SEC Filing - Acadia Realty Trust

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 1-12002 ACADIA REALTY TRUST (Exact name of registrant in its charter) MARYLAND 23-2715194 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 20 SOUNDVIEW MARKETPLACE, PORT WASHINGTON, NY 11050 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (516) 767-8830 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No As of August 8, 2000, there were 25,126,158 common shares of beneficial interest, par value $.001 per share, outstanding.

FORM 10-Q INDEX Part I: Financial Information Page Item 1. Financial Statements (unaudited) Consolidated Balance Sheets as of June 30, 2000 and December 31, 1999 1 Consolidated Statements of Operations for the three and six months ended June 30, 2000 and 1999 2 Consolidated Statements of Cash Flows for the six months ended June 30, 2000 and 1999 3 Notes to Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 12 Item 3. Quantitative and Qualitative Disclosure of Market Risk 20 Part II: Other Information Item 4. Submission of Matters to a Vote of Security Holders 21 Item 6. Exhibits 22 Signatures 23

Part I. Financial Information Item 1. Financial Statements ACADIA REALTY TRUST AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except per share amounts) June 30, 2000 December 31, (unaudited) 1999 ----------- ------------ ASSETS Real estate Land $ 81,956 $ 81,956 Buildings and improvements 479,310 477,573 Properties under development 13,371 9,992 -------- -------- 574,637 569,521 Less: accumulated depreciation 99,520 90,932 -------- -------- Net real estate 475,117 478,589 Property held for sale 12,814 13,227 Cash and cash equivalents 11,949 35,340 Cash in escrow 11,696 9,707 Investments in unconsolidated partnerships 6,890 7,463 Rents receivable, net 9,349 8,865 Prepaid expenses 1,451 2,952 Due from related parties -- 19 Deferred charges, net 13,701 12,374 Other assets 2,412 2,267 -------- -------- $545,379 $570,803 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Mortgage notes payable $307,398 $326,651 Accounts payable and accrued expenses 5,845 6,385 Dividends and distributions payable 4,325 4,371 Other liabilities 3,526 4,224 -------- -------- Total liabilities 321,094 341,631 -------- -------- Minority interest in Operating Partnership 73,942 74,462 Minority interest in majority owned partnerships 2,206 2,223 -------- -------- Total minority interests 76,148 76,685 -------- -------- Shareholders' equity: Common shares, $.001 par value, authorized 100,000,000 shares, issued and outstanding 25,145,158 and 25,724,315 shares, respectively 26 26 Additional paid-in capital 164,291 168,641 Deficit (16,180) (16,180) -------- -------- Total shareholders' equity 148,137 152,487 -------- -------- $545,379 $570,803 ======== ======== See accompanying notes 1

ACADIA REALTY TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (in thousands, except per share amounts) Three months ended Six months ended June 30, June 30, 2000 1999 2000 1999 ---- ---- ---- ---- (unaudited) (unaudited) Revenues Minimum rents $18,663 $17,500 $37,104 $34,853 Percentage rents 589 686 1,340 1,473 Expense reimbursements 3,199 3,037 7,043 6,495 Other 2,518 681 3,345 1,333 ------- ------- ------- ------- Total revenues 24,969 21,904 48,832 44,154 ------- ------- ------- ------- Operating expenses Property operating 5,337 5,427 11,323 11,308 Real estate taxes 2,914 2,564 5,627 5,115 General and administrative 1,285 1,638 2,578 3,104 Depreciation and amortization 5,085 4,965 10,100 9,651 ------- ------- ------- ------- Total operating expenses 14,621 14,594 29,628 29,178 ------- ------- ------- ------- Operating income 10,348 7,310 19,204 14,976 Equity in earnings of unconsolidated partnerships 151 157 351 340 Loss on sale of property -- -- -- (1,284) Interest expense (6,261) (5,581) (12,616) (11,005) ------- ------- ------- ------- Income before minority interest 4,238 1,886 6,939 3,027 Minority interest (1,274) (597) (2,101) (973) ------- ------- ------- ------- Net Income $ 2,964 $ 1,289 $ 4,838 $ 2,054 ======= ======= ======= ======= Net income per Common Share - Basic and diluted $ .12 $ .05 $ .19 $ .08 ======= ======= ======= ======= See accompanying notes 2

ACADIA REALTY TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (in thousands) June 30, June 30, 2000 1999 (unaudited) (unaudited) ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 4,838 $ 2,054 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 10,100 9,651 Minority interest 2,101 973 Equity in income of unconsolidated partnerships (351) (340) Provision for bad debts 314 893 Stock-based compensation 197 -- Loss on sale of property -- 1,284 Changes in assets and liabilities: Funding of escrows, net (1,989) (1,180) Rents receivable (798) (1,974) Prepaid expenses 1,501 1,502 Due from related parties 19 144 Other assets (298) (312) Accounts payable and accrued expenses (540) (4,041) Other liabilities (698) (730) ----- ----- Net cash provided by operating activities 14,396 7,924 ------ ----- CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for real estate and improvements (5,239) (14,626) Net proceeds from sale of property -- 6,128 Distributions from unconsolidated partnerships 924 637 Payment of deferred leasing costs (1,095) (863) ------- ----- Net cash used in investing activities (5,410) (8,724) ------- ------- See accompanying notes 3

