ACADIA REALTY TRUST - 10-Q Summary (Period Ended Sept 30, 2010)
Business Context and Reporting Period
This is a Quarterly Report (Form 10-Q) for Acadia Realty Trust, a self-managed equity REIT focused on retail properties, including neighborhood shopping centers, mixed-use properties, and self-storage facilities. The report covers the three and nine months ended September 30, 2010. The Company operates through a Core Portfolio and three Opportunity Funds (Fund I, II, and III), as well as a Retailer Controlled Property (RCP) Venture.
Key Financial Metrics
| Metric (Nine Months Ended Sept 30, 2010) | Value (in thousands) |
|---|---|
| Total Revenues | $113,920 |
| Net Income | $41,285 |
| Net Income Attributable to Common Shareholders | $23,045 |
| Funds From Operations (FFO) | $38,300 |
| FFO Per Share (Diluted) | $0.94 |
| Net Cash Provided by Operating Activities | $22,592 |
| Total Assets | $1,490,748 |
| Total Liabilities | $916,908 |
| Total Debt (Mortgages + Notes Payable) | $832,151 |
| Cash and Cash Equivalents | $110,703 |
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased to $113.9 million for the nine months ended Sept 30, 2010, compared to $108.9 million in the prior year period. This was driven by increased rental income in the Opportunity Funds and Storage Portfolio.
- Significant Non-Recurring Gain: Net income was significantly boosted by a $33.8 million non-cash gain on bargain purchase resulting from the acquisition of the remaining interest in the CityPoint redevelopment project in Brooklyn, NY. Without this gain, net income would have been substantially lower.
- Debt Reduction: The Company repurchased $65.0 million in face amount of its Convertible Notes at a discount, reducing the outstanding balance to $50.0 million. Additionally, a $40.0 million principal payment was received on a Georgetown mezzanine investment.
- Operating Cash Flow: Net cash provided by operating activities decreased by $16.5 million compared to the prior year, primarily due to cash used to fund an escrow account for the CityPoint bond financing and lower proceeds from auction rate securities redemptions.
Guidance, Outlook, and Risks
- Outlook: Management continues to focus on internal growth within the Core Portfolio through redevelopment and aggressive leasing. External growth is targeted through disciplined acquisitions and the Opportunity Funds.
- Liquidity: As of September 30, 2010, the Company had approximately $104.9 million of additional capacity under existing debt facilities and $110.7 million in cash on hand. The Company expects to use Fund III and new funds for future acquisitions.
- Debt Maturities: Approximately $25.5 million of debt matures in 2010, and $400.6 million matures in 2011. Management believes it can extend or refinance these obligations using existing liquidity or market conditions.
- Risks: Primary risks include general economic conditions affecting tenant demand, interest rate fluctuations (though 54.4% of debt is fixed via swaps), and the risks associated with real estate development and joint venture investments.
Key Facts for Investor Verification
- Gain on Bargain Purchase: Verify the sustainability of earnings by excluding the $33.8 million non-cash gain from the CityPoint acquisition when assessing core operating performance.
- Debt Refinancing: Monitor the Company's ability to refinance or extend the $400.6 million in debt maturing in 2011, particularly given the competitive lending environment.
- CityPoint Project: Review the status of the CityPoint redevelopment, as it is currently in the development stage and not yet generating revenue, despite the significant accounting gain recorded.
- FFO vs. Net Income: Note the divergence between Net Income ($41.3M) and FFO ($38.3M) due to the non-cash gain and depreciation adjustments; FFO is the preferred metric for REIT operating performance.
- Convertible Notes: Confirm the remaining $50.0 million balance of Convertible Notes and the potential for further repurchases or conversion.