UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): October 24, 2018

ACADIA REALTY TRUST

(Exact name of registrant as specified in its charter)

 

 

411 Theodore Fremd Avenue

Suite 300

Rye, New York 10580

(Address of principal executive offices) (Zip Code)

(914) 288-8100

(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

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Item 2.02.Results of Operations and Financial Condition.

 

On October 24, 2018, Acadia Realty Trust (the “Company”) issued a press release announcing its consolidated financial results for the quarter ended September 30, 2018. A copy of this press release is attached to this Current Report on Form 8-K as Exhibit 99.1 and incorporated herein by reference. On the same day, the Company made available supplemental reporting information concerning the ownership, operations and portfolio of the Company as of and for the quarter ended September 30, 2018. A copy of this supplemental reporting information is attached to this Current Report on Form 8-K as Exhibit 99.2 and incorporated herein by reference.

 

The information included in this Item 2.02, including the information included in Exhibits 99.1 and 99.2 attached hereto, is intended to be furnished solely pursuant to this Item 2.02, and is not deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference into any filing under the Securities Act of 1933, as amended (“Securities Act”) or the Exchange Act, or otherwise subject to the liabilities of Sections 11 and 12 (a) (2) of the Securities Act.

Item 9.01.Financial Statements and Exhibits.

 

(d) Exhibits

 

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

Exhibit 99.1

ACADIA REALTY TRUST REPORTS THIRD QUARTER 2018 OPERATING RESULTS

RYE, NY (October 24, 2018) - Acadia Realty Trust (NYSE:AKR) (“Acadia” or the “Company”) today reported operating results for the quarter ended September 30, 2018. All per share amounts are on a fully-diluted basis.

Acadia operates dual platforms, comprised of a high-quality core real estate portfolio (“Core Portfolio”), which owns and operates assets in the nation’s most dynamic urban and street-retail corridors, and a series of discretionary, institutional funds (“Funds”) that target opportunistic and value-add investments.

Please refer to the tables and notes accompanying this press release for further details on operating results and additional disclosures related to net income, funds from operations ("FFO") and net operating income ("NOI").

Highlights

 

“Our third-quarter operating results exceeded our expectations driven by strong leasing activity and the performance of our Core Portfolio,” stated Kenneth F. Bernstein, President and CEO of Acadia Realty Trust. “With respect to our Core Portfolio, our long-term growth plan remains on track, with continued progress during the third quarter on our two key redevelopments, Clark and Diversey in Chicago and City Center in San Francisco. In the fund platform, we remain active buyers and sellers and continue to execute on the strategic business plans for our existing investments. Most importantly, while we have and will continue to remain disciplined in our investment strategy, our significant dry powder, both on balance sheet and in our fund platform, keeps us well-positioned to capitalize on future compelling opportunities as they arise.”

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FINANCIAL RESULTS

A complete reconciliation, in dollars and per share amounts, of net income attributable to common shareholders to FFO attributable to common shareholders is included in the financial tables of this release.

Net Income

Net income attributable to common shareholders for the quarter ended September 30, 2018 was $9.2 million, or $0.11 per share. Net income attributable to common shareholders for the quarter ended September 30, 2017 was $12.9 million, or $0.15 per share, which included $3.0 million, or $0.04 per share, attributable to an aggregate gain on dispositions of Fund properties which was partially offset by the proportionate share of aggregate impairment and other charges of $2.2 million, or $0.03 per share, consisting primarily of transaction costs related to the sale of a Fund property.

Net income attributable to common shareholders for the nine months ended September 30, 2018 was $24.3 million, or $0.29 per share. Net income attributable to common shareholders for the nine months ended September 30, 2017 was $40.6 million, or $0.48 per share, of which $6.9 million, or $0.08 per share, was attributable to an aggregate gain on dispositions of Fund properties which was partially offset by the proportionate share of aggregate impairment and other charges of $2.2 million, or $0.03 per share, consisting primarily of transaction costs related to the sale of a Fund property.

