ACADIA REALTY TRUST annual report, FY2022

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.