ACADIA REALTY TRUST - 10-Q Summary (Q1 2010)
Business Context and Reporting Period
This report covers the quarterly period ended March 31, 2010. Acadia Realty Trust is a fully-integrated, self-managed equity REIT focused on retail properties, including neighborhood shopping centers, mixed-use properties, and self-storage facilities. The company operates through an umbrella partnership REIT (UPREIT) structure and manages three Opportunity Funds (Fund I, II, and III) alongside its Core Portfolio.
Key Financial Metrics
| Metric | Q1 2010 | Q1 2009 |
|---|---|---|
| Total Revenues | $37.9 million | $35.0 million |
| Net Income (GAAP) | $1.5 million | $6.6 million |
| Net Income Attributable to Common Shareholders | $5.1 million | $10.3 million |
| Funds From Operations (FFO) | $10.2 million | $14.3 million |
| Net Cash Provided by Operating Activities | $9.5 million | $19.1 million |
| Cash and Cash Equivalents (End of Period) | $66.1 million | $116.0 million |
| Total Debt (Mortgage & Convertible Notes) | $754.7 million | $780.2 million |
| Available Credit Facility Capacity | $121.3 million | N/A |
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 8.1% to $37.9 million, driven by a 21% increase in minimum rents within the Opportunity Funds due to new acquisitions (Cortlandt Towne Center) and new leases at Fordham Place and Pelham Manor. This offset a decline in Core Portfolio rents caused by vacancies and the Circuit City bankruptcy.
- Net Income Decline: Net income attributable to Common Shareholders decreased 50% to $5.1 million. This was primarily due to the absence of a $3.1 million gain on debt extinguishment and a $5.6 million gain on property sales recorded in Q1 2009 (discontinued operations).
- Operating Expenses: Total operating expenses rose to $27.8 million from $25.7 million, largely due to increased depreciation and amortization ($10.3 million vs. $8.6 million) associated with new acquisitions and development projects.
- Cash Flow: Net cash provided by operating activities dropped significantly to $9.5 million from $19.1 million, primarily due to a $10.9 million decrease in cash provided by the redemption of short-term financial instruments in the prior year.
Outlook, Risks, and Contingencies
- Debt Maturities and Disputes: The company faces $76.9 million in debt maturing in 2010. A specific $30.0 million loan for the 161st Street property matured on April 1, 2010. The lender refused an extension request and issued a Notice of Event of Default. Management is negotiating an amendment and believes the resolution will not be materially adverse.
- Construction Loan Disputes: A servicer has alleged non-monetary defaults on two construction loans ($31.7 million and $11.5 million) regarding Pelham Manor and Atlantic Avenue, claiming improvements were not completed on time. The company disputes this and is in discussions to resolve the matter.
- Liquidity Strategy: The company intends to use Fund III and new funds for future acquisitions. It maintains $66.1 million in cash and $121.3 million in available credit capacity. Management believes it can repay or refinance 2010 maturities using existing liquidity and unfunded capital commitments from Opportunity Fund investors.
- Market Risks: The company highlights risks related to the post-recessionary economic environment, potential tenant losses, and the difficulty of refinancing debt in tight credit markets.
Investor Verification Checklist
- Debt Resolution: Verify the status of the $30 million 161st Street loan default and the outcome of negotiations with the special servicer.
- Construction Disputes: Monitor the resolution of the alleged defaults on the Pelham Manor and Atlantic Avenue construction loans.
- Refinancing Capability: Assess the company's ability to refinance the $76.9 million of debt maturing in 2010 given current credit market conditions.
- Core Portfolio Occupancy: Review occupancy rates and leasing activity at the Core Portfolio, specifically regarding the impact of the Circuit City bankruptcy and vacancies at Third Avenue.
- Opportunity Fund Performance: Evaluate the progress and capitalization status of Fund II and Fund III redevelopment projects, particularly CityPoint and Canarsie Plaza.