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, 201721, 2019 there were 83,705,83586,948,888 common shares of beneficial interest, par value $0.001 per share (“Common Shares”), outstanding.
ACADIA REALTY TRUST AND SUBSIDIARIES
FORM 10-Q
INDEX
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Item No. |
| Description |
| Page |
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1. |
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| 4 | |
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| Consolidated Balance Sheets as of September 30, 2019 (Unaudited) and December 31, 2018 |
| 4 |
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| 5 | |
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| 6 | |
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| 7 | |
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| 9 | |
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| 11 | |
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2. |
| Management’s Discussion and Analysis of Financial Condition and Results of Operations |
| 45 |
3. |
|
| 58 | |
4. |
|
| 61 | |
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1. |
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| 61 | |
1A. |
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| 61 | |
2. |
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| 61 | |
3. |
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| 61 | |
4. |
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| 61 | |
5. |
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| 61 | |
6. |
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| 62 | |
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| 63 |
Item No. | Description | Page | |
1. | |||
2. | |||
3. | |||
4. | |||
1. | |||
1A. | |||
2. | |||
3. | |||
4. | |||
5. | |||
6. | |||
2
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Quarterly Report on Form 10-Q (the “Report”) may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), and as such may involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend” or “project” or the negative thereof or other variations thereon or comparable terminology. Factors which could have a material adverse effect on our operations and future prospects include, but are not limited to those set forth under the headings “
Item 1A. Risk Factors” and “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” inSPECIAL 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.
PART 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) |
| 2019 |
|
| 2018 |
| ||
ASSETS |
| (Unaudited) |
|
|
|
|
| |
Investments in real estate, at cost |
|
|
|
|
|
|
|
|
Operating real estate, net |
| $ | 3,288,377 |
|
| $ | 3,160,851 |
|
Real estate under development |
|
| 250,278 |
|
|
| 120,297 |
|
Net investments in real estate |
|
| 3,538,655 |
|
|
| 3,281,148 |
|
Notes receivable, net |
|
| 94,807 |
|
|
| 109,613 |
|
Investments in and advances to unconsolidated affiliates |
|
| 372,478 |
|
|
| 262,410 |
|
Other assets, net |
|
| 200,588 |
|
|
| 208,570 |
|
Cash and cash equivalents |
|
| 48,140 |
|
|
| 21,268 |
|
Restricted cash |
|
| 12,867 |
|
|
| 13,580 |
|
Rents receivable |
|
| 59,071 |
|
|
| 62,191 |
|
Assets of properties held for sale |
|
| 2,939 |
|
|
| — |
|
Total assets |
| $ | 4,329,545 |
|
| $ | 3,958,780 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
Mortgage and other notes payable, net |
| $ | 1,029,678 |
|
| $ | 1,017,288 |
|
Unsecured notes payable, net |
|
| 625,677 |
|
|
| 533,257 |
|
Accounts payable and other liabilities |
|
| 403,297 |
|
|
| 286,072 |
|
Dividends and distributions payable |
|
| 26,017 |
|
|
| 24,593 |
|
Distributions in excess of income from, and investments in, unconsolidated affiliates |
|
| 15,353 |
|
|
| 15,623 |
|
Total liabilities |
|
| 2,100,022 |
|
|
| 1,876,833 |
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
EQUITY |
|
|
|
|
|
|
|
|
Acadia Shareholders' Equity |
|
|
|
|
|
|
|
|
Common shares, $0.001 par value, authorized 200,000,000 shares, issued and outstanding 86,644,196 and 81,557,472 shares, respectively |
|
| 87 |
|
|
| 82 |
|
Additional paid-in capital |
|
| 1,692,659 |
|
|
| 1,548,603 |
|
Accumulated other comprehensive (loss) income |
|
| (44,138 | ) |
|
| 516 |
|
Distributions in excess of accumulated earnings |
|
| (129,026 | ) |
|
| (89,696 | ) |
Total Acadia shareholders’ equity |
|
| 1,519,582 |
|
|
| 1,459,505 |
|
Noncontrolling interests |
|
| 709,941 |
|
|
| 622,442 |
|
Total equity |
|
| 2,229,523 |
|
|
| 2,081,947 |
|
Total liabilities and equity |
| $ | 4,329,545 |
|
| $ | 3,958,780 |
|
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 |
The accompanying notes are an integral part of these consolidated financial statements
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(in thousands except per share amounts) |
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income |
| $ | 72,191 |
|
| $ | 51,003 |
|
| $ | 214,490 |
|
| $ | 150,838 |
|
Expense reimbursements |
|
| — |
|
|
| 13,194 |
|
|
| — |
|
|
| 35,000 |
|
Other |
|
| 1,136 |
|
|
| 1,330 |
|
|
| 3,053 |
|
|
| 4,116 |
|
Total revenues |
|
| 73,327 |
|
|
| 65,527 |
|
|
| 217,543 |
|
|
| 189,954 |
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 32,170 |
|
|
| 28,676 |
|
|
| 92,807 |
|
|
| 86,755 |
|
General and administrative |
|
| 8,222 |
|
|
| 7,982 |
|
|
| 25,579 |
|
|
| 24,359 |
|
Real estate taxes |
|
| 10,225 |
|
|
| 11,538 |
|
|
| 29,680 |
|
|
| 27,528 |
|
Property operating |
|
| 13,180 |
|
|
| 10,113 |
|
|
| 37,267 |
|
|
| 30,709 |
|
Impairment charge |
|
| 321 |
|
|
| — |
|
|
| 1,721 |
|
|
| — |
|
Other operating |
|
| — |
|
|
| 270 |
|
|
| — |
|
|
| 655 |
|
Total operating expenses |
|
| 64,118 |
|
|
| 58,579 |
|
|
| 187,054 |
|
|
| 170,006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on disposition of properties |
|
| 12,056 |
|
|
| 5,107 |
|
|
| 14,070 |
|
|
| 5,140 |
|
Operating income |
|
| 21,265 |
|
|
| 12,055 |
|
|
| 44,559 |
|
|
| 25,088 |
|
Equity in earnings of unconsolidated affiliates |
|
| 1,299 |
|
|
| 376 |
|
|
| 7,129 |
|
|
| 7,079 |
|
Interest income |
|
| 1,748 |
|
|
| 3,513 |
|
|
| 6,247 |
|
|
| 10,539 |
|
Other income |
|
| 5,034 |
|
|
| — |
|
|
| 6,947 |
|
|
| — |
|
Interest expense |
|
| (19,103 | ) |
|
| (18,077 | ) |
|
| (56,721 | ) |
|
| (50,882 | ) |
Income (loss) from continuing operations before income taxes |
|
| 10,243 |
|
|
| (2,133 | ) |
|
| 8,161 |
|
|
| (8,176 | ) |
Income tax provision |
|
| (1,403 | ) |
|
| (464 | ) |
|
| (1,622 | ) |
|
| (851 | ) |
Net income (loss) |
|
| 8,840 |
|
|
| (2,597 | ) |
|
| 6,539 |
|
|
| (9,027 | ) |
Net loss attributable to noncontrolling interests |
|
| 1,618 |
|
|
| 11,822 |
|
|
| 25,196 |
|
|
| 33,336 |
|
Net income attributable to Acadia |
| $ | 10,458 |
|
| $ | 9,225 |
|
| $ | 31,735 |
|
| $ | 24,309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per share |
| $ | 0.12 |
|
| $ | 0.11 |
|
| $ | 0.38 |
|
| $ | 0.29 |
|
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 |
The accompanying notes are an integral part of these consolidated financial statements
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Unaudited)
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
(in thousands) |
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||
Net income (loss) |
| $ | 8,840 |
|
| $ | (2,597 | ) |
| $ | 6,539 |
|
| $ | (9,027 | ) |
Other comprehensive (loss) income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized (loss) income on valuation of swap agreements |
|
| (15,388 | ) |
|
| 3,973 |
|
|
| (51,347 | ) |
|
| 12,576 |
|
Reclassification of realized interest on swap agreements |
|
| (288 | ) |
|
| (55 | ) |
|
| (1,374 | ) |
|
| 417 |
|
Other comprehensive (loss) income |
|
| (15,676 | ) |
|
| 3,918 |
|
|
| (52,721 | ) |
|
| 12,993 |
|
Comprehensive (loss) income |
|
| (6,836 | ) |
|
| 1,321 |
|
|
| (46,182 | ) |
|
| 3,966 |
|
Comprehensive loss attributable to noncontrolling interests |
|
| 2,726 |
|
|
| 11,033 |
|
|
| 33,263 |
|
|
| 30,996 |
|
Comprehensive (loss) income attributable to Acadia |
| $ | (4,110 | ) |
| $ | 12,354 |
|
| $ | (12,919 | ) |
| $ | 34,962 |
|
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.
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
Three Months Ended September 30, 2019 and 2018
|
| Acadia Shareholders |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
(in thousands, except per share amounts) |
| Common Shares |
|
| Share Amount |
|
| Additional Paid-in Capital |
|
| Accumulated Other Comprehensive Income (Loss) |
|
| Distributions in Excess of Accumulated Earnings |
|
| Total Common Shareholders’ Equity |
|
| Noncontrolling Interests |
|
| Total Equity |
| ||||||||
Balance at July 1, 2019 |
|
| 84,453 |
|
| $ | 84 |
|
| $ | 1,625,906 |
|
| $ | (29,570 | ) |
| $ | (115,224 | ) |
| $ | 1,481,196 |
|
| $ | 618,910 |
|
| $ | 2,100,106 |
|
Conversion of OP Units to Common Shares by limited partners of the Operating Partnership |
|
| 42 |
|
|
| — |
|
|
| 720 |
|
|
| — |
|
|
| — |
|
|
| 720 |
|
|
| (720 | ) |
|
| — |
|
Issuance of Common Shares |
|
| 2,149 |
|
|
| 3 |
|
|
| 60,634 |
|
|
| — |
|
|
| — |
|
|
| 60,637 |
|
|
| — |
|
|
| 60,637 |
|
Dividends/distributions declared ($0.28 per Common Share/OP Unit) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (24,260 | ) |
|
| (24,260 | ) |
|
| (1,765 | ) |
|
| (26,025 | ) |
Employee and trustee stock compensation, net |
|
| — |
|
|
| — |
|
|
| 148 |
|
|
| — |
|
|
| — |
|
|
| 148 |
|
|
| 1,768 |
|
|
| 1,916 |
|
Noncontrolling interest distributions |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (29,713 | ) |
|
| (29,713 | ) |
Noncontrolling interest contributions |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 129,438 |
|
|
| 129,438 |
|
Comprehensive (loss) income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (14,568 | ) |
|
| 10,458 |
|
|
| (4,110 | ) |
|
| (2,726 | ) |
|
| (6,836 | ) |
Reallocation of noncontrolling interests |
|
| — |
|
|
| — |
|
|
| 5,251 |
|
|
| — |
|
|
| — |
|
|
| 5,251 |
|
|
| (5,251 | ) |
|
| — |
|
Balance at September 30, 2019 |
|
| 86,644 |
|
| $ | 87 |
|
| $ | 1,692,659 |
|
| $ | (44,138 | ) |
| $ | (129,026 | ) |
| $ | 1,519,582 |
|
| $ | 709,941 |
|
| $ | 2,229,523 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at July 1, 2018 |
|
| 81,503 |
|
| $ | 82 |
|
| $ | 1,543,651 |
|
| $ | 10,138 |
|
| $ | (61,196 | ) |
| $ | 1,492,675 |
|
| $ | 619,874 |
|
| $ | 2,112,549 |
|
Conversion of OP Units to Common Shares by limited partners of the Operating Partnership |
|
| 47 |
|
|
| — |
|
|
| 834 |
|
|
| — |
|
|
| — |
|
|
| 834 |
|
|
| (834 | ) |
|
| — |
|
Dividends/distributions declared ($0.27 per Common Share/OP Unit) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (22,019 | ) |
|
| (22,019 | ) |
|
| (1,692 | ) |
|
| (23,711 | ) |
Employee and trustee stock compensation, net |
|
| — |
|
|
| — |
|
|
| 137 |
|
|
| — |
|
|
| — |
|
|
| 137 |
|
|
| 2,082 |
|
|
| 2,219 |
|
Noncontrolling interest distributions |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (9,014 | ) |
|
| (9,014 | ) |
Noncontrolling interest contributions |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 40,440 |
|
|
| 40,440 |
|
Comprehensive income (loss) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,129 |
|
|
| 9,225 |
|
|
| 12,354 |
|
|
| (11,033 | ) |
|
| 1,321 |
|
Reallocation of noncontrolling interests |
|
| — |
|
|
| — |
|
|
| 1,783 |
|
|
| — |
|
|
| — |
|
|
| 1,783 |
|
|
| (1,783 | ) |
|
| — |
|
Balance at September 30, 2018 |
|
| 81,550 |
|
| $ | 82 |
|
| $ | 1,546,405 |
|
| $ | 13,267 |
|
| $ | (73,990 | ) |
| $ | 1,485,764 |
|
| $ | 638,040 |
|
| $ | 2,123,804 |
|
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)
Nine Months Ended September 30, 20172019 and 2016
|
| Acadia Shareholders |
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
(in thousands, except per share amounts) |
| Common Shares |
|
| Share Amount |
|
| Additional Paid-in Capital |
|
| Accumulated Other Comprehensive Income (Loss) |
|
| Distributions in Excess of Accumulated Earnings |
|
| Total Common Shareholders’ Equity |
|
| Noncontrolling Interests |
|
| Total Equity |
| ||||||||
Balance at January 1, 2019 |
|
| 81,557 |
|
| $ | 82 |
|
| $ | 1,548,603 |
|
| $ | 516 |
|
| $ | (89,696 | ) |
| $ | 1,459,505 |
|
| $ | 622,442 |
|
| $ | 2,081,947 |
|
Conversion of OP Units to Common Shares by limited partners of the Operating Partnership |
|
| 250 |
|
|
| — |
|
|
| 4,230 |
|
|
| — |
|
|
| — |
|
|
| 4,230 |
|
|
| (4,230 | ) |
|
| — |
|
Issuance of Common Shares |
|
| 4,816 |
|
|
| 5 |
|
|
| 135,746 |
|
|
| — |
|
|
| — |
|
|
| 135,751 |
|
|
| — |
|
|
| 135,751 |
|
Dividends/distributions declared ($0.84 per Common Share/OP Unit) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (71,065 | ) |
|
| (71,065 | ) |
|
| (5,322 | ) |
|
| (76,387 | ) |
Employee and trustee stock compensation, net |
|
| 21 |
|
|
| — |
|
|
| 396 |
|
|
| — |
|
|
| — |
|
|
| 396 |
|
|
| 6,965 |
|
|
| 7,361 |
|
Noncontrolling interest distributions |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (34,595 | ) |
|
| (34,595 | ) |
Noncontrolling interest contributions |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 161,628 |
|
|
| 161,628 |
|
Comprehensive (loss) income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (44,654 | ) |
|
| 31,735 |
|
|
| (12,919 | ) |
|
| (33,263 | ) |
|
| (46,182 | ) |
Reallocation of noncontrolling interests |
|
| — |
|
|
| — |
|
|
| 3,684 |
|
|
| — |
|
|
| — |
|
|
| 3,684 |
|
|
| (3,684 | ) |
|
| — |
|
Balance at September 30, 2019 |
|
| 86,644 |
|
| $ | 87 |
|
| $ | 1,692,659 |
|
| $ | (44,138 | ) |
| $ | (129,026 | ) |
| $ | 1,519,582 |
|
| $ | 709,941 |
|
| $ | 2,229,523 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2018 |
|
| 83,708 |
|
| $ | 84 |
|
| $ | 1,596,514 |
|
| $ | 2,614 |
|
| $ | (32,013 | ) |
| $ | 1,567,199 |
|
| $ | 648,440 |
|
| $ | 2,215,639 |
|
Conversion of OP Units to Common Shares by limited partners of the Operating Partnership |
|
| 111 |
|
|
| — |
|
|
| 1,957 |
|
|
| — |
|
|
| — |
|
|
| 1,957 |
|
|
| (1,957 | ) |
|
| — |
|
Repurchase of Common Shares |
|
| (2,294 | ) |
|
| (2 | ) |
|
| (55,055 | ) |
|
| — |
|
|
| — |
|
|
| (55,057 | ) |
|
| — |
|
|
| (55,057 | ) |
Dividends/distributions declared ($0.81 per Common Share/OP Unit) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (66,286 | ) |
|
| (66,286 | ) |
|
| (5,126 | ) |
|
| (71,412 | ) |
Employee and trustee stock compensation, net |
|
| 25 |
|
|
| — |
|
|
| 408 |
|
|
| — |
|
|
| — |
|
|
| 408 |
|
|
| 7,924 |
|
|
| 8,332 |
|
Noncontrolling interest distributions |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (24,654 | ) |
|
| (24,654 | ) |
Noncontrolling interest contributions |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 46,990 |
|
|
| 46,990 |
|
Comprehensive income (loss) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 10,653 |
|
|
| 24,309 |
|
|
| 34,962 |
|
|
| (30,996 | ) |
|
| 3,966 |
|
Reallocation of noncontrolling interests |
|
| — |
|
|
| — |
|
|
| 2,581 |
|
|
| — |
|
|
| — |
|
|
| 2,581 |
|
|
| (2,581 | ) |
|
| — |
|
Balance at September 30, 2018 |
|
| 81,550 |
|
| $ | 82 |
|
| $ | 1,546,405 |
|
| $ | 13,267 |
|
| $ | (73,990 | ) |
| $ | 1,485,764 |
|
| $ | 638,040 |
|
| $ | 2,123,804 |
|
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 |
The accompanying notes are an integral part of these consolidated financial statements.
