Acadia Realty Trust
Annual Report 2005
Solid Core Portfolio
Strong Balance Sheet
External Growth Platform
Superior Management Team
Acadia Realty Trust (NYSE:AKR), headquartered in White
Plains, New York is a fully integrated, self-managed and
self-administered equity REIT focused primarily on the
ownership, acquisition, redevelopment and management
of retail properties, including neighborhood/community
shopping centers and mixed-use properties with
retail components.
We currently operate 75 properties, which we own or have
an ownership interest in, which are located primarily in
the Northeast, Mid-Atlantic and Midwestern regions of
the United States totaling approximately 10 million
square feet.
Financial Highlights
In thousands
Total Revenues
Funds from
Operations 2
Real Estate Owned,
at Cost
Common Shares
Outstanding
Operating Partnership
Units Outstanding
2005
2004 1
2003 1
2002 1
2001 1
$83,318
$ 71,657
$ 66,646
$ 65,916
$ 57,327
$35,842
$ 30,004
$ 27,664
$ 30,162
$ 13,487
$435,751
$414,974
$ 407,220
$393,635
$378,216
31,543
31,341
27,409
25,257
28,698
653
392
1,139
3,163
5,250
1Amounts for 2001 through 2004 have been restated to reflect activity and balances from continuing operations only. Consistent with
Statement of Financial Accounting Standards No. 144, the results of operations as well as assets and liabilities of sold properties are reported
separately as discontinued operations in our consolidated financial statements.
2We consider funds from operations (“FFO”) as defined by the National Association of Real Estate Investment Trusts (“NAREIT”) to be an
appropriate supplemental disclosure of operating performance for an equity REIT due to its widespread acceptance and use within the
REIT and analyst communities. FFO is presented to assist investors in analyzing 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 property and depre-
ciation 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 generally accepted
accounting principles (“GAAP”) and is not indicative of cash available to fund all cash needs, including distributions. It should not be con-
sidered as an alternative to net income for the purpose of evaluating our performance or to cash flows as a measure of liquidity. Consistent
with the NAREIT definition, we define FFO as net income (computed in accordance with GAAP), excluding gains (or losses) from sales of
depreciated property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.
Acadia Realty Trust 2005 Annual Report
Page 1
To Our Shareholders
By almost all measures, 2005 was a year of significant achievement for
Acadia and its shareholders. We were the best performing shopping center
REIT, delivering to our investors a total return of 36%. Acadia’s shareholders
have also enjoyed average annual returns of 46% over the last three years
and 35% over five years. As important as high shareholder returns, is our
ability to achieve these results while maintaining a conservative balance
sheet, an ever-improving core portfolio and a pipeline of value-added proj-
ects that represent the seeds for our future growth.
Kenneth F. Bernstein
President and CEO
Acadia’s Average Five-Year Total Returns
Acadia versus Other Shopping Center REIT Sectors
Acadia
Peers
40%
35%
30%
25%
20%
15%
Along with strong stock performance, the other
financial metrics of our business were among
the leaders in our industry. Our earnings (nor-
malized FFO) grew 9%. Our dividend grew by
7.25% as our payout ratio (the best indicator of
the safety of that dividend) held steady at 63%
of FFO. While same store net operating income
(NOI) grew at a very healthy 5.7%, we continued
to maintain a conservative debt-to-market cap
at 32% with very little floating rate debt. All of
these achievements have positioned Acadia for
continued growth and success.
One of the more evident, but less meaningful, changes this year, is the format of our annual report. Because most of our
shareholders/readers use the Internet, we have chosen this year to focus our creativity and resources on creating an
electronic annual report available on our recently updated website at acadiarealty.com . While this letter and our 10k
will continue to be printed (this year on recycled paper stock), this mailed version is certainly leaner and greener than
previous years. For a more comprehensive visual understanding of Acadia, our progress and our focus, please visit our
website the next time you are at your computer.
Page 2
Acadia Realty Trust 2005 Annual Report
Since I assumed CEO responsibilities five years ago, our focus has been four-pronged:
Create a high-quality, core portfolio of high barrier-to-entry retail properties.
Maintain a solid balance sheet that provides both security and the opportunity for strong
future growth.
Implement a disciplined and profitable investment program that stimulates significant external
growth through strong risk-adjusted returns on our capital.
Create and nurture an experienced and dedicated management team that embraces our core values
and will consistently grow our business to provide superior performance well into the future.
Those of you who have followed Acadia closely over the past five years have certainly heard or read all this
before. While the specific assets and details may change, these four components of our strategy remain the keys
to our success.
CORE PORTFOLIO
In 2005 we continued to drive the performance and enhance the asset quality of our core portfolio
through aggressive leasing and effective asset recycling. As a result, our occupancy rate has
improved to an all-time high of 94%.
2005 was an opportune time to shed properties that
Our leasing/redevelopment team, led by Joe Povinelli, did
were inconsistent with our long-term growth strategy
a terrific job of driving our occupancy to an all-time high
and replace them with higher growth and higher quality
for Acadia. More than just occupancy rates, Joe’s team
properties. An example of how we implemented this
strategy was the disposition of an underperforming cen-
focuses on bringing the right tenants to our centers and
building strong relationships with those tenants who
ter in Berlin, New Jersey and its replacement with an
represent the lifeblood of our industry. During 2005 we
exceptional property in densely populated Staten Island,
renewed our commitment to offer our anchor tenants,
New York. While there are several factors that can deter-
such as Target, Shaw’s Supermarket and Home Depot,
mine the long-term quality of a shopping center, a dense
and other important tenants such as Trader Joe’s, TJ Maxx
population with very limited land for new retail develop-
and Starbucks, the finest locations in a given market.
ment — what we consider high barriers to entry — is
Acadia’s leasing team should also be credited with cre-
perhaps the most significant. We will continue to pru-
atively repositioning existing properties, which resulted
dently look to recycle or rotate assets, building an ever-
in luring such tenants as Coach to our Greenwich,
improving portfolio of supply-constrained properties that
Connecticut property last June and Sleepy’s to a redevel-
provide superior performance independent of where we
opment on Bartow Avenue in the Bronx.
might be in the economic cycle.
Acadia Realty Trust 2005 Annual Report
Page 3
STRONG BALANCE SHEET
Maintaining a strong balance sheet has always been a critical component of our business plan
because it reduces certain risks and volatility. Equally important, a strong balance sheet provides
us with plenty of “dry powder” as new opportunities arise. The strength of our 2005 balance sheet
was evidenced by all industry measures. We held our debt-to-market cap to 32% and, more importantly, a fixed-
charge coverage of 3.5 times. These ratios ensure the availability of capital to take advantage of opportunities
without having to be overly dependent on the public equity markets.
Protecting our balance sheet from unnecessary exposure
Finally, a critical component of our capital structure is
to rising interest rates is also crucial to our balance sheet
providing our shareholders with a safe and growing divi-
strategy. Mike Nelsen, Jon Grisham and the rest of their
dend. Last year we increased our dividend by 7.25%, result-
team did an excellent job last year of minimizing our
ing in average dividend growth of 8.5% over the past five
exposure to rising floating-rate debt while simultaneously
years. We believe that a dividend’s safety, defined by how
locking into low-cost fixed-rate long-term debt. While it
well-covered it is by our earnings, is as important as
may be unclear when and how significantly long-term
the amount of the dividend. Our dividend payout ratio
rates will climb, we are confident that borrowing
remained at a solid 63% of FFO in 2005, which enables us
long-term fixed-rate debt at less than 5.5% will feel
to increase our dividend as our earnings growth continues.
very comfortable in the not-so-distant future.
Dividend Growth
Fixed Charge Coverage Ratio
Acadia versus Other Shopping Center REITS
$0.75
$0.70
$0.65
$0.60
$0.55
$0.50
$0.45
$0.40
$0.35
$0.30
2002
2003
2004
2005
2006
Acadia
Peers
4.0x
3.5x
3.0x
2.5x
2.0x
1.5x
Page 4
Acadia Realty Trust 2005 Annual Report
PROFITABLE EXTERNAL GROWTH PLATFORM
Five years ago we launched our external growth platform with the formation of our first invest-
ment fund, AKR Fund I. We believed that the discretionary fund structure enabled us to leverage
our company’s strength and provide our shareholders with returns superior to a more typical
acquisition structure. At the time, the fund structure was relatively new to the REIT community and not fully
appreciated. In 2004 we launched our second fund, AKR Fund II, which is our current investment vehicle. In 2005,
we continued our Fund II deployment with several exciting new acquisitions, and began the very profitable
harvesting of Fund I investments made in prior years.
Acadia’s investment team, led by Joel Braun and comple-
velopments include two new properties in Northern
mented by all of our other departments, is one of the
Manhattan, and properties on 161st Street in the Bronx,
best in the business. Utilizing our investment funds as
on Liberty Avenue in Queens and in Canarsie, Brooklyn.
the main driver of external growth, Joel and his talented
team acquired a series of outstanding properties and
put into place important investment ventures that will
help drive our growth for future years. Last year, although
we did acquire a few one-off assets, such as Clark and
Diversey in Lincoln Park, Chicago, we focused the majority
of our investment efforts on the two investment platforms
formed in prior years: our New York Urban/Infill Venture
and our RCP Venture.
Acadia is a
participant
in the acquisi-
tion of the
257-store
Mervyn’s
department
store chain.
NEW YORK URBAN/INFILL
These seven innovative projects, which could total as
Our New York Urban/Infill redevelopment program,
much as 1.5 million square feet when complete, utilize the
launched with our gifted partners at P/A Associates,
unique density of the five boroughs of New York City and
acquires prime New York City properties in portions of
the strong tenant relationships that P/A and Acadia have
the city that are underserved by strong national tenants.
fostered, to bring the best retailers to locations previously
We use our two companies’ combined talents to identify
perceived as too complex for national tenants to pene-
locations that can become dominant retail properties.
trate. While these deals are as complex as they are excit-
Last year we added five redevelopment projects in New
ing, I believe our joint team is up to the task. Joe Hogan,
York City to our previous acquisitions on Fordham Road
our skillful head of construction, works hand in hand
in the Bronx and in Pelham Manor, New York. These rede-
with Aaron Malinsky and Paul Slayton of P/A Associates
Pelham Manor Shopping Plaza, Pelham Manor, NY (suburb of NYC). Redevelopment rendering.
Acadia Realty Trust 2005 Annual Report
Page 5
and our redevelopment team to see these projects
through to their completion. Bob Scholem, head of prop-
erty management, has done a remarkable job integrating
these projects into our operating system — not an easy task
given all of the moving parts.
While these ventures will not contribute to our earnings
until they are closer to completion, they contribute to
Acadia’s opportunities for significant future growth. At a
time when existing, stable real estate properties are very
expensive, investing in situations where we can use our
value-added capabilities to create future growth is essen-
tial to our long-term growth prospects.
Brandywine Town Center, Brandywine, PA
consortium as our partners, and look forward to participat-
RETAILER CONTROLLED PROPERTY VENTURE
ing in other retailer investments through our RCP Venture.
In 2004 we launched our second investment platform,
the Retailer Controlled Property (“RCP”) Venture, with our
partners Klaff Realty and Lubert-Adler. The goal of this
strategy is to acquire real estate owned or controlled
by major retailers. Our first RCP investment (our partici-
pation in the acquisition of Mervyn’s department stores
in 2004) has already proven to be one of the more prof-
itable in our company’s history. During 2005, through
the sale of a portion of the portfolio and a subsequent
refinancing of the balance, we have already received
almost twice our equity investment. Our partners in the
consortium have done a remarkable job — at both the
real estate and Mervyn’s operations level — maximizing
the value of this investment.
HARVESTING PROFITS
While we continue to make important new investments
that will plant the seeds for future growth, 2005 was also
a great year to begin harvesting some of the profits from
earlier investments. With the sale of our fund investors’
interest in our Wilmington, Delaware complex, we entered
into an agreement to recapitalize our investment in those
properties at year-end. The recapitalization resulted in an
implied equity profit of $88 million on our equity invest-
ment of only $47 million enabling the return of all of the
investors’ capital in AKR Fund I and allowing our profit
participation to begin. This profit participation will con-
tribute significant earnings gains in 2006 and should
continue for several years as the harvesting continues.
When we launched RCP with the Klaff organization and
Bob Masters, our General Counsel, along with Joel Braun,
Lubert-Adler, we were confident that we had chosen
did a great job on a complicated and profitable transac-
the right partners to participate with in this unique and
tion. As an added benefit to this transaction, we are able
profitable strategy. Since then, both Hersch Klaff and
to create a potentially productive relationship with GDC
Dean Adler have proven that they and their extraordinary
Development Corp., the acquirer of AKR Fund I’s interest
teams are the premier players in the retailer real estate
in the property. We consider the GDC team an ideal long-
arena. We are fortunate to have them and their extended
term partner and a top-tier mixed-use developer.
Page 6
Acadia Realty Trust 2005 Annual Report
ENERGIZED MANAGEMENT TEAM
As Acadia has grown, hiring, motivating, teaching and harnessing the energy from our talented
management team has become a critical ingredient in our success. Joe Napolitano, as our head of
asset management, has worked with all of our department heads, as well as senior management,
to continue to drive our superior performance. In 2005, we added 41 new members to our team. They bring cre-
ativity, innovation and new perspectives that have already positively impacted our organization and will enable us
to continue to drive our growth and results for years to come.
A key component to a successful management team is a
with both the letter and the spirit of the evolving and
knowledgeable and independent board of directors. Our
complex regulations and requirements expected of
board not only provides important oversight on behalf of
today’s public companies. Wendy Luscombe, as a former
shareholders, but is a valuable source of knowledge and
REIT CEO herself and an active advisor to institutional
experience. Lee Wielansky, as Lead Trustee, brings both his
investors, brings an in-depth knowledge of both the
decades of experience as a real estate developer and his
public and private real estate markets. I am grateful to all
extensive REIT experience. Alan Forman of Yale University
the board members for their time, integrity, diligence and
has managed one of the most successful real estate
overall contribution to our success.
endowment funds in the nation and contributes his
significant investment acumen. Doug Crocker, the former
CEO of Equity Residential Trust, is one of the most experi-
enced REIT/real estate executives that any board can
have as a member. Larry Kellar, former CFO of Kroger
Supermarkets and former head of real estate for Kmart,
offers both a retailer’s perspective and keen financial
insight. Suzanne Hopgood, as chair of our corporate gov-
ernance/nominating committee, ensures our compliance
With our four-pronged focus, we are excited and energized
about the future of Acadia. Our team, which continues
to become deeper and stronger as Acadia grows, is well
positioned and committed to continuing to create share-
holder value, our mandate. We are extremely grateful for
the support our shareholders gave us in 2005 and hope
to retain that confidence and support by continuing to
deliver superior results in 2006 and beyond.
Kenneth F. Bernstein
President and CEO
Acadia Realty Trust 2005 Annual Report
Page 7
Acadia Locations
Core Properties
239 Greenwich Avenue
Greenwich, CT
Town Line Plaza
Rocky Hill, CT
Hobson West Plaza
Naperville, IL
Merrillville Plaza
Hobart, IN
Crescent Plaza
Brockton, MA
Methuen Shopping Center
Methuen, MA
Bloomfield Town Square
Bloomfield Hills, MI
Elmwood Park
Shopping Center
Elmwood Park, NJ
Ledgewood Mall
Ledgewood, NJ
Clark and Diversey
Chicago, IL
Marketplace of Absecon
Absecon, NJ
Bartow Avenue
Bronx, NY
Amboy Road
Staten Island, NY
The Branch Plaza
Smithtown, NY
New Loudon Center
Latham, NY
Pacesetter Park
Shopping Center
Pomona, NY
Soundview Marketplace
Port Washington, NY
Village Commons
Shopping Center
Smithtown, NY
Crossroads
Shopping Center
White Plains, NY
Mad River Station
Dayton, OH
Abington Towne Center
Abington, PA
Blackman Plaza
Wilkes-Barre, PA
Bradford Towne Centre
Towanda, PA
Greenridge Plaza
Scranton, PA
Luzerne Street
Shopping Center
Scranton, PA
Mark Plaza
Edwardsville, PA
Pittston Plaza
Pittston, PA
Plaza 422
Lebanon, PA
Route 6 Mall
Honesdale, PA
Walnut Hill Plaza
Woonsocket, RI
The Gateway
Shopping Center
South Burlington, VT
Fund Properties
Brandywine
Town Center
Wilmington, DE
Market Square
Shopping Center
Wilmington, DE
Sterling Heights
Shopping Center
Sterling Heights, MI
Fordham Place
Bronx, NY
Pelham Manor
Shopping Plaza
Pelham, NY
4650 Broadway
Manhattan, NY
161st Street
Bronx, NY
Liberty Avenue
Queens, NY
216th Street
Manhattan, NY
Tarrytown Centre
Tarrytown, NY
Amherst Marketplace
Amherst, OH
Granville Center
Columbus, OH
Sheffield Crossing
Sheffield, OH
Haygood Shopping Center
Virginia Beach, VA
Kroger/Safeway Locations
Cary, NC
Atlanta, TX
Cincinnati, OH
Batesville, AR
Conroe, TX
Benton, AR
Great Bend, KS
Carthage, TX
Hanrahan, LA
Little Rock, AR
Indianapolis, IN
Longview, WA
Irving, TX
Mustang, OK
Pratt, KS
Roswell, NM
Roanoke, VA
Ruidoso, NM
Shreveport, LA
San Ramon, CA
Wichita, KS (2 stores)
Springerville, AZ
Tucson, AZ
Tulsa, OK
Neiman Marcus
(Oakbrook Center)
Chicago, IL
Levitz Furniture
(Montrose Crossing
Shopping Center)
Rockville, MD
Headquarters
White Plains, NY
Regional Offices
Dayton, OH
Kingston, PA
Woonsocket, RI
Page 8
Acadia Realty Trust 2005 Annual Report
Acadia Realty Trust
Form 10k Report 2005
United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-K
✔
❏ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2005
❏ 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 as specified in its charter)
Maryland
(State of incorporation)
23-2715194
(I.R.S. employer identification no.)
