Acadia Realty Trust(AKR) - 2022 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported earnings of $0.28 per share, exceeding expectations, with same-store NOI growth of 5.4% for the quarter and 6.6% year-to-date, on track to exceed the initial guidance of 4% to 6% for the full year [18][19][26] - Cash collections remained strong at 98%, aligning with pre-pandemic levels, despite one Regal location's temporary rent payment issues due to Chapter 11 filing [24][25] Business Line Data and Key Metrics Changes - The street retail portfolio outperformed, with cash leasing spreads exceeding 20%, and specific locations like SoHo achieving cash spreads of 40% [6][21] - Sequential physical occupancy grew by 70 basis points, with leased occupancy increasing to 94.3% as of September 30, up from 94.1% in the previous quarter [20] Market Data and Key Metrics Changes - Strong demand was noted in key markets such as SoHo, Gold Coast of Chicago, and Melrose Place in LA, with luxury retailers showing increased commitment [8][9] - Retailer sales in certain corridors exceeded pre-COVID levels, with M Street in Georgetown reporting sales over 20% higher than before the pandemic [11] Company Strategy and Development Direction - The company plans to add$ 30 million to $40 million of NOI to its core portfolio over the next three to five years, focusing on aggressive leasing and internal growth [14][26] - The strategy includes self-funding capital needs and minimizing exposure to rising interest rates, with a focus on opportunistic asset sales to close the gap between private real estate values and stock price [15][31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued strong leasing momentum despite macroeconomic headwinds, citing robust demand for space and the quality of locations [7][8] - The company anticipates 5% to 10% pro rata core NOI growth for 2023, excluding nonrecurring impacts from 2022 cash recoveries [27][28] Other Important Information - The company increased its 2022 guidance for FFO before special items to$ 1.28 to $1.30, reflecting a year-over-year growth of about 17% [26] - The company took a noncash GAAP impairment charge on three investments, primarily due to longer recovery times in specific submarkets [29][30] Q&A Session Summary Question: About the$ 30 million to $40 million of core NOI expected over the next three to five years - Management clarified that this figure does not include recent acquisitions or growth from City Point, with leasing expected to contribute significantly to this growth [43][44][47] Question: Conversations around long-term leases with retailers - Management noted that retailers are more inclined to lock in long-term leases now, especially in mission-critical locations, as they anticipate higher inflation and rent growth [50][51] Question: Financing fund investments and variable rate debt - Management indicated that financing strategies may change due to current market conditions, emphasizing flexibility in the fund business [54][55] Question: Update on Bed Bath & Beyond negotiations - Management described the situation as fluid, with ongoing negotiations to potentially rightsize the store, expressing cautious optimism about reaching a profitable conclusion [60][62] Question: Disconnect between asset values and stock price - Management acknowledged the disconnect, attributing it to market conditions and emphasizing the strength of their portfolio outside of underperforming areas [63][64][66]