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
| Nine Months Ended September 30, |
| |||||
(in thousands) |
| 2019 |
|
| 2018 |
| ||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
Net income (loss) |
| $ | 6,539 |
|
| $ | (9,027 | ) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
| 92,807 |
|
|
| 86,755 |
|
Distributions of operating income from unconsolidated affiliates |
|
| 8,654 |
|
|
| 12,906 |
|
Equity in earnings and gains of unconsolidated affiliates |
|
| (7,129 | ) |
|
| (7,079 | ) |
Stock compensation expense |
|
| 7,361 |
|
|
| 8,332 |
|
Amortization of financing costs |
|
| 5,769 |
|
|
| 4,350 |
|
Impairment charge |
|
| 1,721 |
|
|
| — |
|
Gain on disposition of properties |
|
| (14,070 | ) |
|
| (5,140 | ) |
Deferred gain on tax credits |
|
| (5,034 | ) |
|
| — |
|
Other, net |
|
| (7,804 | ) |
|
| (6,331 | ) |
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Other liabilities |
|
| (6,071 | ) |
|
| (61 | ) |
Prepaid expenses and other assets |
|
| 10,271 |
|
|
| (4,860 | ) |
Rents receivable |
|
| 870 |
|
|
| (7,452 | ) |
Accounts payable and accrued expenses |
|
| 1,303 |
|
|
| (5,210 | ) |
Net cash provided by operating activities |
|
| 95,187 |
|
|
| 67,183 |
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
Acquisition of real estate |
|
| (256,647 | ) |
|
| (104,902 | ) |
Development, construction and property improvement costs |
|
| (77,636 | ) |
|
| (66,238 | ) |
Issuance of or advances on notes receivable |
|
| — |
|
|
| (3,002 | ) |
Proceeds from the disposition of properties, net |
|
| 80,120 |
|
|
| 52,759 |
|
Investments in and advances to unconsolidated affiliates and other |
|
| (154,256 | ) |
|
| (3,481 | ) |
Return of capital from unconsolidated affiliates and other |
|
| 38,359 |
|
|
| 23,777 |
|
Proceeds from notes receivable |
|
| 15,250 |
|
|
| 26,000 |
|
Return of deposits for properties under contract |
|
| 1,060 |
|
|
| 1,750 |
|
Payment of deferred leasing costs |
|
| (5,874 | ) |
|
| (2,981 | ) |
Net cash used in investing activities |
|
| (359,624 | ) |
|
| (76,318 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
Principal payments on mortgage and other notes |
|
| (166,865 | ) |
|
| (69,050 | ) |
Principal payments on unsecured debt |
|
| (352,195 | ) |
|
| (578,600 | ) |
Proceeds received on mortgage and other notes |
|
| 183,556 |
|
|
| 122,332 |
|
Proceeds from unsecured debt |
|
| 444,575 |
|
|
| 578,800 |
|
Payments for repurchase of Common Shares |
|
| — |
|
|
| (55,057 | ) |
Payments of finance lease obligations |
|
| (2,125 | ) |
|
| — |
|
Proceeds from the sale of Common Stock, net |
|
| 135,750 |
|
|
| — |
|
Capital contributions from noncontrolling interests |
|
| 161,628 |
|
|
| 46,990 |
|
Distributions to noncontrolling interests |
|
| (39,917 | ) |
|
| (29,731 | ) |
Dividends paid to Common Shareholders |
|
| (69,641 | ) |
|
| (66,869 | ) |
Deferred financing and other costs |
|
| (4,170 | ) |
|
| (3,316 | ) |
Net cash provided by (used in) financing activities |
|
| 290,596 |
|
|
| (54,501 | ) |
Increase (decrease) in cash and restricted cash |
|
| 26,159 |
|
|
| (63,636 | ) |
Cash of $21,268 and $74,823 and restricted cash of $13,580 and $10,846, respectively, beginning of period |
|
| 34,848 |
|
|
| 85,669 |
|
Cash of $48,140 and $9,525 and restricted cash of $12,867 and $12,508, respectively, end of period |
| $ | 61,007 |
|
| $ | 22,033 |
|
ACADIA REALTY TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)(Continued)
|
| Nine Months Ended September 30, |
| |||||
(in thousands) |
| 2019 |
|
| 2018 |
| ||
Supplemental disclosure of cash flow information |
|
|
|
|
|
|
|
|
Cash paid during the period for interest, net of capitalized interest of $8,430 and $4,366 respectively |
| $ | 53,586 |
|
| $ | 45,251 |
|
Cash paid for income taxes, net of refunds |
| $ | 730 |
|
| $ | 1,227 |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash investing and financing activities |
|
|
|
|
|
|
|
|
Assumption of accounts payable and accrued expenses through acquisition of real estate |
| $ | 3,697 |
|
| $ | 1,014 |
|
Right-of-use assets, finance leases obtained in exchange for finance lease liabilities |
| $ | 16,349 |
|
| $ | — |
|
Right-of-use assets, finance leases obtained in exchange for assets under capital lease |
| $ | 76,965 |
|
| $ | — |
|
Right-of-use assets, operating leases obtained in exchange for operating lease liabilities |
| $ | 57,165 |
|
| $ | — |
|
Capital lease obligation exchanged for finance lease liability |
| $ | 71,111 |
|
| $ | — |
|
Other liabilities exchanged for operating lease liabilities |
| $ | 946 |
|
| $ | — |
|
Assumption of debt through investments in unconsolidated affiliates |
| $ | 4,688 |
|
| $ | — |
|
Acquisition of undivided interest in a property through conversion of notes receivable |
| $ | — |
|
| $ | 22,201 |
|
Debt exchanged for deferred gain on tax credits |
| $ | (5,262 | ) |
| $ | — |
|
Other assets exchanged for deferred gain on tax credits |
| $ | 228 |
|
| $ | — |
|
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 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
10
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. Organization, Basis of Presentation and Summary of Significant Accounting Policies
Organization
Acadia Realty Trust and(collectively with its subsidiaries, (collectively, the “Company”) is a fully-integrated equity real estate investment trust (“REIT”) focused on the ownership, acquisition, development, and management of retail properties located primarily in high-barrier-to-entry, supply-constrained, densely-populated metropolitan areas in the United States.
All of the Company’s assets are held by, and all of its operations are conducted through, Acadia Realty Limited Partnership (the “Operating Partnership”) and entities in which the Operating Partnership owns an interest. As of September 30, 20172019 and December 31, 2016,2018, the Company controlled approximately 95%94% 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, 2017,2019, the Company has ownership interests in 118125 properties within its core portfolio, which consist of those properties either 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 6457 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 182 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 Date |
| Operating Partnership Share of Capital |
|
| Capital Called as of September 30, 2019 |
|
| Unfunded Commitment |
|
| Equity Interest Held By Operating Partnership (a) |
|
| Preferred Return |
|
| Total Distributions as of September 30, 2019 (b) |
| ||||||
Fund II and Mervyns II (c) |
| 6/2004 |
|
| 28.33 | % |
| $ | 347.1 |
|
| $ | 15.0 |
|
|
| 28.33 | % |
|
| 8 | % |
| $ | 146.6 |
|
Fund III |
| 5/2007 |
|
| 24.54 | % |
|
| 436.4 |
|
|
| 13.6 |
|
|
| 24.54 | % |
|
| 6 | % |
|
| 568.8 |
|
Fund IV |
| 5/2012 |
|
| 23.12 | % |
|
| 438.1 |
|
|
| 91.9 |
|
|
| 23.12 | % |
|
| 6 | % |
|
| 172.1 |
|
Fund V |
| 8/2016 |
|
| 20.10 | % |
|
| 258.6 |
|
|
| 261.4 |
|
|
| 20.10 | % |
|
| 6 | % |
|
| 2.0 |
|
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% | — |
(a) | |
Amount represents the current economic ownership at September 30, |
(b) | |
Represents the total for the Funds, including the Operating Partnership and noncontrolling interests’ shares. |
(c) | ||
During April 2018, a distribution of $15.0 million was made to the Fund II investors, including $4.3 million to the Operating Partnership. This amount remains subject to re-contribution to Fund II until April 2021. |
11
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Basis of Presentation
Segments
At September 30, 2017,2019, the Company had three3 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 in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810 “Consolidation” (“ASC Topic 810”). The ownership interests of other investors in these entities are recorded as noncontrolling interests. All significant intercompany balances and transactions have been eliminated in consolidation. Investments in entities for which the Company has the ability to exercise significant influence over, but does not have financial or operating control, are accounted for using the equity method of accounting. Accordingly, the Company’s share of the earnings (or losses) of these entities are included in consolidated net income.
The interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and 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 20162018 Annual Report on Form 10-K, as filed with the SEC on February 24, 2017 and amended on February 27, 2017.
Use of Estimates
GAAP requires the Company’s management to make estimates and assumptions that affect the amounts reported in the interim consolidated financial statements and accompanying notes. The most significant assumptions and estimates relate to the valuation of real estate, depreciable lives, revenue recognition and the collectability of notes receivable and rents receivable. Application of these estimates and assumptions requires the exercise of judgment as to future uncertainties and, as a result, actual results could differ from these estimates.
Reclassifications
Certain prior period amounts with regard to gains on dispositions of properties and credit losses have been reclassified to conform to the current period presentation.
Recently IssuedAdopted Accounting Pronouncements
Lease Accounting Standards Update
In February 2016, the FASB issued ASU No. 2016-02
,• | A package of three practical expedients that must be elected together for all leases and includes: (i) not reassessing expired or existing contracts as to whether they are or contain leases; (ii) not reassessing lease classification of existing leases and (iii) not reassessing the amount of capitalized initial direct costs for existing leases; |
• | A practical expedient to use hindsight in determining the lease term or assessing purchase options for existing leases and in assessing impairment of right of use assets; |
12
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
• | Lessees may make an accounting policy election by class of underlying asset not to separate lease components from non-lease components; and |
• | Lessees may make an accounting policy election not to apply the recognition and measurement requirements to short-term leases. |
ASU 2016-02 was modified by the following subsequently issued ASU’s (together with ASU 2016-02, “Topic 842”), many of which provided additional transition practical expedients:
• | ASU 2018-01, Land Easements Practical Expedient for Transition to Topic 842 added a transition practical expedient to not reassess existing or expired land easement agreements not previously accounted for as leases |
• | ASU No. 2018-10, Codification Improvements to Topic 842, Leases. These amendments provide minor clarifications and corrections to ASU 2016-02. |
• | ASU 2018-11, Leases (Topic 842): Targeted Improvements. |
o | The amendments in this Update provide entities with an additional optional transition method to adopt ASU 2016-02. Under this new transition method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Consequently, an entity’s reporting under this additional transition method for the comparative periods presented in the financial statements in which it adopts the new leases standard would continue to be in accordance with former GAAP (Topic 840, Leases). |
o | The amendments in this Update also provide lessors with a practical expedient, by class of underlying asset, to make a policy election to not separate non-lease components from the associated lease component and, instead, to account for those components as a single component if the non-lease components otherwise would be accounted for under the new revenue guidance (Topic 606). Conditions are required to elect the practical expedient, and if met, the single component will be accounted for under either under Topic 842 or Topic 606 depending on which component(s) are predominant. The lessor practical expedient to not separate non-lease components from the associated component must be elected for all existing and new leases. |
• | ASU 2018-20, Leases (Topic 842), Narrow-Scope Improvements for Lessors. This ASU modifies ASU No. 2016-02 to permit lessors, as an accounting policy election, not to evaluate whether certain sales taxes and other similar taxes are lessor costs or lessee costs. Instead, those lessors will account for those costs as if they are lessee costs. Consequently, a lessor making this election will exclude from the consideration in the contract and from variable payments not included in the consideration in the contract all collections from lessees of taxes within the scope of the election and will provide certain disclosures (includes sales, use, value added, and some excise taxes and excludes real estate taxes). |
• | ASU 2019-01, Leases (Topic 842), Codification Improvements. There are three codification updates to Topic 842 covered by this ASU: Issue 1 provides guidance on how to compute fair value of leased items for lessors who are non-dealers or manufacturers; Issue 2 relates to cash flow presentation for lessors of sales-type and direct financing leases; and Issue 3 clarifies that certain transition disclosures will only be required in annual disclosures. |
Under the new leasing guidance, contract consideration shall be allocated to its lease components (such as the lease of retail properties) and non-lease components (such as maintenance). For lessors, any non-lease components will be accounted for under Topic 606unless the entity elects the lessor practical expedient to not separate the non-lease components from the associated lease component as described above. The new guidance also requiresincludes a definition of initial directcosts that internal leasing costs be expensed as incurred, as opposed to capitalized and deferred. is narrower than the prior definition in former GAAP (Topic 840, Leases). Topic 842 was effective for the Company beginning January 1, 2019.
The Company expects thatadopted Topic 842 effective January 1, 2019 utilizing the new transition method described in ASU 2018-11 and has availed itself of all the available practical expedients described above except it will no longer capitalizedid not use hindsight in determining the lease term or assessing purchase options for existing leases and in assessing impairment of right of use assets.
As lessor, the Company has more than 1,000 leases primarily with retail tenants and to a lesser extent with office and residential tenants. A significant portionmajority of internal leasing costs that were previouslyits leases are on a triple-net basis. The impact of adoption of ASU 2016-02 for the Company as lessor was as follows:
• | The Company has elected the lessor practical expedient to not separate common area maintenance from the associated lease for all existing and new leases and to account for the combined component as a single lease component. Common area maintenance is considered a non-lease component within the scope of Topic 606 and reimbursements of taxes and insurance are considered contractual payments that do not transfer a good or service to the tenant; however, such revenues related to leases, which were formerly reported as reimbursed expenses, will be reported within lease revenues in the presentation of the statement of income subsequent to the implementation of ASC 842. Prior year classifications under ASC 840 will not be adjusted. |
• | Due to its election of available practical expedients, the Company expects that post-adoption substantially all existing leases, and new leases compared to similar existing leases, will have no change in the timing of revenue recognition. |
• | The Company’s internal leasing costs will be expensed as incurred, as opposed to being capitalized and deferred. Commissions subsequent to successful lease execution will continue to be capitalized. After adoption, the Company will no longer capitalize internal |
13
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
leasing costs that were previously capitalized (the Company capitalized $1.8 million of internal leasing costs during the year ended December 31, 2018). |
• | The Company has existing easement arrangements that have not been previously identified as leases. The Company expects that its existing and similar future easement arrangements will not be classified as rental revenue but as other revenues as these arrangements do not transfer control to the counterparty. |
• | The Company makes a policy election to continue to account for only those taxes described under ASU 2018-20 that it pays on behalf of the tenant as reimbursable costs and will not account for those taxes paid directly by the lessee which are considered lessee costs. |
As lessee, the Company was party to 13 ground, office and equipment leases with future payment obligations aggregating $203.1 million at December 31, 2018. The impact of adoption of ASU 2016-02 for the Company as lessee was as follows (Note 11):
• | As lessee, the Company has applied the following practical expedients in the implementation ASU 2016-02: (i) to not separate non-lease components from the associated lease component as described above and (ii) to not apply the right-of-use recognition requirements to short-term leases. As such, there were no changes in the timing of recognition of expenses related to its operating leases. |
• | The Company recognized right-of-use assets and lease liabilities of $11.9 million and $12.8 million, respectively, related to its operating leases. |
• | The Company reclassified its existing capital lease asset of $77.0 million and capital lease liability of $71.1 million to a right-of-use asset and a lease liability, respectively, pertaining to finance leases. |
• | Subsequent to the adoption of and in accordance with Topic 842, the Company reassessed the circumstances surrounding three of its operating ground leases and determined that it had made significant leasehold improvements and was now reasonably certain to exercise their purchase options. Accordingly, the Company reclassified the existing right-of-use assets and lease liabilities from operating leases to finance leases and adjusted the leases’ right-of-use assets and corresponding lease liabilities to $5.7 million and $5.7 million, respectively, to incorporate the present value of the purchase options, which totaled $4.7 million at January 1, 2019. |
• | With the adoption of ASC Topic 842, the Company will first apply the guidance under ASC 842 in assessing its rents receivable: if collection of rents under specific operating leases is not probable, then the Company recognizes the lesser of that lease’s rental income on a straight-line basis or cash received, plus variable rents as earned. Once this initial assessment is completed, the Company may apply a general reserve, as provided under ASC 450-20, if applicable. |
The Company capitalized $0.8 milliondid not record any cumulative effect of internal leasing costs duringchange in accounting principle upon the adoption of ASC Topic 842 as lessor or lessee. Consistent with the transition guidance under ASU 2018-11, all prior period disclosures remain in accordance with ASC Topic 840.
