Acadia Realty Trust(AKR) - 2020 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements This section presents Acadia Realty Trust's unaudited consolidated financial statements for the periods ended September 30, 2020 and 2019, including balance sheets, statements of operations, comprehensive income, equity changes, cash flows, and notes Consolidated Balance Sheets Total assets decreased from $4.31 billion to $4.25 billion, while total liabilities increased to $2.20 billion, leading to a decrease in total equity to $2.05 billion Consolidated Balance Sheet Highlights (in thousands) | Account | September 30, 2020 (Unaudited) | December 31, 2019 | | :--- | :--- | :--- | | Total Assets | $4,251,408 | $4,309,114 | | Net investments in real estate | $3,615,729 | $3,609,315 | | Cash and cash equivalents | $16,108 | $15,845 | | Total Liabilities | $2,199,308 | $2,122,149 | | Mortgage and other notes payable, net | $1,159,688 | $1,170,076 | | Unsecured line of credit | $127,400 | $60,800 | | Total Equity | $2,052,100 | $2,186,965 | Consolidated Statements of Operations The company shifted from net income to a $33.4 million net loss for the nine months ended September 30, 2020, driven by decreased revenues and $51.5 million in impairment charges Statement of Operations Summary (in thousands) | Metric | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $51,281 | $73,327 | $186,474 | $217,543 | | Rental income | $50,300 | $72,191 | $183,396 | $214,490 | | Total Operating Expenses | $65,330 | $64,118 | $253,109 | $187,054 | | Impairment charges | $— | $321 | $51,549 | $1,721 | | Operating (Loss) Income | ($14,025) | $21,265 | ($66,126) | $44,559 | | Net (Loss) Income | ($38,289) | $8,840 | ($33,422) | $6,539 | | Net (Loss) Income Attributable to Acadia | ($9,030) | $10,458 | $1,966 | $31,735 | | Basic and Diluted (Loss) EPS | ($0.10) | $0.12 | $0.02 | $0.38 | Consolidated Statements of Comprehensive Income (Loss) A comprehensive loss of $106.3 million for the nine months ended September 30, 2020, was primarily driven by operating losses and $82.4 million in unrealized swap valuation losses Comprehensive Loss Summary (in thousands) | Metric | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :--- | :--- | :--- | | Net (loss) income | ($33,422) | $6,539 | | Unrealized (loss) on valuation of swap agreements | ($82,444) | ($51,347) | | Comprehensive loss | ($106,268) | ($46,182) | | Comprehensive loss attributable to Acadia | ($52,732) | ($12,919) | Consolidated Statements of Changes in Shareholders' Equity Total equity decreased from $2.19 billion to $2.05 billion due to $22.4 million in share repurchases, $24.9 million in dividends, and a $52.7 million comprehensive loss - During the first nine months of 2020, the company repurchased 1,219,000 common shares for a total of $22.4 million[15] - Dividends and distributions declared for the nine months ended September 30, 2020, totaled $24.9 million[15] Consolidated Statements of Cash Flows Net cash from operations decreased to $81.1 million, investing activities used $92.9 million (down from $359.6 million), and financing activities provided $11.6 million (down from $290.6 million) Cash Flow Summary (in thousands) | Activity | Nine Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $81,081 | $95,187 | | Net cash used in investing activities | ($92,868) | ($359,624) | | Net cash provided by financing activities | $11,558 | $290,596 | | (Decrease) increase in cash and restricted cash | ($229) | $26,159 | Notes to Consolidated Financial Statements (Unaudited) This section details disclosures on segments, accounting policies, real estate activities, debt, financial instruments, and the significant impact of the COVID-19 pandemic - The company operates through three reportable segments: Core Portfolio, Funds, and Structured Financing[25] - Effective January 1, 2020, the company adopted ASU 2016-13 regarding credit losses, recording a cumulative-effect adjustment of $0.4 million to retained earnings for its Structured Financing portfolio[32] - The company made an accounting policy election to account for lease concessions related to COVID-19 as though the enforceable rights and obligations for those concessions existed in the original contract[42] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the COVID-19 pandemic's impact on operations, including tenant issues, rent collections, and impairment charges, alongside liquidity, capital resources, and a decrease in FFO per share - Due to the COVID-19 pandemic, the company recorded credit loss reserves of approximately $24.0 million and $39.9 million during the three and nine months ended September 30, 2020, respectively[218] - The Board of Trustees temporarily suspended common share distributions from Q2 2020 through Q4 2020, with reinstatement expected in Q1 2021, subject to approval[218][277] Rent Collections of Pre-COVID Billings (as of Oct 31, 2020) | Portfolio | Q2 2020 Collections | Q3 2020 Collections | October 2020 Collections | | :--- | :--- | :--- | :--- | | Core | 76% | 87% | 90% | | Fund | 67% | 79% | 81% | Funds from Operations (FFO) per Share - Diluted | Period | 2020 | 2019 | | :--- | :--- | :--- | | Three Months Ended Sep 30 | $0.17 | $0.34 | | Nine Months Ended Sep 30 | $0.96 | $1.09 | Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk is interest rate exposure on its $1.8 billion debt, with 75.8% fixed-rate and 24.2% variable-rate, where a 100 basis point increase would raise annual interest expense by $4.3 million - As of September 30, 2020, total mortgage and other notes payable was $1.8 billion, with 75.8% ($1.36 billion) fixed-rate or effectively fixed, and 24.2% ($435.1 million) variable-rate[308] - A 100 basis point increase in LIBOR would increase annual interest expense on the company's variable-rate debt by $4.3 million[312] - The company's interest rate risk exposure increased as variable-rate debt grew from $314.6 million (18.3% of total) at year-end 2019 to $435.1 million (24.2% of total) by September 30, 2020[319] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2020, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2020[320] - No material changes were made to the company's internal control over financial reporting during the third quarter of 2020[321] PART II - OTHER INFORMATION Legal Proceedings Litigation regarding a defaulted mortgage loan was settled on October 30, 2020, with a $30 million payment, expected to result in a gain in the fourth quarter - Litigation related to the defaulted Brandywine Loan, which had an original principal of $26.3 million, was settled on October 30, 2020[322][324] - The settlement involved a $30 million payment by Brandywine Holdings, which was a discount to the carrying value and is expected to result in a gain for accounting purposes in Q4 2020[324] Risk Factors The company highlights material risks from the COVID-19 pandemic, including adverse effects on business, financial condition, and liquidity due to tenant closures and reduced rent collections - The primary updated risk factor relates to the adverse effects of the COVID-19 pandemic on the company's and its tenants' businesses, financial condition, and results of operations[327][328] - Key pandemic-related risks include tenants' inability to make timely rental payments, uncertainty regarding lease renewals, potential delays and reduced returns on development projects, and disruptions to capital markets[331] - As of October 31, 2020, the company had collected approximately 87% of Core Portfolio and 79% of Fund Portfolio pre-COVID billings for the third quarter of 2020[329] Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable for the reporting period - Not applicable[333] Defaults Upon Senior Securities This item is not applicable for the reporting period - Not applicable[333] Mine Safety Disclosures This item is not applicable for the reporting period - Not applicable[333] Other Information This item is not applicable for the reporting period - Not applicable[333] Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data files - Exhibits filed include CEO and CFO certifications under Sections 302 and 906 of the Sarbanes-Oxley Act, and XBRL interactive data files[335]