ACADIA REALTY TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (in thousands) June 30, June 30, 2000 1999 (unaudited) (unaudited) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on mortgage notes $(60,453) $(1,863) Proceeds received on mortgage notes 41,200 5,194 Payment of deferred financing costs (1,055) (523) Dividends paid (6,126) (3,050) Distributions to minority interest in Operating Partnership (2,516) (1,342) Distributions on Preferred Operating Partnership units (73) -- Distributions to minority interest in majority owned partnership (22) -- Repurchase of Common Shares (3,332) (20) -------- ------- Net cash used in financing activities (32,377) (1,604) -------- ------- Decrease in cash and cash equivalents (23,391) (2,404) Cash and cash equivalents, beginning of period 35,340 15,183 ------ ------- Cash and cash equivalents, end of period $ 11,949 $12,779 ======== ======= Supplemental Disclosures of Cash Flow Information: Cash paid during the period for interest, net of amounts capitalized of $241 and $732, respectively $12,501 $11,624 ======= ======= Supplemental Disclosure of Non-Cash Investing and Financing Activities: Acquisition of real estate by assumption of debt $13,883 ======= See accompanying notes 4

ACADIA REALTY TRUST AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share amounts) 1. THE COMPANY Acadia Realty Trust (the "Company") is a fully integrated and self-managed real estate investment trust ("REIT") focused primarily on the ownership, acquisition, redevelopment and management of neighborhood and community shopping centers, and multi-family properties. All of the Company's assets are held by, and all of its operations are conducted through, Acadia Realty Limited Partnership (the "Operating Partnership") and its majority owned partnerships. As of June 30, 2000, the Company controlled 71% of the Operating Partnership as the sole general partner. The Company currently operates fifty-eight properties, which it owns or has an ownership interest in, consisting of forty-seven neighborhood and community shopping centers, three enclosed malls, two mixed-use properties (a retail/office center and a retail/residential property), five multi-family properties and one redevelopment property located in the Eastern and Midwestern regions of the United States. The retail/office center was held for sale as of June 30, 2000. 2. BASIS OF PRESENTATION The consolidated financial statements include the consolidated accounts of the Company and its majority owned partnerships, including the Operating Partnership, and have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Non-controlling investments in partnerships are accounted for under the equity method of accounting as the Company exercises significant influence. The information furnished in the accompanying consolidated financial statements reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the aforementioned consolidated financial statements for the interim periods. The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from these estimates. 5

ACADIA REALTY TRUST AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share amounts) 2. BASIS OF PRESENTATION (continued) Operating results for the six-month period ended June 30, 2000 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2000. For further information refer to the consolidated financial statements and accompanying footnotes included in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. 3. SHAREHOLDERS' EQUITY AND MINORITY INTERESTS The following table summarizes the change in the shareholders' equity and minority interests since December 31, 1999: Minority Minority interest in interest in Shareholders' Operating majority owned equity Partnership(1) partnerships ------ -------------- ------------ Balance at December 31, 1999 $152,487 $74,462 $ 2,223 Repurchase of Common Shares (3,332) -- -- Reissuance of Common Shares held in treasury 197 -- -- Dividends and distributions declared of $0.24 per Common Share and Operating Partnership unit (6,053) (2,516) -- Cash flow distribution -- -- (22) Net income for the period January 1 through June 30, 2000 4,838 1,996 5 ----- ----- - Balance at June 30, 2000 $148,137 $73,942 $ 2,206 ======== ======= ======== (1) Net income attributable to minority interest in Operating Partnership and distributions do not include a distribution on Preferred OP Units of $100. Minority interests in Operating Partnership represent the limited partners' interest of 10,484,143 and 11,084,143 units in the Operating Partnership ("Common OP Units") at June 30, 2000 and 1999, respectively, and 2,212 units of preferred limited partnership interests ("Preferred OP Units"), with a nominal value of $1,000 per unit, which are entitled to a preferred quarterly distribution of $22.50 per unit (9% annually). Minority interests in majority owned partnerships represent interests held by third parties in four partnerships in which the Company has a majority ownership position. 6

ACADIA REALTY TRUST AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share amounts) 4. INVESTMENT IN PARTNERSHIPS The Company owns a 49% interest in the Crossroads Joint Venture and Crossroads II (collectively "Crossroads") and accounts for this investment using the equity method. Summary financial information of the Crossroads and the Company's investment in and share of income from the Crossroads follows: June 30, December 31, 2000 1999 ---- ---- Balance Sheet Assets: Rental property, net $ 8,579 $ 8,801 Other assets 4,627 5,204 -------- -------- Total assets $ 13,206 $ 14,005 ======== ======== Liabilities and partners' equity Mortgage note payable $ 34,879 $ 35,105 Other liabilities 680 777 Partners' equity (22,353) (21,877) -------- -------- Total liabilities and partners' equity $ 13,206 $ 14,005 ======== ======== Company's investment in partnerships $ 6,890 $ 7,463 ======== ======== Three months ended Six months ended June 30, June 30, 2000 1999 2000 1999 ---- ---- ---- ---- Statement of Operations Total revenue $1,772 $1,724 $3,637 $3,527 Operating and other expenses 468 435 926 898 Interest expense 663 637 1,330 1,271 Depreciation and amortization 132 132 265 264 --- --- --- --- Net income $509 $ 520 $1,116 $1,094 ==== ====== ====== ====== Company's share of net income $249 $ 255 $547 $ 536 Amortization of excess investment (See below) 98 98 196 196 -- -- --- --- Income from partnerships $151 $ 157 $351 $ 340 ==== ====== ==== ====== The unamortized excess of the Company's investment over its share of the net equity in Crossroads at the date of acquisition was $19,580. The portion of this excess attributable to buildings and improvements is being amortized over the life of the related property. 7

