ACADIA REALTY TRUST annual report, FY2023

Acadia Realty Trust 2023 Form 10-K Summary

Business context and reporting period

Acadia Realty Trust is a Maryland REIT focused on owning, acquiring, developing, redeveloping and managing retail properties in supply-constrained, densely populated U.S. markets. The Company operates through an UPREIT structure and reports three segments: Core Portfolio, Funds and Structured Financing. This filing covers the fiscal year ended December 31, 2023; the source does not provide a separate fourth-quarter income statement.

At year-end, the Company had interests in 201 Core Portfolio and Fund properties.
The Core Portfolio included 139 operating properties totaling approximately 5.4 million square feet, with 92.8% physical occupancy and 94.8% leased occupancy.
Fund properties totaled approximately 9.0 million square feet, with 91.4% physical occupancy and 93.3% leased occupancy.
Fund V completed its investment period in August 2023; remaining Fund commitments relate to existing investments.

Financial performance and key metrics

Metric	2023	2022	Change
Total revenue	$338.7 million	$326.3 million	+$12.4 million
Rental revenue	$333.0 million	$317.8 million	+$15.2 million
Operating income	$49.1 million	$68.2 million	-$19.1 million
Net income attributable to Acadia	$19.9 million	$(35.4) million	+$55.3 million
Diluted earnings per share	$0.20	$(0.40)	Improved
Funds from operations attributable to common shareholders and OP unitholders	$132.2 million	$103.6 million	+$28.6 million
Diluted FFO per share/unit	$1.28	$1.02	+$0.26
Net cash provided by operating activities	$155.8 million	$133.2 million	+$22.6 million
Core same-property NOI	$113.9 million	$107.7 million	+5.8%

Reported operating income declined despite higher revenue because 2022 included $57.2 million of gains on property dispositions, while 2023 included no property-sale gains. Interest expense increased to $93.3 million from $80.2 million, primarily due to higher borrowing costs and higher average borrowings. The Company reported a $1.7 million consolidated net loss, but net income attributable to Acadia shareholders was $19.9 million after redeemable and other noncontrolling interests.

Core Portfolio revenue increased $1.0 million, while Funds revenue increased $11.4 million.
Core same-property revenue rose to $165.9 million from $158.4 million, while same-property operating expenses increased to $52.1 million from $50.7 million.
Core new and renewal leases generated 19.5% cash-basis rent growth and 28.2% straight-line rent growth on 436,322 square feet across 65 leases.
Common dividends and distributions totaled $68.6 million, or $0.72 per common share/OP unit for 2023.

Balance sheet, debt and liquidity

Total assets were $4.29 billion at December 31, 2023, including $3.61 billion of net real estate investments.
Consolidated debt was $1.881 billion, compared with $1.805 billion at year-end 2022. Net indebtedness after unamortized costs and premium was $1.870 billion.
Approximately 77.3% of debt was fixed or effectively fixed, with $1.4547 billion at a 4.71% weighted-average rate. Variable-rate debt totaled $426.4 million at a 7.77% weighted-average rate.
Interest expense on variable-rate debt would increase by approximately $4.3 million annually for a 100-basis-point rate increase.
Cash and cash equivalents were $17.5 million, and the Company reported $106.1 million of additional capacity under existing consolidated Core and Fund revolving facilities.
Debt maturities, before available extensions, were $333.2 million in 2024 and $680.8 million in 2025. The Company expects to refinance at least part of these amounts but cautions that financing may not be available on acceptable terms.
Pro-rata unconsolidated debt maturities were $69.1 million in 2024 and $10.2 million in 2025.
The Company had $29.3 million of its share of remaining Fund capital commitments at year-end and estimated $26.1 million to $42.5 million of costs to complete consolidated development and redevelopment projects through 2025.

