciation and amortization for our Core Portfolio increased $4.6 million for the nine months ended September 30, 2022 compared to the prior year period primarily due to Core Portfolio property acquisitions in 2021 and 2022.
Property operating expenses and real estate taxes for our Core Portfolio increased $2.6 million for the nine months ended September 30, 2022 compared to the prior year period primarily due to Core Portfolio property acquisitions in 2021 and 2022.
The gain (loss) on disposition of properties for our Core Portfolio of $4.6 million for the nine months ended September 30, 2021 relates to the sale of 60 Orange Street (Note 2).
Realized and unrealized holding gains (losses) on investments and other for our Core Portfolio includes $1.2 million for the nine months ended September 30, 2022 related to the bargain purchase gain on the acquisition of the Williamsburg Collection (Note 2).
Equity in (losses) earnings of unconsolidated affiliates for our Core Portfolio decreased $46.5 million for the nine months ended September 30, 2022 compared to the prior year period primarily due to a $50.8 million impairment charge at 840 N. Michigan Avenue (Note 8), offset by a $2.2 million decrease in credit loss reserves in 2022 at unconsolidated properties related to the COVID-19 Pandemic as well as $1.3 million for the acceleration of a below market lease for a tenant in 2022.
Interest expense for our Core Portfolio increased $4.6 million for the nine months ended September 30, 2022 compared to the prior year period primarily due to $2.9 million from higher average outstanding borrowings in 2022, and by $1.7 million higher average interest rates in 2022.
56
Net loss (income) attributable to noncontrolling interests for our Core Portfolio increased $3.3 million for the nine months ended September 30, 2022 compared to the prior year period based on the noncontrolling interests’ share of the variances discussed above.
Funds (all amounts below are consolidated amounts and are not representative of our proportionate share)
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 decreased $22.9 million for the nine months ended September 30, 2022 compared to the prior year period as a result of the changes described below.
Revenues for the Funds increased $15.3 million for the nine months ended September 30, 2022 compared to the prior year period primarily due to (i) $13.4 million from consolidated Fund property acquisitions in 2021 (Note 2), (ii) $4.6 million from development projects placed in service during 2021, and (iii) a $2.3 million decrease in credit loss reserves in 2022 related to the COVID-19 Pandemic (Note 11). These increases were offset by a $6.0 million decrease from consolidated Fund property dispositions in 2021 and 2022.
Depreciation and amortization for the Funds increased $6.6 million for the nine months ended September 30, 2022 compared to the prior year period primarily due to Fund property acquisitions in 2021.
Impairment charges for the Funds increased $23.4 million for the nine months ended September 30, 2022 compared to the prior year period (Note 8). Impairment charges totaling $33.3 million during 2022 for the Funds relate to 146 Geary Street and 717 N. Michigan Avenue in Fund IV. Impairment charges totaling $9.9 million for the Funds in 2021 related to 27 East 61st and 210 Bowery in Fund IV.
Gain on disposition of properties for the Funds increased $44.0 million for the nine months ended September 30, 2022 compared to the prior year period due to the sales of Cortlandt Crossing at Fund III, Wake Forest Crossing, Lincoln Place, Mayfair and Dauphin at Fund IV and a New Towne outparcel at Fund V in 2022 compared to dispositions of 654 Broadway at Fund III and the NE Grocer Portfolio and 110 University at Fund IV in 2021 (Note 2, Note 11).
Realized and unrealized holding gains (losses) on investments and other for the Funds decreased $76.1 million for the nine months ended September 30, 2022 compared to the prior year period, due to a $77.7 million change in the mark-to-market adjustment on the Investment in Albertsons offset by $ 1.5 million related to the Company's proportionate share of the gain on sale of Fund III's interest in Self Storage Management (Note 4).
Equity in (losses) earnings of unconsolidated affiliates for the Funds decreased $2.9 million for the nine months ended September 30, 2022 compared to the prior year period primarily due to the gain on dispositionsale related to two land parcels at Riverdale Family Center in Fund V in 2021 (Note 4).
Interest expense for the Funds increased $3.4 million for the nine months ended September 30, 2022 compared to the prior year period primarily due to $2.0 million from higher average outstanding borrowings in 2022 and $1.0 million from higher average rates in 2022.
Net loss attributable to redeemable noncontrolling interests for the Funds increased $3.2 million for the nine months ended September 30, 2022 compared to the prior year period due to the City Point Loan in 2022 (Note 10).
Net loss (income) attributable to noncontrolling interests for the Funds increased $27.1 million for the nine months ended September 30, 2022 compared to the prior year period based on the noncontrolling interests’ share of propertiesthe variances discussed above.
Structured Financing
The results of operations for our Structured Financing segment are depicted in the table above under the headings labeled “SF.”
