SEC Filing - Acadia Realty Trust

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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, 2011

or

o	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.)

1311 MAMARONECK AVENUE, SUITE 260	10605
WHITE PLAINS, NY	(Zip Code)
(Address of principal executive offices)

(914) 288-8100

(Registrant’s telephone number, including area code)

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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES x NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.


	Large Accelerated Filer o Accelerated Filer x

	Non-accelerated Filer o Smaller Reporting Company o

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes o No x

As of August 5, 2011 there were 40,332,554 common shares of beneficial interest, par value $.001 per share, outstanding.

ACADIA REALTY TRUST AND SUBSIDIARIES

FORM 10-Q

INDEX


		Page


Part I:	Financial Information

Item 1.	Financial Statements

	Consolidated Balance Sheets as of June 30, 2011 (unaudited) and December 31, 2010	1

	Consolidated Statements of Income for the three and six months ended June 30, 2011 and 2010 (unaudited)	2

	Consolidated Statements of Shareholders’ Equity and Comprehensive Income for the six months ended June 30, 2011 and 2010 (unaudited)	3

	Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and 2010 (unaudited)	4

	Notes to Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31

Item 4.	Controls and Procedures	31

Part II:	Other Information

Item 1.	Legal Proceedings	31

Item 1A.	Risk Factors	31

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31

Item 3.	Defaults Upon Senior Securities	31

Item 4.	(Removed and Reserved)	31

Item 5.	Other Information	31

Item 6.	Exhibits	31

	Signatures	32

	Exhibit Index	33

Part I. Financial Information

Item 1. Financial Statements.

ACADIA REALTY TRUST AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


(dollars in thousands)	June 30, 2011			December 31, 2010

	(unaudited)
ASSETS

Operating real estate
Land	$	252,039		$	222,167
Building and improvements		936,514			876,588
Construction in progress		2,871			4,236

		1,191,424			1,102,991
Less: accumulated depreciation		199,982			185,878

Net operating real estate		991,442			917,113
Real estate under development		237,373			243,892
Notes receivable, net		45,457			89,202
Investments in and advances to unconsolidated affiliates		68,523			31,036
Cash and cash equivalents		148,859			120,592
Cash in escrow		30,831			28,610
Rents receivable, net		21,646			17,621
Deferred charges, net		24,345			23,715
Acquired lease intangibles, net		20,808			18,622
Prepaid expenses and other assets		23,583			22,354
Assets of discontinued operations		—			12,049

Total assets	$	1,612,867		$	1,524,806


LIABILITIES

Mortgage notes payable	$	831,320		$	806,212
Convertible notes payable, net of unamortized discount of $523 and $1,063, respectively		39,221			48,712
Distributions in excess of income from, and investments in, unconsolidated affiliates		21,356			20,884
Accounts payable and accrued expenses		36,336			27,648
Dividends and distributions payable		7,506			7,427
Acquired lease and other intangibles, net		5,867			5,737
Other liabilities		16,963			20,492
Liabilities of discontinued operations		—			172

Total liabilities		958,569			937,284


EQUITY

Shareholders’ equity
Common shares, $.001 par value, authorized 100,000,000 shares; issued and outstanding 40,331,366 and 40,254,525 shares, respectively		40			40
Additional paid-in capital		303,536			303,823
Accumulated other comprehensive loss		(2,350	)		(2,857	)
Retained earnings		42,346			17,206

Total shareholders’ equity		343,572			318,212
Noncontrolling interests		310,726			269,310

Total equity		654,298			587,522

Total liabilities and equity	$	1,612,867		$	1,524,806

See accompanying notes

ACADIA REALTY TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(unaudited)


	Three months ended June 30,						Six months ended June 30,
(dollars in thousands, except per share amounts)	2011			2010			2011			2010

Revenues
Rental income	$	29,016		$	24,662		$	56,423		$	49,345
Interest income		3,370			5,238			7,908			10,231
Expense reimbursements		5,635			4,574			10,889			10,150
Management fee income		288			436			917			836
Other		495			557			1,183			1,074

Total revenues		38,804			35,467			77,320			71,636


Operating Expenses
Property operating		7,654			6,302			15,376			13,575
Real estate taxes		4,702			4,144			8,886			8,469
General and administrative		5,699			5,416			11,389			10,535
Depreciation and amortization		8,449			6,472			16,346			15,074
Impairment of asset		6,925			—			6,925			—

Total operating expenses		33,429			22,334			58,922			47,653


Operating income		5,375			13,133			18,398			23,983

Equity in earnings (losses) of unconsolidated affiliates		63			80			(85	)		467
Other interest income		80			153			114			287
Gain from bargain purchase		—			33,805			—			33,805
(Loss) gain on debt extinguishment		(102	)		—			1,571			—
Interest and other finance expense		(8,903	)		(9,502	)		(17,856	)		(19,157	)

(Loss) income from continuing operations before income taxes		(3,487	)		37,669			2,142			39,385
Income tax provision		(233	)		(645	)		(495	)		(1,084	)

(Loss) income from continuing operations		(3,720	)		37,024			1,647			38,301


Discontinued Operations
Operating income from discontinued operations		185			473			548			703
Gain on sale of property		28,576			—			32,498			—

Income from discontinued operations		28,761			473			33,046			703


Net income		25,041			37,497			34,693			39,004


Noncontrolling interests
Continuing operations		5,525			(24,647	)		8,478			(20,974	)
Discontinued operations		(332	)		(52	)		(3,514	)		(102	)

Net loss (income) attributable to noncontrolling interests		5,193			(24,699	)		4,964			(21,076	)


Net income attributable to Common Shareholders	$	30,234		$	12,798		$	39,657		$	17,928


Basic Earnings per Share
Income from continuing operations	$	0.04		$	0.31		$	0.25		$	0.43
Income from discontinued operations		0.71			0.01			0.73			0.02

Basic earnings per share	$	0.75		$	0.32		$	0.98		$	0.45


Diluted Earnings per Share
Income from continuing operations	$	0.04		$	0.31		$	0.25		$	0.43
Income from discontinued operations		0.70			0.01			0.73			0.02

Diluted earnings per share	$	0.74		$	0.32		$	0.98		$	0.45

See accompanying notes

ACADIA REALTY TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED JUNE 30, 2011 AND 2010

(unaudited)


						Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Retained Earnings			Total Shareholders’ Equity			Noncontrolling Interests			Total Equity

	Common Shares
(Amounts in thousands, except per share amounts)	Shares			Amount

Balance at December 31, 2010		40,254		$	40	$	303,823			$	(2,857	)	$	17,206			$		318,212			$	269,310	$	587,522

Conversion of 11 OP Units to Common Shares by limited partners of the Operating Partnership		11			—		49			—			—			49			(49	)		—
Dividends declared ($0.36 per Common Share)		—			—		—			—			(14,517	)		(14,517	)		(492	)		(15,009	)
Vesting of employee Restricted Share and LTIP awards		95			—		257			—			—			257			1,966			2,223
Common Shares issued under Employee Share Purchase Plan		2			—		45			—			—			45			—			45
Issuance of LTIP Unit awards to employees		—			—		—			—			—			—			2,441			2,441
Issuance of Common Shares to trustees		8			—		79			—			—			79			—			79
Exercise of trustees options		1			—		7			—			—			7			—			7
Employee Restricted Shares cancelled		(40	)		—		(724	)		—			—			(724	)		—			(724	)
Noncontrolling interest distributions		—			—		—			—			—			—			(705	)		(705	)
Noncontrolling interest contributions		—			—		—			—			—			—			43,646			43,646

		40,331			40		303,536			(2,857	)		2,689			303,408			316,117			619,525

Comprehensive income (loss):
Net income (loss)		—			—		—			—			39,657			39,657			(4,964	)		34,693
Unrealized loss on valuation of swap agreements		—			—		—			(803	)		—			(803	)		(754	)		(1,557	)
Reclassification of realized interest on swap agreements		—			—		—			1,310			—			1,310			327			1,637

Total comprehensive income (loss)		—			—		—			507			39,657			40,164			(5,391	)		34,773


Balance at June 30, 2011		40,331		$	40	$	303,536		$	(2,350	)	$	42,346		$	343,572		$	310,726		$	654,298


Balance at December 31, 2009		39,787		$	40	$	299,014		$	(2,994	)	$	16,125		$	312,185		$	220,292		$	532,477

Conversion of 257 OP Units to Common Shares by limited partners of the Operating Partnership		257			—		2,174			—			—			2,174			(2,174	)		—
Dividends declared ($0.36 per Common Share)		—			—		—			—			(14,466	)		(14,466	)		(381	)		(14,847	)
Vesting of employee Restricted Share and LTIP awards		133			—		1,062			—			—			1,062			888			1,950
Common Shares issued under Employee Share Purchase Plan		3			—		50			—			—			50			—			50
Issuance of Common Shares to trustees		13			—		190			—			—			190			—			190
Exercise of trustees options		7			—		101			—			—			101			—			101
Employee Restricted Shares cancelled		(57	)		—		(966	)		—			—			(966	)		—			(966	)
Noncontrolling interest distributions		—			—		—			—			—			—			(523	)		(523	)
Noncontrolling interest contributions		—			—		—			—			—			—			19,476			19,476

		40,143			40		301,625			(2,994	)		1,659			300,330			237,578			537,908

Comprehensive income (loss)
Net income		—			—		—			—			17,928			17,928			21,076			39,004
Unrealized loss on valuation of swap agreements		—			—		—			(1,701	)		—			(1,701	)		(26	)		(1,727	)
Reclassification of realized interest on swap agreements		—			—		—			1,324			—			1,324			177			1,501

Total comprehensive income (loss)		—			—		—			(377	)		17,928			17,551			21,227			38,778


Balance at June 30, 2010		40,143		$	40	$	301,625		$	(3,371	)	$	19,587		$	317,881		$	258,805		$	576,686

See accompanying notes

ACADIA REALTY TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


(dollars in thousands)	Six months ended June 30,
	2011			2010

CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	34,693		$	39,004
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		16,689			16,119
Amortization of financing costs		1,817			2,086
Gain from bargain purchase		—			(33,805	)
Gain on sale of property		(32,498	)		—
Gain on debt extinguishment		(1,571	)		—
Impairment of asset		6,925			—
Non-cash accretion of notes receivable		(504	)		(2,961	)
Share compensation expense		2,304			2,141
Equity in losses (earnings) of unconsolidated affiliates		85			(467	)
Other, net		2,303			2,107
Changes in assets and liabilities
Cash in escrow		(2,543	)		484
Rents receivable, net		(4,252	)		(1,441	)
Prepaid expenses and other assets, net		(1,223	)		(1,094	)
Accounts payable and accrued expenses		1,077			(2,216	)
Other liabilities		(3,053	)		280


Net cash provided by operating activities		20,249			20,237

CASH FLOWS FROM INVESTING ACTIVITIES
Investment in real estate		(91,918	)		(36,934	)
Deferred acquisition and leasing costs		(2,554	)		(1,802	)
Investments in and advances to unconsolidated affiliates		(41,572	)		(2,182	)
Return of capital from unconsolidated affiliates		3,141			617
Repayments of notes receivable		47,932			2,011
Increase in notes receivable		(3,834	)		—
Proceeds from sale of property		43,791			—


Net cash used in investing activities		(45,014	)		(38,290	)

ACADIA REALTY TRUST AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)


	Six months ended June 30,
(dollars in thousands)	2011			2010

CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on mortgage notes		(24,260	)		(26,254	)
Proceeds received on mortgage notes		51,223			29,035
Increase in deferred financing and other costs		(1,268	)		(2,945	)
Capital contributions from noncontrolling interests		43,646			19,476
Distributions to noncontrolling interests		(1,123	)		(903	)
Dividends paid to Common Shareholders		(14,513	)		(14,419	)
Repurchase and cancellation of Common Shares		(725	)		(966	)
Common Shares issued under Employee Share Purchase Plan		45			50
Exercise of options to purchase Common Shares		7			101


Net cash provided by financing activities		53,032			3,175


Increase (decrease) in cash and cash equivalents		28,267			(14,878	)
Cash and cash equivalents, beginning of period		120,592			93,808


Cash and cash equivalents, end of period	$	148,859		$	78,930


Supplemental disclosure of cash flow information
Cash paid during the period for interest, net of capitalized interest of $2,464 and $876, respectively	$	16,683		$	15,597


Cash paid for income taxes	$	3,701		$	1,095


Acquisition of interest in unconsolidated affiliate:
Real estate, net	$	—		$	(108,000	)
Assumption of mortgage debt		—			25,990
Gain on bargain purchase		—			33,805
Other assets and liabilities		—			7,532
Investment in unconsolidated affiliates		—			37,824

Cash included in investment in real estate	$	—		$	(2,849	)

See accompanying notes

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. ORGANIZATION AND BASIS OF PRESENTATION

Business and Organization

Acadia Realty Trust (the “Trust”) and subsidiaries (collectively, the “Company”), is a fully-integrated equity real estate investment trust (“REIT”) focused on the ownership, management and redevelopment of retail properties and urban/infill mixed-use properties with a retail component concentration located primarily in high-barrier-to-entry, densely-populated metropolitan areas in the United States along the East Coast and in Chicago.

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 entities in which the Operating Partnership owns an interest. As of June 30, 2011, the Trust controlled approximately 99% of the Operating Partnership as the sole general partner. As the general partner, the Trust is entitled to share, in proportion to its percentage interest, in the cash distributions and profits and losses of the Operating Partnership. The limited partners primarily represent entities or individuals that contributed their interests in certain properties or entities to the Operating Partnership in exchange for common or preferred units of limited partnership interest (“Common or Preferred OP Units”) and restricted OP units (“LTIP Units”) awarded to employees as long-term compensation (Note 13). Limited partners holding Common OP Units are generally entitled to exchange their units on a one-for-one basis for common shares of beneficial interest of the Trust (“Common Shares”).

As of June 30, 2011, the Company has ownership interests in 35 properties within its core portfolio (“Core Portfolio”) and 49 properties within its three opportunity funds, Acadia Strategic Opportunity Fund L.P. (“Fund I”), Acadia Strategic Opportunity Fund II, LLC (“Fund II”) and Acadia Strategic Opportunity Fund III, LLC (“Fund III” and together with Fund I and Fund II, the “Opportunity Funds”). The 84 properties consist of commercial properties, primarily neighborhood and community shopping centers, mixed-use properties with a retail component and self-storage properties. In addition, the Company also invests in operating companies through Acadia Mervyn Investors I, LLC (“Mervyns I”) and Acadia Mervyn Investors II, LLC (“Mervyns II”) or Fund II, all on a non-recourse basis. These investments comprise and are referred to as the Company’s Retailer Controlled Property initiative (“RCP Venture”). The Operating Partnership has the following equity interests in the Opportunity Funds, Mervyns I and Mervyns II:


Entity			Equity Interest Held By Operating Partnership

Fund I and Mervyns I			22.2%
Fund II and Mervyns II			20.0%
Fund III			19.9%

In addition, with respect to each of the Opportunity Funds, Mervyns I and Mervyns II, the Operating Partnership is entitled to a profit participation in excess of its equity interest percentage based on certain investment return thresholds (“Promote”).

Basis of Presentation

The consolidated financial statements include the consolidated accounts of the Company and its investments in partnerships and limited liability companies in which the Company is presumed to have control in accordance with the consolidation guidance of the Financial Accounting Statements Board (“FASB”) Accounting Standards Codification (“ASC”). Investments in entities for which the Company has the ability to exercise significant influence but does not have financial or operating control, are accounted for under the equity method of accounting. Accordingly, the Company’s share of the net earnings (or losses) of entities accounted for under the equity method are included in consolidated net income under the caption, Equity in Earnings (Losses) of Unconsolidated Affiliates. Investments in entities for which the Company does not have the ability to exercise any influence are accounted for under the cost method.

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The preparation of consolidated financial statements in conformity with GAAP 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. Operating results for the three and six months ended June 30, 2011 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2011. The information furnished in the accompanying consolidated financial statements reflects all adjustments that, in the opinion of management, are necessary for a fair presentation of the aforementioned consolidated financial statements for the interim periods. These consolidated financial statements should be read in conjunction with the Company’s 2010 Annual Report on Form 10-K, as filed with the SEC on February 28, 2011.

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. ORGANIZATION AND BASIS OF PRESENTATION (continued)

Reclassifications

Certain reclassifications have been made to the 2010 financial statements to conform to the 2011 presentation.

Real Estate

The Company reviews its long-lived assets used in operations for impairment when there is an event, or change in circumstances that indicates that the carrying amount may not be recoverable. The Company records impairment losses and reduces the carrying value of properties when indicators of impairment are present and the expected undiscounted cash flows related to those properties are less than their carrying amounts. In cases where the Company does not expect to recover its carrying costs on properties held for use, the Company reduces its carrying cost to fair value, and for properties held for sale, the Company reduces its carrying value to the fair value less costs to sell. During the quarter ended June 30, 2011, the Company determined that the value of the Granville Centre owned by Fund I was impaired. Accordingly, it recorded an impairment loss of $6.9 million. Management does not believe that the values of any of its other properties within the portfolio are impaired as of June 30, 2011.

Recent Accounting Pronouncements

During April 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-02 “A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring.” ASU 2011-02 requires a creditor to evaluate whether a restructuring constitutes a troubled debt restructuring by concluding that the restructuring constitutes a concession and that the debtor is experiencing financial difficulties and was effective for the first interim or annual period beginning on or after June 15, 2011. The adoption of ASU 2011-02 did not have a material impact on the Company’s financial condition or results of operations.

During May 2011, the FASB issued ASU No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” ASU No. 2011-04 amended ASC 820, Fair Value Measurements and Disclosures, to converge the fair value measurement guidance in GAAP and International Financial Reporting Standards (“IFRS”). The amendments, which primarily require additional fair value disclosure, are to be applied prospectively. The Company is currently evaluating the impact of adopting ASU 2011-04 which is effective for interim and annual periods beginning after December 15, 2011.

During June 2011, the FASB issued ASU No. 2011-05, “Presentation of Comprehensive Income” which revises the manner in which companies present comprehensive income. Under ASU No. 2011-05, companies may present comprehensive income, which is net income adjusted for the components of other comprehensive income, either in a single continuous statement of comprehensive income or by using two separate but consecutive statements. Regardless of the alternative chosen, companies must display adjustments for items reclassified from other comprehensive income into net income within the presentation of both net income and other comprehensive income. ASU 2011-05 is effective for interim and annual periods beginning after December 15, 2011, on a retrospective basis. The Company is currently evaluating the impact of the adoption of ASU 2011-05 on its consolidated financial statements.

2. EARNINGS PER COMMON SHARE

Basic earnings per Common Share is computed using net income attributable to common shareholders and the weighted average Common Shares outstanding. Diluted earnings per Common Share reflect the conversion of obligations and the assumed exercises of securities including the effects of awards issuable under the Company’s Share Incentive Plans. The following table sets forth the computation of basic and diluted earnings per share from continuing operations for the periods indicated:

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

2. EARNINGS PER COMMON SHARE (continued)


	Three months ended June 30,				Six months ended June 30,
(dollars in thousands, except per share amounts)	2011		2010		2011		2010

Numerator
Income from continuing operations attributable to Common Shareholders	$	1,805	$	12,377	$	10,125	$	17,327
Effect of dilutive securities:
Preferred OP Unit distributions		5		5		9		9

Numerator for diluted earnings per Common Share	$	1,810	$	12,382	$	10,134	$	17,336

Denominator
Weighted average shares for basic earnings per share		40,334		40,135		40,326		40,058
Effect of dilutive securities:
Employee share options		274		212		256		191
Convertible Preferred OP Units		25		25		25		25

Dilutive potential Common Shares		299		237		281		216

Denominator for diluted earnings per share		40,633		40,372		40,607		40,274

Basic earnings per Common Share from continuing operations attributable to Common Shareholders	$	0.04	$	0.31	$	0.25	$	0.43

Diluted earnings per Common Share from continuing operations attributable to Common Shareholders	$	0.04	$	0.31	$	0.25	$	0.43

The weighted average shares used in the computation of diluted earnings per share include unvested restricted Common Shares (“Restricted Shares”) and restricted OP units (“LTIP Units”) (Note 13) that are entitled to receive dividend equivalent payments. The effect of the conversion of Common OP Units is not reflected in the above table, as they are exchangeable for Common Shares on a one-for-one basis. The income allocable to such units is allocated on this same basis and reflected as noncontrolling interests in subsidiaries in the accompanying consolidated financial statements. As such, the assumed conversion of these units would have no net impact on the determination of diluted earnings per share. The conversion of the convertible notes payable (Note 9) is not reflected in the table above as such conversion, based on the current market price of the Common Shares, would be settled with cash.

The effect of the assumed conversion of 188 Series A Preferred OP Units into 25,067 Common Shares would be dilutive for the three and six months ended June 30, 2011 and 2010 and are accordingly included in the table above.

3. NONCONTROLLING INTERESTS

Noncontrolling interests represent the portion of equity in entities consolidated in the accompanying financial statements that the Company does not own. Such noncontrolling interests are reported on the Consolidated Balance Sheets within equity, separately from shareholders’ equity.

Noncontrolling interests include third party interests in the Company’s Opportunity Funds and other entities. It also include interests in the Operating Partnership which represent (i) the limited partners’ 280,349 and 281,294 Common OP Units at June 30, 2011 and December 31, 2010, respectively; (ii) 188 Series A Preferred OP Units at both June 30, 2011 and December 31, 2010; and (iii) 1,060,225 and 641,534 LTIP Units at June 30, 2011 and December 31, 2010, respectively.

4. ACQUISITION AND DISPOSITION OF REAL ESTATE AND DISCONTINUED OPERATIONS

Acquisitions

During June 2011, the Company acquired 15 Mercer Street, a 6,000 square foot single-tenant retail condominium located in New York, New York for $4.8 million.

During May 2011, the Company acquired 651-671 West Diversey Parkway, a 44,000 square foot retail property located in Chicago, Illinois, for $28.4 million.

During April 2011, the Company, through Fund III, acquired The Heritage Shops at Millennium Park, a 105,000 square foot property located in the East Loop section of downtown Chicago, Illinois, for $31.6 million.

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

4. ACQUISITION AND DISPOSITION OF REAL ESTATE AND DISCONTINUED OPERATIONS (continued)

During February 2011, Fund III, in a venture with an unaffiliated partner, acquired three retail properties (“Lincoln Road”), aggregating 61,400 square feet located in the Lincoln Road area of South Miami Beach, Florida for $51.9 million, which included the assumption of $20.6 million of in-place mortgage debt. Fund III has a 95% interest in these properties.

During February 2011, Fund III, in a venture with an unaffiliated partner, acquired a 64,600 square foot single-tenant retail property (“White Oak”) located in Silver Spring, Maryland for $9.8 million. Fund III has a 90% interest in the property.

Discontinued Operations

The Company reports properties held-for-sale and properties sold during the periods as discontinued operations. The results of operations of discontinued operations are reflected as a separate component within the accompanying Consolidated Financial Statements for all periods presented.

During May 2011, the Company sold the Ledgewood Mall, a 517,000 square foot, unencumbered enclosed mall located in Ledgewood, New Jersey, for $37.0 million. The sale resulted in a gain of $28.6 million.

During January 2011, the Company completed the sale of a Fund II leasehold interest in the Neiman Marcus location at Oakbrook Center, located in Oak Brook, Illinois, for $8.2 million. The sale resulted in a gain of $3.9 million.

The combined assets and liabilities as of December 31, 2010 and results of operations of the properties classified as discontinued operations for the three and six months ended June 30, 2011 and 2010, respectively are summarized as follows:


BALANCE SHEET	December 31,
(dollars in thousands)	2010

ASSETS
Net real estate	$	9,420
Rents receivable, net		492
Deferred charges, net of amortization		2,015
Prepaid expenses and other assets, net		122

Total assets of discontinued operations	$	12,049

LIABILITIES
Accounts payable and accrued expenses	$	43
Other liabilities		129

Total liabilities of discontinued operations	$	172


STATEMENTS OF OPERATIONS	Three months ended June 30,						Six months ended June 30,
(dollars in thousands)	2011			2010			2011			2010


Total revenues	$	468		$	1,465		$	1,803		$	3,023
Total expenses		283			992			1,255			2,320

Operating income		185			473			548			703
Gain on sale of property		28,576			—			32,498			—

Income from discontinued operations		28,761			473			33,046			703
Income from discontinued operations attributable to noncontrolling interests		(332	)		(52	)		(3,514	)		(102	)

Income from discontinued operations attributable to Common Shareholders	$	28,429		$	421		$	29,532		$	601

5. INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES

Core Portfolio

The Company owns a 22.2% interest in an approximately one million square foot retail portfolio (the “Brandywine Portfolio”) located in Wilmington, Delaware and a 49% interest in Crossroads Joint Venture and Crossroads II (collectively, “Crossroads”), which own a 311,000 square foot shopping center located in White Plains, New York. These investments are accounted for under the equity method.

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

5. INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES (continued)

Opportunity Funds

RCP Venture

During 2004, the Company along with Klaff Realty, LP (“Klaff”) and Lubert-Adler Management, Inc. (“Lubert-Adler”) formed an investment group, the RCP Venture, for the purpose of making investments in surplus or underutilized properties owned by retailers. The RCP Venture is neither a single entity nor a specific investment. Any member of this group has the option of participating, or not, in any individual investment and each individual investment has been made on a stand-alone basis through a separate limited liability company (“LLC”). These investments have been made through different investment vehicles with different affiliated and unaffiliated investors and different economics to the Company. Investments under the RCP Venture are structured as separate joint ventures as there may be other investors participating in certain investments in addition to Klaff, Lubert-Adler and Acadia. The Company has made these investments through its subsidiaries, Mervyns I, Mervyns II and Fund II, (together the “Acadia Investors”), all on a non-recourse basis. Through June 30, 2011, the Acadia Investors have made investments in Mervyns Department Stores (“Mervyns”) and Albertsons including additional investments in locations that are separate from these original investments (“Add-On Investments”). Additionally, the Acadia Investors have invested in Shopko, Marsh and Rex Stores Corporation (collectively “Other RCP Investments”).

The Acadia Investors have noncontrolling interests in the individual investee LLC’s as follows:


			Acadia Investors Ownership % in:
Investment	Investee LLC	Acadia Investors Entity	Investee LLC		Underlying entity(s)

Mervyns	KLA/Mervyn’s, LLC	Mervyns I and Mervyns II	10.5	%	5.8	%
Mervyns Add-On investments	KLA/Mervyn’s, LLC	Mervyns I and Mervyns II	10.5	%	5.8	%
Albertsons	KLA A Markets, LLC	Mervyns II	18.9	%	5.7	%
Albertsons Add-On investments	KLA A Markets, LLC	Mervyns II	20.0	%	6.0	%
Shopko	KLA-Shopko, LLC	Fund II	20.0	%	2.0	%
Marsh and Add-On investments	KLA Marsh, LLC	Fund II	20.0	%	3.3	%
Rex Stores	KLAC Rex Venture, LLC	Mervyns II	13.3	%	13.3	%

The Company accounts for the original investments in Mervyns and Albertsons under the equity method of accounting as the Company has the ability to exercise significant influence, but does not have financial or operating control.

The Company accounts for the Add-On Investments and Other RCP Investments under the cost method. Due to its minor ownership interest, based on the size of the investments as well as the terms of the underlying operating agreements, the Company has no influence over such entities operating and financial policies. Other than the minority investor rights to which the Company is entitled pursuant to statute, it has no rights other than to receive its pro-rata share of cash distributions as declared by the managers of the Add-On Investments and Other RCP Investments. The Company has no rights with respect to the control and operation of these investment vehicles, nor with the formulation and execution of business and investment policies.

The following table summarizes activity related to the RCP Venture investments from inception through June 30, 2011:


(dollars in thousands)						Operating Partnership Share

Investment	Year Acquired	Invested Capital and Advances		Distributions		Invested Capital and Advances		Distributions

Mervyns	2004	$	26,058	$	45,966	$	4,901	$	11,251
Mervyns Add-On investments	2005/2008		6,517		3,558		1,046		819
Albertsons	2006		20,717		77,053		4,239		15,410
Albertsons Add-On investments	2006/2007		2,416		1,679		388		336
Shopko	2006		1,108		1,659		222		332
Marsh and Add-on investments	2006/2008		2,667		2,639		533		528
Rex Stores	2007		2,701		840		535		168

		$	62,184	$	133,394	$	11,864	$	28,844

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

5. INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES (continued)

Other Opportunity Fund Investments

Fund II Investments

Prior to June 30, 2010, Fund II had a 24.75% interest in CityPoint, a redevelopment project located in downtown Brooklyn, NY, which was accounted for under the equity method. On June 30, 2010, Fund II acquired the remaining interest in the project from its unaffiliated partner and, as a result, now consolidates the CityPoint investment.

Fund III Investments

The unaffiliated venture partners for the Lincoln Road (Note 4), White Oak (Note 4) and the White City Shopping Center investments maintain control over these entities and, as such, the Company accounts for these investments using the equity method.

During June 2010, Fund III, together with an unaffiliated partner, invested in an entity for the purpose of providing management services to owners of self-storage properties, including the 14 locations currently owned through Fund II and Fund III. The entity was determined to be a variable interest entity for which the Company was determined not to be the primary beneficiary. As such, the Company accounts for this investment under the equity method.

Summary of Investments in Unconsolidated Affiliates

The following combined/condensed Balance Sheets and Statements of Operations, in each period, summarize the financial information of the Company’s investments in unconsolidated affiliates.


(dollars in thousands)	June 30, 2011			December 31, 2010

Combined and Condensed Balance Sheets
Assets
Rental property, net	$	246,972		$	186,802
Investment in unconsolidated affiliates		171,478			192,002
Other assets		29,046			27,841


Total assets	$	447,496		$	406,645


Liabilities and partners’ equity
Mortgage notes payable	$	288,345		$	267,565
Other liabilities		14,758			13,815
Partners’ equity		144,393			125,265


Total liabilities and partners’ equity	$	447,496		$	406,645

Company’s investment in and advances to unconsolidated affiliates	$	68,523		$	31,036

Company’s share of distributions in excess of share of income and investments in unconsolidated affiliates	$	(21,356	)	$	(20,884	)

ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

5. INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES (continued)


	Three Months Ended						Six Months Ended
(dollars in thousands)	June 30, 2011			June 30, 2010			June 30, 2011			June 30, 2010

Combined and Condensed Statements of Operations
Total revenues	$	10,917		$	7,401		$	20,499		$	14,470
Operating and other expenses		3,528			2,074			7,294			4,611
Interest expense		4,242			3,391			8,258			6,777
Equity in (losses) earnings of unconsolidated affiliates		(1,370	)		(159	)		(412	)		2,764
Depreciation and amortization		2,376			1,557			4,245			2,624
Loss on sale of property, net		—			—			—			(2,957	)

Net (loss) income	$	(599	)	$	220		$	290		$	265


Company’s share of net income	$	160		$	177		$	110		$	661
Amortization of excess investment		(97	)		(97	)		(195	)		(194	)

Company’s share of net income (loss)	$	63		$	80		$	(85	)	$	467

6. NOTES RECEIVABLE

At June 30, 2011, the Company’s notes receivable, net, aggregated $45.5 million, and were collateralized either by the underlying properties or the borrowers’ ownership interest in the entities that own the properties and/or by the borrowers’ personal guarantee as follows:


Description	Effective interest rate			Maturity date	First priority liens		Net carrying amount of notes receivable		Extension options

(dollars in thousands)
Mezzanine Loan		10.0	%	7/2011	$	—	$	2,530		—
Mezzanine Loan		13.0	%	9/2011		28,925		2,980		—
Mezzanine Loan		13.0	%	9/2011		6,000		1,964		—
First Mortgage Loan		10.8	%	9/2011		—		10,000		—
Mezzanine Loan		10.2	%	11/2011		9,348		8,000		1 x 1 year
Other Loan		14.5	%	12/2011		—		8,585		—
Other Loan		24.0	%	1/2016		166,200		3,394		—
Mezzanine Loan		17.5	%	1/2017		37,700		2,173		—
Mezzanine Loan		15.0	%	Upon Capital Event		11,925		3,834		—
Individually less than 3%		10% to 13.0	%	9/2011 to 12/2011		17,334		1,997		—

Total							$	45,457

During May 2011, the Company received a payment of $54.7 million on a mezzanine loan, representing $33.8 million of principal, $13.4 million of accrued interest, and a $7.5 million exit fee.