Material developments versus the prior comparable period

Fund V acquired Cypress Creek in Tampa, Florida, and Maple Tree Place in Williston, Vermont, for total reported consideration of approximately $127.2 million; including the Mohawk Commons unconsolidated investment, Fund V acquisitions totaled $189.3 million.
The Company received its share of a $28.2 million special Albertsons dividend, sold 200,000 Albertsons shares for $4.6 million of net proceeds and held 1.4 million shares valued at $33.3 million at year-end.
Albertsons-related dividends and fair-value gains contributed materially to 2023 investment results and are not representative of recurring property operations.
The Company completed a deed-in-lieu-of-foreclosure transfer of the vacant 146 Geary Street property and recognized a $3.7 million impairment charge.
Bed Bath & Beyond filed for bankruptcy. The Company accelerated $8.1 million of below-market lease amortization but reported no material impact on cash flows or property values and had re-leased or identified replacement tenants for most affected spaces.
2022 included $222.2 million of property dispositions and $57.2 million of disposition gains; no property dispositions were reported in 2023.
Impairment charges declined to $3.7 million from $33.3 million in 2022, when the Company recorded significant impairment related to 146 Geary Street and 717 N. Michigan Avenue.
Net cash used in investing activities increased to $208.5 million from $124.2 million, primarily because 2023 had substantially less disposition proceeds.
The Company issued no shares under its ATM program in 2023. In January 2024, it completed a 6.9 million-share offering for $113.0 million of net proceeds.

Guidance, outlook, risks and unusual items

Management did not provide formal earnings or operating guidance in the supplied filing. Management stated that it expects to continue adding value through leasing momentum, development and redevelopment projects and its leasing pipeline, while actively managing inflation, interest-rate and broader economic risks.

Management reported no material negative operating impact from macroeconomic volatility other than increased interest costs, but noted that inflation exceeds contractual rent increases and could pressure future rents and rent spreads.
Retail concentration, anchor tenant departures, tenant bankruptcies, e-commerce, lease expirations and fixed property costs could reduce occupancy, rental income and property values.
The Core Portfolio is geographically concentrated: 42.8% of Core annualized base rent came from the New York metropolitan region and 18.3% from Chicago.
Twenty key tenants accounted for approximately 17.8% of consolidated revenue; Target represented 5.2% of portfolio base rent.
Approximately 18.8% of Core Portfolio pro-rata leased square footage and 12.6% of Core annualized base rent were scheduled to expire in 2024, assuming no renewal options are exercised.
Interest-rate, refinancing and covenant risks remain significant. One Fund V mortgage did not meet its debt-service-coverage requirement at year-end and three Fund V mortgages did not meet liquidity requirements; the filing states these matters were cured or addressed in early 2024.
A $21.6 million Core Portfolio note, including accrued interest, had matured and remained unpaid at year-end. Management believed the collateral was sufficient, but recovery timing is uncertain.
The Company had $72.5 million of principal payment guarantees, $15.8 million of contractor commitments, and $25.7 million of tenant-improvement commitments, with the Company’s share of the latter two categories reported as $12.5 million and $14.6 million, respectively.
Legal proceedings are described as ordinary-course matters that management does not expect to have a material adverse effect. Environmental, climate, insurance, cybersecurity, joint-venture and REIT-qualification risks remain material uncertainties.

Most important facts for an investor to verify

Confirm the refinancing plan, available extensions and current status of the $333.2 million of consolidated debt maturing in 2024 and $680.8 million maturing in 2025.
Assess recurring FFO and property NOI excluding Albertsons dividends, mark-to-market gains, lease-termination items and other unusual or nonrecurring items.
Review occupancy, renewal spreads and leasing progress for the 2024 lease expirations, especially in New York and Chicago.
Evaluate the $21.6 million matured note receivable, the North Michigan Avenue debt restructuring and Fund V covenant compliance.
Reconcile consolidated debt with pro-rata unconsolidated debt, guarantees and noncontrolling interests when assessing leverage and liquidity.
Review the January 2024 equity offering and subsequent financing activity, including the use of the $113.0 million proceeds.
Verify dividend coverage using recurring cash flow rather than GAAP net income or FFO alone.