| Nine Months Ended September 30, 2017 | Nine Months Ended September 30, 2016 | Increase (Decrease) | ||||||||||||||||||||||||||||||||||||||||||||||
| Core | Funds | SF | Total | Core | Funds | SF | Total | Core | Funds | SF | Total | |||||||||||||||||||||||||||||||||||||
| Revenues | $ | 127.1 | $ | 57.1 | $ | — | $ | 184.2 | $ | 109.2 | $ | 26.6 | $ | — | $ | 135.8 | $ | 17.9 | $ | 30.5 | $ | — | $ | 48.4 | ||||||||||||||||||||||||
| Depreciation and amortization | (46.7 | ) | (30.5 | ) | — | (77.2 | ) | (37.6 | ) | (9.1 | ) | — | (46.7 | ) | 9.1 | 21.4 | — | 30.5 | ||||||||||||||||||||||||||||||
| Property operating expenses, other operating and real estate taxes | (33.3 | ) | (22.1 | ) | — | (55.4 | ) | (28.5 | ) | (9.3 | ) | — | (37.8 | ) | 4.8 | 12.8 | — | 17.6 | ||||||||||||||||||||||||||||||
| Impairment of an asset | — | (3.8 | ) | — | (3.8 | ) | — | — | — | — | — | 3.8 | — | 3.8 | ||||||||||||||||||||||||||||||||||
| General and administrative expenses | — | — | — | (25.3 | ) | — | — | — | (30.7 | ) | — | — | — | (5.4 | ) | |||||||||||||||||||||||||||||||||
| Operating income | 47.1 | 0.6 | — | 22.4 | 43.1 | 8.2 | — | 20.5 | 4.0 | (7.6 | ) | — | 1.9 | |||||||||||||||||||||||||||||||||||
| Gain on disposition of properties | — | 13.0 | — | 13.0 | — | 82.0 | — | 82.0 | — | (69.0 | ) | — | (69.0 | ) | ||||||||||||||||||||||||||||||||||
| Interest income | — | — | 23.6 | 23.6 | — | — | 19.3 | 19.3 | — | — | 4.3 | 4.3 | ||||||||||||||||||||||||||||||||||||
| Equity in earnings of unconsolidated affiliates | 2.3 | 18.7 | — | 21.0 | 2.7 | 0.9 | — | 3.6 | (0.4 | ) | 17.8 | — | 17.4 | |||||||||||||||||||||||||||||||||||
| Interest expense | (20.8 | ) | (18.9 | ) | — | (39.7 | ) | (20.3 | ) | (4.6 | ) | — | (24.9 | ) | 0.5 | 14.3 | — | 14.8 | ||||||||||||||||||||||||||||||
| Income tax provision | — | — | — | (1.0 | ) | — | — | — | (0.1 | ) | — | — | — | (0.9 | ) | |||||||||||||||||||||||||||||||||
| Net income | 28.6 | 13.4 | 23.6 | 39.4 | 25.4 | 86.5 | 19.3 | 100.4 | 3.2 | (73.1 | ) | 4.3 | (61.0 | ) | ||||||||||||||||||||||||||||||||||
| Net (income) loss attributable to noncontrolling interests | (1.2 | ) | 2.4 | — | 1.2 | (2.8 | ) | (44.6 | ) | — | (47.4 | ) | (1.6 | ) | (47.0 | ) | — | (48.6 | ) | |||||||||||||||||||||||||||||
| Net income attributable to Acadia | $ | 27.5 | $ | 15.7 | $ | 23.6 | $ | 40.6 | $ | 22.7 | $ | 41.8 | $ | 19.3 | $ | 53.0 | $ | 4.8 | $ | (26.1 | ) | $ | 4.3 | $ | (12.4 | ) | ||||||||||||||||||||||
Unallocated
The Company does not allocate general and administrative expenses and income taxes to its reportable segments. These unallocated amounts are depicted in the Fundstable above under the headings labeled “Total.” Unallocated general and administrative expenses increased by $30.5$3.2 million for the
57
nine months ended September 30, 2017 compared to the prior year period primarily due to $16.0 million from property acquisitions in 2016 and 2017 as well as $11.6 million from
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 September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Consolidated Operating Income | $ | 5,744 | $ | 1,254 | $ | 22,383 | $ | 20,541 | ||||||||
| Add back: | ||||||||||||||||
| General and administrative | 7,953 | 12,869 | 25,286 | 30,742 | ||||||||||||
| Impairment of an asset | 3,840 | — | 3,840 | — | ||||||||||||
| Depreciation and amortization | 26,652 | 15,217 | 77,245 | 46,744 | ||||||||||||
| Less: | ||||||||||||||||
| Above/below market rent, straight-line rent and other adjustments | (4,728 | ) | — | (14,671 | ) | (5,900 | ) | |||||||||
| Consolidated NOI | 39,461 | 29,340 | 114,083 | 92,127 | ||||||||||||
| Noncontrolling interest in consolidated NOI | (8,877 | ) | (3,400 | ) | (22,462 | ) | (15,600 | ) | ||||||||
| Less: Operating Partnership's interest in Fund NOI included above | (2,569 | ) | (900 | ) | (6,545 | ) | (3,400 | ) | ||||||||
Add: Operating Partnership's share of unconsolidated joint ventures NOI (a) | 4,728 | 4,764 | 14,415 | 11,818 | ||||||||||||
| NOI - Core Portfolio | $ | 32,743 | $ | 29,804 | $ | 99,491 | $ | 84,945 | ||||||||
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
|
|
|
|
| (As Restated) |
|
|
|
|
| (As Restated) |
| ||||
Consolidated operating (loss) income (a) |
| $ | (13,953 | ) |
| $ | (1,474 | ) |
| $ | 51,737 |
|
| $ | 20,201 |
|
Add back: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
General and administrative |
|
| 10,170 |
|
|
| 9,910 |
|
|
| 32,768 |
|
|
| 29,555 |
|
Depreciation and amortization |
|
| 33,744 |
|
|
| 30,064 |
|
|
| 102,428 |
|
|
| 91,244 |
|
Impairment charges |
|
| 33,311 |
|
|
| 9,925 |
|
|
| 33,311 |
|
|
| 9,925 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Less: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Above/below-market rent, straight-line rent and other adjustments |
|
| (4,680 | ) |
|
| (4,810 | ) |
|
| (16,943 | ) |
|
| (13,742 | ) |
Gain on disposition of properties |
|
| (8,885 | ) |
|
| — |
|
|
| (49,916 | ) |
|
| (10,521 | ) |
Consolidated NOI |
|
| 49,707 |
|
|
| 43,615 |
|
|
| 153,385 |
|
|
| 126,662 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Redeemable noncontrolling interest in consolidated NOI |
|
| (537 | ) |
|
| — |
|
|
| (537 | ) |
|
| — |
|
Noncontrolling interest in consolidated NOI |
|
| (13,669 | ) |
|
| (11,714 | ) |
|
| (44,767 | ) |
|
| (33,437 | ) |
Less: Operating Partnership's interest in Fund NOI included above |
|
| (4,009 | ) |
|
| (2,983 | ) |
|
| (11,917 | ) |
|
| (8,517 | ) |
Add: Operating Partnership's share of unconsolidated joint ventures NOI |
|
| 3,542 |
|
|
| 2,961 |
|
|
| 10,882 |
|
|
| 10,025 |
|
NOI - Core Portfolio |
| $ | 35,034 |
|
| $ | 31,879 |
|
| $ | 107,046 |
|
| $ | 94,733 |
|
(a) Does not include the Operating Partnership’s share of NOI from unconsolidated joint ventures within the Funds.
58
Same-Property NOI includes Core Portfolio properties that we owned for both the current and prior periods presented, but excludes those properties whichthat we acquired, sold or expected to sell, and developed during these periods.