During February 2011, the Company made a mezzanine loan for $3.8 million which accrues interest at 15% and is payable upon a capital event. The Company also received a payment of $1.9 million on a mezzanine loan.

Allowances for real estate notes receivable are established based upon management’s quarterly review of the investments. In performing this review, management considers the estimated net recoverable value of the loan as well as other factors, including the fair value of any collateral, the amount and status of any senior debt, and the prospects for the borrower. Because this determination is based upon projections of future economic events, which are inherently subjective, the amounts ultimately realized from the loans may differ materially from the carrying value at the balance sheet date.

ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

6. NOTES RECEIVABLE (continued)

The activity in the allowance for notes receivable for the six months ended June 30, 2011 is as follows:


(dollars in thousands)	Allowance for Notes Receivable


Balance at December 31, 2010	$	4,964
Provision for losses on notes receivable		180

Balance at June 30, 2011	$	5,144

7. DERIVATIVE FINANCIAL INSTRUMENTS

As of June 30, 2011, the Company’s derivative financial instruments consisted of seven interest rate swaps with an aggregate notional value of $71.3 million, which effectively fix LIBOR at rates ranging from 0.4% to 5.1% and mature between September 2011 and November 2012. The Company also has a derivative financial instrument with a notional value of $28.9 million which caps LIBOR at 6.0% and matures in April 2013. The fair value of the net derivative liability of these instruments, which is included in other liabilities in the Consolidated Balance Sheets, totaled $2.2 million and $2.8 million at June 30, 2011 and December 31, 2010, respectively. The notional value does not represent exposure to credit, interest rate, or market risks.

These derivative instruments have been designated as cash flow hedges and hedge the future cash outflows on variable rate mortgage debt. Such instruments are reported at the fair value reflected above. As of June 30, 2011 and December 31, 2010, unrealized losses totaling $2.4 million and $2.8 million, respectively, were reflected in accumulated other comprehensive loss.

As of June 30, 2011 and December 31, 2010, no derivatives were designated as fair value hedges, hedges of net investments in foreign operations or considered to be ineffective. Additionally, the Company does not use derivatives for trading or speculative purposes.

8. MORTGAGE NOTES PAYABLE

The Company completed the following transactions related to mortgage loans and credit facilities during the six months ended June 30, 2011:

During June 2011, the Company modified an existing $85.3 million loan collateralized by a property. The modification extended the maturity date from October 4, 2011 to September 30, 2012. The loan continues to bear interest at LIBOR plus 350 basis points subject to an interest rate floor of 5.00%.

During June 2011, the Company modified an existing $9.4 million loan collateralized by a property. The modification extended the maturity date from June 29, 2012 to June 30, 2018. The loan continues to bear interest at LIBOR plus 140 basis points.

During February 2011, the Company borrowed $39.0 million under the Fund III subscription line of credit. During April 2011, the Company repaid $15.1 million of the Fund III subscription line of credit. As of June 30, 2011, the total outstanding amount on this line of credit was $195.4 million.

During January 2011, the Company liquidated a $9.3 million mortgage loan for $7.6 million, resulting in a $1.7 million gain on extinguishment of debt.

During January 2011, the Company borrowed the remaining $2.4 million of a $34.0 million loan collateralized by a property.

During January 2011, the Company amended an existing $48.0 million construction loan collateralized by a property. The amendment provided for an additional $3.0 million supplemental loan and a $7.0 million subordinate loan. The amended loan continues to bear interest at LIBOR plus 400 basis points, subject to an interest rate floor of 6.50% and matures on January 12, 2012. During the first six months of 2011, the Company drew down an additional $9.7 million on this construction loan. As of June 30, 2011, the total outstanding amount on this loan was $49.9 million.

ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

9. CONVERTIBLE NOTES PAYABLE

In December 2006 and January 2007, the Company issued $115.0 million of convertible notes with a fixed interest rate of 3.75% due 2026 (the “Convertible Notes”). The Convertible Notes were issued at par and require interest payments semi-annually in arrears on June 15^th and December 15^th of each year. The Convertible Notes are unsecured obligations and rank equally with all other unsecured and unsubordinated indebtedness. The Convertible Notes have an effective interest rate of 6.03% giving effect to the accounting treatment required by ASC Topic 470-20 “Debt with Conversion and Other Options.” Holders of the Convertible Notes may require the Company to repurchase the Convertible Notes at par on December 20, 2011, December 15, 2016 and December 15, 2021. The Company determined that the Convertible Notes will mature on December 20, 2011.

The carrying amount of the equity component included in additional paid-in capital totaled $0.5 million at June 30, 2011 and $1.1 million at December 31, 2010. The additional non-cash interest expense recognized in the Consolidated Statements of Income was $0.3 million for each of the three months ended June 30, 2011 and 2010, and $0.5 million for each of the six months ended June 30, 2011 and 2010, respectively. The if-converted value of the Convertible Notes does not exceed their aggregate principal amount as of June 30, 2011 and there are no derivative transactions that were entered into in connection with the issuance of the Convertible Notes.

During June 2011, the Company purchased $10.0 million in face amount of its Convertible Notes for $10.1 million and recognized a loss on debt extinguishment of $0.1 million.

Through June 30, 2011, the Company has purchased $75.3 million in face amount of its Convertible Notes at an average discount of approximately 16%. The outstanding Convertible Notes face amount as of June 30, 2011 was $39.7 million.

10. FAIR VALUE MEASUREMENTS

The FASB’s fair value measurements and disclosure guidance requires the valuation of certain of the Company’s financial assets and liabilities, based on a three-level fair value hierarchy. Market participant assumptions obtained from sources independent of the Company are observable inputs that are classified within Levels 1 and 2 of the hierarchy, and the Company’s own assumptions about market participant assumptions are unobservable inputs classified within Level 3 of the hierarchy.

The following table presents the Company’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of June 30, 2011:


(dollars in thousands)	Level 1		Level 2		Level 3

Liabilities
Derivative financial instruments (Note 7)	$	—	$	2,199	$	—

During the quarter ended June 30, 2011, the Company determined that the value of the Granville Centre owned by Fund I was impaired and recorded an impairment loss of $6.9 million (Note 1). The Company estimated the Granville Centre’s fair value by using projected future cash flows, which it determined were not sufficient to recover the property’s net book value. The inputs used to determine the fair value of the Granville Centre are classified as Level 3 under authoritative guidance for fair value measurements.

Financial Instruments

Certain of the Company’s assets and liabilities meet the definition of financial instruments. Except as disclosed below, the carrying amounts of these financial instruments approximates their fair value.

ACADIA REALTY TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

10. FAIR VALUE MEASUREMENTS (continued)

The Company has determined the estimated fair values of the following financial instruments by discounting future cash flows utilizing a discount rate equivalent to the rate at which similar financial instruments would be originated at the reporting date:


	June 30, 2011				December 31, 2010

(dollars in thousands)	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value


Notes Receivable	$	45,457	$	45,457	$	89,202	$	90,612

Mortgage Notes Payable and Convertible Notes Payable	$	870,541	$	849,944	$	854,924	$	863,639

11. RELATED PARTY TRANSACTIONS

The Company earned property management fees, legal and leasing fees from the Brandywine portfolio totaling $0.2 million for each of the three months ended June 30, 2011 and 2010 and $0.7 million and $0.4 million for the six months ended June 30, 2011 and June 30, 2010, respectively.

Related party receivables due from an unconsolidated affiliate totaled $2.7 million at June 30, 2011 and $2.5 million at December 31, 2010.

Lee Wielansky, the Lead Trustee of the Company, was paid a consulting fee of $25,000 for each of the three months ended June 30, 2011 and 2010 and $50,000 for each of the six months ended June 30, 2011 and 2010.

12. SEGMENT REPORTING

The Company has five reportable segments: Core Portfolio, Opportunity Funds, Self-Storage Investments, Notes Receivable and Other. “Notes Receivable” consists of the Company’s notes receivable and preferred equity investment and related interest income. “Other” consists primarily of management fees and interest income. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Company evaluates property performance primarily based on net operating income before depreciation, amortization and certain nonrecurring items. Investments in the Core Portfolio are typically held long-term. Given the contemplated finite life of the Opportunity Funds, these investments are typically held for shorter terms. Fees earned by the Company as the general partner/member of the Opportunity Funds are eliminated in the Company’s consolidated financial statements. The following tables set forth certain segment information for the Company, reclassified for discontinued operations, as of and for the three and six months ended June 30, 2011 and 2010 (does not include unconsolidated affiliates):

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

12. SEGMENT REPORTING, (continued)

Three Months Ended June 30, 2011


(dollars in thousands)	Core Portfolio		Opportunity Funds		Self - Storage Investments		Notes Receivable		Other		Amounts Eliminated in Consolidation			Total

Revenues	$	14,121	$	15,381	$	5,646	$	3,370	$	4,751	$	(4,465	)	$	38,804
Property operating expenses and real estate taxes		4,165		5,362		3,506		—		—		(677	)		12,356
Other expenses		6,058		2,523		—		—		—		(2,882	)		5,699

Income before depreciation, amortization and impairment	$	3,898	$	7,496	$	2,140	$	3,370	$	4,751	$	(906	)	$	20,749

Depreciation and amortization	$	3,671	$	4,005	$	1,070	$	—	$	—	$	(297	)	$	8,449

Interest and other finance expense	$	4,145	$	3,884	$	874	$	—	$	—	$	—		$	8,903

Real estate at cost	$	477,573	$	754,483	$	210,997	$	—	$	—	$	(14,256	)	$	1,428,797

Total assets	$	641,008	$	846,477	$	192,713	$	45,457	$	—	$	(112,788	)	$	1,612,867

Expenditures for real estate and improvements	$	36,538		41,116	$	1,671	$	—	$	—	$	(632	)	$	78,693

Reconciliation to net income and net income attributable to Common Shareholders
Net property income before depreciation and amortization														$	20,749
Other interest income															80
Depreciation and amortization															(8,449	)
Equity in earnings of unconsolidated affiliates															63
Interest and other finance expense															(8,903	)
Income tax provision															(233	)
Loss on debt extinguishment															(102	)
Impairment of asset															(6,925	)
Income from discontinued operations															185
Gain on sale of property															28,576

Net income															25,041
Net loss attributable to noncontrolling interests															5,193

Net income attributable to Common Shareholders														$	30,234

Three Months Ended June 30, 2010


(dollars in thousands)	Core Portfolio		Opportunity Funds		Self - Storage Investments		Notes Receivable		Other		Amounts Eliminated in Consolidation			Total

Revenues	$	13,632	$	11,388	$	4,773	$	5,238	$	5,204	$	(4,768	)	$	35,467
Property operating expenses and real estate taxes		3,500		4,069		3,298		—		—		(421	)		10,446
Other expenses		5,347		3,543		—		—		—		(3,474	)		5,416

Income before depreciation and amortization	$	4,785	$	3,776	$	1,475	$	5,238	$	5,204	$	(873	)	$	19,605

Depreciation and amortization	$	3,365	$	2,328	$	889	$	—	$	—	$	(110	)	$	6,472

Interest and other finance expense	$	4,510	$	3,765	$	1,254	$	—	$	—	$	(27	)	$	9,502

Real estate at cost	$	439,489	$	667,323	$	209,733	$	—	$	—	$	(12,015	)	$	1,304,530

Total assets	$	547,264	$	703,900	$	196,223	$	126,048	$	—	$	(111,003	)	$	1,462,432

Expenditures for real estate and improvements	$	2,348		23,871	$	551	$	—	$	—	$	(918	)	$	25,852

Reconciliation to net income and net income attributable to Common Shareholders
Net property income before depreciation and amortization														$	19,605
Other interest income															153
Depreciation and amortization															(6,472	)
Equity in earnings of unconsolidated affiliates															80
Interest and other finance expense															(9,502	)
Income tax provision															(645	)
Gain from bargain purchase															33,805
Income from discontinued operations															473

Net income															37,497
Net income attributable to noncontrolling interests															(24,699	)

Net income attributable to Common Shareholders														$	12,798

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

12. SEGMENT REPORTING, (continued)

Six Months Ended June 30, 2011


(dollars in thousands)	Core Portfolio		Opportunity Funds		Self - Storage Investments		Notes Receivable		Other		Amounts Eliminated in Consolidation			Total

Revenues	$	28,541	$	28,975	$	10,981	$	7,921	$	11,225	$	(10,323	)	$	77,320
Property operating expenses and real estate taxes		8,451		10,234		6,699		—		—		(1,122	)		24,262
Other expenses		11,957		6,002		—		—		—		(6,570	)		11,389

Income before depreciation, amortization and impairment	$	8,133	$	12,739	$	4,282	$	7,921	$	11,225	$	(2,631	)	$	41,669

Depreciation and amortization	$	6,928	$	7,804	$	2,019	$	—	$	—	$	(405	)	$	16,346


Interest and other finance expense	$	8,351	$	7,552	$	1,953	$	—	$	—	$	—		$	17,856

Real estate at cost	$	477,573	$	754,483	$	210,997	$	—	$	—	$	(14,256	)	$	1,428,797


Total assets	$	641,008	$	846,477	$	192,713	$	45,457	$	—	$	(112,788	)	$	1,612,867

Expenditures for real estate and improvements	$	37,923		52,786	$	2,116	$	—	$	—	$	(907	)	$	91,918

Reconciliation to net income and net income attributable to Common Shareholders
Net property income before depreciation and amortization														$	41,669
Other interest income															114
Depreciation and amortization															(16,346	)
Equity in losses of unconsolidated affiliates															(85	)
Interest and other finance expense															(17,856	)
Income tax provision															(495	)
Gain on debt extinguishment															1,571
Impairment of asset															(6,925	)
Income from discontinued operations															548
Gain on sale of property															32,498

Net income															34,693
Net loss attributable to noncontrolling interests															4,964

Net income attributable to Common Shareholders														$	39,657

Six Months Ended June 30, 2010


(dollars in thousands)	Core Portfolio		Opportunity Funds		Self - Storage Investments		Notes Receivable		Other		Amounts Eliminated in Consolidation			Total

Revenues	$	28,274	$	22,983	$	9,312	$	10,231	$	9,990	$	(9,154	)	$	71,636
Property operating expenses and real estate taxes		8,118		8,434		6,206		—		—		(714	)		22,044
Other expenses		11,061		6,925		—		—		—		(7,451	)		10,535

Income before depreciation and amortization	$	9,095	$	7,624	$	3,106	$	10,231	$	9,990	$	(989	)	$	39,057


Depreciation and amortization	$	6,651	$	6,856	$	1,757	$	—	$	—	$	(190	)	$	15,074

Interest and other finance expense	$	9,038	$	7,502	$	2,671	$	—	$	—	$	(54	)	$	19,157

Real estate at cost	$	439,489	$	667,323	$	209,733	$	—	$	—	$	(12,015	)	$	1,304,530


Total assets	$	547,264	$	703,900	$	196,223	$	126,048	$	—	$	(111,003	)	$	1,462,432

Expenditures for real estate and improvements	$	4,308	$	32,482	$	1,113	$	—	$	—	$	(969	)	$	36,934

Reconciliation to net income and net income attributable to Common Shareholders
Net property income before depreciation and amortization														$	39,057
Other interest income															287
Depreciation and amortization															(15,074	)
Equity in earnings of unconsolidated affiliates															467
Interest and other finance expense															(19,157	)
Income tax provision															(1,084	)
Gain from bargain purchase															33,805
Income from discontinued operations															703

Net income															39,004
Net income attributable to noncontrolling interests															(21,076	)

Net income attributable to Common Shareholders														$	17,928

ACADIA REALTY TRUST AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

13. LONG-TERM INCENTIVE COMPENSATION

LONG-TERM INCENTIVE COMPENSATION

The Company maintains two share incentive plans, the 2003 Share Incentive Plan and the 2006 Share Incentive Plan (collectively the “Share Incentive Plans”).

On March 3, 2011 and March 22, 2011, the Company issued a combined total of 429,909 LTIP Units and 1,549 Restricted Shares to officers of the Company and 164 LTIP Units and 9,584 Restricted Shares to other employees of the Company. Vesting with respect to these awards are generally recognized ratably over the five annual anniversaries following the issuance date. Vesting with respect to 11% of the awards issued to officers is also generally subject to achieving certain Company performance measures.

These awards were measured at their fair value as if they were vested on the grant date. Fair value was established as the market price of the Company’s Common Shares as of the close of trading on the day preceding the grant date.

The total value of the above Restricted Shares and LTIP Units as of the grant date was $8.4 million, of which $2.4 million was recognized in compensation expense during 2010 and $6.0 million will be recognized in compensation expense over the vesting period. Compensation expense of $0.9 million and $1.2 million has been recognized in the accompanying financial statements related to these awards for the three and six months ended June 30, 2011.

Total long-term incentive compensation expense, including the expense related to the above-mentioned plans, was $1.4 million and $1.0 million for the three months ended June 30, 2011 and 2010, respectively and $2.2 million and $2.0 million for the six months ended June 30, 2011 and 2010, respectively.

On May 10, 2011, the Company issued 24,904 Restricted Shares to Trustees of the Company in connection with Trustee fees. Vesting with respect to 10,279 of the Restricted Shares will be on the first anniversary of the date of issuance and 14,625 of the Restricted Shares vest over three years with 33% vesting on each of the next three anniversaries of the issuance date. The Restricted Shares do not carry voting rights or other rights of Common Shares until vesting and may not be transferred, assigned or pledged until the recipients have a vested non-forfeitable right to such shares. Dividends are not paid currently on unvested Restricted Shares, but are paid cumulatively, from the issuance date through the applicable vesting date of such Restricted Shares. Trustee fee expense of $0.1 million has been recognized for the six months ended June 30, 2011 related to these Restricted Shares.

In 2009, the Company adopted the Long Term Investment Alignment Program (the “Program”) pursuant to which the Company may award units primarily to senior executives which would entitle them to receive up to 25% of any future Fund III Promote when and if such Promote is ultimately realized. The Company has awarded units representing 73% of the Program, which were determined to have no value at issuance or as of June 30, 2011. In accordance with ASC Topic 718, “Compensation - Stock Compensation,” compensation relating to these awards will be recorded based on the change in the estimated fair value at each reporting period.

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 the Company as of June 30, 2011 and 2010 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 that may cause our actual results, performance or achievements to be materially different from any future results performance or achievements expressed or implied by such forward-looking statements. Such factors are set forth under the heading “Item 1A. Risk Factors” in our Form 10-K for the year ended December 31, 2010 (our “2010 Form 10-K”) and include, among others, the following: general economic and business conditions, including the current post-recessionary period, 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 our real estate markets, including, among other things, competition with other companies; risks of real estate development, acquisition and investment; risks related to our use of leverage; demands placed on our resources due to the growth of our business; risks related to operating through a partnership structure; our limited control over joint venture investments; the risk of loss of key members of management; uninsured losses; REIT distribution requirements and ownership limitations; concentration of ownership by certain institutional investors; governmental actions and initiatives; and environmental/safety requirements. Except as required by law, we do not undertake any obligation to update or revise any forward-looking statements contained in this Form 10-Q.

OVERVIEW

As of June 30, 2011, we operated 84 properties, which we own or have an ownership interest in, within our Core Portfolio or within our three Opportunity Funds. These 84 properties consist of commercial properties, primarily neighborhood and community shopping centers, mixed-use properties with a retail component and self-storage properties. The properties we operate are located primarily in the Northeast, Mid-Atlantic and Midwestern regions of the United States. Our Core Portfolio consists of those properties either 100% owned, or partially owned through joint venture interests, by the Operating Partnership, or subsidiaries thereof, not including those properties owned through our Opportunity Funds. Excluding one property under redevelopment, there are 34 properties in our Core Portfolio totaling approximately 4.9 million square feet. Fund I has 20 properties comprising approximately 0.9 million square feet. Fund II has 9 properties, seven of which (representing 1.2 million square feet) are currently operating, one is under construction, and one is in the design phase. Three of the properties also include self-storage facilities. We expect the Fund II portfolio will have approximately 2.0 million square feet upon completion of all current construction and anticipated redevelopment activities. Fund III has 20 properties totaling approximately 2.0 million square feet, of which 11 locations representing 0.9 million net rentable square feet are self-storage facilities. The majority of our operating income is derived from rental revenues from these 84 properties, including recoveries from tenants, offset by operating and overhead expenses. As our RCP Venture invests in operating companies, we consider these investments to be private-equity style, as opposed to real estate, investments. Since these are not generally traditional investments in operating rental real estate but investments in operating businesses, the Operating Partnership principally invests in these through a taxable REIT subsidiary (“TRS”).

Our primary business objective is to acquire and manage commercial retail properties that will provide cash for distributions to shareholders while also creating the potential for capital appreciation to enhance investor returns. We focus on the following fundamentals to achieve this objective:

– Own and operate a Core Portfolio of community and neighborhood shopping centers and main street retail located in markets with strong demographics and generate internal growth within the Core Portfolio through aggressive redevelopment, re-anchoring and/or leasing activities

– Maintain a strong and flexible balance sheet through conservative financial practices while ensuring access to sufficient capital to fund future growth

– Generate external growth through an opportunistic yet disciplined acquisition program. We target transactions with high inherent opportunity for the creation of additional value through redevelopment and leasing and/or transactions requiring creative capital structuring to facilitate the transactions. These transactions may include other types of commercial real estate besides those which we invest in through our Core Portfolio. These may also include joint ventures with private equity investors for the purpose of making investments in operating retailers with significant embedded value in their real estate assets

CRITICAL ACCOUNTING POLICIES

Management’s discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Management bases its estimates on historical experience and assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe there have been no material changes to the items that we disclosed as our critical accounting policies under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in our 2010 Form 10-K.

RESULTS OF OPERATIONS

Comparison of the three months ended June 30, 2011 (“2011”) to the three months ended June 30, 2010 (“2010”)


Revenues	2011								2010

(dollars in millions)	Core Portfolio		Opportunity Funds		Self- Storage Investments		Notes Receivable and Other		Core Portfolio		Opportunity Funds		Self- Storage Investments		Notes Receivable and Other


Rental income	$	11.2	$	12.6	$	5.2	$	—	$	11.1	$	9.1	$	4.5	$	—

Interest income		—		—		—		3.4		—		—		—		5.2
Expense reimbursements		2.9		2.7		—		—		2.4		2.2		—		—
Management fee income (1)		—		—		—		0.3		—		—		—		0.4
Other		—		—		0.5		—		0.2		0.1		0.3		—


Total revenues	$	14.1	$	15.3	$	5.7	$	3.7	$	13.7	$	11.4	$	4.8	$	5.6


	(1)	Includes fees earned by us as general partner/managing member of the Opportunity Funds that are eliminated in consolidation and adjusts the loss (income) attributable to noncontrolling interests. The balance reflected in the table represents third party fees that are not eliminated in consolidation. Reference is made to Note 12 to the Notes to Consolidated Financial Statements in Part 1, Item 1 of this Form 10-Q for an overview of our five reportable segments.

The increase in rental income in the Opportunity Funds primarily related to additional rents at Canarsie, Pelham Manor and 161^st Street of $2.8 million for leases that commenced during 2010 (“Fund Redevelopment Properties”) as well as additional rents of $0.7 million following the acquisition of The Heritage Shops at Millennium Park (“2011 Fund Acquisition”) in April 2011.

The decrease in interest income related to the full repayment of two notes during 2010 and 2011.


Operating Expenses	2011									2010

(dollars in millions)	Core Portfolio		Opportunity Funds		Self- Storage Investments		Notes Receivable and Other			Core Portfolio		Opportunity Funds		Self- Storage Investments		Notes Receivable and Other


Property operating	$	2.0	$	3.5	$	2.8	$	(0.7	)	$	1.6	$	2.5	$	2.6	$	(0.4	)
Real estate taxes		2.1		1.9		0.7		—			1.9		1.6		0.6		—
General and administrative		6.1		2.5		—		(2.9	)		5.4		3.5		—		(3.5	)
Depreciation and amortization		3.7		4.0		1.1		(0.3	)		3.4		2.3		0.9		(0.1	)
Impairment of asset		—		6.9		—		—			—		—		—		—


Total operating expenses	$	13.9	$	18.8	$	4.6	$	(3.9	)	$	12.3	$	9.9	$	4.1	$	(4.0	)

The increase in property operating expenses in the Opportunity Funds related primarily to Fund Redevelopment Properties and the 2011 Fund Acquisition.

The decrease in general and administrative expense in the Opportunity Funds related to the reduction in Promote expense attributable to Fund I. The increase in general and administrative expense in the Other category primarily related to the reduction in Fund I Promote expense eliminated for consolidated financial statement presentation purposes.

Depreciation and amortization expense increased $1.7 million in the Opportunity Funds primarily as the result of Fund Redevelopment Properties and the 2011 Fund Acquisition.

The $6.9 million impairment of asset related to the write down of the Granville Centre owned by Fund I to its fair value in the second quarter of 2011.


Other	2011												2010

(dollars in millions)	Core Portfolio			Opportunity Funds			Self- Storage Investments			Notes Receivable and Other			Core Portfolio			Opportunity Funds			Self- Storage Investments			Notes Receivable and Other


Equity in earnings (losses) of unconsolidated affiliates	$	0.2		$	0.6		$	(0.7	)	$	—		$	0.2		$	—		$	(0.1	)	$	—

Other interest income		—			—			—			0.1			—			—			—			0.2
Gain from bargain purchase		—			—			—			—			—			33.8			—			—
Loss on debt extinguishment		(0.1	)		—			—			—			—			—			—			—
Interest and other finance expense		(4.1	)		(3.9	)		(0.9	)		—			(4.5	)		(3.8	)		(1.2	)		—
Income tax provision		(0.4	)		—			0.2			—			(0.6	)		—			—			—

Income from discontinued operations		—			—			—			28.8			—			—			—			0.5
Net loss (income) attributable to noncontrolling interests in subsidiaries
- Continuing operations		(0.4	)		5.9			—			—			(0.2	)		(24.5	)		0.1			—
- Discontinued operations		—			—			—			(0.3	)		—			—			—			(0.1	)

The $33.8 million gain from bargain purchase was attributable to Fund II’s purchase of an unaffiliated member’s interest in CityPoint during 2010.

Income from discontinued operations related to a property sold during the second quarter 2011.

Net loss (income) attributable to noncontrolling interests in subsidiaries – Continuing operations primarily represents the noncontrolling interests’ share of all Opportunity Funds variances discussed above.

Comparison of the six months ended June 30, 2011 (“2011”) to the six months ended June 30, 2010 (“2010”)


Revenues	2011								2010

(dollars in millions)	Core Portfolio		Opportunity Funds		Self- Storage Investments		Notes Receivable and Other		Core Portfolio		Opportunity Funds		Self- Storage Investments		Notes Receivable and Other


Rental income	$	22.4	$	23.8	$	10.2	$	—	$	22.2	$	18.5	$	8.6	$	—

Interest income		—		—		—		7.9		—		—		—		10.2
Expense reimbursements		5.8		5.1		—		—		5.8		4.4		—		—
Management fee income (1)		—		—		—		0.9		—		—		—		0.8
Other		0.4		—		0.8		—		0.3		0.1		0.7		—


Total revenues	$	28.6	$	28.9	$	11.0	$	8.8	$	28.3	$	23.0	$	9.3	$	11.0

(1)

Includes fees earned by us as general partner/managing member of the Opportunity Funds that are eliminated in consolidation and adjusts the loss (income) attributable to noncontrolling interests. The balance reflected in the table represents third party fees that are not eliminated in consolidation. Reference is made to Note 12 to the Notes to Consolidated Financial Statements in Part 1, Item 1 of this Form 10-Q for an overview of our five reportable segments.

The increase in rental income in the Opportunity Funds primarily related to additional rents from the Fund Redevelopment Properties. The increase in rental income in the Self-Storage Investments related to increased occupancy throughout the portfolio.

The decrease in interest income primarily related to the full repayment of a note during 2010.


Operating Expenses	2011									2010

(dollars in millions)	Core Portfolio		Opportunity Funds		Self- Storage Investments		Notes Receivable and Other			Core Portfolio		Opportunity Funds		Self- Storage Investments		Notes Receivable and Other


Property operating	$	4.4	$	6.8	$	5.3	$	(1.1	)	$	4.1	$	5.3	$	4.9	$	(0.7	)
Real estate taxes		4.1		3.4		1.4		—			4.1		3.1		1.3		—
General and administrative		12.0		6.0		—		(6.6	)		11.1		6.9		—		(7.5	)
Depreciation and amortization		6.9		7.8		2.0		(0.4	)		6.6		6.9		1.8		(0.2	)
Impairment of asset		—		6.9		—		—			—		—		—		—


Total operating expenses	$	27.4	$	30.9	$	8.7	$	(8.1	)	$	25.9	$	22.2	$	8.0	$	(8.4	)

The increase in property operating expenses in the Opportunity Funds related primarily to Fund Redevelopment Properties and increased winter related common area expenses during 2011.

The increase in general and administrative expense in the Core Portfolio primarily related to higher cash and stock compensation expense in 2011. The decrease in general and administrative expense in the Opportunity Funds related to the reduction in Promote expense attributable to Fund I. The increase in general and administrative expense in the Other category primarily related to the reduction in Fund I Promote expense eliminated for consolidated financial statement presentation purposes.

The increase in depreciation and amortization expense in the Opportunity Funds primarily related to the Fund Redevelopment Properties.

The $6.9 million impairment of asset related to the write down of the Granville Centre owned by Fund I to its fair value in the second quarter of 2011.


Other	2011												2010

(dollars in millions)	Core Portfolio			Opportunity Funds			Self- Storage Investments			Notes Receivable and Other			Core Portfolio			Opportunity Funds			Self- Storage Investments			Notes Receivable and Other


Equity in earnings (losses) of unconsolidated affiliates	$	0.4		$	1.1		$	(1.6	)	$	—		$	0.3		$	0.3		$	(0.1	)	$	—

Other interest income		—			—			—			0.1			—			—			—			0.3
Gain from bargain purchase		—			—			—			—			—			33.8			—			—
Gain on debt extinguishment		1.6			—			—			—			—			—			—			—
Interest and other finance expense		(8.3	)		(7.6	)		(2.0	)		—			(9.0	)		(7.5	)		(2.7	)		—
Income tax provision		(0.9	)		—			0.4			—			(1.0	)		(0.1	)		—			—
Income from discontinued operations		—			—			—			33.0			—			—			—			0.7
Net loss (income) attributable to noncontrolling interests in subsidiaries
- Continuing operations		(0.4	)		9.0			(0.1	)		—			(0.3	)		(20.8	)		0.1			—
- Discontinued operations		—			—			—			(3.5	)		—			—			—			(0.1	)

Equity in earnings (losses) in the Self-Storage Investments represents the pro-rata share of losses from our unconsolidated investment in a self storage management company which commenced operations in 2010. The losses at the self storage management company are attributable to start-up costs.

The $33.8 million gain from bargain purchase was attributable to Fund II’s purchase of an unaffiliated member’s interest in CityPoint in 2010.

The $1.6 million gain on debt extinguishment was attributable to the purchase of mortgage debt at a discount in 2011.

Income from discontinued operations related to property sales during 2011.

FUNDS FROM OPERATIONS

Consistent with the National Association of Real Estate Investment Trusts (“NAREIT”) definition, we define funds from operations (“FFO”) as net income attributable to common shareholders (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.

We consider FFO 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 our performance. 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 operating property and depreciation and amortization. However, our 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 GAAP and is not indicative of cash available to fund all cash needs, including distributions. FFO should not be considered as an alternative to net income for the purpose of evaluating our performance or to cash flows as a measure of liquidity.

