Acadia Realty Trust(AKR) - 2020 Q1 - Quarterly Report

Front Matter General Information This section covers the company's 10-Q quarterly report cover information, including company name, jurisdiction, contact details, file number, and confirmation as a Large Accelerated Filer - Company name: ACADIA REALTY TRUST[1] - Jurisdiction of incorporation: Maryland[1] - The company is designated as a Large Accelerated Filer[1] - As of April 30, 2020, 86,089,836 shares of common stock were outstanding[1] SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This report contains forward-looking statements based on certain assumptions, involving known and unknown risks, uncertainties, and other factors that could cause actual results to differ materially from expectations - Forward-looking statements are based on specific assumptions, describing the company's future plans, strategies, and expectations[3] - Risk factors include economic, political, and social uncertainties from the COVID-19 pandemic, such as government relief effectiveness, duration of lockdowns, rent payment obligations, property sale uncertainties, development project return impacts, and broader economic contraction and unemployment rate increases[3] - Other risks include tenant performance, capital market access, business strategy implementation, changing economic conditions, increased borrowing costs, debt repayment ability, joint venture investments, lease renewals, environmental issues, natural disasters, REIT qualification maintenance, information technology security breaches, and loss of key executives[3] - The company undertakes no obligation to publicly update or revise any forward-looking statements[4] SPECIAL NOTE REGARDING CERTAIN REFERENCES This section clarifies that all references to "Notes" in the report refer to the footnotes to the consolidated financial statements under "Financial Statements" in Part I - All "Notes" in the report refer to the footnotes to the consolidated financial statements under "Financial Statements" in Part I[5] Part I ITEM 1. FINANCIAL STATEMENTS. This section presents the company's unaudited consolidated financial statements as of March 31, 2020, and December 31, 2019, including balance sheets, statements of operations, comprehensive (loss) income, shareholders' equity, and cash flows CONSOLIDATED BALANCE SHEETS This section provides the company's consolidated balance sheets, detailing assets, liabilities, and equity as of March 31, 2020, and December 31, 2019 Consolidated Balance Sheets Key Data (As of March 31, 2020, and December 31, 2019) | Metric | March 31, 2020 (Thousands of Dollars) | December 31, 2019 (Thousands of Dollars) | | :--- | :--- | :--- | | Assets | | | | Real estate investments, net | 3,568,874 | 3,609,315 | | Notes receivable, net | 173,159 | 114,943 | | Investments in and advances to unconsolidated affiliates | 294,195 | 305,097 | | Cash and cash equivalents | 23,404 | 15,845 | | Total Assets | 4,305,138 | 4,309,114 | | Liabilities | | | | Mortgage and other notes payable, net | 1,170,622 | 1,170,076 | | Unsecured notes payable, net | 480,658 | 477,320 | | Unsecured revolving credit facility | 174,700 | 60,800 | | Accounts payable and other liabilities | 425,330 | 371,516 | | Total Liabilities | 2,293,578 | 2,122,149 | | Equity | | | | Total Acadia shareholders' equity | 1,434,464 | 1,542,308 | | Noncontrolling interests | 577,096 | 644,657 | | Total Equity | 2,011,560 | 2,186,965 | | Total Liabilities and Equity | 4,305,138 | 4,309,114 | CONSOLIDATED STATEMENTS OF OPERATIONS This section presents the company's consolidated statements of operations, outlining revenues, expenses, and net (loss) income for the three months ended March 31, 2020, and 2019 Consolidated Statements of Operations Key Data (For the Three Months Ended March 31, 2020, and 2019) | Metric | 2020 (Thousands of Dollars) | 2019 (Thousands of Dollars) | | :--- | :--- | :--- | | Rental income | 70,457 | 73,188 | | Other income | 963 | 797 | | Total Revenues | 71,420 | 73,985 | | Depreciation and amortization | 33,377 | 30,333 | | General and administrative expenses | 9,070 | 8,323 | | Real estate taxes | 10,447 | 9,603 | | Property operating expenses | 13,320 | 11,532 | | Impairment charges | 51,549 | — | | Total Operating Expenses | 117,763 | 59,791 | | Gain on disposition of property | — | 2,014 | | Operating (Loss) Income | (46,343) | 16,208 | | Equity in earnings of unconsolidated affiliates | 1,255 | 2,271 | | Interest income | 2,929 | 2,270 | | Other expenses | (530) | — | | Interest expense | (18,302) | (17,859) | | (Loss) Income from Continuing Operations Before Income Taxes | (60,991) | 2,890 | | Income tax benefit | 952 | 46 | | Net (Loss) Income | (60,039) | 2,936 | | Net loss attributable to noncontrolling interests | 51,625 | 9,261 | | Net (Loss) Income Attributable to Acadia | (8,414) | 12,197 | | Basic and Diluted (Loss) Earnings Per Share | (0.10) | 0.15 | CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME This section details the company's consolidated statements of comprehensive (loss) income, including net (loss) income and other comprehensive loss components Consolidated Statements of Comprehensive (Loss) Income Key Data (For the Three Months Ended March 31, 2020, and 2019) | Metric | 2020 (Thousands of Dollars) | 2019 (Thousands of Dollars) | | :--- | :--- | :--- | | Net (loss) income | $(60,039) | $2,936 | | Other comprehensive loss: | | | | Unrealized loss on valuation of swap agreements | $(74,774) | $(13,306) | | Reclassification of realized interest on swap agreements | $977 | $(551) | | Other Comprehensive Loss | $(73,797) | $(13,857) | | Comprehensive