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Core Portfolio NOI | $ | 32,743 | $ | 29,804 | $ | 99,491 | $ | 84,945 | ||||||||
| Less properties excluded from Same-Property NOI | (7,090 | ) | (4,149 | ) | (23,159 | ) | (9,142 | ) | ||||||||
| Same-Property NOI | $ | 25,653 | $ | 25,655 | $ | 76,332 | $ | 75,803 | ||||||||
| Percent change from prior year period | — | % | 0.7 | % | ||||||||||||
| Components of Same-Property NOI: | ||||||||||||||||
| Same-Property Revenues | $ | 34,454 | $ | 33,479 | $ | 103,706 | $ | 99,193 | ||||||||
| Same-Property Operating Expenses | (8,801 | ) | (7,824 | ) | (27,374 | ) | (23,390 | ) | ||||||||
| Same-Property NOI | $ | 25,653 | $ | 25,655 | $ | 76,332 | $ | 75,803 | ||||||||
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Core Portfolio NOI |
| $ | 35,034 |
|
| $ | 31,879 |
|
| $ | 107,046 |
|
| $ | 94,733 |
|
Less properties excluded from Same-Property NOI |
|
| (6,014 | ) |
|
| (4,357 | ) |
|
| (17,241 | ) |
|
| (10,471 | ) |
Same-Property NOI |
| $ | 29,020 |
|
| $ | 27,522 |
|
| $ | 89,805 |
|
| $ | 84,262 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Percent change from prior year period |
|
| 5.4 | % |
|
|
|
|
| 6.6 | % |
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Components of Same-Property NOI: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Same-Property Revenues |
| $ | 41,746 |
|
| $ | 40,268 |
|
| $ | 128,784 |
|
| $ | 122,875 |
|
Same-Property Operating Expenses |
|
| (12,726 | ) |
|
| (12,746 | ) |
|
| (38,979 | ) |
|
| (38,613 | ) |
Same-Property NOI |
| $ | 29,020 |
|
| $ | 27,522 |
|
| $ | 89,805 |
|
| $ | 84,262 |
|
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 and nine months ended
| Three Months Ended September 30, 2017 | Nine Months Ended September 30, 2017 | |||||||||||||||
| Core Portfolio New and Renewal Leases | Cash Basis | Straight-Line Basis | Cash Basis | Straight-Line Basis | ||||||||||||
| Number of new and renewal leases executed | 15 | 15 | 54 | 54 | ||||||||||||
| GLA commencing | $ | 61,254 | $ | 61,254 | $ | 399,149 | $ | 399,149 | ||||||||
| New base rent | $ | 22.02 | $ | 22.59 | $ | 23.47 | $ | 24.08 | ||||||||
| Expiring base rent | $ | 20.62 | $ | 19.79 | $ | 21.76 | $ | 20.54 | ||||||||
| Percent growth in base rent | 6.8 | % | 14.1 | % | 7.9 | % | 17.2 | % | ||||||||
| Average cost per square foot | $ | 11.15 | $ | 11.15 | $ | 6.87 | $ | 6.87 | ||||||||
| Weighted average lease term (years) | 6.9 | 6.9 | 5.1 | 5.1 | ||||||||||||
|
| Three Months Ended September 30, 2022 |
|
| Nine Months Ended September 30, 2022 |
| ||||||||||
Core Portfolio New and Renewal Leases |
| Cash Basis |
|
| Straight- |
|
| Cash Basis |
|
| Straight- |
| ||||
Number of new and renewal leases executed |
|
| 20 |
|
|
| 20 |
|
|
| 59 |
|
|
| 59 |
|
GLA commencing |
|
| 181,007 |
|
|
| 181,007 |
|
|
| 560,861 |
|
|
| 560,861 |
|
New base rent |
| $ | 38.01 |
|
| $ | 39.88 |
|
| $ | 37.00 |
|
| $ | 38.28 |
|
Expiring base rent |
| $ | 31.37 |
|
| $ | 31.31 |
|
| $ | 33.31 |
|
| $ | 32.79 |
|
Percent growth in base rent |
|
| 21.2 | % |
|
| 27.4 | % |
|
| 11.1 | % |
|
| 16.8 | % |
Average cost per square foot (a) |
| $ | 8.31 |
|
| $ | 8.31 |
|
| $ | 18.44 |
|
| $ | 18.44 |
|
Weighted average lease term (years) |
|
| 4.7 |
|
|
| 4.7 |
|
|
| 5.6 |
|
|
| 5.6 |
|
(a) The average cost per square foot includes tenant improvement costs, leasing commissions and tenant allowances.
59
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”)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.
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
|
|
|
|
| (As Restated) |
|
|
|
|
| (As Restated) |
| ||||
Net (loss) income attributable to Acadia |
| $ | (55,891 | ) |
| $ | 12,007 |
|
| $ | (39,427 | ) |
| $ | 20,535 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Depreciation of real estate and amortization of leasing costs (net of |
|
| 27,097 |
|
|
| 23,111 |
|
|
| 78,007 |
|
|
| 69,995 |
|
Impairment charges (net of noncontrolling interests' share) |
|
| 58,481 |
|
|
| 2,294 |
|
|
| 58,481 |
|
|
| 2,294 |
|
Gain on disposition of properties (net of noncontrolling interests' share) |
|
| (2,055 | ) |
|
| — |
|
|
| (11,892 | ) |
|
| (4,163 | ) |
Income (loss) attributable to Common OP Unit holders |
|
| (3,083 | ) |
|
| 749 |
|
|
| (2,057 | ) |
|
| 1,371 |
|
Distributions - Preferred OP Units |
|
| 123 |
|
|
| 123 |
|
|
| 369 |
|
|
| 369 |
|
Funds from operations attributable to Common Shareholders and |
| $ | 24,672 |
|
| $ | 38,284 |
|
| $ | 83,481 |
|
| $ | 90,401 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Less: Impact of City Point share conversion (a) |
|
| (906 | ) |
|
| — |
|
|
| (906 | ) |
|
| — |
|
Funds from operations attributable to Common Shareholders and |
| $ | 23,766 |
|
| $ | 38,284 |
|
| $ | 82,575 |
|
| $ | 90,401 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Funds From Operations per Share - Diluted |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Basic weighted-average shares outstanding, GAAP earnings |
|
| 94,980,333 |
|
|
| 88,480,844 |
|
|
| 94,757,678 |
|
|
| 87,217,422 |
|
Weighted-average OP Units outstanding |
|
| 5,307,160 |
|
|
| 5,122,016 |
|
|
| 5,311,460 |
|
|
| 5,125,394 |
|
Basic weighted-average shares and OP Units outstanding, FFO |
|
| 100,287,493 |
|
|
| 93,602,860 |
|
|
| 100,069,138 |
|
|
| 92,342,816 |
|
Assumed conversion of Preferred OP Units to Common Shares |
|
| 25,067 |
|
|
| 464,623 |
|
|
| 464,623 |
|
|
| 464,623 |
|
Assumed conversion of LTIP units and Restricted Share Units to |
|
| — |
|
|
| 15,671 |
|
|
| — |
|
|
| — |
|
Diluted weighted-average number of Common Shares and Common |
|
| 100,312,560 |
|
|
| 94,083,154 |
|
|
| 100,533,761 |
|
|
| 92,807,439 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Diluted Funds from operations, per Common Share and Common OP Unit |
| $ | 0.24 |
|
| $ | 0.41 |
|
| $ | 0.82 |
|
| $ | 0.97 |
|
| (dollars in thousands except per share data) | Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Net income attributable to Acadia | $ | 12,867 | $ | 6,112 | $ | 40,558 | $ | 52,955 | ||||||||