The reconciliation of net income to FFO for the three and six months ended June 30, 2011 and 2010 is as follows:


	Three months ended June 30,					Six months ended June 30,


(dollars in millions, except per share amounts)	2011			2010		2011			2010

Funds From Operations

Net income attributable to Common Shareholders	$	30.2		$	12.8	$	39.7		$	17.9
Depreciation of real estate and amortization of leasing costs (net of noncontrolling interests’ share)
Consolidated affiliates		4.6			4.2		9.1			8.8
Unconsolidated affiliates		0.4			0.5		0.7			0.8
Gain on sale (net of noncontrolling interests’ share)
Consolidated affiliates		(28.6	)		—		(29.4	)		—
Income attributable to noncontrolling interests’ in Operating Partnership		0.4			0.1		0.5			0.3

Funds from operations	$	7.0		$	17.6	$	20.6		$	27.8


Funds From Operations per Share - Diluted

Weighted average number of Common Shares and OP Units		41.1			40.8		41.1			40.8


Diluted funds from operations, per share	$	0.17		$	0.43	$	0.50		$	0.68

USES OF LIQUIDITY

Our principal uses of liquidity are (i) distributions to our shareholders and OP unit holders, (ii) investments which include the funding of our capital committed to the Opportunity Funds and property acquisitions and redevelopment/re-tenanting activities within our Core Portfolio, and (iii) debt service and loan repayments.

Distributions

In order to qualify as a REIT for Federal income tax purposes, we must currently distribute at least 90% of our taxable income to our shareholders. For the three and six months ended June 30, 2011, we paid dividends and distributions on our Common Shares and Common OP Units totaling $7.5 million and $14.9 million, respectively.

Investments

Fund I and Mervyns I

During 2001, we formed a partnership, Fund I, and in 2004 formed a limited liability company, Mervyns I, with four institutional investors with $90.0 million, in the aggregate, of committed discretionary capital. Fund I and Mervyns I have returned all invested capital and accumulated preferred return thus triggering our Promote in all future Fund I and Mervyns I earnings and distributions. As of June 30, 2011, $86.6 million has been invested in Fund I and Mervyns I, of which the Operating Partnership contributed $19.2 million.

As of June 30, 2011, Fund I currently owned, or had ownership interests in, 20 assets comprising approximately 0.9 million square feet as follows:


Shopping Center	Location	Year acquired		GLA

New York Region

New York
Tarrytown Shopping Center	Tarrytown		2004		34,979

Mid-Atlantic Region

Ohio
Granville Centre	Columbus		2002		134,997

Various Regions
Kroger/Safeway Portfolio (18 locations)	Various		2003		714,776

Total					884,752

Reference is made to Note 5 in the Notes to Consolidated Financial Statements in Part 1, Item 1 in this Form 10-Q for a discussion of RCP investments made by Mervyns I to date.

Fund II and Mervyns II

During 2004, we, along with the investors from Fund I as well as two additional institutional investors, formed Fund II, and Mervyns II with $300.0 million, in the aggregate, of committed discretionary capital. Fund II’s primary investment focus has been in the New York Urban/Infill Redevelopment Initiative and the Retailer Controlled Property Venture which are discussed below. As of June 30, 2011, a total of $273.2 million has been invested in Fund II and Mervyns II, of which the Operating Partnership contributed $54.6 million. The remaining capital contribution balance of $26.8 million is expected to be utilized to complete development activities for existing Fund II investments.

New York Urban Infill Redevelopment Initiative

In September 2004, we, through Fund II, launched our New York Urban Infill Redevelopment initiative. Fund II, together with an unaffiliated partner, formed Acadia Urban Development LLC (“Acadia Urban Development”) for the purpose of acquiring, constructing, developing, owning, operating, leasing and managing certain mixed-use real estate properties which include a significant retail component in the New York City metropolitan area. To date our partner has invested its maximum commitment of $2.2 million and Fund II, the managing member, has agreed to invest the balance.

To date, Fund II has invested in nine New York Urban Infill Redevelopment construction projects, eight of which were made through Acadia Urban Development, as follows:


					Redevelopment (dollars in millions)
Property	Location	Year acquired	Costs to date		Anticipated additional costs		Estimated construction completion	Square feet upon completion

Liberty Avenue (1)	Queens	2005	$	15.5	$	0.1	Completed		125,000
216^th Street	Manhattan	2005		27.7		—	Completed		60,000
Fordham Place	Bronx	2004		125.2		7.9	Completed		260,000
Pelham Manor Shopping Center (1)	Westchester	2004		62.9		1.9	Completed		320,000
161^st Street (2)	Bronx	2005		62.8		3.9	TBD		230,000
Atlantic Avenue (3)	Brooklyn	2007		22.3		0.1	Completed		110,000
Canarsie Plaza	Brooklyn	2007		85.6		5.4	Completed		275,000
CityPoint (1)	Brooklyn	2007		88.3		111.7	TBD		550,000
Sherman Plaza	Manhattan	2005		33.9		TBD	TBD		TBD

Total			$	524.2	$	131.0			1,930,000

Notes:

TBD – To be determined.

(1) Acadia Urban Development acquired a ground lease interest at this property.

(2) Currently operating but redevelopment activities have commenced.

(3) Fund II owns 100% of this project.

Retailer Controlled Property Venture

Reference is made to Note 5 in the Notes to Consolidated Financial Statements in Part 1, Item 1 in this Form 10-Q for a discussion of RCP investments made by Fund II and Mervyns II to date.

Fund III

During 2007, we formed Fund III with 14 institutional investors, including all of the investors from Fund I and a majority of the investors from Fund II with $502.5 million of committed discretionary capital. As of June 30, 2011, $143.0 million has been invested in Fund III, of which the Operating Partnership contributed $28.5 million.

New York Urban Infill Redevelopment Initiative

Fund III has invested in a New York Urban/Infill Redevelopment and a main street retail redevelopment in Westport, Connecticut as follows:


Property	Location	Year acquired	Costs to date		Anticipated additional costs		Estimated construction completion	Square feet upon completion

Sheepshead Bay	Brooklyn, NY	2007	$	22.8	$	TBD	TBD	TBD
125 Main Street	Westport, CT	2007		23.5		2.1	2^nd half 2011	26,000

Total			$	46.3	$	2.1		26,000

Notes:

TBD - To be determined

Other Fund III Investments

Fund III, in conjunction with an unaffiliated partner, Storage Post, has a 95% interest in a portfolio of eleven self-storage properties located throughout New York and New Jersey. It also owns the Cortlandt Towne Center, a 642,000 square foot shopping center located in Westchester County, NY.

During December 2010, Fund III, in a joint venture with an unaffiliated partner, acquired the 255,200 square foot White City Shopping Center in Shrewsbury, Massachusetts for $56.0 million.

During the six months ended June 2011, Fund III acquired five properties through three separate ventures for an aggregate purchase price of $93.3 million, including assumed debt of $20.6 million. Reference is made to Notes 4 in the Notes to Consolidated Financial Statements in Part 1, Item 1 in this Form 10-Q for a discussion of these investments.

Notes Receivable

Reference is made to Note 6 to the Notes to Consolidated Financial Statements in Part 1, Item 1 in this Form 10-Q for an overview of our notes receivable.

During February 2011, we made a mezzanine loan for $3.8 million which accrues interest at 15% and is payable upon a capital event.

Core Portfolio Property Acquisitions, Redevelopment and Expansion

During the six months ended June 2011, we acquired two properties for an aggregate purchase price of $33.2 million. Reference is made to Note 4 in the Notes to Consolidated Financial Statements in Part 1, Item 1 in this Form 10-Q for a discussion of these investments.

In addition, we currently have entered into purchase and sale agreements with multiple unaffiliated sellers to acquire 26 properties with an aggregate purchase price of $103.3 million. We anticipate assuming debt totaling $33.3 million, issuing OP units totaling $15.0 million and utilizing existing cash on hand of $55.0 million in connection with these acquisitions. The completion of these transactions are subject to customary closing conditions, and, as such, no assurance can be given that we will successfully complete these transactions.

Our Core Portfolio redevelopment program focuses on selecting well-located neighborhood and community shopping centers and creating significant value through re-tenanting and property redevelopment. We currently have one property in the early stages of redevelopment.

Purchase of Convertible Notes

Purchases of our Convertible Notes have been another use of our liquidity. During the six months ended June 30, 2011, we purchased $10.0 million in face amount of our outstanding Convertible Notes for $10.1 million.

Share Repurchase

We have an existing share repurchase program that authorizes management, at its discretion, to repurchase up to $20.0 million of our outstanding Common Shares. The program may be discontinued or extended at any time and there is no assurance that we will purchase the full amount authorized. Under this program we have repurchased 2.1 million Common Shares, none of which were repurchased after December 2001. As of June 30, 2011, management may cause the Company to repurchase up to approximately $7.5 million of our outstanding Common Shares under this program.

SOURCES OF LIQUIDITY

We intend on using Fund III, as well as new funds that we may establish in the future, as the primary vehicles for our future acquisitions, including investments in the RCP Venture and New York Urban/Infill Redevelopment Initiative. Additional sources of capital for funding property acquisitions, redevelopment, expansion, re-tenanting and RCP Venture investments, are expected to be obtained primarily from (i) the issuance of public equity or debt instruments, (ii) cash on hand and cash flow from operating activities, (iii) additional property debt financings, (iv) noncontrolling interests’ unfunded capital commitments of $21.4 million for Fund II and $287.6 million for Fund III, and (v) future sales of existing properties.

During April 2011, Fund III received capital contributions of $46.5 million to fund the acquisition of The Heritage Shops at Millennium Park and to pay down Fund III’s credit facility. During June 2011, Fund II received capital contributions of $8.0 million to fund development costs.

As of June 30, 2011, we had approximately $58.9 million of additional capacity under existing debt facilities and cash and cash equivalents on hand of $148.9 million.

Shelf Registration Statements and Issuance of Equity

During April 2009, we filed a shelf registration on Form S-3 providing for offerings of up to a total of $500.0 million of Common Shares, Preferred Shares and debt securities. We have remaining capacity under this registration statement to issue up to approximately $430.0 million of these securities.

Asset Sales

Asset sales are an additional source of liquidity for us. During May 2011, we sold the Ledgewood Mall, a 517,000 square foot, unencumbered enclosed mall located in Ledgewood, New Jersey, for $37.0 million. The sale resulted in a gain of $28.6 million. During January 2011, we completed the sale of a Fund II leasehold interest in the Neiman Marcus location at Oakbrook Center, located in Oak Brook, Illinois, for $8.2 million. The sale resulted in a gain of $3.9 million. In March 2010, the Sterling Heights Shopping Center was sold for $2.3 million.

Notes Receivable

During May 2011, we received a payment of $54.7 million on a mezzanine loan, representing $33.8 million of principal, $13.4 million of accrued interest, and a $7.5 million exit fee. During February 2011, we received a payment of $1.9 million on a mezzanine loan. Reference is made to Note 6 to the Notes to Consolidated Financial Statements in Part 1, Item 1 in this Form 10-Q for an overview of our notes receivable.

Financing and Debt

At June 30, 2011, mortgage and convertible notes payable aggregated $870.5 million, net of unamortized premium of $0.1 million and unamortized discount of $0.5 million, and the mortgages were collateralized by 27 properties and related tenant leases. Interest rates on our outstanding mortgage indebtedness and convertible notes payable ranged from 0.79% to 7.34% with maturities that ranged from August 2011 to November 2032. Taking into consideration $71.3 million of notional principal under variable to fixed-rate swap agreements currently in effect, $395.2 million of the portfolio, or 45.4%, was fixed at a 5.63% weighted average interest rate and $475.3 million, or 54.6% was floating at a 3.24% weighted average interest rate as of June 30, 2011. There is $310.7 million of debt maturing in 2011 at a weighted average interest rate of 1.91%. Of this amount, $1.7 million represents scheduled annual amortization. $33.0 million of loans maturing during 2011 provide for extension options, which we believe we will be able to exercise and $195.4 million represents Fund III subscription line borrowings that are payable from capital calls. As it relates to remaining maturities, we may not have sufficient cash on hand to repay such indebtedness, and, therefore, we expect to refinance at least a portion of this indebtedness or select other alternatives based on market conditions as these loans mature.

Reference is made to Note 8 in the Notes to Consolidated Financial Statements in Part 1, Item 1 in this Form 10-Q for an overview of transactions related to mortgage loans, bond financing and credit facilities during the six months ended June 30, 2011.

The following table sets forth certain information pertaining to our secured credit facilities:


(dollars in millions) Borrower	Total amount of credit facility		Amount borrowed as of December 31, 2010		Net borrowings (repayments) during the six months ended June 30, 2011		Amount borrowed as of June 30, 2011		Letters of credit outstanding as of June 30, 2011		Amount available under credit facilities as of June 30, 2011

Acadia Realty, LP	$	64.5	$	1.0	$	—	$	1.0	$	4.6	$	58.9
Fund II		40.0		40.0		—		40.0		—		—
Fund III		195.9		171.5		23.9		195.4		0.5		—

Total	$	300.4	$	212.5	$	23.9	$	236.4	$	5.1	$	58.9

The following table summarizes the Company’s mortgage and other secured indebtedness as of June 30, 2011 and December 31, 2010:


(dollars in millions)

Description of Debt and Collateral	June 30, 2011			December 31, 2010			Interest Rate at June 30, 2011	Maturity	Payment Terms

Mortgage notes payable – variable-rate
Liberty Avenue	$	10.0		$	10.0		3.44% (LIBOR +3.25%)	9/1/2011	Interest only monthly
Tarrytown Shopping Center		8.2			8.4		1.84% (LIBOR +1.65%)	10/30/2011	Interest only monthly
Branch Shopping Plaza		13.8			13.9		1.49% (LIBOR +1.30%)	12/1/2011	Monthly principal and interest
Canarsie Plaza		49.9			40.2		Greater of 6.50% or	1/12/2012	Interest only monthly
							4.19% (LIBOR +4.00%)
Fordham Place		85.3			85.9		Greater of 1.5%+3.5% or	9/30/2012	Monthly principal and interest
							5.00% (LIBOR +3.5%)
161^st Street		28.9			28.9		5.69% (LIBOR +5.50%)	4/1/2013	Interest only monthly
CityPoint		20.7			20.7		2.69% (LIBOR +2.50%)	8/12/2013	Interest only monthly
Pelham Manor		34.0			31.6		2.94% (LIBOR +2.75%)	12/1/2013	Monthly principal and interest
Cortlandt Towne Center		50.0			50.0		2.09% (LIBOR +1.90%)	10/26/2015	Monthly principal and interest
Village Commons Shopping Center		9.4			9.3		1.59% (LIBOR +1.40%)	6/30/2018	Monthly principal and interest

Sub-total mortgage notes payable		310.2			298.9


Secured credit facilities – variable-rate
Fund III unfunded investor capital commitments		195.4			171.5		0.79% (LIBOR +0.60%)	10/9/2011	Interest only monthly
Six Core Portfolio properties		1.0			1.0		1.44% (LIBOR +1.25%)	12/1/2011	Annual principal and monthly interest
Fund II		40.0			40.0		3.09% (LIBOR +2.90%)	12/22/2014	Interest only monthly

Sub-total secured credit facilities		236.4			212.5


Interest rate swaps (1)		(71.3	)		(71.5	)

Total variable-rate debt		475.3			439.9


Mortgage notes payable – fixed-rate:
Five self-storage properties		41.5			41.5		5.30%	8/31/2011	Interest only monthly
Clark Diversey		4.6			4.6		6.35%	7/1/2014	Monthly principal and interest
New Loudon Center		14.0			14.2		5.64%	9/6/2014	Monthly principal and interest
CityPoint		20.0			20.0		7.25%	11/1/2014	Interest only quarterly
Crescent Plaza		17.4			17.6		4.98%	9/6/2015	Monthly principal and interest
Pacesetter Park Shopping Center		12.0			12.1		5.12%	11/6/2015	Monthly principal and interest
Elmwood Park Shopping Center		34.0			34.2		5.53%	1/1/2016	Monthly principal and interest
The Gateway Shopping Center		20.4			20.5		5.44%	3/1/2016	Monthly principal and interest
Walnut Hill Plaza		23.5			23.5		6.06%	10/1/2016	Interest only monthly until 10/11; monthly principal and interest thereafter
239 Greenwich Avenue		26.0			26.0		5.42%	2/11/2017	Interest only monthly
Merrillville Plaza		26.2			26.2		5.88%	8/1/2017	Interest only monthly until 7/12 monthly principal and interest thereafter
216^th Street		25.5			25.5		5.80%	10/1/2017	Interest only monthly
Atlantic Avenue		11.5			11.5		7.34%	1/1/2020	Interest only upon drawdown on construction loan until 1/15 monthly principal and interest thereafter
A&P Shopping Plaza		8.0			8.0		6.40%	11/1/2032	Monthly principal and interest
Chestnut Hill		—			9.3		—	—	—
Interest rate swaps (1)		71.3			71.5		4.85%

Total fixed-rate debt		355.9			366.2
Unamortized premium		0.1			0.1

Total	$	831.3		$	806.2

(1) Represents the amount of the Company’s variable-rate debt that has been fixed through certain cash flow hedge transactions. (Note 7).

CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS

At June 30, 2011, maturities on our mortgage notes payable and convertible notes payable ranged from August 2011 to November 2032. In addition, we have non-cancelable ground leases at 24 of our shopping centers. We also lease space for our corporate headquarters for a term expiring in 2015. The following table summarizes our debt maturities, obligations under non-cancelable operating leases and construction contracts as of June 30, 2011:


(dollars in millions)	Payments due by period

Contractual obligations	Total		Less than 1 year		1 to 3 years		3 to 5 years		More than 5 years


Future debt maturities	$	871.0	$	362.8	$	188.0	$	194.6	$	125.6
Interest obligations on debt		110.0		30.6		40.0		25.1		14.3
Operating lease obligations		168.6		6.0		11.6		10.5		140.5
Construction commitments		23.9		23.9		—		—		—


Total	$	1,173.5	$	423.3	$	239.6	$	230.2	$	280.4

OFF BALANCE SHEET ARRANGEMENTS

We have investments in the following joint ventures for the purpose of investing in operating properties. We account for these investments using the equity method of accounting as we have a noncontrolling interest. As such, our financial statements reflect our share of income and loss from but not the assets and liabilities of these joint ventures.

Reference is made to Note 5 in the Notes to Consolidated Financial Statements in Part 1, Item 1 in this Form 10-Q for a discussion of our unconsolidated investments. Our pro-rata share of unconsolidated debt related to these investments is as follows:


(dollars in millions)

Investment	Pro-rata share of mortgage debt Operating Partnership		Interest rate at June 30, 2011			Maturity Date

Crossroads	$	29.8		5.37	%	December 2014
Brandywine		36.9		5.99	%	July 2016
White City		6.6		2.79	%	December 2017
Lincoln Road		3.9		6.14	%	August 2014

Total	$	77.2

In addition, we have arranged for the provision of two separate letters of credit in connection with certain leases and investments. As of June 30, 2011, there were no outstanding balances under any of the letters of credit. If the letters of credit were fully drawn, the combined maximum amount of our exposure would be $5.1 million.

In addition to our derivative financial instruments, one of our unconsolidated affiliates is a party to two separate interest rate LIBOR swaps with a notional value of $29.8 million, which effectively fix the interest rate at 5.54% and expires in December 2017. Our pro-rata share of the fair value of the derivative liability totaled $0.2 million at June 30, 2011.

HISTORICAL CASH FLOW

The following table compares the historical cash flow for the six months ended June 30, 2011 (“2011”) with the cash flow for the six months ended June 30, 2010 (“2010”)


	Six months ended March 31,

(dollars in millions)	2011			2010			Change


Net cash provided by operating activities	$	20.3		$	20.2		$	0.1
Net cash used in investing activities		(45.0	)		(38.3	)		(6.7	)
Net cash provided by financing activities		53.0			3.2			49.8


Total	$	28.3		$	(14.9	)	$	43.2

A discussion of the significant changes in cash flow for 2011 compared to 2010 is as follows:

Net cash provided by operating activities of $20.3 million was essentially unchanged between 2011 and 2010. There were offsetting increases and decreases in cash provided by (used in) operating activities as outlined below:

Items which contributed to an increase in cash from operating activities:


	•	Additional rents from redevelopment projects placed in service subsequent to March 31, 2010

Items which contributed to a decrease in cash from operating activities:

	•	Payment of $3.9 million for ground rent at City Point during 2011
	•	Additional cash payments totaling $3.3 million during 2011 for income taxes related to our taxable REIT subsidiaries

The increase of $6.7 million of net cash used in investing activities primarily resulted from the following:

Items which contributed to an increase in cash used in investing activities:

	•	An increase of $55.7 million in expenditures for real estate, development and tenant installations during 2011
	•	An increase of $39.4 million in investments and advances to unconsolidated affiliates during 2011 related to the acquisitions of Lincoln Road and White Oak

Items which contributed to a decrease in cash used in investing activities:

	•	An increase of $45.9 million from the collection of notes receivable during 2011
	•	An increase of $43.8 million in proceeds from the sale of two properties during 2011

The $49.8 million increase in net cash provided by financing activities resulted primarily from the following:

Items which contributed to an increase in cash from financing activities:

	•	An additional $24.2 million of contributions from non-controlling interests during 2011
	•	An additional $22.2 million in borrowings during 2011

INFLATION

Our long-term leases contain provisions designed to mitigate the adverse impact of inflation on our net income. Such provisions include clauses enabling us 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 our leases are for terms of less than ten years, which permits us to seek to increase rents upon re-rental at market rates if current rents are below the then existing market rates. Most of our leases require the tenants to pay their share of operating expenses, including common area maintenance, real estate taxes, insurance and utilities, thereby reducing our exposure to increases in costs and operating expenses resulting from inflation.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Our primary market risk exposure is to changes in interest rates related to our mortgage debt. See the discussion under Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations for certain quantitative details related to our mortgage debt.

Currently, we manage our exposure to fluctuations in interest rates primarily through the use of fixed-rate debt and interest rate swap and cap agreements. As of June 30, 2011, we had total mortgage debt and convertible notes payable of $870.5 million, net of unamortized premium of $0.1 million and unamortized discount of $0.5 million, of which $395.2 million or 45.4% was fixed-rate, inclusive of interest rate swaps, and $475.3 million, or 54.6% was variable-rate based upon LIBOR plus certain spreads. As of June 30, 2011, we were a party to seven interest rate swap transactions and one interest rate cap to hedge our exposure to changes in interest rates with respect to $71.3 million of LIBOR-based variable-rate debt.

Of our total consolidated outstanding debt, $310.7 million and $137.2 million will become due in 2011 and 2012, respectively. As we intend on refinancing some or all of such debt at the then-existing market interest rates, which may be greater than the current interest rate, our interest expense would increase by approximately $4.5 million annually if the interest rate on the refinanced debt increased by 100 basis points. After giving effect to noncontrolling interests, the Company’s share of this increase would be $1.3 million.

Interest expense on our consolidated variable-rate debt, net of variable to fixed-rate swap agreements currently in effect, as of June 30, 2011 would increase by $4.8 million annually if LIBOR increased by 100 basis points. After giving effect to noncontrolling interests, the Company’s share of this increase would be $0.7 million. We may seek additional variable-rate financing if and when pricing and other commercial and financial terms warrant. As such, we would consider hedging against the interest rate risk related to such additional variable-rate debt through interest rate swaps and protection agreements, or other means.

Item 4. Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures. In accordance with paragraph (b) of Rule 13a-15 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures were effective.

(b) Internal Control over Financial Reporting. There has not been any change in our internal control over financial reporting during the fiscal quarter to which this report relates that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II. Other Information

Item 1. Legal Proceedings.

There have been no material legal proceedings or updates thereto beyond those previously disclosed in our 2010 Form 10-K.

Item 1A. Risk Factors.

The most significant risk factors applicable to us are described in Item 1A of our 2010 Form 10-K. There have been no material changes to those previously-disclosed risk factors.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None

Item 3. Defaults Upon Senior Securities.

None

Item 4. (Removed and Reserved).

Item 5. Other Information.

None

Item 6. Exhibits.

The information under the heading “Exhibit Index” below is incorporated herein by reference.

SIGNATURES

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

ACADIA REALTY TRUST


August 5, 2011	/s/ Kenneth F. Bernstein

	Kenneth F. Bernstein
	President and Chief Executive Officer (Principal Executive Officer)

August 5, 2011	/s/ Michael Nelsen

	Michael Nelsen
	Senior Vice President and Chief Financial Officer (Principal Financial Officer)

Exhibit Index



Exhibit No.	Description
3.1	Declaration of Trust of the Company, as amended (1)
3.2	Fourth Amendment to Declaration of Trust (2)
3.3	Amended and Restated By-Laws of the Company (3)
3.4	Fifth Amendment to Declaration of Trust (9)
3.5	First Amendment the Amended and Restated Bylaws of the Company (9)
4.1	Voting Trust Agreement between the Company and Yale University dated February 27, 2002 (4)

10.49	Second Amendment to Consolidated, Amended and Restated Term Loan Agreement and Omnibus Amendment and Ratification of Loan Documents between Acadia East Fordham Acquisitions, LLC and Eurohypo AG, New York Branch, Replacement Note between Acadia East Fordham Acquisitions, LLC and Eurohypo AG, New York Branch and First Amendment to Cash Management and Security Agreement between Acadia East Fordham Acquisitions, LLC and Eurohypo AG, New York Branch all dated June 30, 2011 (5)
10.50	Term Loan Agreement between RD Smithtown, LLC and Bank of America, N.A., Mortgage and Security Agreement between RD Smithtown, LLC and Bank of America, N.A., Mortgage Consolidation and Modification Agreement between RD Smithtown, LLC and Bank of America, N.A., Note between RD Smithtown, LLC and Bank of America, N.A., Note between RD Smithtown, LLC and Bank of America, N.A., Note Consolidation and Modification Agreement between RD Smithtown, LLC and Bank of America, N.A. and Guaranty Agreement between RD Smithtown, LLC and Bank of America, N.A. all dated June 30, 2011 (5)
31.1	Certification of Chief Executive Officer pursuant to rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (5)
31.2	Certification of Chief Financial Officer pursuant to rule 13a–14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (5)
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (5)
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (5)
99.1	Amended and Restated Agreement of Limited Partnership of the Operating Partnership (6)
99.2	First and Second Amendments to the Amended and Restated Agreement of Limited Partnership of the Operating Partnership (6)
99.3	Third Amendment to Amended and Restated Agreement of Limited Partnership of the Operating Partnership (7)
99.4	Fourth Amendment to Amended and Restated Agreement of Limited Partnership of the Operating Partnership (7)
99.5	Certificate of Designation of Series A Preferred Operating Partnership Units of Limited Partnership Interest of Acadia Realty Limited Partnership (8)
99.6	Certificate of Designation of Series B Preferred Operating Partnership Units of Limited Partnership Interest of Acadia Realty Limited Partnership (7)
101.INS	XBRL Instance Document*
101.SCH	XBRL Taxonomy Extension Schema Document*
101.CAL	XBRL Taxonomy Extension Calculation Document*
101.DEF	XBRL Taxonomy Extension Definitions Document*
101.LAB	XBRL Taxonomy Extension Labels Document*
101.PRE	XBRL Taxonomy Extension Presentation Document*

*	Pursuant to Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

Notes:
(1)	Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Annual Report on Form 10-K filed for the fiscal Year ended December 31, 1994
(2)	Incorporated by reference to the copy thereof filed as an Exhibit to Company’s Quarterly Report on Form 10-Q filed for the quarter ended September 30, 1998
(3)	Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Annual Report on Form 10-K filed for the fiscal year ended December 31, 2005.
(4)	Incorporated by reference to the copy thereof filed as an Exhibit to Yale University’s Schedule 13D filed on September 25, 2002
(5)	Filed herewith.
(6)	Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Registration Statement on Form S-3 filed on March 3, 2000
(7)	Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Annual Report on Form 10-K filed for the fiscal year ended December 31, 2003
(8)	Incorporated by reference to the copy thereof filed as an Exhibit to Company’s Quarterly Report on Form 10-Q filed for the quarter ended June 30, 1997
(9)	Incorporated by reference to the copy thereof filed as an Exhibit to Company’s Quarterly Report on Form 10-Q filed for the quarter ended March 31, 2009

Exhibit 10.49

SECOND AMENDMENT TO CONSOLIDATED, AMENDED AND
RESTATED TERM LOAN AGREEMENT AND OMNIBUS
AMENDMENT AND RATIFICATION OF LOAN DOCUMENTS

This Second Amendment to Consolidated, Amended and Restated Term Loan Agreement and Omnibus Amendment and Ratification of Loan Documents (the “Amendment”) is entered into as of the 30^th day of June, 2011, by and among ACADIA EAST FORDHAM ACQUISITIONS, LLC, a limited liability company duly organized and validly existing under the laws of the State of Delaware, formerly known as Acadia-PA East Fordham Acquisitions, LLC (“Acquisitions”) and FORDHAM PLACE OFFICE LLC, a limited liability company duly organized and validly existing under the laws of the State of Delaware (“Office”, and together with Acquisitions, jointly and severally, singly and collectively, the “Borrower”), ACADIA STRATEGIC OPPORTUNITY FUND II, LLC, a Delaware limited liability company (“Guarantor”), each of the lenders that is a signatory hereto identified under the caption “LENDERS” on the signature page hereof (individually, each a “Lender” and collectively the “Lenders”) and EUROHYPO AG, NEW YORK BRANCH, the New York branch of a German banking corporation, as administrative agent for such Lenders (in such capacity, the “Administrative Agent”), having an office at 1114 Avenue of the Americas, New York, New York 10036, in consideration of the mutual covenants contained herein and benefits to be derived herefrom.