Loss | $(133,836) | $(10,921) | | Comprehensive loss attributable to noncontrolling interests | $70,882 | $11,581 | | Comprehensive (Loss) Income Attributable to Acadia | $(62,954) | $660 | CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY This section outlines changes in the company's consolidated shareholders' equity for the three months ended March 31, 2020, and 2019, including stock repurchases and dividends Summary of Consolidated Shareholders' Equity Changes (For the Three Months Ended March 31, 2020, and 2019) | Equity Item | Balance January 1, 2020 (Thousands of Dollars) | Balance March 31, 2020 (Thousands of Dollars) | Balance January 1, 2019 (Thousands of Dollars) | Balance March 31, 2019 (Thousands of Dollars) | | :--- | :--- | :--- | :--- | :--- | | Common stock | $87 | $86 | $82 | $83 | | Additional paid-in capital | $1,706,357 | $1,686,794 | $1,548,603 | $1,577,503 | | Accumulated other comprehensive (loss) income | $(31,175) | $(85,715) | $516 | $(11,021) | | Accumulated earnings in excess of distributions | $(132,961) | $(166,701) | $(89,696) | $(100,634) | | Total Acadia shareholders' equity | $1,542,308 | $1,434,464 | $1,459,505 | $1,465,931 | | Noncontrolling interests | $644,657 | $577,096 | $622,442 | $640,421 | | Total Equity | $2,186,965 | $2,011,560 | $2,081,947 | $2,106,352 | - In Q1 2020, the company repurchased 1,219,065 shares of common stock totaling $22,352 thousand[11] - In Q1 2020, the company declared and paid dividends/distributions of $26,786 thousand ($0.29 per common share/OP unit)[11] CONSOLIDATED STATEMENTS OF CASH FLOWS This section presents the company's consolidated statements of cash flows, categorizing cash movements into operating, investing, and financing activities Consolidated Statements of Cash Flows Key Data (For the Three Months Ended March 31, 2020, and 2019) | Cash Flow Activity | 2020 (Thousands of Dollars) | 2019 (Thousands of Dollars) | | :--- | :--- | :--- | | Net cash from operating activities | $27,735 | $19,785 | | Net cash from investing activities | $(90,485) | $(93,013) | | Net cash from financing activities | $70,356 | $78,672 | | Increase in Cash and Restricted Cash | $7,606 | $5,444 | | Cash and restricted cash at beginning of period | $30,010 | $34,848 | | Cash and restricted cash at end of period | $37,616 | $40,292 | - In Q1 2020, net cash from operating activities increased primarily due to higher depreciation and amortization, impairment charges, and credit loss allowances, partially offset by net loss and a decrease in accounts payable and accrued expenses[13] - In Q1 2020, cash outflows from investing activities were mainly for real estate acquisitions ($19,088 thousand), development, construction, and property improvement costs ($13,333 thousand), and issuance or advances of notes receivable ($59,000 thousand)[13] - In Q1 2020, cash inflows from financing activities primarily came from unsecured debt proceeds ($122,245 thousand) and noncontrolling interest capital contributions ($7,268 thousand), partially offset by common stock repurchases ($22,352 thousand) and dividends paid to common shareholders ($25,245 thousand)[13] NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) This section provides detailed notes to the consolidated financial statements, covering organization, accounting policies, real estate investments, debt, and subsequent events 1. Organization, Basis of Presentation and Summary of Significant Accounting Policies This section describes the company's organizational structure, basis of financial statement presentation, and a summary of its significant accounting policies - Acadia Realty Trust is a fully integrated equity real estate investment trust (REIT) focused on owning, acquiring, developing, and managing retail properties in high-barrier-to-entry, supply-constrained, and densely populated urban areas in the United States[16] - The company controls approximately 94% of the operating partnership interests through its operating partnership and its subsidiaries, utilizing an umbrella partnership REIT (UPREIT) structure[17] - As of March 31, 2020, the company held interests in 131 properties in its Core Portfolio and 57 properties in its Opportunity Funds, totaling 188 properties, primarily comprising street-retail and urban retail, and dense suburban shopping centers[17] - The company has three reportable operating segments: Core Portfolio, Funds, and Structured Financing[21] - The company adopted ASU 2016-13 (Financial Instruments—Credit Losses) and related amendments on January 1, 2020, recording a $0.4 million loan loss allowance adjusted through accumulated earnings in excess of distributions[28] - In Q1 2020, the company recorded a $0.5 million credit loss allowance[28] 2. Real Estate This section provides details on the company's real estate investments, including net property values, acquisitions, and dispositions Net Real Estate Investments (As of March 31, 2020, and December 31, 2019) | Real Estate Item | March 31, 2020 (Thousands of Dollars) | December 31, 2019 (Thousands of Dollars) | | :--- | :--- | :--- | | Land | $756,833 | $756,297 | | Buildings and improvements | $2,740,001 | $2,740,479 | | Tenant improvements | $179,356 | $173,686 | | Construction in progress | $6,659 | $13,617 | | Right-of-use assets - finance leases | $102,050 | $102,055 | | Right-of-use assets - operating leases, net | $59,386 | $60,006 | | Total | $3,844,285 | $3,846,140 | | Less: Accumulated depreciation and amortization | $(513,242) | $(490,227) | | Operating real estate, net | $3,331,043 | $3,355,913 | | Real estate under development | $237,831 | $253,402 | | Real Estate