| Depreciation of real estate and amortization of leasing costs (net of noncontrolling interests' share) | 20,309 | 16,340 | 62,935 | 45,780 | ||||||||||||
| Impairment of an asset | 1,088 | — | 1,088 | — | ||||||||||||
| Gain on sale (net of noncontrolling interests’ share) | (2,294 | ) | — | (5,789 | ) | (19,257 | ) | |||||||||
| Income attributable to Common OP Unit holders | 758 | 370 | 2,400 | 3,334 | ||||||||||||
| Distributions - Preferred OP Units | 138 | 6 | 415 | 417 | ||||||||||||
| Funds from operations attributable to Common Shareholders and Common OP Unit holders | $ | 32,866 | $ | 22,828 | $ | 101,607 | $ | 83,229 | ||||||||
| Funds From Operations per Share - Diluted | ||||||||||||||||
| Basic weighted-average shares outstanding, GAAP earnings | 83,699,850 | 78,448,643 | 83,665,749 | 74,049,523 | ||||||||||||
| Weighted-average OP Units outstanding | 4,736,815 | 4,343,460 | 4,749,057 | 4,421,816 | ||||||||||||
| Basic weighted-average shares outstanding, FFO | 88,436,665 | 82,792,103 | 88,414,806 | 78,471,339 | ||||||||||||
| Assumed conversion of Preferred OP Units to common shares | 512,366 | 25,067 | 506,944 | 427,586 | ||||||||||||
| Assumed conversion of options, LTIP units and restricted share units to common shares | 51,143 | 346,105 | 77,392 | 239,264 | ||||||||||||
| Diluted weighted-average number of Common Shares and Common OP Units outstanding, FFO | 89,000,174 | 83,163,275 | 88,999,142 | 79,138,189 | ||||||||||||
| Diluted Funds from operations, per Common Share and Common OP Unit | $ | 0.37 | $ | 0.27 | $ | 1.14 | $ | 1.05 | ||||||||
60
LIQUIDITY AND CAPITAL RESOURCES
Uses of Liquidity and Cash Requirements
Generally, 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, and (iv) debt service and loan repayments.
Distributions
In order to qualify as a REIT for Federalfederal income tax purposes, we must currently distribute at least 90% of our taxable income to our shareholders. During the nine months ended September 30, 2017,2022, we paid dividends and distributions on our Common Shares Common OP Units and Preferred OP Units totaling $77.8$55.1 million. This amount included a $13.3 million special dividend that was paid in January 2017, which related to the Operating Partnership’s share of cash proceeds from property distributions during 2016. The balance of the distribution was funded from the Operating Partnership’s share of operating cash flow.
Investments in Real Estate
During the nine months ended September 30, 2017, within2022, we made four new consolidated investments in our Core Portfolio and Fund portfoliosV acquired three unconsolidated properties totaling $425.0 million as described below (Note 2, Note 4):
On June 27, 2022, we made an $18.5 million investment in Fund II and Mervyns II increasing our ownership in each by 11.67% to 40.00%. On August 1, 2022, we made an additional $5.8 million investment in Fund II and increased our ownership by 21.67% to 61.67% (Note 1).
During the nine months ended September 30, 2017,2022, we originated a loan to other Fund II investors of $65.9 million (Note 10).
Capital Commitments
During the nine months ended September 30, 2022, we made capital contributions of $6.0aggregating $131.7 million to our Funds. Moreover, we made an additional $24.3 million investment in Fund IVII and Mervyns II, increasing our ownership from 28.33% in connection with acquisitionseach to 61.67% and development costs. Capital contributed will be used by the Funds to acquire and operate real estate assets.40.00%, respectively (Note 1). At September 30, 2017,2022, our share of the remaining capital commitments to our Funds aggregated $149.9$44.8 million as follows:
61
Development Activities
During the nine months ended September 30, 2017,2022, capitalized costs associated with development activities totaled $84.6 million. These costs primarily related to Fund II’s City Point project.$4.5 million (Note 2). At September 30, 2017,2022, we had 13 propertiesa total of nine consolidated and one unconsolidated project under development or redevelopment, for which the estimated total cost to complete these projects through 20202025 was $102.0$57.7 million to $144.0$74.9 million, and our estimated share was approximately $34.1$35.5 million to $46.0$45.0 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):
| September 30, | December 31, | |||||||
| 2017 | 2016 | |||||||
| Total Debt - Fixed and Effectively Fixed Rate | $ | 869,829 | $ | 860,484 | ||||
| Total Debt - Variable Rate | 749,342 | 645,186 | ||||||
| 1,619,171 | 1,505,670 | |||||||
| Net unamortized debt issuance costs | (17,205 | ) | (18,288 | ) | ||||
| Unamortized premium | 881 | 1,336 | ||||||
| Total Indebtedness | $ | 1,602,847 | $ | 1,488,718 | ||||
|
| September 30, |
|
| December 31, |
| ||
|
| 2022 |
|
| 2021 |
| ||
|
|
|
|
|
|
| ||
Total Debt - Fixed and Effectively Fixed Rate |
| $ | 1,341,355 |
|
| $ | 1,038,803 |
|
Total Debt - Variable Rate |
|
| 489,876 |
|
|
| 780,935 |
|
|
|
| 1,831,231 |
|
|
| 1,819,738 |
|
Net unamortized debt issuance costs |
|
| (13,768 | ) |
|
| (7,946 | ) |
Unamortized premium |
|
| 369 |
|
|
| 446 |
|
Total Indebtedness |
| $ | 1,817,832 |
|
| $ | 1,812,238 |
|
As of September 30, 2017,2022, our consolidated outstanding mortgage and notes payableindebtedness aggregated $1,619.2$1,831.2 million, excluding unamortized premium of $0.9$0.4 million and net unamortized loan costs of $17.2$13.8 million, and were collateralized by 4534 properties and related tenant leases. InterestStated interest rates on our outstanding indebtedness ranged from 1.00%LIBOR + 1.40% to 5.89%Prime + 2.00% with maturities that ranged from October 15, 2017,31, 2022 to April 15, 2035.2035, without regard to available extension options. Taking into consideration $454.8$1,164.1 million of notional principal under variable to fixed-rate swap agreements currently in effect, $869.8$1,341.4 million of the portfolio debt, or 53.7%73.2%, was fixed at a 3.70%4.06% weighted-average interest rate and $749.3$489.9 million, or 46.3%26.8% was floating at a 3.30%4.61% weighted average interest rate as of September 30, 2017.