WITNESSETH:

WHEREAS, the Borrower, Administrative Agent and the Lenders entered into a certain loan arrangement (the “Loan Arrangement”) evidenced, in part, by that certain Consolidated, Amended and Restated Term Loan Agreement dated as of November 4, 2009, by and among the Borrower, the Lenders and the Administrative Agent, as amended by that certain First Amendment to Consolidated, Amended and Restated Term Loan Agreement dated as of February 1, 2010 (as the same may be further amended, restated, replaced, supplemented or otherwise modified from time to time, collectively, the “Loan Agreement”) and certain promissory notes in the original aggregate principal amount of $86,000,000.00, each made payable to the respective Lender by the Borrower (as may be amended, restated, replaced, supplemented or otherwise modified from time to time, singly and collectively, the “Note”); and

WHEREAS, the obligations of the Borrower under the Loan Arrangement, including, without limitation, those obligations of the Borrower under the Loan Agreement and Note, are secured by, among others, that certain (i) Mortgage Consolidation and Modification Agreement, dated as of November 4, 2009, by and between the Borrower and the Administrative Agent, and recorded in the Office of the City Register of the City of New York on November 16, 2009 as CRFN 2009000381998 (as may be amended, restated, replaced, supplemented or otherwise modified from time to time, the “Mortgage”), (ii) Assignment of Contracts, Governmental Approvals and Other Project Documents, dated as of October 5, 2007, made by the Borrower in favor of the Administrative Agent, as amended by that certain Amendment To and Reaffirmation of Loan Documents, dated as of November 4, 2009 (as may be further amended, restated, replaced, supplemented or otherwise modified from time to time, collectively, the “Assignment of Contracts”), (iii) Co-Borrower Guaranty, dated as of October 5, 2007, made by Acquisitions in favor of the Administrative Agent and the Lenders, as amended by that certain Amendment To

and Reaffirmation of Loan Documents, dated as of November 4, 2009 (as may be further amended, restated, replaced, supplemented or otherwise modified from time to time, collectively, the “Acquisitions Guaranty”), (iv) Co-Borrower Guaranty, dated as of October 5, 2007, made by Office in favor of Administrative Agent and the Lenders, as amended by that certain Amendment To and Reaffirmation of Loan Documents, dated as of November 4, 2009 (as may be further amended, restated, replaced, supplemented or otherwise modified from time to time, collectively, the “Office Guaranty” and, together with the Acquisitions Guaranty, collectively, the “Co-Borrower Guaranty”), (v) Indemnity, Subrogation and Contribution Agreement, dated as of October 5, 2007, between the Borrower and the Administrative Agent, as amended by that certain Amendment To and Reaffirmation of Loan Documents, dated as of November 4, 2009 (as may be further amended, restated, replaced, supplemented or otherwise modified from time to time, collectively, the “Contribution Agreement”) and (vi) Property Manager’s Consent and Subordination of Management Agreement, dated as of October 5, 2007, by and among the Borrower, Acadia-P/A Management Services LLC and the Administrative Agent, as amended by that certain Amendment To and Reaffirmation of Consent and Subordination, dated as of November 4, 2009 (as may be further amended, restated, replaced, supplemented or otherwise modified from time to time, collectively, the “Consent and Subordination”); and

WHEREAS, to induce the Administrative Agent and the Lenders to extend credit to the Borrower as provided for in the Loan Agreement and the Note, Guarantor guaranteed certain of the obligations of the Borrower to the Administrative Agent and the Lenders under the Loan Arrangement pursuant to that certain (i) Completion Guaranty, dated as October 5, 2007, as amended by that certain Amendment and Reaffirmation of Guaranty, dated as of November 4, 2009 (as may be further amended, restated, replaced, supplemented or otherwise modified from time to time, collectively, the “Completion Guaranty”), and (b) that certain Recourse Guaranty, dated as of October 5, 2007, as amended by that certain Amendment and Reaffirmation of Guaranty, dated as of November 4, 2009 (as may be further amended, restated, replaced, supplemented or otherwise modified from time to time, collectively, the “Recourse Guaranty” and, together with the Completion Guaranty, collectively, the “Guaranty”); and

WHEREAS, the Borrower and the Guarantor have agreed to indemnify the Administrative Agent and the Lenders in accordance with the terms and provisions of that certain Environmental Indemnity Agreement, dated as of October 5, 2007, as amended by that certain Amendment and Reaffirmation of Environmental Indemnity, dated as of November 4, 2009 (as may be further amended, restated, replaced, supplemented or otherwise modified from time to time, the “Environmental Indemnity”, and together with the Loan Agreement, the Note, the Mortgage, the Assignment of Contracts, the Co-Borrower Guaranty, the Contribution Agreement, the Consent and Subordination, the Guaranty and any and all other documents, instruments and agreements entered into by and among the Administrative Agent, the Lenders, the Borrower and the Guarantor with respect to the Loan Arrangement, the “Loan Documents”); and

WHEREAS, as a result of, and in accordance with, the Borrower’s request, the Borrower, the Guarantor, the Administrative Agent and the Lenders have agreed to amend and modify the Loan Arrangement as provided herein.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Borrower, the Guarantor, the Administrative Agent and the Lenders agree as follows:


1.	Definitions. Unless otherwise defined herein, all capitalized terms used herein shall have the meaning set forth in the Loan Agreement.

2.	Amendments to Loan Agreement.

	a.	The definition of “Debt Service Coverage Ratio” set forth in Section 1.1(55) of the Loan Agreement is hereby deleted in its entirety.

	b.	The definition of “Debt Yield” set forth in Section 1.1(56) of the Loan Agreement is hereby deleted in its entirety.

	c.	The definition of “Low DSCR Release Event” set forth in Section 1.1(109) of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

			“(109) “Low DSCR Release Event” means, at any time after the occurrence of a Low DSCR Trigger Event, that the Pro Forma Debt Service Coverage Ratio shall, for one consecutive calendar or fiscal quarter, be at or above 1.45:1.00.”

	d.	The definition of “Low DSCR Trigger Event” set forth in Section 1.1(110) of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

			“(110) “Low DSCR Trigger Event” means, at any time prior to the Maturity Date, that the Pro Forma Debt Service Coverage Ratio for any calendar quarter is less than 1.45:1.00.”

	e.	The definition of “Low DSCR Trigger Period” set forth in Section 1.1(111) of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

			“(111) “Low DSCR Trigger Period” means from April 1, 2011 until the occurrence of a Low DSCR Release Event, and thereafter the period of time after a Low DSCR Trigger Event until the occurrence of a Low DSCR Release Event.”

	f.	The definition of “Maturity Date” set forth in Section 1.1(116) of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

			“(116) “Maturity Date” means the earlier of (a) September 30, 2012 or (b) any earlier date on which all of the Loans are required to be paid in full, by acceleration or otherwise, under this Agreement or any of the other Loan Documents. There is no option to extend the Maturity Date and all references to any extension options are null and void.”

	g.	The definition of “Operating Expenses” set forth in Section 1.1(127) of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

			“(127) “Operating Expenses” means all reasonable and necessary expenses actually incurred in operating the Project in the ordinary course of business calculated in accordance with GAAP which are directly associated with and fairly allocable to the


		Project for the applicable period, including annualized ad valorem real estate taxes and assessments, capital expenditures at an imputed rate of $0.10 per square foot on an annualized basis of gross leasable area at the Project, annualized insurance premiums, regularly scheduled tax impounds paid to Administrative Agent, maintenance costs, management fees and costs in an amount equal to the greater of the management fees and costs actually paid or an imputed rate of four percent (4%) of Operating Revenues, accounting, legal, and other professional fees, fees relating to environmental and Net Cash Flow and Net Operating Income audits, and other expenses incurred by Administrative Agent and reimbursed by Borrower under this Agreement and the other Loan Documents, deposits to any capital replacement reserves required by Administrative Agent, wages, salaries, and personnel expenses, but excluding Debt Service, capital expenditures, any of the foregoing expenses which are paid from deposits to cash reserves previously included as Operating Expenses, any payment or expense for which Borrower was or is to be reimbursed from proceeds of the Loans or insurance or by any third party, and any non-cash charges such as depreciation and amortization. Any management fee or other expense payable to Borrower or to an Affiliate of Borrower shall be included as an Operating Expense only with Administrative Agent’s prior approval. Operating Expenses shall not include federal, state or local income taxes or legal and other professional fees unrelated to the operation of the Project.”

h.	The definition of “Operating Revenues” set forth in Section 1.1(128) of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

		“(128) “Operating Revenues” means all cash receipts of Borrower from operation of the Project or otherwise arising in respect of the Project after the date hereof which are properly allocable to the Project for the applicable period (subject to an underwritten market vacancy rate of not less than 8%), including receipts from leases and parking agreements (including percentage rental income based upon the three (3) month period immediately preceding the date of calculation), concession fees and charges and other miscellaneous operating revenues, proceeds from rental or business interruption insurance, withdrawals from cash reserves (except to the extent any operating expenses paid therewith are excluded from Operating Expenses), in all cases, determined in accordance with GAAP but without taking into account straight-lining of rents and extraordinary revenues (including, but not limited to, lease termination payments) and FAS 141R adjustments, but excluding (a) all rent and other revenues received during the applicable period from tenants that, at any time during the applicable period, are subject to a Bankruptcy Proceeding, unless such Bankruptcy Proceeding has been closed, and the subject tenant has not been discharged from its obligations under the subject lease and/or the rental payments due and/or paid by such tenant to Borrower cannot be disgorged from Borrower, (b) rent and other revenues from tenants that have been in default on the payment of rent under their respective leases for more than thirty (30) days, (c) rent and other revenues from tenants under leases which have remaining terms of less than twelve (12) months from the date of calculation (including rent and other revenues from tenants under month-to-month leases), (d) security deposits and earnest money deposits until they are forfeited by the depositor, (e) advance rentals (i.e. more than thirty (30) days in advance) until they are earned, (f) lump sum lease buy-out payments made by tenants in connection with any surrender, cancellation or termination of their lease, and (g) proceeds from a sale or other disposition.”

i.	The definition of “Pro Forma Operating Revenues” set forth in Section 1.1(145) of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

		“(145) “Pro Forma Operating Revenues” means, for any period, the sum of (a) Adjusted Operating Revenues and (b) pro forma net effective rental income from tenants


		who have executed leases, are not yet required to commence paying rent for the applicable period, but are required to commence paying rent within three (3) months from the date of calculation.”

j.	The definition of “TI/LC Reserve Account” is hereby added to Section 1.1 of the Loan Agreement in the appropriate alphabetic location:

		““TI/LC Reserve Account” has the meaning assigned to such term in the Cash Management Agreement.”

k.	The definition of “TI/LC Reserve Fund” is hereby added to Section 1.1 of the Loan Agreement in the appropriate alphabetic location:

		““TI/LC Reserve Fund” has the meaning assigned to such term in Section 4.2.”

l.	Section 2.5 of the Loan Agreement is hereby deleted in its entirety.

m.	Section 2.11 of the Loan Agreement is hereby amended by deleting the reference to “one quarter of one percent (0.25%)” and replacing it with “one half of one percent (0.50%).”

n.	Section 3.2(2)(a)(viii) of the Loan Agreement is hereby amended by replacing the terms “Debt Service Coverage Ratio” with “Pro Forma Debt Service Coverage Ratio.”

o.	Section 4.2 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:

		“Section 4.2 Tenant Improvement/Leasing Reserve Letter of Credit.

		Borrower has provided to Administrative Agent for the benefit of the Lenders an unconditional, irrevocable standby letter of credit (the “TI/LC Letter of Credit”) in the amount of $4,561,377.00 to be used for the payment of future tenant improvements, base building construction costs and leasing commissions, which TI/LC Letter of Credit conforms with the requirements of a Collateral Letter of Credit (except that the TI/LC Letter of Credit shall not be required to include an “evergreen” automatic renewal provision). In addition, on June 30, 2011, Borrower shall deposit $5,148,623.00 (said amount, together with any other funds which may be deposited in accordance with subsections (1) or (2) of this Section 4.2, being, collectively, the “TI/LC Reserve Fund”) in the TI/LC Reserve Account. The amount of the TI/LC Letter of Credit and the TI/LC Reserve Fund shall be reduced (with such reduction being allocated first against the TI/LC Reserve Fund) upon the written request of Borrower made not more than once per calendar month, in connection with the payment by Borrower of amounts for tenant improvements, base building construction costs and leasing commissions for newly executed leases entered into at the Project which have been approved by Administrative Agent or are deemed approved pursuant to Section 6.2 hereof. In the event that the 7^th and 8^th floors of the Office Component are leased to multiple tenants and the net leasable square feet (“NSRF”) is determined to be approximately 95,265, then in such event, reductions to the TI/LC Letter of Credit shall be calculated using amounts equal to (i) the lesser of (X) actual tenant improvement costs or base building construction costs, as applicable, or (Y) $88.00 per net leasable square foot with respect to the space on floors 2, 6, 7 and 9 through and including 14 of the Office Component, (ii) the lesser of (X) actual tenant improvement costs or base building construction costs, as applicable, or (Y)


		$23.00 per net leasable square foot with respect to the space on floor 8 of the Office Component, and (iii) the lesser of (X) actual leasing commissions or (Y) $18.00 per net leasable square of space at the Office Component. Notwithstanding the foregoing sentence, in the event that the 7^th and 8^th floors of the Office Component are leased to a single tenant and the NRSF is determined to be approximately 101,653, then in such event, reductions to the TI/LC Letter of Credit shall be calculated using amounts equal to (i) the lesser of (X) actual tenant improvement costs or base building constructions costs, as applicable, or (Y) 77.50 per net leasable square foot with respect to the space on floors 2 and 6 through and including 14 of the Office Component, and (ii) the lesser of (X) actual leasing commissions or (Y) $18.00 per net leasable square of space at the Office Component. Any savings incurred from the foregoing as a result of the actual cost being less than the maximum reduction amount set forth above in the preceding sentences, as applicable, shall be made available in connection with reductions to the TI/LC Letter of Credit with respect to future leases at the Project on terms mutually agreeable between the Administrative Agent and the Borrower. The TI/LC Letter of Credit shall be subject to each of the terms and conditions set forth in Section 4.5 with respect to a Collateral Letter of Credit subject to the following additional terms:

		(1) At least forty-five (45) days prior to the expiration date of the TI/LC Letter of Credit and each renewal and extension thereof, Borrower shall either (i) deliver to Administrative Agent on behalf of the Lenders a replacement, extension or renewal TI/LC Letter of Credit in the stated amount equal to (x) $9,710,000.00, less (y) any reduction as provided above in this Section 4.2, less (z) the amount then on deposit in TI/LC Reserve Account (the “Required Amount”), in accordance with the terms hereof, or (ii) deposit in the TI/LC Reserve Account the Required Amount.

		(2) Following a draw by Administrative Agent on the TI/LC Letter of Credit solely because of the failure to either furnish Administrative Agent with a replacement or renewal of the TI/LC Letter of Credit or deposit in the TI/LC Reserve Account the required amount pursuant to subsection (1) above, Administrative Agent will deposit such proceeds in the TI/LC Reserve Account for the purposes for which such TI/LC Letter of Credit was delivered.

		(3) Administrative Agent shall be entitled to draw upon any proceeds held in the TI/LC Reserve Account to the extent Borrower is entitled to a reduction in such amount as provided for above it and such shall be subject to disbursement to Borrower on the same basis as reductions to the TI/LC Reserve Fund are calculated, as described above.

		(4) Any amendments or modifications to the TI/LC Letter of Credit shall be at the sole cost and expense of the Borrower, and Borrower shall pay all of Administrative Agent’s fees and expenses in connection therewith.

p.	Section 4.3 of the Loan Agreement is hereby replaced with the following:

		“Section 4.3 Low DSCR Account. During any Low DSCR Trigger Period, any funds deposited into the Low DSCR Account shall be applied by the Administrative Agent to the payment of principal under the Loans.”

q.	Section 4.5(2) of the Loan Agreement is hereby amended by adding to the end thereof the following:

		“If Administrative Agent draws upon a Collateral Letter of Credit pursuant to the terms of this subsection (2), then Administrative Agent shall apply the proceeds thereof to the payment of the Loans in such manner as Administrative Agent may determine.”


	r.	Section 9.16 of the Loan Agreement is hereby deleted in its entirety.

	s.	Section 8.1 of the Loan Agreement is hereby amended by replacing the term “Debt Service Coverage Ratio” with “Pro Forma Debt Service Coverage Ratio.”

	t.	Section 10.10 of the Loan Agreement is hereby deleted in its entirety.

	u.	Schedule 1 to the Loan Agreement (“Commitments”) is hereby deleted in its entirety, and Schedule 1 attached hereto as Exhibit A is hereby substituted in its stead.

	v.	Schedule 7.28 to the Loan Agreement (“Organizational Chart”) is hereby deleted in its entirety, and Schedule 1 attached hereto as Exhibit B is hereby substituted in its stead.

3.	Loan Documents. All references in the Loan Documents to the “Loan Agreement” shall mean the Loan Agreement as amended by this Amendment.

4.	Outstanding Principal Balance. As of the date hereof, the parties hereto acknowledge and agree that the outstanding principal balance under the Loans is $85,184,266.18.

5.	Waiver of Claims. The Borrower and the Guarantor each acknowledge, confirm and agree that, to its knowledge, as of the date hereof, it has no offsets, defenses, claims or counterclaims against Administrative Agent or the Lenders with respect to any of its liabilities and Obligations owing to Administrative Agent or the Lenders, and, to the extent that the Borrower or Guarantor currently has or has ever had any such offsets, defenses, claims or counterclaims, the Borrower and Guarantor hereby specifically WAIVE and RELEASE any and all rights to such offsets, defenses, claims or counterclaims, provided, that the foregoing shall not act as a waiver or release of any offsets, defenses, claims, or counterclaims Borrower or Guarantor may have subsequent to the date hereof.

6.	Ratification. The Borrower and Guarantor each hereby ratify, confirm and reaffirm all covenants, warranties and representations set forth in the Loan Agreement and the other Loan Documents to which it is a party as being true as of the date hereof (taking into account any knowledge or other qualifiers contained in such covenants, warranties, and representations). Without limiting the generality of the foregoing, the Borrower and Guarantor each hereby warrant and represent to Administrative Agent and the Lenders that, upon the effectiveness of this Amendment, no Event of Default will have occurred and be continuing. Except as amended hereby, all terms and conditions of the Loan Agreement and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed.

7.	Conditions to Effectiveness. This Amendment shall not be effective until each of the following have been satisfied:

	a.	This Amendment shall have been duly executed and delivered by the respective parties hereto.


	b.	The Borrower shall have delivered to the Administrative Agent a modification fee in the amount of $425,921.33.

	c.	The Borrower shall have paid all costs and expenses of Administrative Agent and Lenders, including, without limitation, reasonable attorneys’ fees in connection with the preparation, negotiation, execution and delivery of this Amendment.

	d.	The Borrower shall have satisfied such reasonable requirements of Administrative Agent in order to effectuate the terms of the Amendment.

8.	Miscellaneous.

	a.	This Amendment may be executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, and all of which together shall constitute one instrument.

	b.	This Amendment expresses the entire understanding of the parties with respect to the transactions contemplated hereby. No prior negotiations or discussions shall limit, modify, or otherwise affect the provisions hereof.

	c.	Any determination that any provision of this Amendment or any application hereof is invalid, illegal or unenforceable in any respect and in any instance shall not affect the validity, legality, or enforceability of such provision in any other instance, or the validity, legality or enforceability of any other provisions of this Amendment.

	d.	The Borrower and the Guarantor warrant and represent that the Borrower and the Guarantor have consulted with independent legal counsel of their selection in connection with this Amendment and are not relying on any representations or warranties of Administrative Agent or its counsel in entering into this Amendment.

9.	Governing Law. This Agreement is and shall be deemed to be a contract entered into pursuant to the laws of the State of New York and shall in all respects be governed, construed, applied and enforced in accordance with the laws of the State of New York.

[Remainder of Page Intentionally Left Blank]

This Amendment shall take effect as of the date first written above.


BORROWER:	ACADIA EAST FORDHAM ACQUISITIONS, LLC, a Delaware limited liability company

	By:	/s/ Robert Masters

		Name: Robert Masters
		Title: Senior Vice President – Secretary

	FORDHAM PLACE OFFICE LLC,
	a Delaware limited liability company

	By:	/s/ Robert Masters

		Name: Robert Masters
		Title: Senior Vice President – Secretary

GUARANTOR:	ACADIA STRATEGIC OPPORTUNITY FUND II, LLC, a Delaware limited liability company

	By:	Acadia Realty Acquisition II, LLC, a Delaware limited liability company, its managing member


		By:	Acadia Realty Limited Partnership, a Delaware limited partnership, its sole member

			By:	Acadia Realty Trust, a Maryland real estate investment trust, its general partner

				By:	/s/ Robert Masters

					Name: Robert Masters
					Title: Senior Vice President-Secretary

Signature Page to Second Amendment


ADMINISTRATIVE AGENT:	EUROHYPO AG, NEW YORK BRANCH, as Administrative Agent

	By:	/s/ Lisa Komm

		Name:	Lisa Komm
		Title:	Vice President

	By:	/s/ John Hayes

		Name:	John Hayes
		Title:	Director

LENDER:	EUROHYPO AG, NEW YORK BRANCH

	By:	/s/ Lisa Komm

		Name:	Lisa Komm
		Title:	Vice President

	By:	/s/ John Hayes

		Name:	John Hayes
		Title:	Director

Signature Page to Second Amendment


LENDER:	DEUTSCHE GENOSSENSCHAFTS - HYPOTHEKENBANK AG

	By:	/s/ Joachim Gielens

		Name:	Joachim Gielens
		Title:	Authorized Signatory

	By:	/s/ Erik Wallenius

		Name:	Erik Wallenius
		Title:	Authorized Signatory

Signature Page to Second Amendment


LENDER:	TD BANK, as successor-in-interest to Commerce Bank, N.A.

	By:	/s/ John Valladores

		Name:	John Valladores
		Title:	Vice President

Signature Page to Second Amendment

Exhibit A

Revised Schedule 1 to Loan Agreement

SCHEDULE 1

COMMITMENTS


	LENDER	COMMITMENT

1.	Eurohypo AG New York Branch	$	52,150,400.00

2.	Deutsche Genossenschafts-Hypothekenbank AG	$	20,313,200.00

3.	TD Bank, N.A.	$	13,536,400.00


Total Commitment:		$	86,000,000.00

Exhibit B

Revised Schedule 7.28 to Loan Agreement

SCHEDULE 7.28

ORGANIZATIONAL CHART

400 East Fordham Road
Bronx, New York

(FLOW CHART)

THIS REPLACEMENT NOTE AMENDS, RESTATES AND REPLACES IN ITS ENTIRETY THAT CERTAIN (I) REPLACEMENT NOTE FROM ACADIA-PA EAST FORDHAM ACQUISITIONS, LLC AND FORDHAM PLACE OFFICE LLC TO EUROHYPO AG, NEW YORK BRANCH DATED NOVEMBER 4, 2009 IN THE ORIGINAL PRINCIPAL AMOUNT OF $34,099,000.00 AND (II) REPLACEMENT NOTE FROM ACADIA-PA EAST FORDHAM ACQUISITIONS, LLC AND FORDHAM PLACE OFFICE LLC TO AMALGAMATED BANK DATED NOVEMBER 4, 2009 IN THE ORIGINAL PRINCIPAL AMOUNT OF $18,051,400.00.

REPLACEMENT NOTE


$51,655,750.54	June 30, 2011
	New York, New York

FOR VALUE RECEIVED, ACADIA EAST FORDHAM ACQUISITIONS, LLC, formerly known as Acadia-PA East Fordham Acquisitions, LLC, and FORDHAM PLACE OFFICE LLC, each a Delaware limited liability company (“Borrower”), hereby promises to pay to EUROHYPO AG, NEW YORK BRANCH (the “Lender”), for account of its respective Applicable Lending Offices provided for by the Agreement referred to below, at the principal office of Eurohypo AG, New York Branch, at 1114 Avenue of the Americas, New York, New York 10036, the principal sum of Fifty-One Million Six Hundred Fifty-Five Thousand Seven Hundred Fifty and 54/100 Dollars ($51,655,750.54) (or such lesser amount as shall equal the aggregate unpaid principal amount of the Loans made by the Lender to Borrower under the Agreement), in lawful money of the United States of America and in immediately available funds, on the dates and in the principal amounts provided in the Agreement, and to pay interest on the unpaid principal amount of each such Loan, at such office, in like money and funds, for the period commencing on the date of such Loan until such Loan shall be paid in full, at the rates per annum and on the dates provided in the Agreement.

The date, amount, Type, interest rate and duration of Interest Period (if applicable) of each Loan made by the Lender to Borrower, and each payment made on account of the principal thereof, shall be recorded by the Lender on its books and, prior to any transfer of this Note, endorsed by the Lender on the schedule attached hereto or any continuation thereof, provided that the failure of the Lender to make any such recordation or endorsement shall not affect the obligations of Borrower to make a payment when due of any amount owing under the Agreement or hereunder in respect of the Loans made by the Lender.

This Note is one of the Notes referred to in that certain Consolidated, Amended and Restated Term Loan Agreement dated as November 4, 2009, as amended by that certain First Amendment to Consolidated, Amended and Restated Term Loan Agreement dated as of February 1, 2010, as further amended by that certain Second Amendment to Consolidated, Amended and Restated Term Loan Agreement and Omnibus Amendment and Ratification of Loan Documents (as modified, supplemented, extended and in effect from time to time, the “Agreement”) between Borrower, the lenders party thereto (including the Lender) and Eurohypo AG, New York Branch, as Administrative Agent, and evidences Loans made by the Lender

thereunder. Terms used but not defined in this Note have the respective meanings assigned to them in the Agreement.

The Agreement provides for the acceleration of the maturity of this Note upon the occurrence of certain events and for prepayments of Loans upon the terms and conditions specified therein.

Except as expressly permitted by Section 12.24 of the Agreement, this Note may not be assigned by the Lender to any other Person.

This Note shall be governed by, and construed in accordance with, the law of the State of New York without regard to conflicts of laws principles other than Section 5-1401 of the General Obligations Law of the State of New York.

As long as a Hedge Agreement with the Eurohypo Counterparty is in effect, the interest payable under this Note shall be increased or decreased from time to time in accordance with such Hedge Agreement. Therefore, this Note also evidences such amounts as may become due and payable by Borrower under the Hedge Agreement with the Eurohypo Counterparty, including, without limitation, any amount payable upon or in connection with termination of such Hedge Agreement, all of which sums shall be deemed to constitute “Additional Interest” evidenced hereby and payable pursuant to this Note and in accordance with the terms and provisions of the Hedge Agreement with a Eurohypo Counterparty.

[Remainder of page intentionally left blank]

IN WITNESS WHEREOF, Borrower has executed and delivered this Note as of the date first above written.


	ACADIA EAST FORDHAM ACQUISITIONS, LLC,
	a Delaware limited liability company

	By:	/s/ Robert Masters

		Name: Robert Masters
		Title: Senior Vice President – Secretary

	FORDHAM PLACE OFFICE LLC,
	a Delaware limited liability company

	By:	/s/ Robert Masters

		Name: Robert Masters
		Title: Senior Vice President – Secretary

Signature Page to Replacement Note (Eurohypo)

SCHEDULE OF LOANS

This Note evidences Loans made, Continued or Converted under the within-described Agreement to Borrower, on the dates, in the principal amounts, of the Types, bearing interest at the rates and having Interest Periods (if applicable) of the durations set forth below, subject to the payments, Continuations, Conversions and prepayments of principal set forth below:

Date
Made,
Continued
or
Converted

Principal
Amount of
Loan

Type
of
Loan

Interest
Rate

Duration
of
Interest
Period

Amount
Paid,
Prepaid,
Continued
or
Converted

Unpaid
Principal
Amount

Notation
Made
by

Signature Page to Replacement Note (Eurohypo)

FIRST AMENDMENT TO CASH MANAGEMENT AND SECURITY AGREEMENT

THIS FIRST AMENDMENT TO CASH MANAGEMENT AND SECURITY AGREEMENT (this “First Amendment”), is made as of June 30, 2011, by and among ACADIA EAST FORDHAM ACQUISITIONS, LLC, a limited liability company duly organized and validly existing under the laws of the State of Delaware, formerly known as Acadia-PA East Fordham Acquisitions, LLC (“Acquisitions”) and FORDHAM PLACE OFFICE LLC, a limited liability company duly organized and validly existing under the laws of the State of Delaware (“Office”, and together with Acquisitions, jointly and severally, singly and collectively, the “Borrower”), each having its principal place of business at c/o Acadia Realty Trust, 1311 Mamaroneck Avenue, Suite 260, White Plains, NY 10605, EUROHYPO AG, NEW YORK BRANCH, as Administrative Agent for the lenders referred to below (in such capacity, together with its successors in such capacity, the “Administrative Agent”), having an office at 1114 Avenue of the Americas, New York, New York 10036, WELLS FARGO BANK, N.A., a national banking association (the “Depository Bank”) having an office at 1320 Willow Pass Road, Suite 300, Concord, California 94520, and ACADIA URBAN MANAGEMENT SERVICES LLC, a limited liability company duly organized and validly existing under the laws of the State of Delaware, formerly known as Acadia-P/A Management Services LLC (“Manager”), having its principal place of business at c/o Acadia Realty Trust, 1311 Mamaroneck Avenue, Suite 260, White Plains, NY 10605. All capitalized terms not otherwise defined herein shall have the same meaning ascribed to such terms and set forth under the Cash Management Agreement (as defined herein).

W I T N E S S E T H:

WHEREAS, Borrower, certain lenders and the Administrative Agent are parties to that certain Consolidated, Amended and Restated Term Loan Agreement dated as of November 4, 2009, by and among the Borrower, the Lenders and the Administrative Agent, as amended by that certain First Amendment to Consolidated, Amended and Restated Term Loan Agreement dated as of February 1, 2010, as further amended by that certain Second Amendment to Consolidated, Amended and Restated Term Loan Agreement dated as of the date hereof (as the same may be further amended, restated, replaced, supplemented or otherwise modified from time to time, collectively the “Loan Agreement”), which Loan Agreement provides, among other things, for Loans to be made by the lenders party thereto from time to time (collectively, the “Lenders”) to Borrower in an aggregate principal amount not exceeding $86,000,000.00 to finance the property located at 2502 Webster Avenue, 2504 Webster Avenue, and 400-414 East Fordham Road, a/k/a 4747-4763 Park Avenue, a/k/a 2506-2526 Webster Avenue in the County of Bronx, State of New York; and

WHEREAS, as a condition to making the Loans, the Administrative Agent and the Lenders required the Borrower, the Manager and the Depository Bank to execute and deliver that certain Cash Management and Security Agreement dated as of November 24, 2009 (as amended, supplemented or otherwise modified from time to time, the “Cash Management Agreement”),

which governs the use and disbursement of any funds in the Accounts (as defined in the Cash Management Agreement); and

WHEREAS, the parties to the Cash Management Agreement desire to modify and amend certain provisions of the Cash Management Agreement, as more particularly set forth in this First Amendment.

NOW, THEREFORE, in consideration of the premises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:


1.	The definition of “Accounts” in the Definitions Section of the Cash Management Agreement is hereby deleted in its entirety and replaced with the following:

		““Accounts” shall mean, collectively, the Clearing Account, the Cash Management Account, the Debt Service Account, the Tax and Insurance Reserve Account, the Additional Cash Collateral Account, the Low DSCR Account, the Casualty/Taking Account, the Agent-Controlled Account, Property Expenses Account and the TI/LC Reserve Account and all other subaccounts established pursuant to the terms of this Agreement.”

2.	The definition of “Low DSCR Trigger Period” is hereby added to the Definitions Section of the Cash Management Agreement in the appropriate alphabetic location:

		“Low DSCR Trigger Period” shall have meaning assigned to such term in the Loan Agreement.”

3.	The definition of “Property Expenses Account” is hereby added to the Definitions Section of the Cash Management Agreement in the appropriate alphabetic location:

		““Property Expenses Account” shall have the meaning assigned to such term in Section 2.1(h).”

4.	The definition of “TI/LC Reserve Account” is hereby added to the Definitions Section of the Cash Management Agreement in the appropriate alphabetic location:

		““TI/LC Reserve Account” shall have the meaning assigned to such term in Section 2.1(i).”

5.	Section 2.1(g) of the Cash Management Account is hereby deleted in its entirety and replaced with the following:

		“(g) A sub-account of the Cash Management Account into which Borrower shall deposit, or cause to be deposited, all amounts required to be deposited and disbursed by Administrative Agent pursuant to Section 4.3 of the Loan Agreement (the “Low DSCR Account”).”

6.	The following is hereby added as Section 2.1(h) to the Cash Management Agreement:

		“(h) A subaccount of the Cash Management Account into which Borrower shall deposit, or cause to be deposited, the amounts required for the payment of the monthly budgeted operating expenses for such month, as set forth in a budget approved by Administrative Agent in accordance with Section 8.4 of the Loan Agreement (the “Property Expenses Account”).”


7.	The following is hereby added as Section 2.1(i) to the Cash Management Agreement:

			“(i) A subaccount of the Cash Management Account into which Borrower shall deposit, or cause to be deposited, the amounts required pursuant to Section 4.2 of the Loan Agreement (the “TI/LC Reserve Account”).”

8.	Section 3.3 of the Cash Management Agreement is hereby deleted in its entirety and replaced with the following:

		“Section 3.3 Disbursements from Cash Management Account prior to an Event of Default.