Investments, Net | $3,568,874 | $3,609,315 | Consolidated Retail Property Acquisitions in Q1 2020 | Property and Location | Acquisition Percentage | Acquisition Date | Purchase Price (Thousands of Dollars) | | :--- | :--- | :--- | :--- | | Soho Acquisitions - 37 Greene Street - New York, NY | 100% | January 9, 2020 | $15,689 | | 917 W. Armitage - Chicago, IL | 100% | February 13, 2020 | $3,515 | | Total 2020 Acquisitions | | | $19,204 | - In Q1 2020, the company did not make any property dispositions[45] - In Q1 2020, the company placed a Fund III project (Cortlandt Crossing) into service[49] 3. Notes Receivable, Net This section details the company's notes receivable, net of credit loss allowances, and significant lending activities Notes Receivable, Net (As of March 31, 2020, and December 31, 2019) | Description | March 31, 2020 (Thousands of Dollars) | December 31, 2019 (Thousands of Dollars) | | :--- | :--- | :--- | | Core Portfolio | $135,467 | $76,467 | | Fund II | $33,316 | $33,170 | | Fund III | $5,306 | $5,306 | | Total Notes Receivable | $174,089 | $114,943 | | Allowance for credit losses | $(930) | — | | Notes Receivable, Net | $173,159 | $114,943 | - In Q1 2020, the company originated a $54 million loan at a 9% interest rate in the form of a redeemable preferred equity investment in the 850 Third Avenue property in Brooklyn[54] - In Q1 2020, the company originated a new $5 million Core note to its joint venture partner at an 8% interest rate[54] - As of March 31, 2020, a Core note totaling $21 million was in default[55] - The company calculated an allowance for credit losses for its structured financing portfolio's amortized cost basis under ASC 326, with total credit loss allowances for non-collateral dependent loans amounting to $0.9 million as of March 31, 2020[59] 4. Investments in and Advances to Unconsolidated Affiliates This section outlines the company's investments in and advances to unconsolidated affiliates, primarily accounted for using the equity method Investments in and Advances to Unconsolidated Affiliates (As of March 31, 2020, and December 31, 2019) | Portfolio | March 31, 2020 (Thousands of Dollars) | December 31, 2019 (Thousands of Dollars) | | :--- | :--- | :--- | | Core Portfolio | $223,088 | $225,907 | | Fund III | $224 | $224 | | Fund IV | $38,411 | $39,885 | | Fund V | $32,857 | $38,649 | | Various (due from affiliates, other) | $(3,85) | $432 | | Total Investments in and Advances to Unconsolidated Affiliates | $294,195 | $305,097 | - The company primarily accounts for investments in and advances to unconsolidated affiliates using the equity method, as it has significant influence but no financial or operating control over them[61] - In Q1 2020, the company made an additional $0.2 million investment in Fifth Wall Ventures Retail Fund, L.P., bringing its total investment to $2.0 million[65] - In Q1 2020 and Q1 2019, the company received $0.1 million in property management, construction, development, leasing, and legal service fees from its unconsolidated partnership investments[78] Unconsolidated Affiliates Consolidated and Condensed Statements of Operations (For the Three Months Ended March 31, 2020, and 2019) | Metric | 2020 (Thousands of Dollars) | 2019 (Thousands of Dollars) | | :--- | :--- | :--- | | Total revenues | $24,112 | $19,973 | | Operating and other expenses | $(8,135) | $(5,106) | | Interest expense | $(5,489) | $(4,776) | | Depreciation and amortization | $(7,096) | $(4,792) | | Net Income Attributable to Unconsolidated Affiliates | $3,392 | $5,299 | | Company's equity share in net income of unconsolidated affiliates | $1,948 | $2,995 | | Amortization of basis differences | $(693) | $(724) | | Company's Equity in Earnings of Unconsolidated Affiliates | $1,255 | $2,271 | 5. Other Assets, Net and Accounts Payable and Other Liabilities This section provides a breakdown of other assets, net, and accounts payable and other liabilities, including derivative financial instruments Other Assets, Net (As of March 31, 2020, and December 31, 2019) | Item | March 31, 2020 (Thousands of Dollars) | December 31, 2019 (Thousands of Dollars) | | :--- | :--- | :--- | | Lease intangibles, net | $108,723 | $116,820 | | Deferred expenses, net | $30,212 | $28,746 | | Prepaid expenses | $14,948 | $18,873 | | Accrued interest income | $11,181 | $9,872 | | Derivative financial instruments | $14 | $2,583 | | Total Other Assets, Net | $179,043 | $190,658 | Accounts Payable and Other Liabilities (As of March 31, 2020, and December 31, 2019) | Item | March 31, 2020 (Thousands of Dollars) | December 31, 2019 (Thousands of Dollars) | | :--- | :--- | :--- | | Derivative financial instruments | $104,253 | $39,061 | | Lease intangible liabilities, net | $81,288 | $82,926 | | Lease liabilities - finance leases, net | $77,881 | $77,657 | | Accounts payable and accrued expenses | $64,701 | $68,838 | | Lease liabilities - operating leases, net | $56,387 | $56,762 | | Deferred revenue | $28,414 | $33,682 | | Total Accounts Payable and Other Liabilities | $425,330 | $371,516 | 6. Lease Intangibles This section details the net book value and amortization schedule of the company's lease intangible assets and liabilities Net Book Value of Amortizable Intangible Assets (As of March 31, 2020, and December 31, 2019) | Item | March 31, 2020 (Thousands of Dollars) | December 31, 2019 (Thousands of Dollars) | | :--- | :--- | :--- | | In-place lease intangibles | $105,054 | $112,853 | | Above-market rents | $3,669 | $3,967 | | Total | $108,723 | $116,820 | Net Book Value of Amortizable Intangible Liabilities (As of March 31, 2020, and December 31, 2019) | Item | March 31, 2020 (Thousands of Dollars) | December 31, 2019 (Thousands of Dollars) | | :--- | :--- | :--- | | Below-market rents | $(80,782) | $(82,406) | | Above-market ground leases | $(506) | $(520) | | Total | $(81,288) | $(82,926) | - In Q1 2020, the company acquired $1.5 million in in-place lease intangibles and $1.4 million in below-market rents, with weighted-average useful lives of 3.4 years and 2.6 years, respectively[88] Amortization Schedule for Lease Intangible Assets and Liabilities (As of March 31, 2020, in Thousands of Dollars) | Year Ended December 31 | Increase in Rental Revenue | Increase in Amortization | Decrease in Rental Expense | Net (Expense) Income | | :--- | :--- | :--- | :--- | :--- | | 2020 (remaining) | $5,656 | $(31,683) | $44 | $(25,983) | | 2021 | $7,172 | $(21,358) | $58 | $(14,128) | | 2022 | $6,427 | $(15,267) | $58 | $(8,782) | | 2023 | $6,063 | $(11,403) | $58 | $(5,282) | | 2024 | $5,621 | $(8,773) | $58 | $(3,094) | | Thereafter | $46,174 | $(16,570) | $230 | $29,834 | | Total | $77,113 | $(105,054) | $506 | $(27,435) | 7. Debt This section summarizes the company's consolidated debt, including mortgage and unsecured notes, and its principal repayment schedule Summary of Consolidated Debt (As of March 31, 2020, and December 31, 2019) | Debt Type | March 31, 2020 (Thousands of Dollars) | December 31, 2019 (Thousands of Dollars) | | :--- | :--- | :--- | | Total mortgage notes payable | $1,170,622 | $1,170,076 | | Total unsecured notes payable | $480,658 | $477,320 | | Unsecured revolving credit facility | $174,700 | $60,800 | | Total Debt | $1,834,375 | $1,717,928 | | Net unamortized debt issuance costs | $(9,020) | $(10,383) | | Unamortized premium | $625 | $651 | | Total Liabilities | $1,825,980 | $1,708,196 | - As of March 31, 2020, the company had $1,422.6 million (77.6%) in fixed-rate debt (including floating-rate debt fixed through interest rate swap agreements) and $411.7 million (22.4%) in floating-rate debt[93][252] - In Q1 2020, the company extended two Fund IV loans to February and March 2021[97] - In Q1 2020, the company entered into two swap agreements, each with a notional value of $50 million, effective in April 2022 and April 2023, respectively[97] - A $26.3 million mortgage loan in the Core Portfolio was in default and subject to litigation as of both March 31, 2020, and December 31, 2019[100] Debt Principal Repayment Schedule (As of March 31, 2020, in Thousands of Dollars) | Year Ended December 31 | Amount | | :--- | :--- | | 2020 (remaining) | $393,596 | | 2021 | $333,837 | | 2022 | $281,578 | | 2023 | $415,476 | | 2024 | $211,991 | | Thereafter | $197,897 | | Total | $1,834,375 | 8. Financial Instruments and Fair Value Measurements This section discusses the company's financial instruments, fair value measurements, and the impact of derivative instruments - Fair value measurements utilize a three-level hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable market inputs other than quoted prices), and Level 3 (unobservable inputs)[109] Fair Value of Derivative Financial Instruments (As of March 31, 2020, and December 31, 2019) | Item | March 31, 2020 (Thousands of Dollars) | December 31, 2019 (Thousands of Dollars) | | :--- | :--- | :--- | | Derivative financial assets | $14 | $2,583 | | Derivative financial liabilities | $(104,253) | $(39,061) | | Net Derivative Financial Instruments | $(104,239) | $(36,478) | - In March 2020, due to the COVID-19 pandemic, the company re-evaluated the holding periods and projected operating income for certain properties, resulting in $51.5 million in impairment charges recorded for Fund assets, with Acadia's proportionate share being $12.4 million[117][118] - All of the company's derivative instruments are designated as cash flow hedges to hedge future cash outflows on floating-rate debt[120] - Approximately $18 million of accumulated other comprehensive (loss) income related to derivative instruments is expected to be reclassified to interest expense within the next twelve months[120] 9. Commitments and Contingencies This section outlines the company's contractual commitments for property construction and development, as well as ongoing legal contingencies - As of March 31, 2020, the company had approximately $37.6 million in property construction or development agreements with general contractors[128] - As of March 31, 2020, the company had $14.6 million in outstanding letters of credit[129] - The company is involved in various legal proceedings, including litigation related to a mortgage loan, but management expects the resolution of these matters not to have a material adverse effect on the company's consolidated financial position[127] 10. Shareholders' Equity, Noncontrolling Interests and Other Comprehensive Loss This section details changes in shareholders' equity, noncontrolling interests, and other comprehensive loss, including share repurchases and dividends - In Q1 2020, the company repurchased 1,219,065 shares of common stock totaling $22.4 million, with $122.6 million remaining available under the repurchase program[134] - On February 26, 2020, the company declared a $0.29 per common share/OP unit dividend, paid on April 15, 2020[135] Changes in Accumulated Other Comprehensive Loss (For the Three Months Ended March 31, 2020, and 2019) | Item | 2020 (Thousands of Dollars) | 2019 (Thousands of Dollars) | | :--- | :--- | :--- | | Balance January 1 | $(31,175) | $516 | | Other comprehensive loss before reclassifications | $(74,774) | $(13,306) | | Reclassification of realized interest on swap agreements | $977 | $(551) | | Net Other Comprehensive Loss for the