Other Accounting Topics
In February 2018, the FASB issued ASU No. 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. These amendments provide financial statement preparers with an option to reclassify stranded tax effects within accumulated other comprehensive income to retained earnings in each period in which the effect of the nine months ended September 30, 2017change in the U.S. federal corporate income tax rate in the Tax Cuts and 2016, respectively. ASU 2016-02 will also require extensive quantitative and qualitative disclosures andJobs Act is recorded. This guidance is effective for fiscal years beginning after December 15, 2018, butand interim periods therein. The Company adopted this guidance effective January 1, 2019, which had no effect on the Company’s financial statements.
In July 2018, the FASB issued ASU No. 2018-09, Codification Improvements. These amendments provide clarifications and corrections to certain ASC subtopics including the following: 220-10 (Income Statement - Reporting Comprehensive Income - Overall), 470-50 (Debt - Modifications and Extinguishments), 480-10 (Distinguishing Liabilities from Equity - Overall), 718-740 (Compensation - Stock Compensation - Income Taxes), 805-740 (Business Combinations - Income Taxes), 815-10 (Derivatives and Hedging - Overall), and 820-10 (Fair Value Measurement - Overall). Some of the amendments in ASU 2018-09 do not require transition guidance and were effective upon issuance; however, many of the amendments do have transition guidance with effective dates for annual periods beginning after December 15, 2018. For those amendments that were effective January 1, 2019 or earlier, there was no material effect on the Company’s financial statements.
Recently Issued Accounting Pronouncements
In April 2019, the FASB issued ASU No. 2019-04 Codification Improvements to Topic 326, Financial Instruments — Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, which provides updates and clarifications to three previously-issued ASUs: 2016-01 Financial Instruments — Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities; 2016-13 Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, described further below and which the Company has not yet adopted; and 2017-12 Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which the Company early adopted effective January 1, 2018.The updates related to ASU 2016-13 have the same transition as ASU 2016-13 and are effective for periods beginning after December 15, 2019, with adoption permitted after the issuance of ASU 2019-04. The
14
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
updates related to ASU 2017-12 are effective for the Company on January 1, 2020.The updates related to ASU 2016-01 are effective for fiscal years beginning after December 15, 2019. The Company is permitted.
In May 2019, the FASB issued ASU No. 2019-05 Financial Instruments — Credit Losses (Topic 326) which provides relief to certain entities adopting ASU 2016-13 (discussed below). The amendments accomplish those objectives by providing entities with an option to irrevocably elect the fair value option in Subtopic 825-10, applied on an instrument-by-instrument basis for eligible instruments, that are within the scope of Subtopic 326-20, upon adoption of Topic 326. The fair value option election does not apply to held-to-maturity debt securities. ASU 2019-05 has the same transition as ASU 2016-13 and is effective for periods beginning after December 15, 2019, with adoption permitted after this update. The Company is currently evaluating the impact of this new standard on its consolidated financial statements.
In November 2018, the FASB issued ASU No. 2018-19 Codification Improvements to Topic 326, Financial Instruments — Credit Losses. This ASU modifies ASU 2016-13 (discussed below). The amendment clarifies that receivables arising from operating leases are not within the scope of Subtopic 326-20, Financial Instruments – Credit Losses – Measure at Amortized Cost. Instead, impairment of receivables arising from operating leases should be accounted for in accordance with Topic 842, Leases. ASU 2018-19 is effective for periods beginning after December 15, 2019, with adoption permitted for fiscal years beginning after December 15, 2018. The Company is currently evaluating the impact of this new standard on its consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13,
In June 2018, the FASB issued ASU No. 2018-07, Compensation — Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. These amendments provide specific guidance for transactions for acquiring goods and services from nonemployees and specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (i) financing to the issuer or (ii) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers. This guidance is effective for fiscal years beginning after December 15, 2018, and interim periods beginning after December 15, 2020. Early adoption is permitted but not earlier than the adoption of Topic 606. The Company does not believe that this guidance will have a material effect on its consolidated financial statements as it has not historically issued share-based payments in exchange for goods or services to be consumed within its operations.
In August 2018, the FASB issued ASU 2016-13No. 2018-13, Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement which removes, modifies, and adds certain disclosure requirements related to fair value measurements in ASC 820. This guidance is effective for public companies in fiscal years beginning after December 15, 2019 with early adoption permitted. The Company is currently evaluating the impact of this new standard on its consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-15 Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract to provide guidance on implementation costs incurred in a cloud computing arrangement that is a service contract. The ASU aligns the accounting for such costs with the guidance on capitalizing costs associated with developing or obtaining internal-use software. Specifically, the ASU amends ASC 350 to include in its scope implementation costs of such arrangements that are service contracts and clarifies that a customer should apply ASC 350-40 to determine which implementation costs should be capitalized. This ASU, which is effective for fiscal years beginning after December 15, 2019, is not expected to have a material impact on the Company’s consolidated financial statements.
15 2017 and early adoption is permitted. It is expected that the new standard will reduce the number of future real estate acquisitions that will be accounted for as business combinations and, therefore, reduce the amount of acquisition costs that will be expensed. The Company expensed $0.9 million and $5.5 million of acquisition costs during the nine months ended September 30, 2017 and 2016, respectively.
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
2. Real Estate
The Company’s consolidated real estate is comprised of the following (in thousands):
|
| September 30, 2019 |
|
| December 31, 2018 |
| ||
Land |
| $ | 733,679 |
|
| $ | 710,469 |
|
Buildings and improvements |
|
| 2,669,992 |
|
|
| 2,594,828 |
|
Tenant improvements |
|
| 170,214 |
|
|
| 151,154 |
|
Construction in progress |
|
| 38,458 |
|
|
| 44,092 |
|
Properties under capital lease (Note 11) |
|
| — |
|
|
| 76,965 |
|
Right-of-use assets - finance leases (Note 11) |
|
| 93,796 |
|
|
| — |
|
Right-of-use assets - operating leases (Note 11) |
|
| 55,717 |
|
|
| — |
|
Total |
|
| 3,761,856 |
|
|
| 3,577,508 |
|
Less: Accumulated depreciation and amortization |
|
| (473,479 | ) |
|
| (416,657 | ) |
Operating real estate, net |
|
| 3,288,377 |
|
|
| 3,160,851 |
|
Real estate under development, at cost |
|
| 250,278 |
|
|
| 120,297 |
|
Net investments in real estate |
| $ | 3,538,655 |
|
| $ | 3,281,148 |
|
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 |
16
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Acquisitions
During the nine months ended September 30, 20172019 and the year ended December 31, 2016,2018, the Company acquired the following consolidated retail properties (dollars in thousands):
Property and Location |
| Percent Acquired |
|
| Date of Acquisition |
| Purchase Price |
| ||
2019 Acquisitions |
|
|
|
|
|
|
|
|
|
|
Core |
|
|
|
|
|
|
|
|
|
|
Soho Acquisitions - 41, 47, 51 and 53 Greene Street - New York, NY (a) |
| 100% |
|
| Mar 15, 2019 Mar 27, 2019 May 29, 2019 July 30, 2019 |
| $ | 74,638 |
| |
849 and 912 W. Armitage - Chicago, IL |
| 100% |
|
| Sept 11, 2019 |
|
| 7,802 |
| |
Subtotal Core |
|
|
|
|
|
|
|
| 82,440 |
|
|
|
|
|
|
|
|
|
|
|
|
Fund V |
|
|
|
|
|
|
|
|
|
|
Palm Coast Landing - Palm Coast, FL |
| 100% |
|
| May 6, 2019 |
|
| 36,644 |
| |
Lincoln Commons - Lincoln, RI |
| 100% |
|
| June 21, 2019 |
|
| 54,299 |
| |
Landstown Commons - Virginia Beach, VA |
| 100% |
|
| Aug 2, 2019 |
|
| 86,961 |
| |
Subtotal Fund V |
|
|
|
|
|
|
|
| 177,904 |
|
Total 2019 Acquisitions |
|
|
|
|
|
|
| $ | 260,344 |
|
|
|
|
|
|
|
|
|
|
|
|
2018 Acquisitions and Conversions |
|
|
|
|
|
|
|
|
|
|
Core |
|
|
|
|
|
|
|
|
|
|
Bedford Green Land Parcel - Bedford Hills, NY |
| 100% |
|
| Mar 23, 2018 |
| $ | 1,337 |
| |
Subtotal Core |
|
|
|
|
|
|
|
| 1,337 |
|
|
|
|
|
|
|
|
|
|
|
|
Fund IV |
|
|
|
|
|
|
|
|
|
|
Broughton Street Partners I - Savannah, GA (Conversion) (Note 4) |
| 100% |
|
| Oct 11, 2018 |
|
| 36,104 |
| |
Subtotal Fund IV |
|
|
|
|
|
|
|
| 36,104 |
|
|
|
|
|
|
|
|
|
|
|
|
Fund V |
|
|
|
|
|
|
|
|
|
|
Trussville Promenade - Trussville, AL |
| 100% |
|
| Feb 21, 2018 |
|
| 45,259 |
| |
Elk Grove Commons - Elk Grove, CA |
| 100% |
|
| Jul 18, 2018 |
|
| 59,320 |
| |
Hiram Pavilion - Hiram, GA |
| 100% |
|
| Oct 23, 2018 |
|
| 44,443 |
| |
Subtotal Fund V |
|
|
|
|
|
|
|
| 149,022 |
|
Total 2018 Acquisitions and Conversions |
|
|
|
|
|
|
| $ | 186,463 |
|
|
|
|
|
|
|
|
|
|
|
|
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 | |||||
(a) | ||
The Soho Acquisitions are a collection of 7 properties located in New York, NY with an aggregate purchase price of approximately $122.0 million under two separate contracts. The acquisitions of the remaining three properties are expected to be finalized through early 2020.No assurance can be given that the Company will successfully close on the remaining acquisitions under contract, which are subject to customary closing conditions. |
The 2019 Acquisitions and 2018 Acquisitions and Conversions were considered asset acquisitions based on accounting guidance effective as |
17
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Purchase Price Allocations
The purchase prices for the business combinations2019 Acquisitions and the 2018 Acquisitions and Conversions were allocated to the acquired assets and assumed liabilities based on their estimated fair values at the dates of acquisition.
|
| Nine Months Ended September 30, 2019 |
|
| Year Ended December 31, 2018 |
| ||
Net Assets Acquired |
|
|
|
|
|
|
|
|
Land |
| $ | 54,171 |
|
| $ | 38,086 |
|
Buildings and improvements |
|
| 183,829 |
|
|
| 129,586 |
|
Acquisition-related intangible assets (Note 6) |
|
| 31,883 |
|
|
| 26,693 |
|
Acquisition-related intangible liabilities (Note 6) |
|
| (9,539 | ) |
|
| (7,902 | ) |
Net assets acquired |
| $ | 260,344 |
|
| $ | 186,463 |
|
|
|
|
|
|
|
|
|
|
Consideration |
|
|
|
|
|
|
|
|
Cash |
| $ | 256,647 |
|
| $ | 147,985 |
|
Liabilities assumed |
|
| 3,697 |
|
|
| 2,597 |
|
Existing interest in previously unconsolidated investment |
|
| — |
|
|
| 35,881 |
|
Total consideration |
| $ | 260,344 |
|
| $ | 186,463 |
|
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 |
Dispositions
During the nine months ended September 30, 20172019 and the year ended December 31, 2016,2018, the Company disposed of the following consolidated properties (in thousands):
Property and Location |
| Owner |
| Date Sold |
| Sale Price |
|
| Gain (Loss) on Sale |
| ||
2019 Dispositions |
|
|
|
|
|
|
|
|
|
|
|
|
3104 M Street - Washington, DC (Note 4) |
| Fund III |
| Jan 24, 2019 |
| $ | 10,500 |
|
| $ | 2,014 |
|
210 Bowery - 2 Residential Condos - New York, NY |
| Fund IV |
| May 17, 2019, Sept 23, 2019 |
|
| 5,900 |
|
|
| (242 | ) |
JFK Plaza - Waterville, ME |
| Fund IV |
| July 24, 2019 |
|
| 7,800 |
|
|
| 2,012 |
|
3780-3858 Nostrand Avenue - New York, NY |
| Fund III |
| Aug 22, 2019 |
|
| 27,650 |
|
|
| 3,079 |
|
938 W North Avenue - Chicago, IL |
| Fund IV |
| Sept 27, 2019 |
|
| 32,000 |
|
|
| 7,207 |
|
Total 2019 Dispositions |
|
|
|
|
| $ | 83,850 |
|
| $ | 14,070 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018 Dispositions |
|
|
|
|
|
|
|
|
|
|
|
|
Sherman Avenue - New York, NY |
| Fund II |
| Apr 17, 2018 |
| $ | 26,000 |
|
| $ | 33 |
|
Lake Montclair - Dumfries, VA |
| Fund IV |
| Aug 27, 2018 |
|
| 22,450 |
|
|
| 2,923 |
|
1861 Union Street - San Francisco, CA |
| Fund IV |
| Aug 29, 2018 |
|
| 6,000 |
|
|
| 2,184 |
|
210 Bowery - 4 Residential Condos - New York, NY |
| Fund IV |
| Nov 30, 2018, Dec 10, 2018, Dec 17, 2018, Dec 21, 2018 |
|
| 12,050 |
|
|
| — |
|
Total 2018 Dispositions |
|
|
|
|
| $ | 66,500 |
|
| $ | 5,140 |
|
Property 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: | |||||||||
Cortlandt Town Center (65%) - Mohegan Lake, NY (Note 4) | 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 |
18
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
The aggregate rental revenue, expenses and pre-tax income reported within continuing operations for the aforementioned consolidated properties that were sold during the nine months ended September 30, 20172019 and year ended December 31, 20162018 were as follows (in thousands):
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2019 |
|
| 2018 |
|
| 2019 |
|
| 2018 |
| ||||
Revenues |
| $ | 1,071 |
|
| $ | 2,919 |
|
| $ | 5,652 |
|
| $ | 7,542 |
|
Expenses |
|
| (1,322 | ) |
|
| (2,192 | ) |
|
| (4,595 | ) |
|
| (6,368 | ) |
Gain on disposition of properties |
|
| 12,056 |
|
|
| 5,107 |
|
|
| 14,070 |
|
|
| 5,140 |
|
Net income attributable to noncontrolling interests |
|
| (8,675 | ) |
|
| (4,089 | ) |
|
| (11,045 | ) |
|
| (4,155 | ) |
Net income attributable to Acadia |
| $ | 3,130 |
|
| $ | 1,745 |
|
| $ | 4,082 |
|
| $ | 2,159 |
|
Three Months Ended September 30, | Nine 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 Forfor Sale
At December 31, 2016,June 30, 2019, the Company had one1 property in Fund IIIV classified as held-for-sale, JFK Plaza, with total assets of $21.5 million and subject to a mortgage of $25.5$6.3 million.