1311 Mamaroneck Avenue, Suite 260, White Plains, NY 10605
(Address of principal executive offices)
(914) 288-8100
(Registrant’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Common Shares of Beneficial Interest, $.001 par value
(Title of Class)
New York Stock Exchange
(Name of Exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
✔
YES ❏ NO ❏
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15 (d) of the Securities Act.
✔
YES ❏ NO ❏
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 ❏ NO ❏
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or
any amendment to this Form 10-K. ❏
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2
of the Act).
Large Accelerated Filer ❏ Accelerated Filer ❏ Non-accelerated Filer ❏
✔
Indicate by checkmark whether the registrant ia a shell company (as defined in Rule 12b-2 of the Act).
✔
YES ❏ NO ❏
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of the last business day of
the Registrant’s most recently completed second fiscal quarter was $586.4 million, based on a price of $18.65 per share, the average sales price
for the Registrant’s shares of beneficial interest on the New York Stock Exchange on that date.
The number of shares of the registrant’s Common Shares of Beneficial Interest outstanding on March 15, 2006 was 31,758,241.
Part III: Definitive proxy statement for the 2006 Annual Meeting of Shareholders presently scheduled to be held May 15, 2006 to be filed pur-
suant to Regulation 14A.
DOCUMENTS INCORPORATED BY REFERENCE
Acadia Realty Trust 2005 Annual Report
Acadia Realty Trust. Form 10-K Report 2005
Contents
Item No.
PART I
Page
1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
PART II
5. Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of
Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . 27
7A. Quantitative and Qualitative Disclosures about Market Risk. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . 36
9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
PART III
10. Directors and Executive Officers of the Registrant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
PART IV
15. Exhibits, Financial Statements, Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Acadia Realty Trust 2005 Annual Report
Special Note Regarding
Forward-Looking Statements
Certain statements contained in this Annual Report on Form
10-K may contain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities & Exchange Act of 1934 and as
such may involve known and unknown risks, uncertainties
and other factors which may cause our actual results, per-
formance or achievements to be materially different from
future results, performance or achievements expressed or
implied by such forward-looking statements. Forward-looking
statements, which are based on certain assumptions and
describe our future plans, strategies and expectations are
generally identifiable by use of the words “may,”“will,”
to share, in proportion to our percentage interest, in the cash
distributions and profits and losses of the Operating Partner-
ship. The limited partners represent entities or individuals
who contributed their interests in certain properties or
partnerships to the Operating Partnership in exchange for
common or preferred units of limited partnership interest
(“Common OP Units” or “Preferred OP Units”). Limited part-
ners 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 Company (“Common Shares”). This
structure is commonly referred to as an umbrella partnership
REIT or “UPREIT.”
Capital Market Transactions
On January 27, 2004, the Operating Partnership issued 4,000
“should,”“expect,”“anticipate,”“estimate,”“believe,”“intend”
Series B Preferred Units in connection with the acquisition
or “project” or the negative thereof or other variations
from Klaff Realty, L.P. (“Klaff”) of its rights to provide asset
thereon or comparable terminology. Factors which could
management, leasing, disposition, development and construc-
have a material adverse effect on our operations and future
tion services for an existing portfolio of retail properties.
prospects include, but are not limited to those set forth
These units have a stated value of $1,000 each and are enti-
under the heading “Risk Factors” in this Form 10-K. These
tled to a quarterly preferred distribution of the greater of
risks and uncertainties should be considered in evaluating
(i) $13.00 (5.2% annually) per Preferred OP Unit or (ii) the
any forward-looking statements contained or incorporated
quarterly distribution attributable to a Preferred OP Unit if
by reference herein.
PART I
ITEM 1. BUSINESSx
GENERAL
Acadia Realty Trust (the “Company,”“Acadia,”“we,”“us” or
“our”) was formed on March 4, 1993 as a Maryland Real
Estate Investment Trust (“REIT”). We are a fully integrated,
self-managed and self-administered equity REIT focused
primarily on the ownership, acquisition, redevelopment and
such unit were converted into a Common OP Unit. The Pre-
ferred OP Units are convertible into Common OP Units
based on the stated value of $1,000 divided by $12.82 at any
time. Additionally, the holder of the Preferred OP Units may
redeem them at par for either cash or Common OP Units
(at our option) after the earlier of the third anniversary of
their issuance, or the occurrence of certain events including
a change in the control of our Company. Finally, after the
fifth anniversary of the issuance, we may redeem the Pre-
ferred OP Units and convert them into Common OP Units
at market value as of the redemption date.
management of retail properties, including neighborhood
In March of 2004, a secondary public offering was completed
and community shopping centers and mixed-use properties
for a total of 5,750,000 Common Shares. The selling share-
with retail components. We currently operate 75 properties,
holders, Yale University and its affiliates (“Yale”) and Ross
which we own or have an ownership interest in. These assets
Dworman, a former trustee and Chairman, sold 4,191,386
are located primarily in the Northeast, Mid-Atlantic and Mid-
and 1,558,614 Common Shares, respectively. Yale was a major
western regions of the United States which, in total, comprise
shareholder, owning, at one time, approximately one-third
approximately 10 million square feet. We also have non-oper-
of all of our outstanding Common Shares. We did not sell
ational investments in properties throughout the country
any Common Shares in the offering and did not receive any
through joint ventures.
proceeds from the offering.
All of our assets are held by, and all of our operations are
During November 2004, we issued 1,890,000 Common Shares
conducted through, Acadia Realty Limited Partnership, a
(the “Offering”). The Offering was made pursuant to shelf
Delaware limited partnership (the “Operating Partnership”)
registration statements filed under the Securities Act of 1933,
and its majority-owned subsidiaries. As of December 31,
as amended, and previously declared effective by the Securities
2005 we controlled 98% of the Operating Partnership as the
and Exchange Commission on March 29, 2000, May 14, 2003
sole general partner. As the general partner, we are entitled
and March 19, 2004. The $28.3 million in proceeds from the
Acadia Realty Trust 2005 Annual Report
1
Offering, net of related costs, were used to retire above-market,
date we have launched two acquisition joint ventures, Acadia
fixed-rate indebtedness as well as to invest in real estate
Strategic Opportunity Fund, LP (“Fund I”) and Acadia Strategic
assets. Yale, and Kenneth F. Bernstein, our Chief Executive
Opportunity Fund II, LLC (“Fund II”).
Officer, also sold 1,000,000, and 110,000 Common Shares,
respectively, in connection with this transaction.
Fund I
RECENT DEVELOPMENTS
Effective February 15, 2005, we acquired the balance of Klaff’s
rights to provide the above services and certain potential
In September 2001, we and four of our institutional share-
holders formed a joint venture, whereby the investors com-
mitted $70 million for the purpose of acquiring real estate
assets. We committed an additional $20 million to Fund I,
future revenue streams. The consideration for this acquisition
as the general partner with a 22% interest. In addition to
was $4.0 million in the form of 250,000 restricted Common
a pro-rata return on our invested equity, we are entitled to
OP Units, valued at $16 per unit, which are convertible into
our Common Shares on a one-for-one basis after a five year
lock-up period. As part of this transaction we also assumed
all operational and redevelopment responsibility for the
a profit participation based upon certain investment return
thresholds. Cash flow is distributed pro-rata to the partners
(including us) until they have received a 9% cumulative return
on, and a return of, all capital contributions. Thereafter, remain-
Klaff Properties a year earlier than was contemplated in the
ing cash flow is distributed 80% to the partners (including
January 2004 transaction.
BUSINESS OBJECTIVES AND STRATEGIES
Our primary business objective is to acquire and manage
commercial retail properties that will provide cash for distri-
butions to shareholders while also creating the potential for
capital appreciation to enhance investor returns. We focus
on the following fundamentals to achieve this objective:
us) and 20% to us. We also earn a fee for asset manage-
ment services equal to 1.5% of the allocated invested equity ,
as well as fees for property management, leasing and con-
struction services.
Our acquisition program was executed exclusively through
Fund I through June 2004. Fund I focused on targeting assets
for acquisition that had superior in-fill locations, restricted
competition due to high barriers of entry and in-place below-
■ Own and operate a portfolio of community and neigh-
market anchor leases with the potential to create significant
borhood shopping centers and mixed-use properties
additional value through re-tenanting, timely capital
with a retail component located in markets with strong
improvements and property redevelopment. Fund I consid-
demographics.
■ Maintain a strong and flexible balance sheet through
conservative financial practices while ensuring access to
sufficient capital to fund future growth.
ered both single assets and portfolios in its acquisition
program. Although our core properties are located primarily
in the Northeast, Mid-Atlantic and Midwest region, and
therefore Fund I focused on potential acquisitions within
these geographic areas, Fund I considered portfolio acquisi-
■ Generate internal growth within the portfolio through
tions outside the geographic footprint.
aggressive redevelopment, re-anchoring and leasing
activities.
On January 4, 2006, Fund I recapitalized a one million square
foot retail portfolio located in Wilmington, Delaware (“Brandy-
■ Generate external growth through an opportunistic
wine Portfolio”) through a merger of interests with affiliates
yet disciplined acquisition program. The emphasis is on
of GDC Properties (“GDC”). The Brandywine Portfolio was
targeting transactions with high inherent opportunity for
recapitalized through a “cash-out” merger of the 77.8% inter-
the creation of additional value through redevelopment
est, which was previously held by the institutional investors
and leasing and/or transactions requiring creative capital
in Fund I to GDC at a valuation of $164 million. We, through
structuring to facilitate the transactions.
a subsidiary, retained our existing 22.2% interest and will
External Growth Strategy: Opportunistic Acquisition
Platforms
In addition to our direct investments in real estate assets,
we have also capitalized on our expertise in the acquisition,
redevelopment, leasing and management of retail real estate
by establishing joint ventures in which we earn, in addition
to a return on our equity interest, fees for our services. To
continue to operate the Brandywine Portfolio and earn fees
for such services. At the closing, the Fund I investors received
a return of all of their capital invested in Fund I and preferred
return, thus triggering the payment to us of our additional
20% carried interest (“Promote”) in all future Fund I distribu-
tions. It is anticipated that up to $38 million of additional
proceeds will be distributed to our investors from this
transaction following, among other things, the successful
Acadia Realty Trust 2005 Annual Report 2
replacement of bridge financing provided by us and our
■ Working with financially healthy retailers to create value
investors. Additionally there are 32 assets comprising
from their surplus real estate.
approximately 2 million square feet remaining in Fund I
in which our interest in cash flow and income will increase
from 22.2% to 37.8% as a result of the Promote.
Fund II
Following our success with Fund I, we formed a second, larger
acquisition joint venture. In June of 2004, we launched Fund
II, which includes all of the investors from Fund I as well as
two additional institutional investors. With $300 million of
committed discretionary capital, Fund II expects to be able
to acquire up to $900 million of real estate assets on a
leveraged basis. We are the managing member with a 20%
interest in Fund II. The terms and structure of Fund II are
substantially the same as Fund I with the exceptions that
the Preferred Return is 8% and the asset management fee is
calculated on committed equity of $250 million for the first
twelve months and then on the total committed equity of
$300 million thereafter.
■ Acquiring properties, designation rights or other control of
real estate or leases associated with retailers in bankruptcy.
■ Completing sale leasebacks with retailers in need of capital.
During 2004, we made our first RCP Venture investment
with our participation in the acquisition of Mervyn’s as
discussed in “PROPERTY ACQUISITIONS” in Item 1 of this
Form 10-K. The RCP Venture is also currently exploring
additional investment opportunities.
New York Urban Infill Redevelopment Initiative
In September of 2004, we, through Fund II, launched our
New York Urban Infill Redevelopment initiative. As retailers
continue to recognize that many of the nation’s urban mar-
kets are underserved from a retail standpoint, Fund II is
poised to capitalize on this trend by investing in redevelop-
ment projects in dense urban areas where retail tenant
demand has effectively surpassed the supply of available
As the demand for retail real estate has significantly increased
sites. During 2004, Fund II, together with an unaffiliated
in recent years, there has been a commensurate increase in
partner, P/A Associates, LLC (“P/A”), formed Acadia-P/A Hold-
selling prices. In an effort to generate superior risk-adjusted
ing Company, LLC (“Acadia-P/A”) for the purpose of acquiring,
returns for our shareholders and joint venture investors, we
constructing, developing, owning, operating, leasing and
have channeled our acquisition efforts through Fund II in
managing certain retail real estate properties in the New
two new opportunistic joint ventures launched during 2004
York City metropolitan area. P/A has agreed to invest 10%
— the Retailer Controlled Property Venture and the New York
of required capital up to a maximum of $2.0 million and
Urban Infill Redevelopment Initiative.
Fund II, the managing member, has agreed to invest the
Retailer Controlled Property Venture (the “RCP Venture”)
On January 27, 2004, through Funds I and II, we entered into
the RCP Venture with Klaff and Klaff’s long time capital part-
ner Lubert-Adler Management, Inc. (“Lubert-Adler”) for the
purpose of making investments in surplus or underutilized
properties owned by retailers. The initial size of the RCP
Venture is expected to be approximately $300 million in
equity based on anticipated investments of approximately
$1 billion. Each participant in the RCP Venture has the right
to opt out of any potential investment. Affiliates of Funds I
and II have invested $24.6 million in the RCP Venture to date.
Fund II anticipates investing the remaining portion of the
original 20% of the equity of the RCP Venture. Cash flow is
to be distributed to the partners until they have received a
10% cumulative return and a full return of all contributions.
Thereafter, remaining cash flow is to be distributed 20% to
balance to acquire assets in which Acadia-P/A agrees to
invest. Operating cash flow is generally to be distributed
pro-rata to Fund II and P/A until they have received a 10%
cumulative return and then 60% to Fund II and 40% to P/A.
Distributions of net refinancing and net sales proceeds,
as defined, follow the distribution of operating cash flow
except that unpaid original capital is returned before the
60%/40% split between Fund II and P/A, respectively. Upon
the liquidation of the last property investment of Acadia-
P/A, to the extent that Fund II has not received an 18% inter-
nal rate of return (“IRR”) on all of its capital contributions,
P/A is obligated to return a portion of its previous distribu-
tions, as defined, until Fund II has received an 18% IRR. To
date, Fund II has, in conjunction with P/A, invested in six
projects through Fund II as discussed further in “PROPERTY
ACQUISITIONS” in this Item 1 of this Form 10-K.
Klaff (“Klaff’s Promote”) and 80% to the partners (including
Other Investments
Klaff). We will also earn market-rate fees for property man-
We may also invest in preferred equity investments, mort-
agement, leasing and construction services on behalf of the
gages, other real estate interests and other investments.
RCP Venture. Fund II seeks to invest opportunistically in the
The mortgages in which we invest may be either first
RCP Venture primarily in the following three ways:
Acadia Realty Trust 2005 Annual Report
3
mortgages or mezzanine debt, where we believe the under-
We typically hold our properties for long-term investment.
lying value of the real estate collateral is in excess of its loan
As such, we continuously review the existing portfolio and
balance. In March of 2005, we invested $20 million in a pre-
implement programs to renovate and modernize targeted
ferred equity position (“Preferred Equity”) in Levitz SL, L.L.C.
centers to enhance the property’s market position. This in
(“Levitz SL”), the owner of 2.5 million square feet of fee and
turn strengthens the competitive position of the leasing
leasehold interests in 30 locations (the “Properties”), the
program to attract and retain quality tenants, increasing
majority of which are currently leased to Levitz Furniture
cash flow and consequently property value. We also periodi-
Stores. Klaff is a managing member of Levitz SL. The Preferred
cally identify certain properties for disposition and redeploy
Equity receives a return of 10%, plus a minimum return of
the capital to existing centers or acquisitions with greater
capital of $2 million per annum. At the end of 12 months, the
potential for capital appreciation. Our core portfolio consists
rate of return will be reset to the six-month LIBOR plus 644
primarily of neighborhood and community shopping centers,
basis points. The Preferred Equity is redeemable at the option
which are generally dominant centers in high barrier-to-entry
of Levitz SL at any time.
We also regularly engage in discussions with public and private
entities regarding business combinations. Furthermore, we
may consider either acquiring directly or engaging in addi-
tional joint ventures related to property acquisition and
development. The requirements that acquisitions be accretive
on a long-term basis based on our cost of capital, as well as
markets. The anchors at these centers typically pay market
or below-market rents and have low rent-to-sales ratios, which
are, on average, less than 5%. Furthermore, supermarket and
necessity-based retailers anchor the majority of our core
portfolio. These attributes enable our properties to better
withstand a weakening economy while also creating oppor-
tunities to increase rental income.
increase the overall portfolio quality and value, are core to
During 2004 and 2005 we sold two non-core properties and
our acquisition program. As such, we constantly evaluate the
redeployed the capital to acquire two retail properties during
blended cost of equity and debt and adjust the amount of
2005 as further discussed in “ASSET SALES” and PROPERTY
acquisition activity to align the level of investment activity
ACQUISITIONS” in this Item 1 of this Form 10-K.
with capital flows.
Financing Strategy
Operating Strategy: Experienced Management Team
with Proven Track Record
We intend to continue financing acquisitions and property
redevelopment with sources of capital determined by man-
Our senior management team has an average of eight years
agement to be the most appropriate based on, among other
with us and our predecessors and 25 years in the real estate
industry. During 2002, the management team successfully
completed a multi-year portfolio repositioning initiative
that significantly improved the quality of our portfolio and
tenant base. We believe our management team has demon-
strated the ability to create value internally through anchor
recycling, property redevelopment and strategic non-core
dispositions.
Operating functions such as leasing, property management,
construction, finance and legal (collectively, the “Operating
Departments”) are provided by our personnel, providing for
fully integrated property management and development.
factors, availability, pricing and other commercial and finan-
cial terms. The sources of capital may include cash on hand,
bank and other institutional borrowing, the sale of properties
and issuance of equity securities. We continually focus on
maintaining a strong balance sheet when considering the
sourcing of capital. We manage our interest rate risk prima-
rily through the use of variable and fixed rate debt. We also
utilize LIBOR swap agreements in managing our exposure
to interest rate fluctuations. See Item 7A for a discussion on
our market risk exposure related to our mortgage debt.
PROPERTY ACQUISITIONS
By incorporating the Operating Departments in the acquisi-
RCP Venture
tion process, acquisitions are appropriately priced giving
effect to each asset’s specific risks and returns. Also, because
of the Operating Departments involvement with, and corre-
sponding understanding of, the acquisition process, transi-
tion time is minimized and management can immediately
execute on its strategic plan for each asset.
