Acadia Realty Trust — Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2022. This is an annual filing, not a standalone fourth-quarter report. Acadia is an integrated U.S. retail REIT operating through an UPREIT structure, with Core Portfolio, Funds, and Structured Financing segments.
Business Context and Portfolio
- At year-end, the Company owned or held interests in 202 properties across its Core Portfolio and Funds.
- The Core Portfolio comprised 143 operating properties totaling approximately 5.6 million square feet, with 92.1% physical occupancy and 94.4% leased occupancy.
- Fund properties totaled approximately 8.0 million square feet, with 88.9% physical occupancy and 92.5% leased occupancy.
- Core Portfolio annualized base rent was $163.9 million; Acadia’s pro rata share was $148.4 million. Acadia’s pro rata Fund base rent was $29.8 million.
- Geographic exposure is concentrated in the New York and Chicago metropolitan areas, which represented 38.2% and 24.6%, respectively, of Core Portfolio annual base rent.
Financial Performance and Key Metrics
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Total revenue | $326.3 million | $292.5 million | +$33.8 million |
| Rental income | $317.8 million | $285.9 million | +$31.9 million |
| Operating income | $68.2 million | $30.7 million | +$37.6 million |
| Net loss attributable to Acadia | $(35.4) million | $23.5 million | $(58.9) million |
| Diluted loss per share | $(0.40) | $0.26 | Unfavorable |
| FFO attributable to common shareholders and OP unitholders | $103.6 million | $117.1 million | $(13.5) million |
| Diluted FFO per share/unit | $1.02 | $1.26 | $(0.24) |
| Net cash provided by operating activities | $133.2 million | $105.0 million | +$28.2 million |
- Calculated operating margin was approximately 20.9%, compared with approximately 10.5% in 2021. The net loss margin attributable to Acadia was approximately negative 10.9% in 2022.
- Core same-property NOI increased 6.3% to $120.4 million. New and renewal leases generated cash-basis rent growth of 10.2% and straight-line rent growth of 15.8%.
- Revenue growth reflected acquisitions, lease-up, tenant collections, and the consolidation of additional investments, partly offset by property dispositions.
Liquidity, Debt and Capital Resources
- Cash and cash equivalents were $17.2 million, with restricted cash of $15.1 million.
- Consolidated debt was $1.805 billion, compared with $1.820 billion in 2021. Total indebtedness, net of debt issuance costs and including premium, was $1.793 billion.
- Approximately 79.8% of debt was fixed or effectively fixed; 20.2%, or $364.6 million, was variable-rate debt. A 100-basis-point increase in rates would increase annual interest expense on variable-rate debt by approximately $3.6 million before noncontrolling interests.
- Available capacity under consolidated revolving debt facilities was approximately $173.5 million at year-end.
- Debt scheduled to mature, without regard to extension options, totaled $340.1 million in 2023 and $251.7 million in 2024. The Company expects to refinance at least part of these maturities or pursue other alternatives.
- The Company paid $68.3 million of dividends and distributions during 2022. The regular quarterly dividend increased from $0.15 per share in 2021 to $0.18 per share in 2022.
- The Company issued 5.5 million common shares under its ATM program for $123.9 million of gross proceeds, or $119.5 million net. No shares were repurchased in 2022.
Material Changes Versus 2021
- Revenue increased 11.6%, but net income attributable to Acadia declined from $23.5 million to a $35.4 million loss.
- Results were adversely affected by a $38.9 million unrealized mark-to-market loss on the Albertsons investment, compared with a $51.9 million unrealized gain in 2021.
- The Company recorded $33.3 million of consolidated real estate impairment charges and a $50.8 million impairment related to its 840 N. Michigan Avenue unconsolidated investment.
- Gains on property dispositions increased to $57.2 million from $10.5 million, reflecting multiple Fund and Core property sales.
- Interest expense increased to $80.2 million from $68.0 million, primarily because of higher average borrowings and interest rates.
- Variable-rate debt declined materially from $780.9 million, or 42.9% of total debt, at year-end 2021 to $364.6 million, or 20.2%, at year-end 2022.
- Operating cash flow improved, while financing cash flow shifted from $91.3 million provided in 2021 to $4.4 million used in 2022, reflecting higher debt repayments, distributions, and investments in noncontrolling interests.
Outlook, Commentary, Risks and Unusual Items
- The filing does not provide formal earnings, FFO, revenue, or occupancy guidance.
- Management expects to continue acquiring and developing retail properties, investing in re-tenanting and redevelopment, and using a combination of equity, secured and unsecured debt, asset sales, and Fund capital.
- Inflation and rising interest rates may increase financing, construction, property operating, and general and administrative costs. Management noted that contractual rent increases may not fully offset current inflation.
- The Company faces refinancing risk, particularly for 2023 and 2024 maturities, and exposure to the transition from LIBOR to SOFR or other replacement benchmarks.
- Retail tenant credit, bankruptcies, anchor vacancies, co-tenancy provisions, e-commerce trends, lease expirations, and concentrated exposure to New York and Chicago could affect revenues and property values.
- One Core Portfolio note receivable totaling $21.6 million, including accrued interest, remained in default at year-end. Management believes the collateral is sufficient to cover the carrying value.
- A $28.2 million Albertsons special dividend was received in January 2023, of which Acadia’s share was $11.3 million; it will be recognized in the first quarter of 2023.
- The Company previously identified a material weakness related to consolidation accounting and restated certain prior-period financial statements. Management and the independent auditor concluded that the weakness was remediated as of December 31, 2022.
- Management does not expect existing litigation to have a material adverse effect, but environmental, climate, cybersecurity, insurance, regulatory, joint-venture, and REIT qualification risks remain material considerations.
Important Facts for Investors to Verify
- Ability to refinance or otherwise address $340.1 million of 2023 consolidated debt maturities and related unconsolidated debt obligations.
- Current occupancy, tenant collections, lease renewals, and exposure to anchor or major-tenant distress.
- Impact of higher interest rates and LIBOR-to-SOFR transition on future interest expense and debt covenants.
- Valuation and operating prospects of impaired assets, particularly 840 N. Michigan Avenue, 146 Geary Street, and 717 N. Michigan Avenue.
- Future fair-value changes and liquidity associated with the Albertsons investment and the timing of related distributions.
- Remaining development and redevelopment commitments, estimated at $70.8 million to $98.0 million in total costs, with an estimated Acadia share of approximately $49.7 million to $69.2 million.
- Execution of the remediation controls following the prior restatement and continued reliability of financial reporting.