Acadia Realty Trust(AKR) - 2024 Q1 - Quarterly Results

Company and Financial Overview Company Information Acadia Realty Trust is an equity REIT focused on owning, acquiring, redeveloping, and managing high-quality retail properties in prime urban and suburban locations through its Core Portfolio and various investment funds - Acadia Realty Trust is an equity REIT focused on owning, acquiring, redeveloping, and managing high-quality retail properties in prime urban and suburban locations through its Core Portfolio and various investment funds[3] Market Capitalization As of March 31, 2024, Acadia Realty Trust's total market capitalization was approximately $3.18 billion, with equity constituting 58% and debt 42%, comprising 108.1 million common shares and OP units outstanding Market Capitalization as of March 31, 2024 (in thousands) | Category | Amount | Percentage | | :--- | :--- | :--- | | Total Equity Capitalization | $1,847,063 | 58% | | Total Debt Capitalization | $1,328,651 | 42% | | Total Market Capitalization | $3,175,714 | 100% | - The total number of combined common shares and OP units outstanding was 108,123,000 at the end of the quarter, an increase from 100,707,000 at the end of 2023, primarily due to the issuance of 6,987,000 shares[8] Operating Statements For the first quarter of 2024, Acadia reported total revenues of $91.4 million and a net income attributable to the company of $3.3 million, reflecting rental income as the primary source offset by significant expenses Consolidated Statements of Operations In the first quarter ended March 31, 2024, Acadia generated $91.4 million in total revenues, primarily from rental income ($86.0 million), resulting in a net income attributable to Acadia of $3.3 million after total expenses of $76.2 million Q1 2024 Consolidated Statement of Operations (in thousands) | Metric | Quarter Ended March 31, 2024 | | :--- | :--- | | Total Revenues | $91,356 | | Total Expenses | $76,150 | | Operating Income | $14,008 | | Net Loss | $(6,857) | | Net Income Attributable to Acadia | $3,269 | Statements of Operations – Pro-Rata Adjustments Pro-rata adjustments for Q1 2024 show a net income attributable to Acadia of $10.1 million from consolidated noncontrolling interests and a net loss of $0.3 million from unconsolidated interests, reflecting the removal and addition of respective shares Q1 2024 Pro-Rata Adjustments Summary (in thousands) | Category | Noncontrolling Interest in Consolidated Subsidiaries | Company's Interest in Unconsolidated Subsidiaries | | :--- | :--- | :--- | | Total Revenues Adjustment | $(37,171) | $18,882 | | Total Expenses Adjustment | $(12,842) | $6,427 | | Net Income (Loss) Attributable to Acadia | $10,126 | $(312) | Balance Sheet As of March 31, 2024, Acadia's consolidated balance sheet reported total assets of $4.27 billion, total liabilities of $2.0 billion, and total Acadia shareholders' equity of $1.76 billion Consolidated Balance Sheet As of March 31, 2024, the company's consolidated balance sheet reported total assets of $4.27 billion, with net investments in real estate comprising $3.60 billion, total liabilities of $2.0 billion, and total Acadia shareholders' equity of $1.76 billion Consolidated Balance Sheet Summary as of March 31, 2024 (in thousands) | Category | Amount | | :--- | :--- | | Net investments in real estate | $3,596,289 | | Total Assets | $4,271,782 | | Total Liabilities | $2,000,251 | | Total Acadia Shareholders' Equity | $1,760,900 | | Total Liabilities, Redeemable Noncontrolling Interests, and Equity | $4,271,782 | Balance Sheet – Pro-rata Adjustments Pro-rata adjustments to the balance sheet as of March 31, 2024, resulted in a reduction of $1.05 billion in assets and $0.66 billion in liabilities related to noncontrolling interests, and an addition of $213.5 million in both assets and liabilities for the company's share of unconsolidated subsidiaries Pro-Rata Balance Sheet Adjustments as of March 31, 2024 (in thousands) | Category | Noncontrolling Interest in Consolidated Subsidiaries | Company's Interest in Unconsolidated Subsidiaries | | :--- | :--- | :--- | | Total Assets Adjustment | $(1,047,127) | $213,548 | | Total Liabilities Adjustment | $(659,000) | $213,548 | Funds from Operations (FFO), FFO Before Special Items, Adjusted Funds from Operations (AFFO) For Q1 2024, Acadia reported diluted FFO of $0.28 per share, FFO before Special Items of $0.33 per share, and Adjusted Funds from Operations (AFFO) of $37.3 million, reflecting a slight increase in AFFO year-over-year FFO and AFFO Performance (in thousands, except per share amounts) | Metric | Quarter Ended March 31, 2024 | Quarter Ended March 31, 2023 | | :--- | :--- | :--- | | FFO to Common Shareholders - Diluted | $30,957 | $40,721 | | FFO before Special Items | $36,966 | $40,655 | | AFFO to Common Shareholders | $37,265 | $36,274 | | Diluted FFO per Share | $0.28 | $0.40 | | FFO before Special Items per Share | $0.33 | $0.40 | EBITDA In Q1 2024, total EBITDA was $51.9 million, down from $56.9 million in Q1 2023, with the Core Portfolio contributing $44.3 million and Funds contributing $7.6 million, while Adjusted EBITDA totaled $55.8 million EBITDA Summary (in thousands) | Category | Quarter Ended March 31, 2024 | Quarter Ended March 31, 2023 | | :--- | :--- | :--- | | Core Portfolio EBITDA | $44,310 | $38,240 | | Funds EBITDA | $7,572 | $18,615 | | Total EBITDA | $51,882 | $56,855 | | Adjusted EBITDA | $55,820 | $60,631 | Same Property Net Operating Income For Q1 2024, Acadia's Core Portfolio Same Property Net Operating Income (NOI) increased by 5.7% year-over-year to $32.0 million, driven by a 5.4% increase in total revenue, with physical occupancy at 91.8% and leased occupancy at 94.4% Core Portfolio Same Property Performance (YoY Change) | Metric | Quarter Ended March 31, 2024 | Change vs. Q1 2023 | | :--- | :--- | :--- | | Same Property NOI | $32,028 thousand | 5.7% | | Total Revenue | $46,143 thousand | 5.4% | | Physical Occupancy | 91.8% | (1.0%) | | Leased Occupancy | 94.4% | (0.2%) | Fee Income In Q1 2024, Acadia generated a total of $4.9 million in pro-rata fee income from its funds, primarily from Fund V ($3.4 million) and Fund IV ($1.1 million) through asset, property management, and transactional fees Fee Income by Fund - Q1 2024 (in thousands) | Fund | Total Fees (Pro-Rata) | | :--- | :--- | | Fund II | $194 | | Fund III | $36 | | Fund IV | $1,148 | | Fund V | $3,351 | | Other | $209 | | Total | $4,938 | Structured Financing As of March 31, 2024, Acadia's structured financing portfolio had a total ending balance of $227.0 million in notes receivable with an effective interest rate of 10.03%, including one core note of $17.8 million in default Structured Financing Portfolio as of March 31, 2024 (in thousands) | Investment Type | Ending Principal Balance | Ending Accrued Interest | Total Ending Balance | | :--- | :--- | :--- | :--- | | First mortgage notes | $59,801 | $3,809 | $63,610 | | Other notes | $127,233 | $36,165 | $163,398 | | Total Core notes receivable | $187,034 | $39,974 | $227,008 | - A Core note