Period | $(73,797) | $(13,857) | | Net other comprehensive loss for the period attributable to noncontrolling interests | $19,257 | $2,320 | | Balance March 31 | $(85,715) | $(11,021) | Summary of Noncontrolling Interests Changes (For the Three Months Ended March 31, 2020, and 2019) | Item | Balance January 1, 2020 (Thousands of Dollars) | Balance March 31, 2020 (Thousands of Dollars) | Balance January 1, 2019 (Thousands of Dollars) | Balance March 31, 2019 (Thousands of Dollars) | | :--- | :--- | :--- | :--- | :--- | | Operating partnership noncontrolling interests | $97,670 | $93,382 | $104,223 | $105,044 | | Partially owned affiliate noncontrolling interests | $546,987 | $483,714 | $518,219 | $535,377 | | Total | $644,657 | $577,096 | $622,442 | $640,421 | - As of March 31, 2020, the operating partnership had 3,205,931 common OP units and 3,003,027 LTIP units outstanding[138] 11. Leases This section provides information on the company's leasing activities as both a lessor and lessee, including lease costs and obligations - In Q1 2020, as a lessor, the company recognized $14.6 million in variable lease income, primarily from real estate taxes and common area maintenance fees[143] - In Q1 2020, as a lessee, the company did not enter into any new lease contracts[144] Lease Costs (For the Three Months Ended March 31, 2020, and 2019) | Lease Cost Item | 2020 (Thousands of Dollars) | 2019 (Thousands of Dollars) | | :--- | :--- | :--- | | Finance lease costs | $1,507 | $1,339 | | Operating lease costs | $1,394 | $536 | | Variable lease costs | $16 | $32 | | Total Lease Costs | $2,917 | $1,907 | Lease Information (As of March 31, 2020, and 2019) | Information Item | March 31, 2020 | March 31, 2019 | | :--- | :--- | :--- | | Weighted-average remaining lease term for finance leases (years) | 42.3 | 47.4 | | Weighted-average remaining lease term for operating leases (years) | 34.1 | 8.4 | | Weighted-average discount rate for finance leases | 4.4% | 4.4% | | Weighted-average discount rate for operating leases | 5.8% | 5.0% | - In Q1 2020, due to business closures from the COVID-19 pandemic, the company re-evaluated its allowance for credit losses on straight-line rent receivables and recorded a $2.5 million charge[154] Schedule of Lease Obligations (As of March 31, 2020, in Thousands of Dollars) | Year Ended December 31 | Minimum Rental Income | Minimum Lease Payments | | :--- | :--- | :--- | | 2020 (remaining) | $151,850 | $5,251 | | 2021 | $201,955 | $6,823 | | 2022 | $182,397 | $6,832 | | 2023 | $161,665 | $6,825 | | 2024 | $139,995 | $7,008 | | Thereafter | $575,373 | $312,421 | | Total | $1,413,235 | $345,160 | 12. Segment Reporting This section presents financial information by the company's three reportable segments: Core Portfolio, Funds, and Structured Financing - The company has three reportable segments: Core Portfolio, Funds, and Structured Financing[155] Segment Revenues (For the Three Months Ended March 31, 2020, and 2019) | Segment | 2020 (Thousands of Dollars) | 2019 (Thousands of Dollars) | | :--- | :--- | :--- | | Core Portfolio | $39,933 | $46,423 | | Funds | $31,487 | $27,562 | | Structured Financing | $0 | $0 | | Unallocated | $0 | $0 | | Total Revenues | $71,420 | $73,985 | Net (Loss) Income Attributable to Acadia by Segment (For the Three Months Ended March 31, 2020, and 2019) | Segment | 2020 (Thousands of Dollars) | 2019 (Thousands of Dollars) | | :--- | :--- | :--- | | Core Portfolio | $5,671 | $14,548 | | Funds | $(8,366) | $3,656 | | Structured Financing | $2,399 | $2,270 | | Unallocated | $(8,118) | $(8,277) | | Total | $(8,414) | $12,197 | - The Funds segment recorded $51,549 thousand in impairment charges in Q1 2020, significantly impacting its net loss[157][206] 13. Share Incentive and Other Compensation This section details the company's equity incentive plans, including grants of LTIP units and restricted stock units, and related compensation expenses - In Q1 2020, the company granted 396,149 LTIP units and 13,766 restricted stock units to employees under its equity incentive plans[161] - Total long-term incentive compensation expense was $2.1 million in Q1 2020, compared to $1.9 million in the same period of 2019[163] - As of March 31, 2020, total unrecognized compensation cost related to unvested equity incentive arrangements was $21.2 million, expected to be recognized over a weighted-average period of 1.7 years[168] - In Q1 2020, the company incurred $0.1 million in expenses for employee benefit plans, including the employee stock purchase plan and 401(k) plan[169] 14. Earnings Per Common Share This section outlines the calculation of basic and diluted earnings per common share, reflecting net income attributable to common shareholders - Basic earnings per common share is calculated by dividing net income attributable to common shareholders by the weighted-average number of common shares outstanding[171] - Diluted earnings per common share reflects the potential dilutive effect of convertible obligations and assumed exercise of securities, including restricted stock units issued under equity incentive plans[172] Basic and Diluted Earnings Per Share (For the Three Months Ended March 31, 2020, and 2019) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Net (loss) income attributable to Acadia (Thousands of Dollars) | $(8,414) | $12,197 | | Weighted-average shares outstanding for basic EPS | 86,971,552 | 82,032,852 | | Basic and Diluted (Loss) Earnings Per Common Share | $(0.10) | $0.15 | 15. Subsequent Events This section discloses significant events occurring after the reporting period, including property transactions, capital calls, and