Without regard to available extension options, at September 30, 2022 there was $83.3 million of debt maturing in 20172022 at a weighted-average interest rate of 3.15%5.57%; there is $1.7was $2.0 million of scheduled principal amortization due in 2017;the remainder of 2022; and our share of scheduled remaining 20172022 principal payments and maturities on our
Share Repurchase Program
We maintain a share repurchase program under which $122.6 million remains available as of September 30, 2022 (Note 10). We did not repurchase any shares under this program during the nine months ended September 30, 2022.
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 (v)(vi) cash on hand and future cash flow from operating activities. Our cash on hand in our consolidated subsidiaries at September 30, 20172022 totaled $48.3$18.1 million. Our remaining sources of liquidity are described further below.
62
ATM Program
We have an at-the-market (“ATM”ATM Program (Note 10) equity issuance program 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 tomay issue, equity in follow-on offerings separate from our ATM program.Program. Net proceeds raised through our ATM programProgram 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. ThereDuring the nine months ended September 30, 2022 we sold 5,525,419 of our Common Shares for net proceeds of $119.5 million at a weighted-average price per share of $21.65 through our ATM Program. No such sales were no issuancesmade during the three months ended September 30, 2022.
Fund Capital
During the nine months ended September 30, 2022, Funds II and V called for capital contributions of equity under$175.8 million and $121.7 million, respectively, of which our aggregate share was $131.7 million. At September 30, 2022, unfunded capital commitments from noncontrolling interests within Funds II, III, IV and V were zero, $1.4 million, $32.2 million and $137.5 million, respectively.
Asset Sales and Other Transactions
During the ATM programnine months ended September 30, 2022, we disposed of five consolidated Fund properties, one land parcel and one unconsolidated investment as follows:
We recognized aggregate gains of $49.9 million on the sales of the above properties during the nine months ended September 30, 2017.
Structured Financing Repayments
During the nine months ended September 30, 2017, noncontrolling2022 Fund III foreclosed on one Structured Financing loan in the amount of $10.0 million including accrued interest. We also have one Structured Financing investment in the amount of $21.6 million, including accrued interest capital contributions to Fund IV of $20.1 million were primarily used to fund recent acquisitionsthat previously matured and development activities. At September 30, 2017, unfunded capital commitments from noncontrolling interests within our Funds III, IVhas not been repaid. In May and V were $40.2 million, $107.1July 2022, we received full payment on a $16.0 million and $415.5$13.5 million respectively.
Financing and Debt
As of September 30, 2017,2022, we had $126.1$207.0 million of additional capacity under existing Core Portfolio and Fund revolving debt facilities. In addition, at that date within our Core and Fund portfolios, we had 6594 unleveraged consolidated properties with an aggregate carrying value of approximately $1.4$1.8 billion, and 26 unleveraged unconsolidated properties for which our share of the carrying value was $94.0 million, although there can be no assurance that we would be able to obtain financing for these properties at favorable terms, if at all.
Inflation and Economic Condition Considerations
In the past year, microeconomic and macroeconomic conditions, including the fallout from the COVID-19 pandemic, the war in Ukraine, supply-chain disruptions, and the recessionary outlook of the current financial markets, has increased volatility in the market and has caused a surge in
63
already increasing inflation and interest rates. We manage our properties in a cost-conscious manner to minimize recurring operational expenses and utilize multi-year contracts to alleviate the impact of inflation on our business and our tenants. Most of our leases require tenants to pay their share of operating expenses, including common area maintenance, real estate taxes and insurance, thereby reducing our exposure to increases in costs and operating expenses resulting from inflation. These provisions are designed to partially mitigate the impact of inflation; however, current inflation levels are much greater than the contractual rent increases we obtain from our tenant base. The rate hikes enacted by the Federal Reserve have had a significant impact on interest rate indexes such as LIBOR, SOFR and the Prime Rate. As of September 30, 2022, approximately 73% of our outstanding debt is fixed rate with the remaining 27% indexed to LIBOR, SOFR or Prime plus an applicable margin per the loan agreement. As of September 30, 2022, we were counter-party to 42 interest rate swap agreements and three interest rate cap agreements, all of which qualify for and are designated as hedging instruments, which helps to alleviate the impact of rising interest rates on our operations. While we have not experienced any material negative impacts at this time, we are actively managing our business to respond to the ongoing economic and social impact from such events. See “Risk Factors” in Part I, Item 1A, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
HISTORICAL CASH FLOW
The following table compares the historical cash flow for the nine months ended September 30, 20172022 with the cash flow for the nine months ended September 30, 20162021 (in millions)millions, totals may not add due to rounding):
| Nine Months Ended September 30, | ||||||||||||
| 2017 | 2016 | Variance | ||||||||||
| Net cash provided by operating activities | $ | 84.4 | $ | 56.5 | $ | 27.9 | ||||||
| Net cash used in investing activities | (146.3 | ) | (375.7 | ) | 229.4 | |||||||
| Net cash provided by financing activities | 38.3 | 295.7 | (257.4 | ) | ||||||||
| (Decrease) increase in cash and cash equivalents | $ | (23.6 | ) | $ | (23.5 | ) | $ | (0.1 | ) | |||
|
| Nine Months Ended September 30, |
| |||||||||
|
| 2022 |
|
| 2021 |
|
| Variance |
| |||
|
|
|
|
|
|
|
|
|
| |||
Net cash provided by operating activities |
| $ | 100.5 |
|
| $ | 71.4 |
|
| $ | 29.1 |
|
Net cash used in investing activities |
|
| (144.9 | ) |
|
| (81.6 | ) |
|
| (63.3 | ) |
Net cash provided by financing activities |
|
| 47.6 |
|
|
| 7.9 |
|
|
| 39.7 |
|
Increase (decrease) in cash and restricted cash |
| $ | 3.1 |
|
| $ | (2.3 | ) |
| $ | 5.4 |
|
Operating Activities
Our operating activities provided $27.9$29.1 million more cash during the nine months ended September 30, 2017, primarily due to additional cash flow from 2016 and 2017 Core and Fund acquisitions.