In September 2004, we made our first RCP Venture invest-
ment with our participation in the acquisition of Mervyn’s.
Affiliates of Fund I and Fund II, through separately organized,
newly formed limited liability companies on a non-recourse
basis, invested in the acquisition of Mervyn’s through the
RCP Venture, which, as part of an investment consortium of
Acadia Realty Trust 2005 Annual Report 4
Sun Capital and Cerberus, acquired Mervyn’s from Target
is to reconfigure the property so that approximately 50% of
Corporation. The total acquisition price was approximately
the income from the building will eventually be derived
$1.2 billion subject to debt of approximately $800.0 million.
from retail tenants.
Our share of equity invested aggregated $24.6 million on a
non-recourse basis and was divided equally between affiliates
of Funds I and II. As of the date of acquisition, Mervyn’s was
a 257-store discount retailer with a very strong West Coast
concentration. During 2005, the consortium sold a portion
of the portfolio as well as refinanced existing mortgage
debt and distributed cash to the investors, of which a total
of $42.7 million was distributed to affiliates of Fund I and
Fund II of which our share amounted to $10.2 million. In
February of 2006, the consortium distributed additional
cash of which a total of $1.4 million was distributed to affili-
ates of Fund I and Fund II of which $0.4 million was our share.
New York Urban/Infill Redevelopment Initiative
Liberty Avenue: On December 20,2005, Acadia-P/A acquired
the remaining 40-year term of a leasehold interest in land
located at Liberty Avenue and 98th Street in Queens (Ozone
Park), NY. The development plans for this property include
30,000 square feet of retail anchored by a CVS drug store
and a 98,500 square foot self-storage facility to be operated
by Storage Post. Acadia-P/A will be a partner in the self-storage
complex with Storage Post, which is anticipated to be a part-
ner in future retail projects in New York City where self stor-
age will be a potential component of the redevelopment. The
total cost of the redevelopment is expected to be approxi-
mately $13 million. The CVS 10,880 square foot lease has been
executed and construction on this project has commenced.
216th Street: On December 1, 2005, Acadia-P/A acquired a
65,000 square foot parking garage located at 10th Avenue
and 216th Street in the Inwood section of Manhattan for
$7 million. Acadia-P/A plans to redevelop the building into a
60,000 square foot office building and are finalizing a lease
where it would relocate an agency of the City of New York,
which is a current tenant at another of our Urban/Infill
Redevelopment projects. Inclusive of acquisition costs, total
costs for the project, which also includes a 100-space rooftop
parking deck, are anticipated to be $25 million.
161st Street: On August 5, 2005, Acadia-P/A purchased 244-268
161st Street located in the Bronx for $49.3 million, inclusive
of closing costs. In connection with the transaction, Acadia-
P/A borrowed $12.1 million from Bank of America as bridge
financing. The loan carries variable-rate interest at LIBOR
plus 1.5% with monthly payments of interest only. The loan
matures March 31, 2006. The ultimate redevelopment plan
for the property, a 100% occupied, 10-story office building,
Acadia Realty Trust 2005 Annual Report
5
4650 Broadway: On April 6, 2005, Acadia-P/A acquired 4650
Broadway located in the Washington Heights/Inwood section
of Manhattan. The property, a 140,000 square foot building,
which is currently occupied by the City of New York and a
commercial parking garage, was acquired for a purchase
price of $25 million. Acadia-P/A plans to redevelop the site
to include retail, commercial and residential components
totaling over 300,000 square feet. The retail and commercial
(including office, “Community Use” and parking) portion
comprise approximately 50% of the project and the residen-
tial component comprises the other 50%. Redevelopment of
the project is anticipated to commence during 2007 with
completion expected 18 months thereafter. Expected costs to
complete the retail and commercial component of the project
are estimated at $40 million before any potential sale of the
residential air rights. In lieu of directly developing the resi-
dential portion of the project, the rights to this component
may be sold while retaining ownership of the other portions
of the project.
Pelham Manor: On October 1, 2004, Acadia-P/A entered into
a 95-year, inclusive of extension options, ground lease to
redevelop a 16-acre site in Pelham Manor, Westchester County,
New York. The property is in an upper middle-income, infill
neighborhood located approximately 10 miles from Manhat-
tan with over 400,000 people in a three-mile radius. The
redevelopment contemplates the demolition of the existing
industrial and warehouse buildings, and replacing them
with a multi-anchor community retail center. Acadia-P/A
anticipates the redevelopment to cost between $30 and $33
million, with construction anticipated to commence during
2007. In the interim, the property will continue to be operated
as an industrial and warehouse facility. Prior to commence-
ment of the redevelopment process, the warehouse rents
collected are projected to equal the ground rent payment.
Fordham Road: On September 29, 2004, Acadia-P/A purchased
400 East Fordham Road in the Bronx, NY. The property, a
multi-level retail and commercial building, is located at the
intersection of East Fordham Road and Webster Avenue,
near Fordham University. Sears is the major tenant of the
property, retailing on four levels. The redevelopment of the
property is scheduled to commence in 2007 following the
expiration of the Sears lease, which was originally signed
in 1964. However, depending on current negotiations with
both Sears and other potential anchors, the time frame
of the redevelopment may be accelerated. As part of the
redevelopment, there is the potential for additional expan-
$0.9 million, primarily our pro-rata share of equity, as a partner
sion of up to 85,000 square feet of space. The total cost of
in Fund I. In September 2004, Fund I and Hendon purchased
the redevelopment project, including the acquisition cost of
the Pine Log Plaza for $1.5 million. The 35,000 square foot
$30 million, is estimated to be between $65 and $70 million,
center is located in front of and adjacent to Hitchcock Plaza.
depending on the ultimate scope of the project. On February
Related to this transaction, we provided an additional $0.75
25, 2005, Acadia-P/A acquired vacant land adjacent to the
million mortgage loan to the project with a March 2006
400 East Fordham Road property for $867,000.
maturity and interest at 7% for the first year and 6% for the
In addition to the above New York Urban/Infill projects, Fund
II also acquired the following:
During July 2005, Fund II acquired for $1.0 million, a 50% equity
interest from its partner in the RCP Venture in the entity
which has a leasehold interest in a former Levitz Furniture
store located in Rockville, Maryland.
second year.
During February 2006, Fund I finalized an agreement with
Hendon whereby Fund I converted its common equity to
a preferred equity position with a 15% preferred return. In
connection with this agreement, Hendon assumed all opera-
tional, redevelopment and leasing responsibilities. Hendon
also secured construction financing from which the first
During November 2005, Fund II acquired a ground lease
mortgage loans to us were repaid.
interest in a 112,000 square foot building occupied by Neiman
Marcus. The property is located at Oakbrook Center, a super-
regional Class A mall located in the Chicago Metro area. The
ground lease was acquired for $6.9 million, including closing
and other acquisition costs.
Fund I
To date, Fund I has purchased a total of 35 assets totaling
2.7 million square feet. During January 2006, Fund I recapi-
talized the Brandywine Portfolio, representing two assets
totaling approximately 1.0 million square feet, through a
In May 2004, Fund I and an unaffiliated partner, each with
a 50% interest, acquired a 35,000 square foot shopping cen-
ter in Tarrytown, New York, for $5.3 million. Related to this
acquisition, we loaned $2.0 million to Fund I which bears
interest at the prime rate and matured May 2005. This loan
has been converted to a demand note. The 35,000 square
foot, Westchester, NY property (New York City MSA), was
formerly anchored by a 25,000 square foot Grand Union
supermarket. The redeveloped property includes a 15,000
square foot Walgreen’s drugstore with the balance of space
merger of interests with GDC as discussed further in “BUSI-
leased to shop tenants.
NESS OBJECTIVES AND STRATEGIES” in this Item 1 of this
Form 10-K. Following are the Fund I acquisitions:
2004 Acquisitions
On March 11, 2004, Fund I, in conjunction with our long-time
investment partner, Hendon Properties (“Hendon”), purchased
a $9.6 million first mortgage loan from New York Life Insur-
ance Company for $5.5 million. The loan, which was secured
by the Hitchcock Plaza in Aiken, South Carolina, was in default
at acquisition. Fund I and Hendon acquired the loan with
the intention of pursuing ownership of the property secur-
ing the debt. Fund I provided 90% of the equity capital and
Hendon provided the remaining 10% of the equity capital
used to acquire the loan. Hendon is entitled to receive profit
participation in excess of its proportionate equity interest.
Subsequent to the acquisition of the loan, Fund I and Hendon
obtained fee title to this property and currently plan to
redevelop and re-anchor the center. We provided $3.2 million
of mortgage financing to the project in connection with
the purchase of the first mortgage loan. The note matured
March 9, 2006, and bore interest at 7% for the first year and
6% for the second year. In addition to this loan, we invested
In May 2004, Fund I acquired a 50% interest in the Haygood
Shopping Center and the Sterling Heights Shopping Center
for an aggregate investment of $3.2 million. These assets are
part of the portfolio that we currently manage as a result
of our January 2004 acquisition of certain management
contracts from Klaff. The Haygood Shopping Center is a
165,000 square foot shopping center located in Virginia Beach,
VA. It is currently 73% occupied and anchored by a Farmfresh
supermarket and Eckerd Drug. The Sterling Heights Shopping
Center, located in Sterling Heights, MI (suburb of Detroit),
totals 141,000 square feet. The property is 55% occupied and
is anchored by Burlington Coat Factory. Redevelopment
activities include the complete renovation of the property
and the re-leasing of the current vacancy to Rite-Aid.
2003 Acquisitions
Brandywine Portfolio: In January of 2003, Fund I acquired
a major open-air retail complex located in Wilmington,
Delaware. The approximately 1.0 million square foot value-
based retail complex consists of the following two properties:
Acadia Realty Trust 2005 Annual Report 6
Market Square Shopping Center: A 103,000 square foot com-
munity shopping center (including a 15,000 square foot out-
Kroger/Safeway Portfolio: In January of 2003, Fund I formed
a joint venture (the “Kroger/Safeway JV”) with an affiliate
parcel building) which is 100% leased and anchored by a T.J.
of real estate developer and investor AmCap Incorporated
Maxx and a Trader Joe’s gourmet food market.
(“AmCap”) for the purpose of acquiring a portfolio of 25
Brandywine Town Center: A two phase open-air value retail
center. The first phase (“Phase I”) is approximately 450,000
square feet and 100% occupied, with tenants including Lowe’s,
Bed Bath & Beyond, Regal Cinema, Michaels, Petsmart, Old
Navy, Annie Sez, Thomasville Furniture and Dick’s Sporting
Goods. The second phase (“Phase II”) consists of approximately
420,000 square feet of existing space, of which Target occu-
pies 138,000 square feet and Bombay occupies 9,000 square
feet. The balance of Phase II is currently not occupied.
supermarket leases for $48.9 million inclusive of the closing
and other related acquisition costs. The portfolio, which
aggregates approximately 1.0 million square feet, consists
of 25 anchor-only leases with Kroger (12 leases) and Safeway
supermarkets (13 leases). The majority of the properties are
free-standing and all are triple-net leases. The Kroger/Safe-
way JV acquired the portfolio subject to long-term ground
leases with terms, including renewal options, averaging in
excess of 80 years, which are master leased to a non-affili-
ated entity. The rental options for the supermarket leases at
The initial investment for this portfolio was approximately
the end of their primary lease term in approximately seven
$86.3 million, inclusive of closing and other related acquisi-
years (“Primary Term”) are at an average of $5.13 per square
tion costs. Fund I will also pay additional amounts for the
foot. Although there is no obligation for the Kroger/Safeway
current vacant space in Phase II when and if it is leased and
JV to pay ground rent during the Primary Term, to the extent
occupied (the “Earn-out”). To date, Fund I has incurred costs
it exercises an option to renew a ground lease for a property
of $30.3 million for Earn-out space.
at the end of the Primary Term, it will be obligated to pay an
During January of 2006, Fund I recapitalized this investment
average ground rent of $1.55 per square foot.
as further discussed in “BUSINESS OBJECTIVES AND STRATE-
The following table sets forth more specific information
GIES” in this Item 1 of this Form 10-K.
with respect to the 25 supermarket leases:
Location
Great Bend, KS
Cincinnati, OH
Conroe, TX
Harahan, LA
Indianapolis, IN
Irving, TX
Pratt, KS
Roanoke, VA
Shreveport, LA
Wichita, KS
Wichita, KS
Atlanta, TX
Batesville, AR
Benton, AR
Carthage, TX
Little Rock, AR
Longview, WA
Mustang, OK
Roswell, NM
Ruidoso, NM
San Ramon, CA
Springerville, AZ
Tucson, AZ
Tulsa, OK
Cary, NC
Tenant
Kroger Co. (1)
Kroger Co.
Kroger Co. (2)
Kroger Co. (2)
Kroger Co.
Kroger Co.
Kroger Co. (1)
Kroger Co.
Kroger Co.
Kroger Co. (1)
Kroger Co. (1)
Safeway (3)
Safeway (1)
Safeway (1)
Safeway (1)
Safeway (1)
Safeway
Safeway (1)
Safeway (2)
Safeway (1)
Safeway
Safeway
Safeway
Safeway (1)
Kroger Co. (3)
Total
Gross Leasable
Area (“GLA”)
48,000
32,200
75,000
60,000
34,000
43,900
38,000
36,700
45,000
50,000
40,000
31,000
29,000
33,500
27,700
36,000
48,700
30,200
36,300
38,600
54,000
30,500
41,800
30,000
48,000
1,018,100
Current
Rent
$ 3.60
8.09
6.95
6.93
5.85
6.53
5.68
13.02
10.52
11.23
10.48
7.35
10.55
8.68
7.59
12.15
8.27
7.66
10.96
11.01
9.16
8.92
8.64
9.14
6.88
Rent Upon Initial
Option Commencement
$ 2.40
5.36
4.60
4.61
3.87
4.32
3.78
8.62
6.96
7.48
6.97
3.98
5.72
4.71
4.12
6.58
4.48
4.15
5.94
5.97
4.96
4.83
4.68
4.96
4.55
Lease Expiration Year/
Last Option Expiration Year
2009/2049
2009/2049
2009/2049
2009/2049
2009/2049
2009/2049
2009/2049
2009/2049
2009/2049
2009/2049
2009/2049
2009/2049
2009/2049
2009/2049
2009/2049
2009/2049
2009/2049
2009/2049
2009/2049
2009/2049
2009/2049
2009/2049
2009/2049
2009/2049
2009/2049
(1) The tenant is obligated to pay rent pursuant to the lease and has sub-leased this location to a supermarket sub-tenant.
(2) The tenant is obligated to pay rent pursuant to the lease and has sub-leased this location to a non-supermarket sub-tenant.
(3)The tenant is currently not operating at this location although they continue to pay rent in accordance with the lease.
Acadia Realty Trust 2005 Annual Report
7
Ohio Portfolio: In September of 2002, Fund I acquired three
supermarket-anchored shopping centers located in Cleve-
current 26,000 square foot store to 37,000 square feet. We
also installed a new 49,000 square foot Raymour and Flanigan
land and Columbus, Ohio for a total purchase price of $26.7
Furniture store at this center during 2004. This community
million. Additional information on these properties is
shopping center is now 100% occupied. Costs incurred for
included in Item 2 of this Form 10-K.
this project totaled $418,000.
ASSET SALES AND CAPITAL/ASSET RECYCLING
We periodically identify certain properties for disposition and
redeploy the capital to existing centers or acquisitions with
greater potential for capital appreciation. During July 2005,
we sold the Berlin Shopping Center for $4.0 million and in
2004, we disposed of the East End Centre, for $12.4 million.
We also completed the redevelopment and re-anchoring of
the Town Line Plaza, located in Rocky Hill, Connecticut during
2004. The former building, occupied by GU Markets, was
demolished and replaced with a 66,000 square foot Super
Stop & Shop. The new supermarket anchor is paying gross
rent at a 33% increase over that of the former tenant with
no interruption in rent payments. Costs to date for this proj-
During July 2005 we purchased 4343 Amboy Road (“Amboy
ect totaled $1.7 million.
Road”) located in Staten Island, New York for $16.6 million
in cash and $0.2 million in Common OP Units. The property,
a 60,000 square foot neighborhood shopping center, is
anchored by a Waldbaum’s supermarket and a Duane Reade
FINANCIAL INFORMATION ABOUT
MARKET SEGMENTS
We have two reportable segments: retail properties and
drug store, and is subject to a 23-year ground lease.
multi-family properties. The accounting policies of the seg-
During January 2006, we closed on a 20,000 square foot
retail building in the Lincoln Park district in Chicago (“Clark/
Diversey”). The property was acquired from an affiliate of
Klaff for $9.8 million. Tenants include Starbucks, Nine West,
Vitamin Shoppe, The Body Shop, Papyrus and Cold Stone
Creamery. Along with its strong location, the property has
significant long-term growth potential.
ments are the same as those described in the notes to the
consolidated financial statements appearing in Item 8 of
this Annual Report on Form 10-K. We evaluate property per-
formance primarily based on net operating income before
depreciation, amortization and certain non-recurring items.
The reportable segments are managed separately due to the
differing nature of the leases and property operations asso-
ciated with retail versus residential tenants. We do not have
Also during January 2006, we acquired a 60% interest in the
any foreign operations. See the consolidated financial state-
A&P Shopping Plaza located in Boonton (“Boonton”), New
ments and notes thereto included in Item 8 of this Annual
Jersey. The property, which is 100% occupied and located in
Report on Form 10-K for certain information on industry
northeastern New Jersey, is a 63,000 square foot shopping
segments as required by Item 1.
center anchored by a 49,000 square foot A&P Supermarket.
The remaining 40% interest is owned by a principal of P/A.
The interest was acquired for $3.2 million.
PROPERTY REDEVELOPMENT AND EXPANSION
Our redevelopment program focuses on selecting well-
CORPORATE HEADQUARTERS AND EMPLOYEES
Our executive offices are located at 1311 Mamaroneck Avenue,
Suite 260, White Plains, New York 10605, and our telephone
number is (914) 288-8100. We have 158 employees, of whom
94 are located at our executive office, seven at the Pennsylva-
located neighborhood and community shopping centers and
nia regional office and the remaining property management
creating significant value through re-tenanting and property
personnel are located on-site at our properties.
redevelopment. During 2005, we did not undertake any sig-
nificant redevelopment projects within our core portfolio.