FFO

Driven by the strength of its core operations, FFO for the quarter ended September 30, 2018 was $30.1 million, or $0.35 per share compared to $32.9 million, or $0.37 per share for the quarter ended September 30, 2017. The decrease in FFO for the quarter is due primarily to a decrease of $2.9 million, or $0.04 per share, of interest income following the repayments within the Structured Finance business.

FFO for the nine months ended September 30, 2018 was $89.1 million, or $1.01 per share compared to $101.6 million, or $1.14 per share, for the nine months ended September 30, 2017 which was net of $0.4 million of acquisition costs. The decrease in FFO for the nine months is due primarily to a decrease of $13.1 million, or $0.16 per share, of interest income following the repayments within the Structured Finance business.

CORE PORTFOLIO

Core Operating Results

The Company experienced higher-than-anticipated same-property net operating income growth of 3.4% for the third quarter (excluding redevelopment), driven by the profitable re-leasing of key street and urban properties along with lower than anticipated credit loss.

As previously discussed, the Company's 2018 leasing goal is to execute leases comprising approximately $8 million of NOI on a run rate basis. To date, the Company has executed leases comprising approximately $7 million of annualized NOI, or over 85% of its goal, at its key street and urban locations at rents in line with its expectations.  

The Core Portfolio was 94.7% occupied and 95.5% leased as of September 30, 2018, compared to 94.8% occupied and 95.3% leased as of June 30, 2018. The leased rate includes space that is leased but not yet occupied and excludes development and redevelopment properties.

During the third quarter, the Company generated an 8.0% and 15.5% increase in rent on a cash and GAAP basis, respectively, on 21 conforming new and renewal leases aggregating 163,000 square feet primarily within its suburban portfolio.

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Redevelopment Update

City Center, San Francisco, CA. The Company has commenced construction on the 40,000-square foot expansion of City Center, its Target-anchored urban shopping center located in San Francisco. The expansion space is approximately 90% pre-leased, with anticipated tenant delivery and rent commencement in late 2019.

Clark and Diversey, Lincoln Park, Chicago, IL. Construction has been completed on the Company's 30,000-square foot development located at the corner of Clark Street and Diversey Parkway in Lincoln Park, Chicago. During June and September 2018, Blue Mercury and T.J. Maxx opened their 2,100 and 20,600 square foot stores, respectively.

FUND PLATFORM

Fund Acquisitions

Fund V completed $104.6 million in acquisitions during the nine months ended September 30, 2018. In July 2018, Fund V completed a previously-reported $59.3 million acquisition as follows:

Elk Grove Commons, Elk Grove, CA (Fund V). In July 2018, Fund V acquired a 242,000-square foot shopping center, located in Elk Grove, CA (Sacramento MSA), for $59.3 million. The property is anchored by Trader Joe’s, HomeGoods and Kohl’s. During its hold period, the Fund expects to have an opportunity to re-anchor certain spaces to further strengthen the tenancy at this high-performing shopping center. This investment combines the Fund platform’s “high-yield opportunistic” and “value-add” strategies.

Fund Dispositions

Through September 30, 2018, the Company has completed $64.5 million of Fund dispositions including $30.5 million completed during the third quarter as follows:

Lake Montclair Center, Dumfries, VA (Fund IV). In August 2018, Fund IV sold Lake Montclair Center, a 106,000-square foot supermarket-anchored shopping center located in Dumfries, VA, for $22.5 million. This compares to an all-in cost basis of $21.3 million. In October 2013, the Fund acquired this high-yield investment at an opportunistic cap rate. At acquisition, the property was 97% occupied. During its 4.8-year hold period, the Fund (i) executed a six-year extension of Food Lion's lease term to November 2023, increasing the center's long-term stability, and (ii) maintained strong occupancy (99% at exit). This sale generated a 26% IRR and 2.0x multiple on the Fund's equity investment.