At September 30, 2019, the Company had 1 2015.property in Fund IV classified as held-for-sale, a residential condo at 210 Bowery, with total assets of $2.9 million. The related acquisition expensesproperty had an insignificant loss for each of $0.9 million and $5.5 million reported during the nine months ended September 30, 20172019 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.
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 |
Real Estate Under Development and Construction in Progress
Real estate under development represents the Company’s consolidated properties that have not yet been placed into service while undergoing substantial development or construction.
Development activity for the nine months ended September 30, 2017 includes $2.0 million of accelerated depreciation related to a building under development that was demolished.
|
| December 31, 2018 |
|
| Nine Months Ended 2019 |
|
| September 30, 2019 |
| |||||||||||||||||||
|
| Number of Properties |
|
| Carrying Value |
|
| Transfers In |
|
| Capitalized Costs |
|
| Transfers Out |
|
| Number of Properties |
|
| Carrying Value |
| |||||||
Core |
|
| 1 |
|
| $ | 7,759 |
|
| $ | 57,342 |
|
| $ | 9,663 |
|
| $ | 9,819 |
|
|
| 1 |
|
| $ | 64,945 |
|
Fund II |
|
| — |
|
|
| 7,462 |
|
|
| — |
|
|
| 1,626 |
|
|
| — |
|
|
| — |
|
|
| 9,088 |
|
Fund III |
|
| 1 |
|
|
| 21,242 |
|
|
| 12,313 |
|
|
| 1,969 |
|
|
| — |
|
|
| 1 |
|
|
| 35,524 |
|
Fund IV |
|
| 1 |
|
|
| 83,834 |
|
|
| 47,166 |
|
|
| 9,721 |
|
|
| — |
|
|
| 2 |
|
|
| 140,721 |
|
Total |
|
| 3 |
|
| $ | 120,297 |
|
| $ | 116,821 |
|
| $ | 22,979 |
|
| $ | 9,819 |
|
|
| 4 |
|
| $ | 250,278 |
|
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 table above refers to projects comprising the entire property; however, certain projects represent a portion of a property. During the nine months ended September 30, 2017,2019, the Company placed substantially allthe following projects into development:
• | a portion of City Center (Core) |
• | a portion of Cortlandt Crossing (Fund III) |
• | its 1238 Wisconsin Avenue property (Core, Note 11) |
• | a portion of 110 University Place (Fund IV, Note 11) |
• | its 146 Geary Street property (Fund IV) |
During the nine months ended September 30, 2019, the Company placed 1 Core development project, 56 E. Walton, into service. Fund II amounts relate to the City Point Phase III project.
During the year ended December 31, 2018, the Company placed 1 Core development project into service.
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.
19
ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
3. Notes Receivable, Net
The Company’s notes receivable, net were generally collateralized either by the underlying properties or the borrower’s ownership interest in the entities that own the properties, and were as follows (dollars in thousands):
|
| September 30, |
|
| December 31, |
|
| September 30, 2019 |
| |||||||||
Description |
| 2019 |
|
| 2018 |
|
| Number |
|
| Maturity Date |
| Interest Rate |
| ||||
Core Portfolio |
| $ | 56,475 |
|
| $ | 56,475 |
|
|
| 2 |
|
| Oct 2019 - Apr 2020 |
| 6.0% - 8.1% |
| |
Fund II |
|
| 33,026 |
|
|
| 32,582 |
|
|
| 1 |
|
| Dec 2020 |
| 1.75% |
| |
Fund III |
|
| 5,306 |
|
|
| 5,306 |
|
|
| 1 |
|
| Jul 2020 |
| 18.0% |
| |
Fund IV |
|
| — |
|
|
| 15,250 |
|
|
| — |
|
| Feb 2021 |
| 15.3% |
| |
|
| $ | 94,807 |
|
| $ | 109,613 |
|
|
| 4 |
|
|
|
|
|
|
|
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, 2017,2019, the Company:
• | increased the balance of a Fund II note receivable by the interest accrued of $0.4 million; |
• | redeemed its $15.25 million Fund IV investment plus accrued interest of $10.0 million; |
• | stopped accruing interest on one Fund III loan, due to the estimated market value of the collateral. The note had $4.7 million of accrued interest at each of December 31, 2018 and September 30, 2019; |
• | extended the maturity for Brandywine’s note receivable to October 31, 2019; and |
• | modified one Core loan to defer $0.4 million of interest until maturity. |
During the full valueyear ended December 31, 2018, the Company:
• | exchanged $22.0 million of a • received full payment on $26.0 million of • funded an additional $2.8 million to its existing $15.0 million Core note receivable and entered into an agreement to extend the maturity to April 1, 2020; • advanced an additional $0.2 million on a • increased the balance of a Fund II note receivable by the interest accrued of $0.8 million. The Company monitors the credit quality of its notes receivable on an ongoing basis and considers indicators of credit quality such as loan payment activity, the estimated fair value of the underlying collateral, the seniority of the Company’s loan in relation to other debt secured by the collateral and the prospects of the borrower. Earnings from these notes and mortgages receivable are reported within the Company’s Structured Financing segment ( 20 ACADIA REALTY TRUST AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 4. Investments 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, 2019 2019 2018 Core: 840 N. Michigan (a) 88.43% $ 63,925 $ 65,013 Renaissance Portfolio 20% 32,458 32,458 Gotham Plaza 49% 29,463 29,550 Town Center (a, b) 75.22% 98,243 99,758 Georgetown Portfolio 50% 4,738 4,653 228,827 231,432 Mervyns I & II: KLA/Mervyn's, LLC (c) 10.5% — — Fund III: Fund III Other Portfolio 90% 17 21 Self Storage Management (d) 95% 206 206 223 227 Fund IV: Broughton Street Portfolio (e) 50% 12,650 3,236 Fund IV Other Portfolio 90% 14,353 14,540 650 Bald Hill Road 90% 12,504 12,880 39,507 30,656 Fund V: Family Center at Riverdale (a) 89.42% 13,818 — Tri-City Plaza 90% 36,106 — Washington REIT Portfolio 90% 52,463 — 102,387 — Various: Due (to) from Related Parties (827 ) (461 ) Other (f) 2,361 556 Investments in and advances to unconsolidated affiliates $ 372,478 $ 262,410 Core: Crossroads (g) 49% $ 15,353 $ 15,623 Distributions in excess of income from, and investments in, unconsolidated affiliates $ 15,353 $ 15,623 (a) Represents a tenancy-in-common interest. (b) During (c) Distributions, discussed below, have exceeded the Company’s non-recourse investment, therefore the carrying value is (d) Represents a variable interest (e) The Company is entitled to a 15% return on its cumulative capital contribution which was (f) Includes (g) Distributions have exceeded the Company’s investment; however, the Company recognizes a liability balance as it may be required to return distributions to fund future obligations of the entity. 21 ACADIA REALTY TRUST AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Core Portfolio 2019 Acquisition of Unconsolidated On January On August 8, 2019, the Company invested $1.8 million in Fifth Wall Ventures Retail Fund, L.P. The Company’s total commitment is $5.0 million. The Brandywine Portfolio, The Company owns an interest in an approximately one million square foot retail portfolio (the “Brandywine Portfolio” joint venture) located in Wilmington, Delaware, which includes Additionally, in April 2016, the Company repaid the outstanding balance of $140.0 million of non-recourse debt collateralized by the Brandywine Portfolio and provided a note receivable collateralized by the partners’ tenancy-in-common interest in the Brandywine Portfolio for their proportionate share of the repayment. On May 1, 2017, the Company exchanged $16.0 million of the $153.4 million On November 16, 2017, the Company On March 28, 2018, the Company exchanged $22.0 million of its At September 30, 2019, $38.7 million of 22 ACADIA REALTY TRUST AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Fund 2019 Acquisitions of Unconsolidated Investments On March 19, 2019, Fund V obtained an 99.35% interest in On April 30, 2019, Fund V acquired an interest in a venture which invested in a 300,000 square-foot property located in Vernon, Connecticut referred to as “Tri-City Plaza” for $36.7 million. The Company accounts for its interest in Tri-City Plaza under the equity method of accounting as it does not control but exercises significant influence over the investment. On August 21, 2019, Fund V acquired an interest in a venture which invested in a 225,000 square foot property and a 300,000 square foot property, both located in Frederick County, Maryland collectively referred to as the “Washington REIT Portfolio” for $21.8 million and $33.1 million, respectively. The Company accounts for its interest in the Washington REIT Portfolio under the equity method of accounting as it does not control but exercises significant influence over the investment. Broughton Street Portfolio During 2014, Fund IV acquired 50% interests in 2 joint ventures referred to as “BSP I” and “BSP II” with the same venture partner to acquire and operate a total of 23 properties in Savannah, Georgia referred to as the “Broughton Street Portfolio.” Since that time, as described below, the ventures have sold 8 of the properties and terminated the master leases on 2 of the properties. In October 2018, the venture partner relinquished its interest in BSP I resulting in Fund IV becoming the 100% owner of the BSP I venture, which holds 11 consolidated properties (Note 2). Fund IV accounted for this transaction as an asset purchase at fair value whereby its existing preferred and common interests were deemed consideration for the properties and no gain or loss was recognized. At September 30, 2019, the Broughton Street portfolio had 13 remaining properties, 2 of which are unconsolidated and are held within the BSP II venture. Storage Post On June 29, 2019, Fund III’s Storage Post venture, which is a cost-method investment 2018 Dispositions of Unconsolidated Investments On January On June 29, 2018, Fund IV’s Broughton Street Portfolio venture terminated its master leases on 2 of its properties resulting in a net loss of $1.0 million On Fees from Unconsolidated Affiliates The Company earned property management, construction, development, legal and leasing fees from its investments in unconsolidated partnerships totaling In addition, the Company paid to certain unaffiliated partners of its joint ventures, 23 ACADIA REALTY TRUST AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Summarized Financial Information of Unconsolidated Affiliates The following combined and condensed Balance Sheets and Statements of Income, in each period, summarize the financial information of the Company’s investments in unconsolidated affiliates (in thousands): September 30, 2019 December 31, 2018 Combined and Condensed Balance Sheets Assets: Rental property, net $ 644,970 $ 487,846 Investment in unconsolidated affiliates — — Other assets 82,302 89,890 Total assets $ 727,272 $ 577,736 Liabilities and partners’ equity: Mortgage notes payable $ 496,371 $ 408,967 Other liabilities 63,478 54,585 Partners’ equity 167,423 114,184 Total liabilities and partners’ equity $ 727,272 $ 577,736 Company's share of accumulated equity $ 249,480 $ 139,028 Basis differential 101,658 103,812 Deferred fees, net of portion related to the Company's interest 4,247 3,646 Amounts payable by the Company (827 ) (461 ) Investments in and advances to unconsolidated affiliates, net of Company's share of distributions in excess of income from and investments in unconsolidated affiliates 354,558 246,025 Cost method investments 2,567 762 Company's share of distributions in excess of income from and investments in unconsolidated affiliates 15,353 15,623 Investments in and advances to unconsolidated affiliates $ 372,478 $ 262,410 Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Combined and Condensed Statements of Income Total revenues $ 22,310 $ 19,971 $ 65,023 $ 59,730 Operating and other expenses (6,746 ) (6,028 ) (17,088 ) (17,479 ) Interest expense (5,888 ) (5,240 ) (16,303 ) (15,365 ) Depreciation and amortization (7,321 ) (5,502 ) (17,908 ) (17,340 ) Loss on disposition of properties — (263 ) — (1,673 ) Net income attributable to unconsolidated affiliates $ 2,355 $ 2,938 $ 13,724 $ 7,873 Company’s share of equity in net income of unconsolidated affiliates $ 2,006 $ 1,136 $ 9,283 $ 9,396 Basis differential amortization (707 ) (760 ) (2,154 ) (2,317 ) Company’s equity in earnings of unconsolidated affiliates $ 1,299 $ 376 $ 7,129 $ 7,079 24 ACADIA REALTY TRUST AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 5. Other Assets, Net and Accounts Payable and Other Liabilities Other assets, net and accounts payable and other liabilities are comprised of the following for the periods presented: (in thousands) September 30, 2019 December 31, 2018 Other Assets, Net: Lease intangibles, net (Note 6) $ 121,171 $ 115,939 Deferred charges, net (a) 28,520 28,619 Prepaid expenses 18,301 18,422 Other receivables 10,361 5,058 Accrued interest receivable 9,898 17,046 Due from seller 3,682 4,000 Deposits 3,673 4,611 Corporate assets 1,666 1,953 Income taxes receivable 1,443 2,070 Derivative financial instruments (Note 8) 1,217 7,018 Deferred tax assets 656 2,032 Due from related parties — 1,802 $ 200,588 $ 208,570 (a) Deferred Charges, Net: Deferred leasing and other costs $ 47,984 $ 45,011 Deferred financing costs related to line of credit 9,489 8,960 57,473 53,971 Accumulated amortization (28,953 ) (25,352 ) Deferred charges, net $ 28,520 $ 28,619 Accounts Payable and Other Liabilities: Lease intangibles, net (Note 6) $ 89,832 $ 95,045 Lease liability - finance leases, net (Note 11) 88,137 — Accounts payable and accrued expenses 71,732 65,215 Lease liability - operating leases, net (Note 11) 57,093 — Derivative financial instruments (Note 8) 53,194 7,304 Deferred income 31,392 34,052 Tenant security deposits, escrow and other 11,780 10,588 Other 137 2,757 Capital lease obligations (Note 11) — 71,111 $ 403,297 $ 286,072 25 ACADIA REALTY TRUST AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 6. Lease Intangibles Upon acquisitions of real estate Intangible assets and liabilities are included in other assets and other liabilities (Note 5) on the consolidated balance sheet and summarized as follows (in thousands): September 30, 2019 December 31, 2018 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Amortizable Intangible Assets In-place lease intangible assets $ 245,221 $ (128,237 ) $ 116,984 $ 216,021 $ (105,972 ) $ 110,049 Above-market rent 17,118 (12,931 ) 4,187 18,169 (12,279 ) 5,890 $ 262,339 $ (141,168 ) $ 121,171 $ 234,190 $ (118,251 ) $ 115,939 Amortizable Intangible Liabilities Below-market rent $ (159,814 ) $ 70,516 $ (89,298 ) $ (152,188 ) $ 57,721 $ (94,467 ) Above-market ground lease (671 ) 137 (534 ) (671 ) 93 (578 ) $ (160,485 ) $ 70,653 $ (89,832 ) $ (152,859 ) $ 57,814 $ (95,045 ) During the nine months ended September 30, During the year ended December 31, 2018, the Company acquired in-place lease intangible assets of $24.2 million, above-market rents of $2.5 million, and below-market rents of $7.9 million with weighted-average useful lives of 5.2, 5.1, and 20.5 years, respectively. Amortization of in-place lease intangible assets is recorded in depreciation and amortization expense and amortization of above-market rent and below-market rent is recorded as a reduction to and increase to rental income, respectively, in the consolidated statements of income. Amortization of above-market ground leases are recorded as a reduction to rent expense in the consolidated statements of income. The scheduled amortization of acquired lease intangible assets and assumed liabilities as of September 30, Years Ending December 31, Net Increase in Lease Revenues Increase to Amortization Reduction of Rent Expense Net (Expense) Income 2019 (Remainder) $ 2,233 $ (8,454 ) $ 15 $ (6,206 ) 2020 8,120 (27,446 ) 58 (19,268 ) 2021 7,672 (20,486 ) 58 (12,756 ) 2022 7,312 (14,970 ) 58 (7,600 ) 2023 7,386 (11,432 ) 58 (3,988 ) Thereafter 52,388 (34,196 ) 287 18,479 Total $ 85,111 $ (116,984 ) $ 534 $ (31,339 ) 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, 2019 2018 September 30, 2019 2019 2018 Mortgages Payable Core Fixed Rate 3.88%-6.00% 3.88%-6.00% Feb 2024 - Apr 2035 $ 176,714 $ 178,271 Core Variable Rate - Swapped (a) 3.41%-5.67% 3.41%-5.67% Jan 2023 - Nov 2028 81,819 82,583 Total Core Mortgages Payable 258,533 260,854 Fund II Fixed Rate 4.75% 1.00%-4.75% May 2020 200,000 205,262 Fund II Variable Rate LIBOR+3.00% — March 2022 23,925 — Fund II Variable Rate - Swapped (a) 4.27% 4.27% Nov 2021 19,138 19,325 Total Fund II Mortgages Payable 243,063 224,587 Fund III Variable Rate LIBOR+3.00%-LIBOR+3.10% Prime+0.50%-LIBOR+4.65% Jan 2020 - Jun 2020 74,145 90,096 Fund IV Fixed Rate 3.40%-4.50% 3.40%-4.50% Oct 2025 - Jun 2026 8,189 8,189 Fund IV Variable Rate LIBOR+1.60%-LIBOR+3.40% LIBOR+1.60%-LIBOR+3.95% Dec 2019 - Apr 2022 157,200 233,065 Fund IV Variable Rate - Swapped (a) 3.67%-4.61% 3.67%-4.23% Mar 2020 - Dec 2022 88,601 71,841 Total Fund IV Mortgages Payable 253,990 313,095 Fund V Variable Rate LIBOR+2.15%-LIBOR+2.25% LIBOR+2.25% Oct 2020 - Jan 2021 51,506 51,506 Fund V Variable Rate - Swapped (a) 4.01%-4.78% 4.61%-4.78% Feb 2021 - Mar 2024 156,900 86,570 Total Fund V Mortgage Payable 208,406 138,076 Net unamortized debt issuance costs (9,135 ) (10,173 ) Unamortized premium 676 753 Total Mortgages Payable $ 1,029,678 $ 1,017,288 Unsecured Notes Payable Core Term Loans — LIBOR+1.25% Mar 2023 $ — $ 383 Core Variable Rate Unsecured Term Loans - Swapped (a) 2.49%-4.05% 2.54%-3.59% Mar 2023 350,000 349,617 Total Core Unsecured Notes Payable 350,000 350,000 Fund II Unsecured Notes Payable LIBOR+1.65% LIBOR+1.40% Sep 2020 40,000 40,000 Fund IV Term Loan/Subscription Facility LIBOR+1.65%-LIBOR+2.00% LIBOR+1.65%-LIBOR+2.75% Dec 2019 - June 2021 87,625 40,825 Fund V Subscription Facility LIBOR+1.60% LIBOR+1.60% May 2020 148,380 102,800 Net unamortized debt issuance costs (328 ) (368 ) Total Unsecured Notes Payable $ 625,677 $ 533,257 Unsecured Line of Credit Core Unsecured Line of Credit — — — $ — $ — Total Debt - Fixed Rate (b)(c) $ 1,236,805 $ 1,001,658 Total Debt - Variable Rate (d) 427,337 558,675 Total Debt 1,664,142 1,560,333 Net unamortized debt issuance costs (9,463 ) (10,541 ) Unamortized premium 676 753 Total Indebtedness $ 1,655,355 $ 1,550,545 (a) At September 30, (b) Includes (c) Fixed-rate debt at September 30, 2019 includes $155.4 million of Core swaps that may be used to hedge debt instruments of the Funds. (d) Includes $143.0 million and $143.8 million, respectively, of variable-rate debt that is subject to interest cap agreements. 