During 2004, we completed the redevelopment of the New
Loudon Center, located in Latham, New York. A new anchor,
The Bon Ton Department Store, opened for business during
the fourth quarter of 2003 as part of the redevelopment of
this shopping center. Occupying 66,000 square feet formerly
occupied by an Ames department store, Bon Ton is paying
base rent at a 15% increase over that of Ames. During 2004,
Marshall’s, an existing tenant at the center, expanded its
COMPANY WEBSITE
All of our filings with the Securities and Exchange Com-
mission, including our annual reports on Form 10-K, quar-
terly reports on Form 10-Q and current reports on Form 8-K
and amendments to those reports filed or furnished pur-
suant to Section 13(a) or 15(d) of the Securities Exchange
Act of 1934, are available free of charge at our website at
www.acadiarealty.com, as soon as reasonably practicable
after we electronically file such material with, or furnish it
to, the Securities and Exchange Commission. These filings
Acadia Realty Trust 2005 Annual Report 8
can also be accessed through the Securities and Exchange
if a major tenant files bankruptcy. See the discussion of
Commission’s website at www.sec.gov. Alternatively, we will
bankruptcy risks under Risk Factors.
provide paper copies of our filings free of charge upon request.
CODE OF ETHICS AND WHISTLEBLOWER
POLICIES
During 2003, our Board of Trustees adopted a Code of Ethics
for Senior Financial Officers that applies to our Chief Execu-
tive Officer, Chief Financial Officer, Chief Accounting Officer,
Controller and Assistant Controllers. The Board also adopted
a Code of Business Conduct and Ethics applicable to all
employees, as well as a “Whistleblower Policy.” Copies of
these documents are available in the Investor Information
section of our website.
ITEM 1A. RISK FACTORSx
Limited control over joint venture investments.
Our joint venture investments may involve risks not other-
wise present for investments made solely by us, including
the possibility that our joint venture partner might have
different interests or goals than we do. Other risks of joint
venture investments include impasse on decisions, such as
a sale, because neither we nor a joint venture partner would
have full control over the joint venture. Also, there is no
limitation under our organizational documents as to the
amount of funds that may be invested in joint ventures.
Through our investments in joint ventures we have also
invested in operating businesses that have operational risk
If any of the following risks actually occur, our business,
in addition to the risks associated with real estate investments,
results of operations and financial condition would likely
including among other risks, human capital issues, adequate
suffer. This section includes or refers to certain forward-
supply of product and material, and merchandising issues,
looking statements. Refer to the explanation of the qualifi-
cations and limitations on such forward-looking statements
discussed elsewhere in this Form 10-K.
We rely on revenues derived from major tenants.
We derive significant revenues from certain anchor tenants
that occupy space in more than one center. We could be
adversely affected in the event of the bankruptcy or insol-
vency of, or a downturn in the business of, any of our major
tenants, or in the event that any such tenant does not
renew its leases as they expire or renews at lower rental
rates. Vacated anchor space not only would reduce rental
revenues if not re-tenanted at the same rental rates but also
could adversely affect the entire shopping center because of
the loss of the departed anchor tenant’s customer drawing
power. Loss of customer drawing power also can occur through
the exercise of the right that most anchors have to vacate
and prevent re-tenanting by paying rent for the balance of
the lease term, or the departure of an anchor tenant that
owns its own property. In addition, in the event that certain
major tenants cease to occupy a property, such an action
may result in a significant number of other tenants having
the right to terminate their leases, or pay a reduced rent
based on a percentage of the tenant’s sales, at the affected
property, which could adversely affect the future income
from such property.
Tenants may seek the protection of the bankruptcy laws,
which could result in the rejection and termination of their
leases and thereby cause a reduction in the cash flow avail-
able for distribution by us. Such reduction could be material
During 2005, our investment in joint ventures provided
Promote income. There can be no assurance that the joint
ventures will continue to operate profitably and thus provide
additional Promote income in the future.
Under the terms of our Fund II joint venture, we are required
to first offer to Fund II all of our opportunities to acquire retail
shopping centers. Only if (i) our joint venture partner elects
not to approve Fund II’s pursuit of an acquisition opportunity;
(ii) the ownership of the acquisition opportunity by Fund II
would create a material conflict of interest for us; (iii) we
require the acquisition opportunity for a “like-kind” exchange;
or (iv) the consideration payable for the acquisition opportunity
is our Common Shares, OP Units or other securities, may we
pursue the opportunity directly. As a result, we may not be able
to make attractive acquisitions directly and may only receive
a minority interest in such acquisitions through Fund II.
We operate through a partnership structure, which could
have an adverse effect on our ability to manage our assets.
Our primary property-owning vehicle is the Operating Part-
nership, of which we are the general partner. Our acquisition
of properties through the Operating Partnership in exchange
for interests in the Operating Partnership may permit certain
tax deferral advantages to limited partners who contribute
properties to the Operating Partnership. Since properties
contributed to the Operating Partnership may have unrealized
gain attributable to the difference between the fair market
value and adjusted tax basis in such properties prior to con-
tribution, the sale of such properties could cause adverse tax
consequences to the limited partners who contributed such
Acadia Realty Trust 2005 Annual Report
9
properties. Although we, as the general partner of the Oper-
potential reduction in customer traffic may adversely impact
ating Partnership, generally have no obligation to consider
the balance of tenants at the center.
the tax consequences of our actions to any limited partner,
there can be no assurance that the Operating Partnership
will not acquire properties in the future subject to material
restrictions designed to minimize the adverse tax conse-
quences to the limited partners who contribute such prop-
erties. Such restrictions could result in significantly reduced
flexibility to manage our assets.
There are risks relating to investments in real estate.
Value of real estate is dependent on numerous factors. Real
property investments are subject to varying degrees of risk.
Real estate values are affected by a number of factors,
including: changes in the general economic climate, local
conditions (such as an oversupply of space or a reduction in
demand for real estate in an area), the quality and philosophy
of management, competition from other available space, the
ability of the owner to provide adequate maintenance and
insurance and to control variable operating costs. Shopping
centers, in particular, may be affected by changing perceptions
of retailers or shoppers regarding the safety, convenience
and attractiveness of the shopping center and by the overall
climate for the retail industry generally. Real estate values
are also affected by such factors as government regulations,
interest rate levels, the availability of financing and potential
liability under, and changes in, environmental, zoning, tax
and other laws. As substantially all of our income is derived
from rental income from real property, our income and cash
flow would be adversely affected if a significant number of
our tenants were unable to meet their obligations, or if we
were unable to lease on economically favorable terms a sig-
nificant amount of space in our properties. In the event of
default by a tenant, we may experience delays in enforcing,
and incur substantial costs to enforce, our rights as a land-
lord. In addition, certain significant expenditures associated
with each equity investment (such as mortgage payments,
real estate taxes and maintenance costs) are generally not
reduced when circumstances cause a reduction in income
from the investment.
The bankruptcy of, or a downturn in the business of, any
of our major tenants may adversely affect our cash flows
and property values.
Certain of our tenants have experienced financial difficulties
and have filed for bankruptcy under Chapter 11 of the United
States Bankruptcy Code (“Chapter 11 Bankruptcy”). Pursuant
to bankruptcy law, tenants have the right to reject their leases.
In the event the tenant exercises this right, the landlord
generally has the right to file a claim for lost rent equal to
the greater of either one year’s rent (including tenant expense
reimbursements) for remaining terms greater than one year,
or 15% of the rent remaining under the balance of the lease
term, but not to exceed three years rent. Actual amounts to
be received in satisfaction of those claims will be subject to
the tenant’s final plan of reorganization and the availability
of funds to pay its creditors.
Since January 1, 2003, there have been two significant tenant
bankruptcies within our portfolio:
On May 30, 2003, The Penn Traffic Company (“Penn Traffic”)
filed for protection under Chapter 11 Bankruptcy. Penn Traffic
operates in one location in our wholly-owned portfolio in
52,000 square feet. Rental revenues from this tenant at this
location were $0.4 million for the year ended December 31,
2005 and $0.5 million for each of the years ended December
31, 2004 and 2003. Penn Traffic also operated in a location
occupying 55,000 square feet at a property in which we,
through Fund I, hold a 22% ownership interest. Our pro-rata
share of rental revenues from the tenant at this location were
$0, $22,000 and $147,000 for the years ended December 31,
2005, 2004 and 2003, respectively. Penn Traffic continues to
operate in our wholly-owned location and has assumed this
lease. Penn Traffic rejected the lease at the joint venture
location on February 20, 2004.
On January 14, 2004, KB Toys (“KB”) filed for protection under
Chapter 11 Bankruptcy. KB operated in five locations in our
wholly-owned portfolio totaling approximately 41,000 square
feet. Rental revenues from KB at these locations aggregated
$0.3 million, $ 0.8 million and $0.7 million for the years ended
December 31, 2005, 2004 and 2003, respectively. KB also
operated in a location occupying 20,000 square feet at a
property in which we hold a 22% ownership interest through
Fund I. Our pro-rata share of rental revenues from the tenant
The bankruptcy of, or a downturn in the business of, any of
at this location were $0, $37,000 and $87,000 for the years
our major tenants causing them to reject their leases, or not
ended December 31, 2005, 2004 and 2003, respectively. KB
renew their leases as they expire, or renew at lower rental
rejected the lease at two of the locations and continues
rates may adversely affect our cash flows and property values.
to operate in three of our wholly-owned locations but has
Furthermore, the impact of vacated anchor space and the
neither assumed nor rejected these three leases. The tenant
has rejected the lease at the Fund I property.
Acadia Realty Trust 2005 Annual Report 10
We could be adversely affected by poor market conditions
where properties are geographically concentrated.
require us to comply with certain affirmative and negative
covenants, including the maintenance of certain debt service
Our performance depends on the economic conditions in
coverage and leverage ratios. In addition, as of December 31,
markets in which our properties are concentrated. We have
2005, loans secured by five of our properties, totaling $44.5
significant exposure to the New York region, from which we
million, are subject to cross-collateralization and cross-default
derive 32% of the annual base rents within our wholly-owned
provisions and two loans, aggregating $29.1 million, are also
portfolio. Our operating results could be adversely affected
subject to cross-collateralization and cross-default provisions.
if market conditions, such as an oversupply of space or a
reduction in demand for real estate, in this area becomes
more competitive relative to other geographic areas.
Our ability to change our portfolio is limited because real
estate investments are illiquid.
Interest expense on our variable debt as of December 31,
2005 would increase by $0.2 million annually for a 100 basis
point increase in interest rates. We may seek additional vari-
able-rate financing if and when pricing and other commercial
and financial terms warrant. As such, we would consider
Equity investments in real estate are relatively illiquid and,
hedging against the interest rate risk related to such addi-
therefore, our ability to change our portfolio promptly in
tional variable-rate debt through interest rate swaps and
response to changed conditions will be limited. Our board
protection agreements, or other means.
of trustees may establish investment criteria or limitations
as it deems appropriate, but currently does not limit the
number of properties in which we may seek to invest or
on the concentration of investments in any one geographic
region. We could change our investment, disposition and
financing policies without a vote of our shareholders.
Market interest rates could have an adverse effect on
our share price.
One of the factors that may influence the trading price
of our Common Shares is the annual dividend rate on our
Common Shares as a percentage of its market price. An
increase in market interest rates may lead purchasers of
our Common Shares to seek a higher annual dividend rate,
which could adversely affect the market price of our Com-
mon Shares and our ability to raise additional equity in the
public markets.
We could become highly leveraged, resulting in increased
risk of default on our obligations and in an increase in
debt service requirements which could adversely affect
our financial condition and results of operations and our
ability to pay distributions.
We enter into interest-rate hedging transactions, including
interest rate swaps and cap agreements, with counterpar-
ties. There can be no guarantee that the financial condition
of these counterparties will enable them to fulfill their obli-
gations under these agreements.
We may not be able to renew current leases and the
terms of re-letting (including the cost of concessions
to tenants) may be less favorable to us than current
lease terms.
Upon the expiration of current leases for space located in
our properties, we may not be able to re-let all or a portion
of that space, or the terms of re-letting (including the cost
of concessions to tenants) may be less favorable to us than
current lease terms. If we are unable to re-let promptly all
or a substantial portion of the space located in our properties
or if the rental rates we receive upon re-letting are signifi-
cantly lower than current rates, our net income and ability
to make expected distributions to our shareholders will be
adversely affected due to the resulting reduction in rent
receipts. There can be no assurance that we will be able to
retain tenants in any of our properties upon the expiration
We have incurred, and expect to continue to incur, indebted-
of their leases. See Item 2 - Properties - Lease Expirations in
ness in furtherance of our activities. Neither our Declaration
this Annual Report on Form 10-K for additional information
of Trust nor any policy statement formally adopted by our
as to the scheduled lease expirations in our portfolio.
board of trustees limits either the total amount of indebted-
ness or the specified percentage of indebtedness that we may
incur. Accordingly, we could become more highly leveraged,
resulting in increased risk of default on our obligations and
in an increase in debt service requirements which could
adversely affect our financial condition and results of opera-
tions and our ability to make distributions.
Our loan agreements contain customary representations,
covenants and events of default. Certain loan agreements
Acadia Realty Trust 2005 Annual Report
11
Possible liability relating to environmental matters.
Under various federal, state and local environmental laws,
statutes, ordinances, rules and regulations, as an owner of
real property, we may be liable for the costs of removal or
remediation of certain hazardous or toxic substances at, on,
in or under our property, as well as certain other potential
costs relating to hazardous or toxic substances (including
government fines and penalties and damages for injuries
to persons and adjacent property). These laws may impose
Changes in laws increasing the potential liability for environ-
liability without regard to whether we knew of, or were
mental conditions existing on properties or increasing the
responsible for, the presence or disposal of those substances.
restrictions on discharges or other conditions may result in
This liability may be imposed on us in connection with the
significant unanticipated expenditures or may otherwise
activities of an operator of, or tenant at, the property. The
adversely affect the operations of our tenants, which could
cost of any required remediation, removal, fines or personal
adversely affect our financial condition or results of operations.
or property damages and our liability therefore could exceed
the value of the property and/or our aggregate assets. In
addition, the presence of those substances, or the failure to
properly dispose of or remove those substances, may adversely
affect our ability to sell or rent that property or to borrow
using that property as collateral, which, in turn, would
reduce our revenues and ability to make distributions.
Competition may adversely affect our ability to purchase
properties and to attract and retain tenants.
There are numerous commercial developers, real estate
companies, financial institutions and other investors with
greater financial resources than we have that compete with
us in seeking properties for acquisition and tenants who
will lease space in our properties. Our competitors include
A property can also be adversely affected either through
other REITs, financial institutions, insurance companies,
physical contamination or by virtue of an adverse effect
pension funds, private companies and individuals. This com-
upon value attributable to the migration of hazardous or
petition may result in a higher cost for properties that we
toxic substances, or other contaminants that have or may
wish to purchase.
have emanated from other properties. Although our tenants
are primarily responsible for any environmental damages
and claims related to the leased premises, in the event of
the bankruptcy or inability of any of our tenants to satisfy
any obligations with respect to the property leased to that
tenant, we may be required to satisfy such obligations. In
addition, we may be held directly liable for any such dam-
ages or claims irrespective of the provisions of any lease.
From time to time, in connection with the conduct of our
business, and prior to the acquisition of any property from
a third party or as required by our financing sources, we
authorize the preparation of Phase I environmental reports
and, when necessary, Phase II environmental reports, with
respect to our properties. Based upon these environmental
reports and our ongoing review of our properties, as of the
date of this prospectus supplement, we are not aware of any
environmental condition with respect to any of our properties
that we believe would be reasonably likely to have a material
adverse effect on us. There can be no assurance, however,
that the environmental reports will reveal all environmental
conditions at our properties or that the following will not
expose us to material liability in the future:
■ The discovery of previously unknown environmental
conditions.
■ Changes in law.
■ Activities of tenants.
■ Activities relating to properties in the vicinity of our
properties.
In addition, retailers at our properties face increasing com-
petition from outlet malls, discount shopping clubs, internet
commerce, direct mail and telemarketing, which could
(i) reduce rents payable to us; (ii) reduce our ability to
attract and retain tenants at our properties; and (iii) lead
to increased vacancy rates at our properties.
We have pursued, and may in the future continue to
pursue, extensive growth opportunities which may
result in significant demands on our operational,
administrative and financial resources.
We have pursued extensive growth opportunities. This
expansion has placed significant demands on our operational,
administrative and financial resources. The continued growth
of our real estate portfolio can be expected to continue to
place a significant strain on its resources. Our future perform-
ance will depend in part on our ability to successfully attract
and retain qualified management personnel to manage the
growth and operations of our business and to finance such
acquisitions. In addition, acquired properties may fail to
operate at expected levels due to the numerous factors
which may affect the value of real estate. There can be no
assurance that we will have sufficient resources to identify
and manage acquired properties or otherwise be able to
maintain our historic rate of growth.
Our inability to carry out our growth strategy could
adversely affect our financial condition and results of
operations.
Our growth strategy is based on the acquisition and
development of additional properties, including acquisitions
through co-investment programs such as joint ventures. In
Acadia Realty Trust 2005 Annual Report 12
the context of our business plan, “development” generally
qualified or will remain qualified as a REIT. The Internal Rev-
means an expansion or renovation of an existing property.
enue Code provisions and income tax regulations applicable
The consummation of any future acquisitions will be subject
to REIT’s are more complex than those applicable to corpo-
to satisfactory completion of our extensive valuation analysis
rations. The determination of various factual matters and
and due diligence review and to the negotiation of definitive
circumstances not entirely within our control may affect our
documentation. We cannot be sure that we will be able to
ability to continue to qualify as a REIT. In addition, no assur-
implement our strategy because we may have difficulty
ance can be given that legislation, regulations, administrative
finding new properties, negotiating with new or existing
interpretations or court decisions will not significantly change
tenants or securing acceptable financing.
the requirements for qualification as a REIT or the federal
Acquisitions of additional properties entail the risk that
investments will fail to perform in accordance with expec-
tations, including operating and leasing expectations. Rede-
velopment is subject to numerous risks, including risks of
construction delays, cost overruns or force majeure that
may increase project costs, new project commencement
risks such as the receipt of zoning, occupancy and other
required governmental approvals and permits, and the
incurrence of development costs in connection with projects
that are not pursued to completion.