		(a) From and after April 1, 2011, pursuant to the Clearing Account Agreement, the Clearing Bank shall be required to withdraw all available funds on deposit in the Clearing Account on every Business Day and wire transfer such funds into the Cash Management Account. Provided that no Event of Default exists and subject to Section 3.3(b) below, on each Payment Date commencing on the Payment Date occurring in July, 2011, the Depository Bank shall disburse all funds in the Cash Management Account (in amounts designated by the Administrative Agent in writing as to clauses (i) through (iv) below), in the following amounts and order of priority:

		(i) First, funds sufficient to pay the real estate taxes and insurance premiums in accordance with Section 4.1 of the Loan Agreement on the applicable Payment Date, which amount shall be deposited in the Tax and Insurance Reserve Account;

		(ii) Second, funds sufficient to pay the aggregate amount of scheduled principal and/or interest payments under the Notes (collectively, the “Monthly Debt Service Payment Amount”) on the applicable Payment Date, which amount shall be deposited in the Debt Service Account;

		(iii) Third, funds sufficient to pay the monthly budgeted operating expenses (as set forth in a budget approved by Administrative Agent in accordance with Section 8.4 of the Loan Agreement) for the calendar month of the applicable Payment Date (the “Monthly Property Expenses Amount”), which amount shall be deposited in the Property Expenses Account; and

		(iv) Fourth, during a Low DSCR Trigger Period, all cash flow in excess of such amounts required to satisfy the deposits required under subsection (i) – (iii) above shall be deposited in the Low DSCR Account.

		(b) Provided no Low DSCR Trigger Period has occurred and is continuing, and provided no Event of Default has occurred and is continuing, all cash flow in excess of such amounts required to satisfy the deposits required under subsection (i) – (iii) above shall be paid to Borrower on the applicable Payment Date by deposit into an account designated in writing by Borrower from time to time (the “Borrower Account”) for use by Borrower to the extent not prohibited by the Loan Documents.”

9.	Section 3.4 of the Cash Management Agreement is hereby deleted in its entirety and replaced with the following:

		“Section 3.4 Disbursements from Cash Management Account during an Event of Default.

		While any Event of Default exists, the Depository Bank shall disburse the funds in the Cash Management Account to the Agent-Controlled Account or otherwise in accordance with the instructions of the Administrative Agent, and in such event, the Administrative Agent shall have no obligation to apply or direct the application of funds held in the Cash Management Account or Agent-


		Controlled Account to any other Account or expense, and shall have all of its rights and remedies with respect thereto set forth in Section 5.2.”

10.	Section 4.1 of the Cash Management Agreement is hereby deleted in its entirety and replaced with the following:

		“Section 4.1 Withdrawals from Tax and Insurance Reserve Account, Debt Service Account, Property Expenses Account and Low DSCR Account. So long as no Event of Default has occurred and is continuing, the Depository Bank shall withdraw all funds on deposit in the Cash Management Account and in the subaccounts thereof and disburse such funds at the written request of the Administrative Agent as follows:

		(a) Disbursement from Tax and Insurance Reserve Account. The Depository Bank shall disburse funds on deposit in the Tax and Insurance Reserve Account pursuant to the written instructions of Administrative Agent necessary to pay real estate taxes and insurance premiums in accordance with Section 4.1 of the Loan Agreement.

		(b) Disbursement from Debt Service Account. On each Payment Date, Depository Bank shall disburse funds on deposit in the Debt Service Account to Administrative Agent for the payment of the Monthly Debt Service Payment Amount.

		(c) Disbursement from Property Expenses Account. On each Payment Date, the Depository Bank shall disburse funds on deposit in the Property Expense Account to Borrower for payment of the Monthly Property Expenses Amount.

		(d) Disbursement from Low DSCR Account. On each Payment Date, the Depository Bank shall disburse funds (if any) on deposit in the Low DSCR Account to Administrative Agent for the payment of principal under the Loans.”

11.	Section 4.2 of the Cash Management Agreement is hereby deleted in its entirety and replaced with the following:

		“Section 4.2 Requests for Withdrawals from Certain Reserve Accounts. The Depository Bank shall disburse funds on deposit in the Additional Cash Collateral Account, the Casualty/Taking Account and the TI/LC Reserve Account in accordance with the written request of the Administrative Agent in accordance with the Loan Agreement, and shall not make any withdrawals from the foregoing accounts other than in compliance with the instructions set forth in such written request.”

12.	Borrower and Administrative Agent hereby acknowledge and agree that a Low DSCR Trigger Period (as defined in the Loan Agreement) occurred as of March 31, 2011 and is continuing under the Loan Agreement.

13.	Except as specifically amended hereby, the Cash Management Agreement shall remain in full force and effect and the Borrower, the Manager and the Depository Bank hereby reaffirm all covenants contained therein as of the date hereof. The Cash Management Agreement, as modified hereby, and as provided in said Cash Management Agreement is upon the condition that all covenants and agreements of the Borrower, the Manager and the Depository Bank contained therein and herein shall be kept and fully performed for any breach of which condition the holder hereof shall have all the rights and remedies set forth in the Cash Management Agreement.


14.	This First Amendment and any amendment hereof may be executed in several counterparts and by each party on a separate counterpart, each of which when so executed and delivered shall be an original, and all of which together shall constitute one instrument.

[Remainder of page intentionally left blank]

IN WITNESS WHEREOF, the parties hereto have duly executed this First Amendment as of the day and year first above written.


BORROWER:	ACADIA EAST FORDHAM ACQUISITIONS, LLC, a Delaware limited liability company

	By:	/s/ Robert Masters

		Name: Robert Masters
		Title: Senior Vice President – Secretary


	FORDHAM PLACE OFFICE LLC,
	a Delaware limited liability company

	By:	/s/ Robert Masters

	Name: Robert Masters
	Title: Senior Vice President – Secretary


MANAGER:	ACADIA URBAN MANAGEMENT SERVICES LLC, a Delaware limited liability company

	By:	/s/ Robert Masters

	Name: Robert Masters
	Title: Senior Vice President

[Signature Page to First Amendment to Cash Management and Security Agreement]


ADMINISTRATIVE AGENT:	EUROHYPO AG, NEW YORK BRANCH, as Administrative Agent

	By:	/s/ Lisa Komm

		Name: Lisa Komm
		Title: Vice President

	By:	/s/ John Hayes

		Name: John Hayes
		Title: Director

[Signature Page to First Amendment to Cash Management and Security Agreement]


DEPOSITORY BANK:	WELLS FARGO BANK, N.A., a national banking association

	By:	/s/ Perry J. Monroe

		Name: Perry J. Monroe
		Title: Assistant Vice President

[Signature Page to First Amendment to Cash Management and Security Agreement]

Exhibit 10.50

(BANK OF AMERICA LOGO)

TERM LOAN AGREEMENT
by and between

RD SMITHTOWN LLC,
a New York limited liability company,

as Borrower,

and

BANK OF AMERICA, N.A.,
a national banking association,

as Lender,

with respect to

Village Commons Shopping Center
Smithtown, New York

TABLE OF CONTENTS


			Page


ARTICLE I		GENERAL INFORMATION	1
	Section 1.1.	Conditions to Closing	1
	Section 1.2.	Schedules	1
	Section 1.3.	Defined Terms	2

ARTICLE II		TERMS OF THE LOAN	2
	Section 2.1.	The Loan	2
	Section 2.2.	Advance	2
	Section 2.3.	Liability of Lender	2

ARTICLE III		REPRESENTATIONS AND WARRANTIES	3
	Section 3.1.	Organization, Power and Authority of Borrower; Loan Documents	3
	Section 3.2.	Other Documents; Laws	3
	Section 3.3.	Taxes	3
	Section 3.4.	Legal Actions	3
	Section 3.5.	Nature of Loan	4
	Section 3.6.	Trade Names	4
	Section 3.7.	Financial Statements	4
	Section 3.8.	No Material Adverse Change	4
	Section 3.9.	ERISA and Prohibited Transactions	4
	Section 3.10.	Compliance with Laws and Zoning and Other Requirements; Encroachments	5
	Section 3.11.	Certificates of Occupancy	5
	Section 3.12.	Utilities; Roads; Access	5
	Section 3.13.	Other Liens	5
	Section 3.14.	No Defaults	5
	Section 3.15.	Patriot Act	5

ARTICLE IV		AFFIRMATIVE COVENANTS AND AGREEMENTS	6
	Section 4.1.	Compliance with Laws; Use of Proceeds	6
	Section 4.2.	Inspections; Cooperation	6
	Section 4.3.	Payment and Performance of Contractual Obligations	7
	Section 4.4.	Insurance	7
	Section 4.5.	Adjustment of Condemnation and Insurance Claims	9
	Section 4.6.	Utilization of Net Proceeds	9
	Section 4.7.	Management	10
	Section 4.8.	Books and Records; Financial Statements; Tax Returns	10
	Section 4.9.	Estoppel Certificates	12
	Section 4.10.	Taxes; Tax Receipts	12


	Section 4.11.	Lender’s Rights to Pay and Perform	12
	Section 4.12.	Reimbursement; Interest	12
	Section 4.13.	Notification by Borrower	13
	Section 4.14.	Indemnification by Borrower	13
	Section 4.15.	Fees and Expenses	13
	Section 4.16.	Appraisals	14
	Section 4.17.	Leasing and Tenant Matters	14
	Section 4.18.	Preservation of Rights	14
	Section 4.19.	Income from Property	14
	Section 4.20.	Representations and Warranties	15
	Section 4.21.	Deposit Accounts; Principal Depository	15
	Section 4.22.	Loan to Value Ratio	15
	Section 4.23.	Debt Service Coverage Ratio	16
	Section 4.24.	Patriot Act	16
	Section 4.25.	Swap Contracts	16

ARTICLE V		NEGATIVE COVENANTS	16
	Section 5.1.	Conditional Sales	16
	Section 5.2.	Insurance Policies and Bonds	16
	Section 5.3.	Intentionally Omitted	17
	Section 5.4.	Additional Debt	17

ARTICLE VI		EVENTS OF DEFAULT	17
	Section 6.1.	Payment Default	17
	Section 6.2.	Default Under Other Loan Documents	17
	Section 6.3.	Accuracy of Information; Representations and Warranties	17
	Section 6.4.	Deposits	18
	Section 6.5.	Insurance Obligations	18
	Section 6.6.	Other Obligations	18
	Section 6.7.	Damage to Improvements	18
	Section 6.8.	Lapse of Permits or Approvals	18
	Section 6.9.	Mechanic’s Lien	18
	Section 6.10.	Bankruptcy	18
	Section 6.11.	Appointment of Receiver, Trustee, Liquidator	19
	Section 6.12.	Inability to Pay Debts	19
	Section 6.13.	Judgment	19
	Section 6.14.	Dissolution; Change in Business Status	19
	Section 6.15.	Default Under Other Indebtedness	19
	Section 6.16.	Change in Controlling Interest	19

ARTICLE VII		REMEDIES ON DEFAULT	20
	Section 7.1.	Remedies on Default	20
	Section 7.2.	No Release or Waiver; Remedies Cumulative and Concurrent	21

iii


ARTICLE VIII		MISCELLANEOUS	22
	Section 8.1.	Further Assurances; Authorization to File Documents	22
	Section 8.2.	No Warranty by Lender	22
	Section 8.3.	Standard of Conduct of Lender	22
	Section 8.4.	No Partnership	22
	Section 8.5.	Severability	23
	Section 8.6.	Notices	23
	Section 8.7.	Permitted Successors and Assigns; Disclosure of Information	24
	Section 8.8.	Modification; Waiver	24
	Section 8.9.	Third Parties; Benefit	25
	Section 8.10.	Rules of Construction	25
	Section 8.11.	Counterparts	25
	Section 8.12.	Intentionally Omitted	25
	Section 8.13.	Governing Law	25
	Section 8.14.	Time of Essence	25
	Section 8.15.	Electronic Transmission of Data	26
	Section 8.16.	Forum	26
	Section 8.17.	WAIVER OF JURY TRIAL	26
	Section 8.18.	USA Patriot Act Notice	27
	Section 8.19.	Entire Agreement	27
	Section 8.20.	Usury	27
	Section 8.21.	Special State Provisions	28
	Section 8.22.	Cross-Default-Cross Collateralization	28


Schedules to Building Loan Agreement

Schedule 1	Definitions
Schedule 2	Existing Mortgages
Schedule 3	Leasing and Tenant Matters
Schedule 4	Swap Contracts

TERM LOAN AGREEMENT

THIS TERM LOAN AGREEMENT (this “Agreement”) is made as of the 30th day of June, 2011, by and between RD SMITHTOWN LLC, a New York limited liability company (“Borrower”), and Bank of America, N.A., a national banking association (“Lender”).

Recitals

Fleet Bank, National Association (“Fleet”) made certain loans (collectively, the “Existing Loan”) to Borrower secured by the mortgages described on Schedule 2 attached hereto (the “Existing Mortgages”) and Lender, as successor by merger to Fleet is the holder of the Existing Loans, the Existing Mortgages and the notes secured thereby (the “Existing Notes”).

Borrower has applied to Lender (i) to extend, amend and restate the Existing Loan, Existing Notes and Existing Mortgages and (ii) for a new loan in the amount of $139,203.73 (the “New Loan”) for the purpose of pursuing Borrower’s business at the property that will serve as security for the loan and for working capital. Lender has agreed to (i) extend, amend and restate the Existing Loan, Existing Notes and Existing Mortgages and (ii) make the New Loan on the terms and conditions set forth in this Agreement and in the other documents evidencing and securing the loan.

NOW, THEREFORE, in consideration of the premises, and in further consideration of the mutual covenants and agreements herein set forth and of the sum of Ten Dollars ($10.00) paid by each party to the other, receipt of which is hereby acknowledged, the parties covenant and agree as follows:

Agreements

ARTICLE I
GENERAL INFORMATION

Section 1.1. Conditions to Closing.

The conditions precedent to closing the Loan and recording the Mortgage are set forth in the Closing Checklist.

Section 1.2. Schedules.

The Schedules attached to this Agreement are incorporated herein and made a part hereof.

Section 1.3. Defined Terms.

Capitalized terms in this Agreement shall have the meanings ascribed to such terms in the Preamble hereto and in Schedule 1.

ARTICLE II
TERMS OF THE LOAN

Section 2.1. The Loan.

Borrower agrees (i) that it has borrowed the Existing Loan from Lender and (ii) to borrow the New Loan from Lender, and Lender agrees to modify the Existing Loan and to lend the New Loan (collectively, the “Loan”) to Borrower, subject to the terms and conditions herein set forth, in an amount not to exceed the Loan Amount. Interest shall accrue and be payable in arrears only on sums advanced hereunder for the period of time outstanding. The Loan is not a revolving loan; amounts repaid may not be re-borrowed.

Section 2.2. Advance.

Borrower acknowledges that the Existing Loan has previously been funded to Borrower and that the outstanding principal amount of each of the Existing Notes and Existing Mortgages is set forth on Schedule 2 attached hereto. At closing, Lender shall advance the entire New Loan proceeds in the amounts, and to the parties, specified in the closing statement agreed upon between Borrower and Lender.

At closing, Lender shall advance New Loan proceeds in the amount of $139,203.73 as follows:

(a) First, to Lender, the sum of $122,160.00 which represents disbursements for the following items:


Appraisal Fee	$	5,160
Commitment Fee		117,000

TOTAL	$	122,160

(b) Second, the balance as directed by Borrower in a separate written request.

Section 2.3. Liability of Lender.

Lender shall in no event be responsible or liable to any Person other than Borrower for the disbursement of or failure to disburse the Loan proceeds or any part thereof and no Person other than Borrower shall have any right or claim against Lender under this Agreement or the other Loan Documents.

ARTICLE III
REPRESENTATIONS AND WARRANTIES

Borrower makes the following representations and warranties to Lender as of the date hereof and as of the date of each advance hereunder:

Section 3.1. Organization, Power and Authority of Borrower; Loan Documents.

Borrower (a) is a limited liability company duly organized, existing and in good standing under the laws of the state in which it is organized and is duly qualified to do business and in good standing in the state in which the Land is located (if different from the state of its formation) and in any other state where the nature of Borrower’s business or property requires it to be qualified to do business, and (b) has the power, authority and legal right to own its property and carry on the business now being conducted by it and to engage in the transactions contemplated by the Loan Documents. The Loan Documents to which Borrower is a party have been duly executed and delivered by Borrower, and the execution and delivery of, and the carrying out of the transactions contemplated by, such Loan Documents, and the performance and observance of the terms and conditions thereof, have been duly authorized by all necessary organizational action by and on behalf of Borrower. The Loan Documents to which Borrower is a party constitute the valid and legally binding obligations of Borrower and are fully enforceable against Borrower in accordance with their respective terms, except to the extent that such enforceability may be limited by laws generally affecting the enforcement of creditors’ rights.

Section 3.2. Other Documents; Laws.

The execution and performance of the Loan Documents to which Borrower is a party and the consummation of the transactions contemplated thereby will not conflict with, result in any breach of, or constitute a default under, the organizational documents of Borrower, or any contract, agreement, document or other instrument to which Borrower is a party or by which Borrower or any of its properties may be bound or affected, and such actions do not and will not violate or contravene any Law to which Borrower is subject.

Section 3.3. Taxes.

Borrower has filed all federal, state, county and municipal Tax returns required to have been filed by Borrower and has paid all Taxes which have become due pursuant to such returns or pursuant to any Tax assessments received by Borrower.

Section 3.4. Legal Actions.

There are no Claims or investigations by or before any court or Governmental Authority, pending, or to the best of Borrower’s knowledge and belief, threatened against or affecting Borrower, Borrower’s business or the Property. Borrower is not in default with respect to any order, writ, injunction, decree or demand of any court or any Governmental Authority affecting Borrower or the Property.

Section 3.5. Nature of Loan.

Borrower is a business or commercial organization. The Loan is being obtained solely for business or investment purposes, and will not be used for personal, family, household or agricultural purposes.

Section 3.6. Trade Names.

Borrower conducts its business solely under the name set forth in the Preamble to this Agreement and makes use of no trade names in connection therewith, unless such trade names have been previously disclosed to Lender in writing.

Section 3.7. Financial Statements.

The financial statements heretofore delivered by Borrower and each Guarantor to Lender are true and correct in all respects, have been prepared in accordance with sound accounting principles consistently applied, and fairly present the respective financial conditions of the subjects thereof as of the respective dates thereof.

Section 3.8. No Material Adverse Change.

No material adverse change has occurred in the financial conditions reflected in the financial statements of Borrower or any Guarantor since the respective dates of such statements, and no material additional liabilities have been incurred by Borrower since the dates of such statements other than the borrowings contemplated herein or as approved in writing by Lender.

Section 3.9. ERISA and Prohibited Transactions.

As of the date hereof and throughout the term of the Loan: (a) Borrower is not and will not be (i) an “employee benefit plan,” as defined in Section 3(3) of ERISA, (ii) a “governmental plan” within the meaning of Section 3(32) of ERISA, or (iii) a “plan” within the meaning of Section 4975(e) of the Code; (b) the assets of Borrower do not and will not constitute “plan assets” within the meaning of the United States Department of Labor Regulations set forth in Section 2510.3-101 of Title 29 of the Code of Federal Regulations; (c) transactions by or with Borrower are not and will not be subject to state statutes applicable to Borrower regulating investments of fiduciaries with respect to governmental plans; and (d) Borrower will not engage in any transaction that would cause any Obligation or any action taken or to be taken hereunder (or the exercise by Lender of any of its rights under the Mortgage or any of the other Loan Documents) to be a non-exempt (under a statutory or administrative class exemption) prohibited transaction under ERISA or Section 4975 of the Code. Borrower agrees to deliver to Lender such certifications or other evidence of compliance with the provisions of this Section as Lender may from time to time request.

Section 3.10. Compliance with Laws and Zoning and Other Requirements; Encroachments.

Borrower is in compliance with the requirements of all applicable Laws. The use of the Property complies with applicable zoning ordinances, regulations and restrictive covenants affecting the Land. All use and other requirements of any Governmental Authority having jurisdiction over the Property have been satisfied. No violation of any Law exists with respect to the Property. The Improvements are constructed entirely on the Land and do not encroach upon any easement or right-of-way, or upon the land of others. The Improvements comply with all applicable building restriction lines and set-backs, however established, and are in strict

compliance with all applicable use or other restrictions and the provisions of all applicable agreements, declarations and covenants and all applicable zoning and subdivision ordinances and regulations.

Section 3.11. Certificates of Occupancy.

All certificates of occupancy and other permits and licenses necessary or required in connection with the use and occupancy of the Improvements have been validly issued.

Section 3.12. Utilities; Roads; Access.

All utility services necessary for the operation of the Improvements for their intended purposes have been fully installed, including telephone service, cable television, water supply, storm and sanitary sewer facilities, natural gas and electric facilities, including cabling for telephonic and data communication, and the capacity to send and receive wireless communication. All roads and other accesses necessary to serve the Land and Improvements have been completed, are serviceable in all weather, and where required by the appropriate Governmental Authority, have been dedicated to and formally accepted by such Governmental Authority.

Section 3.13. Other Liens.

Except for contracts for labor, materials and services furnished or to be furnished in connection with any construction at the Property, including any construction of tenant improvements, Borrower has made no contract or arrangement of any kind the performance of which by the other party thereto would give rise to a lien on the Property.

Section 3.14. No Defaults.

There is no Default or Event of Default under any of the Loan Documents, and there is no default or event of default under any material contract, agreement or other document related to the construction or operation of the Improvements.

Section 3.15. Patriot Act.

Borrower is not now, nor has ever been (i) listed on any Government Lists (as hereinafter defined), (ii) a Person who has been determined by competent authority to be subject to the prohibitions contained in Presidential Executive Order No. 13224 (September 23, 2001) or any other similar prohibitions contained in the rules and regulations of OFAC (as hereinafter defined) or in any enabling legislation or other Presidential Executive Orders in respect thereof, (iii) indicted for or convicted of any felony involving a crime or crimes of moral turpitude or for any Patriot Act Offense, or (iv) under investigation by any Governmental Authorities for alleged criminal activity. For purposes hereof, the term “Patriot Act Offense” means any violation of the criminal laws of the United States of America or of any of the several states, or that would be a criminal violation if committed within the jurisdiction of the United States of America or any of the several states, relating to terrorism or the laundering of monetary instruments, including any offense under (A) the criminal laws against terrorism; (B) the criminal laws against money laundering, (C) the Bank Secrecy Act, as amended, (D) the Money Laundering Control Act o

1986, as amended, or (E) the Patriot Act. “Patriot Act Offense” also includes the crimes of conspiracy to commit, or aiding and abetting another to commit, a Patriot Act Offense. For purposes hereof, the term “Government Lists” means (1) the specially designated nationals and blocked persons lists maintained by the Office of Foreign Assets Control (“OFAC”), (2) any other list of terrorists, terrorist organizations or narcotics traffickers maintained pursuant to any of the rules and regulations of OFAC that Lender notified Borrower in writing is now included in “Government Lists”, or (3) any similar lists maintained by the United States Department of State, the United States Department of Commerce or any other Government Authorities or pursuant to any executive order of the President of the United States of America that Lender notified Borrower in writing is now included in “Government Lists”.

ARTICLE IV
AFFIRMATIVE COVENANTS AND AGREEMENTS

Borrower covenants as of the date hereof and until such time as all Obligations shall be paid and performed in full, that:

Section 4.1. Compliance with Laws; Use of Proceeds.

Borrower shall comply with all Laws and all orders, writs, injunctions, decrees and demands of any court or any Governmental Authority affecting Borrower or the Property. Borrower shall use all proceeds of the Loan for business purposes which are not in contravention of any Law or any Loan Document.

Section 4.2. Inspections; Cooperation.

Borrower shall permit representatives of Lender to enter upon the Land, to inspect the Improvements and any and all materials to be used in connection with any construction at the Property, including any construction of tenant improvements, to examine all detailed plans and shop drawings and similar materials as well as all records and books of account maintained by or on behalf of Borrower relating thereto and to discuss the affairs, finances and accounts pertaining to the Loan and the Improvements with representatives of Borrower. Borrower shall at all times cooperate and cause each and every one of its contractors, subcontractors and material suppliers to cooperate with the representatives of Lender in connection with or in aid of the performance of Lender’s functions under this Agreement. Except in the event of an emergency, Lender shall give Borrower at least twenty-four hours’ notice by telephone in each instance before entering upon the Land and/or exercising any other rights granted in this Section.

Section 4.3. Payment and Performance of Contractual Obligations.

Borrower shall perform in a timely manner all of its obligations under any and all contracts and agreements related to any construction activities at the Property or the maintenance or operation of the Improvements, and Borrower will pay when due all bills for services or labor performed and materials supplied in connection with such construction, maintenance and/or operation. Within thirty (30) days after the filing of any mechanic’s lien or other lien or encumbrance against the Property, Borrower will promptly discharge the same by payment or

filing a bond or otherwise as permitted by Law. So long as Lender’s security has been protected by the filing of a bond or otherwise in a manner satisfactory to Lender in its sole and absolute discretion, Borrower shall have the right to contest in good faith any claim, lien or encumbrance, provided that Borrower does so diligently and without prejudice to Lender or delay in completing construction of any tenant improvements.

Section 4.4. Insurance.

Borrower shall maintain the following insurance at its sole cost and expense:

(a) Insurance against Casualty to the Property under a policy or policies covering such risks as are presently included in “special form” (also known as “all risk”) coverage, including such risks as are ordinarily insured against by similar businesses, but in any event including fire, lightning, windstorm, hail, explosion, riot, riot attending a strike, civil commotion, damage from aircraft, smoke, vandalism, malicious mischief and acts of terrorism. Such insurance shall name Lender as mortgagee and loss payee. Unless otherwise agreed in writing by Lender, such insurance shall be for the full insurable value of the Property on a replacement cost basis, with a deductible amount, if any, satisfactory to Lender. No policy of insurance shall be written such that the proceeds thereof will produce less than the minimum coverage required by this Section by reason of co-insurance provisions or otherwise. The term “full insurable value” means one hundred percent (100%) of the actual replacement cost of the Property, including tenant improvements (excluding foundation and excavation costs and costs of underground flues, pipes, drains and other uninsurable items).

(b) Comprehensive (also known as commercial) general liability insurance on an “occurrence” basis against claims for “personal injury” liability and liability for death, bodily injury and damage to property, products and completed operations, in limits satisfactory to Lender with respect to any one occurrence and the aggregate of all occurrences during any given annual policy period. Such insurance shall name Lender as an additional insured.

(c) Workers’ compensation insurance for all employees of Borrower in such amount as is required by Law and including employer’s liability insurance, if required by Lender.

(d) During any period of construction of tenant improvements, Borrower shall maintain, or cause others to maintain, such insurance as may be required by Lender of the type customarily carried in the case of similar construction for one hundred percent (100%) of the full replacement cost of materials stored at or upon the Property. During any period of other construction upon the Property, Borrower shall maintain, or cause others to maintain, builder’s risk insurance (non-reporting form) of the type customarily carried in the case of similar construction for one hundred percent (100%) of the full replacement cost of work in place and materials stored at or upon the Property.

(e) If at any time any portion of any structure on the Property is insurable against Casualty by flood and is located in a Special Flood Hazard Area under the Flood Disaster Protection Act of 1973, as amended, a flood insurance policy on the structure and Borrower owned contents in form and amount acceptable to Lender but in no amount less than the amount

sufficient to meet the requirements of applicable Law as such requirements may from time to time be in effect.

(f) Loss of rental value insurance or business interruption insurance in an amount equal to twelve (12) months of the projected gross income of the Property and an extended period of indemnity endorsement providing an additional six (6) months’ (180 days) loss of rental value or business interruption insurance after the Property has been restored or until the projected gross income returns to the level that existed prior to the loss, whichever is first to occur.

(g) Such other and further insurance as may be required from time to time by Lender in order to comply with regular requirements and practices of Lender in similar transactions including, if required by Lender, boiler and machinery insurance, pollution liability insurance, wind insurance and earthquake insurance, so long as any such insurance is generally available at commercially reasonable premiums as determined by Lender from time to time.

Each policy of insurance (i) shall be issued by one or more insurance companies each of which must have an A.M. Best Company financial and performance rating of A-VII or better and are qualified or authorized by the Laws of the State to assume the risks covered by such policy, (ii) with respect to the insurance described under the preceding Subsections (a), (d), (e) and (f), shall have attached thereto standard non-contributing, non-reporting mortgagee clauses in favor of and entitling Lender without contribution to collect any and all proceeds payable under such insurance, either as sole payee or as joint payee with Borrower, (iii) shall provide that such policy shall not be canceled or modified for nonpayment of premiums without at least thirty (30) days’ prior written notice to Lender, or for any other reason without at least thirty (30) days’ prior written notice to Lender, and (iv) shall provide that any loss otherwise payable thereunder shall be payable notwithstanding any act or negligence of Borrower which might, absent such agreement, result in a forfeiture of all or a part of such insurance payment. Borrower shall promptly pay all premiums when due on such insurance and, not less than ten (10) days prior to the expiration dates of each such policy, Borrower will deliver to Lender acceptable evidence of insurance, such as a renewal policy or policies marked “premium paid” or other evidence satisfactory to Lender reflecting that all required insurance is current and in force. Borrower will immediately give Notice to Lender of any cancellation of, or change in, any insurance policy. Lender shall not, because of accepting, rejecting, approving or obtaining insurance, incur any liability for (A) the existence, nonexistence, form or legal sufficiency thereof, (B) the solvency of any insurer, or (C) the payment of losses. Borrower may satisfy any insurance requirement hereunder by providing one or more “blanket” insurance policies, subject to Lender’s approval in each instance as to limits, coverages, forms, deductibles, inception and expiration dates, and cancellation provisions.

Section 4.5. Adjustment of Condemnation and Insurance Claims.

Borrower shall give prompt Notice to Lender of any Casualty or any Condemnation or threatened Condemnation. Lender is authorized, at its sole and absolute option, to commence, appear in and prosecute, in its own or Borrower’s name, any action or proceeding relating to any Condemnation or Casualty, and to make proof of loss for and to settle or compromise any Claim in connection therewith. In such case, Lender shall have the right to

receive all Condemnation Awards and Insurance Proceeds, and may deduct therefrom all of its Expenses. However, so long as no Event of Default has occurred and Borrower is diligently pursuing its rights and remedies with respect to a Claim, Lender will obtain Borrower’s written consent (which consent shall not be unreasonably withheld or delayed) before making proof of loss for or settling or compromising such Claim. Borrower agrees to diligently assert its rights and remedies with respect to each Claim and to promptly pursue the settlement and compromise of each Claim subject to Lender’s approval, which approval shall not be unreasonably withheld or delayed. If, prior to the receipt by Lender of any Condemnation Award or Insurance Proceeds, the Property shall have been sold pursuant to the provisions of the Mortgage, Lender shall have the right to receive such funds (a) to the extent of any deficiency found to be due upon such sale with interest thereon (whether or not a deficiency judgment on the Mortgage shall have been sought or recovered or denied), and (b) to the extent necessary to reimburse Lender for its Expenses. If any Condemnation Awards or Insurance Proceeds are paid to Borrower, Borrower shall receive the same in trust for Lender. Within ten (10) days after Borrower’s receipt of any Condemnation Awards or Insurance Proceeds, Borrower shall deliver such awards or proceeds to Lender in the form in which they were received, together with any endorsements or documents that may be necessary to effectively negotiate or transfer the same to Lender. Borrower agrees to execute and deliver from time to time, upon the request of Lender, such further instruments or documents as may be requested by Lender to confirm the grant and assignment to Lender of any Condemnation Awards or Insurance Proceeds.

Section 4.6. Utilization of Net Proceeds.

(a) Net Proceeds must be utilized either for payment of the Obligations or for the restoration of the Property. Net Proceeds may be utilized for the restoration of the Property only if no Default shall exist and only if in the reasonable judgment of Lender (i) there has been no material adverse change in the financial viability of the Improvements, (ii) the Net Proceeds, together with other funds deposited with Lender for that purpose, are sufficient to pay the cost of the restoration pursuant to a budget and plans and specifications approved by Lender, and (iii) the restoration can be completed prior to the final maturity of the Loan and prior to the date required by any permanent loan commitment or any purchase and sale agreement or by any Lease. Otherwise, Net Proceeds shall be utilized for payment of the Obligations.