ACADIA REALTY TRUST AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share amounts) 5. RELATED PARTY TRANSACTIONS The Company manages three properties in which certain current shareholders of the Company or their affiliates have ownership interests. Management fees earned by the Company under these contracts are at rates ranging from 3.0% to 3.5%. Such fees aggregated $208 and $445 during the three and six-month periods ended June 30, 2000, respectively, and $153 and $296 during the three and six-month periods ended June 30, 1999, respectively. 6. DIVIDENDS AND DISTRIBUTIONS PAYABLE On May 16, 2000, the Board of Trustees of the Company approved and declared a cash quarterly dividend for the quarter ended June 30, 2000 of $0.12 per Common Share and Common OP Unit. The dividend was paid on July 15, 2000 to the shareholders of record as of June 30, 2000. The Board of Trustees also approved a distribution of $22.50 per Preferred OP Unit which was paid on July 15, 2000 as well. 7. PER SHARE DATA For the three and six-month periods ended June 30, 2000 and 1999, basic earnings per share was determined by dividing the net income applicable to common shareholders for each period by the weighted average number of common shares of beneficial interest ("Common Shares") outstanding during each period consistent with the Financial Accounting Standards Board Statement No. 128. The weighted average number of shares outstanding for the three-month periods ended June 30, 2000 and 1999 were 25,241,794 and 25,510,424, respectively. The weighted average number of shares outstanding for the six-month periods ended June 30, 2000 and 1999 were 25,358,946 and 25,465,071, respectively. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue Common Shares were exercised or converted into Common Shares or resulted in the issuance of Common Shares that then shared in the earnings of the Company. For the three and six-month periods ended June 30, 2000 and 1999 no additional shares were reflected as the impact would be anti-dilutive in such periods. 8

ACADIA REALTY TRUST AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share amounts) 8. SEGMENT REPORTING The Company has two reportable segments: retail properties and multi-family properties. The Company evaluates property performance primarily based on net operating income before depreciation, amortization and certain non-recurring items. The reportable segments are managed separately due to the differing nature of the leases and property operations associated with the retail versus residential tenants. Six months ended June 30, 2000 ------------- Retail Multi-Family All properties properties other Total ------------------------------------------------ Revenues .................................................... $ 40,135 $ 7,620 $ 1,077 $ 48,832 Property operating expenses and real estate taxes ........... 13,972 2,978 -- 16,950 Net property income before depreciation and amortization..... 26,163 4,642 1,077 31,882 Depreciation and amortization ............................... 8,875 1,008 217 10,100 Interest expense ............................................ 10,416 2,150 50 12,616 Real estate at cost ......................................... 491,848 82,789 -- 574,637 Total assets ................................................ 452,036 86,453 6,890 545,379 Gross leasable area(multi-family 2,273 units) ............... 8,809 2,039 -- 10,848 Expenditures for real estate and improvements ............... 4,595 644 -- 5,239 Reconciliation to income before minority interest Net property income before depreciation and amortization..... 31,882 Depreciation and amortization ............................... (10,100) General and administrative .................................. (2,578) Equity in earnings of unconsolidated partnerships ........... 351 Interest expense ............................................ (12,616) -------- Income before minority interest $ 6,939 ======== Three months ended June 30, 2000 ------------------ Retail Multi-Family All properties properties other Total ------------------------------------------------ Revenues .................................................... $ 20,653 $ 3,829 $ 487 $ 24,969 Property operating expenses and real estate taxes ........... 6,698 1,553 -- 8,251 Net property income before depreciation and amortization..... 13,955 2,276 487 16,718 Depreciation and amortization ............................... 4,480 510 95 5,085 Interest expense ............................................ 5,177 1,084 -- 6,261 Real estate at cost ......................................... -- -- -- -- Total assets ................................................ -- -- -- -- Gross leasable area ......................................... -- -- -- -- Expenditures for real estate and improvements ............... 2,471 328 -- 2,799 Reconciliation to income before minority interest Net property income before depreciation and amortization..... 16,718 Depreciation and amortization ............................... (5,085) General and administrative .................................. (1,285) Equity in earnings of unconsolidated partnerships ........... 151 Interest expense ............................................ (6,261) -------- Income before minority interest $ 4,238 ======== 9