1861 Union Street, San Francisco, CA (Fund IV). The Fund, in partnership with the Prado Group, sold 1861 Union St, a 5,000-square foot street-retail property located in San Francisco, CA, for $6.0 million. This compares to an all-in cost basis of $3.7 million. This property is part of the partnership's Fillmore-Union Collection. The property was sold vacant for occupancy by the buyer. It contains a 3,000-square foot retail space and second-floor office space. At acquisition, both spaces were leased at below-market rents. This sale generated a 24% IRR and 1.7x multiple on the Fund's equity investment.

Broughton St Collection (1 of 23 properties), Savannah, GA (Fund IV). In August 2018, Fund IV completed the sale of its 118 E Broughton St property within its Broughton St Collection in Savannah, GA for $2.1 million. The total Broughton St Collection originally contained 23 properties and approximately 200,000 square feet of retail, residential, and office space; to date, 10 properties have been sold.

BALANCE SHEET

The Company has maintained its solid, low-leveraged balance sheet, with substantially all of its Core Portfolio debt fixed at an average rate of 3.59%. As of September 30, 2018, the Company’s net debt to EBITDA ratio for the Core Portfolio was 4.8x.

The Company repurchased $55.1 million of its common shares (2.3 million shares) during the nine months ended September 30, 2018 at an average cost of approximately $24 per share on a leverage-neutral basis. No shares were issued or purchased during the third quarter.

2018 GUIDANCE

The Company’s core earnings and FFO, separate from transactional activity, performed at the upper end of its range for the first nine months of 2018, driven by the profitable lease up and operating performance of its Core Portfolio.

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The Company is updating its 2018 earnings guidance to reflect various timing items involving transactional activity within its dual platform, including: lower than initially anticipated acquisition volumes in its Core, Structured Finance and Fund businesses, profitable dispositions within its Fund business and a revision in the expected timing of promote income from Fund III.  Such amounts were partially offset by an increase in anticipated straight-line rent and below-market lease income. The table below presents the revised earnings guidance (together with a reconciliation of per share net income to FFO):

  

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(a)Nonrecurring items include income from the potential recapture of below market leases as further outlined on page 17 of the supplemental report.

The Company is projecting same property net operating income growth (excluding redevelopment) of 3% to 5% for the fourth quarter.

Please refer to the Company’s third quarter 2018 supplemental information package for a complete list of updates.

CONFERENCE CALL

Management will conduct a conference call on Thursday, October 25, 2018 at 12:00 PM ET to review the Company’s earnings and operating results. Dial-in and webcast information is listed below.

Live Conference Call:

Date:            Thursday, October 25, 2018

Time:           12:00 PM ET

Dial#:         844-309-6711

Passcode:     “Acadia Realty” or “7348519”

Webcast (Listen-only):  www.acadiarealty.com under Investors, Presentations & Events

Phone Replay:

Dial#:            855-859-2056

Passcode:      “7348519”

Available Through:    Thursday, November 1, 2018

Webcast Replay:      www.acadiarealty.com under Investors, Presentations & Events

About Acadia Realty Trust

Acadia Realty Trust is an equity real estate investment trust focused on delivering long-term, profitable growth via its dual - Core and Fund - operating platforms and its disciplined, location-driven investment strategy. Acadia Realty Trust is accomplishing this goal by building a best-in-class core real estate portfolio with meaningful concentrations of assets in the nation’s most dynamic urban and street-retail corridors; making profitable opportunistic and value-add investments through its series of discretionary, institutional funds; and maintaining a strong balance sheet. For further information, please visit www.acadiarealty.com.