(b) If Net Proceeds are to be utilized for the restoration of the Property, the Net Proceeds, together with any other funds deposited with Lender for that purpose, must be deposited in a Borrower’s Deposit Account, which shall be an interest-bearing account, with all accrued interest to become part of Borrower’s deposit. Borrower agrees that it shall include all interest and earnings on any such deposit as its income (and, if Borrower is a partnership or other pass-through entity, the income of its partners, members or beneficiaries, as the case may be), and shall be the owner of all funds on deposit in the Borrower’s Deposit Account for federal and applicable state and local tax purposes. Lender shall have the exclusive right to manage and control all funds in the Borrower’s Deposit Account, but Lender shall have no fiduciary duty with respect to such funds. Lender will advance the deposited funds from time to time to Borrower for the payment of costs of restoration of the Property upon presentation of evidence acceptable to Lender that such restoration has been completed satisfactorily and lien-free and in compliance with law. Any account fees and charges may be deducted from the balance, if any, in the Borrower’s Deposit Account. Borrower grants to Lender a security interest in the

Borrower’s Deposit Account and all funds hereafter deposited to such deposit account, and any proceeds thereof, as security for the Obligations. Such security interest shall be governed by the Uniform Commercial Code of the State, and Lender shall have available to it all of the rights and remedies available to a secured party thereunder. The Borrower’s Deposit Account may be established and held in such name or names as Lender shall deem appropriate, including in the name of Lender. Borrower hereby constitutes and appoints Lender and any officer or agent of Lender its true and lawful attorneys-in-fact with full power of substitution to open the Borrower’s Deposit Account and to do any and every act that Borrower might do on its own behalf to fulfill the terms of this Section 4.6. To the extent permitted by Law, Borrower hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. It is understood and agreed that this power of attorney, which shall be deemed to be a power coupled with an interest, cannot be revoked.

Section 4.7. Management.

Borrower at all times shall provide for the competent and responsible management and operation of the Property. At all times, Borrower shall cause the Property to be managed by an Approved Manager. All management contracts affecting the Property shall be terminable upon thirty (30) days’ written notice without penalty or charge (except for unpaid accrued management fees). All management contracts must be approved in writing by Lender prior to the execution of the same and must contain a provision expressly stating that it is subordinate to the Mortgage.

Section 4.8. Books and Records; Financial Statements; Tax Returns.

(a) Borrower will keep and maintain full and accurate books and records administered in accordance with sound accounting principles, consistently applied, showing in detail the earnings and expenses of the Property and the operation thereof. Borrower will keep and maintain its books and records, including recorded data of any kind and regardless of the medium of recording, at the address of Borrower set forth in Section 8.6. Borrower shall permit Lender, or any Person authorized by Lender, to inspect and examine such books and records (regardless of where maintained) and all supporting vouchers and data and to make copies and extracts therefrom at all reasonable times and as often as may be requested by Lender.

(b) Borrower shall provide or cause to be provided to Lender with a copy for each Lender all of the following:


	(i) Financial Statements of Borrower: (A) for each fiscal year of such reporting party, as soon as reasonably practicable and in any event within one hundred twenty (120) days after the close of each fiscal year; and (B) for each fiscal quarter of such reporting party, as soon as reasonably practicable and in any event within sixty (60) days after the close of each fiscal quarter.

	(ii) Financial Statements related to Guarantor: (A) for each fiscal year of such Guarantor, as soon as reasonably practicable and in any event within one hundred twenty (120) days after the close of each fiscal year, and for Acadia Realty Trust, as soon as reasonably practicable and in any event within one hundred twenty (120) days after the


	close of each such reporting period; or (B) semi-annually, as soon as reasonably practicable and in any event within sixty (60) days after the close of each fiscal half year, and for Acadia Realty Trust, as soon as reasonably practicable and in any event within sixty (60) days after the close of each such reporting period; upon proper filing of the applicable annual form 10K and quarterly form 10Q by Guarantor with the Securities and Exchange Commission, such statements shall be deemed delivered to Lender hereunder.

	(iii) (A) Prior to the beginning of each fiscal year of Borrower, a capital and operating budget for the Property and (B) for each calendar quarter (and for the fiscal year through the end of that month) (1) a statement of all income and expenses in connection with the Property and (2) a current leasing status report (including tenants’ names, occupied tenant space, lease terms, rents, vacant space and proposed rents), including in each case a comparison to the budget, as soon as reasonably practicable but in any event within forty-five (45) days after the end of each such quarter, certified in writing as true and correct by a representative of Borrower satisfactory to Lender. Items provided under this paragraph shall be in form and detail satisfactory to Lender.

	(iv) At the time of submitting, and together with, Borrower’s quarterly financial statements, Borrower shall submit a certificate representing and warranting (i) that no Default or Event of Default exists, or specifying any and all Defaults or Event Defaults which do exist at the time and (ii), commencing with the delivery of financial statements for the period in which the Debt Service Coverage Ratio Covenant in Section 4.23 applies, whether or not the financial covenants set forth in Sections 4.22 and 4.23 are in compliance, including a reasonably detailed calculation of such compliance or non-compliance. At the time of submitting (or prior to the date due, in the case of deemed submission by virtue of filings with the Securities and Exchange Commission as set forth above), and together with, Guarantor’s quarterly financial statements, Guarantor shall submit a detailed certificate of the compliance of the financial covenants set forth in the Guaranty.

	(v) From time to time promptly after Lender’s request, such additional information, reports and statements respecting the Property and the Improvements, or the business operations and financial condition of each reporting party, as Lender may reasonably request.

All Financial Statements shall be in form and detail satisfactory to Lender and shall contain or be attached to the signed and dated written certification of the reporting party in form specified by Lender to certify that the Financial Statements are furnished to Lender in connection with the extension of credit by Lenders and constitute a true and correct statement of the reporting party’s financial position. All certifications and signatures on behalf of corporations, partnerships or other entities shall be by a representative of the reporting party satisfactory to Lender. All Financial Statements for a reporting party who is an individual shall be on Lender’s then-current personal financial statement form or in another form satisfactory to Lender. All fiscal year-end Financial Statements of Acadia Realty Trust shall be audited and certified, without any qualification or exception not acceptable to Lender, by independent certified public accountants acceptable to Lender, and shall contain all reports and disclosures required by generally accepted accounting principles for a fair presentation. The annual Financial Statements of Borrower may

be internally prepared. All quarterly and semi-annual Financial Statements shall be compiled or reviewed by independent certified public accountants acceptable to Lender, or may be prepared by the reporting party.

Section 4.9. Estoppel Certificates.

Within ten (10) days after any request by Lender or a proposed assignee or purchaser of the Loan or any interest therein, Borrower shall certify in writing to Lender, or to such proposed assignee or purchaser, the then unpaid balance of the Loan and whether Borrower claims any right of defense or setoff to the payment or performance of any of the Obligations, and if Borrower claims any such right of defense or setoff, Borrower shall give a detailed written description of such claimed right, whether or not the Borrower is in default under the Loan Documents, and such other matters as Lender may reasonably require.

Section 4.10. Taxes; Tax Receipts.

Borrower shall pay and discharge all Taxes prior to the date on which penalties are attached thereto unless and to the extent only that such Taxes are contested in accordance with the terms of the Mortgage. If Borrower fails, following demand, to provide Lender the tax receipts required under the Mortgage, without limiting any other remedies available to Lender, Lender may, at Borrower’s sole expense, obtain and enter into a tax services contract with respect to the Property with a tax reporting agency satisfactory to Lender.

Section 4.11. Lender’s Rights to Pay and Perform.

If, after any required notice, Borrower fails to promptly pay or perform any of the Obligations within any applicable grace or cure periods, Lender, without Notice to or demand upon Borrower, and without waiving or releasing any Obligation or Default, may (but shall be under no obligation to) at any time thereafter make such payment or perform such act for the account and at the expense of Borrower. Lender may enter upon the Property for that purpose and take all action thereon as Lender considers necessary or appropriate.

Section 4.12. Reimbursement; Interest.

If Lender shall incur any Expenses or pay any Claims by reason of the Loan or the rights and remedies provided under the Loan Documents (regardless of whether or not any of the Loan Documents expressly provide for an indemnification by Borrower against such Claims), Lender’s payment of such Expenses and Claims shall constitute advances to Borrower which shall be paid by Borrower to Lender on demand, together with interest thereon from the date incurred until paid in full at the rate of interest then applicable to the Loan under the terms of the Note. Each advance shall be secured by the Mortgage and the other Loan Documents as fully as if made to Borrower, regardless of the disposition thereof by the party or parties to whom such advance is made. Notwithstanding the foregoing, however, in any action or proceeding to foreclose the Mortgage or to recover or collect the Obligations, the provisions of Law governing the recovery of costs, disbursements and allowances shall prevail unaffected by this Section.

Section 4.13. Notification by Borrower.

Borrower will promptly give Notice to Lender of the occurrence of any Default or Event of Default hereunder or under any of the other Loan Documents. Borrower will also promptly give Notice to Lender of any claim of a default by Borrower, or any claim by Borrower of a default by any other party, under any property management contract or any Lease.

Section 4.14. Indemnification by Borrower.

Borrower agrees to indemnify Lender and to hold Lender harmless from and against, and to defend Lender by counsel approved by Lender against, any and all Claims directly or indirectly arising out of or resulting from any transaction, act, omission, event or circumstance in any way connected with the Property or the Loan, including any Claim arising out of or resulting from (a) any construction activity at the Property, including any defective workmanship or materials; (b) any failure by Borrower to comply with the requirements of any Laws or to comply with any agreement that applies or pertains to the Property, including any agreement with a broker or “finder” in connection with the Loan or other financing of the Property; (c) any failure by Borrower to observe and perform any of the obligations imposed upon the landlord under the Leases; (d) any other Default or Event of Default hereunder or under any of the other Loan Documents; or (e) any assertion or allegation that Lender is liable for any act or omission of Borrower or any other Person in connection with the ownership, financing, leasing, operation or sale of the Property; provided, however, that Borrower shall not be obligated to indemnify Lender with respect to any Claim arising solely from the gross negligence or willful misconduct of Lender. The agreements and indemnifications contained in this Section shall apply to Claims arising both before and after the repayment of the Loan and shall survive the repayment of the Loan, any foreclosure or deed, assignment or conveyance in lieu thereof and any other action by Lender to enforce the rights and remedies of Lender hereunder or under the other Loan Documents.

Section 4.15. Fees and Expenses.

Borrower shall pay all fees, charges, costs and expenses required to satisfy the conditions of the Loan Documents. Without limitation of the foregoing, (a) Borrower will pay, when due, and if paid by Lender will reimburse Lender on demand for, all fees and expenses of any construction consultant (if any), the title insurer, environmental engineers, appraisers, surveyors and Lender’s counsel in connection with the closing, administration, modification or any “workout” of the Loan, or the enforcement of Lender’s rights and remedies under any of the Loan Documents and (b) Borrower shall pay all filing, registration or recording fees, and all expenses incident to the execution, delivery, acknowledgment and recording or filing, as applicable, of the Mortgage, any mortgage supplemental thereto, any security instrument with respect to the Personalty, and any instrument of further assurance, and any Expenses (including reasonable attorney’s fees and disbursements) and all federal, state, county, and municipal stamp, mortgage or recording taxes and other taxes, duties, impositions, imposes, fees, costs, expenses, assessments and charges arising out of or in connection with the execution and delivery of the Note, the Mortgage or any mortgage supplemental thereto, any security instrument with respect to the Personalty or any instrument of further assurance.

Section 4.16. Appraisals.

Lender may obtain from time to time an appraisal of all or any part of the Property, prepared in accordance with written instructions from Lender, from a third-party appraiser satisfactory to, and engaged directly by, Lender. The cost of one such appraisal obtained by Lender in each calendar year and the cost of each such appraisal obtained by Lender following the occurrence of an Event of Default shall by borne by Borrower and shall be paid by Borrower on demand. Provided no Event of Default exists and Borrower has paid the cost of any such appraisal as aforesaid and Borrower executes and delivers Lender’s then standard form of agreement regarding Lender not being responsible for the contents of any such appraisal, Lender shall then provide a copy of such appraisal to Borrower upon request.

Section 4.17. Leasing and Tenant Matters.

Borrower shall comply with the terms and conditions of Schedule 3 in connection with the leasing of space within the Improvements. In addition, Borrower shall deposit with Lender on the date of Borrower’s receipt thereof any and all termination fees or other similar funds paid by tenant in connection with any tenant’s election to exercise an early termination option contained in its respective Lease or otherwise at the Property (the “Termination Fee Deposit”). Lender shall have the right, in its sole and absolute discretion, to either (a) make the Termination Fee Deposit available to reimburse Borrower for Tenant Improvements and Leasing Commissions paid with respect to reletting the vacated space at the Property which shall be disbursed in accordance with Lender’s customary practices, terms and conditions for construction lending or (b) apply the Termination Fee Deposit to repay a portion of the outstanding principal balance of the Loan in accordance with Section 4 of the Note.

Section 4.18. Preservation of Rights.

Borrower shall obtain, preserve and maintain in good standing, as applicable, all rights, privileges and franchises necessary or desirable for the operation of the Property and the conduct of Borrower’s business thereon or therefrom.

Section 4.19. Income from Property.

Borrower shall first apply all income derived from the Property, including all income from Leases, to pay costs and expenses associated with the ownership, maintenance, operation and leasing of the Property, including all amounts then required to be paid under the Loan Documents, before using or applying such income for any other purpose. No such income shall be distributed or paid to any member, partner, shareholder or, if Borrower is a trust, to any beneficiary or trustee, unless and until all such costs and expenses which are then due shall have been paid in full.

Section 4.20. Representations and Warranties.

Borrower shall take all actions and shall do all things necessary or desirable to cause all of Borrower’s representations and warranties in this Agreement to be true and correct at all times.

Section 4.21. Deposit Accounts; Principal Depository.

Borrower shall maintain with Lender all deposit accounts, if any, related to the Property (except accounts which are in the name of Guarantor), including all operating accounts, any reserve or escrow accounts, any accounts from which Borrower may from time to time authorize Lender or Swap Counterparty to debit payments due on the Loan and any Swap Contracts, and any lockbox, cash management or other account into which tenants are required from time to time to pay rent. Borrower hereby grants to Lender a security interest in Borrower’s interest in the foregoing accounts and deposit accounts. Without limiting the generality of the foregoing, Borrower shall maintain Bank of America, N.A. as its principal depository bank, including for the maintenance of business, cash management, operating and administrative deposit accounts to the extent any such accounts are owned by Borrower.

Section 4.22. Loan to Value Ratio.

The Property shall have a “Loan to Value Ratio” of not greater than 60%, which Loan to Value Ratio shall be calculated, and defined, as follows: the outstanding principal balance and accrued but unpaid interest on the Loan as of the date of the determination of the ratio shall be divided by the appraised “As-Is” value of the Property. The appraised “As-Is” value of the Property shall be based upon the most recent appraisal performed pursuant to Section 4.16, as reviewed, adjusted and approved by Lender. The Loan to Value Ratio requirement shall be tested not more often than once per calendar year, unless one or more events have occurred which have, alone or in the aggregate, a Material Adverse Effect. In the event the Loan to Value Ratio covenant is not met, Lender shall notify Borrower of such condition and Borrower may satisfy the Loan to Value Ratio covenant by, within thirty (30) days of such notice, either (A) making a principal curtailment on the Loan (which shall not be credited towards future principal amortization required under the Loan Documents) in an amount sufficient to bring the Loan to Value Ratio into compliance and/or (B) provide additional collateral acceptable to Lender, which shall have value (as determined by Lender) which when added to the Property value is sufficient to satisfy the Loan to Value Ratio covenant. If Borrower fails to satisfy the Loan to Value Ratio covenant within such thirty (30) day period, such condition shall constitute an immediate Event of Default. If Borrower has provided additional collateral to Lender to satisfy the Loan to Value Ratio covenant set forth in this Section and a subsequent appraisal performed pursuant to Section 4.16, as reviewed, adjusted and approved by Lender, indicates that such Loan to Value Ratio covenant is satisfied without reliance on such additional collateral (and such additional collateral is not required to satisfy any other covenant contained herein or in the other Loan Documents), then, provided no Event of Default exists, upon request of Borrower, Lender shall release such additional collateral.

Section 4.23. Debt Service Coverage Ratio.

Commencing on December 31, 2011, Borrower shall at all times have a Debt Service Coverage Ratio of at least 1.75 to 1.00. In the event the Debt Service Coverage Ratio covenant is not met, Lender shall notify Borrower of such condition and Borrower may satisfy the Debt Service Coverage Ratio covenant by, within thirty (30) days of such notice, either (A) making a principal curtailment on the Loan (which shall not be credited towards future principal amortization required under the Loan Documents) in an amount sufficient to bring this Debt

Service Coverage Ratio into compliance and/or (B) provide additional collateral acceptable to Lender, which shall have value (as determined by Lender) which would, assuming such collateral were liquidated and applied to reduce the outstanding principal amount of the Loan, be sufficient to satisfy the Debt Service Coverage Ratio covenant. If Borrower fails to satisfy the Debt Service Coverage Ratio covenant within such thirty (30) day period, such condition shall constitute an immediate Event Default. If Borrower has provided additional collateral to Lender to satisfy the Debt Service Coverage Ratio covenant set forth in this Section and subsequently Borrower satisfies such Debt Service Coverage Ratio covenant for two (2) consecutive calendar quarters without reliance on such additional collateral (and such additional collateral is not required to satisfy any other covenant contained herein or in the other Loan Documents) as determined by Lender, then, provided no Event of Default exists, upon request of Borrower, Lender shall release such additional collateral.

Section 4.24. Patriot Act.

Borrower shall comply in all respects with the Patriot Act.

Section 4.25. Swap Contracts.

In the event that borrower shall elect to enter into a Swap Contract with Swap Counterparty, Borrower shall comply with all of the terms and conditions of Schedule 4 with respect to all Swap Contracts.

ARTICLE V
NEGATIVE COVENANTS

Borrower covenants as of the date hereof and until such time as all Obligations shall be paid and performed in full, that:

Section 5.1. Conditional Sales.

Borrower shall not incorporate in the Improvements any property acquired under a conditional sales contract or lease or as to which the vendor retains title or a security interest, without the prior written consent of Lender.

Section 5.2. Insurance Policies and Bonds.

Borrower shall not do or permit to be done anything that would affect the coverage or indemnities provided for pursuant to the provisions of any insurance policy, performance bond, labor and material payment bond or any other bond given in connection with any construction at the Property, including any construction of tenant improvements.

Section 5.3. Intentionally Omitted.

Section 5.4. Additional Debt.

Borrower shall not incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than (a) the Loan, and (b) advances or trade debt or accrued expenses incurred in the ordinary course of business of operating the Property. No other debt may be secured by the Property, whether senior, subordinate or pari passu.

ARTICLE VI
EVENTS OF DEFAULT

The occurrence or happening, from time to time, of any one or more of the following shall constitute an Event of Default under this Agreement:

Section 6.1. Payment Default.

Borrower fails to pay any Obligation under this Agreement within ten (10) days after the date due, whether on the scheduled due date or upon acceleration, maturity or otherwise, including, without limitation, pursuant to Sections 4.22 and 4.23 hereof, except that the five (5) day grace period contemplated above shall not apply in the case of (x) the principal payment, if any, required pursuant to Sections 4.22 and 4.23 hereof or (y) principal due on the Maturity Date.

Section 6.2. Default Under Other Loan Documents.

An Event of Default (as defined therein) occurs under the Note or the Mortgage or any other Loan Document, or Borrower or Guarantor fails to promptly pay, perform, observe or comply with any term, obligation or agreement contained in any of the Loan Documents (within any applicable grace or cure period).

Section 6.3. Accuracy of Information; Representations and Warranties.

Any information contained in any financial statement, schedule, report or any other document delivered by Borrower, Guarantor or any other Person to Lender in connection with the Loan proves at any time not to be in all respects true and accurate, or Borrower, Guarantor or any other Person shall have failed to state any material fact or any fact necessary to make such information not misleading, or any representation or warranty contained in this Agreement or in any other Loan Document or other document, certificate or opinion delivered to Lender in connection with the Loan, proves at any time to be incorrect or misleading in any material respect either on the date when made or on the date when reaffirmed pursuant to the terms of this Agreement.

Section 6.4. Deposits.

Borrower fails to deposit funds with Lender, in the amount requested by Lender, pursuant to the provisions of Section 4.6, within ten (10) days from the effective date of a Notice from Lender requesting such deposit, or Borrower fails to deliver to Lender any Condemnation Awards or Insurance Proceeds within ten (10) days after Borrower’s receipt thereof.

Section 6.5. Insurance Obligations.

Borrower fails to promptly perform or comply with any of the covenants contained in the Loan Documents with respect to maintaining insurance, including the covenants contained in Section 4.4.

Section 6.6. Other Obligations.

Borrower fails to promptly perform or comply with any of the Obligations set forth in this Agreement (other than those expressly described in other Sections of this Article VI), and such failure continues uncured for a period of thirty (30) days after Notice from Lender to Borrower, unless (a) such failure, by its nature, is not capable of being cured within such period, and (b) within such period, Borrower commences to cure such failure and thereafter diligently prosecutes the cure thereof, and (c) Borrower causes such failure to be cured no later than ninety (90) days after the date of such Notice from Lender.

Section 6.7. Damage to Improvements.

The Improvements are substantially damaged or destroyed by fire or other casualty and Lender determines that the Improvements cannot be restored in accordance with the terms and provisions of this Agreement and the Mortgage.

Section 6.8. Lapse of Permits or Approvals.

Any permit, license, certificate or approval that Borrower is required to obtain with respect to any construction activities at the Property or the operation, leasing or maintenance of the Improvements or the Property lapses or ceases to be in full force and effect and continues for thirty (30) days.

Section 6.9. Mechanic’s Lien.

A lien for the performance of work or the supply of materials filed against the Property, or any stop notice served on Borrower, any contractor of Borrower, or Lender, remains unsatisfied or unbonded for a period of thirty (30) days after Borrower’s receipt of notice or otherwise obtaining knowledge of such filing or service.

Section 6.10. Bankruptcy.

Borrower or any Guarantor files a bankruptcy petition or makes a general assignment for the benefit of creditors, or a bankruptcy petition is filed against Borrower or any Guarantor and such involuntary bankruptcy petition continues undismissed for a period of ninety (90) days after the filing thereof.

Section 6.11. Appointment of Receiver, Trustee, Liquidator.

Borrower or any Guarantor applies for or consents in writing to the appointment of a receiver, trustee or liquidator of Borrower, any Guarantor, the Property, or all or substantially all of the other assets of Borrower or any Guarantor, or an order, judgment or

decree is entered by any court of competent jurisdiction on the application of a creditor appointing a receiver, trustee or liquidator of Borrower, any Guarantor, the Property, or all or substantially all of the other assets of Borrower or any Guarantor.

Section 6.12. Inability to Pay Debts.

Borrower or any Guarantor becomes unable or admits in writing its inability or fails generally to pay its debts as they become due.

Section 6.13. Judgment.

A final nonappealable judgment for the payment of money involving more than $500,000 is entered against Borrower, or involving more than $1,000,000 is entered against any Guarantor, and Borrower or such Guarantor fails to discharge the same, or causes it to be discharged or bonded off to Lender’s satisfaction, within sixty (60) days from the date of the entry of such judgment.

Section 6.14. Dissolution; Change in Business Status.

Unless the written consent of Lender is previously obtained, all or substantially all of the business assets of Borrower or any Guarantor are sold, Borrower or any Guarantor is dissolved, or there occurs any change in the form of business entity through which Borrower or any Guarantor presently conducts its business or any merger or consolidation involving Borrower or any Guarantor.

Section 6.15. Default Under Other Indebtedness.

Borrower or any Guarantor fails to pay any indebtedness (other than the Loan) owed by Borrower or such Guarantor to Lender when and as due and payable (whether by acceleration or otherwise).

Section 6.16. Change in Controlling Interest.

Without the prior written consent of Lender (which consent may be conditioned, among other matters, on the issuance of a satisfactory endorsement to the title insurance policy insuring Lender’s interest under the Mortgage), the controlling interest in Borrower ceases to be owned directly or indirectly by Guarantor.

ARTICLE VII
REMEDIES ON DEFAULT

Section 7.1. Remedies on Default.

Upon the happening of any Event of Default, Lender shall have the right, in addition to any other rights or remedies available to Lender under the Mortgage or any of the other Loan Documents or under applicable Law, to exercise any one or more of the following rights and remedies:


	(a) Lender may accelerate all of Borrower’s Obligations under the Loan Documents whereupon such Obligations shall become immediately due and payable, without notice of default, acceleration or intention to accelerate, presentment or demand for payment, protest or notice of nonpayment or dishonor, or notices or demands of any kind or character (all of which are hereby waived by Borrower).

	(b) Lender may apply to any court of competent jurisdiction for, and obtain appointment of, a receiver for the Property.

	(c) Lender may set off the amounts due Lender under the Loan Documents, whether or not matured and regardless of the adequacy of any other collateral securing the Loan, against any and all accounts, credits, money, securities or other property of Borrower now or hereafter on deposit with, held by or in the possession of Lender to the credit or for the account of Borrower, without notice to or the consent of Borrower.

	(d) Lender may enter into possession of the Property and perform any and all work and labor necessary to complete any construction at the Property, including any construction of tenant improvements, and to employ watchmen to protect the Property and the Improvements. All sums expended by Lender for such purposes shall be deemed to have been advanced to Borrower under the Note and shall be secured by the Mortgage. For this purpose, Borrower hereby constitutes and appoints Lender its true and lawful attorney-in-fact with full power of substitution, which power is coupled with an interest, to complete the work in the name of Borrower, and hereby empowers said attorney or attorneys, in the name of Borrower or Lender:

		(i) To use any funds of Borrower including any balance which may be held by Lender and any funds (if any) which may remain unadvanced hereunder for the purpose of completing any construction, including any construction of tenant improvements, whether or not in the manner called for in the applicable plans and specifications;

		(ii) To make such additions and changes and corrections to any plans and specifications as shall be necessary or desirable in the judgment of Lender to complete any construction, including any construction of tenant improvements;

		(iii) To employ such contractors, subcontractors, agents, architects and inspectors as shall be necessary or desirable for said purpose;

		(iv) To pay, settle or compromise all existing bills and claims which are or may be liens against the Property, or may be necessary or desirable for the completion of the work or the clearance of title to the Property;

		(v) To execute all applications and certificates which may be required in the name of Borrower;

		(vi) To enter into, enforce, modify or cancel Leases and to fix or modify Rents on such terms as Lender may consider proper;


		(vii) To file for record, at Borrower’s cost and expense and in Borrower’s name, any notices of completion, notices of cessation of labor, or any other notices that Lender in its sole and absolute discretion may consider necessary or desirable to protect its security; and

		(viii) To do any and every act with respect to any such construction which Borrower may do in its own behalf.

It is understood and agreed that this power of attorney shall be deemed to be a power coupled with an interest which cannot be revoked. Said attorney-in-fact shall also have the power to prosecute and defend all actions or proceedings in connection with any construction at the Property, including any construction of tenant improvements, and to take such actions and to require such performance as Lender may deem necessary.

Section 7.2. No Release or Waiver; Remedies Cumulative and Concurrent.

Borrower shall not be relieved of any Obligation by reason of the failure of Lender to comply with any request of Borrower or of any other Person to take action to foreclose on the Property under the Mortgage or otherwise to enforce any provision of the Loan Documents, or by reason of the release, regardless of consideration, of all or any part of the Property. No delay or omission of Lender to exercise any right, power or remedy accruing upon the happening of an Event of Default shall impair any such right, power or remedy or shall be construed to be a waiver of any such Event of Default or any acquiescence therein. No delay or omission on the part of Lender to exercise any option for acceleration of the maturity of the Obligations, or for foreclosure of the Mortgage following any Event of Default as aforesaid, or any other option granted to Lender hereunder in any one or more instances, or the acceptance by Lender of any partial payment on account of the Obligations shall constitute a waiver of any such Event of Default and each such option shall remain continuously in full force and effect. No remedy herein conferred upon or reserved to Lender is intended to be exclusive of any other remedies provided for in the Loan Documents, and each and every such remedy shall be cumulative, and shall be in addition to every other remedy given hereunder, or under the Loan Documents, or now or hereafter existing at Law or in equity or by statute. Every right, power and remedy given by the Loan Documents to Lender shall be concurrent and may be pursued separately, successively or together against Borrower or the Property or any part thereof, and every right, power and remedy given by the Loan Documents may be exercised from time to time as often as may be deemed expedient by Lender.

ARTICLE VIII
MISCELLANEOUS

Section 8.1. Further Assurances; Authorization to File Documents.

At any time, and from time to time, upon request by Lender, Borrower will, at Borrower’s expense, (a) correct any defect, error or omission which may be discovered in the form or content of any of the Loan Documents, and (b) make, execute, deliver and record, or cause to be made, executed, delivered and recorded, any and all further instruments, certificates

and other documents as may, in the opinion of Lender, be necessary or desirable in order to complete, perfect or continue and preserve the lien of the Mortgage. Upon any failure by Borrower to do so, Lender may make, execute and record any and all such instruments, certificates and other documents for and in the name of Borrower, all at the sole expense of Borrower, and Borrower hereby appoints Lender the agent and attorney-in-fact of Borrower to do so, this appointment being coupled with an interest and being irrevocable. Without limitation of the foregoing, Borrower irrevocably authorizes Lender at any time and from time to time to file any initial financing statements, amendments thereto and continuation statements deemed necessary or desirable by Lender to establish or maintain the validity, perfection and priority of the security interests granted in the Mortgage or hereunder, and Borrower ratifies any such filings made by Lender prior to the date hereof.

Section 8.2. No Warranty by Lender.

By accepting or approving anything required to be observed, performed or fulfilled by Borrower or to be given to Lender pursuant to this Agreement, including any certificate, Survey, receipt, appraisal or insurance policy, Lender shall not be deemed to have warranted or represented the sufficiency, legality, effectiveness or legal effect of the same, or of any term, provision or condition thereof and any such acceptance or approval thereof shall not be or constitute any warranty or representation with respect thereto by Lender.

Section 8.3. Standard of Conduct of Lender.

Nothing contained in this Agreement or any other Loan Document shall limit the right of Lender to exercise its business judgment or to act, in the context of the granting or withholding of any advance or consent under this Agreement or any other Loan Document, in a subjective manner, whether or not objectively reasonable under the circumstances, so long as Lender’s exercise of its business judgment or action is made or undertaken in good faith. Borrower and Lender intend by the foregoing to set forth and affirm their entire understanding with respect to the standard pursuant to which Lender’s duties and obligations are to be judged and the parameters within which Lender’s discretion may be exercised hereunder and under the other Loan Documents. As used herein, “good faith” means honesty in fact in the conduct and transaction concerned.

Section 8.4. No Partnership.

Nothing contained in this Agreement shall be construed in a manner to create any relationship between Borrower and Lender other than the relationship of borrower and lender and Borrower and Lender shall not be considered partners or co-venturers for any purpose on account of this Agreement.

Section 8.5. Severability.

In the event any one or more of the provisions of this Agreement or any of the other Loan Documents shall for any reason be held to be invalid, illegal or unenforceable, in whole or in part or in any other respect, or in the event any one or more of the provisions of any of the Loan Documents operates or would prospectively operate to invalidate this Agreement or any of the other Loan Documents, then and in either of those events, at the option of Lender,

such provision or provisions only shall be deemed null and void and shall not affect the validity of the remaining Obligations, and the remaining provisions of the Loan Documents shall remain operative and in full force and effect and shall in no way be affected, prejudiced or disturbed thereby.

Section 8.6. Notices.