ACADIA REALTY TRUST AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share amounts) 8. SEGMENT REPORTING (continued) Six months ended June 30, 1999 ------------- Retail Multi-Family All properties properties other Total ------------------------------------------------ Revenues .................................................... $ 35,927 $ 7,390 $ 837 $ 44,154 Property operating expenses and real estate taxes ........... 13,483 2,940 -- 16,423 Net property income before depreciation, amortization and certain nonrecurring items ............... 22,444 4,450 837 27,731 Depreciation and amortization ............................... 8,701 880 70 9,651 Interest expense ............................................ 8,980 2,025 -- 11,005 Real estate at cost ......................................... 497,960 81,616 -- 579,576 Total assets ................................................ 449,571 82,924 7,219 539,714 Gross leasable area (multi-family - 2,273 units) ............ 8,709 2,039 -- 10,748 Expenditures for real estate and improvements ............... 13,976 650 -- 14,626 Reconciliation to income before minority interest Net property income before depreciation, amortization and certain nonrecurring items ............... 27,731 Depreciation and amortization ............................... (9,651) General and administrative .................................. (3,104) Equity in earnings of unconsolidated partnerships ........... 340 Loss on sale of property .................................... (1,284) Interest expense ............................................ (11,005) -------- Income before minority interest $ 3,027 ======== Three months ended June 30, 1999 ------------------ Retail Multi-Family All properties properties other Total ------------------------------------------------ Revenues .................................................... $17,668 $3,696 $540 $21,904 Property operating expenses and real estate taxes ........... 6,441 1,550 -- 7,991 Net property income before depreciation, amortization and certain nonrecurring items ............... 11,227 2,146 540 13,913 Depreciation and amortization ............................... 4,448 447 70 4,965 Interest expense ............................................ 4,574 1,007 -- 5,581 Real estate at cost ......................................... -- -- -- -- Total assets ................................................ -- -- -- -- Gross leasable area (multi-family - 2,273 units) ............ -- -- -- -- Expenditures for real estate and improvements ............... 3,259 397 -- 3,656 Reconciliation to income before minority interest Net property income before depreciation, amortization and certain nonrecurring items ............... 13,913 Depreciation and amortization ............................... (4,965) General and administrative .................................. (1,638) Equity in earnings of unconsolidated partnerships .............................................. 157 Interest expense ............................................ (5,581) ------- Income before minority interest $ 1,886 ======= 10

ACADIA REALTY TRUST AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share amounts) 9. SUBSEQUENT EVENTS On July 19, 2000, the Company closed on a facility with a bank, which provides for the borrowing of up to $10,000. The facility, which is secured by one of the Company's properties, matures in August 2003 and requires the monthly payment of interest at the rate of LIBOR plus 175 basis points and principal amortized over 25 years. At closing, the Company borrowed $9,000 under this facility, of which $7,060 of proceeds were used to retire existing debt with another lender, $149 for various closing costs and the balance available for working capital. The Company may draw the additional $1,000 subject to certain lender requirements including debt-service and collateral value. 11

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion is based on the consolidated financial statements of Acadia Realty Trust (the "Company") as of June 30, 2000 and 1999 and for the three and six months then ended. This information should be read in conjunction with the accompanying consolidated financial statements and notes thereto. FORWARD-LOOKING STATEMENTS Certain statements contained in this report constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: general economic and business conditions, which will, among other things, affect demand for rental space, the availability and creditworthiness of prospective tenants, lease rents and the availability of financing; adverse changes in the Company's real estate markets, including, among other things, competition with other companies; risks of real estate development and acquisition; governmental actions and initiatives; and environmental/safety requirements. RESULTS OF OPERATIONS Comparison of the three month period ended June 30, 2000 ("2000") to the three month period ended June 30, 1999 ("1999") Total revenues increased $3.1 million, or 14%, to $25.0 million for 2000 compared to $21.9 million for 1999. Minimum rents increased $1.2 million, or 7%, to $18.7 million for 2000 compared to $17.5 million for 1999. $660,000 of this increase was the result of the redevelopment of 239 Greenwich Avenue and the reanchoring of the Ledgewood Mall ("1999 Redevelopments"). 239 Greenwich Avenue, which was completed in December of 1999, contributed $427,000 to the increase in minimum rents. The Ledgewood Mall contributed $233,000 to the increase as a result of the installation of new tenants, including Wal*Mart and Circuit City. The acquisition of the Mad River Shopping Center in February 1999, the Mall 189 in May 1999 and the Pacesetter Park Shopping Center in November 1999 ("1999 Acquisitions") contributed $325,000 to the increase in minimum rents as well. Expense reimbursements increased $162,000, or 5%, from $3.0 million for 1999 to $3.2 million for 2000. The 1999 Acquisitions and 1999 Redevelopments contributed $252,000 and $32,000, respectively, to the increase. These increases were partially offset by a $122,000 decrease in reimbursement income throughout the balance of the portfolio. Other income increased $1.8 million, from $681,000 in 1999 to $2.5 million in 2000. This was primarily due to $1.8 million of lease termination income received from two tenants at the Abington Towne Center (formerly the Atrium Mall) in connection with the commencement of redevelopment of the center in 2000. Total operating expenses of $14.6 million in 2000 were essentially unchanged from 1999. Property operating expenses decreased $90,000, or 2%, to $5.3 million for 2000 compared to $5.4 million for 1999. This was primarily a result of a decrease in bad debt expense in 2000 offset, partially, by a $140,000 increase attributable to the 1999 Acquisitions. Real estate taxes increased $350,000, or 14%, from $2.6 million for 1999 to $2.9 million for 2000. The 1999 Acquisitions contributed $195,000 of this increase. The remaining increase was experienced throughout the balance of the portfolio. 12