dividend policy changes - On April 1, 2020, the company converted its remaining $38.7 million in notes receivable (plus $2.0 million in accrued interest) into a 24.78% interest in its joint venture partner's Town Center property, and will consolidate this property entity starting in Q2 2020[175][176] - On April 7, 2020, Fund II requested an additional $15.0 million capital call, with the company's share being $4.3 million[177] - On April 13, 2020, Fund IV sold the Colonie Plaza property in Albany, New York, for $15.3 million[177] - On May 5, 2020, the company's Board of Trustees voted to suspend distributions on common shares and common OP units for Q2 2020 in response to the COVID-19 pandemic[179] - As of April 30, 2020, the company estimated approximately 34% of its consolidated and unconsolidated annualized base rent came from "essential businesses" and 66% from "non-essential businesses"[180] - As of April 30, 2020, the collection rate for April rents and recoveries exceeded 50%[180] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. This section discusses the company's financial condition and operating results for the three months ended March 31, 2020, focusing on COVID-19 impacts, investments, and liquidity OVERVIEW This section provides an overview of the company's property portfolio, business objectives, and growth strategies - As of March 31, 2020, the company owned or held interests in 188 properties through its Core Portfolio and Funds, primarily comprising street-retail and urban retail, and dense suburban shopping centers[185] Property Portfolio Overview and Occupancy Rate (As of March 31, 2020) | Portfolio | Number of Operating Properties | Operating Gross Leasable Area (GLA) | Occupancy Rate | | :--- | :--- | :--- | :--- | | Core Portfolio | 126 | 5,644,467 | 92.2% | | Fund Portfolio | 53 | 7,468,046 | 86.8% | | Total Core and Funds | 179 | 13,112,513 | 89.2% | - The company's primary business objective is to provide cash distributions to shareholders and create capital appreciation potential through the acquisition and management of commercial retail properties[187] - The company achieves growth through development and re-leasing activities in its Core Portfolio and opportunistic acquisitions in its Funds, while striving to maintain a strong and flexible balance sheet[187][189] SIGNIFICANT DEVELOPMENTS DURING THE THREE MONTHS ENDED MARCH 31, 2020 This section highlights key events and their impacts during the first quarter of 2020, particularly the effects of the COVID-19 pandemic - The COVID-19 pandemic led to government-imposed travel restrictions, stay-at-home orders, social distancing measures, and mandatory closures of "non-essential" businesses in most U.S. states, significantly impacting the company's retail tenants[190] - The company recorded $51.5 million in non-cash impairment charges as of March 31, 2020, with its proportionate share being $12.4 million, due to changes in estimated holding periods, net operating income, and capitalization rates for certain properties caused by the COVID-19 pandemic[190] - As of April 30, 2020, 66% of retail tenants in the Core Portfolio and 71% in the Fund Portfolio were considered "non-essential" businesses and remained closed, accounting for approximately 66% of total April rents[190] - The company anticipates a negative impact on revenues in Q2 2020 and potentially for the full year, and is negotiating rent relief (primarily in the form of deferrals) with some tenants[190] - In Q1 2020, the company invested $19.2 million to acquire two Core properties, including 37 Greene Street in SoHo, New York, and a mixed-use building in Chicago[193] - In Q1 2020, the company repurchased 1,219,065 shares of common stock totaling $22.4 million[196] RESULTS OF OPERATIONS This section analyzes the company's operating results, including revenue and expense drivers, and segment performance Net (Loss) Income Attributable to Acadia by Segment (For the Three Months Ended March 31, 2020, and 2019) | Segment | 2020 (Thousands of Dollars) | 2019 (Thousands of Dollars) | Change (Thousands of Dollars) | | :--- | :--- | :--- | :--- | | Core Portfolio | $5,671 | $14,548 | $(8,877) | | Funds | $(8,366) | $3,656 | $(12,022) | | Structured Financing | $2,399 | $2,270 | $129 | | Unallocated | $(8,118) | $(8,277) | $159 | | Total | $(8,414) | $12,197 | $(20,611) | - Core Portfolio revenue decreased by $6.5 million, primarily due to a $5.7 million write-off of below-market rents from tenant move-outs in 2019 and a $4.3 million increase in credit loss allowances in 2020, mainly related to the COVID-19 pandemic[199] - Fund segment revenue increased by $3.9 million, primarily benefiting from Fund property acquisitions in 2019, partially offset by a $1.5 million decrease from Fund property dispositions[203] - The Fund segment recorded $51.5 million in impairment charges, primarily involving 654 Broadway and Cortlandt Crossing in Fund III, and 801 Madison and 146 Geary in Fund IV[206] - Interest income from the Structured Financing portfolio increased by $0.6 million, mainly due to $1.3 million from new notes issued in 2020 and 2019, partially offset by a $0.9 million decrease from Fund IV note repayments in 2019[210] SUPPLEMENTAL FINANCIAL MEASURES This section presents supplemental financial metrics such as Net Operating Income (NOI) and Funds From Operations (FFO) to assess operational performance - Net Operating Income (NOI) and rent spreads on new and renewal leases are considered supplemental disclosures for measuring the Core Portfolio's operating performance[213] Core Portfolio Same-Property NOI (For the Three Months Ended