All Notices required or which any party desires to give hereunder or under any other Loan Document shall be in writing and, unless otherwise specifically provided in such other Loan Document, shall be deemed sufficiently given or furnished if delivered by personal delivery, by nationally recognized overnight courier service or by certified United States mail, postage prepaid, addressed to the party to whom directed at the applicable address set forth below (unless changed by similar notice in writing given by the particular party whose address is to be changed) or by facsimile. Any Notice shall be deemed to have been given either at the time of personal delivery or, in the case of courier or mail, as of the date of first attempted delivery at the address and in the manner provided herein, or, in the case of facsimile, upon receipt; provided that service of a Notice required by any applicable statute shall be considered complete when the requirements of that statute are met. Notwithstanding the foregoing, no notice of change of address shall be effective except upon actual receipt. This Section shall not be construed in any way to affect or impair any waiver of notice or demand provided in this Agreement or in any other Loan Document or to require giving of notice or demand to or upon any Person in any situation or for any reason.

The address and fax number of Borrower are:


	Acadia Realty Trust 1311 Mamaroneck Avenue, Suite 260 White Plains, New York 10605 Attention: Robert Masters, Esq. Telefax: 914-428-3646

The address and fax number of Lender are:

	Bank of America, N.A. One Bryant Park, 35th Floor New York, New York 10036 Attention: Mr. Gregory Egli Telefax: 212-293-8197

Section 8.7. Permitted Successors and Assigns; Disclosure of Information.

(a) Each and every one of the covenants, terms, provisions and conditions of this Agreement and the Loan Documents shall apply to, bind and inure to the benefit of Borrower, its successors and those assigns of Borrower consented to in writing by Lender, and shall apply to, bind and inure to the benefit of Lender and the endorsees, transferees, successors and assigns of Lender, and all Persons claiming under or through any of them.

(b) Borrower agrees not to transfer, assign, pledge or hypothecate any right or interest in any payment or advance due pursuant to this Agreement, or any of the other benefits of this Agreement, without the prior written consent of Lender, which consent may be withheld by Lender in its sole and absolute discretion. Any such transfer, assignment, pledge or hypothecation made or attempted by Borrower without the prior written consent of Lender shall be void and of no effect. No consent by Lender to an assignment shall be deemed to be a waiver of the requirement of prior written consent by Lender with respect to each and every further assignment and as a condition precedent to the effectiveness of such assignment.

(c) Lender may sell or offer to sell the Loan or interests therein to one or more assignees or participants. Borrower shall execute, acknowledge and deliver any and all instruments reasonably requested by Lender in connection therewith, and to the extent, if any, specified in any such assignment or participation, such assignee(s) or participant(s) shall have the same rights and benefits with respect to the Loan Documents as such Person(s) would have if such Person(s) were Lender hereunder. Lender may disseminate any information it now has or hereafter obtains pertaining to the Loan, including any security for the Loan, any credit or other information on the Property (including environmental reports and assessments), Borrower, any of Borrower’s principals or any Guarantor, to any actual or prospective assignee or participant, to Lender’s affiliates, including Merrill Lynch, Pierce, Fenner & Smith Incorporated, to any regulatory body having jurisdiction over Lender, to any actual or prospective counterparty (or its advisors), to any Swap Counterparty, to any swap or derivative transaction relating to Borrower and the Loan, or to any other party as necessary or appropriate in Lender’s reasonable judgment.

Section 8.8. Modification; Waiver.

None of the terms or provisions of this Agreement may be changed, waived, modified, discharged or terminated except by instrument in writing executed by the party or parties against whom enforcement of the change, waiver, modification, discharge or termination is asserted. None of the terms or provisions of this Agreement shall be deemed to have been abrogated or waived by reason of any failure or failures to enforce the same.

Section 8.9. Third Parties; Benefit.

All conditions to the obligation of Lender to make advances hereunder are imposed solely and exclusively for the benefit of Lender and its assigns and no other Persons shall have standing to require satisfaction of such conditions in accordance with their terms or be entitled to assume that Lender will refuse to make advances in the absence of strict compliance with any or all thereof and no other Person shall, under any circumstances, be deemed to be the beneficiary of such conditions, any or all of which may be freely waived in whole or in part by Lender at any time in the sole and absolute exercise of its discretion. The terms and provisions of this Agreement are for the benefit of the parties hereto and, except as herein specifically provided, no other Person shall have any right or cause of action on account thereof.

Section 8.10. Rules of Construction.

The words “hereof,” “herein,” “hereunder,” “hereto,” and other words of similar import refer to this Agreement in its entirety. The terms “agree” and “agreements” mean and

include “covenant” and “covenants.” The words “include” and “including” shall be interpreted as if followed by the words “without limitation.” The captions and headings contained in this Agreement are included herein for convenience of reference only and shall not be considered a part hereof and are not in any way intended to define, limit or enlarge the terms hereof. All references (a) made in the neuter, masculine or feminine gender shall be deemed to have been made in all such genders, (b) made in the singular or plural number shall be deemed to have been made, respectively, in the plural or singular number as well, (c) to the Loan Documents are to the same as extended, amended, restated, supplemented or otherwise modified from time to time unless expressly indicated otherwise, (d) to the Land, the Improvements or the Property shall mean all or any portion of each of the foregoing, respectively, and (e) to Articles, Sections and Schedules are to the respective Articles, Sections and Schedules contained in this Agreement unless expressly indicated otherwise.

Section 8.11. Counterparts.

This Agreement may be executed in any number of counterparts, each of which shall be considered an original for all purposes; provided, however, that all such counterparts shall together constitute one and the same instrument.

Section 8.12. Intentionally Omitted.

Section 8.13. Governing Law.

This Agreement shall be governed by and construed, interpreted and enforced in accordance with the laws of the State.

Section 8.14. Time of Essence.

Time shall be of the essence for each and every provision of this Agreement of which time is an element.

Section 8.15. Electronic Transmission of Data.

Lender and Borrower agree that certain data related to the Loan (including confidential information, documents, applications and reports) may be transmitted electronically, including transmission over the Internet. This data may be transmitted to, received from or circulated among agents and representatives of Borrower and/or Lender and their Affiliates and other Persons involved with the subject matter of this Agreement. Borrower acknowledges and agrees that (a) there are risks associated with the use of electronic transmission and that Lender does not control the method of transmittal or service providers, (b) Lender has no obligation or responsibility whatsoever and assumes no duty or obligation for the security, receipt or third party interception of any such transmission, and (c) Borrower will release, hold harmless and indemnify Lender from any claim, damage or loss, including that arising in whole or part from Lender’s strict liability or sole, comparative or contributory negligence, which is related to the electronic transmission of data except to the extent due to Lender’s gross negligence or willful misconduct.

Section 8.16. Forum.

Borrower hereby irrevocably submits generally and unconditionally for itself and in respect of its property to the jurisdiction of any state court or any United States federal court sitting in the State specified in the governing law section of this Agreement and to the jurisdiction of any state court or any United States federal court sitting in the state in which any of the Property is located, over any Dispute. Borrower hereby irrevocably waives, to the fullest extent permitted by Law, any objection that Borrower may now or hereafter have to the laying of venue in any such court and any claim that any such court is an inconvenient forum. Borrower hereby agrees and consents that, in addition to any methods of service of process provided for under applicable law, all service of process in any such suit, action or proceeding in any state court or any United States federal court sitting in the state specified in the governing law section of this Agreement may be made by certified or registered mail, return receipt requested, directed to Borrower at its address for notice set forth in this Agreement, or at a subsequent address of which Lender received actual notice from Borrower in accordance with the notice section of this Agreement, and service so made shall be complete five (5) days after the same shall have been so mailed. Nothing herein shall affect the right of Lender to serve process in any manner permitted by Law or limit the right of Lender to bring proceedings against Borrower in any other court or jurisdiction.

Section 8.17. WAIVER OF JURY TRIAL.

BORROWER AND LENDER WAIVE TRIAL BY JURY IN RESPECT OF ANY DISPUTE AND ANY ACTION ON SUCH DISPUTE. THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY BORROWER AND LENDER, AND BORROWER AND LENDER HEREBY REPRESENT THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY PERSON OR ENTITY TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THE LOAN DOCUMENTS. BORROWER AND LENDER ARE EACH HEREBY AUTHORIZED TO FILE A COPY OF THIS SECTION IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER OF JURY TRIAL. BORROWER FURTHER REPRESENTS AND WARRANTS THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED BY INDEPENDENT LEGAL COUNSEL SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.

Section 8.18. USA Patriot Act Notice.

Lender hereby notifies Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”), Lender is required to obtain, verify and record information that identifies Borrower, which information includes the name and address of Borrower and other information that will allow Lender to identify Borrower in accordance with the Act.

Section 8.19. Entire Agreement.

The Loan Documents constitute the entire understanding and agreement between Borrower and Lender with respect to the transactions arising in connection with the Loan, and supersede all prior written or oral understandings and agreements between Borrower and Lender with respect to the matters addressed in the Loan Documents. In particular, and without limitation, the terms of any commitment by Lender to make the Loan are merged into the Loan Documents. Except as incorporated in writing into the Loan Documents, there are no representations, understandings, stipulations, agreements or promises, oral or written, with respect to the matters addressed in the Loan Documents. If there is any conflict between the terms, conditions and provisions of this Agreement and those of any other instrument or agreement, including any other Loan Document, the terms, conditions and provisions of this Agreement shall prevail.

Section 8.20. Usury.

All agreements between Borrower and Lender are hereby expressly limited so that in no contingency or event whatsoever, whether by reason of acceleration of maturity of the indebtedness evidenced hereby or otherwise, shall the amount paid or agreed to be paid to Lender for the use or the forbearance of the indebtedness evidenced hereby exceed the maximum permissible under applicable law. As used herein, the term “applicable law” shall mean the law in effect as of the date hereof; provided, however, that in the event there is a change in the law which results in a higher permissible rate of interest, then the Note shall be governed by such new law as of its effective date. In this regard, it is expressly agreed that it is the intent of Borrower and Lender in the execution, delivery and acceptance of the Note to contract in strict compliance with the laws of the State of New York from time to time in effect. If, under or from any circumstances whatsoever, fulfillment of any provision hereof or of any of the loan documents evidencing and/or securing the Loan at the time of performance of such provision shall be due, shall involve transcending the limit of such validity prescribed by applicable law, then the obligation to be fulfilled shall automatically be reduced to the limits of such validity, and if under or from circumstances whatsoever Lender should ever receive as interest an amount which would exceed the highest lawful rate, such amount which would be excessive interest shall be applied to the reduction of the principal balance evidenced hereby and not to the payment of interest. This provision shall control every other provision of all agreements between Borrower and Lender.

Section 8.21. Special State Provisions.

In the event of any inconsistency between the other terms of this Agreement and this Section 8.22, the terms of this Section 8.22 shall control.


	(a) In addition to any other right or remedy contained in this Agreement or in any other Loan Document, Lender shall have all of the rights against lessees of all or any part of the Property as are set forth in Section 291-f of the Real Property Law of New York.


	(b) Notwithstanding anything in this Agreement or in Section 254 of the Real Property Law of the State of New York to the contrary, the Net Proceeds coming into the possession of Lender shall not be deemed trust funds.

	(c) Borrower will receive the advances of the Loan and will hold the right to receive such advances as a trust fund to be applied first for the purpose of paying the “cost of improvement”, as such quoted term is defined in the New York Lien Law, and will apply the same first to the payment of such costs before using any part of the total of the same for any other purpose and, in the event all or any part of the Property is located in the State of New York, will comply with Section 13 of the New York Lien Law. Borrower will indemnify and hold Lender harmless against any loss or liability, cost or expense, including, without limitation, any judgments, attorney’s fees, costs of appeal bonds and printing costs, arising out of or relating to any proceeding instituted by any claimant alleging a violation by Borrower of the New York Lien Law including, without limitation, any section of Article 3-A thereof.

	(d) The Property is not real property principally improved or to be improved by one or more structures containing in the aggregate not more than six (6) residential dwelling units, each having their own separate cooking facilities.

Section 8.22. Cross-Default-Cross Collateralization.

This Loan shall be cross-defaulted and cross-collateralized with all other loans which Borrower shall have from Lender (or any subsidiary or affiliated entity of Lender) during the term of this Loan, whether existing as of the date of this Agreement subsequently made. A default under any of the above described loans shall constitute a Default under this Loan. A Default under this Loan shall constitute a Default under the above described other loans. To the extent not prohibited by applicable law, if Lender, at its option, avails itself of this cross-collateralization/cross-default provision, Lender shall have the option to pursue its remedies in any combinations and against any or all of Lender’s security for the aforesaid loans, whether successively, concurrently or otherwise.

[Remainder of page intentionally left blank]

IN WITNESS WHEREOF, Borrower and Lender have caused this Agreement to be executed as an instrument under seal as of the date first above written.


BORROWER:

RD SMITHTOWN LLC, a New York limited liability company

By:	Acadia Realty Limited Partnership, its managing member

	By:	Acadia Realty Trust, its general partner

		By	/s/ Robert Masters

			Robert Masters
			Senior Vice President


	LENDER:

	BANK OF AMERICA, N.A.

	By	/s/ Gregory Egli

		Gregory Egli
		Senior Vice President

SCHEDULE 1

DEFINITIONS

Unless the context otherwise specifies or requires, the following terms shall have the meanings herein specified, such definitions to be applicable equally to the singular and the plural forms of such terms and to all genders:

“Acadia Realty Trust” means Acadia Realty Trust, a Maryland real estate investment trust, which is an indirect principal in Borrower and Guarantor.

“Act” means the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)).

“Adjusted Net Operating Income” means Operating Income less the sum of (i) Adjusted Operating Expenses plus (ii) the Vacancy and Credit Loss Factor.

“Adjusted Operating Expenses” means the aggregate amount of all actual operating expenses of the Property paid by Borrower in the most recently ended six (6) month period for which Borrower has delivered financial statements to Lender, annualized, provided that the amount of management fees included in Adjusted Operating Expenses shall be equal to the greater of (x) actual management fees paid by Borrower with respect to such period or (y) 3.0% of the operating income received by Borrower during such period. Adjusted Operating Expenses shall exclude from expenses payments of principal and interest under the Loan Documents and other expenses payable to Lender pursuant to the Loan Documents, capital expenditures, Tenant Improvement costs, Leasing Commissions and extraordinary items of expense.

“Affiliate” means, with respect to any Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

“Approved Manager” means Borrower, Acadia Realty Limited Partnership or any other reputable and creditworthy property manager, subject to the prior approval of Lender, not to be unreasonably withheld, with a portfolio of properties comparable to the Property under active management.

“Authorized Signer” means any signer of this Agreement.

“Banking Day” means any day that is not a Saturday, Sunday or banking holiday in the State.

“Borrower’s Deposit Account” means an account established with Lender pursuant to the terms of Section 4.6.

“Casualty” means any act or occurrence of any kind or nature that results in damage, loss or destruction to the Property.

“Claim” means any liability, suit, action, claim, demand, loss, expense, penalty, fine, judgment or other cost of any kind or nature whatsoever, including fees, costs and expenses of attorneys, consultants, contractors and experts.

“Closing Checklist” means that certain Closing Requirements and Checklist setting forth the conditions for closing the Loan and recording the Mortgage.

“Code” means the Internal Revenue Code of 1986, as amended.

“Condemnation” means any taking of title to, use of, or any other interest in the Property under the exercise of the power of condemnation or eminent domain, whether temporarily or permanently, by any Governmental Authority or by any other Person acting under or for the benefit of a Governmental Authority.

“Condemnation Awards” means any and all judgments, awards of damages (including severance and consequential damages), payments, proceeds, settlements, amounts paid for a taking in lieu of Condemnation, or other compensation heretofore or hereafter made, including interest thereon, and the right to receive the same, as a result of, or in connection with, any Condemnation or threatened Condemnation.

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise, “Controlling” or “Controlled” have meanings correlative thereto.

“Debt Service Coverage Ratio” means the ratio, as of any date of calculation, of (a) the Adjusted Net Operating Income to (b) the annual Debt Service Payments.

“Debt Service Payments” means the annual amount of principal and interest payments that would be payable on a loan in the amount of the principal amount outstanding as of the date of calculation of the Loan based upon a thirty (30) year self liquidating mortgage amortization schedule at an annual assumed interest rate equal to the greatest of (i) 7.0%, (ii) the “Ten Year Treasury Rate Obligation” (as hereinafter defined) as of any date of calculation plus 2.50% and (iii) the actual interest applicable to the Loan as of any date of calculation. The “Ten Year Treasury Rate Obligation” shall mean the rate determined by Lender to be the week ending yield on United States treasury securities, adjusted to a constant maturity of ten years, as published by the United States Federal Reserve Board in the then most currently available Statistical Release H.15 (519) (or, if not published at such time, such other comparable statistical release then published by the United States Federal Reserve Board) rounded to the next highest 1/8 of 1%.

“Default” means an event or circumstance that, with the giving of Notice or lapse of time, or both, would constitute an Event of Default under the provisions of this Agreement.

“Dispute” means any controversy, claim or dispute between or among the parties to this Agreement, including any such controversy, claim or dispute arising out of or relating to (a) this Agreement, (b) any other Loan Document, (c) any related agreements or instruments, or

(d) the transaction contemplated herein or therein (including any claim based on or arising from an alleged personal injury or business tort).

“Environmental Agreement” means the Environmental Indemnification and Release Agreement of even date herewith by and among Borrower, Guarantor and Lender pertaining to the Property, as the same may from time to time be extended, amended, restated or otherwise modified.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“Event of Default” means any event or circumstance specified in Article VI and the continuance of such event or circumstance beyond the applicable grace and/or cure periods therefor, if any, set forth in Article VI.

“Existing Loan” shall have the meaning set forth in the Recitals.

“Existing Mortgages” shall have the meaning set forth in the Recitals.

“Existing Notes” shall have the meaning set forth in the Recitals.

“Expenses” means all fees, charges, costs and expenses of any nature whatsoever incurred at any time and from time to time (whether before or after an Event of Default) by Lender in making, funding, administering or modifying the Loan, in negotiating or entering into any “workout” of the Loan, or in exercising or enforcing any rights, powers and remedies provided in the Mortgage or any of the other Loan Documents, including attorneys’ fees, court costs, receiver’s fees, management fees and costs incurred in the repair, maintenance and operation of, or taking possession of, or selling, the Property.

“Financial Statements” means (i) for each reporting party other than an individual, a balance sheet, income statement, statements of cash flow and amounts and sources of contingent liabilities, a reconciliation of changes in equity and liquidity verification, and unless Lender otherwise consents, consolidated statements if the reporting party is a holding company or a parent of a subsidiary entity; and (ii) for each reporting party who is an individual, a balance sheet, statements of amount and sources of contingent liabilities, sources and uses of cash and liquidity verification and, unless Lender otherwise consents, Financial Statements for each entity owned or jointly owned by the reporting party. For purposes of this definition and any covenant requiring the delivery of Financial Statements, each party for whom Financial Statements are required is a “reporting party” and a specified period to which the required Financial Statements relate is a “reporting period”.

“Fleet” shall have the meaning set forth in the Recitals.

“Governmental Authority” means any governmental or quasi-governmental entity, including any court, department, commission, board, bureau, agency, administration, service, district or other instrumentality of any governmental entity.

“Guarantor” means Acadia Realty Limited Partnership, a Delaware limited partnership, and its successors and assigns.

“Guaranty” means the Guaranty Agreement of even date herewith executed by Guarantor for the benefit of Lender, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.

“Improvements” means all on-site and off-site improvements to the Land for a shopping center located on the Land, together with all fixtures, tenant improvements and appurtenances now or later to be located on the Land and/or in such improvements.

“Insurance Proceeds” means the insurance claims under and the proceeds of any and all policies of insurance covering the Property or any part thereof, including all returned and unearned premiums with respect to any insurance relating to such Property, in each case whether now or hereafter existing or arising.

“Land” means the land described in and encumbered by the Mortgage.

“Laws” means all federal, state and local laws, statutes, rules, ordinances, regulations, codes, licenses, authorizations, decisions, injunctions, interpretations, orders or decrees of any court or other Governmental Authority having jurisdiction as may be in effect from time to time.

“Leasing Commissions” means reasonable and customary commissions paid in connection with a Lease to a real estate broker licensed in the state where the Property is located, under commission agreements containing such terms and provisions as are then prevailing between third party, unaffiliated owners and brokers for comparable leases of space at properties similar to the Property in the market area in which the Property is located.

“Leases” means all leases, license agreements and other occupancy or use agreements (whether oral or written), now or hereafter existing, which cover or relate to the Property or any part thereof, together with all options therefor, amendments thereto and renewals, modifications and guaranties thereof, including any cash or security deposited under the Leases to secure performance by the tenants of their obligations under the Leases, whether such cash or security is to be held until the expiration of the terms of the Leases or applied to one or more of the installments of rent coming due thereunder.

“Lien Law” means the Lien Law of the State of New York, as amended.

“Loan” means the Existing Loan and the New Loan from Lender to Borrower, the repayment obligations in connection with which are evidenced by the Note.

“Loan Amount” means $9,360,000.

“Loan Documents” means this Agreement, the Note, the Mortgage, the Environmental Agreement, any Swap Contract, the Guaranty, any application or reimbursement agreement executed in connection with any Letter of Credit and any and all other documents which Borrower, Guarantor or any other party or parties have executed and delivered, or may

hereafter execute and deliver, to evidence, secure or guarantee the Obligations, or any part thereof, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.

“Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect upon, the Property, or the operations, business, properties, liabilities (actual or contingent), condition (financial or otherwise) or prospects of Borrower; (b) a material impairment of the ability of any party to the Loan Documents to perform its obligations under any Loan Document to which it is a party; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against any party to the Loan Documents of any Loan Document to which it is a party.

“Mortgage” means the mortgages described in, and consolidated and modified by that certain Mortgage Consolidation and Modification Agreement dated as of the date hereof between Borrower and Lender, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.

“Net Proceeds” when used with respect to any Condemnation Awards or Insurance Proceeds, means the gross proceeds from any Condemnation or Casualty remaining after payment of all expenses, including attorneys’ fees, incurred in the collection of such gross proceeds.

“New Loan” shall have the meaning set forth in the Recitals.

“Note” means the Note of even date herewith, in an amount equal to the Loan Amount, made by Borrower to the order of Lender pursuant to that certain Note Modification and Modification Agreement between Borrower and Lender dated as of the date hereof, as the same may from time to time be extended, amended, restated, supplemented or otherwise modified.

“Notice” means a notice, request, consent, demand or other communication given in accordance with the provisions of Section 8.6 of this Agreement.

“Obligations” means all present and future debts, obligations and liabilities of Borrower to Lender arising pursuant to, or on account of, the provisions of this Agreement, the Note or any of the other Loan Documents, including the obligations: (a) to pay all principal, interest, late charges, prepayment premiums (if any) and other amounts due at any time under the Note; (b) to pay all Expenses, indemnification payments, fees and other amounts due at any time under the Mortgage or any of the other Loan Documents, together with interest thereon as provided in the Mortgage or such Loan Document; (c) to pay and perform all obligations of Borrower (or its Affiliate) under any Swap Contract; and (d) to perform, observe and comply with all of the terms, covenants and conditions, expressed or implied, which Borrower is required to perform, observe or comply with pursuant to the terms of this Agreement, the Mortgage or any of the other Loan Documents.

“Operating Income” means the sum of (x) the aggregate rentals and all other revenue (unless excluded pursuant hereto) of the Property actually received from only executed bona fide leases, licenses and other occupancy agreements of the Property which are in full force

and effect as to which the tenant thereunder is not the subject of any bankruptcy proceeding and is not in default under its lease, beyond any applicable notice or cure periods set forth therein for the six (6) months preceding the date of calculation and (y) the aggregate rentals and all other revenue (unless excluded pursuant hereto) of the Property as projected by Borrower and approved by Lender from only executed bona fide leases, licenses and other occupancy agreements of the Property which are in full force and effect as to which the tenant thereunder is not the subject of any bankruptcy proceeding and is not in default under its lease (including tenants who have not commenced payment of full base rent but who are obligated to do so within six (6) months), beyond any applicable notice or cure periods set forth therein for the six (6) months following the date of calculation as projected by Lender. Operating Income shall exclude all extraordinary items of income, all amounts paid to Borrower for tenant alterations in connection with the leasing of space at the Property, all amounts payable to Borrower under leases with affiliates of Borrower, as tenant, or with Borrower, as tenant (unless Lender otherwise agrees) and, with respect to any lease providing for a reduction in the rentals payable under such lease at any time during the term thereof, base rentals in excess of the lowest base rentals payable under such lease (other than during any period of rent concessions made with respect to consecutive monthly periods commencing with the first month of the term of such lease), but notwithstanding the preceding, including reimbursements for operating expenses and percentage rent pursuant to executed leases, provided a sales report is provided by the applicable tenant.

“Person” means an individual, a corporation, a partnership, a joint venture, a limited liability company, a trust, an unincorporated association, any Governmental Authority or any other entity.

“Property” means the real and personal property conveyed and encumbered by the Mortgage.

“Rents” means all of the rents, royalties, issues, profits, revenues, earnings, income and other benefits of the Property or any part thereof, or arising from the use or enjoyment of the Property or any part thereof, including all such amounts paid under or arising from any of the Leases and all fees, charges, accounts or other payments for the use or occupancy of rooms or other public facilities within the Property or any part thereof.

“State” means the State of New York.

“Survey” means a map or plat of survey of the Land which conforms with Lender’s survey requirements set forth in the Closing Checklist and with the “Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys” jointly established and adopted by ALTA, ACSM and NSPS in 2005, and pursuant to Accuracy Standards as adopted by ALTA, ACSM and NSPS and in effect on the date when the Survey is certified to Lender in the form specified in the Closing Checklist.

after the date hereof, between Swap Counterparty and Borrower (or its Affiliate), together with any related schedule and confirmation, as amended, supplemented, superseded or replaced from time to time.

“Swap Counterparty” means Lender or an Affiliate of Lender, in its capacity as counterparty under any Swap Contract.

“Swap Transaction” means any transaction that is a rate swap, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap or option, bond option, note or bill option, interest rate option, forward foreign exchange transaction, cap transaction, collar transaction, floor transaction, currency swap transaction, cross-currency rate swap transaction, swap option, currency option, credit swap or default transaction, T-lock, or any other similar transaction (including any option to enter into the foregoing) or any combination of the foregoing, entered into prior to the date hereof or anytime after the date hereof between Swap Counterparty and Borrower (or its Affiliate) so long as a writing, such as a Swap Contract, evidences the parties’ intent that such obligations shall be secured by the Mortgage in connection with (i) the Loan or (ii) any other loans or credit facilities between Lender or its Affiliate and Borrower.

“Tenant Improvements” means improvements, fixtures and equipment, the construction or installation of which is required by Leases.

“Taxes” means all taxes and assessments whether general or special, ordinary or extraordinary, or foreseen or unforeseen, which at any time may be assessed, levied, confirmed or imposed by any Governmental Authority or any communities facilities or other private district on Borrower or on any of its properties or assets or any part thereof or in respect of any of its franchises, businesses, income or profits.

“Termination Fee Deposit” shall have the meaning set forth in Section 4.17.

“Vacancy and Credit Loss Factor” means an amount (which amount can be $0 but cannot be less than $0) determined by multiplying Operating Income by the lesser of (i) 5% or (ii) the amount, stated as a percentage of total rentable retail area, by which total rented retail area at the time of calculation exceeds 95% of total rentable retail area.

SCHEDULE 2

Existing Mortgages


1.	Mortgage dated May 22, 1997 made by RD Smithtown LLC to Fleet Bank, National Association to secure the principal sum of $7,100,000 and recorded on June 2, 1997 in Liber 19204, page 560. (Principal amount currently outstanding: $5,541,642.43)

2.	Mortgage dated May 22, 1997 made by RD Smithtown LLC to Fleet Bank, National Association to secure the principal sum of $1,000,000 and recorded on June 2, 1997 in Liber 19204, page 561.

	Mortgage dated as of February 19, 1998 made by RD Smithtown LLC to Fleet Bank, National Association to secure the principal sum of $1,500,000 and recorded on March 9, 1998 in Liber 19308, page 495. Consolidated by its terms with the aforesaid mortgage recorded in Liber 19204, page 561 to form a single lien of $2,500,000. (Principal amount currently outstanding: $2,192,082.88)

3.	Mortgage dated May 31, 2002 made by RD Smithtown LLC to Fleet National Bank to secure the principal sum of $1,439,437 and recorded on June 12, 2002 in Liber 20015, page 518. (Principal amount currently outstanding: $97,152.36)

4.	Mortgage dated June 30, 2004 made by RD Smithtown LLC to Fleet National Bank to secure the principal sum of $1,840,497.61 and recorded on July 15, 2004 in Liber 20796, page 519. (Principal amount currently outstanding: $1,389,918.60)

SCHEDULE 3

Leasing and Tenant Matters

1. Representations and Warranties of Borrower Regarding Leases.

Borrower represents and warrants that Borrower has delivered to Lender Borrower’s standard form of tenant lease and a true and correct copy of all Leases and any guaranty(ies) thereof, affecting any part of the Improvements, together with an accurate and complete rent roll for the Property, and no such Lease or guaranty contains any option or right of first refusal to purchase all or any portion of the Property or any present or future interest therein.

2. Covenants of Borrower Regarding Leases and Rents.

Borrower covenants that Borrower (a) will observe and perform all of the obligations imposed upon the landlord in the Leases and will not do or permit to be done anything to impair the security thereof; (b) will use its best efforts to enforce or secure, or cause to be enforced or secured, the performance of each and every obligation and undertaking of the respective tenants under the Leases and will appear in and defend, at Borrower’s sole cost and expense, any action or proceeding arising under, or in any manner connected with, the Leases; (c) will not collect any of the Rents more than thirty (30) days in advance of the time when the same become due under the terms of the Leases; (d) will not discount any future accruing Rents; (e) without the prior written consent of Lender, will not execute any assignment of the Leases or the Rents; (f) will not modify the rent, the term, the demised premises or the common area maintenance charges under any of the Leases, or add or modify any option or right of first refusal to purchase all or any portion of the Property or any present or future interest therein, or surrender, cancel or terminate any Lease, without the prior written consent of Lender; and (g) will execute and deliver, at the request of Lender, all such assignments of the Leases and Rents in favor of Lender as Lender may from time to time require.

3. Leasing Guidelines.

Borrower shall not enter into any Lease of space in the Improvements unless approved or deemed approved by Lender prior to execution. Borrower’s standard form of tenant lease, and any revisions thereto, must have the prior written approval of Lender. Lender shall be “deemed” to have approved any Lease that: (a) is on the standard form lease approved by Lender with no deviations except as approved by Lender; (b) is entered into in the ordinary course of business with a bona fide unrelated third party tenant, and Borrower, acting in good faith and exercising due diligence, has determined that the tenant is financially capable of performing its obligations under the Lease; (c) is received by Lender, together with any guaranty(ies) and financial information received by Borrower regarding the tenant and any guarantor(s), within fifteen (15) days after execution; (d) reflects an arm’s length transaction; (e) contains no option or right of first refusal to purchase all or any portion of the Property or any present or future interest therein; (f) requires the tenant to execute and deliver to Lender an estoppel certificate in form and substance acceptable to Lender within ten (10) days after notice from Lender; and (g) does not cover in excess of twenty-five percent (25%) of the aggregate net rentable area of

the Improvements or have a rental rate that is less than $25.00 per square foot. Borrower shall provide to Lender a correct and complete copy of each Lease, including any exhibits, and any guaranty(ies) thereof, prior to execution unless the Lease meets the foregoing requirements for “deemed” approval by Lender. Borrower shall pay all reasonable costs incurred by Lender in reviewing and approving Leases and any guaranties thereof, and also in negotiating subordination agreements and subordination, nondisturbance and attornment agreements with tenants, including reasonable attorneys’ fees and costs.

4. Delivery of Leasing Information and Documents.

From time to time upon Lender’s request, Borrower shall promptly deliver to Lender (a) complete executed originals of each Lease, including any exhibits thereto and any guaranty(ies) thereof, (b) a complete rent roll of the Property in such detail as Lender may require, together with such operating statements and leasing schedules and reports as Lender may require, (c) any and all financial statements of the tenants, subtenants and any lease guarantors to the extent available to Borrower, (d) such other information regarding tenants and prospective tenants and other leasing information as Lender may request, and (e) such estoppel certificates, subordination agreements and/or subordination, nondisturbance and attornment agreements executed by such tenants, subtenants and guarantors, if any, in such forms as Lender may require.