RESULTS OF OPERATIONS, continued Depreciation and amortization expense increased $120,000, or 2%, from $5.0 million for 1999 to $5.1 million for 2000. Depreciation increased $233,000 and amortization expense decreased $113,000. The increase in depreciation expense was primarily due to increases related to the 1999 Redevelopments and 1999 Acquisitions of $103,000 and $71,000, respectively. The decrease in amortization resulted from a $159,000 decrease in amortization of leasing costs partially offset by an increase in the amortization of financing costs related to additional financings in 1999 and 2000. General and administrative expense decreased $353,000, or 22%, from $1.6 million for 1999 to $1.3 million for 2000, which was primarily attributable to a $55,000 decrease in expenses in 2000 following the relocation of the Pennsylvania regional office and lower third-party professional fees in 2000. Interest expense of $6.3 million for 2000 increased $680,000, or 12%, from $5.6 million for 1999 primarily attributable to the higher average outstanding borrowings related to property acquisition and redevelopment activities. Comparison of the six month period ended June 30, 2000 ("2000") to the six month period ended June 30, 1999 ("1999") Total revenues increased $4.7 million, or 11%, to $48.8 million for 2000 compared to $44.1 million for 1999. Minimum rents increased $2.3 million, or 6%, to $37.1 million for 2000 compared to $34.8 million for 1999. Of this increase, $1.6 million and $791,000 was attributable to the 1999 Redevelopments and 1999 Acquisitions, respectively. These increases were partially offset by a $213,000 decline in minimum rents following the sale of the Searstown Mall in February 1999 and the Auburn Plaza in March 1999 ("1999 Dispositions"). Expense reimbursements increased $548,000, or 8%, from $6.5 million for 1999 to $7.0 million for 2000. The 1999 Acquisitions and 1999 Redevelopments contributed $416,000 and $157,000, respectively, to the increase. These increases were partially offset by a $102,000 decrease as a result of the 1999 Dispositions. Other income increased $2.0 million, from $1.3 million in 1999 to $3.3 million in 2000, primarily as a result of $1.8 million in lease termination income received in 2000 as previously discussed for the three months ended June 30, 2000. Total operating expenses increased $450,000, or 2%, to $29.6 million for 2000, from $29.2 million for 1999. Property operating expenses were essentially unchanged at $11.3 million for 2000. Expenses increased by $295,000 attributable to the 1999 Acquisitions. This was offset by a $149,000 decrease in expenses as a result of the 1999 Dispositions and a decrease in bad debt expense in 2000. Real estate taxes increased $512,000, or 10%, from $5.1 million for 1999 to $5.6 million for 2000. The 1999 Acquisitions contributed $307,000 of this increase with the remainder of the increase experienced throughout the balance of the portfolio. This was partially offset by an $83,000 decrease in real estate taxes associated with the 1999 Dispositions. 13

RESULTS OF OPERATIONS, continued Depreciation and amortization increased $449,000, or 5%, from $9.7 million for 1999 to $10.1 million for 2000. Depreciation increased $460,000 and amortization expense was essentially unchanged. The increase in depreciation expense was primarily due to increases related to the 1999 Redevelopments and 1999 Acquisitions of $262,000 and $147,000, respectively. A $133,000 decrease in amortization of leasing costs was offset by an increase in the amortization of financing costs related to additional financings in 1999 and 2000. General and administrative expense decreased $526,000, or 17%, from $3.1 million for 1999 to $2.6 million for 2000, which was primarily attributable to a $108,000 decrease in expenses in 2000 following the relocation of the Pennsylvania regional office and lower third-party professional fees in 2000. Interest expense of $12.6 million for 2000 increased $1.6 million, or 15%, from $11.0 million for 1999 primarily attributable to the higher average outstanding borrowings related to property acquisition and redevelopment activities. Funds from Operations The Company, along with most industry analysts, considers funds from operations ("FFO") as defined by the National Association of Real Estate Investment Trusts ("NAREIT") as an appropriate supplemental measure of operating performance. However, FFO does not represent cash generated from operations as defined by generally accepted accounting principles and is not indicative of cash available to fund cash needs. It should not be considered as an alternative to net income for the purpose of evaluating the Company's performance or to cash flows as a measure of liquidity. Generally, NAREIT defines FFO as net income (computed in accordance with generally accepted accounting principles) before gains (losses) on sales of property, plus depreciation on real estate and amortization of capitalized leasing costs, and after adjustments for unconsolidated partnerships and joint ventures on the same basis. The reconciliation of net income to FFO for the three and six months ended June 30, 2000 and 1999 is as follows: For the three months ended For the six months ended June 30, June 30, 2000 1999 2000 1999 ---- ---- ------- ------- Net income $ 2,964 $ 1,289 $ 4,838 $ 2,054 Depreciation of real estate and amortization of leasing costs: Wholly owned and consolidated partnerships 4,789 4,769 9,526 9,282 Unconsolidated partnerships 160 156 316 311 Income attributable to minority interest in Operating Partnership (a) 1,216 597 1,996 973 Loss on sale of property -- -- -- 1,284 -------- -------- -------- -------- Funds from operations $ 9,129 $ 6,811 $ 16,676 $ 13,904 ======== ======== ======== ======== Funds from operations per share - basic and diluted (b) $ 0.26 $ 0.19 $ 0.47 $ 0.38 ======== ======== ======== ======== (a) Does not include distributions paid to Preferred OP Unitholders for the three and six months ended June 30, 2000. (b) Assumes full conversion of a weighted average 10,484,143 Common OP Units into Common Shares for the three and six months ended June 30, 2000 and 11,084,143 Common OP Units for the three and six months ended June 30, 1999. Assumes no conversion of Preferred OP Units as such conversion would be anti-dilutive in such periods. 14