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Safe Harbor Statement

Certain matters in this press release may constitute forward-looking statements within the meaning of federal securities law and as such may involve known and unknown risks, uncertainties and other factors that may cause the actual results, performances or achievements of Acadia to be materially different from any future results, performances or achievements expressed or implied by such forward-looking statements. These forward-looking statements include statements regarding Acadia’s future financial results and its ability to capitalize on potential investment opportunities. Factors that could cause the Company’s forward-looking statements to differ from its future results include, but are not limited to, those discussed under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s most recent annual report on Form 10-K filed with the SEC on February 27, 2018 (“Form 10-K”) and other periodic reports filed with the SEC, including risks related to: (i) political and economic uncertainty; (ii) the Company’s reliance on revenues derived from major tenants; (iii) the Company’s limited control over joint venture investments; (iv) the Company’s partnership structure; (v) real estate and the geographic concentration of the Company’s properties; (vi) market interest rates; (vii) leverage; (viii) liability for environmental matters; (ix) the Company’s growth strategy; (x) the Company’s status as a REIT; (xi) uninsured losses; (xii) information technology security threats and (xiii) the loss of key executives. Copies of the Form 10-K and the other periodic reports Acadia files with the SEC are available on the Company’s website at www.acadiarealty.com. Any forward-looking statements in this press release speak only as of the date hereof. Acadia expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in Acadia’s expectations with regard thereto or change in events, conditions or circumstances on which any such statement is based.

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ACADIA REALTY TRUST AND SUBSIDIARIES

Consolidated Statements of Operations ^(a)  

(dollars and Common Shares in thousands, except per share data)

 

 

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ACADIA REALTY TRUST AND SUBSIDIARIES

Reconciliation of Consolidated Net Income to Funds From Operations ^{(a, c)}  

(dollars and Common Shares and Units in thousands, except per share data)

 

 

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ACADIA REALTY TRUST AND SUBSIDIARIES

Reconciliation of Consolidated Operating Income to Net Property Operating Income (“NOI”) ^(a)  

(dollars in thousands)

 

 

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ACADIA REALTY TRUST AND SUBSIDIARIES

Consolidated Balance Sheets ^(a)  

(dollars in thousands)

 

 

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ACADIA REALTY TRUST AND SUBSIDIARIES

Notes to Financial Highlights:

 

 

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Exhibit 99.2

ACADIA—REALTY TRUST—Q2 2018 SUPPLEMENTAL REPORTING INFORMATIO

 

 

 

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Visit www.acadiarealty.com for additional investor and portfolio information

 

 

 

 

 

 

 

 

 

 

 

Supplemental Report – September 30, 2018                                                  

 

 

 

 

 

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Market Capitalization

(including pro-rata share of Fund debt, in thousands)

 

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Income Statements

(in thousands)

 

 

 

 

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Income Statement - Detail

(in thousands)

 

 

 

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Income Statement - Pro Rata Adjustments

(in thousands)

 

 

 

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Consolidated Balance Sheet ⁷

(in thousands)

 

 

 

 

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Pro-Rata Balance Sheet Adjustments ⁷

(in thousands)

 

 

 

 

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__________

Notes to income statements, balance sheet and pro rata adjustments:

 

 

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Funds from Operations ("FFO") ¹

(in thousands)

 

__________

 

 

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EBITDA

(in thousands)

 

 

 

 

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Core Portfolio

Same Property Performance ¹

(in thousands)

 

__________

 

 

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Fee Income by Fund

(in thousands)

 

 

 

 

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Structured Financing Portfolio

(in thousands)

 

 

 

 

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Transactional Activity

(in thousands)

 

 

 

 

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2018 Guidance

 

__________

 

 

 

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Net Asset Valuation Information

(in thousands)

 

__________

 

 

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Selected Financial Ratios

(in thousands)

 

 

__________

 

 

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Portfolio Debt - Summary

(in thousands)

 

_________

 

 

 

 

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Portfolio Debt - Detail

(in thousands)

 

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Portfolio Debt - Detail

(in thousands)

 

_________

 

 

 

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Future Debt Maturities ¹

(in thousands)

 

__________

 

 

 

 

 

 

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Core Portfolio Retail Properties - Detail ¹

 

 

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Core Portfolio Retail Properties - Detail ¹

 

 

 

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Core Portfolio Retail Properties - Detail ¹

 

 

 