SCHEDULE 4

Swap Contracts

1. Swap Documentation. Within the timeframes required by Lender and Swap Counterparty, Borrower shall deliver to Swap Counterparty the following documents and other items, executed and acknowledged as appropriate, all in form and substance satisfactory to Lender and Swap Counterparty: (a) Master Agreement in the form published by the International Swaps and Derivatives Association, Inc. and related schedule in the form agreed upon between Borrower (or its Affiliate) and Swap Counterparty; (b) a confirmation under the foregoing, if applicable; (c) the Guaranty; (d) if Borrower (or its Affiliate) is anything other than a natural person, evidence of due authorization to enter into transactions under the foregoing Swap Contract with Swap Counterparty, together with evidence of due authorization and execution of any Swap Contract; and such other title endorsements, documents, instruments and agreements as Lender and Swap Counterparty may require to evidence satisfaction of the conditions set forth in this Section 1 of Schedule 7, including a swap endorsement to Lender’s title policy in form and substance satisfactory to Lender.

2. Conveyance and Security Interest. To secure Borrower’s Obligations, Borrower hereby transfers, assigns and transfers to Lender, and grants to Lender a security interest in, all of Borrower’s right, title and interest, but not its obligations, duties or liabilities for any breach, in, under and to the Swap Contract, any and all amounts received by Borrower in connection therewith or to which Borrower is entitled thereunder, and all proceeds of the foregoing. All amounts payable to Borrower under the Swap Contract shall be paid to Lender and shall be applied to pay interest or other amounts under the Loan.

3. Cross-Default. It shall be an Event of Default under this Agreement if any Event of Default occurs as defined under any Swap Contract as to which Borrower (or its Affiliate) is the Defaulting Party, or if any Termination Event occurs under any Swap Contract as to which Borrower (or its Affiliate) is an Affected Party. As used in this Section, the terms “Defaulting Party,” “Termination Event” and “Affected Party” have the meanings ascribed to them in the Swap Contract.

4. Remedies; Cure Rights. In addition to any and all other remedies to which Lender and Swap Counterparty are entitled at law or in equity, Swap Counterparty shall have the right, to the extent so provided in any Swap Contract or any Master Agreement relating thereto, (a) to declare an event of default, termination event or other similar event thereunder and to designate an Early Termination Date as defined under the Master Agreement, and (b) to determine net termination amounts in accordance with the Swap Contract and to setoff amounts between Swap Contracts. Lender shall have the right at any time (but shall have no obligation) to take in its name or in the name of Borrower (or its Affiliate) such action as Lender may at any time determine to be necessary or advisable to cure any default under any Swap Contract or to protect the rights of Borrower (or its Affiliate) or Swap Counterparty thereunder; provided, however, that before the occurrence of an Event of Default under this Agreement, Lender shall give prior written notice to Borrower before taking any such action. For this purpose, Borrower hereby constitutes Lender its true and lawful attorney-in-fact with full power of substitution,

which power of attorney is coupled with an interest and irrevocable, to exercise, at the election of Lender, any and all rights and remedies of Borrower (or its Affiliate) under the Swap Contract, including making any payments thereunder and consummating any transactions contemplated thereby, and to take any action that Lender may deem proper in order to collect, assert or enforce any claim, right or title, in and to the Swap Contract hereby assigned and conveyed, and generally to take any and all such action in relation thereto as Lender shall deem advisable. Lender shall not incur any liability if any action so taken by Lender or on its behalf shall prove to be inadequate or invalid. Borrower expressly understands and agrees that Lender is not hereby assuming any duties or obligations of Borrower (or its Affiliate) to make payments to Swap Counterparty under any Swap Contract or under any other Loan Document. Such payment duties and obligations remain the responsibility of Borrower (or its Affiliate) notwithstanding any language in this Agreement.

5. Timing of Interest Rate Periods. At all times when any Swap Contract is in effect, Borrower shall elect Interest Periods of one month in duration for all LIBOR Rate Principal. As used herein, the terms “Interest Period” and “LIBOR Rate Principal” have the meanings ascribed to them in the Note. Borrower shall time its rate elections under the Note so that each Interest Period for LIBOR Rate Principal ends on a day when a payment is due from either counterparty under any Swap Contract.


SECTION:	004.00
BLOCK:	02.00
LOTS:	002.002 (formerly lot 002.001) and 002.003 (formerly lot 002.000)
COUNTY:	Suffolk
ADDRESS:	18-80 East Main Street (Lot 002.002)
	10 Miller Place (Lot 002.003)

RD SMITHTOWN LLC,

a New York limited liability company

as Mortgagor

BANK OF AMERICA, N.A.

as Mortgagee

MORTGAGE AND SECURITY AGREEMENT

Dated: As of June 30, 2011

RECORD AND RETURN TO:

Schiff Hardin LLP
666 Fifth Avenue, 17th Floor
New York, New York 10103
Attention: Paul G. Mackey, Esq.

MORTGAGE AND SECURITY AGREEMENT

THIS MORTGAGE AND SECURITY AGREEMENT (this “Mortgage”) made the 30th day of June, 2011, by RD SMITHTOWN LLC, a New York limited liability company, having its office and principal place of business at c/o Acadia Realty Trust, 1311 Mamaroneck Avenue, Suite 260, White Plains, New York 10605 (hereinafter referred to as “Mortgagor” or “Borrower”), to BANK OF AMERICA, N.A., having an address at One Bryant Park, 35th Floor, New York, New York 10036 (hereinafter referred to as “Mortgagee”);

W I T N E S S E T H:

To secure the payment of an indebtedness in the principal sum of One Hundred Thirty-Nine Thousand Two Hundred Three and 73/100 Dollars ($139,203.73), in lawful money of the United States of America, to be paid with interest (said indebtedness, interest and all other sums which may or shall become due hereunder being hereinafter collectively referred to as the “Debt”) according to a certain note dated the date hereof given by Mortgagor to Mortgagee (hereinafter referred to as the “Note”), Mortgagor has mortgaged, given, granted, bargained, sold, aliened, enfeoffed, conveyed, confirmed and assigned, and by these presents does mortgage, give, grant, bargain, sell, alien, enfeoff, convey, confirm and assign unto Mortgagee all right, title and interest of Mortgagor now owned, or hereafter acquired, in and to the property described in Schedule A attached hereto (hereinafter referred to as the “Premises”);

TOGETHER WITH all right, title, interest and estate of Mortgagor now owned, or hereafter acquired, in and to the following property, rights, interests and estates (the Premises together with such property, rights, interests and estates being hereinafter collectively referred to as the “Mortgaged Property”):


	(a) (i) all buildings, structures, fixtures, additions, enlargements, extensions, modifications, repairs, replacements and improvements now or hereafter located on the Premises (hereinafter referred to as the “Improvements”); and (ii) to the extent permitted by law, the name or names, if any, as may now or hereafter be used for each Improvement, and the goodwill associated therewith.

	(b) all easements, rights-of-way, strips and gores of land, streets, ways, alleys, passages, sewer rights, water, water courses, water rights and powers, air rights and development rights, liberties, tenements, hereditaments and appurtenances of any nature whatsoever, in any way belonging, relating or pertaining to the Premises or the Improvements and the reversion and reversions, remainder and remainders, and all land lying in the bed of any street, road or avenue, opened or proposed, in front of or adjoining the Premises to the center line thereof and all the estates, rights, titles, interests, dower and rights of dower, curtesy and rights of curtesy, property, possession, claim and demand whatsoever, both in law and in equity, of Mortgagor of, in and to the Premises or the Improvements and every part and parcel thereof, with the appurtenances thereto;

	(c) all machinery, equipment, fixtures (including but not limited to all heating, air conditioning, plumbing, lighting, communications and elevator fixtures) and other


	property of every kind and nature whatsoever owned by Mortgagor, or in which Mortgagor has or shall have an interest, now or hereafter located upon the land or related to the Improvements, or appurtenant thereto, or usable in connection with the present or future operation and occupancy of the Premises or the Improvements and all building equipment, materials and supplies of any nature whatsoever owned by Mortgagor, or in which Mortgagor has or shall have an interest, now or hereafter located upon the Premises or the Improvements, or appurtenant thereto, or usable in connection with the present or future operation and occupancy of the Premises or the Improvements (hereinafter collectively called the “Equipment”), and the right, title and interest of Mortgagor in and to any of the Equipment which may be subject to any security agreements (as defined in the Uniform Commercial Code), superior in lien to the lien of the Mortgage;

	(d) all awards or payments, including interest thereon, which may heretofore and hereafter be made with respect to the Premises, the Improvements or the Equipment, whether from the exercise of the right of eminent domain (including but not limited to any transfer made in lieu of or in anticipation of the exercise of said right), or for a change of grade, or for any other injury to or decrease in the value of the Premises, the Improvements or the Equipment;

	(e) all leases and other agreements affecting the use, enjoyment or occupancy of the Premises, the Improvements or the Equipment now or hereafter entered into (the “Leases”) and all oil and gas or other mineral royalties, bonuses and rents, issues and profits from the Premises, the Improvements or the Equipment (the “Rents”) and all proceeds from the sale or other disposition of the Leases and the right to receive and apply the Rents to the payment of the Debt;

	(f) all proceeds of and any unearned premiums on any insurance policies covering the Premises, the Improvements or the Equipment, including, without limitation, the right to receive and apply the proceeds of any insurance, judgments, or settlements made in lieu thereof, for damage to the Premises, the Improvements or the Equipment;

	(g) the right, in the name and on behalf of Mortgagor, to appear in and defend any action or proceeding brought with respect to the Premises, the Improvements or the Equipment and to commence any action or proceeding to protect the interest of Mortgagee in the Premises, the Improvements or the Equipment; and

	(h) all right, title and interest of every nature of the Mortgagor in all monies deposited or to be deposited in any funds or account maintained or deposited with Mortgagee, or its assigns, in connection herewith.

TO HAVE AND TO HOLD the above granted and described Mortgaged Property unto and to the proper use and benefit of Mortgagee, and the successors and assigns of Mortgagee, forever.

PROVIDED, ALWAYS, and these presents are upon this express condition, if Mortgagor shall well and truly pay to Mortgagee the Debt at the time and in the manner provided in the

Note and this Mortgage, then these presents and the estate hereby granted shall cease, determine and be void.

AND Mortgagor covenants with and represents and warrants to Mortgagee as follows:

1. Payment of Debt. Mortgagor will pay the Debt at the time and in the manner provided for its payment in the Note.

2. Warranty of Title. Mortgagor warrants that Mortgagor has good, marketable and insurable title to the Mortgaged Property and has the full power, authority and right to execute, deliver and perform its obligations under this Mortgage and to deed, encumber, mortgage, give, grant, bargain, sell, alienate, enfeoff, convey, confirm, pledge, assign and hypothecate the same and that Mortgagor possesses a fee estate in the Premises and the Improvements and that it owns the Mortgaged Property free and clear of all liens, encumbrances and charges whatsoever except those which are approved by Mortgagee given by Mortgagor to Mortgagee covering the Mortgaged Property (the “Permitted Exceptions”) and that this Mortgage is and will remain a valid and enforceable first lien on and security interest in the Mortgaged Property, subject only to said exceptions. Mortgagor shall forever warrant, defend and preserve such title and the validity and priority of the lien of this Mortgage and shall forever warrant and defend the same to Mortgagee against the claims of all persons whomsoever.

3. Sale of Mortgaged Property. If this Mortgage is foreclosed, the Mortgaged Property, or any interest therein, may, at the discretion of Mortgagee, be sold in one or more parcels or in several interests or portions and in any order or manner.

4. No Credits on Account of the Debt. Mortgagor will not claim or demand or be entitled to any credit or credits on account of the Debt for any part of the taxes assessed against the Mortgaged Property or any part thereof and no deduction shall otherwise be made or claimed from the taxable value of the Mortgaged Property, or any part thereof, by reason of this Mortgage or the Debt.

5. Documentary Stamps. If at any time the United States of America, any state thereof or any governmental subdivision of any such state shall require revenue or other stamps to be affixed to the Note or this Mortgage, Mortgagor will pay for the same, with interest and penalties thereon, if any.

6. Appointment of Receiver. Mortgagee, in any action to foreclose this Mortgage or upon the actual or threatened waste to any part of the Mortgaged Property or upon the occurrence of any default hereunder, shall be at liberty, without notice, to apply for the appointment of a receiver of the Rents, and shall be entitled to the appointment of such receiver as a matter of right, without regard to the value of the Mortgaged Property as security for the Debt, or the solvency or insolvency of any person then liable for the payment of the Debt.

7. Liability. If Mortgagor consists of more than one person, the obligations and liabilities of each such person hereunder shall be joint and several.

8. Construction. The terms of this Mortgage shall be governed by and construed in accordance with the laws of the State of New York.

9. Security Agreement. This Mortgage constitutes both a real property mortgage and a “security agreement” within the meaning of the Uniform Commercial Code, and the Mortgaged Property includes both real and personal property and all other rights and interest, whether tangible or intangible in nature, of Mortgagor in the Mortgaged Property. Mortgagor, by executing and delivering this Mortgage, has granted to Mortgagee, as security for the Debt, a security interest in the Equipment. If Mortgagor shall default under the Note or this Mortgage, Mortgagee, in addition to any other rights and remedies which it may have, shall have and may exercise, immediately and without demand, any and all rights and remedies granted to a secured party upon default under the Uniform Commercial Code.

10. Headings, etc. The headings and captions of various paragraphs of this Mortgage are for convenience of reference only and are not to be construed as defining or limiting, in any way, the scope or intent of the provisions hereof.

11. Filing of Mortgage, etc. Mortgagor forthwith upon the execution and delivery of this Mortgage and thereafter, from time to time, will cause this Mortgage, and any security instrument creating a lien or evidencing the lien hereof upon the Mortgaged Property, to be filed, registered or recorded in such manner and in such places as may be required by any present or future law in order to publish notice of and fully to protect the lien hereof upon, and the interest of Mortgagee in, the Mortgaged Property. Mortgagor will pay all filing, registration or recording fees, and all expenses incident to the preparation, execution and acknowledgment of this Mortgage and any security instrument with respect to the Mortgaged Property, and all Federal, state, county and municipal taxes, duties, imposts, assessments and charges (excluding Mortgagee’s income taxes) arising out of or in connection with the execution and delivery of this Mortgage or any security instrument with respect to the Mortgaged Property. Mortgagor shall hold harmless and indemnify Mortgagee, its successors and assigns, against any liability incurred by reason of the imposition of any tax (excluding Mortgagee’s income taxes) on the making and recording of this Mortgage.

12. Marshalling. Mortgagor waives and releases any right to have the Mortgaged Property marshaled.

13. Authority. Mortgagor (and the undersigned representative of Mortgagor) has full power, authority and legal right to execute this Mortgage and to mortgage, give, grant, bargain, sell, alien, enfeoff, convey, confirm and assign the Mortgaged Property pursuant to the terms hereof and to keep and observe all of the terms of this Mortgage on Mortgagor’s part to be performed.

14. Inapplicable Provisions. If any term, covenant or condition of the Mortgage shall be held to be invalid, illegal or unenforceable in any respect, this Mortgage shall be construed without such provision.

15. No Oral Change. This Mortgage may only be modified or amended by an agreement in writing signed by Mortgagor and Mortgagee, and may only be released, discharged or satisfied of record by an agreement in writing signed by Mortgagee.

16. Trust Fund. Pursuant to Section 13 of the Lien Law of New York, Mortgagor shall receive the advances secured hereby and shall hold the right to receive such advances as a trust fund to be applied first for the purpose of paying the cost of any improvement and shall apply such advances first to the payment of the cost of any such improvement on the Mortgaged Property before using any part of the total of the same for any other purpose.

17. Commercial Property. This Agreement does not cover real property principally improved or to be improved by one or more structures containing in the aggregate not more than six (6) residential dwelling units.

[Remainder of page intentionally left blank]

IN WITNESS WHEREOF, Mortgagor has duly executed this Mortgage the day and year first above written.


	MORTGAGOR:

	RD SMITHTOWN LLC, a New York limited liability company

	By	/s/ Robert Masters

		Robert Masters
		Senior Vice President


STATE OF NEW YORK	)
	: ss.:
COUNTY OF WESTCHESTER	)

On the 28th day of June in the year 2011, before me, the undersigned, a notary public in and for said state, personally appeared Robert Masters, personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument.


		/s/ Debra Leibler-Jones

		Notary Public

My Commission Expires:

4/20/14


Debra Leibler-Jones
Notary Public – State of New York
No. 01LE6005994
Qualified in Dutchess County
Comm. Exp. 04/20/2014

SCHEDULE A

Property Description

PARCEL A-1:

ALL that certain plot, piece or parcel of land, situate, lying and being in the Smithtown Branch, Town of Smithtown, County of Suffolk and State of New York, bounded and described as follows:

BEGINNING at a point on the south side of Main Street, distant 590 feet easterly from the corner formed by the intersection of the southerly side of Main Street with the easterly side of Lawrence Avenue, being the point of intersection of the southerly side of Main Street and the center line of Miller Place;

RUNNING THENCE along the southerly side of Main Street north 72 degrees 28 minutes 50 seconds east 93.95 feet;

THENCE still along the southerly side of Main Street north 77 degrees 55 minutes 30 seconds east 96.05 feet to the land now or formerly of Evelyn W. Miller;

THENCE along the land now or formerly of Evelyn W. Miller south 17 degrees 31 minutes 10 seconds east 147.9 feet to the center line of a road;

THENCE along the center line of said road and the extension thereof westerly, north 86 degrees 39 minutes 30 seconds west 202.87 feet to a point in the center line of Miller Place;

THENCE along the center line of Miller Place north 17 degrees 31 minutes 10 seconds west 84.76 feet to the southerly side of Main Street at the point or place of BEGINNING.

PARCEL A-2:

ALL that certain plot, piece or parcel of land, situate, lying and being in the Smithtown Branch, Town of Smithtown, County of Suffolk and State of New York, bounded and described as follows:

BEGINNING at a point formed by the intersection of the southerly side of Main Street with the easterly side of Lawrence Avenue;

RUNNING THENCE easterly along the southerly side of Main Street north 72 degrees 28 minutes 50 seconds east 228.66 feet to a point;

THENCE south 17 degrees 31 minutes 10 seconds east 373.78 feet along other land of Smithtown Center, Inc. to land of the Union Free School District No. 1;

THENCE south 72 degrees 28 minutes 50 seconds west 371.10 feet along said land of the Union Free School District No. 1 to a point on the easterly side of Lawrence Avenue;

THENCE north 3 degrees 20 minutes 30 seconds east 400 feet along the easterly side of Lawrence Avenue to the point or place of BEGINNING.

PARCEL A-3:

ALL that certain plot, piece or parcel of land, situate, lying and being in the Smithtown Branch, Town of Smithtown, County of Suffolk and State of New York, bounded and described as follows:

BEGINNING at a point on the south side of Main Street distant 228.66 feet easterly as measured along the south side of Main Street from the corner formed by the intersection of the south side of Main Street with the east side of Lawrence Avenue from said point of beginning;

RUNNING THENCE north 72 degrees 28 minutes 50 seconds east along the south side of Main Street 361.34 feet to the center line of Miller Place;

THENCE along the center line of Miller Place the following two courses and distances:


	South 17 degrees 31 minutes 10 seconds east 175.16 feet; and
	South 3 degrees 20 minutes 30 seconds west 221.82 feet;

THENCE north 87 degrees 14 minutes 55 seconds west a distance of 25 feet to a point in the westerly line of Miller Place;

THENCE south 72 degrees 28 minutes 50 seconds west along land of Union Free School District No. 1, 258.90 feet to land of Smithtown Center Inc.;

THENCE along last-mentioned land north 17 degrees 31 minutes 10 seconds west along last-mentioned land 373.78 feet to the point or place of BEGINNING.

PARCEL B:

ALL that certain plot, piece or parcel of land, situate, lying and being in the Smithtown Branch, Town of Smithtown, County of Suffolk and State of New York, bounded and described as follows:

COMMENCING at a point on the southerly side of Main Street, distant 590 feet easterly from the corner formed by the intersection of the easterly side of Lawrence Avenue with the southerly side of Main Street;

RUNNING THENCE south 17 degrees 31 minutes 10 seconds east 84.76 feet to the point of beginning;

THENCE from said point of beginning south 86 degrees 39 minutes 30 seconds east 202.87 feet to land of Evelyn W. Miller;

THENCE along said land the following four courses and distances:


	South 17 degrees 31 minutes 10 seconds east 152.10 feet;
	South 72 degrees 28 minutes 50 seconds west 67.96 feet;
	South 4 degrees 45 minutes 20 seconds east 338.82 feet;
	North 87 degrees 50 minutes 20 seconds west 230 feet to land of Union Free School District No. 1;

THENCE along said land north 2 degrees 09 minutes 40 seconds east 200 feet;

THENCE south 87 degrees 14 minutes 55 seconds east 25 feet;

THENCE north 3 degrees 20 minutes 30 seconds east 221.82 feet;

THENCE north 17 degrees 31 minutes 10 seconds west 90.40 feet to the point or place of BEGINNING.

BLANKET DESCRIPTION

FOR INFORMATION MAY BE USED FOR CONVEYANCING:

ALL THAT CERTAIN plot, piece or parcel of land, situate, lying and being in the Smithtown Branch, Town of Smithtown, County of Suffolk and State of New York, bounded and described as follows:

BEGINNING at a point formed by the intersection of the southerly side of Main Street with the easterly side of Lawrence Avenue;

RUNNING THENCE easterly along the southerly side of Main Street, north 72 degrees 28 minutes 50 seconds east, 683.95 feet to a point;

THENCE still along the southerly side of Main Street, north 77 degrees 55 minutes 30 seconds east, 96.05 feet; and

THENCE south 17 degrees 31 minutes 10 seconds east, 300.00 feet;

THENCE south 72 degrees 28 minutes 50 seconds west, 67.96 feet;

THENCE south 4 degrees 45 minutes 20 seconds east, 338.82 feet;

THENCE north 87 degrees 50 minutes 20 seconds west, 230.00 feet;

THENCE north 2 degrees 9 minutes 40 seconds east, 200.00 feet;

THENCE south 72 degrees 28 minutes 50 seconds west, 630.00 feet to the easterly side of Lawrence Avenue;

THENCE along the easterly side of Lawrence Avenue, north 3 degrees 20 minutes 30 seconds east, 400.00 feet to the point or place of BEGINNING.


SECTION:	004.00
BLOCK:	02.00
LOTS:	002.002 (formerly lot 002.001) and 002.003 (formerly lot 002.000)
COUNTY:	Suffolk
ADDRESS:	18-80 East Main Street (Lot 002.002)
	10 Miller Place (Lot 002.003)

As of June 30, 2011

MORTGAGE CONSOLIDATION AND MODIFICATION AGREEMENT

by and between

RD SMITHTOWN LLC,

as Mortgagor

and

BANK OF AMERICA, N.A.,

a national banking association,

as Mortgagee

This instrument prepared by, and after recording please return to:

Schiff Hardin LLP
666 Fifth Avenue, 17th Floor
New York, New York 10103
Attention: Paul G. Mackey, Esq.

MORTGAGE CONSOLIDATION AND MODIFICATION AGREEMENT

MORTGAGE CONSOLIDATION AND MODIFICATION AGREEMENT (this “Agreement”) made as of the 30th day of June, 2011 by and between BANK OF AMERICA, N.A., having an office at One Bryant Park, 35th Floor, New York, New York 10036 (“Mortgagee”), and P/A-RD SMITHTOWN LLC, a New York limited liability company having an address c/o Acadia Realty Trust, 1311 Mamaroneck Avenue, Suite 260, White Plains, New York 10605 (“Mortgagor”).

W I T N E S S E T H :

WHEREAS, Mortgagee is the successor by merger to Fleet National Bank and is now the lawful owner and holder of the mortgages (collectively, the “Mortgage”) more particularly described in Exhibit A attached hereto and made a part hereof, and of the notes (collectively, the “Note”) and other obligations secured thereby;

WHEREAS, the maximum outstanding principal amount which is or under any contingency may be secured by the Mortgage is $9,360,000 (the “Indebtedness”), plus interest thereon and all additional interest and late payment and prepayment charges in respect thereof, plus all amounts expended by Mortgagee following a default thereunder in respect of insurance premiums and real estate taxes, and all legal costs or expenses of collection of the note(s) secured thereby or of the defense or prosecution of the rights and lien created thereby;

WHEREAS, the Mortgage is presently a valid lien on all of the real property described in Schedule A attached hereto and made a part hereof (the “Premises”);

WHEREAS, Mortgagor is the lawful owner of the Premises; and

WHEREAS, Mortgagee and Mortgagor have agreed to consolidate, modify, amend and restated the Mortgage as a single first lien on the entire Premises and to modify the terms of the Mortgage in the manner hereinafter set forth;

NOW, THEREFORE, in consideration of the premises and the mutual agreements herein expressed, the parties hereto covenant and agree as follows:

1. Mortgagor hereby assumes the payment and performance of all obligations, conditions and covenants under, and agrees to be bound by all of the terms of, the Mortgage, as herein modified. The lien of the Mortgage is hereby consolidated and modified to encumber all of the “Mortgaged Property” (as such term is defined in the Mortgage, as modified hereby), so that together they shall hereafter constitute in law but one first mortgage, a valid and enforceable single lien upon the Premises, securing the Indebtedness, together with interest accrued and to accrue thereon and all other sums secured thereby.

2. Mortgagor hereby assumes and agrees to pay the Indebtedness and interest thereon at the rate(s) of interest and on the terms provided for the payment of principal and interest in the Note, as consolidated and modified by that certain note consolidation and modification agreement, dated the date hereof, between Mortgagee and Mortgagor (the “Note Agreement”).

3. The Mortgage is hereby consolidated, amended and restated in its entirety by Exhibit B attached hereto and made a part hereof including any exculpatory provisions contained in said Exhibit B, and Mortgagor hereby agrees to comply with and be bound by all of the terms, covenants and conditions set forth in said Exhibit B.

4. Mortgagor hereby certifies that this Agreement secures the same indebtedness evidenced by the Note, as consolidated and modified by the Note Agreement, and secured by the Mortgage, as consolidated and modified hereby, and secures no new or further indebtedness or obligation.

5. Mortgagor represents and warrants that there exist no defenses, offsets or counterclaims with respect to its obligations under the Mortgage, as consolidated and modified hereby, or under the Note, as consolidated and modified by the Note Agreement, including its obligation for the payment of the Indebtedness.

6. The terms and provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their heirs, representatives, successors and assigns.

7. This Agreement and the rights and obligations of the parties hereto shall in all respects be governed by, and construed and enforced in accordance with, the laws of the State of New York (without giving effect to New York’s choice of law principles).

8. This Agreement may be executed in multiple counterparts, each of which shall constitute an original and together which shall constitute but one and the same instrument.

9. The information set forth on the cover hereof is incorporated herein.

[Remainder of page intentionally left blank.]

IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by each of the parties hereto as of the day and year first above written.


	BANK OF AMERICA, N.A.

	By	/s/ Gregory Egli

		Gregory Egli
		Senior Vice President

	RD SMITHTOWN LLC, a New York limited liability company

	By	/s/ Robert Masters

		Robert Masters
		Senior Vice President


STATE OF NEW YORK	)
	: ss.:
COUNTY OF NEW YORK	)

On the 29th day of June in the year 2011, before me, the undersigned, a notary public in and for said state, personally appeared Gregory Egli, personally known to me or proved to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s), or the person upon behalf of which the individual(s) acted, executed the instrument.


		/s/ Pascale Andre

		Notary Public
My Commission Expires:

Jan. 25, 2015


Pascale Andre
Notary Public – State of New York
No. 01AN6018911
Qualified in Nassau County
My Commission Expires January 25, 2015


STATE OF NEW YORK	)
	: ss.:
COUNTY OF WESTCHESTER	)


		/s/ Debra Leibler-Jones

		Notary Public
My Commission Expires:

4/20/14


Debra Leibler-Jones
Notary Public – State of New York
No. 01LE6005994
Qualified in Dutchess County
Comm. Exp. 04/20/2014

SCHEDULE A

Property Description

PARCEL A-1:

ALL that certain plot, piece or parcel of land, situate, lying and being in the Smithtown Branch, Town of Smithtown, County of Suffolk and State of New York, bounded and described as follows:

RUNNING THENCE along the southerly side of Main Street north 72 degrees 28 minutes 50 seconds east 93.95 feet;

THENCE still along the southerly side of Main Street north 77 degrees 55 minutes 30 seconds east 96.05 feet to the land now or formerly of Evelyn W. Miller;

THENCE along the land now or formerly of Evelyn W. Miller south 17 degrees 31 minutes 10 seconds east 147.9 feet to the center line of a road;

THENCE along the center line of said road and the extension thereof westerly, north 86 degrees 39 minutes 30 seconds west 202.87 feet to a point in the center line of Miller Place;

THENCE along the center line of Miller Place north 17 degrees 31 minutes 10 seconds west 84.76 feet to the southerly side of Main Street at the point or place of BEGINNING.

PARCEL A-2:

ALL that certain plot, piece or parcel of land, situate, lying and being in the Smithtown Branch, Town of Smithtown, County of Suffolk and State of New York, bounded and described as follows:

BEGINNING at a point formed by the intersection of the southerly side of Main Street with the easterly side of Lawrence Avenue;

RUNNING THENCE easterly along the southerly side of Main Street north 72 degrees 28 minutes 50 seconds east 228.66 feet to a point;

THENCE south 17 degrees 31 minutes 10 seconds east 373.78 feet along other land of Smithtown Center, Inc. to land of the Union Free School District No. 1;

THENCE south 72 degrees 28 minutes 50 seconds west 371.10 feet along said land of the Union Free School District No. 1 to a point on the easterly side of Lawrence Avenue;

THENCE north 3 degrees 20 minutes 30 seconds east 400 feet along the easterly side of Lawrence Avenue to the point or place of BEGINNING.

PARCEL A-3:

ALL that certain plot, piece or parcel of land, situate, lying and being in the Smithtown Branch, Town of Smithtown, County of Suffolk and State of New York, bounded and described as follows:

RUNNING THENCE north 72 degrees 28 minutes 50 seconds east along the south side of Main Street 361.34 feet to the center line of Miller Place;

THENCE along the center line of Miller Place the following two courses and distances:


	South 17 degrees 31 minutes 10 seconds east 175.16 feet; and
	South 3 degrees 20 minutes 30 seconds west 221.82 feet;

THENCE north 87 degrees 14 minutes 55 seconds west a distance of 25 feet to a point in the westerly line of Miller Place;

THENCE south 72 degrees 28 minutes 50 seconds west along land of Union Free School District No. 1, 258.90 feet to land of Smithtown Center Inc.;

THENCE along last-mentioned land north 17 degrees 31 minutes 10 seconds west along last-mentioned land 373.78 feet to the point or place of BEGINNING.

PARCEL B:

ALL that certain plot, piece or parcel of land, situate, lying and being in the Smithtown Branch, Town of Smithtown, County of Suffolk and State of New York, bounded and described as follows:

RUNNING THENCE south 17 degrees 31 minutes 10 seconds east 84.76 feet to the point of beginning;

THENCE from said point of beginning south 86 degrees 39 minutes 30 seconds east 202.87 feet to land of Evelyn W. Miller;

THENCE along said land the following four courses and distances:


	South 17 degrees 31 minutes 10 seconds east 152.10 feet;
	South 72 degrees 28 minutes 50 seconds west 67.96 feet;
	South 4 degrees 45 minutes 20 seconds east 338.82 feet;
	North 87 degrees 50 minutes 20 seconds west 230 feet to land of Union Free School District No. 1;