March 31, 2020, and 2019) | Metric | 2020 (Thousands of Dollars) | 2019 (Thousands of Dollars) | Year-over-Year Change | | :--- | :--- | :--- | :--- | | Core Portfolio NOI | $34,737 | $33,665 | 3.2% | | Less: Excluded properties | $(3,443) | $(1,934) | | | Same-Property NOI | $31,294 | $31,731 | (1.4)% | Core Portfolio Rent Spreads on New and Renewal Leases (For the Three Months Ended March 31, 2020) | Metric | Cash Basis | Straight-Line Basis | | :--- | :--- | :--- | | Percentage increase in base rent | -0.3% | 11.8% | | Average cost per square foot | $7.58 | $7.58 | | Weighted-average lease term (years) | 7.9 | 7.9 | Funds From Operations (FFO) (For the Three Months Ended March 31, 2020, and 2019) | Metric | 2020 (Thousands of Dollars) | 2019 (Thousands of Dollars) | | :--- | :--- | :--- | | Net (loss) income attributable to Acadia | $(8,414) | $12,197 | | Real estate depreciation and amortization of lease costs (net of noncontrolling interests' share) | $24,088 | $21,999 | | Impairment charges (net of noncontrolling interests' share) | $12,400 | — | | Gain on disposition of property (net of noncontrolling interests' share) | — | $(384) | | (Loss) income attributable to common OP unit holders | $(462) | $795 | | Distributions - preferred OP units | $126 | $135 | | Funds From Operations Attributable to Common Shareholders and Common OP Unit Holders | $27,738 | $34,742 | | Diluted FFO Per Share | $0.30 | $0.39 | LIQUIDITY AND CAPITAL RESOURCES This section discusses the company's liquidity sources and uses, capital commitments, debt structure, and cash flow activities - The company's primary uses of liquidity include distributions to shareholders and OP unit holders, property investments, Fund capital commitments, debt repayments, and stock repurchases[224] - The company has suspended distributions on common shares and common OP units for Q2 2020[225] - As of March 31, 2020, the company's remaining capital commitments to Funds totaled $83.9 million[227] - As of March 31, 2020, capitalized costs for the company's development activities totaled $4.6 million. The estimated total cost to complete these projects by 2022 is $130.2 million to $169.1 million, with the company's share being approximately $86.6 million to $106.1 million[229] Summary of Consolidated Debt (As of March 31, 2020, and December 31, 2019) | Debt Type | March 31, 2020 (Thousands of Dollars) | December 31, 2019 (Thousands of Dollars) | | :--- | :--- | :--- | | Total fixed and effectively fixed-rate debt | $1,422,627 | $1,403,324 | | Total floating-rate debt | $411,748 | $314,604 | | Total Debt | $1,834,375 | $1,717,928 | | Net unamortized debt issuance costs | $(9,020) | $(10,383) | | Unamortized premium | $625 | $651 | | Total Liabilities | $1,825,980 | $1,708,196 | - The company's primary capital sources include the issuance of public equity and OP units, issuance of secured and unsecured debt, uncalled capital commitments from Fund noncontrolling interests, sales of existing properties, repayment of structured financing investments, and cash on hand and future cash flows from operations[235] Historical Cash Flows (For the Three Months Ended March 31, 2020, and 2019) | Cash Flow Activity | 2020 (Millions of Dollars) | 2019 (Millions of Dollars) | Difference (Millions of Dollars) | | :--- | :--- | :--- | :--- | | Net cash from operating activities | $27.7 | $19.8 | $7.9 | | Net cash from investing activities | $(90.5) | $(93.0) | $2.5 | | Net cash from financing activities | $70.4 | $78.7 | $(8.3) | | Increase in Cash and Restricted Cash | $7.6 | $5.4 | $2.2 | CONTRACTUAL OBLIGATIONS This section summarizes the company's contractual obligations, including debt principal, interest, lease obligations, and construction commitments Summary of Contractual Obligations (As of March 31, 2020, in Millions of Dollars) | Contractual Obligation | Total | Less than 1 Year | 1 to 3 Years | 3 to 5 Years | More than 5 Years | | :--- | :--- | :--- | :--- | :--- | :--- | | Debt principal obligations | $1,834.4 | $497.2 | $916.2 | $283.8 | $137.2 | | Debt interest obligations | $199.8 | $62.1 | $77.5 | $32.1 | $28.1 | | Lease obligations | $345.2 | $5.3 | $13.7 | $13.8 | $312.4 | | Construction commitments | $37.6 | $37.6 | — | — | — | | Total | $2,417.0 | $602.2 | $1,007.4 | $329.7 | $477.7 | - As of March 31, 2020, all remaining development and redevelopment costs (discretionary expenditures) were temporarily on hold pending a recovery in tenant interest due to the COVID-19 pandemic[245] OFF-BALANCE SHEET ARRANGEMENTS This section describes the company's off-balance sheet arrangements, primarily investments in unconsolidated joint ventures - The company invests through joint ventures and accounts for them using the equity method, so the assets and liabilities of these joint ventures are not reflected in the company's financial statements[246] Operating Partnership's Proportionate Share of Non-Recourse Mortgage Debt in Unconsolidated Partnerships (As of March 31, 2020, in Millions of Dollars) | Investment Project | Proportionate Share of Mortgage Debt | | :--- | :--- | | 650 Bald Hill Road | $3.5 | | Eden Square | $5.5 | | Promenade at Manassas | $5.9 | | 3104 M Street | $0.9 | | Family Center at Riverdale | $5.8 | | Gotham Plaza | $9.5 | | Renaissance Portfolio | $32.0 | | Crossroads | $31.6 | | Tri-City Plaza | $6.4 | | Frederick Crossing | $4.4 | | Frederick County Square | $2.7 | | 840 N. Michigan | $65.0 | | Georgetown Portfolio | $8.0 | | Total | $181.2 | CRITICAL ACCOUNTING POLICIES This section outlines the critical accounting policies that involve significant estimates and judgments in preparing the financial