27 ACADIA REALTY TRUST AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Credit Facility On February 20, 2018, the Company entered into a $500.0 million senior unsecured credit facility (the “Credit Facility”), comprised of a $150.0 million senior unsecured revolving credit facility (the “Revolver”) which bears interest at LIBOR + 1.35%, and a $350.0 million senior unsecured term loan (the “Term Loan”) which bears interest at LIBOR + 1.25%. The Credit Facility refinanced the Company’s existing $300.0 million credit facility (comprised of the $150.0 million Core unsecured revolving line of credit and the $150.0 million term loan), $150.0 million in Core unsecured term loans and repaid a $40.4 million mortgage secured by its 664 North Michigan Property. The Revolver and Term Loans mature on March 31, 2022 and March 31, 2023, respectively. The Company’s Credit Facility was amended, and the capacity of the unsecured revolving line of credit was increased on October 8, 2019 (Note 15). Mortgages Payable During the nine months ended September 30, • The Company obtained 4 new Fund mortgages totaling $118.3 million with a weighted-average interest rate of LIBOR + 1.65% collateralized by four properties and maturing in 2022 through 2024. • The Company refinanced a Fund IV loan in the amount of $23.8 million, of which $18.9 million had been drawn at September 30, 2019, and which bears interest at a rate of LIBOR + 1.75% and matures in 2022. • Fund III mortgage, which had a balance of $4.7 million and an interest rate of Prime + 0.5%, was assumed by the purchasing venture in a property sale (Note 2). The Company also repaid a Fund IV loan in full, which had a balance of $38.2 million and an interest rate of LIBOR + 2.35%. The Company repaid one Fund III loan in the amount of $9.8 million and two Fund IV loans in the aggregate amount of $18.4 million in connection with the sale of the properties. The Company also made scheduled principal payments of $4.6 million. • The Company re-borrowed $49.0 million in the third quarter pursuant to the requirements of a loan amendment entered into during the second quarter and the Company also drew down $8.7 million on a Fund III construction loan • The Company modified two Fund IV loans to increase the commitment of BSP Venture I’s mortgage by $9.4 million; and to decrease the 717 North Michigan Avenue mortgage balance by $9.9 million, decrease future availability by $3.9 million and reduce the interest rate to LIBOR + 3.10%. The Company also modified a Fund III loan to decrease the balance by $10.0 million to $39.5 million and reduce the interest rate to LIBOR plus 3.10% from LIBOR plus 4.65%. • The Company entered into interest rate swap contracts to effectively fix the variable portion of the interest rates of four of the new obligations with a notional value of $91.5 million at a weighted-average interest rate of 2.74%. At September 30, The mortgage loan During the third quarter of 2019, the company recognized income of $5.0 million related to Fund II’s New Market Tax Credit transaction (“NMTC”) involving its City Point project. NMTCs were created to encourage economic development in low income communities and provided for a 39% tax credit on certain qualifying invested equity/loans. In 2012, the NMTCs were transferred to a group of investors (“Investors”) in 28 ACADIA REALTY TRUST AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) exchange for $5.2 million. The Unsecured Notes Payable Unsecured notes payable for which total availability was $17.6 million • As discussed above, the Core unsecured term loans totaling $300.0 million • Fund II has a $40.0 million term loan secured by the real estate assets of City Point Phase II and guaranteed by the Company and the Operating Partnership. The outstanding balance of the Fund II term loan was • At Fund IV there is a $80.2 million bridge facility and a $27.0 million subscription line, which were modified from their previous limits of $41.8 million and $15.0 million, respectively, during the second quarter of 2019. The outstanding balance of the Fund IV bridge facility was • Fund V has a $150.0 million subscription line collateralized by Fund V’s unfunded capital commitments and guaranteed by the Operating Partnership. The outstanding balance and total available credit of the Fund V subscription line was $148.4 million and $1.6 million, respectively at September 30, 2019. The outstanding balance and total available credit of the Fund V subscription line was $102.8 million and $47.2 million, respectively at December 31, 2018. Unsecured Revolving Line of Credit The Company had a total of The capacity of the Company’s unsecured revolving line of credit was increased on October 8, 2019 (Note 15). Scheduled Debt Principal Payments The scheduled principal repayments of the Company’s consolidated indebtedness, as of September 30, Year Ending December 31, 2019 (Remainder) $ 121,846 2020 561,472 2021 240,659 2022 91,357 2023 412,305 Thereafter 236,503 1,664,142 Unamortized premium 676 Net unamortized debt issuance costs (9,463 ) Total indebtedness $ 1,655,355 29 ACADIA REALTY TRUST AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 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 Derivative Assets Derivative Liabilities 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, 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, 2019 December 31, 2018 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Assets Money Market Funds $ 10,000 $ — $ — $ 4,504 $ — $ — Derivative financial instruments — 1,217 — — 7,018 — Liabilities Derivative financial instruments — 53,194 — — 7,304 — In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability. Items Measured at Fair Value on a Nonrecurring Basis (Including Impairment Charges) During 2018, the Company began selling the residential units of its 210 Bowery property in Fund IV. As the projected aggregate selling prices net of selling costs were in line with the carrying amount of the property through the first quarter 2019, 0 gain or loss had been recognized on the units sold through that date and 0 impairment was previously deemed necessary. During the second quarter 2019, the Company revised its estimate of the expected selling price of the remaining three 30 ACADIA REALTY TRUST AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) million impairment charge for the remaining condominium unit, inclusive of an amount attributable to a noncontrolling interest of $0.2 million, to adjust the carrying value to the estimated selling price less estimated costs to sell. The Company did 0t record any impairment charges during the nine months ended September 30, 2018. Derivative Financial Instruments The Company had the following interest rate swaps and caps for the periods presented (dollars in thousands): Strike Rate Fair Value Derivative Instrument Aggregate Notional Amount Effective Date Maturity Date Low High Balance Sheet Location September 30, 2019 December 31, 2018 Core Interest Rate Swaps $ 423,761 Dec 2012-July 2020 Mar 2022-July 2030 1.71 % — 3.77 % Other Liabilities (a) $ (46,395 ) $ (6,332 ) Interest Rate Swaps 163,500 Oct 2014 - July 2016 Nov 2019-June 2021 1.24 % — 1.70 % Other Assets 581 6,022 $ 587,261 $ (45,814 ) $ (310 ) Fund II Interest Rate Swap $ 19,138 Oct 2014 Nov 2021 2.88 % — 2.88 % Other Liabilities $ (180 ) $ — Interest Rate Swap — — — — — — Other Assets — 108 Interest Rate Cap 23,300 Mar 2019 Mar 2022 3.50 % — 3.50 % Other Assets 3 — $ 42,438 $ (177 ) $ 108 Fund III Interest Rate Cap $ 58,000 Dec 2016 Jan 2020 3.00 % — 3.00 % Other Assets $ — $ 8 Fund IV Interest Rate Swap $ 23,100 Mar 2017 Mar 2020 1.82 % — 1.82 % Other Assets $ 2 $ 851 Interest Rate Swaps 65,501 Mar 2017 - May 2019 Apr 2022 - Dec 2022 1.97 % — 4.00 % Other Liabilities (1,068 ) — Interest Rate Caps 104,400 Nov 2016 - July 2019 Dec 2019 - July 2021 3.00 % — 3.50 % Other Assets — 8 $ 193,001 $ (1,066 ) $ 859 Fund V Interest Rate Swaps $ — Nov 2019 Sept 2024 - Oct 2024 1.25 % — 1.28 % Other Assets (b) $ 631 $ 21 Interest Rate Swaps 156,900 Jan 2018-Oct 2019 Feb 2021-Oct 2024 1.45 % — 2.88 % Other Liabilities (c) (5,551 ) (972 ) $ 156,900 $ (4,920 ) $ (951 ) Total asset derivatives $ 1,217 $ 7,018 Total liability derivatives $ (53,194 ) $ (7,304 ) (a) Includes 2 swaps with an aggregate fair value of ($15.7) million and ($2.9) million at September 30, 2019 and December 31, 2018, respectively, which were acquired during July 2018 and are not effective until July 2020. At September 30, 2019 and December 31, 2018, $155.4 million and $0.0 million of the Core swaps were available, respectively to hedge debt at the Funds. (b) Includes 3 swaps with an aggregate fair value of $0.6 million at September 30, 2019, which were acquired during August 2019 and are not effective until November 2019. (c) Includes 2 swaps with an aggregate fair value of ($0.1) million at September 30, 2019, which were acquired during September 2019 and are not effective until October 2019. All of the Company’s derivative instruments have been designated as cash flow hedges and hedge the future cash outflows on 31 ACADIA REALTY TRUST AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 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, thevalues 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 Credit Risk-Related Contingent Features The Company has agreements with each of its Other Financial Instruments The Company’s other financial instruments had the following carrying values and fair values as of the dates shown (dollars in September 30, 2019 December 31, 2018 Level Carrying Amount Estimated Fair Value Carrying Amount Estimated Fair Value Notes Receivable (a) 3 $ 94,807 $ 94,180 $ 109,613 $ 107,370 Mortgage and Other Notes Payable (a) 3 1,038,137 1,048,580 1,026,708 1,021,075 Investment in non-traded equity securities (b) 3 — 56,337 — 56,337 Unsecured notes payable and Unsecured line of credit (c) 2 626,005 626,785 533,625 533,954 (a) The Company determined the estimated fair value of these financial instruments using a discounted cash flow model with rates that take into account the credit of the borrower or tenant, where applicable, and interest rate risk. The Company also considered the value of the underlying collateral, taking into account the quality of the collateral, the credit quality of the borrower, the time until maturity and the current market interest rate environment. (b) (c) The Company determined the estimated fair value of the unsecured notes payable and unsecured line of credit using quoted market prices in an open market with limited trading volume where available. In cases where there was no trading volume, the Company determined the estimated fair value using a discounted cash flow model using a rate that reflects the average yield of similar market participants. The Company’s cash and cash equivalents, restricted cash, accounts receivable, accounts payable and certain financial instruments included in other assets and other liabilities had fair values that approximated their carrying values due to their short maturity profiles at September 30, 9. Commitments and Contingencies The Company is involved in various matters of litigation arising out of, or incident to, its business, including the litigation described in Note 7. 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 32 ACADIA REALTY TRUST AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) At 10. Shareholders’ Equity, Noncontrolling Interests and Other Comprehensive Income Common Shares In addition to the ATM Program activity discussed below, the Company completed the following transactions in its common shares during the nine months ended September 30, • The Company withheld 2,468 Restricted Shares to pay the employees’ statutory minimum income taxes due on the value of the portion of their Restricted Shares that vested. • The Company recognized Common Share and Common OP Unit-based compensation totaling In addition to the • The Company withheld 3,288 Restricted Shares to pay the employees’ statutory minimum income taxes due on the value of the portion of their Restricted Shares that vested. • The Company recognized ATM Program The Company has an at-the-market equity issuance program (“ATM Program”) which provides the Company an efficient and low-cost vehicle for raising public equity to fund its capital needs. The Company entered into its current $250.0 million ATM Program (which replaced its prior program) in the second quarter of 2019 and also added an optional “forward purchase” component. The Company has not issued any shares on a forward basis during the nine months ended September 30, 2019. During the three months ended September 30, 2019, the Company sold 2,149,154 Common Shares under its ATM Program for gross proceeds of $61.6 million, or $60.6 million net of issuance costs, at a weighted-average gross price per share of $28.64. During the nine months ended September 30, 2019, the Company sold 4,816,505 Common Shares under its ATM Program for gross proceeds of $137.8 million, or $135.8 million net of issuance costs, at a weighted-average gross price per share of $28.61. Share Repurchase Program During 2018, the Company’s board of trustees approved a new share repurchase program, Dividends and Distributions The following table sets forth the dividends declared and/or paid during the nine months ended September 30, Date Declared Amount Per Share Record Date Payment Date November 15, 2018 $ 0.28 December 31, 2018 January 15, 2019 February 28, 2019 $ 0.28 March 29, 2019 April 15, 2019 May 9, 2019 $ 0.28 June 28, 2019 July 15, 2019 August 13, 2019 $ 0.28 September 30, 2019 October 15, 2019 33 ACADIA REALTY TRUST AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Accumulated Other Comprehensive Income The following Gains or Losses on Derivative Instruments Balance at July 1, 2019 $ (29,570 ) Other comprehensive loss before reclassifications (15,388 ) Reclassification of realized interest on swap agreements (288 ) Net current period other comprehensive loss (15,676 ) Net current period other comprehensive loss attributable to noncontrolling interests 1,108 Balance at September 30, 2019 $ (44,138 ) Balance at July 1, 2018 $ 10,138 Other comprehensive income before reclassifications 3,973 Reclassification of realized interest on swap agreements (55 ) Net current period other comprehensive income 3,918 Net current period other comprehensive income attributable to noncontrolling interests (789 ) Balance at September 30, 2018 $ 13,267 Gains or Losses on Derivative Instruments Balance at January 1, 2019 $ 516 Other comprehensive loss before reclassifications (51,347 ) Reclassification of realized interest on swap agreements (1,374 ) Net current period other comprehensive loss (52,721 ) Net current period other comprehensive loss attributable to noncontrolling interests 8,067 Balance at September 30, 2019 $ (44,138 ) Balance at January 1, 2018 $ 2,614 Other comprehensive income before reclassifications 12,576 Reclassification of realized interest on swap agreements 417 Net current period other comprehensive income 12,993 Net current period other comprehensive income attributable to noncontrolling interests (2,340 ) Balance at September 30, 2018 $ 13,267 