Our board of trustees may change our investment policy
without shareholder approval.
income tax consequences of such qualification. If we do not
qualify as a REIT, we would not be allowed a deduction for
distributions to shareholders in computing our net taxable
income. In addition, our income would be subject to tax at
the regular corporate rates. We also could be disqualified from
treatment as a REIT for the four taxable years following the
year during which qualification was lost. Cash available for
distribution to our shareholders would be significantly reduced
for each year in which we do not qualify as a REIT. In that
event, we would not be required to continue to make distri-
butions. Although we currently intend to continue to qualify
as a REIT, it is possible that future economic, market, legal,
tax or other considerations may cause us, without the con-
Our board of trustees will determine our investment and
sent of the shareholders, to revoke the REIT election or to
financing policies, our growth strategy and our debt, capital-
otherwise take action that would result in disqualification.
ization, distribution, acquisition, disposition and operating
policies. Our board of trustees may establish investment
criteria or limitations as it deems appropriate, but currently
does not limit the number of properties in which we may
seek to invest or on the concentration of investments in
any one geographic region. Although our board of trustees
has no present intention to revise or amend our strategies
and policies, it may do so at any time without a vote by our
shareholders. Accordingly, our shareholders’ control over
changes in our strategies and policies is limited to the elec-
tion of trustees, and changes made by our board of trustees
may not serve the interests of all of our shareholders and
could adversely affect our financial condition or results of
operations, including our ability to distribute cash to share-
holders or qualify as a REIT.
There can be no assurance we have qualified or will
remain qualified as a REIT for federal income tax purposes.
Distribution requirements imposed by law limit our
operating flexibility.
To maintain our status as a REIT for federal income tax pur-
poses, we are generally required to distribute to our share-
holders at least 90% of our taxable income for that calendar
year. Our taxable income is determined without regard to
any deduction for dividends paid and by excluding net capital
gains. To the extent that we satisfy the distribution require-
ment, but distribute less than 100% of our taxable income,
we will be subject to federal corporate income tax on our
undistributed income. In addition, we will incur a 4% nonde-
ductible excise tax on the amount, if any, by which our distri-
butions in any year are less than the sum of (i) 85% of our
ordinary income for that year; (ii) 95% of our capital gain net
income for that year; and (iii) 100% of our undistributed tax-
able income from prior years. We intend to continue to make
distributions to our shareholders to comply with the distribu-
We believe that we have met the requirements for qualifi-
tion requirements of the Internal Revenue Code and to reduce
cation as a REIT for federal income tax purposes beginning
exposure to federal income and nondeductible excise taxes.
with our taxable year ended December 31, 1993, and we intend
Differences in timing between the receipt of income and the
to continue to meet these requirements in the future. How-
payment of expenses in determining our income and the
ever, qualification as a REIT involves the application of highly
effect of required debt amortization payments could require
technical and complex provisions of the Internal Revenue
us to borrow funds on a short-term basis in order to meet
Code, for which there are only limited judicial or administra-
the distribution requirements that are necessary to achieve
tive interpretations. No assurance can be given that we have
the tax benefits associated with qualifying as a REIT.
Acadia Realty Trust 2005 Annual Report
13
Uninsured losses or a loss in excess of insured limits
could adversely affect our financial condition.
rules for these limits are complex and groups of related
individuals or entities may be deemed a single owner and
We carry comprehensive liability, fire, extended coverage
consequently in violation of the share ownership limits.
and rent loss insurance on most of our properties, with policy
specifications and insured limits customarily carried for sim-
ilar properties. However, with respect to those properties
where the leases do not provide for abatement of rent under
any circumstances, we generally do not maintain rent loss
insurance. In addition, there are certain types of losses, such
as losses resulting from wars, terrorism or acts of God that
generally are not insured because they are either uninsurable
or not economically insurable. Should an uninsured loss or a
loss in excess of insured limits occur, we could lose capital
invested in a property, as well as the anticipated future rev-
enues from a property, while remaining obligated for any
mortgage indebtedness or other financial obligations related
to the property. Any loss of these types would adversely
affect our financial condition.
Adverse legislative or regulatory tax changes could have
an adverse effect on us.
There are a number of issues associated with an investment
in a REIT that are related to the federal income tax laws,
including, but not limited to, the consequences of failing
to continue to qualify as a REIT. At any time, the federal
income tax laws governing REIT’s or the administrative
interpretations of those laws may be amended. Any of those
new laws or interpretations may take effect retroactively
and could adversely affect us or our shareholders. Recently
enacted legislation reduces tax rates applicable to certain
corporate dividends paid to most domestic noncorporate
shareholders. REIT dividends generally would not be eligible
for reduced rates because a REIT’s income generally is not
subject to corporate level tax. As a result, investment in
Limits on ownership of our capital shares.
non-REIT corporations may be viewed as relatively more
For the Company to qualify as a REIT for federal income tax
attractive than investment in REIT’s by domestic noncorporate
purposes, among other requirements, not more than 50%
investors. This could adversely affect the market price of the
of the value of our capital shares may be owned, directly or
Company’s shares.
indirectly, by five or fewer individuals (as defined in the Inter-
nal Revenue Code to include certain entities) during the last
half of each taxable year after 1993, and such capital shares
must be beneficially owned by 100 or more persons during
at least 335 days of a taxable year of 12 months or during a
proportionate part of a shorter taxable year (in each case,
other than the first such year). Our Declaration of Trust includes
certain restrictions regarding transfers of our capital shares
and ownership limits that are intended to assist us in satis-
fying these limitations. These restrictions and limits may not
be adequate in all cases, however, to prevent the transfer of
our capital shares in violation of the ownership limitations.
The ownership limit discussed above may have the effect
of delaying, deferring or preventing someone from taking
control of us.
Concentration of ownership by certain investors.
Six shareholders own more than 5% individually, and 45.7%
in the aggregate, of our Common Shares. A significant con-
centration of ownership may allow an investor to exert a
greater influence over our management and affairs and
may have the effect of delaying, deferring or preventing a
change in control of us.
Restrictions on a potential change of control.
Our Board of Trustees is authorized by our Declaration of
Trust to establish and issue one or more series of preferred
shares without shareholder approval. We have not established
any series of preferred shares; however, the establishment
and issuance of a series of preferred shares could make more
difficult a change of control of us that could be in the best
Actual or constructive ownership of our capital shares in
interest of the shareholders.
excess of the share ownership limits contained in our Decla-
ration of Trust would cause the violative transfer or ownership
to be null and void from the beginning and subject to purchase
by us at a price equal to the lesser of (i) the price stipulated
in the challenged transaction; and (ii) the fair market value
of such shares (determined in accordance with the rules set
forth in our declaration of trust). As a result, if a violative
transfer were made, the recipient of the shares would not
acquire any economic or voting rights attributable to the
transferred shares. Additionally, the constructive ownership
In addition, we have entered into an employment agreement
with our Chief Executive Officer and severance agreements
are in place with our senior vice presidents which provide
that, upon the occurrence of a change in control of us, those
executive officers would be entitled to certain termination
or severance payments made by us (which may include a
lump sum payment equal to defined percentages of annual
salary and prior years’ average bonuses, paid in accordance
with the terms and conditions of the respective agreement),
Acadia Realty Trust 2005 Annual Report 14
which could deter a change of control of us that could be in
feet with an average size of 199,000 square feet. As of
our best interest.
The loss of a key executive officer could have an adverse
effect on us.
Our success depends on the contribution of key management
members. The loss of the services of Kenneth F. Bernstein,
December 31, 2005, our wholly-owned portfolio and the
Joint Venture Portfolio (excluding properties under redevel-
opment) were 94.3% and 96.8% occupied, respectively. Our
shopping centers are typically anchored by supermarkets or
value-oriented retail.
President and Chief Executive Officer, or other key executive-
We had approximately 671 leases as of December 31, 2005.
level employees could have a material adverse effect on
Greater than 50% of our rental revenues were from national
our results of operations. Although we have entered into
tenants. A majority of the income from the properties consists
an employment agreement with our President, Kenneth F.
of rent received under long-term leases. Most of these leases
Bernstein, the loss of his services could have an adverse
provide for the payment of fixed minimum rent monthly in
effect on our operations.
ITEM 1B. UNRESOLVED STAFF COMMENTSx
None.
ITEM 2. PROPERTIESx
Shopping Center Properties
The discussion and tables in Item 2 include properties held
through joint ventures in which we own a partial interest
(“Joint Venture Portfolio”). Except where noted, it does not
include our partial interest in 25 anchor-only leases with
Kroger and Safeway supermarkets as previously discussed
advance and for the payment by tenants of a pro-rata share
of the real estate taxes, insurance, utilities and common area
maintenance of the shopping centers. Minimum rents and
expense reimbursements accounted for approximately 80%
of our total revenues for the year ended December 31, 2005.
As of December 31, 2005, approximately 45% of our existing
leases also provided for the payment of percentage rents
either in addition to, or in place of, minimum rents. These
arrangements generally provide for payment to us of a certain
percentage of a tenant’s gross sales in excess of a stipulated
annual amount. Percentage rents accounted for approximately
1% of the total 2005 revenues of the Company.
in “PROPERTY ACQUISITIONS” in Item 1 of this Form 10-K , as
Five of our shopping center properties are subject to long-
the majority of these properties are free-standing and all
term ground leases in which a third party owns and has
are triple-net leases.
As of December 31, 2005, we owned and operated 46 shop-
ping centers as part of our wholly-owned portfolio and the
Joint Venture Portfolio, which included a mixed-use property
leased the underlying land to us. We pay rent for the use of
the land at four locations and are responsible for all costs
and expenses associated with the buildings and improve-
ments at all five locations.
(retail and residential), ten properties under redevelopment
No individual property contributed in excess of 10% of our
and one property under development. Our shopping centers,
total revenues for the years ended December 31, 2005, 2004
which total approximately 7.7 million square feet of gross
and 2003.
leaseable area (“GLA”), are located in 15 states and are gener-
ally well-established, anchored community and neighborhood
shopping centers. The operating properties are diverse in
size, ranging from approximately 17,000 to 775,000 square
Reference is made to our consolidated financial statements
in Item 8 of this Annual Report on form 10-K for information
on the mortgage debt pertaining to our properties.
Acadia Realty Trust 2005 Annual Report
15
The following sets forth more specific information with respect to each of our shopping centers at December 31, 2005:
Shopping Center
Location
Year
Constructed (C)
Acquired (A)
Ownership
Interest
Occupancy (1) %
12/31/05
GLA
Anchor Tenants
Current Lease Expiration/
Lease Option Expiration
NEW YORK REGION
New York
Soundview Marketplace
Village Commons
Shopping Center
Port Washington
1998 (A)
LI/Fee (5)
183,675
94%
Smithtown
1998 (A)
Fee
87,306
100%
Branch Shopping Plaza
Smithtown
1998 (A)
LI (5)
125,724
99%
New Loudon Center
Latham
1982 (A)
Fee
255,826
100%
Pacesetter Park Shopping Center
Pomona
Amboy Road
Staten Island
1999 (A)
2005 (A)
Fee
LI (5)
96,698
59,979
96%
100%
Bartow Avenue
Bronx
2005 (C)
Fee
14,694
51%
New Jersey
Elmwood Park Shopping Center
Elmwood Park
1998 (A)
Fee
149,085
98%
Marketplace of Absecon
Absecon
1998 (A)
Fee
105,097
97%
Ledgewood Mall
Ledgewood
1983 (A)
Fee
517,077
95%
NEW ENGLAND REGION
Connecticut
Town Line Plaza
Rocky Hill
1998 (A)
Fee
206,178 (2)
96%
239 Greenwich Avenue
Greenwich
1998 (A)
Fee
16,834 (3)(4)
100%
Massachusetts
Methuen Shopping Center
Methuen
1998 (A)
LI/Fee (5)
130,238
92%
Crescent Plaza
Brockton
1984 (A)
Fee
218,141
99%
Rhode Island
Walnut Hill Plaza
Woonsocket
1998 (A)
Fee
283,235
99%
King Kullen 2007/2022
Clearview Cinema 2010/2030
Daffy’s 2008/2028
Walgreens 2021/none
Waldbaum’s 2013/2028
CVS 2010/—
Price Chopper 2015/2035
Marshalls 2014/2029
Bon Ton 2014/2034
Raymour & Flanigan 2019/2034
AC Moore 2009/2014
Stop & Shop 2020/2040
Waldbaum’s 2028/—
Duane Reade 2008/2018
Pathmark 2017/2052
Walgreens 2022/2062
Acme 2015/2055
Eckerd Drug 2020/2040
Wal-Mart 2019/2049
Macy’s 2010/2025
The Sports Authority 2007/2037
Circuit City 2020/2040
Marshall’s 2014/2034
Barnes & Noble 2010/2035
Ashley Furniture 2010/2030
Stop & Shop 2023/2063
Wal-Mart(2)
Restoration Hardware
2015/2025
Coach 2016/2021
DeMoulas Market 2015/2020
Wal-Mart 2011/2051
Shaw’s 2012/2042
Home Depot 2021/2056
Shaw’s 2013/2043
Sears 2008/2033
CVS 2009/2014
Vermont
The Gateway Shopping Center
South Burlington
1999 (A)
Fee
101,792
99%
Shaw’s 2024/2054
Acadia Realty Trust 2005 Annual Report 16
Shopping Center
Location
Year
Constructed (C)
Acquired (A)
Ownership
Interest
Occupancy (1) %
12/31/05
GLA
Anchor Tenants
Current Lease Expiration/
Lease Option Expiration
MIDWEST REGION
Illinois
Hobson West Plaza
Indiana
Merrillville Plaza
Naperville
1998 (A)
Fee
99,044
99%
Bobak’s Market & Restaurant
2007/2032
Merrillville
1998 (A)
Fee
235,605
94%
TJ Maxx 2009/2014
JC Penney 2008/2018
Office Max 2008/2028
Pier I 2009/—
David’s Bridal 2010/2020
Toys ‘R’ Us 2014/2039
TJ Maxx 2009/—
Marshalls 2011/2026
Home Goods 2010/2025
Babies ‘R’ Us 2010/2020
Office Depot 2010/—
Pier I 2010/—
TJ Maxx 2010/2020
Target (6)
Kmart 2009/2049
Eckerd Drug 2006/—
P&C Foods 2014/2024
Kmart 2019/2069
Giant Food 2021/2051
Eckerd Drug 2009/2019
Price Rite/Wakefern 2015/2035
Redner’s Markets 2018/2028
Kmart 2009/2049
Redner’s Markets 2018/2028
Eckerd Drug 2006/2016
Home Depot 2028/2058
Weis Markets (not owned)
Kmart 2020/2070
Eckerd Drug 2011/2026
Fashion Bug 2006/—
Michigan
Bloomfield Town Square
Bloomfield Hills
1998 (A)
Fee
214,866
97%
Ohio
Mad River Station
MID-ATLANTIC REGION
Pennsylvania
Abington Towne Center
Dayton
1999 (A)
Fee
155,739 (7)
82%
Abington
1998 (A)
Fee
216,355 (6)
99%
Blackman Plaza
Wilkes-Barre
1968 (C)
Fee
121,341
92%
Bradford Towne Centre
Towanda
1993 (C)
Fee
256,939
91%
Greenridge Plaza
Scranton
Luzerne Street Shopping Center
Scranton
1986 (C)
1983 (A)
Fee
Fee
191,755
58,228
79%
87%
Mark Plaza
Pittston Plaza
Plaza 422
Route 6 Mall
Edwardsville
1968 (C)
LI/Fee (5)
216,047
97%
Pittston
1994 (C)
Fee
79,494
96%
Lebanon
Honesdale
1972 (C)
1994 (C)
Fee
Fee
155,026
175,507
69%
99%
Wholly-owned portfolio
4,727,525
94%
Acadia Realty Trust 2005 Annual Report
17
Properties Held In Joint Ventures
Shopping Center
Location
Constructed (C)
Acquired (A)
Year
Ownership
Interest
Occupancy (1) %
12/31/05
GLA
Anchor Tenants
Current Lease Expiration/
Lease Option Expiration
NEW YORK REGION
New York
Crossroads Shopping Center
White Plains
1998(A)
JV (8)
310,644
100%
MID-ATLANTIC REGION
Delaware
Brandywine Town Center
Wilmington
2003(A)
JV (10)
775,932
100%
Market Square Shopping Center Wilmington
2003(A)
JV (10)
102,762
100%
MIDWEST REGION
Ohio
Amherst Marketplace
Cleveland
2002(A)
JV (10)
79,937
100%
Granville Centre
Sheffield Crossing
Columbus
Cleveland
2002(A)
2002(A)
JV (10)
JV (10)
134,999
112,534
44%
94%
VARIOUS REGIONS
Kroger/Safeway Portfolio
Various
2003 (A)
JV (10)
1,018,100
100%
Waldbaum’s 2007/2032
Kmart 2012/2022
B. Dalton 2012/2017
Modell’s 2009/2019
Pier I 2007/2017
Pay Half 2018/—
Annie Sez (Big M) 2007/2022
Michaels 2011/2026
Old Navy (The Gap) 2011/2016
Petsmart 2017/2042
Thomasville Furniture
2011/2021
World Market 2015/—
Access Group 2015/2025
Bed, Bath & Beyond 2014/2029
Dick’s Sporting Goods
2013/2028
Lowe’s Home Centers
2018/2048
Regal Cinemas 2017/2037
Target 2018/2068
Kincaid Furniture 2010/—
Transunion Settlement
2013/2018
The Bombay Company
2015/2025
Lane Home Furnishings
2015/—
Tutor Time 2010/2025
Moe’s 2015/—
MJM Designer 2015/—
New Balance
Trader Joe’s 2013/2028
TJ Maxx 2006/2016
Giant Eagle 2021/2041
Riser Foods Company/
Pharmacy 2012/2027
California Fitness 2017/2027
Giant Eagle 2022/2042
Revco Drug 2012/2027
25 Kroger/Safeway
Supermarkets 2009/2049
Acadia Realty Trust 2005 Annual Report 18
JV Redevelopments
Shopping Center
Location
Michigan
Sterling Heights Shopping Center Detroit
Year
Constructed (C)
Acquired (A)
Ownership
Interest
Occupancy (1) %
12/31/05
GLA
Anchor Tenants
Current Lease Expiration/
Lease Option Expiration
2004(A)
JV (10)
154,838
55%
New York
Tarrytown Shopping Center
400 E. Fordham Road
Pelham Manor Shopping Plaza
161st Street
Sherman Avenue
South Carolina
Hitchcock Plaza
Pine Log Plaza
Virginia
Haygood Shopping Center
Notes:
Westchester
Bronx
Westchester/Bronx
Bronx
New York
Aiken
Aiken
2004(A)
2004(A)
2004(A)
2005(A)
2005(A)
JV (10)
JV (11)
JV (5)(11)
JV (11)
JV (11)
38,930
117,355
398,775
223,611
134,773
2004(A)
2004(A)
JV (10)
JV (10)
233,886
35,064
Virginia Beach
2004(A)
JV (10)
Joint Venture Portfolio
153,999
4,026,139
63%
100%
51%
100%
100%
27%
91%
73%
86%
Burlington Coat Factory
2024/—
Walgreens 2080/—
Sears 2007/—
City of New York 2006/—
Pilot Garage 2007/—
Farmer’s Furniture 2009/2014
Eckerd Drug 2009/—
(1) Does not include space leased for which rent has not yet commenced.