with a principal of $17.8 million and accrued interest of $3.8 million was in default as of March 31, 2024[38] Transactional Activity Subsequent to the quarter's end, on April 3, 2024, Fund IV completed the disposition of the Fillmore properties in San Francisco for a total transaction amount of $14.1 million, with Acadia's share being $2.9 million Post-Quarter Disposition Activity (in thousands) | Property Name | Date | Transaction Amount | Acadia Share | | :--- | :--- | :--- | :--- | | 2207 & 2208-2216 Fillmore | April 3, 2024 | $14,060 | $2,926 | 2024 Guidance The company reaffirmed its 2024 guidance for FFO Before Special Items, maintaining the range of $1.24 to $1.32 per share, while adjusting NAREIT FFO per share to $1.09-$1.15 to account for a Q1 net unrealized holding loss 2024 Full Year Guidance (per share) | Metric | As of 3/31/2024 | As of 12/31/2023 | | :--- | :--- | :--- | | Net earnings per share | $0.07 - $0.13 | $0.09 - $0.15 | | NAREIT FFO per share | $1.09 - $1.15 | $1.11 - $1.17 | | FFO Before Special Items per share | $1.24 - $1.32 | $1.24 - $1.32 | - Guidance for FFO Before Special Items remains unchanged, indicating stable expectations for core operating performance[45] Net Asset Valuation Information As of Q1 2024, the total pro-rata Net Operating Income (NOI) for Acadia's portfolio was $41.9 million, with the Core portfolio contributing $36.0 million, and total pro-rata debt across the Core and Fund portfolios standing at approximately $1.33 billion Pro-Rata NAV Information - Q1 2024 (in thousands) | Category | CORE | FUND V | Total | | :--- | :--- | :--- | :--- | | Net Operating Income | $35,954 | $5,007 | $41,941 | | Debt (Pro-Rata) | $1,050,689 | $151,971 | $1,328,651 | Selected Financial Ratios As of March 31, 2024, Acadia's Core Portfolio Fixed-Charge Coverage Ratio was 3.7x, total Debt to Market Capitalization was 42%, and the Debt to EBITDA ratio for Core and Funds combined was 6.6x, with an AFFO payout ratio of 54% Key Financial Ratios as of March 31, 2024 | Ratio | Core Portfolio | Core and Funds | | :--- | :--- | :--- | | Fixed-Charge Coverage Ratio | 3.7x | 3.1x | | Debt/EBITDA | 5.6x | 6.6x | | Net Debt/EBITDA | 5.5x | 6.6x | Payout Ratios - Q1 2024 | Ratio | Percentage | | :--- | :--- | | FFO Payout Ratio | 65% | | AFFO Payout Ratio | 54% | | FFO Before Special Items Payout Ratio | 54% | Debt Analysis Acadia's total pro-rata debt was approximately $1.33 billion as of March 31, 2024, with a weighted average interest rate of 4.7% and a weighted average maturity of 2.4 years, split between the Core Portfolio ($1.05 billion) and the Funds ($278 million) Portfolio Debt – Summary As of March 31, 2024, Acadia's total pro-rata debt was $1.33 billion, with the Core Portfolio accounting for $1.05 billion at a 4.3% weighted average interest rate and the Funds holding $278 million at a 6.3% rate, with 93% of total debt being fixed-rate Pro-Rata Debt Summary (in thousands) | Portfolio | Principal Balance | WA Interest Rate | WA Years to Maturity | | :--- | :--- | :--- | :--- | | Core Portfolio | $1,050,689 | 4.3% | 2.7 | | Funds | $277,962 | 6.3% | 1.7 | | Total | $1,328,651 | 4.7% | 2.4 | Portfolio Debt – Detail The detailed debt schedule outlines individual borrowings for both the Core Portfolio and Funds, with Core Portfolio debt including significant unsecured term loans and revolving credit facilities, while Funds' debt is primarily secured by individual properties - The Core Portfolio's debt includes significant unsecured term loans and revolving credit