34 ACADIA REALTY TRUST AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Noncontrolling Interests The following Noncontrolling Interests in Operating Partnership (a) Noncontrolling Interests in Partially-Owned Affiliates (b) Total Balance at July 1, 2019 $ 103,705 $ 515,205 $ 618,910 Distributions declared of $0.28 per Common OP Unit (1,765 ) — (1,765 ) Net income (loss) for the three months ended September 30, 2019 785 (2,403 ) (1,618 ) Conversion of 41,646 Common OP Units to Common Shares by limited partners of the Operating Partnership (720 ) — (720 ) Other comprehensive loss - unrealized loss on valuation of swap agreements (864 ) (251 ) (1,115 ) Reclassification of realized interest expense on swap agreements (16 ) 23 7 Noncontrolling interest contributions — 129,438 129,438 Noncontrolling interest distributions — (29,713 ) (29,713 ) Employee Long-term Incentive Plan Unit Awards 1,768 — 1,768 Reallocation of noncontrolling interests (c) (5,251 ) — (5,251 ) Balance at September 30, 2019 $ 97,642 $ 612,299 $ 709,941 Balance at July 1, 2018 $ 105,100 $ 514,774 $ 619,874 Distributions declared of $0.27 per Common OP Unit (1,692 ) — (1,692 ) Net income (loss) for the three months ended September 30, 2018 732 (12,554 ) (11,822 ) Conversion of 46,950 Common OP Units to Common Shares by limited partners of the Operating Partnership (834 ) — (834 ) Other comprehensive income - unrealized gain on valuation of swap agreements 197 505 702 Reclassification of realized interest expense on swap agreements (9 ) 96 87 Noncontrolling interest contributions — 40,440 40,440 Noncontrolling interest distributions — (9,014 ) (9,014 ) Employee Long-term Incentive Plan Unit Awards 2,082 — 2,082 Reallocation of noncontrolling interests (c) (1,783 ) — (1,783 ) Balance at September 30, 2018 $ 103,793 $ 534,247 $ 638,040 35 ACADIA REALTY TRUST AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Noncontrolling Interests in Operating Partnership (a) Noncontrolling Interests in Partially-Owned Affiliates (b) Total Balance at January 1, 2019 $ 104,223 $ 518,219 $ 622,442 Distributions declared of $0.84 per Common OP Unit (5,322 ) — (5,322 ) Net income (loss) for the nine months ended September 30, 2019 2,437 (27,633 ) (25,196 ) Conversion of 249,464 Common OP Units to Common Shares by limited partners of the Operating Partnership (4,230 ) — (4,230 ) Other comprehensive loss - unrealized loss on valuation of swap agreements (2,686 ) (5,320 ) (8,006 ) Reclassification of realized interest expense on swap agreements (61 ) — (61 ) Noncontrolling interest contributions — 161,628 161,628 Noncontrolling interest distributions — (34,595 ) (34,595 ) Employee Long-term Incentive Plan Unit Awards 6,965 — 6,965 Reallocation of noncontrolling interests (c) (3,684 ) — (3,684 ) Balance at September 30, 2019 $ 97,642 $ 612,299 $ 709,941 Balance at January 1, 2018 $ 102,921 $ 545,519 $ 648,440 Distributions declared of $0.81 per Common OP Unit (5,126 ) — (5,126 ) Net income (loss) for the nine months ended September 30, 2018 1,977 (35,313 ) (33,336 ) Conversion of 111,588 Common OP Units to Common Shares by limited partners of the Operating Partnership (1,957 ) — (1,957 ) Other comprehensive income - unrealized gain on valuation of swap agreements 625 1,435 2,060 Reclassification of realized interest expense on swap agreements 10 270 280 Noncontrolling interest contributions — 46,990 46,990 Noncontrolling interest distributions — (24,654 ) (24,654 ) Employee Long-term Incentive Plan Unit Awards 7,924 — 7,924 Reallocation of noncontrolling interests (c) (2,581 ) — (2,581 ) Balance at September 30, 2018 $ 103,793 $ 534,247 $ 638,040 (a) Noncontrolling interests in the Operating Partnership are comprised of (i) the limited partners’ (b) Noncontrolling interests in partially-owned affiliates comprise third-party interests in Funds II, III, IV and V, and Mervyns (c) Adjustment reflects the difference between the fair value of the consideration received or paid and the book value of the Common Shares, Common OP Units, Preferred OP Units, and LTIP Units involving changes in Preferred OP Units There were 36 ACADIA REALTY TRUST AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 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 $1,000 per unit, and are entitled to a preferred quarterly distribution of the greater of (i) $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 During 11. Leases As Lessor The Company implemented ASC Topic 842, Leases The Company is engaged in the operation of shopping centers and other retail properties that are either owned or, with respect to certain shopping centers, operated under long-term ground leases (see below) that expire at various dates through June 20, 2066, with renewal options. Space in the shopping centers is leased to tenants pursuant to agreements that provide for terms ranging generally from one month to As Lessee As lessee, upon implementation of ASC Topic 842, the Company recorded right-of-use assets and corresponding lease liabilities of $11.9 million and $12.8 million, respectively, for 9 existing operating leases (for ground, office and equipment leases) and $82.6 million and $76.6 million, respectively, for 4 finance leases related to ground rentals including an existing capital lease which represented $77.0 million and $71.1 million, respectively, of the total. Three finance leases were recorded post-implementation upon assessment of triggering events whereby the Company’s cumulative leasehold investment made it reasonably certain that the Company would exercise its purchase options. During the three months ended June 30, 2019, the Company • Entered into a new master lease that is a finance lease, (1238 Wisconsin Avenue, acquired on May 2, 2019 within the Core Portfolio) and recorded a Right-of-use asset–finance lease of $11.2 million and a corresponding Lease liability–finance lease of $10.7 million; and • Entered into a new master lease that is an operating lease (110 University Place, acquired on May 1, 2019 by Fund IV for $10.5 million) and recorded a Right of use asset–operating lease of $45.3 million and a corresponding Lease liability–operating lease of $45.3 million. 37 ACADIA REALTY TRUST AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Lease Cost (Not applicable) (Not applicable) Finance lease cost: Amortization of right-of-use assets $ 565 $ 1,603 Interest on lease liabilities 978 2,755 Subtotal 1,543 4,358 Operating lease cost 1,394 3,037 Variable lease cost 62 119 Total lease cost $ 2,999 $ 7,514 Other Information Weighted-average remaining lease term - finance leases (years) 42.9 Weighted-average remaining lease term - operating leases (years) 33.7 Weighted-average discount rate - finance leases 4.5 % Weighted-average discount rate - operating leases 5.8 % Right-of-use assets are included in Operating real estate (Note 2) in the consolidated balance sheet. Lease liabilities are included in Accounts payable and other liabilities in the consolidated balance sheet (Note 5). Operating lease cost comprises amortization of right-of-use assets for operating properties (related to ground rents) or amortization of right-of-use assets for office and corporate assets and is included in Property operating expense or General and administrative expense, respectively,in the consolidated statements of income. Finance lease cost comprises amortization of right-of-use assets for certain ground leases, which is included in Property operating expense, as well as interest on lease liabilities, which is included in Interest expense in the consolidated statements of income. Lease Disclosures Related to Prior Periods The Company During 2016, the Company entered into a 49-year master lease, 38 ACADIA REALTY TRUST AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Lease Obligations The scheduled future minimum (i) rental revenues from rental properties under the terms of Year Ending December 31, Minimum Rental Revenues Minimum Rental Payments (a, b) 2019 (Remainder) $ 48,697 $ 1,821 2020 205,710 7,139 2021 193,653 7,073 2022 173,664 7,082 2023 152,273 7,075 Thereafter 652,003 334,761 Total $ 1,426,000 $ 364,951 (a) A ground lease expiring during 2078 provides the Company with an option to purchase the underlying land during 2031. If the Company does not exercise the option, the rents that will be due are based on future values and as such are not determinable at this time. Accordingly, the above table does not include rents for this lease beyond 2031. (b) Minimum rental payments include $220.8 million of interest related to finance leases. During the three and nine months ended September 30, 12. Segment Reporting The Company has The following tables set forth certain segment information for the Company (in thousands): For the Three Months Ended September 30, 2019 Core Portfolio Funds Structured Financing Unallocated Total Revenues $ 42,142 $ 31,185 $ — $ — $ 73,327 Depreciation and amortization (15,179 ) (16,991 ) — — (32,170 ) Property operating expenses, other operating and real estate taxes (11,205 ) (12,200 ) — — (23,405 ) General and administrative expenses — — — (8,222 ) (8,222 ) Impairment charge — (321 ) — — (321 ) Gain on disposition of properties — 12,056 — — 12,056 Operating income (loss) 15,758 13,729 — (8,222 ) 21,265 Interest income — — 1,748 — 1,748 Other income — 5,034 — — 5,034 Equity in earnings (losses) of unconsolidated affiliates 1,798 (499 ) — — 1,299 Interest expense (7,333 ) (11,770 ) — — (19,103 ) Income tax provision — — — (1,403 ) (1,403 ) Net income (loss) 10,223 6,494 1,748 (9,625 ) 8,840 Net loss attributable to noncontrolling interests 263 1,355 — — 1,618 Net income attributable to Acadia $ 10,486 $ 7,849 $ 1,748 $ (9,625 ) $ 10,458 39 ACADIA REALTY TRUST AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) For the Three Months Ended September 30, 2018 Core Portfolio Funds Structured Financing Unallocated Total Revenues $ 41,742 $ 23,785 $ — $ — $ 65,527 Depreciation and amortization (14,856 ) (13,820 ) — — (28,676 ) Property operating expenses, other operating and real estate taxes (11,910 ) (10,011 ) — — (21,921 ) General and administrative expenses — — — (7,982 ) (7,982 ) Gain on disposition of properties — 5,107 — — 5,107 Operating income (loss) 14,976 5,061 — (7,982 ) 12,055 Interest income — — 3,513 — 3,513 Equity in earnings (losses) of unconsolidated affiliates 2,005 (1,629 ) — — 376 Interest expense (6,972 ) (11,105 ) — — (18,077 ) Income tax provision — — — (464 ) (464 ) Net income (loss) 10,009 (7,673 ) 3,513 (8,446 ) (2,597 ) Net loss attributable to noncontrolling interests 115 11,707 — — 11,822 Net income attributable to Acadia $ 10,124 $ 4,034 $ 3,513 $ (8,446 ) $ 9,225 As of or for the Nine Months Ended September 30, 2019 Core Portfolio Funds Structured Financing Unallocated Total Revenues $ 131,356 $ 86,187 $ — $ — $ 217,543 Depreciation and amortization (45,949 ) (46,858 ) — — (92,807 ) Property operating expenses, other operating and real estate taxes (34,730 ) (32,217 ) — — (66,947 ) General and administrative expenses — — — (25,579 ) (25,579 ) Impairment charge — (1,721 ) — — (1,721 ) Gain on disposition of properties — 14,070 — — 14,070 Operating income (loss) 50,677 19,461 — (25,579 ) 44,559 Interest income — — 6,247 — 6,247 Other income 327 6,620 — — 6,947 Equity in earnings (losses) of unconsolidated affiliates 7,322 (193 ) — — 7,129 Interest expense (20,866 ) (35,855 ) — — (56,721 ) Income tax provision — — — (1,622 ) (1,622 ) Net income (loss) 37,460 (9,967 ) 6,247 (27,201 ) 6,539 Net loss attributable to noncontrolling interests 648 24,548 — — 25,196 Net income attributable to Acadia $ 38,108 $ 14,581 $ 6,247 $ (27,201 ) $ 31,735 Real estate at cost $ 2,190,281 $ 1,821,853 $ — $ — $ 4,012,134 Total assets $ 2,316,683 $ 1,918,055 �� $ 94,807 $ — $ 4,329,545 Cash paid for acquisition of real estate $ 82,125 $ 174,522 $ — $ — $ 256,647 Cash paid for development and property improvement costs $ 19,059 $ 58,577 $ — $ — $ 77,636 40 ACADIA REALTY TRUST AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) As of or for the Nine Months Ended September 30, 2018 Core Portfolio Funds Structured Financing Unallocated Total Revenues $ 122,959 $ 66,995 $ — $ — $ 189,954 Depreciation and amortization (45,283 ) (41,472 ) — — (86,755 ) Property operating expenses, other operating and real estate taxes (32,102 ) (26,790 ) — — (58,892 ) General and administrative expenses — — — (24,359 ) (24,359 ) Gain on disposition of properties — 5,140 — — 5,140 Operating income (loss) 45,574 3,873 — (24,359 ) 25,088 Interest and other income — — 10,539 — 10,539 Equity in earnings of unconsolidated affiliates 5,171 1,908 — — 7,079 Interest expense (20,475 ) (30,407 ) — — (50,882 ) Income tax provision — — — (851 ) (851 ) Net income (loss) 30,270 (24,626 ) 10,539 (25,210 ) (9,027 ) Net loss attributable to noncontrolling interests 241 33,095 — — 33,336 Net income attributable to Acadia $ 30,511 $ 8,469 $ 10,539 $ (25,210 ) $ 24,309 Real estate at cost $ 2,060,024 $ 1,553,150 $ — $ — $ 3,613,174 Total assets $ 2,234,521 $ 1,574,785 $ 109,410 $ — $ 3,918,716 Cash paid for acquisition of real estate $ 1,343 $ 103,559 $ — $ — $ 104,902 Cash paid for development and property improvement costs $ 22,892 $ 43,346 $ — $ — $ 66,238 13. Share Incentive and Other Compensation Share Incentive Plan The Second Amended and Restated 2006 Incentive Plan (the “Share Incentive Plan”) authorizes the Company to issue options, Restricted Shares, LTIP Units and other securities (collectively “Awards”) to, among others, the Company’s officers, trustees and employees. At September 30, Restricted Shares and LTIP Units During the nine months ended September 30, • A portion of these annual equity awards is granted in performance-based Restricted Share Units or LTIP Units that may be earned based on the Company’s attainment of specified relative total shareholder returns (“Relative TSR”) hurdles. • In the event the Relative TSR percentile falls between the 25th percentile and the 50th percentile, the Relative TSR vesting percentage is determined using a straight-line linear interpolation between 50% and 100% and in the event that the Relative TSR percentile falls between the 50th percentile and 75th percentile, the Relative TSR vesting percentage is determined using a straight-line linear interpolation between 100% and 200%. • Two-thirds (2/3) of the performance-based LTIP Units will vest based on the Company’s total shareholder return (“TSR”) for the three-year forward-looking performance period ending December 31, 2021 relative to the constituents of the SNL U.S. REIT Retail Shopping Center Index and one-third (1/3) on the Company’s TSR for the three-year forward-looking performance period as compared to the constituents of the SNL U.S. REIT Retail Index (both on a non-weighted basis). • If the Company’s performance fails to achieve the aforementioned hurdles at the culmination of the three-year performance period, all performance-based shares will be forfeited. Any earned performance-based shares vest 60% at the end of the performance period, with the remaining 40% of shares vesting ratably over the next two years. 