(2) Includes a 92,500 square foot Wal-Mart which is not owned by us.
(3) In addition to the 16,834 square feet of retail GLA, this property also has 21 apartments comprising 14,434 square feet.
(4) Coach is a new tenant and executed an 11-year lease with one five-year option.
(5) We are a ground lessee under a long-term ground lease.
(6) Includes a 157,616 square foot Target Store that is not owned by the Company.
(7) The GLA for this property includes 28,205 square feet of office space.
(8) We have a 49% investment in this property.
(9) Does not include 80,000 square feet of new space in Phase II of the Brandywine Town Center, which will be paid for by Fund I on an Earn-
out basis only if, and when, it is leased.
(10) We have invested in this asset through Fund I.
(11) We have invested in this asset through Fund II.
Acadia Realty Trust 2005 Annual Report
19
MAJOR TENANTS
No individual retail tenant accounted for more than 5.5% of minimum rents for the year ended December 31, 2005, or 10.0%
of total leased GLA as of December 31, 2005. The following table sets forth certain information for the 20 largest retail tenants
based upon minimum rents in place as of December 31, 2005. The table includes leases related to our partial interest in 25
anchor-only leases with Kroger and Safeway supermarkets. The below amounts include our pro-rata share of GLA and annual-
ized base rent for our partial ownership interest in properties (GLA and rent in thousands):
Retail Tenant
Albertson’s (Shaw’s, Acme)
Sears (Sears, Kmart)
T.J. Maxx (T.J. Maxx, Marshalls, A.J. Wrights)
A&P (Waldbaum’s)
Ahold (Giant, Stop & Shop)
Wal-Mart
Brook’s Drug
Home Depot
Pathmark
Redner’s Supermarket
Restoration Hardware
Kroger (3)
Safeway (4)
Price Chopper
Clearview Cinema (5)
Federated (Macy’s)
JC Penney
Walgreens
King Kullen
Payless Shoes
Total
Notes:
Number of Stores
in Portfolio
4
Total GLA
221
Annualized
Base Rent (1)
$ 3,013
Total Portfolio
GLA (2)
4.0%
Annualized Base
Rent (2)
5.5%
Percentage of Total
Represented by Retail Tenant
7
10
2
3
2
7
2
1
2
1
12
13
2
1
1
2
2
1
10
85
553
296
119
179
210
81
211
48
112
9
132
104
77
25
73
73
24
48
38
2,156
2,132
1,913
1,569
1,515
1,070
1,010
955
876
697
722
722
804
686
651
592
589
563
601
10.0%
5.4%
2.2%
3.2%
3.8%
1.5%
3.8%
0.9%
2.0%
0.2%
2.4%
1.9%
1.4%
0.5%
1.3%
1.3%
0.4%
0.9%
0.7%
4.0%
3.9%
3.5%
2.9%
2.8%
2.0%
1.9%
1.8%
1.6%
1.3%
1.3%
1.3%
1.5%
1.3%
1.2%
1.1%
1.1%
1.0%
1.1%
2,633
$22,836
47.8%
42.1%
(1) Base rents do not include percentage rents (except where noted), additional rents for property expense reimbursements, and contractual
rent escalations due after December 31, 2005.
(2) Represents total GLA and annualized base rent for our retail properties including its pro-rata share of Joint Venture Properties.
(3) Kroger has sub-leased four of these locations to supermarket tenants, two locations to a non-supermarket tenant and ceased operations
at one other location. Kroger is obligated to pay rent through the full term of these leases which expire in 2009.
(4) Safeway has sub-leased seven of these locations to supermarket tenants, one location to a non-supermarket tenant and ceased operations
at one other location. Safeway is obligated to pay rent through the full term of all these leases which expire in 2009.
(5) Subsidiary of Cablevision.
Acadia Realty Trust 2005 Annual Report 20
LEASE EXPIRATIONS
The following table shows scheduled lease expirations for retail tenants in place as of December 31, 2005, assuming that none
of the tenants exercise renewal options. Leases related to our joint venture properties are shown separately below before our
pro-rata share of annual base rent and GLA (GLA and rent in thousands):
Wholly-Owned Portfolio:
Leases maturing in
2006
Number of
Leases
86
Annualized Base Rent (1)
GLA
Current
Annual Rent
$ 3,476
Percentage
of Total
8%
Square Feet
288
Percentage
of Total
7%
2007
2008
2009
2010
2011
2012
2013
2014
2015
Thereafter
Total
66
58
66
54
23
8
15
23
19
33
451
Joint Venture Portfolio:
Leases maturing in
2006
Number of
Leases
51
2007
2008
2009
2010
2011
2012
2013
2014
Thereafter
Total
Note:
31
23
44
11
7
6
8
13
26
220
4,386
4,676
4,716
5,591
2,340
885
2,295
2,408
3,678
11,071
$ 45,522
10%
10%
10%
12%
5%
2%
5%
5%
8%
25%
100%
390
338
547
509
213
66
157
307
242
1,146
4,203
9%
8%
13%
12%
5%
2%
4%
7%
6%
27%
100%
Annualized Base Rent (1)
GLA
Current
Annual Rent
$ 6,497
4,451
1,565
10,012
705
1,773
1,377
2,083
2,172
10,621
$41,256
Percentage
of Total
16%
Square Feet
491
Percentage
of Total
14%
11%
4%
24%
2%
4%
3%
5%
5%
26%
100%
476
67
1,132
43
76
139
119
119
819
3,481
14%
2%
33%
1%
2%
4%
3%
3%
24%
100%
(1) Base rents do not include percentage rents, additional rents for property expense reimbursements, nor contractual rent escalations due
after December 31, 2005.
Acadia Realty Trust 2005 Annual Report
21
GEOGRAPHIC CONCENTRATIONS
The following table summarizes our retail properties by region as of December 31, 2005. (GLA and rent in thousands):
GLA (1)
Occupied % (2)
Annualized
Base Rent (2)
Annualized Base
Rent Per Leased
Square Foot
Wholly-Owned Portfolio:
New York Region
New England
Midwest
Mid-Atlantic
Northeastern Pennsylvania
Total Wholly-Owned Portfolio
Joint Venture Portfolio:
Operating Properties
Midwest (3)
Mid-Atlantic (3,4)
New York Region (5)
Total Operating Properties
Redevelopment Properties:
Midwest (6)
Mid-Atlantic (6)
New York Region (7)
Total Redevelopment Properties
Total Joint Venture Portfolio
Notes:
734
1,195
705
839
1,254
4,727
327
879
311
1,517
155
423
913
1,491
3,008
97%
98%
93%
96%
89%
94%
75%
100%
100%
94%
55%
49%
77%
67%
81%
Percentage of Total
Represented by Region
GLA
16%
25%
15%
18%
26%
Annualized
Base Rent
32%
22%
17%
15%
14%
$ 14,735
$ 20.79
9,847
7,597
7,023
6,320
9.19
11.58
10.79
5.67
$ 45,522
$ 10.83
100%
100%
$ 2,619
13,961
6,054
$22,634
$
427
1,524
8,007
9,958
$ 10.67
15.89
19.49
$ 15.77
5.02
7.36
11.36
9.99
$ 32,592
$ 13.40
22%
58%
20%
100%
11%
28%
61%
100%
100%
12%
62%
26%
100%
4%
16%
80%
100%
100%
(1) Property GLA includes a total of 255 square feet which is not owned by us. This square footage has been excluded for calculating annual-
ized base rent per square foot.
(2) The above occupancy and rent amounts do not include space which is currently leased, but for which rent payment has not yet commenced.
(3) We have a 22% interest in Fund I, which owns these properties.
(4) Does not include 80,000 square feet of new space in Phase II of the Brandywine Town Center, which will be paid for by us on an “earn-out
basis” only if, and when it is leased. Subsequent to December 31, 2005, the Brandywine portfolio was recapitalized through the conversion
of the 77.8% interest previously held by institutional investors in Fund I to GDC Properties. We have retained our existing 22.2% interest.
(5) We have a 49% interest in two partnerships which, together, own the Crossroads Shopping Center.
(6) We have a 22% interest in Fund I, which has interests ranging from 50% to 90% of these properties.
(7) We have a 22% interest in Fund I, which owns 50% of the Tarrytown Shopping Center and a 20% interest in Fund II, which owns 97% of
400 East Fordham Road; Pelham Manor Shopping Plaza, Sherman Avenue and 161st Street.
Acadia Realty Trust 2005 Annual Report 22
MULTI-FAMILY PROPERTIES
We own two multi-family properties located in the Mid-Atlantic and Midwest regions. The properties average 737 units and as
of December 31, 2005, had an average occupancy rate of 98%. The following sets forth more specific information with respect
to each of our multi-family properties at December 31, 2005:
Multi-Family Property:
Location
Year Acquired
Ownership
Interest
Units
% Occupied
Missouri (1)
Gate House, Holiday House, Tiger Village
and Colony Apartments
Columbia
1998
North Carolina
Village Apartments
Totals
Notes:
Winston-Salem
1998
Fee
Fee
874
600
1,474
99%
96%
98%
(1) We own four contiguous residential complexes in Columbia, Missouri which, although owned in two separate entities, are managed as a
single property and therefore reflected as such.
ITEM 3. LEGAL PROCEEDINGSx
We are involved in other various matters of litigation arising
in the normal course of business. While we are unable to
predict with certainty the amounts involved, management
is of the opinion that, when such litigation is resolved, our
resulting liability, if any, will not have a significant effect on
our consolidated financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TOx
A VOTE OF SECURITY HOLDERSx
No matter was submitted to a vote of security holders
through the solicitation of proxies or otherwise during the
fourth quarter of 2005.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITYx
RELATED SHAREHOLDER MATTERS AND ISSUERx
PURCHASES OF EQUITY SECURITIESx
(a) Market Information
The following table shows, for the period indicated, the
high and low sales price for the Common Shares as reported
on the New York Stock Exchange, and cash dividends paid
during the two years ended December 31, 2005 and 2004:
Quarter Ended
2005
March 31, 2005
June 30, 2005
September 30, 2005
December 31, 2005
2004
March 31, 2004
June 30, 2004
September 30, 2004
December 31, 2004
High
Low
Dividend
Per Share
$16.60
$15.60
$0.1725
18.65
19.89
20.76
15.53
17.45
16.66
0.1725
0.1725
0.1850
$15.00
$12.36
$0.1600
14.30
15.11
16.49
11.38
13.03
14.70
0.1600
0.1600
0.1725
At March 15, 2006, there were 349 holders of record of the
Company’s Common Shares.
Acadia Realty Trust 2005 Annual Report
23
(b) Dividends
We have determined that for 2005, 95% of the total dividends
(c) Issuer purchases of equity securities
We have an existing share repurchase program that authorizes
distributed to shareholders represented ordinary income,
management, at its discretion, to repurchase up to $20.0
3% represented unrecaptured section 1250 gain and 2%
million of our outstanding Common Shares. Through March
represented nontaxable return of capital. Our cash flow is
15, 2006, we had repurchased 2.1 million Common Shares
affected by a number of factors, including the revenues
at a total cost of $11.7 million of which 2.0 million of these
received from rental properties, our operating expenses,
Common Shares have been subsequently reissued. The program
the interest expense on its borrowings, the ability of lessees
may be discontinued or extended at any time and there is
to meet their obligations to us and unanticipated capital
no assurance that we will purchase the full amount author-
expenditures. Future dividends paid by us will be at the
ized. There were no Common Shares repurchased by us during
discretion of the Trustees and will depend on our actual cash
the fiscal year ended December 31, 2005.
flows, our financial condition, capital requirements, the annual
distribution requirements under the REIT provisions of the
Code and such other factors as the Trustees deem relevant.
(d) Securities authorized for issuance under equity
compensation plans
The following table provides information related to our 1999
Share Incentive Plan (the “1999 Plan”) and 2003 Share Incen-
tive Plan (the “2003 Plan”) as of December 31, 2005:
Equity Compensation Plan Information
(a)
(b)
Number of securities to be issued
upon exercise of outstanding
options, warrants and rights
Weighted-average
exercise price of outstanding
options, warrants and rights
(c)
Number of securities remaining
available for future issuance under
equity compensation plans (excluding
securities reflected in Column a)
477,242
—
477,242
$8.03
—
$8.03
3,021,053 (1)
—
3,021,053 (1)
Equity compensation plans
approved by security holders
Equity compensation plans
not approved by security holders
Total
Notes:
(1) The 1999 and 2003 Plans authorize the issuance of options equal to up to a total of 12% of the total Common Shares outstanding from
time to time on a fully diluted basis. However, not more than 4,000,000 of the Common Shares in the aggregate may be issued pursuant
to the exercise of options and no participant may receive more than 5,000,000 Common Shares during the term of the 1999 and 2003
Plans. Remaining available is based on 31,542,942 outstanding Common Shares and 653,360 OP Units as of December 31, 2005, less the
issuance of a total of 365,261 restricted shares granted through the same date.
Acadia Realty Trust 2005 Annual Report 24
ITEM 6. SELECTED FINANCIAL DATAx
The following table sets forth, on a historical basis, our selected financial data. This information should be read in conjunction
with our audited consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and
Results of Operations appearing elsewhere in this Form 10-K.
OPERATING DATA:
Revenues
Operating expenses
Interest expense
Depreciation and amortization
Abandoned project costs
Gain in sale of land
Equity in earnings of unconsolidated partnerships
Minority interest
Income taxes
Income from continuing operations
(Loss) income from discontinued operations
Income before cumulative effect of
a change in accounting principle
Cumulative effect of a change in accounting principle
Net income
Basic earnings per share:
Income from continuing operations
(Loss) income from discontinued operations
Cumulative effect of a change in accounting principle
Basic earnings per share
Diluted earnings per share:
Income from continuing operations
(Loss) income from discontinued operations
Cumulative effect of a change in accounting principle
Diluted earnings per share
Weighted average number of Common Shares
outstanding
– basic
– diluted (1)
Cash dividends declared per Common Share
BALANCE SHEET DATA:
Real estate before accumulated depreciation
Total assets
Total mortgage indebtedness
Minority interest – Operating Partnership
Total equity
OTHER:
Funds from Operations (2)
Cash flows provided by (used in):
Operating activities
Investing activities
Financing activities
See notes on following page.
2005
Years ended December 31,
2003
2004
2002
2001
$ 83,318
$ 71,657
$66,646
38,958
11,423
16,763
—
—
8,228
(695)
(2,140)
21,567
(941)
20,626
—
33,774
10,436
15,470
—
932
1,797
(1,190)
—
13,516
6,069
19,585
—
33,361
9,896
17,195
—
1,187
2,411
(1,399)
—
8,393
(540)
7,853
—
$ 20,626
$ 19,585
$ 7,853
$65,916
29,737
9,545
14,040
274
1,530
628
(2,994)
—
11,484
7,915
19,399
—
$19,399
$
0.68
$ 0.46
$
0.32
$ 0.45
$
$
(0.03)
—
0.65
0.67
(0.03)
—
$
$
0.21
—
0.67
0.45
0.20
—
(0.02)
—
0.32
—
$ 0.30
$ 0.77
$
0.31
$ 0.45
(0.02)
—
0.31
—
$ 57,327
27,959
10,800
12,983
—
—
504
(1,372)
—
4,717
5,234
9,951
(149)
$ 9,802
$
$
$
0.16
0.20
(0.01)
0.35
0.16
0.20
(0.01)
$
0.64
$
0.65
$ 0.29
$ 0.76
$
0.35
31,949
32,214
29,341
29,912
26,640
27,232
25,321
25,806
28,313
—
$ 0.7025
$ 0.6525
$
0.61
$
0.52
$
0.48
$ 435,751
499,058
238,448
9,204
220,576
$414,974
$ 407,220
$393,652
$ 378,216
405,647
153,361
5,743
216,924
388,184
173,070
7,875
169,734
410,935
181,690
22,745
161,323
493,939
190,462
37,387
179,098
$ 35,842
$ 30,004
$ 27,664
$ 30,162
$ 13,487
23,959
(59,478)
61,632
25,468
(16,371)
(9,757)
20,118
(20,940)
(30,187)
30,008
47,553
(66,531)
21,039
(11,717)
(7,047)
Acadia Realty Trust 2005 Annual Report
25
Notes:
(1) For 2001, the weighted average number of shares outstanding
on a diluted basis is not presented as the inclusion of additional
shares was anti-dilutive.
(2) The Company considers funds from operations (“FFO”) as defined
by the National Association of Real Estate Investment Trusts
(“NAREIT”) to be an appropriate supplemental disclosure of
operating performance for an equity REIT due to its widespread
acceptance and use within the REIT and analyst communities.