Investing Activities
During the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021, our investing activities used $229.4$63.3 million lessmore cash, primarily due to (i) $162.3$178.8 million lessmore cash used for the acquisition of real estate,to acquire properties in 2022, (ii) $137.8$141.4 million less cash used for the issuance of notes receivable, (iii) $63.6 million lessmore cash used for investments in and advances to unconsolidated investments, and (iv) $9.9affiliates, (iii) $10.9 million lessmore cash used for development, construction and property improvement costs.costs and (iv) $4.5 million of cash used for acquisition of investment interests in 2022. These itemsuses of cash were partially offset by (i) $77.7$131.5 million lessmore cash received from the disposition of properties, including unconsolidated affiliates, (ii) $38.3$58.0 million less cash used in the issuance of notes receivable, (iii) $51.6 million more cash received from return of capital from unconsolidated affiliates and (iii) $30.8other, and (iv) $29.5 million lessmore cash received from repayments ofproceeds from notes receivable.
Financing Activities
Our financing activities provided $257.4$39.7 million lessmore cash during the nine months ended September 30, 2017,2022 as compared to the nine months ended September 30, 2021, primarily from (i) $357.3$82.8 million lessmore cash receivedprovided from the issuance of Common Shares and (ii) a decrease in cash of $183.9 million from capital contributions from noncontrolling interests.interests and (ii) $73.6 million more cash provided by the sale of Common Shares. These itemssources of cash were partially offset by (i) an increase$77.7 million more cash used for the acquisition of $236.4 million of cash provided from net borrowings and (ii) a decrease of $61.8 million in cash distributions to noncontrolling interests.
| 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 | $ | 1,619.2 | $ | 261.6 | $ | 770.9 | $ | 335.6 | $ | 251.1 | ||||||||||
| Interest obligations on debt | 228.9 | 61.2 | 99.2 | 36.7 | 31.9 | |||||||||||||||
Lease obligations (a) | 207.7 | 4.5 | 8.9 | 8.5 | 185.8 | |||||||||||||||
Construction commitments (b) | 93.1 | 93.1 | — | — | — | |||||||||||||||
| Total | $ | 2,148.9 | $ | 420.4 | $ | 879.0 | $ | 380.8 | $ | 468.8 | ||||||||||
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.
64
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 |
|
| September 30, 2022 | |||||||||
Investment |
| Ownership |
|
| Pro-rata Share of |
|
| Effective Interest Rate (a) |
|
| Maturity Date | |||
Family Center at Riverdale (b) |
|
| 18.0 | % |
| $ | 4.4 |
|
|
| 3.68 | % |
| May 2023 |
Promenade at Manassas (c) |
|
| 22.8 | % |
|
| 6.2 |
|
|
| 4.57 | % |
| Dec 2022 |
Eden Square |
|
| 22.8 | % |
|
| 5.1 |
|
|
| 4.82 | % |
| Mar 2023 |
Gotham Plaza |
|
| 49.0 | % |
|
| 8.8 |
|
|
| 5.09 | % |
| Jun 2023 |
Renaissance Portfolio |
|
| 20.0 | % |
|
| 32.0 |
|
|
| 3.81 | % |
| Aug 2023 |
3104 M Street |
|
| 20.0 | % |
|
| 0.8 |
|
|
| 6.25 | % |
| Jan 2024 |
Crossroads |
|
| 49.0 | % |
|
| 30.0 |
|
|
| 3.94 | % |
| Oct 2024 |
Tri-City Plaza (c) |
|
| 18.1 | % |
|
| 7.0 |
|
|
| 3.01 | % |
| Oct 2024 |
Frederick Crossing (c) |
|
| 18.1 | % |
|
| 4.4 |
|
|
| 3.26 | % |
| Dec 2024 |
Paramus Plaza (b) |
|
| 11.6 | % |
|
| 3.3 |
|
|
| 4.83 | % |
| Dec 2024 |
Frederick County Square (c) |
|
| 18.1 | % |
|
| 4.0 |
|
|
| 4.00 | % |
| Jan 2025 |
840 N. Michigan Avenue |
|
| 88.4 | % |
|
| 65.0 |
|
|
| 4.36 | % |
| Feb 2025 |
Wood Ridge Plaza (b) |
|
| 18.1 | % |
|
| 5.8 |
|
|
| 6.38 | % |
| Mar 2025 |
650 Bald Hill Road |
|
| 20.8 | % |
|
| 3.3 |
|
|
| 3.75 | % |
| Jun 2026 |
La Frontera |
|
| 18.1 | % |
|
| 10.0 |
|
|
| 5.08 | % |
| Jun 2027 |
Georgetown Portfolio |
|
| 50.0 | % |
|
| 7.6 |
|
|
| 4.72 | % |
| Dec 2027 |
Total |
|
|
|
| $ | 197.7 |
|
|
|
|
|
| ||
Operating Partnership Ownership Percentage | Operating Partnership Pro-rata Share of Mortgage Debt | |||||||||||
| Investment | Interest Rate at September 30, 2017 | Maturity Date | ||||||||||
| Promenade at Manassas | 22.8 | % | $ | 5.7 | 2.93 | % | November 2017 | |||||
| 230/240 W. Broughton | 11.6 | % | 1.2 | 4.23 | % | May 2018 | ||||||
| Eden Square | 22.8 | % | 5.1 | 3.38 | % | June 2020 | ||||||
| 650 Bald Hill | 22.8 | % | 1.5 | 3.88 | % | April 2020 | ||||||
| Gotham Plaza | 49.0 | % | 10.1 | 2.83 | % | June 2023 | ||||||
| Renaissance Portfolio | 20.0 | % | 32.0 | 2.93 | % | August 2023 | ||||||
| Crossroads | 49.0 | % | 33.1 | 3.94 | % | October 2024 | ||||||
| 840 N. Michigan | 88.4 | % | 65.0 | 4.23 | % | February 2025 | ||||||
| Georgetown Portfolio | 50.0 | % | 8.5 | 4.72 | % | December 2027 | ||||||
| Total | $ | 162.2 | ||||||||||
Management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements,Consolidated Financial Statements, which have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statementsConsolidated Financial Statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Management bases itsWe 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 the 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 20162021 Annual Report on Form 10-K.