LIQUIDITY AND CAPITAL RESOURCES General The Company's principal uses of its liquidity are expected to be for distributions to its shareholders and OP unitholders, debt service and loan repayments, and property investment which includes acquisition, redevelopment, expansion and retenanting activities. In order to qualify as a REIT for Federal income tax purposes, the Company must currently distribute at least 95% of its taxable income to its shareholders. Effective 2001, the requirement will be reduced to 90% pursuant to the REIT Modernization Act passed in 1999. On May 16, 2000, the Board of Trustees of the Company approved and declared a cash quarterly dividend for the quarter ended June 30, 2000 of $0.12 per Common Share and Common OP Unit. The dividend was paid on July 15, 2000 to the shareholders of record as of June 30, 2000. The Board of Trustees also approved a distribution of $22.50 per Preferred OP Unit which was paid on July 15, 2000 as well. During the quarter ended June 30, 2000, the Company's share repurchase program was also a use of liquidity. For the three months ended June 30, 2000, the Company purchased 149,305 shares at a total cost of $886,000. Cumulatively, through June 30, 2000, the Company had repurchased 1,017,505 shares at a total cost of $5.3 million under the share repurchase program. The program, which allows for the repurchase of up to $10.0 million of the Company's outstanding Common Shares on the open market, may be discontinued or extended at any time and there is no assurance that the Company will purchase the full amount authorized. Sources of capital for funding property acquisition, redevelopment, expansion and retenanting, as well as repurchase of Common Shares are expected to be obtained from cash on hand, additional debt financings, sales of existing properties and additional equity offerings. As of June 30, 2000, the Company has $23.0 million available under a financing line with a bank as well as $7.4 million available under a revolving credit facility with another bank. The Company also has eleven properties that are currently unencumbered and therefore available as potential collateral for future borrowings. The Company anticipates that cash flow from operating activities will continue to provide adequate capital for all debt service payments, recurring capital expenditures and REIT distribution requirements. Financing and Debt As of June 30, 2000 interest on the Company's mortgage indebtedness ranged from 7.5% to 9.6% with maturities that ranged from August 2000 to March 2022. Of the total outstanding debt, $199.2 million, or 65%, was carried at fixed interest rates with a weighted average of 8.3%, and $108.2 million, or 35%, was carried at variable rates with a weighted average of 8.4%. Of the total outstanding debt, $82.2 million will become due by 2001, with scheduled maturities of $41.0 million at an interest rate of 7.8% in 2000 and $41.2 million at an interest rate of 7.8% in 2001. The Company expects to refinance this maturing debt or select other alternatives based on market conditions at that time, although there can be no assurance as to the consummation or terms of such refinancings. The following significant financing transaction was completed since March 31, 2000: On July 19, 2000, the Company closed on a facility with a bank, which provides for the borrowing of up to $10.0 million. The facility, which is secured by one of the Company's properties, matures in August 2003 and requires the monthly payment of interest at the rate of LIBOR plus 175 basis points and principal amortized over 25 years. At closing, the Company borrowed $9.0 million under this facility, of which $7.1 million of proceeds were used to retire existing debt with another lender, $149,000 for various closing costs and the balance available for working capital. The Company may draw the additional $1.0 million subject to certain lender requirements including debt-service and collateral value. 15

Financing and Debt, continued The following table summarizes the Company's mortgage indebtedness as of June 30, 2000: June 30, December 31, Interest 2000 1999 Rate ------- ------- ------ Mortgage notes payable - variable-rate General Electric Capital Corp. $ 7,060 $ 7,126 9.14% (Commercial paper rate +2.75%) Fleet Bank, N.A. 4,138 3,966 8.39% (LIBOR + 1.75%) Fleet Bank, N.A. 9,271 9,326 8.42% (LIBOR + 1.78%) Sun America Life Insurance Company 13,848 13,931 8.43% (LIBOR + 2.05%) Sun America Life Insurance Company 9,916 9,979 8.34% (LIBOR + 2.05%) KBC Bank 14,351 14,508 7.89% (LIBOR + 1.25%) First Union National Bank 13,698 13,750 8.29% (LIBOR + 1.45%) Dime Savings Bank of NY 35,951 -- 8.44% (LIBOR + 1.75%) ------ ----- Total variable-rate debt 108,233 72,586 ------- ------ Mortgage notes payable - fixed rate John Hancock Mutual Life Insurance Company -- 53,878 9.11% Metropolitan Life Insurance Company 41,000 41,000 7.75% Sun America Life Insurance Company 41,694 42,143 7.75% Huntoon Hastings Capital Corp. 6,222 6,222 7.50% North Fork Bank 9,949 5,000 7.75% M&T Real Estate Inc. -- 4,628 8.18% Anchor National Life Insurance Company 3,821 3,866 7.93% Lehman Brothers Holdings, Inc. 17,884 17,973 8.32% Mellon Mortgage Company 7,495 7,566 9.60% Northern Life Insurance Company 3,049 3,173 7.70% Bankers Security Life 2,102 2,189 7.70% Morgan Stanley Mortgage Capital 43,753 44,092 8.84% Nomura Asset Capital Corporation 22,196 22,335 9.02% ------ ------ Total fixed-rate debt 199,165 254,065 ------- ------- $307,398 $326,651 ======== ======== 16