FFO is presented to assist investors in analyzing the performance
of the Company. It is helpful as it excludes various items included
in net income that are not indicative of the operating perform-
ance, such as gains (losses) from sales of depreciated property
and depreciation and amortization. However, the Company’s
method of calculating FFO may be different from methods used
by other REITs and, accordingly, may not be comparable to such
other REIT’s. FFO does not represent cash generated from opera-
tions as defined by generally accepted accounting principles
(“GAAP”) and is not indicative of cash available to fund all cash
needs, including distributions. It should not be considered as an
alternative to net income for the purpose of evaluating the Com-
pany’s performance or to cash flows as a measure of liquidity.
Consistent with the NAREIT definition, the Company defines FFO
as net income (computed in accordance with GAAP), excluding
gains (losses) from sales of depreciated property, plus depreciation
and amortization, and after adjustments for unconsolidated part-
nerships and joint ventures. See Management’s Discussion and
Analysis of Financial Condition and Results of Operations – Funds
from Operations for the reconciliation of net income to FFO.
Acadia Realty Trust 2005 Annual Report 26
Management’s Discussion and Analysis
ITEM 7x
Management’ s Discussion and Analysis of
Financial Condition and Results of Operations
The following discussion should be read in conjunction with
income primarily from the rental revenue from our proper-
ties, including recoveries from tenants, offset by operating
and overhead expenses.
We focus on three primary areas in executing our business
our consolidated financial statements (including the related
plan as follows:
notes thereto) appearing elsewhere in this Form 10-K. Certain
statements contained in this Annual Report on Form 10-K
may contain forward-looking statements within the mean-
ing of Section 27A of the Securities Act of 1933 and Section
21E of the Securities and Exchange Act of 1934 and as such
may involve known and unknown risks, uncertainties and
other factors which may cause our actual results, perform-
ance or achievements to be materially different from future
results, performance or achievements expressed or implied
by such forward-looking statements. Forward-looking state-
ments, which are based on certain assumptions and describe
our future plans, strategies and expectations are generally
identifiable by use of the words “may,”“will,”“should,”“expect,”
“anticipate,”“estimate,”“believe,”“intend” or “project” or the
negative thereof or other variations thereon or comparable
terminology. Factors which could have a material adverse
effect on our operations and future prospects include, but
are not limited to those set forth under the heading “Risk
Factors” in this Annual Report on Form 10-K. These risks
and uncertainties should be considered in evaluating any
forward-looking statements contained or incorporated by
reference herein.
Overview
We currently operate 71 properties, which we own or have an
ownership interest in, consisting of 69 neighborhood and
community shopping centers and two multi-family properties,
which are located primarily in the Northeast, Mid-Atlantic
and Midwestern regions of the United States. We receive
■ Focus on maximizing the return on our existing portfolio
through leasing and property redevelopment activities.
Our redevelopment program is a significant and ongoing
component of managing our existing portfolio and focuses
on selecting well-located neighborhood and community
shopping centers and creating significant value through
re-tenanting and property redevelopment.
■ Pursue above-average returns through a disciplined and
opportunistic acquisition program. The primary conduits
for our acquisition program are through our existing
acquisition joint venture, Acadia Strategic Opportunity
Fund II, LLC (“Fund II”), as well as the Retailer Controlled
Property Venture (“RCP Venture”) established to invest in
surplus or underutilized properties owned or controlled
by retailers and the New York Urban Infill Redevelopment
initiative which focuses on investing in redevelopment
projects in urban, dense areas where retail tenant demand
has effectively surpassed the supply of available sites.
■ Maintain a strong balance sheet, which provides us with
the financial flexibility to fund both property redevelop-
ment and acquisition opportunities.
Results of Operations
Comparison of the year ended December 31, 2005
(“2005”) to the year ended December 31, 2004
(“2004”)
Revenues::
Minimum rents
Percentage rents
Expense reimbursements
Other property income
Management fee income
Interest income
Other
Total revenues
22000055
$$ 5522..77
00..77
1144..00
00..88
1111..55
33..66
——
$$8833..33
22000044
$$ 5500..77
00..99
1133..00
00..66
44..88
11..55
00..22
$$ 7711..77
$$
$$ 22..00
((00..22))
11..00
00..22
66..77
22..11
((00..22))
$$ 1111..66
Change
%%
44%%
((2222))%%
88%%
3333%%
114400%%
114400%%
((110000))%%
1166%%
Acadia Realty Trust 2005 Annual Report
27
The increase in minimum rents was attributable to additional
Management fee income increased as a result of additional
rents following the purchase of Amboy Road shopping center
leasing fees from Fund I of $0.9 million, increased asset
in July 2005, re-tenanting activities as well as increased
management fees of $2.2 million from Fund II (which was
occupancy across the portfolio.
formed in June 2004), a $2.6 million increase in management
Real estate tax reimbursements increased $0.5 million pri-
marily as a result of general increases in real estate taxes
as well as re-tenanting activities throughout the portfolio.
fees related to the acquisition of certain management con-
tract rights in January 2004 and February 2005 and promote
income on the Mervyn’s investment in 2005 of $1.0 million.
CAM expense reimbursements increased $0.5 million as a
The increase in interest income was a combination of addi-
result of increased tenant reimbursements of higher snow
tional interest income on our advances and notes receivable
removal costs in 2005.
originated in 2004 and 2005 and additional interest income
earned following our preferred equity investment in Levitz
Operating Expenses:
Property operating
Real estate taxes
General and administrative
Depreciation and amortization
Total operating expenses
22000055
$$ 1144..33
99..22
1155..44
1166..88
$$ 5555..77
in 2005.
22000044
$$ 1144..55
88..88
1100..44
1155..55
$$4499..22
Change
$$
$$((00..22))
00..44
55..00
11..33
$$ 66..55
%%
((11))%%
55%%
4488%%
88%%
1133%%
The decrease in property operating expenses was primarily a
The increase in general and administrative expense was
result of the recovery of $0.5 million in 2005 related to the
attributable to increased compensation expense and other
settlement of our insurance claim in connection with the
overhead expenses following the expansion of our infrastruc-
flood damage incurred at Mark Plaza. A non-recurring
ture related to increased investment activity in fund assets
charge of approximately $0.7 million related to this flood
and asset management services.
damage was recorded in 2004. This decrease was partially
offset by higher snow removal costs in 2005.
Depreciation expense increased $0.3 million in 2005 which
was primarily attributable to increased depreciation expense
Real estate taxes increased as a result of general increases in
related to capitalized tenant installation costs in 2004 and
real estate taxes experienced across the portfolio.
2005. Amortization expense increased $1.0 million primarily
as a result of the write-off of certain Klaff management
contracts following the disposition of these assets.
Change
Other::
Equity in earnings of
unconsolidated partnerships
Interest expense
Gain on sale
Minority interest
Income taxes
((Loss) income from
discontinued operations
22000055
$$ 88..22
((1111..44))
——
((00..77))
((22..11))
$$ ((00..99))
22000044
$$
11..88
((1100..44))
00..99
((11..22))
——
$$ 66..11
$$
$$ 66..44
((11..00))
((00..99))
00..55
((22..11))
$$ ((77..00))
%%
335566%%
((1100))%%
((110000))%%
4422%%
((110000))%%
((111155))%%
Acadia Realty Trust 2005 Annual Report 28
Management’s Discussion and Analysis continued
Equity in earnings of unconsolidated partnerships increased
We received additional sales proceeds of $0.9 million which
primarily as a result of our $5.0 million share of gain, through
were being held in escrow pending the completion of certain
our investment funds, from the sale of certain Mervyn’s loca-
site work by the buyer. Of these proceeds, $0.5 million were
tions and our share of bankruptcy proceeds from Penn Traffic
distributed to our joint venture partner in the sale and are
through Fund I of $0.2 million.
a component of minority interest in the accompanying
The increase in interest expense was attributable to higher
financial statements.
average outstanding balances in 2005 of $0.8 million and
Income taxes in 2005 relate to our share of the income taxes
higher average interest rates on the portfolio mortgage
on gain, through our investment funds, from the sale of certain
debt in 2005.
Mervyn’s locations during the third and fourth quarters of 2005.
The gain on sale of land in 2004 was related to a prior year
Income (loss) from discontinued operations represents activity
sale of a contract to purchase land to the Target Corporation.
related to properties sold during 2004 and 2005.
Comparison of the year ended December 31, 2004 (“2004”) to the year ended December 31, 2003 (“2003”)
Change
Revenue::
Minimum rents
Percentage rents
Expense reimbursements
Other property income
Management fee income
Interest income
Other
Total revenues
22000055
$$5500..77
00..99
1133..00
00..66
44..88
11..55
00..22
$$ 7711..77
22000044
$$ 4488..11
11..00
1122..88
00..77
22..00
00..88
11..22
$$6666..66
$$
$$ 22..66
((00..11))
00..22
((00..11))
22..88
00..77
((11..00))
$$ 55..11
%%
55%%
((1100%%))
22%%
((1144%%))
114400%%
8888%%
((8833%%))
77..77%%
The increase in minimum rents was attributable to an
in 2004 offset by increased tenant reimbursements following
increase in rents following the redevelopment of the Gate-
re-tenanting activities across the portfolio.
way shopping center in 2003 and an increase in rents from
re-tenanting activities as well as increased occupancy across
the portfolio.
Management fee income increased as a result of asset man-
agement fees from Fund II of $1.7 million and an increase in
management fees $0.9 million related to the acquisition of
Real estate tax reimbursements increased $0.5 million pri-
certain management contract rights in 2004.
marily as a result of general increases in real estate taxes as
well as re-tenanting activities throughout the portfolio. CAM
expense reimbursements decreased $0.3 million primarily
from tenant reimbursements of lower snow removal costs
Other income decreased primarily due to a lump sum addi-
tional rent payment of $1.2 million received from a former
tenant during 2003 in connection with the re-anchoring of
the Branch Plaza.
Operating expenses:
Property operating
Real estate taxes
General and administrative
Depreciation and amortization
Total operating expenses
22000055
$$ 1144..55
88..88
1100..44
1155..55
$$ 4499..22
22000044
$$ 1144..44
88..22
1100..77
1177..22
$$ 5500..55
Change
$$
$$ 00..11
00..66
((00..33))
((11..77))
$$ ((11..33))
%%
11%%
77%%
((33%%))
((1100%%))
((33%%))
Acadia Realty Trust 2005 Annual Report
29
Property operating expenses increased primarily due to the
Depreciation expense decreased $2.5 million. This was a
result of a non-recurring charge of approximately $0.7 million
result of the write-off of $2.7 million of unamortized tenant
related to flood damage at the Mark Plaza in 2004 offset by
improvement costs related to the buyout and termination of
higher snow removal costs during 2003.
the former anchor at the Town Line Plaza redevelopment
Real estate taxes increased primarily due to a real estate tax
refund received in 2003 related to the appeal of taxes paid
in prior years at the Greenridge Plaza and higher real estate
taxes throughout the portfolio in 2004.
project in 2003. This decrease was offset by increased depre-
ciation expense in 2004 following the Gateway redevelop-
ment project being placed in service during the second
quarter of 2003. Amortization expense increased $0.8 mil-
lion primarily as a result of the amortization of investment
General and administrative expense decreased primarily as
in management contracts in 2004.
the result of certain employee termination costs in 2003 and
our capitalization of certain internal leasing costs in 2004
offset by additional professional fees related to Sarbanes-
Oxley compliance in 2004.
Other::
Equity in earnings of
unconsolidated partnerships
Interest expense
Gain on sale
Minority interest
Operating loss from
discontinued operations
Discontinued operations —
gain on sale of properties
22000055
$$ 11..88
((1100..44))
00..99
((11..22))
((00..66))
66..77
22000044
$$ 22..44
((99..99))
11..22
((11..44))
((00..66))
00..00
Change
$$
$$((00..66))
((00..55))
((00..33))
00..22
00..00
66..77
%%
((2255%%))
55%%
((2255%%))
((1144%%))
——
110000%%
Interest expense increase was primarily attributable to an
our method of calculating FFO may be different from methods
increase of $0.4 million as a result of higher average interest
used by other REIT’s and, accordingly, may not be comparable
rates on the portfolio debt for 2004 and a decrease of $0.1
to such other REIT’s. FFO does not represent cash generated
million in capitalized interest in 2004.
from operations as defined by generally accepted accounting
Income from discontinued operations increased $6.7 million
due to a property sale in 2004.
Funds from Operations
We consider funds from operations (“FFO”) as defined by
the National Association of Real Estate Investment Trusts
(“NAREIT”) to be an appropriate supplemental disclosure
of operating performance for an equity REIT due to its wide-
spread acceptance and use within the REIT and analyst com-
munities. 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 operat-
ing performance, such as gains (losses) from sales of depre-
ciated property and depreciation and amortization. However,
principles (“GAAP”) and is not indicative of cash available to
fund all cash needs, including distributions. It should not be
considered as an alternative to net income for the purpose
of evaluating our performance or to cash flows as a measure
of liquidity.
Consistent with the NAREIT definition, we define FFO as net
income (computed in accordance with GAAP), excluding gains
(losses) from sales of depreciated property, plus depreciation
and amortization, and after adjustments for unconsolidated
partnerships and joint ventures. The reconciliations of net
income to FFO for the years ended December 31, 2005, 2004,
2003, 2002 and 2001 are as follows:
Acadia Realty Trust 2005 Annual Report 30
Management’s Discussion and Analysis continued
Reconciliation of Net Income to Funds from Operations
Net income
Depreciation of real estate and amortization of
leasing costs:
Wholly owned and consolidated partnerships
Unconsolidated partnerships
Income attributable to minority interest in operating
partnership ((11))
((Gain) loss on sale of properties
Cumulative effect of change in accounting principle
Funds from operations
Notes:
22000055
$$ 2200,,662266
22000044
$$ 1199,,558855
Years ended December 31,
22000033
$$ 77,,885533
22000022
$$ 1199,,339999
22000011
$$ 99,,880022
1144,,009922
33,,333300
441166
((22,,662222))
——
$$ 3355,,884422
1144,,441111
22,,332299
337755
((66,,669966))
——
1166,,995577
22,,110077
774477
——
——
1155,,330055
666622
22,,992288
((88,,113322))
——
1188,,442222
662277
22,,222211
((1177,,773344))
114499
$$ 3300,,000044
$$ 2277,,666644
$$ 3300,,116622
$$ 1133,,448877
(1) Represents income attributable to Common Operating Partnership Units and does not include distributions paid to Series A and B Preferred
OP Unitholders.
Liquidity and Capital Resources
Uses of Liquidity
Our principal uses of liquidity are expected to be for distri-
butions to our shareholders and OP unit holders, debt service
and loan repayments, and property investment which include
the funding of our joint venture commitments, acquisition,
redevelopment, expansion and re-tenanting activities.
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 first three quarters
during 2005, we paid a quarterly dividend of $0.1725 per
Common Share and Common OP Unit. In November of 2005,
tributed pro-rata to the partners (including us) until they
have received a 9% cumulative return on, and a return of all
capital contributions. Thereafter, remaining cash flow is to
be distributed 80% to the partners (including us) and 20%
to us. We also earn a fee for asset management services equal
to 1.5% of the allocated equity in the remaining Fund I
assets, as well as market-rate fees for property management,
leasing and construction services.
As of December 31, 2005, Fund I has purchased a total of 35
properties totaling 2.8 million square feet as further discussed
in “PROPERTY ACQUISITIONS” in Item 1 of this Form 10-K.
Acadia Strategic Opportunity Fund II, LLC (“Fund II”)
On June 15, 2004, we closed our second acquisition fund,
our Board of Trustees approved and declared a 7.2% increase
Fund II, which includes all of the investors from Fund I as well
in our quarterly dividend to $0.1850 per Common Share and
as two additional institutional investors. With $300 million
Common OP Unit for the fourth quarter of 2005 which was
of committed discretionary capital, Fund II expects to be able
paid January 13, 2006.
Acadia Strategic Opportunity Fund, LP (“Fund I”)
In September 2001, we committed $20.0 million to a newly
formed joint venture with four of our institutional share-
holders, who committed $70.0 million, for the purpose of
acquiring a total of approximately $300.0 million of com-
munity and neighborhood shopping centers on a leveraged
basis. As of December 31, 2005, we have contributed $19.2
million to Fund I.
We are the manager and general partner of Fund I with a
22% interest. In addition to a pro-rata return on our invested
to acquire up to $900 million of real estate assets on a lever-
aged basis. We are the managing member with a 20% interest
in the joint venture. The terms and structure of Fund II are
substantially the same as Fund I with the exceptions that
the preferred return is 8% and the asset management fee
is calculated on committed equity of $250 million through
June 15, 2005 and then on the total committed equity of
$300 million thereafter. As of December 31, 2005, we have
contributed $67.0 million to Fund II.
Fund II has invested in the RCP Venture and the New York
Urban/Infill Redevelopment initiatives and other investments
as further discussed in “PROPERTY ACQUISITIONS” in Item 1
equity, we are entitled to a profit participation based upon
of this Form 10-K .
certain investment return thresholds. Cash flow is to be dis-
Acadia Realty Trust 2005 Annual Report
31
Other Investments
During 2004 and 2005, we made the following other invest-
Issuance of Equity
During November 2004, we issued 1,890,000 Common
ments as further discussed in “PROPERTY ACQUISITIONS” in
Shares (the “Offering”). The Offering was made under shelf
Item 1 of this Form 10-K:
i) $20.0 million in Levitz SL,
ii) $16.8 million in Amboy Road,
registration statements filed under the Securities Act of
1933, as amended, and previously declared effective by the
Securities and Exchange Commission. The $28.3 million in
iii) $8.0 million for Klaff’s management rights,
proceeds from the Offering, net of related costs, were used
iv) $3.2 million for Boonton and
v) $9.8 million for Clark/Diversey.
Property Development, Redevelopment and Expansion
During 2005, we completed the development of the Bartow
to retire above-market, fixed-rate indebtedness as well as to
invest in real estate assets. Following this transaction, we
have $46.7 million of remaining capacity to issue equity under
our primary shelf registration statement.
Avenue Center, located in Bronx, New York. A new anchor,
Sleepy’s, opened for business during the second quarter. This
Financing and Debt
At December 31, 2005, mortgage notes payable aggregated
store occupies 6,430 square feet of formerly vacant space.