Recently Issued and Adopted Accounting Pronouncements
ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Information as ofSeptember 30, 2017
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 September 30, 2017,2022, we had total mortgage and other notes payable of $1,619.2$1,831.2 million, excluding the unamortized premium of $0.9$0.4 million and net unamortized loandebt issuance costs of $17.2$13.8 million, of which $869.8$1,341.4 million, or 53.7%73.2% was fixed-rate, inclusive of debt with rates fixed through the use of derivative financial instruments, and $749.3$489.9 million, or 46.3%26.8%, was variable-rate based upon LIBOR, SOFR or Prime rates plus certain spreads. As of September 30, 2017,2022, we were party to 2635 interest rate swapswaps and fourthree interest rate cap agreements to hedge our exposure to changes in interest rates with respect to $454.8$1,164.1 million and $196.4$107.3 million of LIBOR-based variable-rate debt, respectively.
65
The following table sets forth information as of September 30, 20172022 concerning our long-term debt obligations, on a pro-rata share basis, including principal cash flows by scheduled maturity (without regard to available extension options) and weighted average effective interest rates of maturing amounts (dollars in millions):
Core Consolidated Mortgage and Other Debt
| Year | Scheduled Amortization | Maturities | Total | Weighted-Average Interest Rate | |||||||||||
| 2017 (Remainder) | $ | 1.0 | $ | 5.8 | $ | 6.8 | 6.0 | % | |||||||
| 2018 | 3.2 | 40.1 | 43.3 | 2.9 | % | ||||||||||
| 2019 | 3.1 | — | 3.1 | — | % | ||||||||||
| 2020 | 3.3 | 109.0 | 112.3 | 2.6 | % | ||||||||||
| 2021 | 3.4 | 200.0 | 203.4 | 2.5 | % | ||||||||||
| Thereafter | 20.9 | 202.7 | 223.6 | 3.6 | % | ||||||||||
| $ | 34.9 | $ | 557.6 | $ | 592.5 | ||||||||||
Year |
| Scheduled |
|
| Maturities |
|
| Total |
|
| Weighted-Average |
| ||||
2022 (Remainder) |
| $ | 0.6 |
|
| $ | — |
|
| $ | 0.6 |
|
|
| — | % |
2023 |
|
| 2.3 |
|
|
| — |
|
|
| 2.3 |
|
|
| — | % |
2024 |
|
| 2.1 |
|
|
| 7.3 |
|
|
| 9.4 |
|
|
| 4.7 | % |
2025 |
|
| 2.4 |
|
|
| 238.3 |
|
|
| 240.7 |
|
|
| 4.1 | % |
2026 |
|
| 2.5 |
|
|
| 409.3 |
|
|
| 411.8 |
|
|
| 4.1 | % |
Thereafter |
|
| 6.6 |
|
|
| 361.5 |
|
|
| 368.1 |
|
|
| 4.2 | % |
|
| $ | 16.5 |
|
| $ | 1,016.4 |
|
| $ | 1,032.9 |
|
|
|
| |
Fund Consolidated Mortgage and Other Debt
| Year | Scheduled Amortization | Maturities | Total | Weighted-Average Interest Rate | |||||||||||
| 2017 (Remainder) | $ | 0.2 | $ | 35.8 | $ | 36.0 | 2.6 | % | |||||||
| 2018 | 0.6 | 13.0 | 13.6 | 3.8 | % | ||||||||||
| 2019 | 0.6 | 52.0 | 52.6 | 4.0 | % | ||||||||||
| 2020 | 0.5 | 112.4 | 112.9 | 4.1 | % | ||||||||||
| 2021 | 0.4 | 12.0 | 12.4 | 3.7 | % | ||||||||||
| Thereafter | 0.1 | 16.2 | 16.3 | 3.1 | % | ||||||||||
| $ | 2.4 | $ | 241.4 | $ | 243.8 | ||||||||||
Year |
| Scheduled |
|
| Maturities |
|
| Total |
|
| Weighted-Average |
| ||||
2022 (Remainder) |
| $ | 1.4 |
|
| $ | 83.3 |
|
| $ | 84.7 |
|
|
| 5.6 | % |
2023 |
|
| 4.2 |
|
|
| 296.0 |
|
|
| 300.2 |
|
|
| 4.7 | % |
2024 |
|
| 2.6 |
|
|
| 199.5 |
|
|
| 202.1 |
|
|
| 3.2 | % |
2025 |
|
| 0.2 |
|
|
| 177.0 |
|
|
| 177.2 |
|
|
| 5.1 | % |
2026 |
|
| 0.1 |
|
|
| 34.0 |
|
|
| 34.1 |
|
|
| 5.2 | % |
Thereafter |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — | % |
|
| $ | 8.5 |
|
| $ | 789.8 |
|
| $ | 798.3 |
|
|
|
| |
Mortgage Debt in Unconsolidated Partnerships (at our Pro-Rata Share)
| Scheduled Amortization | Maturities | Total | Weighted-Average Interest Rate | ||||||||||||
| 2017 (Remainder) | $ | 0.2 | $ | 5.7 | $ | 5.9 | 2.6 | % | |||||||
| 2018 | 1.0 | 1.2 | 2.2 | 4.2 | % | ||||||||||
| 2019 | 1.0 | — | 1.0 | — | % | ||||||||||
| 2020 | 1.6 | 6.4 | 8.0 | 2.2 | % | ||||||||||
| 2021 | 1.1 | — | 1.1 | — | % | ||||||||||
| Thereafter | 3.7 | 140.3 | 144.0 | 3.9 | % | ||||||||||
| $ | 8.6 | $ | 153.6 | $ | 162.2 | ||||||||||
Year |
| Scheduled |
|
| Maturities |
|
| Total |
|
| Weighted-Average |
| ||||
2022 (Remainder) |
| $ | 0.4 |
|
| $ | 6.2 |
|
| $ | 6.6 |
|
|
| 4.6 | % |
2023 |
|
| 1.5 |
|
|
| 50.0 |
|
|
| 51.5 |
|
|
| 4.1 | % |
2024 |
|
| 1.3 |
|
|
| 43.7 |
|
|
| 45.0 |
|
|
| 3.8 | % |
2025 |
|
| 0.4 |
|
|
| 74.6 |
|
|
| 75.0 |
|
|
| 4.5 | % |
2026 |
|
| 0.3 |
|
|
| 3.0 |
|
|
| 3.3 |
|
|
| 3.8 | % |
Thereafter |
|
| 0.3 |
|
|
| 16.0 |
|
|
| 16.3 |
|
|
| 4.9 | % |
|
| $ | 4.2 |
|
| $ | 193.5 |
|
| $ | 197.7 |
|
|
|
| |
Without regard to available extension options, in the remainder of 2017, $174.72022, $85.3 million of our total consolidated debt and $5.9$6.6 million of our pro-rata share of unconsolidated outstanding debt will become due. In addition, $88.3$302.5 million of our total consolidated debt and $2.2$51.5 million of our pro-rata share of unconsolidated debt will become due in 2018.2023. As it relates to the aforementioned maturing debt in 2022 and 2023, we have options to extend consolidated debt aggregating $57.9 million and $41.1 million, respectively; however, there can be no assurance that the Company will be able successfully execute any or all of its available extension options. 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,rates, our interest expense would increase by approximately $2.6$4.5 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 $1.0$2.6 million. Interest expense on our variable-rate debt of $749.3$489.9 million, net of variable to fixed-rate swap agreements currently in effect, as of September 30, 2017,2022, would increase $7.5$4.9 million if LIBORcorresponding rate indices increased by 100 basis points. After giving effect to noncontrolling interests, our share of this increase would be $2.2$2.0 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.