Properties Payment Maturity Encumbered Terms ---------- ---------- ------- Mortgage notes payable - variable-rate General Electric Capital Corp. 01/01/02 (1) (19) Fleet Bank, N.A. 03/15/02 (2) (19) Fleet Bank, N.A. 05/31/02 (3) (19) Sun America Life Insurance Company 08/01/02 (4) (19) Sun America Life Insurance Company 10/01/02 (5) (19) KBC Bank 12/31/02 (6) (19) First Union National Bank 01/01/05 (7) (19) Dime Savings Bank of NY 04/01/05 (8) (19) Mortgage notes payable - fixed rate John Hancock Mutual Life Insurance Company -- -- -- Metropolitan Life Insurance Company 08/31/00 (9) (20) Sun America Life Insurance Company 01/01/01 (10) $346(19) Huntoon Hastings Capital Corp. 09/01/02 (11) (21) North Fork Bank 12/01/02 (12) $38(19) M&T Real Estate Inc. -- -- -- Anchor National Life Insurance Company 01/01/04 (13) $33(19) Lehman Brothers Holdings, Inc. 03/01/04 (14) $139(19) Mellon Mortgage Company 05/23/05 (15) $70(19) Northern Life Insurance Company 12/01/08 (16) $41(19) Bankers Security Life 12/01/08 (16) $28(19) Morgan Stanley Mortgage Capital 11/01/21 (17) $380(19) Nomura Asset Capital Corporation 03/11/22 (18) $193(19) Notes: (1) Soundview Marketplace 9) Valmont Plaza (17) Midway Plaza Luzerne Street Plaza Northside Mall (2) Town Line Plaza Green Ridge Plaza New Smyrna Beach Crescent Plaza Cloud Springs Plaza (3) Smithtown Shopping Center East End Centre Troy Plaza Martintown Plaza (4) Merrillville Plaza (10) Bloomfield Town Square Kings Fairgrounds Atrium Mall Shillington Plaza (5) Village Apartments Walnut Hill Shopping Center Dunmore Plaza GHT Apartments Kingston Plaza (6) Marley Run Apartments Colony Apartments Twenty Fifth Street Shopping Center Circle Plaza (7) 239 Greenwich Avenue (11) Gateway Mall Mountainville Plaza Birney Plaza (8) New Loudon Centre (12) The Branch Shopping Center Monroe Plaza Ledgewood Mall Ames Plaza Bradford Towne Centre Plaza 15 Berlin Shopping Center Route 6 Mall (13) Pittston Plaza (18) Northwood Centre (14) Glen Oaks Apartments (19) Monthly principal and interest (15) Mad River Station Shopping (20) Interest only monthly Center (16) Manahawkin Shopping Center (21) Interest only until 5/01; principal and interest thereafter 17

Property Investment activities The Company's acquisition program focuses on acquiring sub-performing neighborhood and community shopping centers that are well-located and creating significant value through retenanting, timely capital improvements and property redevelopment. In considering acquisitions, the Company focuses on quality shopping centers located in the Northeast, Mid-Atlantic, Southeast and Midwest regions. The Company considers both single assets and portfolios in its acquisition program. In conjunction with evaluating potential portfolio acquisitions, the Company also regularly engages in discussions with public and private entities regarding business combinations as well. Furthermore, the Company may, from time to time, consider acquiring multi-family apartment complexes as well as engaging in joint ventures related to property acquisition and development. The Company also periodically identifies certain properties for disposition and redeploys the capital to existing centers or acquisitions with greater potential for capital appreciation. In connection with this activity, on June 6, 2000, the Company entered into a contract to sell the Northwood Centre. Although the Company expects to complete the transaction prior to December 31, 2000, there can be no assurance as to the consummation of this transaction. Property Redevelopment and Retenanting In June 2000, the Company entered into a contract to sell approximately 160,000 square feet of the main building at the Atrium Mall, located in the Philadelphia suburb of Abington, PA, to the Target Corporation for $11.5 million. Upon completion of the sale, it is anticipated that the sales proceeds will be used primarily to pay down the associated debt on this property. The Company will retain ownership of approximately 50,000 square feet of the building as well as outparcels and related parking areas. Following completion of the redevelopment, the center will be anchored by a Target store and T.J. Maxx (in the Company's portion of the building) and renamed the Abington Towne Center. Redevelopment activities will also include the complete remodeling of the exterior of the main building, outparcels, parking and pylon signs. The Company currently estimates that it will require approximately $4.0 million through 2001 to complete the redevelopment. During 1999, the Company received municipal approval to renovate and expand by approximately 30,000 square feet the 125,000 square foot Elmwood Park Shopping Center. As part of the redevelopment, the Company is planning to construct a 48,000 square foot free-standing supermarket, replacing a 28,000 square foot in-line Grand Union supermarket at a significantly higher rent per square foot. The Company expects redevelopment costs of approximately $8.7 million through 2002 to complete this project. The Operating Partnership is also obligated to issue additional Common OP Units with a total value of $2.8 million upon the completion of this project and the commencement of rental payments from the supermarket. The Company is also in the early stages of redeveloping the Gateway Mall (formerly the Mall 189), located in Burlington, Vermont. The Company currently estimates this project will require approximately $9.3 million through 2002 to fund the redevelopment. During the first quarter of 2000, the Company signed three leases in connection with the re-anchoring of three properties, the New Loudon Shopping Center in Latham, New York, the Northside Mall in Dothan, Alabama, and the Bloomfield Town Square in Bloomfield Hills, Michigan. As of June 30, 2000, two of the three tenants have been installed. The remaining installation costs for the third tenant is anticipated to be approximately $1.5 million. 18

