Acadia Realty Trust: Q1 2021 Form 10-Q Summary
Business Context and Reporting Period
Acadia Realty Trust is a fully integrated equity REIT focused primarily on retail properties in densely populated, supply-constrained U.S. markets. The company operates through its Operating Partnership and owns interests in 186 properties across its Core Portfolio and four opportunity funds, plus structured-financing investments. This unaudited Form 10-Q covers the three months ended March 31, 2021, compared with the three months ended March 31, 2020.
Key Financial Metrics
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Total revenues | $69.4 million | $71.4 million | Down $2.0 million |
| Operating income (loss) | $8.7 million | $(46.3) million | Improved $55.0 million |
| Net income (loss) | $1.9 million | $(60.0) million | Improved $61.9 million |
| Net income (loss) attributable to Acadia | $5.2 million | $(8.4) million | Improved $13.6 million |
| Basic and diluted EPS | $0.06 | $(0.10) | Improved $0.16 |
| Funds from operations attributable to common shareholders and OP unit holders | $24.3 million | $27.7 million | Down $3.4 million |
| Diluted FFO per share/unit | $0.26 | $0.30 | Down $0.04 |
| Net cash provided by operating activities | $30.9 million | $28.0 million | Up $2.9 million |
Operating income margin was approximately 12.5% in Q1 2021 versus a negative margin in Q1 2020, when results included $51.5 million of impairment charges. Net income attributable to Acadia represented approximately 7.4% of revenue in Q1 2021.
- Cash and cash equivalents were $15.4 million, and restricted cash was $15.7 million, at March 31, 2021.
- Total indebtedness was $1.715 billion, including $1.189 billion of mortgage and other notes payable, $421.0 million of unsecured notes payable, and $105.4 million drawn on the unsecured line of credit.
- Debt declined from $1.764 billion at December 31, 2020. Approximately 64.1% of debt was fixed or effectively fixed, while 35.9% was variable-rate debt.
- Net real estate investments were $3.472 billion, compared with $3.507 billion at year-end 2020. Total assets were $4.154 billion.
- Cash flow from investing activities was positive $11.5 million, driven primarily by $15.7 million of net property-disposition proceeds. Financing activities used $45.2 million, principally for debt repayments and distributions.
- The company declared a quarterly distribution of $0.15 per common share and OP unit, reinstating common distributions after suspension from Q2 2020 through Q4 2020.
Material Changes Versus the Prior Comparable Period
- Revenue declined 2.8%, primarily because of tenant vacancies, COVID-19-related abatements, the temporary closure of the Market Hall at City Point, and property dispositions. Core Portfolio revenue increased $2.4 million, while Funds revenue decreased $4.5 million.
- Results benefited substantially from the absence of Q1 2020 impairment charges totaling $51.5 million, primarily in the Funds segment.
- The company sold 60 Orange Street in Bloomfield, New Jersey, for $16.4 million, repaid $6.7 million of related mortgage debt, and recognized a $4.6 million gain.
- Investment gains included a $6.1 million unrealized holding gain from the company’s Albertsons investment. This compares with a $0.5 million holding loss in Q1 2020.
- Core same-property NOI declined 14.5% to $28.4 million, reflecting lower rental revenue and COVID-19-related tenant effects.
- At March 31, 2021, pro rata leased occupancy was 91.0% for the Core Portfolio and 89.0% for the Funds, compared with 93.9% and 93.2%, respectively, at March 31, 2020.
- COVID-19-related charges at the company’s pro rata share declined to $3.7 million from $16.7 million in the prior-year quarter.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- The filing does not provide formal earnings or FFO guidance.
- At March 31, 2021, 92.4% of Core Portfolio ABR and 94.8% of Fund ABR came from stores that were open or partially open. The company had collected or negotiated payment agreements for approximately 91.8% of Core Portfolio and 84.3% of Fund first-quarter pre-COVID billings.
- The company executed 47 rent concession arrangements during the quarter, including 12 deferrals and 35 abatements. Deferred receivables of $8.9 million remained included in rents receivable.
- Debt maturities without regard to extensions totaled $365.8 million in 2021 and $535.6 million in 2022. Available extension options cover approximately $260.5 million of 2021 maturities and $250.6 million of 2022 maturities, but the company cautions that extensions may not be successfully executed.
- One Fund III mortgage totaling $35.6 million had not met a liquidity requirement at quarter-end; management expected the issue to be remedied through the sale of 654 Broadway, which was classified as held for sale.
- Two structured-financing loans remained in default: a Core loan with approximately $21.6 million outstanding and a Fund III loan with approximately $10.0 million outstanding. Management determined that collateral was sufficient to cover the carrying values.
- Development and redevelopment projects had estimated total remaining costs of $105.3 million to $132.9 million, with Acadia’s estimated share of approximately $57.0 million to $68.9 million. Most remaining spending was discretionary.
- Key risks include the continuing effects of COVID-19 on tenants and rent collections, retailer bankruptcies, vacancies and lease renewals, refinancing and interest-rate risk, joint-venture dependence, property valuations, development execution, environmental and catastrophic-event exposure, cybersecurity, and continued REIT qualification.
- A 100-basis-point increase in interest rates would increase annual interest expense by approximately $9.2 million on refinanced debt and by approximately $6.2 million on existing variable-rate debt, before noncontrolling-interest effects.
- Subsequent events included an agreement to sell four Fund IV properties for $40.4 million, additional debt extensions, a one-year extension of Fund V’s investment period, and issuance of a $16.0 million note to a venture partner.
Most Important Facts for Investors to Verify
- Whether tenant collections, occupancy, abatements, and rent concessions continue to improve as COVID-19 restrictions recede.
- Whether the company can refinance or extend the substantial 2021 and 2022 debt maturities on acceptable terms.
- Completion and proceeds of the 654 Broadway sale and its effect on the Fund III liquidity covenant.
- Recoverability of the two defaulted structured-financing loans and adequacy of related credit-loss reserves.
- Underlying operating performance excluding the Q1 2020 impairment comparison, the Albertsons mark-to-market gain, and property-disposition gains.
- Progress, cost-to-complete, leasing demand, and expected returns for development and redevelopment projects.
- Future common distributions and the company’s ability to sustain them while meeting debt service, capital commitments, and Fund obligations.