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Core Portfolio Retail Properties - Detail ¹

 

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Core Portfolio Top Tenants - Ranked by Annual Base Rent (ABR) ¹

 

__________

 

 

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Core Portfolio Lease Expirations (Pro Rata Basis)

 

_________

 

 

 

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Core Portfolio - New and Renewal Rent Spreads ¹

 

__________

 

 

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Core Portfolio Capital Expenditures

 

 

 

 

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Fund Overview

 

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Fund Retail Properties - Detail ¹

 

 

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Fund Retail Properties - Detail ¹

 

 

 

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Fund Retail Properties - Detail ¹

 

__________

 

 

 

 

 

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Funds Lease Expirations - Pro Rata Basis

 

__________

 

 

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Development and Redevelopment Activity

($ in millions)

 

_________

 

Refer to “ Net Asset Valuation Information ” for pro-rata costs incurred.

 

 

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Important Notes

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this supplemental disclosure may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934 and as such may involve known and unknown risks, uncertainties and other factors which may cause the Company’s actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements, which are based on certain assumptions and describe the Company’s future plans, strategies and expectations are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend” or “project” or the negative thereof or other variations thereon or comparable terminology. Factors which could have a material adverse effect on the operations and future prospects of the Company include, but are not limited to those set forth under the heading “Risk Factors” in the Company’s Annual Report on Form 10-K. These risks and uncertainties should be considered in evaluating any forward-looking statements contained or incorporated by reference herein.

USE OF FUNDS FROM OPERATIONS AS NON-GAAP FINANCIAL MEASURE

The Company considers funds from operations (“FFO”) as defined by the National Association of Real Estate Investment Trusts (“NAREIT”) to be an appropriate supplemental disclosure of operating performance for an equity REIT due to its widespread acceptance and use within the REIT and analyst communities. FFO is presented to assist investors in analyzing the performance of the Company. It is helpful as it excludes various items included in net income that are not indicative of the operating performance, such as gains (or losses) from sales of property and depreciation and amortization. However, the Company’s method of calculating FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. FFO does not represent cash generated from operations as defined by generally accepted accounting principles (“GAAP”) and is not indicative of cash available to fund all cash needs, including distributions. 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. Consistent with the NAREIT definition, the Company defines FFO as net income (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciated property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. The Company believes that income or gains derived from its RCP investments, including its investment in Albertson’s, are private-equity investments and, as such, should be treated as operating income and therefore FFO. The Company believes that this supplemental adjustment more appropriately reflects the results of its operations. The Company also provides one other supplemental disclosure of operating performance, adjusted funds from operations (“AFFO”). The Company defines AFFO as FFO adjusted for straight line rent, non-real estate depreciation, amortization of finance costs and costs of management contracts, tenant improvements, leasing commissions and capital expenditures.

USE OF NON-GAAP FINANCIAL MEASURES

Non-GAAP financial measures such as EBITDA, NOI, Same-Property NOI and lease spreads are widely used financial measures in many industries, including the REIT industry, and are presented to assist investors and analysts in analyzing the performance of the Company. They are helpful as they exclude various items included in net income that are not indicative of operating performance, such as gains (or losses) from sales of property and depreciation and amortization and is used in computing various financial ratios as a measure of operational performance. The Company computes EBITDA as the sum of net income before extraordinary items plus interest expense, depreciation, income taxes and amortization, less any gains (losses including impairment charges) on the sale of income producing properties. The Company computes NOI by taking the difference between Property Revenues and Property Expenses as detailed in this reporting supplement. Same-Property NOI includes properties in our Core Portfolio that we owned for both the current and prior periods presented, but excludes those properties which we acquired, sold or expected to sell, and redeveloped during these periods. The Company’s method of calculating EBITDA, NOI and Same-Property NOI may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs. EBITDA, NOI and Same-Property NOI do not represent cash generated from operations as defined by GAAP and are not indicative of cash available to fund all cash needs, including distributions. They 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.