facilities, while the Funds' debt is primarily secured by individual properties[67][69] Future Debt Maturities Based on contractual maturities, Acadia has significant debt maturing in 2025 ($177 million for Core, $143 million for Funds) and 2026 ($461 million for Core), with extension options pushing major Core maturities to 2026 ($548 million) and 2027 ($190 million) Acadia's Pro-Rata Share of Contractual Debt Maturities (in thousands) | Year | Core Portfolio Total | Funds Total | | :--- | :--- | :--- | | 2024 (Remainder) | $43,453 | $64,051 | | 2025 | $176,925 | $142,696 | | 2026 | $461,070 | $13,880 | | 2027 | $203,340 | $31,877 | Swap Interest Rate Summary Acadia utilizes interest rate swaps to manage variable interest rate exposure, with the Core Portfolio having a total notional balance of $845.1 million in swaps at a weighted average fixed rate of 2.76%, and the Funds having $163.2 million in swaps at 2.98% Pro-Rata Swap Summary (Notional Balance in thousands) | Portfolio | Total Notional Balance | Weighted Average Fixed Rate on Swap | | :--- | :--- | :--- | | Core Portfolio | $845,087 | 2.76% | | Funds | $163,164 | 2.98% | Core Portfolio Information Core Properties The Core Portfolio consists of 5.4 million square feet of Gross Leasable Area (GLA) with an in-place occupancy of 91.6% and a leased occupancy of 94.3%, generating a total Annualized Base Rent (ABR) of $156.7 million Core Portfolio Summary | Category | Total GLA | In Place Occupancy | Leased Occupancy | Total ABR (in millions) | | :--- | :--- | :--- | :--- | :--- | | Street and Urban Retail | 1,475,475 | 87.6% | 90.6% | $92.1 | | Suburban Properties | 3,910,343 | 93.1% | 95.7% | $64.7 | | Total Core Properties | 5,385,818 | 91.6% | 94.3% | $156.7 | Core Top Tenants The top 20 tenants in the Core Portfolio account for 31.5% of total Annualized Base Rent (ABR) and 28.8% of total Gross Leasable Area (GLA), with Target being the largest tenant contributing 5.5% of total ABR Top 5 Core Portfolio Tenants by ABR | Tenant | Percentage of Total ABR | Percentage of Total GLA | | :--- | :--- | :--- | | Target | 5.5% | 6.9% | | Royal Ahold | 2.3% | 2.6% | | TJX Companies | 2.0% | 4.3% | | Walgreens | 1.9% | 1.2% | | PetSmart, Inc. | 1.8% | 1.3% | Core Lease Expirations On a pro-rata basis, 12.2% of the Core Portfolio's GLA is set to expire in the remainder of 2024, representing 8.0% of ABR, with a significant portion of 13.4% of GLA (15.1% of ABR) expiring in 2025 Total Core Portfolio Lease Expirations (Pro-Rata) | Year | % of Total GLA Expiring | % of Total ABR Expiring | | :--- | :--- | :--- | | 2024 (Remainder) | 12.2% | 8.0% | | 2025 | 13.4% | 15.1% | | 2026 | 14.3% | 13.2% | | 2027 | 7.4% | 8.6% | | 2028 | 19.1% | 17.4% | Core New and Renewal Rent Spreads In Q1 2024, Acadia achieved positive rent spreads on 187,851 square feet leased, with a 10.7% increase in base rent on a GAAP basis and a 5.2% increase on a cash basis, driven by strong new lease growth of 33.9% GAAP spread Q1 2024 Leasing Spreads | Lease Type | Percentage Growth in Base Rent (GAAP) | Percentage Growth in Base Rent (Cash) | | :--- | :--- | :--- | | New Leases | 33.9% | 15.7% | | Renewal Leases | 10.1% | 5.0% | | Total New and Renewal | 10.7% | 5.2% | Core Capital Expenditures For the first quarter of 2024, total capital expenditures for the Core Portfolio amounted to $3.4 million, including $0.6 million for leasing commissions, $1.2 million for tenant improvements, and $1.6 million for maintenance capital expenditures Q1 2024 Capital Expenditures (in