41 ACADIA REALTY TRUST AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) For valuation of the 2019 Performance Shares, a Monte Carlo simulation was The total value of the above Restricted Share Units and LTIP Units as of the grant date was In addition, members of the Board of Trustees (the “Board”) have been issued shares and units under the Share Incentive Plan. During In 2009, the Company adopted the 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, NaN compensation expense A summary of the status of the Company’s unvested Restricted Shares and LTIP Units is presented below: Unvested Restricted Shares and LTIP Units Common Restricted Shares Weighted Grant-Date Fair Value LTIP Units Weighted Grant-Date Fair Value Unvested at January 1, 2018 41,327 $ 26.92 910,099 $ 28.28 Granted 22,817 23.65 425,880 26.80 Vested (25,261 ) 30.79 (431,827 ) 29.72 Forfeited (428 ) 27.25 (12,266 ) 28.57 Unvested at December 31, 2018 38,455 22.44 891,886 26.87 Granted 25,359 28.56 348,726 32.78 Vested (21,424 ) 27.12 (290,753 ) 29.30 Forfeited — — (15,679 ) 31.49 Unvested at September 30, 2019 42,390 $ 23.73 934,180 $ 28.24 The weighted-average grant date fair value for Restricted Shares and LTIP Units granted for the nine months ended September 30, 42 ACADIA REALTY TRUST AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Other Plans On a combined basis, the Company incurred a total of $0.3 million related to the following employee benefit plans for each of the nine months ended September 30, 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% 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 $25,000 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. Deferred Share Plan During Employee 401(k) Plan The Company maintains a 401(k) plan for employees under which the Company currently matches 50% of a plan participant’s contribution up to 6% of the employee’s annual salary. A plan participant may contribute up to a maximum of 15% of their compensation, up to 14. Earnings Per Common Share Basic earnings per Common Share is computed by dividing net income attributable to Common Shareholders by the 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”) 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 43 ACADIA REALTY TRUST AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, (dollars in thousands) 2019 2018 2019 2018 Numerator: Net income attributable to Acadia $ 10,458 $ 9,225 $ 31,735 $ 24,309 Less: net income attributable to participating securities (38 ) (66 ) (134 ) (158 ) Income from continuing operations net of income attributable to participating securities $ 10,420 $ 9,159 $ 31,601 $ 24,151 Denominator: Weighted average shares for basic earnings per share 84,888,445 81,565,805 83,552,182 82,245,020 Effect of dilutive securities: Employee unvested restricted shares — — — — Denominator for diluted earnings per share 84,888,445 81,565,805 83,552,182 82,245,020 Basic and diluted earnings per Common Share from continuing operations attributable to Acadia $ 0.12 $ 0.11 $ 0.38 $ 0.29 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 136,593 136,593 136,593 136,593 Series C Preferred OP Units - Common share equivalent 474,278 474,278 474,278 474,278 Restricted shares 40,821 38,450 40,821 37,180 15. Subsequent Events Financings On October 8, 2019, the Operating Partnership amended its revolving senior unsecured credit facility which it originally entered into on February 20, During October 2019, Fund V’s property entities entered into new mortgages for certain of its consolidated (Note 2) and unconsolidated (Note 4) properties totaling $140.4 million for which Fund V • Landstown Commons – $60.9 million at LIBOR plus 1.7%, swapped to a fixed rate of 2.949%, maturing on October 24, 2024. • Lincoln Commons – $40.8 million at LIBOR plus 1.7%, swapped to a fixed rate of 2.949%, maturing on October 24, 2024. At closing, $38.8 million was funded. • Tri-City Plaza – $38.7 million at LIBOR plus 1.9%, swapped to a fixed rate of 3.0935%, maturing on October 18, 2024. At closing, $25.4 million was funded. Fund Distribution On October 44 ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. OVERVIEW As of September 30, Number of Properties Operating Properties Development or Redevelopment Operating GLA Occupancy Core Portfolio: Chicago Metro — 36 707,911 88.0 % New York Metro — 24 335,239 92.4 % San Francisco Metro 1 1 148,832 100.0 % Washington DC Metro 1 28 323,189 91.8 % Boston Metro — 3 55,276 100.0 % Suburban 2 29 4,257,989 93.7 % Total Core Portfolio 4 121 5,828,436 93.0 % Acadia Share of Total Core Portfolio 4 121 5,207,696 93.5 % Fund Portfolio: Fund II — 1 469,518 65.2 % Fund III 1 3 134,434 75.2 % Fund IV 3 35 2,487,995 85.5 % Fund V — 14 4,381,658 90.9 % Total Fund Portfolio 4 53 7,473,605 87.2 % Acadia Share of Total Fund Portfolio 4 53 1,598,960 87.0 % Total Core and Funds 8 174 13,302,041 89.8 % Acadia Share of Total Core and Funds 8 174 6,806,656 92.0 % The majority of our operating income is derived from rental revenues from operating properties, including expense recoveries from tenants, offset by operating and overhead expenses. Our primary business objective is to acquire and manage commercial retail properties that will provide cash for distributions to shareholders while also creating the potential for capital appreciation to enhance investor returns. We focus on the following fundamentals to achieve this objective: • Own and operate a Core Portfolio of high-quality retail properties located primarily in high-barrier-to-entry, densely-populated metropolitan areas and create value through accretive development and re-tenanting activities coupled with the acquisition of high-quality assets that have the long-term potential to outperform the asset class as part of our Core asset recycling and acquisition initiative. • Generate additional external growth through an opportunistic yet disciplined acquisition program within our Funds. We target transactions with high inherent opportunity for the creation of additional value through: • value-add investments in street retail properties, located in established and “next generation” submarkets, with re-tenanting or repositioning opportunities, • opportunistic acquisitions of well-located real-estate anchored by distressed retailers, and • other opportunistic acquisitions which may include high-yield acquisitions and purchases of distressed debt. Some of these investments historically have also included, and may in the future include, joint ventures with private equity investors for the purpose of making investments in operating retailers with significant embedded value in their real estate assets. • Maintain a strong and flexible balance sheet through conservative financial practices while ensuring access to sufficient capital to fund future growth. SIGNIFICANT DEVELOPMENTS DURING THE NINE MONTHS ENDED SEPTEMBER 30, Investments During the nine months ended September 30, • On • On March 15, March 27, May 29, 2019 and July 30, 2019, we acquired four retail condominiums located in • On May 2, 2019, we • On September 11, we acquired two mixed-use buildings in Chicago, Illinois, referred to as “849 and 912 W. Armitage” for a total of $7.8 million (Note 2). During the nine months ended September 30, • On March 19, 2019, Fund V’s unconsolidated venture (Note 4) acquired a suburban shopping center in Riverdale, Utah for $48.5 million referred to as “Family Center at Riverdale” for which Fund V’s share was $43.7 million. • On April 30, 2019, Fund V’s unconsolidated venture (Note 4) acquired a suburban shopping center in Vernon, Connecticut for $36.7 million referred to as “Tri-City Plaza” for which Fund V’s share was $33.0 million • On May 1, 2019, Fund IV acquired a leasehold interest (Note 11) in a retail and parking condominium in a building in New York, New York for $10.5 million referred to as “110 University Place.” • On May 6, 2019, Fund V acquired a suburban shopping center (Note 2) in Palm Coast, Florida for $36.6 million referred to as “Palm Coast Landing.” • On June 21, 2019, Fund V acquired a suburban shopping center (Note 2) in Lincoln, Rhode Island for $54.3 million referred to as “Lincoln Commons.” • On August 2, Fund V acquired a suburban shopping center (Note 2) in Virginia Beach, Virginia for $87.0 million referred to as “Landstown Commons.” • On August 21, Fund V’s unconsolidated venture (Note 4) acquired two suburban shopping centers in Frederick County, Maryland for a total of $54.9 million collectively referred to as the “Washington REIT Portfolio” for which Fund V’s share was $49.4 million. Dispositions of During the nine months ended September 30, • On January 24, 2019, a venture in which Fund III holds an 80% interest sold its 3104 M Street property to an unconsolidated venture (Note 4) in which the Core Portfolio holds a 20% interest for $10.5 million. The acquiring venture assumed the property’s mortgage in the amount of $4.7 million. • On July 24, 2019, Fund IV sold its JFK Plaza property for $7.8 million. • On August 22, 2019, Fund III sold its Nostrand Avenue property for $27.7 million. • On May 17 and September 23, 2019, Fund IV sold two residential condominium units for a total of $5.9 million. • On September 27, 2019 Fund IV sold its 938 W. North Street property for $32.0 million. The Funds recognized a net aggregate gain on the sales of Financings During the nine months ended September 30, • An aggregate of $70.3 million in financings with two new mortgages for Fund V. • An aggregate of $21.9 million in financings, with one new mortgage of $3.0 million and a refinancing of an $18.9 million mortgage for Fund IV. • A $45.0 million loan for Fund II, of which $23.9 million was drawn at September 30, 2019. In addition, Funds III and IV modified two mortgages by repaying a total of $14.8 million and reducing borrowing costs (Note 7). Structured Financing During the nine months ended September 30, 2019, the Company redeemed its $15.3 million Fund IV Structured Financing investment (Note 3) Equity Issuance During the three months ended September 30, 2019, the Company sold 2,149,154 shares under its ATM program (Note 10) for gross proceeds of $61.6 million, or $60.6 million net of issuance costs, at a RESULTS OF OPERATIONS See Comparison of Results for theThree Months Ended September 30, The results of operations by reportable segment for the three months ended September 30, Three Months Ended Three Months Ended September 30, 2019 September 30, 2018 Increase (Decrease) Core Funds SF Total Core Funds SF Total Core Funds SF Total Revenues $ 42.1 $ 31.2 $ — $ 73.3 $ 41.7 $ 23.8 $ — $ 65.5 $ 0.4 $ 7.4 $ — $ 7.8 Depreciation and amortization (15.2 ) (17.0 ) — (32.2 ) (14.9 ) (13.8 ) — (28.7 ) 0.3 3.2 — 3.5 Property operating expenses, other operating and real estate taxes (11.2 ) (12.2 ) — (23.4 ) (11.9 ) (10.0 ) — (21.9 ) (0.7 ) 2.2 — 1.5 General and administrative expenses — — — (8.2 ) — — — (8.0 ) — — — 0.2 Impairment charge — (0.3 ) — (0.3 ) — — — — — 0.3 — 0.3 Gain on disposition of properties — 12.1 — 12.1 — 5.1 — 5.1 — 7.0 — 7.0 Operating income 15.8 13.7 — 21.3 15.0 5.1 — 12.1 0.8 8.6 — 9.2 Interest income — — 1.7 1.7 — — 3.5 3.5 — — (1.8 ) (1.8 ) Other income — 5.0 — 5.0 — — — — — 5.0 — (5.0 ) Equity in earnings (losses) of unconsolidated affiliates 1.8 (0.5 ) — 1.3 2.0 (1.6 ) — 0.4 (0.2 ) 1.1 — 0.9 Interest expense (7.3 ) (11.8 ) — (19.1 ) (7.0 ) (11.1 ) — (18.1 ) 0.3 0.7 — 1.0 Income tax provision — — — (1.4 ) — — — (0.5 ) — — — (0.9 ) Net income (loss) 10.2 6.5 1.7 8.8 10.0 (7.7 ) 3.5 (2.6 ) 0.2 14.2 (1.8 ) 11.4 Net loss attributable to noncontrolling interests 0.3 1.4 — 1.6 0.1 11.7 — 11.8 0.2 (10.3 ) — (10.2 ) Net income attributable to Acadia $ 10.5 $ 7.8 $ 1.7 $ 10.5 $ 10.1 $ 4.0 $ 3.5 $ 9.2 $ 0.4 $ 3.8 $ (1.8 ) $ 1.3 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 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 Revenues Depreciation and amortization expense for the Funds increased Property operating expenses, other operating and real estate taxes for the Funds increased $2.2 million for the three months ended September 30, 2019 compared to the prior year period primarily due to Fund property acquisitions in 2019 and 2018. Other income for the Funds increased $5.0 million for the three months ended September 30, 2019 compared to the prior year period due to the Equity in Interest expense for the Funds increased $0.7 million for the three months ended September 30, 2019 compared to the prior year period due to Net loss attributable to Structured Financing The results of operations for our Structured Financing segment are depicted in the table above under the headings labeled “SF.” Unallocated The Company does not allocate general and administrative expense and income taxes to its reportable segments. Comparison of Results for theNine Months Ended September 30, The results of operations by reportable segment for the nine months ended September 30, Nine Months Ended Nine Months Ended September 30, 2019 September 30, 2018 Increase (Decrease) Core Funds SF Total Core Funds SF Total Core Funds SF Total Revenues $ 131.4 $ 86.2 $ — $ 217.5 $ 123.0 $ 67.0 $ — $ 190.0 $ 8.4 $ 19.2 $ — $ 27.5 Depreciation and amortization (45.9 ) (46.9 ) — (92.8 ) (45.3 ) (41.5 ) — (86.8 ) 0.6 5.4 — 6.0 Property operating expenses, other operating and real estate taxes (34.7 ) (32.2 ) — (66.9 ) (32.1 ) (26.8 ) — (58.9 ) 2.6 5.4 — 8.0 General and administrative expenses — — — (25.6 ) — — — (24.4 ) — — — 1.2 Impairment charge — (1.7 ) — (1.7 ) — — — — — 1.7 — 1.7 Gain on disposition of properties — 14.1 — 14.1 — 5.1 — 5.1 — 9.0 — 9.0 Operating income 50.7 19.5 — 44.6 45.6 3.9 — 25.1 5.1 15.6 — 19.5 Interest income — — 6.2 6.2 — — 10.5 10.5 — — (4.3 ) (4.3 ) Other income 0.3 6.6 — 6.9 — — — — (0.3 ) 6.6 — (6.9 ) Equity in earnings (losses) of unconsolidated affiliates 7.3 (0.2 ) — 7.1 5.2 1.9 — 7.1 2.1 (2.1 ) — - Interest expense (20.9 ) (35.9 ) — (56.7 ) (20.5 ) (30.4 ) — (50.9 ) 0.4 5.5 — 5.8 Income tax provision — — — (1.6 ) — — — (0.9 ) — — — (0.7 ) Net income 37.5 (10.0 ) 6.2 6.5 30.3 (24.6 ) 10.5 (9.0 ) 7.2 14.6 (4.3 ) 15.5 Net loss attributable to noncontrolling interests 0.6 24.5 — 25.2 0.2 33.1 — 33.3 0.4 (8.6 ) — (8.1 ) Net income attributable to Acadia $ 38.1 $ 14.6 $ 6.2 $ 31.7 $ 30.5 $ 8.5 $ 10.5 $ 24.3 $ 7.6 $ 6.1 $ (4.3 ) $ 7.4 Core Portfolio Segment net income attributable to Acadia for our Core Portfolio increased Revenues Property operating expenses, other operating Equity in earnings of unconsolidated affiliates for our Core Portfolio increased $2.1 million for the Funds Segment net income attributable to Acadia for the Funds Revenues Depreciation and amortization for the Funds increased $5.4 million for the nine months ended September 30, 2019 compared to the prior year period due to Fund property acquisitions in 2019 and 2018. Property operating expenses, other operating and real estate taxes for the Funds increased $5.4 million for the nine months ended September 30, 2019 compared to the prior year period due to Fund property acquisitions in 2019 and 2018. The $1.7 million impairment charge in 2019 relates to residential condominium units at Fund IV’s 210 Bowery (Note 8). Gain on disposition of properties for the Funds increased $9.0 million for the nine months ended September 30, 2019 compared to the prior year period due to the sale of 938 W North and JFK Plaza in Fund IV and Nostrand Avenue and 3104 M Street in Fund III during 2019 compared to the sales of Lake Montclair and 1861 Union in Fund IV in 2018. (Note 2, Note 4). Other income for the Funds increased $6.6 million for the nine months ended September 30, 2019 compared to the prior year period due to $5.0 million from the New Market Tax Credit transaction at Fund II’s City Point investment (Note 7) and $1.6 million from an incentive fee earned from Fund III’s Storage investment. Equity in earnings of unconsolidated affiliates for the Funds decreased $2.1 million for the nine months ended September 30, 2019 compared to the prior year period due to a $3.2 million distribution from Fund III’s Storage Post venture in 2018 (Note 4) offset by $1.1 million from the recognition of 100% of the net loss from the Broughton Street Portfolio venture in 2018 as our partner is no longer being allocated their share of the losses. Interest expense for the Funds increased $5.5 million for the nine months ended September 30, 2019 compared to the prior year period due to a $4.9 million increase related to higher average outstanding borrowings in 2019, a $1.5 million increase related to higher average interest rates during 2019 and $1.4 million from higher loan cost amortization in 2019. These increases were partially offset by $2.4 million more interest capitalized in 2019. Net loss attributable to noncontrolling interests for the Funds decreased $8.6 million for the nine months ended September 30, 2019 compared to the prior year period based on the noncontrolling interests’ share of the variances discussed above. Net loss attributable to noncontrolling interests in the Funds includes asset management fees earned by the Company of $13.2 million and $13.5 million for the nine months ended September 30, 2019 and 2018, respectively. Structured Financing Interest income for the Structured Financing portfolio decreased $4.3 million for the nine months ended September 30, 2019 compared to the prior year period due to the conversion of a portion of two notes receivable into increased ownership in the real estate (Note 4) during 2018 along with the payoff of a note made by Fund IV during 2019. Unallocated Unallocated general and administrative expense increased $1.2 million for the nine months ended September 30, 2019 compared to the prior year period primarily due to 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, 2019 2018 2019 2018 Consolidated operating income $ 21,265 $ 12,055 $ 44,559 $ 25,088 Add back: General and administrative 8,222 7,982 25,579 24,359 Depreciation and amortization 32,170 28,676 92,807 86,755 Impairment charge 321 — 1,721 — Less: Above/below market rent, straight-line rent and other adjustments (4,338 ) (4,387 ) (16,970 ) (15,491 ) Gain on disposition of properties (12,056 ) (5,107 ) (14,070 ) (5,140 ) Consolidated NOI 45,584 39,219 133,626 115,571 Noncontrolling interest in consolidated NOI (13,157 ) (9,482 ) (38,217 ) (26,913 ) Less: Operating Partnership's interest in Fund NOI included above (3,480 ) (2,477 ) (10,292 ) (6,938 ) Add: Operating Partnership's share of unconsolidated joint ventures NOI (a) 6,288 6,280 19,553 18,356 NOI - Core Portfolio $ 35,235 $ 33,540 $ 104,670 $ 100,076 (a) Does not include the Operating Partnership’s share of NOI from unconsolidated joint ventures within the Same-Property NOI includes Core Portfolio properties that we owned for both the current and prior periods presented, but excludes those properties which we acquired, sold or expected to sell, and developed during these periods. Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Core Portfolio NOI $ 35,235 $ 33,540 $ 104,670 $ 100,076 Less properties excluded from Same-Property NOI (4,046 ) (3,286 ) (11,737 ) (10,844 ) Same-Property NOI $ 31,189 $ 30,254 $ 92,933 $ 89,232 Percent change from prior year period 3.1 % 4.1 % Components of Same-Property NOI: Same-Property Revenues $ 41,678 $ 42,056 $ 125,893 $ 121,990 Same-Property Operating Expenses (10,489 ) (11,802 ) (32,960 ) (32,758 ) Same-Property NOI $ 31,189 $ 30,254 $ 92,933 $ 89,232 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, 2019 Nine Months Ended September 30, 2019 Core Portfolio New and Renewal Leases Cash Basis Straight- Line Basis Cash Basis Straight- Line Basis Number of new and renewal leases executed 17 17 33 33 GLA commencing 254,531 254,531 492,444 492,444 New base rent $ 22.96 $ 24.17 $ 17.08 $ 17.80 Expiring base rent $ 21.97 $ 20.37 $ 16.32 $ 15.43 Percent growth in base rent 4.5 % 18.7 % �� 4.7 % 15.4 % Average cost per square foot (a) $ 7.87 $ 7.87 $ 5.18 $ 5.18 Weighted average lease term (years) 8.4 8.4 7.0 7.0 (a) The average cost per square foot includes tenant improvement costs, leasing commissions and tenant allowances. Funds from Operations We consider funds from operations (“FFO”) as defined by the National Association of Real Estate Investment Trusts (“NAREIT”) to be an appropriate supplemental disclosure of operating performance for an equity REIT due to its widespread acceptance and use within the REIT and analyst communities. FFO is presented to assist investors in analyzing our performance. It is helpful as it excludes various items included in net income that are not indicative of the operating performance, such as gains (losses) from sales of depreciated property, depreciation and amortization, and impairment of depreciable real estate. Our method of calculating FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. FFO does not represent cash generated from operations as defined by generally accepted accounting principles (“GAAP”) and is not indicative of cash available to fund all cash needs, including distributions. It should not be considered as an alternative to net income for the purpose of evaluating our performance or to cash flows as a measure of liquidity. Consistent with the NAREIT definition, we define FFO as net income (computed in accordance with GAAP), excluding gains (losses) from sales of depreciated property and impairment of depreciable real estate, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Three Months Ended September 30, Nine Months Ended September 30, (dollars in thousands except per share data) 2019 2018 2019 2018 Net income attributable to Acadia $ 10,458 $ 9,225 $ 31,735 $ 24,309 Depreciation of real estate and amortization of leasing costs (net of noncontrolling interests' share) 22,436 21,141 66,157 63,812 Impairment charge (net of noncontrolling interests' share) 74 — 395 — Gain on disposition of properties (net of noncontrolling interests’ share) (2,758 ) (994 ) (3,142 ) (994 ) Income attributable to Common OP Unit holders 649 596 2,031 1,572 Distributions - Preferred OP Units 135 135 405 404 Funds from operations attributable to Common Shareholders and Common OP Unit holders $ 30,994 $ 30,103 $ 97,581 $ 89,103 Funds From Operations per Share - Diluted Basic weighted-average shares outstanding, GAAP earnings 84,888,445 81,565,805 83,552,182 82,245,020 Weighted-average OP Units outstanding 5,082,189 4,928,636 5,139,545 4,953,549 Basic weighted-average shares outstanding, FFO 89,970,634 86,494,441 88,691,727 87,198,569 Assumed conversion of Preferred OP Units to common shares 499,345 499,345 499,345 499,345 Assumed conversion of LTIP units and restricted share units to common shares 212,776 257,658 212,776 201,675 Diluted weighted-average number of Common Shares and Common OP Units outstanding, FFO 90,682,755 87,251,444 89,403,848 87,899,589 Diluted Funds from operations, per Common Share and Common OP Unit $ 0.34 $ 0.35 $ 1.09 $ 1.01 LIQUIDITY AND CAPITAL RESOURCES Uses of Liquidity and Cash Requirements Our principal uses of liquidity are (i) distributions to our shareholders and OP unit holders, (ii) investments which include the funding of our capital committed to the Funds and property acquisitions and development/re-tenanting activities within our Core Portfolio, (iii) distributions to our Fund investors, Distributions In order to qualify as a REIT for Investments in Real Estate During the nine months ended September 30, • On January 24, 2019, our unconsolidated Renaissance portfolio venture acquired Fund III’s 3104 M Street property located in Washington, D.C. for $10.7 million (Note 4). • On March 15, March 27, May 29, and July 30, 2019, we acquired four retail condominiums located in the Soho section of New York City for a total of $74.7 million as part of a collection of seven properties referred to as the “Soho Acquisitions” with an aggregate purchase price of approximately $122.0 million (Note 2). The acquisitions of the remaining three properties are expected to be finalized through early 2020. No assurance can be given that we will successfully close on the remaining acquisitions under contract, which are subject to customary closing conditions. • On March 19, 2019, Fund V acquired • On April 30, 2019, Fund V acquired an interest in an unconsolidated (Note 4) suburban shopping center in Vernon, Connecticut for $36.7 million. • On May 1, 2019, Fund IV acquired a • On May 2, 2019, we entered into a ground lease (Note 11) on a development property • On May 6, 2019, Fund • On June 21, 2019, Fund V acquired a suburban shopping center (Note 2) in Lincoln, Rhode Island for $54.3 million. • On August 2, Fund V acquired a suburban shopping center (Note 2) in Virginia Beach, Virginia for $87.0 million. • On August 21, Fund V acquired an interest in a two unconsolidated suburban shopping centers (Note 4) in Frederick County, Maryland for a • Capital Commitments During the nine months ended September 30, • $3.3 million to Fund III. Fund III was launched in May 2007 with total committed capital of $450.0 million, of which our original share was $89.6 million. During 2015, we acquired an additional interest, which had an original capital commitment of $20.9 million. • $21.3 million to Fund IV. Fund IV was launched in May 2012 with total committed capital of $530.0 million, of which our original share was $122.5 million. • $52.5 million to Fund V. Fund V was launched in August 2016 with total committed capital of $520.0 million, of which our initial share is $104.5 million. During April 2018, a distribution was made to the Fund II Development Activities During the nine months ended September 30, 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, 2019 2018 Total Debt - Fixed and Effectively Fixed Rate $ 1,236,805 $ 1,001,658 Total Debt - Variable Rate 427,337 558,675 1,664,142 1,560,333 Net unamortized debt issuance costs (9,463 ) (10,541 ) Unamortized premium 676 753 Total Indebtedness $ 1,655,355 $ 1,550,545 As of September 30, There is A mortgage loan in the Company’s Core Portfolio for $26.3 million was in default and subject to litigation at September 30, 2019 and December 31, 2018 (Note 7). Share Repurchase Program During the nine months ended September 30, 2019, we made no repurchases under the share repurchase program (Note 10), under which $144.9 million currently remains available. Sources of Liquidity Our primary sources of capital for funding our liquidity needs include (i) the issuance of both public equity and OP Units, (ii) the issuance of both secured and unsecured debt, (iii) unfunded capital commitments from noncontrolling interests within our Funds, (iv) future sales of existing properties, (v) repayments of structured financing investments, and ATM Program We have an corporate purposes. Fund Capital During the nine months ended September 30, 2019, Funds III, IV and V called capital contributions Asset Sales As previously discussed, during the nine months ended September 30, 2019 the Funds made the following dispositions: • On January 24, 2019, a venture in which Fund III holds an 80% interest sold its 3104 M Street property to an unconsolidated venture (Note 4) in which the Core Portfolio holds a 20% interest for $10.5 million. The acquiring venture assumed the property’s mortgage in the amount of $4.7 million. • On July 24, 2019, Fund IV sold its JFK Plaza property (Note 2) for $7.8 million. • On August 22, 2019, Fund III sold its Nostrand Avenue property (Note 2) for $27.7 million. • On May 17 and September 23, 2019, Fund IV sold two residential condominium units for a total of $5.9 million. • On September 27, 2019 Fund IV sold its 938 W. North Street property (Note 2) for $32.0 million. We recognized an aggregate net gain on the sales of these consolidated properties of $14.1 million, for which our share was $3.1 million net of noncontrolling interests. Structured Financing Repayments During the nine months ended September 30, Financing and Debt As of September 30, HISTORICAL CASH FLOW The following table compares the historical cash flow for the nine months ended September 30, Nine Months Ended September 30, 2019 2018 Variance Net cash provided by operating activities $ 95.2 $ 67.2 $ 28.0 Net cash used in investing activities (359.6 ) (76.3 ) (283.3 ) Net cash provided by (used in) financing activities 290.6 (54.5 ) 345.1 Increase (decrease) in cash and restricted cash $ 26.2 $ (63.6 ) $ 89.8 Operating Activities Our operating activities provided Investing Activities During the nine months ended September 30, 2019 as compared to the nine months ended September 30, 2018, our investing activities used Financing Activities Our financing activities provided CONTRACTUAL OBLIGATIONS The following table summarizes: (i) principal and interest obligations under mortgage and other notes, (ii) rents due under non-cancelable operating and capital leases, which includes ground leases at seven of our properties and the lease for our corporate office and (iii) construction commitments as of September 30, 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 $ 1,664.1 $ 613.4 $ 395.5 $ 456.0 $ 199.2 Interest obligations on debt 238.8 71.7 85.0 39.3 42.8 Lease obligations (a) 365.0 1.8 14.2 14.2 334.8 Construction commitments (b) 42.9 42.9 — — — Total $ 2,310.8 $ 729.8 $ 494.7 $ 509.5 $ 576.8 (a) A ground lease expiring during 2078 provides the Company with an option to purchase the underlying land during 2031. If we do not exercise the option, the rents that will be due are based on future values and as such are not determinable at this time. Accordingly, the above table does not include rents for this lease beyond (b) In conjunction with the development of our Core Portfolio and Fund properties, we have entered into construction commitments with general contractors. We intend to fund these requirements with existing liquidity. OFF-BALANCE SHEET ARRANGEMENTS We have the following investments made through joint ventures for the purpose of investing in operating properties. We account for these investments using the equity method of accounting. As such, our financial statements reflect our investment and our share of income and loss from, but not the individual assets and liabilities, of these joint ventures. See Operating Partnership September 30, 2019 Investment Ownership Percentage Pro-rata Share of Mortgage Debt Interest Rate Maturity Date 650 Bald Hill 20.8 % $ 3.5 4.74 % Apr 2020 Eden Square (a) 22.8 % 5.6 4.24 % Jun 2020 Promenade at Manassas (b) 22.8 % 5.9 3.84 % Dec 2021 3104 M Street 20.0 % 0.9 5.75 % Dec 2021 Family Center at Riverdale (c) 18.0 % 5.8 3.79 % May 2022 Gotham Plaza (d) 49.0 % 9.6 3.69 % Jun 2023 Renaissance Portfolio 20.0 % 32.0 3.79 % Aug 2023 Crossroads 49.0 % 32.0 3.94 % Oct 2024 840 N. Michigan 88.4 % 65.0 4.36 % Feb 2025 Georgetown Portfolio 50.0 % 8.0 4.72 % Dec 2027 Total $ 168.3 (a) Our unconsolidated affiliate is a party to two interest rate LIBOR caps. One of the interest rate LIBOR caps effectively fixes the interest rate at 3.00%. The second interest rate LIBOR cap effectively fixes the interest rate at 3.85%. (b) Our unconsolidated affiliate is a party to an interest rate LIBOR swap, which effectively fixes the all-in interest rate at 4.57%. (c) Our unconsolidated affiliate is a party to an interest rate LIBOR swap, which effectively fixes the all-in interest rate at 3.68%. (d) Our unconsolidated affiliate is a party to an interest rate LIBOR swap, which effectively fixes the all-in interest rate at 5.09%. CRITICAL ACCOUNTING POLICIES Management’s discussion and analysis of financial condition and results of operations is based upon our Recently Issued and Adopted Accounting Pronouncements ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Information as ofSeptember 30, Our primary market risk exposure is to changes in interest rates related to our mortgage and other debt. See 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, The following table sets forth information as of September 30, Core Consolidated Mortgage and Other Debt Year Scheduled Amortization Maturities Total Weighted-Average Interest Rate 2019 (Remainder) $ 0.8 $ 26.2 $ 27.0 6.0 % 2020 3.2 — 3.2 — % 2021 3.4 — 3.4 — % 2022 3.5 — 3.5 — % 2023 2.9 367.8 370.7 3.4 % Thereafter 15.4 185.3 200.7 3.9 % $ 29.2 $ 579.3 $ 608.5 Fund Consolidated Mortgage and Other Debt Year Scheduled Amortization Maturities Total Weighted-Average Interest Rate 2019 (Remainder) $ 0.5 $ 94.3 $ 94.8 5.1 % 2020 2.0 556.3 558.3 4.3 % 2021 1.6 235.7 237.3 4.2 % 2022 1.5 86.4 87.9 4.3 % 2023 0.7 40.9 41.6 3.6 % Thereafter 0.1 35.6 35.7 3.9 % $ 6.4 $ 1,049.2 $ 1,055.6 Mortgage Debt in Unconsolidated Partnerships (at our Pro-Rata Share) Year Scheduled Amortization Maturities Total Weighted-Average Interest Rate 2019 (Remainder) $ 0.3 $ — $ 0.3 0.0 % 2020 1.1 9.0 10.1 4.4 % 2021 1.1 6.8 7.9 4.1 % 2022 1.2 5.8 7.0 3.8 % 2023 1.0 40.6 41.6 3.8 % Thereafter 1.6 99.8 101.4 4.3 % $ 6.3 $ 162.0 $ 168.3 In 2019, $121.8 million of our total consolidated debt and Based on our outstanding debt balances as of September 30, As of September 30, Based on our outstanding notes receivable balances as of September 30, Summarized Information as of December 31, As of December 31, Interest expense on our variable-rate debt of Changes in Market Risk Exposures from Our interest rate risk exposure from December 31, 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, Changes in Internal Control Over Financial Reporting There have been no changes in our internal control over financial reporting during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. PART ITEM 1. LEGAL PROCEEDINGS. We are involved in various matters of litigation arising out of, or incident to, our business, including the litigation described in ITEM 1A. RISK FACTORS. The most significant risk factors applicable to us are described in Item 1A. of our 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. ITEM 6. EXHIBITS. The following is an index to all exhibits including (i) those filed with this Quarterly Report on Form 10-Q and (ii) those incorporated by reference herein: Exhibit No. Description Method of Filing 10.1 Incorporated by reference to 10.2 Second Amended and Restated Limited Partnership Agreement dated July 23, 2019 Incorporated by reference to the copy thereof filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed on July 25, 2019. 31.1 Filed herewith 31.2 Filed herewith 32.1 Filed herewith 32.2 Filed herewith 101.INS XBRL Instance Document– the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. Filed herewith 101.SCH XBRL Taxonomy Extension Schema Document Filed herewith 101.CAL XBRL Taxonomy Extension Calculation Document Filed herewith 101.DEF XBRL Taxonomy Extension Definitions Document Filed herewith 101.LAB XBRL Taxonomy Extension Labels Document Filed herewith 101.PRE XBRL Taxonomy Extension Presentation Document Filed herewith 104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) Filed herewith SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the ACADIA REALTY TRUST (Registrant) By: /s/ Kenneth F. Bernstein Kenneth F. Bernstein Chief Executive Officer, President and Trustee By: /s/ John Gottfried John Gottfried Senior Vice President and Chief Financial Officer By: /s/ Richard Hartmann Richard Hartmann Senior Vice President and Chief Accounting Officer Dated: 63 |