HISTORICAL CASH FLOW The following discussion of historical cash flow compares the Company's cash flow for the six month period ended June 30, 2000 ("2000") with the Company's cash flow for the six month period ended June 30, 1999 ("1999"). Net cash provided by operating activities increased from $7.9 million for 1999 to $14.4 million for 2000. This variance was primarily attributable to an increase in operating income before non-cash expenses in 2000 and $3.5 million of additional cash used in 1999 for the payment of accounts payable and accrued expenses. Investing activities used $5.4 million during 2000, representing a $3.3 million decrease from $8.7 million of cash used during 1999. This was the result of an $9.1 million decrease in expenditures for real estate acquisitions, development and tenant installation in 2000 and $287,000 of additional distributions received from an unconsolidated subsidiary partnership in 2000, offset by net sales proceeds of $6.1 million received in 1999 following the sale of two properties. Net cash used in financing activities of $32.4 million for 2000 increased $30.8 million compared to $1.6 million used in 1999. The increase resulted primarily from $58.6 million of additional cash used in 2000 for the repayment of debt, additional dividends and distributions of $4.4 million being paid in 2000 and $3.3 million of cash used in 2000 for the repurchase of common shares. This was partially offset by an increase of $36.0 million of cash provided by additional borrowings. 19

INFLATION The Company's long-term leases contain provisions designed to mitigate the adverse impact of inflation on the Company's net income. Such provisions include clauses enabling the Company to receive percentage rents based on tenants' gross sales, which generally increase as prices rise, and/or, in certain cases, escalation clauses, which generally increase rental rates during the terms of the leases. Such escalation clauses are often related to increases in the consumer price index or similar inflation indexes. In addition, many of the Company's leases are for terms of less than ten years, which permits the Company to seek to increase rents upon re-rental at market rates if rents are below the then existing market rates. Most of the Company's leases require the tenants to pay their share of operating expenses, including common area maintenance, real estate taxes, insurance and utilities, thereby reducing the Company's exposure to increases in costs and operating expenses resulting from inflation. Item 3. Quantitative and qualitative disclosures about market risk The Company's primary market risk exposure is to changes in interest rates related to the Company's mortgage debt. See the discussion under Item 2. of this report for certain quantitative details related to the Company's mortgage debt. Currently, the Company manages its exposure to fluctuations in interest rates primarily through the use of fixed-rate debt and LIBOR rate caps. As of June 30, 2000, the Company had total mortgage debt of $307.4 million of which $199.2 million, or 65%, is fixed-rate and $108.2 million, or 35%, is variable-rate based upon either LIBOR or the lender's commercial paper rate, plus certain spreads. As of June 30, 2000, $23.8 million of notional principal was covered under contracts capping LIBOR on variable-rate debt at a weighted-average rate of 6.5%. Of the total outstanding debt, $41.0 million of fixed-rate debt, which currently bears interest at 7.8%, will become due during 2000. As the Company intends on refinancing such debt at the then-existing market interest rates which may be greater than the current interest rate, the Company's interest expense would increase by approximately $410,000 annually if the interest rate on the refinanced debt increased by 100 basis points. Furthermore, interest expense on the Company's variable-rate debt would increase $882,000 annually for a 100 basis point increase in interest rates. The Company may seek additional variable-rate financing if and when pricing and other commercial and financial terms warrant. As such, the Company would consider further hedging against the interest rate risk related to such variable-rate debt through interest rate caps or other means. 20

Part II. Other Information Item 1. Legal Proceedings There have been no material legal proceedings beyond those previously disclosed in the Registrants previously filed Annual Report on Form 10-K for the year ended December 31, 1999. Item 2. Changes in Securities None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders On May 16, 2000 the Registrant held its annual meeting of shareholders. The shareholders voted, in person or by proxy for the following proposals. The results of the voting are shown below: Proposal 1 - Votes Cast For Votes Against Election of Trustees: Ross Dworman 19,168,521 46,689 Kenneth Bernstein 19,167,455 47,754 Martin L. Edelman, Esq. 19,168,485 47,790 Marvin J. Levine, Esq. 19,167,420 47,790 Lawrence J. Longua 19,168,485 46,724 Gregory White 19,168,521 46,689 Lee Wielansky 19,168,485 46,724 Proposal 2 - The ratification of the appointment of Ernst & Young, LLP as independent auditors for the Company for the fiscal year ending December 31, 2000: Votes Cast For Votes Cast Against Abstain Unvoted 19,159,071 44,589 11,550 -- Proposal 3 - Such other business as may properly come before the Annual Meeting Or adjournments thereof: Votes Cast For Votes Cast Against Abstain Unvoted 13,213,852 2,903,538 3,097,820 -- Item 5. Other Information None 21

Item 6. Exhibits and Reports on Form 8-K The following exhibit is included herein: 27 Financial Data Schedule (EDGAR filing only) (b) Reports on Form 8-K The following Form 8-K's were filed during the three months ended June 30, 2000 1) Form 8-K filed April 6, 2000 (earliest event April 6, 2000), reporting in Item 5. certain supplemental information concerning the ownership, operations and portfolio of the Company as of December 31, 1999. 2) Form 8-K filed May 24, 2000 (earliest event May 24, 2000), reporting in Item 5. certain supplemental information concerning the ownership, operations and portfolio of the Company as of March 31, 2000. 22

SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has fully caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ACADIA REALTY TRUST _________________________________ By: Ross Dworman Chairman and Chief Executive Officer (Principal Executive Officer) _________________________________ Perry Kamerman Senior Vice President of Finance (Principal Financial and Accounting Officer) Date: August 8, 2000 23

5 0000899629 ACADIA REALTY TRUST 1,000 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 11,949 0 11,060 1,711 0 0 574,637 99,520 545,379 0 307,398 0 0 26 148,111 545,379 0 48,832 0 29,628 0 0 12,616 4,838 0 4,838 0 0 0 4,838 0.19 0.19