thousands) | Category | March 31, 2024 | | :--- | :--- | | Leasing Commissions | $560 | | Tenant Improvements | $1,212 | | Maintenance Capital Expenditures | $1,640 | | Total Capital Expenditures | $3,412 | Fund Information Fund Overview Acadia manages five opportunistic/value-add funds totaling over $2.1 billion, with Funds IV and V having unfunded commitments of $24.0 million and $60.4 million respectively for existing projects and new investments, and none currently in a promote position Fund Key Metrics (in millions) | Metric | Fund II | Fund III | Fund IV | Fund V | | :--- | :--- | :--- | :--- | :--- | | Fund Size | $472.0 | $502.5 | $540.6 | $520.0 | | Acadia's Pro-Rata Share | 61.7% | 24.5% | 23.1% | 20.1% | | Preferred Return | 8.0% | 6.0% | 6.0% | 6.0% | | Unfunded Commitment | $0.0 | $1.9 | $24.0 | $60.4 | - The company earns various fees from the funds, including asset management, property management (4.0% of gross revenues), leasing, and development fees (3.0% of project costs for Funds III, IV & V)[107] Fund Properties The combined fund portfolios comprise nearly 9.0 million square feet of GLA with a leased occupancy of 93.6%, with Fund V being the largest at 7.8 million sq. ft. and a 94.3% leased rate, and Fund II's sole remaining asset, City Point, at 85.4% leased Total Fund Properties Summary | Fund | Total GLA | Leased Occupancy | Annualized Base Rent (ABR) (in thousands) | | :--- | :--- | :--- | :--- | | Fund II | 538,097 | 85.4% | $18,076 | | Fund III | 4,637 | 77.6% | $851 | | Fund IV | 686,023 | 91.9% | $16,389 | | Fund V | 7,757,907 | 94.3% | $111,727 | | Total | 8,986,664 | 93.6% | $147,044 | Fund Lease Expirations The fund portfolios have significant lease expirations in 2025, particularly within Fund V, where 27.4% of GLA (25.3% of ABR) is scheduled to expire, while Fund IV has 13.6% of its GLA expiring in the remainder of 2024 Fund Lease Expirations by ABR (Pro-Rata) | Year | Fund II (% of ABR) | Fund IV (% of ABR) | Fund V (% of ABR) | | :--- | :--- | :--- | :--- | | 2024 (Remainder) | 0.0% | 12.0% | 0.0% | | 2025 | 1.6% | 14.7% | 25.3% | | 2026 | 0.0% | 7.7% | 10.7% | Development and Redevelopment Activity Acadia's development and redevelopment pipeline has total pro-rata costs to date of $753.8 million, with an estimated future spend of $23.8 million to $40.2 million, primarily driven by Core portfolio projects like City Center and 555 9th Street in San Francisco Development and Redevelopment Pipeline (Acadia's Pro-rata Share, in millions) | Portfolio | Total Costs to Date | Estimated Future Range | | :--- | :--- | :--- | | Core Development & Redevelopment | $718.9 | $23.8 - $40.2 | | Funds Development & Redevelopment | $34.9 | TBD | | Total | $753.8 | $23.8 - $40.2 | Other Information Important Notes This section contains important disclosures regarding forward-looking statements and the use of non-GAAP financial measures, defining FFO, AFFO, FFO Before Special Items, EBITDA, and NOI, while cautioning that these metrics may not be comparable to those of other REITs - The report contains forward-looking statements that are subject to risks and uncertainties[124] - FFO is defined per NAREIT standards, excluding gains/losses from property sales and depreciation, but including unrealized gains/losses on investments like Albertsons[125] - AFFO adjusts FFO for items like straight-line rent, stock-based compensation, and capital expenditures[126] - EBITDA is calculated as net income plus interest, taxes, depreciation, and amortization, less gains/losses on property sales[129]