66
Based on our outstanding debt balances as of September 30, 2017,2022, the fair value of our total consolidated outstanding debt would decrease by approximately $17.5$5.8 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 $19.6$6.8 million.
As of September 30, 2017,2022, and December 31, 2016,2021, we had consolidated notes receivable of $250.2$124.0 million and $276.2$153.9 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 September 30, 2017,2022, the fair value of our total outstanding notes receivable would decrease by approximately $3.5$1.3 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 $3.7$1.3 million.
Summarized Information as of December 31, 2016
As of December 31, 2016,2021, we had total mortgage and other notes payable of $1,505.7$1,819.7 million, excluding the unamortized premium of $1.3$0.4 million and unamortized loandebt issuance costs of $18.3$7.9 million, of which $860.5$1,038.8 million, or 57.1% was fixed-rate, inclusive of interest rate swaps,debt with rates fixed through the use of derivative financial instruments, and $645.2$780.9 million, or 42.9%, was variable-rate based upon LIBOR, SOFR or Prime rates plus certain spreads. As of December 31, 2016,2021, we were party to 1828 interest rate swap and fourthree interest rate cap agreements to hedge our exposure to changes in interest rates with respect to $365.3$860.4 million and $196.4$110.5 million of LIBOR-based variable-rate debt, respectively.
Interest expense on our variable-rate debt of $645.2$780.9 million as of December 31, 2016,2021, would have increased $6.5$7.8 million if LIBORcorresponding rate indices increased by 100 basis points. Based on our outstanding debt balances as of December 31, 2016,2021, the fair value of our total outstanding debt would have decreased by approximately $20.3$8.4 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 $22.8$16.0 million.
Changes in Market Risk Exposures from 2016December 31, 2021 to 2017
Our interest rate risk exposure from December 31, 2016,2021, to September 30, 2017,2022, has increaseddecreased on an absolute basis, as the $645.2$780.9 million of variable-rate debt as of December 31, 2016,2021, has increaseddecreased to $749.3$489.9 million as of September 30, 2017.2022. As a percentage of our overall debt, our interest rate risk exposure has increaseddecreased as our variable-rate debt accounted for 42.9% of our consolidated debt as of December 31, 2016, and was increased2021 compared to 46.3%26.8% as of September 30, 2017.
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 September 30, 2017,2022, have concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) were not effective as of September 30, 2017,2022 due to the material weakness in our internal control over financial reporting described below.
Previously Reported Material Weakness
As disclosed in Item 9A. “Controls and Procedures” of our Form 10-K, we previously identified a material weakness in our internal control over
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financial reporting related to an error in accounting treatment at the time of formation related to the improper consolidation of two Fund investments that are less-than-wholly-owned through the Company’s opportunity funds.
Management is in the process of remediating the material weakness and believes that the consolidated financial statements, and related notes thereto included in this Quarterly Report on Form 10-Q fairly present, in all material aspects, the Company’s financial condition, results of operations and cash flows for the periods presented.
Remediation
We have commenced measures to remediate the identified material weakness. We performed additional procedures to assess the population of less-than-wholly-owned investments at year end and are implementing additional controls in this area. Until the material weakness is remediated, we will continue to perform additional analysis and other post-closing procedures to ensure that our consolidated financial statements are prepared in accordance with U.S. GAAP. The material weakness will not be considered remediated until management designs and implements effective controls that operate for a reasonable levelsufficient period 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.
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PART II—II–OTHER INFORMATION
ITEM 1.LEGAL PROCEEDINGS.
From time to time, we are involved ina party to various matterslegal proceedings, claims or regulatory inquiries and investigations arising out of, litigation arising in the normalor incident to, our ordinary course of business. While we are unable to predict with certainty the outcome of any particular matter, Management is of the opinion that,management does not expect, when such litigation ismatters are resolved, that our resulting exposure to loss contingencies, if any, will not have a significantmaterial adverse effect on our consolidated financial position, results of operations, or liquidity.
ITEM 1A.RISK FACTORS.
Except to the extent additional factual information disclosed elsewhere in this Report relates to such risk factors applicable to us are described(including, without limitation, the matters discussed in Part I, “Item 1A.2. Management’s Discussion and Analysis of our 2016 Form 10-K. There have beenFinancial Condition and Results of Operations”), there were no material changes to those previously-disclosedthe 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.
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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 | ||||
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 | Inline XBRL Taxonomy Extension Schema Document | Filed herewith | ||||
101.CAL | Inline XBRL Taxonomy Extension Calculation Document | Filed herewith | ||||
101.DEF | Inline XBRL Taxonomy Extension Definitions Document | Filed herewith | ||||
101.LAB | Inline XBRL Taxonomy Extension Labels Document | Filed herewith | ||||
101.PRE | Inline XBRL Taxonomy Extension Presentation Document | Filed herewith | ||||
104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) | Filed herewith | ||||
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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 | ||
Executive Vice President and | ||
Chief Financial Officer | ||
By: | /s/ Richard Hartmann | |
Richard Hartmann | ||
Senior Vice President and | ||
Chief Accounting Officer | ||
Dated: November 3, 2017
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