statements - Management's discussion and analysis of financial condition and results of operations are based on consolidated financial statements prepared in accordance with U.S. GAAP, involving estimates and judgments regarding real estate valuation, depreciation lives, revenue recognition, and collectibility of notes and rents[249] - No significant changes occurred in the critical accounting policies disclosed in the company's 2019 Form 10-K[249] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. This section discloses the company's primary market risk exposure to interest rate changes and its strategies for managing this risk through fixed-rate debt and derivatives - The company's primary market risk exposure is to changes in interest rates related to mortgage and other debt[251] - As of March 31, 2020, 77.6% of the company's total debt was at fixed interest rates (including rates fixed through derivative financial instruments), and 22.4% was at floating interest rates[252] - As of March 31, 2020, the company held 41 interest rate swap agreements and 4 interest rate cap agreements to hedge $1,038.8 million and $143.6 million of LIBOR-based floating-rate debt, respectively[252] - If LIBOR were to increase by 100 basis points, interest expense on the company's $411.7 million in floating-rate debt would increase by $4.1 million annually, with the company's share being $1.0 million[256] - As of March 31, 2020, the fair value of the company's total outstanding debt would decrease by approximately $13.0 million with a 1% increase in interest rates, and increase by approximately $27.4 million with a 1% decrease in interest rates[257] - From December 31, 2019, to March 31, 2020, the company's absolute interest rate exposure increased, with floating-rate debt rising from $314.6 million to $411.7 million, and its proportion of total debt increasing from 18.3% to 22.4%[262] ITEM 4. CONTROLS AND PROCEDURES. This section confirms the effectiveness of the company's disclosure controls and procedures and reports no significant changes in internal control over financial reporting - As of March 31, 2020, the company's disclosure controls and procedures were deemed effective[264] - No significant changes occurred in internal control over financial reporting during the reporting period[265] Part II - Other Information ITEM 1. LEGAL PROCEEDINGS. This section discloses the company's involvement in legal proceedings, including a significant mortgage default lawsuit, and management's assessment of their financial impact - The company is involved in a $26.3 million mortgage loan default lawsuit, where the Delaware Superior Court ruled Brandywine Holdings and the Operating Partnership liable for recourse[266] - Management expects that the resolution of existing legal proceedings will not have a material adverse effect on the company's consolidated financial position[267] ITEM 1A. RISK FACTORS. This section updates the company's risk factors, emphasizing the significant adverse impact of the COVID-19 pandemic on its business, financial condition, and operations - The COVID-19 pandemic poses a significant adverse impact on the company's and its tenants' business, financial condition, results of operations, cash flows, liquidity, and access to capital markets[270][271] - As of April 30, 2020, 66% of retail tenants in the Core Portfolio and 71% in the Fund Portfolio were considered non-essential businesses and remained closed, accounting for approximately 66% of total April rents[272] - The company anticipates a negative impact on revenues in Q2 2020 and potentially for the full year, and is negotiating rent relief (primarily in the form of deferrals) with some tenants[272] - The pandemic may affect tenant lease renewal ability, development project returns, property sale prices, capital market access, debt repayment capacity, and financial covenant compliance[273] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. This section states that information regarding unregistered sales of equity securities and use of proceeds is not applicable - This section is not applicable[276] ITEM 3. DEFAULTS UPON SENIOR SECURITIES. This section states that information regarding defaults upon senior securities is not applicable - This section is not applicable[276] ITEM 4. MINE SAFETY DISCLOSURES. This section states that information regarding mine safety disclosures is not applicable - This section is not applicable[276] ITEM 5. OTHER INFORMATION. This section states that no other information is applicable - This section is not applicable[276] ITEM 6. EXHIBITS. This section lists all exhibits filed with the quarterly report, including equity incentive plan agreements and certification documents - Exhibits include Long-Term Incentive Plan Award Agreements (time-based and time-and-performance-based)[277] - Exhibits contain certification documents from the Chief Executive Officer and Chief Financial Officer under Sections 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934 and Sections 302 and 906 of the Sarbanes-Oxley Act[277] - Exhibits also include XBRL instance document and taxonomy extension documents (Schema, Calculation, Definitions, Labels, Presentation)[277] Signatures SIGNATURES This report was formally signed on May 6, 2020, by Kenneth F. Bernstein, John Gottfried, and Richard Hartmann of Acadia Realty Trust - This report was signed on May 6, 2020[279] - Signatories include Kenneth F. Bernstein (Chief Executive Officer, President, and Trustee), John Gottfried (Senior Vice President and Chief Financial Officer), and Richard Hartmann (Senior Vice President and Chief Accounting Officer)[279]