Acadia Realty Trust — Q1 2024 Form 10-Q Summary
Business context and reporting period
Acadia Realty Trust is a fully integrated equity REIT focused on owning, acquiring, developing and managing retail properties in high-barrier-to-entry, densely populated U.S. markets. The filing covers the three months ended March 31, 2024. The portfolio included interests in 201 properties: 149 core portfolio properties and 52 properties held through four opportunity funds. Consolidated operating properties were 91.1% occupied, including 91.6% for the Core Portfolio and 90.8% for the Fund Portfolio.
Financial results and key metrics
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Total revenues | $91.4 million | $81.8 million | +$9.6 million |
| Rental revenue | $86.0 million | $80.7 million | +$5.3 million |
| Operating income | $14.0 million | $12.1 million | +$1.9 million |
| Net income attributable to Acadia shareholders | $3.3 million | $13.4 million | -$10.1 million |
| Basic and diluted earnings per share | $0.03 | $0.14 | -$0.11 |
| Funds from operations attributable to common shareholders and OP unit holders | $31.0 million | $40.7 million | -$9.8 million |
| Diluted FFO per share and OP unit | $0.28 | $0.40 | -$0.12 |
| Net cash provided by operating activities | $26.0 million | $59.4 million | -$33.4 million |
Operating margin, calculated as operating income divided by total revenues, was approximately 15.3% versus 14.8% in the prior-year quarter. Net income was reduced by $2.1 million of unrealized losses on investments and other, a $1.2 million loss related to a previously disposed property, higher interest expense and losses from unconsolidated affiliates.
Core Portfolio same-property NOI increased 5.7% to $32.0 million. Core Portfolio new and renewal leases executed during the quarter generated cash rent spreads of 5.2% and straight-line rent spreads of 10.7% across 187,851 square feet. Consolidated net real estate investments were $3.6 billion at March 31, 2024. Total assets were $4.27 billion, shareholders’ equity was $1.76 billion and total equity was $2.23 billion.
Debt, liquidity and cash flow
- Total debt was $1.734 billion before unamortized debt costs and premium, down from $1.881 billion at December 31, 2023. Total indebtedness was $1.724 billion after those adjustments.
- Fixed or effectively fixed-rate debt represented 81.0% of total debt, with the remaining 19.0% variable-rate. The weighted average rates were 4.77% for fixed or effectively fixed debt and 8.09% for variable-rate debt.
- Cash and cash equivalents were $18.8 million; cash and restricted cash totaled $26.9 million.
- The revolving credit facility had $114.7 million outstanding and $185.3 million available at March 31, 2024.
- Debt principal repayments scheduled without available extensions totaled $222.8 million for the remainder of 2024 and $583.9 million in 2025. Extension options covered $40.1 million of 2024 maturities and $438.7 million of 2025 maturities, subject to conditions.
- Operating cash flow was lower primarily because Q1 2023 included a $28.2 million dividend from Albertsons. Investing cash flow used $3.8 million, including $12.8 million for development, construction and property improvements. Financing cash flow used $20.5 million, reflecting substantial debt repayments offset by $113.8 million of common share issuance proceeds.
- The Company paid $18.6 million of common share and preferred OP unit distributions during the quarter and declared a $0.18 per common share dividend.
Material changes versus the prior comparable period
- Revenue increased 11.6%, supported by Fund property acquisitions, new tenant lease-up and a $3.5 million forfeited deposit recognized in other revenue.
- Core Portfolio same-property NOI increased 5.7%, while total Core Portfolio NOI declined modestly to $35.95 million from $36.22 million because of portfolio composition and adjustments.
- Funds segment income attributable to Acadia declined $10.8 million, primarily because Q1 2023 benefited from approximately $28.2 million of Albertsons dividend income; higher Fund revenues were more than offset by the absence of that income, increased expenses and higher interest costs.
- Interest expense increased to $23.7 million from $21.6 million, reflecting higher average interest rates, although debt balances and variable-rate exposure declined.
- The Company completed a January underwritten offering of 6.9 million common shares for approximately $113.0 million of net proceeds and sold 87,139 shares through its ATM program for $1.5 million.
- Fund V repaid its $80.6 million subscription line. The Company entered into a $43.4 million Fund mortgage, extended two Fund mortgages totaling $67.7 million and repaid a $7.3 million Core mortgage at maturity.
- In April 2024, two Fund IV properties were sold for $14.1 million and $6.4 million of related mortgage debt was repaid.
Guidance, outlook, risks and unusual items
The filing does not provide quantitative earnings, FFO or occupancy guidance. Management cited continued leasing momentum, consumer confidence, active development and redevelopment projects, and the leasing pipeline as sources of potential value creation. Management stated that, aside from increased interest costs, it had not experienced material negative impacts from prevailing economic conditions at the reporting date.
On April 15, 2024, the Company amended its credit facility. The revolver increased from $300 million to $350 million, its maturity was extended to April 15, 2028, and the $400 million term loan maturity was also extended to April 15, 2028. Both facilities include two additional six-month extension options, and the accordion feature permits total facility capacity of up to $900 million, subject to customary conditions.
- Key risks include refinancing and interest-rate risk, inflation, economic slowdown, constrained capital markets, tenant renewals and re-leasing, joint venture and Fund dependence, development execution, property and environmental risks, catastrophic weather, cybersecurity and REIT qualification.
- A Core Portfolio note with a carrying amount of approximately $21.6 million, including accrued interest, remained in default. Management believes the collateral is sufficient to cover the carrying value and has reserved its rights.
- The Company had approximately $14.5 million of aggregate construction commitments and $21.7 million of tenant-improvement obligations, with its share approximately $11.8 million and $11.6 million, respectively.
- Development and redevelopment projects had estimated remaining costs of $44.8 million to $71.2 million, with the Company’s estimated share of $23.8 million to $40.2 million.
- A 100-basis-point increase in rates on refinanced debt could increase annual interest expense by approximately $8.7 million, or approximately $4.3 million after noncontrolling interests. A 100-basis-point increase in applicable variable-rate indices could increase interest expense by approximately $3.3 million, or approximately $1.0 million after noncontrolling interests.
- Management reported compliance with debt covenants as of March 31, 2024 and stated that pending litigation was not expected to have a material adverse effect.
Most important facts for investors to verify
- Whether the Company can refinance or extend the substantial 2024 and 2025 debt maturities on acceptable terms.
- The sustainability of same-property NOI and leasing spreads amid elevated interest rates, inflation and tenant cost pressures.
- The effect of the discontinued Albertsons dividend benefit on recurring earnings and FFO comparability.
- The status and collateral recovery prospects of the $21.6 million defaulted note.
- Actual completion costs, timing and returns for the development and redevelopment pipeline.
- The impact of April 2024 property sales and the amended credit facility on leverage, liquidity and future interest expense.
- FFO and NOI definitions and reconciliations, which are non-GAAP measures and may not be comparable with other REITs.