$238.4 million and were collateralized by 20 properties and
Costs incurred to date for this project totaled $7.5 million.
related tenant leases. Interest rates on our outstanding
Our redevelopment program focuses on selecting well-located
neighborhood and community shopping centers and creating
significant value through re-tenanting and property redevel-
opment. During 2005, we did not undertake any significant
redevelopment projects within our core portfolio.
mortgage indebtedness ranged from 5.0% to 7.6% with
maturities that ranged from July 2007 to November 2015.
Taking into consideration $92.4 million of notional principal
under variable to fixed-rate swap agreements currently in
effect, $216.8 million of the portfolio, or 91%, was fixed at a
5.8% weighted average interest rate and $21.6 million, or 9%
Additionally, for the year ending December 31, 2006, we cur-
was floating at a 5.8% weighted average interest rate. There
rently estimate that capital outlays of approximately $5.0
is no debt maturing in 2005 and 2006. In 2007, $17.5 million
million to $7.0 million will be required for tenant improve-
is scheduled to mature at a weighted average interest rate
ments, related renovations and other property improvements.
of 5.9%. As we do not anticipate having sufficient cash on
Share Repurchase
Repurchases of our Common Shares is an additional use of
liquidity as discussed in Item 5 of this Form 10-K.
SOURCES OF LIQUIDITY
We intend on using Fund II as the primary vehicle for our
hand to repay such indebtedness, we will need to refinance
this indebtedness or select other alternatives based on mar-
ket conditions at that time.
The following summarizes the financing and refinancing
transactions since December 31, 2004:
future acquisitions, including investments in the RCP Venture
On February 25, 2005, we drew down $20.0 million under an
and New York Urban/Infill Redevelopment initiative. Sources
existing revolving facility, which bears interest at LIBOR plus
of capital for funding our joint venture commitments, other
150 basis points. The proceeds from this drawdown were uti-
property acquisitions, redevelopment, expansion and re-ten-
lized for the Preferred Equity investment with Levitz SL, LLC.
anting, as well as future repurchases of Common Shares are
expected to be obtained primarily from issuance of public
equity or debt instruments, cash on hand, additional debt
financings and future sales of existing properties. As of
December 31, 2005, we had a total of approximately $48.4
million of additional capacity under existing debt facilities,
During April 2005, we borrowed $7.4 million under an exist-
ing secured revolving facility which was repaid in May 2005.
On May 26, 2005, we closed on a $65.0 million cross-collater-
alized revolving facility which is collateralized by five of our
properties. The facility bears interest at LIBOR plus 130 basis
cash and cash equivalents on hand of $39.6 million, and nine
points and matures June 1, 2010. At closing, the lender advanced
properties that are unencumbered and available as potential
$12.0 million, of which $7.4 million was used to refinance
collateral for future borrowings. We anticipate that cash flow
an existing facility with the same lender. On June 27, 2005,
from operating activities will continue to provide adequate
an additional $20.0 million was drawn on this line. On Octo-
capital for all of our debt service payments, recurring capital
ber 21, 2005, $10.0 million was repaid on this line resulting
expenditures and REIT distribution requirements.
in $22.0 million outstanding under this facility as of Decem-
ber 31, 2005.
Acadia Realty Trust 2005 Annual Report 32
Management’s Discussion and Analysis continued
On August 31, 2005, we closed on a $17.6 million loan, which
bears interest at a fixed rate of 4.98%. This loan, which matures
Asset Sales
Asset sales are an additional source of liquidity for us.
September 2015, requires the payment of interest only until
During 2005 and 2004, we sold the Berlin Shopping Center
October 2010, and thereafter interest and principal based on
and East End Centre as discussed in “ASSET SALES AND CAPI-
300-year amortization. The proceeds from this loan were in
TAL/ASSET RECYCLING” in Item 1 of this Form 10-K.
part used to pay down $15.0 million on an existing line.
On October 17, 2005, we closed on a $12.5 million loan, which
bears interest at a fixed rate of 5.12%. This loan, which matures
Contractual Obligations and Other
Commitments
At December 31, 2005, maturities on our mortgage notes
November 2015, requires the payment of interest only until
ranged from July 2007 to January 2016. In addition, we have
November 2008, and thereafter interest and principal until
non-cancelable ground leases at four of our shopping centers.
maturity. The proceeds from this loan were in part used to
We also lease space for our White Plains corporate office for
pay down $10.0 million on the aforementioned $65.0 million
a term expiring in 2010. The following table summarizes our
revolving facility.
debt maturities and obligations under non-cancelable oper-
On December 9, 2005, we closed on a $34.6 million loan,
which bears interest at a fixed rate of 5.53%. This loan,
which matures January 2016, requires the payment of
interest only until January 2010, and thereafter interest
and principal until maturity.
ating leases of December 31, 2005:
(amounts in millions)
Contractual obligation
Future debt maturities
Interest obligations on debt
Operating lease obligations
Total
Payments due by period
Total
$$ 223388..44
8866..44
3388..22
$$336633..00
Less than
1 year
$$ 22..11
1133..66
11..88
$$ 1177..55
1 to 3
years
$$ 2288..88
3377..66
33..88
$$ 7700..22
3 to 5
years
$$ 4433..77
1188..55
33..66
$$ 6655..88
More than
5 years
$$ 116633..88
1166..77
2299..00
$$220099..55
Off Balance Sheet Arangments
We have investments in three joint ventures for the purpose
of investing in operating properties as follows:
We own a 49% interest in two partnerships which own the
Crossroads Shopping Center (“Crossroads”). We account for
the investment in Crossroads using the equity method of
accounting as we have a non-controlling investment in
Crossroads, but exercise significant influence. As such, our
financial statements reflect our share of income from, but
not the assets and liabilities of, Crossroads. Our pro rata
share of Crossroads mortgage debt as of December 31, 2005
was $31.4 million. This fixed-rate debt bears interest at 5.4%
and matures in December 2014.
Reference is made to the discussion of Funds I and II under
“Uses of Liquidity” in this Item 7 for additional detail related
to our investment in and commitments to Funds I and II. As
of December 31, 2005, we own a 22% interest in Fund I and
20% in Fund II for which we also use the equity method of
accounting. Our pro rata share of Funds I and II fixed-rate
mortgage debt as of December 31, 2005 was $24.4 million at
a weighted average interest rate of 6.2%. Our pro rata share
of Funds I and II variable-rate mortgage debt as of Decem-
ber 31, 2005 was $14.3 million at a weighted average interest
rate of 5.8%. Maturities on these loans range from March
2006 to January 2023.
Historical Cash Flow
The following discussion of historical cash flow compares
our cash flow for the year ended December 31, 2005 (“2005’)
with our cash flow for the year ended December 31, 2004
(“2004”).
Acadia Realty Trust 2005 Annual Report
33
Cash and cash equivalents were $39.6 million and $13.5 million at December 31, 2005 and 2004, respectively. The increase of
$26.1 million was a result of the following increases and decreases in cash flows:
(amounts in millions)
Years Ended December 31,
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by (used in) financing activities
22000055
$$ 2244..00
((5599..55))
6611..66
22000044
$$ 2255..55
((1166..44))
((99..88))
Variance
$$ ((11..55))
((4433..11))
7711..44
The variance in net cash provided by operating activities
resulted from an increase of $2.4 million in operating income
before non-cash expenses in 2005, which was primarily due
to an increase in asset management and service fee income
from our fund investments, additional fee income from the
acquisition of certain management contracts rights in Janu-
ary 2004 and February 2005, promote income on the Mervyn’s
investment in 2005, additional interest income resulting from
our preferred equity investment in 2005, and a decrease in
distributions received from unconsolidated partnerships.
These increases were offset by additional general and
administrative costs due to increased compensation and
other overhead expenses following the expansion of our
infrastructure. In addition, a net decrease in cash provided
by operating assets and liabilities of $3.9 million resulted pri-
marily from an increase in receivables related to third party
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, lia-
bilities, revenues and expenses. We base our 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 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 the
following critical accounting policies affect the significant
judgments and estimates used by us in the preparation of
construction cost reimbursements offset by an increase in
our consolidated financial statements.
income taxes payable related to the Company’s share of the
gain realized by Mervyn’s.
The increase in net cash used in investing activities resulted
primarily from a $19.0 million Preferred Equity investment in
2005, an $18.5 million increase in expenditures for real estate
acquisitions, development and tenant installation during 2005
and a decrease of $14.1 million of distributions received from
unconsolidated partnerships. These decreases were offset
by a $3.7 million decrease in investments in and advances
to unconsolidated partnerships in 2005 and $3.9 million of
proceeds received from the sale of a property in 2005.
The increase in net cash provided by financing activities
resulted from the following:
Debt repayment in 22000044
Debt repayment in 22000055
Additional borrowings in 22000055
Proceeds from issuance of
Common Shares in 22000044
Proceeds of exercise of
Stock Options in 22000044
Miscellaneous
Total variance
$$ 110000..99
((3399..00))
4477..88
((2288..33))
((99..00))
((11..00))
$$ 7711..44
Valuation of Property Held for Use and Sale
On a quarterly basis, we review the carrying value of both
properties held for use and for sale. We record impairment
losses and reduce 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 we do not
expect to recover our carrying costs on properties held for
use, we reduce our carrying cost to fair value, and for prop-
erties held for sale, we reduce our carrying value to the fair
value less costs to sell. For the year ended December 31,
2005, an impairment loss of $0.8 million was recognized
related to a property that was sold in July of 2005. Manage-
ment does not believe that the value of any properties in
its portfolio was impaired as of December 31, 2005 or 2004.
Bad Debts
We maintain an allowance for doubtful accounts for estimated
losses resulting from the inability of tenants to make pay-
ments on arrearages in billed rents, as well as the likelihood
that tenants will not have the ability to make payment on
unbilled rents including estimated expense recoveries and
straight-line rent. As of December 31, 2005, we had recorded
Acadia Realty Trust 2005 Annual Report 34
Management’s Discussion and Analysis continued
an allowance for doubtful accounts of $2.8 million. If the
financial condition of our tenants were to deteriorate,
resulting in an impairment of their ability to make payments,
additional allowances may be required.
Inflation
Our long-term leases contain provisions designed to mitigate
the adverse impact of inflation on our net income. Such pro-
visions 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 10
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.
Recently Issued Accounting
Pronouncements
Reference is made to the Notes to Consolidated Financial
Statements included in Item 8 of this Form 10-K.
ITEM 7Ax
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 consolidated
financial statements and notes thereto included in this
Annual Report on Form 10-K for certain quantitative details
related to our mortgage debt.
Currently, we manage our exposure to fluctuations in inter-
est rates primarily through the use of fixed-rate debt and
interest rate swap agreements. As of December 31, 2005, we
had total mortgage debt of $238.4 million of which $216.8
million, or 91% was fixed-rate, inclusive of interest rate
swaps, and $21.6 million, or 9%, was variable-rate based
upon LIBOR plus certain spreads. As of December 31, 2005,
we were a party to five interest rate swap transactions to
hedge our exposure to changes in interest rates with respect
to $92.4 million of LIBOR based variable-rate debt. We also
have three forward-starting interest rate swaps which com-
mence during 2006, and 2007 and mature from 2010 to 2012
that will hedge our exposure to changes in interest rates
with respect to $24.5 million of refinanced LIBOR-based vari-
able rate debt with the matching maturities.
The following table sets forth information as of December
31, 2005 concerning our long-term debt obligations, includ-
ing principal cash flows by scheduled maturity and
weighted average interest rates of maturing amounts
(amounts in millions):
Consolidated mortgage debt:
Year
22000066
22000077
22000088
22000099
22001100
Thereafter
Scheduled
Amortization
$$ 22..11
33..99
44..44
55..33
11..77
4488..00
$$6655..44
Maturities
$$ ——
1122..55
88..00
——
3366..77
111155..88
$$ 117733..00
Mortgage debt in unconsolidated partnerships (at Company’s pro rata share):
Year
22000066
22000077
22000088
22000099
22001100
Thereafter
Scheduled
Amortization
$$ 11..00
11..44
11..55
11..55
00..77
44..66
$$1100..77
Maturities
$$ 33..33
88..44
1111..55
——
11..44
3344..88
$$ 5599..44
Acadia Realty Trust 2005 Annual Report
35
Weighted Average
Interest Rate
NN//AA
66..55%%
55..77%%
NN//AA
66..44%%
55..66%%
Weighted Average
Interest Rate
44..22%%
55..44%%
44..77%%
NN//AA
55..55%%
55..77%%
Total
$$
22..11
1166..44
1122..44
55..33
3388..44
116633..88
$$ 223388..44
Total
$$ 44..33
99..88
1133..00
11..55
22..11
3399..44
$$ 7700..11
Of our total outstanding debt, $12.5 million will become due
ITEM 9x
Changes in and Disagreements with Accoun-
tants on Accounting and Financial Disclosure
On October 6, 2005, the Audit Committee of our Board of
Directors agreed, by resolution, not to continue the engage-
ment of our independent registered public accounting firm,
Ernst and Young, LLP ("Ernst and Young"). The Audit commit-
tee further resolved to engage the accounting firm, BDO
Seidman, LLP (“BDO”) effective immediately. The decision
was based primarily on the Audit Committee's efforts to
reduce our costs for accounting services. We have not had any
disagreements with Ernst and Young during the interim period
from January 1, 2005 through the date of disengagement, nor
any disagreements related to any prior years' audits.
in 2007. 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 $0.1 million annu-
ally if the interest rate on the refinanced debt increased by
100 basis points. Interest expense on our variable debt as of
December 31, 2005 would not increase materially as we only
have $21.6 million of floating rate debt after taking into
account the effect of interest rate swaps hedging $92.4 mil-
lion of notional principal. 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 addi-
tional variable-rate debt through interest rate swaps and
protection agreements, or other means.
ITEM 8x
Financial Statements and
Supplementary Data
The financial statements and supplementary data listed in
items 15(a) (1) and 15(a) (2) hereof are incorporated herein
by reference.
Acadia Realty Trust 2005 Annual Report 36
Management’s Discussion and Analysis continued
ITEM 9Ax
Controls and Procedures
(i) Disclosure Controls and Procedures
We conducted an evaluation, under the supervision and with the participation of management including our Chief Executive
Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures. Based on that evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that the our disclosure controls and procedures were effective as
of December 31, 2005.
(ii) Internal Control Over Financial Reporting
(a) Management’s Annual Report on Internal Control Over Financial Reporting
Management of Acadia Realty Trust is responsible for establishing and maintaining adequate internal control over financial
reporting, as such term is defined in the Securities Exchange Act of 1934 Rule 13a-15(f). Under the supervision and with the
participation of our management, including our principal executive officer and principal financial officer, we conducted an
evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2005 as required by the Secu-
rities Exchange Act of 1934 Rule 13a-15(c). In making this assessment, we used the criteria set forth in the framework in Internal
Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on
our evaluation under the framework in Internal Control–Integrated Framework, our management concluded that our inter-
nal control over financial reporting was effective as of December 31, 2005.
BDO Seidman, LLP, an independent registered public accounting firm that audited our Financial Statements included in this
Annual Report, has issued an attestation report on our management’s assessment of the effectiveness of our internal control
over financial reporting as of December 31, 2005 which appears in this item 9A.
Acadia Realty Trust
White Plains, New York
March 15, 2006
Acadia Realty Trust 2005 Annual Report
37
(b) Attestation report of the independent registered public accounting firm
The Shareholders and Trustees of Acadia Realty Trust
We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over
Financial Reporting, that Acadia Realty Trust and subsidiaries maintained effective internal control over financial reporting as
of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (the COSO criteria). Acadia Realty Trust and subsidiaries’ management
is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of
internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion
on the effectiveness of the company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of
internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operat-
ing effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dis-
positions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expen-
ditures of the company are being made only in accordance with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition
of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, management’s assessment that Acadia Realty Trust and subsidiaries maintained effective internal control over
financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion,
Acadia Realty Trust maintained, in all material respects, effective internal control over financial reporting as of December 31,
2005, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the consolidated balance sheets of Acadia Realty Trust and subsidiaries as of December 31, 2005, and the related consolidated
statements of income, shareholders’ equity, and cash flows for the year ended December 31, 2005 and our report dated
March 8, 2006 expressed an unqualified opinion thereon.
BDO Seidman, LLP
New York, New York
March 8, 2006
(c) Changes in internal control over financial reporting.
There was no change in our internal control over financial reporting during our fourth fiscal quarter ended December 31, 2005
that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Acadia Realty Trust 2005 Annual Report 38
Management’s Discussion and Analysis continued
PART III
ITEM 9Bx
Other Information
None
ITEM 10x
Directors and Executive Officers of the Company
This item is incorporated by reference from the definitive
proxy statement for the 2006 Annual Meeting of Sharehold-
ers presently scheduled to be held May 15, 2006, to be filed
pursuant to Regulation 14A.
ITEM 11x
ITEM 12x
Security Ownership of Certain Beneficial
Owners and Management
This item is incorporated by reference from the definitive
proxy statement for the 2006 Annual Meeting of Share-
holders presently scheduled to be held May 15, 2006, to be
filed pursuant to Regulation 14A.
ITEM 13x
Certain Relationships and Related
Transactions
This item is incorporated by reference from the definitive
proxy statement for the 2006 Annual Meeting of Sharehold-
ers presently scheduled to be held May 15, 2006, to be filed
pursuant to Regulation 14A.
Executive Compensation
This item is incorporated by reference from the definitive
ITEM 14x
proxy statement for the 2006 Annual Meeting of Sharehold-
ers presently scheduled to be held May 15, 2006, to be filed
pursuant to Regulation 14A.
Principal Accountant Fees and Services
This item is incorporated by reference from the definitive
proxy statement for the 2006 Annual Meeting of Sharehold-
ers presently scheduled to be held May 15, 2006, to be filed
pursuant to Regulation 14A.
Acadia Realty Trust 2005 Annual Report
39
PART IV
ITEM 15x
EXHIBITS, FINANCIAL STATEMENTS SCHEDULES
(a) Financial Statements – Form 10-K. The following consolidated financial information is included as a separate
section of this Form 10-K
Report of Registered Public Accounting Firm for the year ended December 31, 2005. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Report of Registered Public Accounting Firm for the years ended December 31, 2004 and 2003 . . . . . . . . . . . . . . . . . . 48
Consolidated Balance Sheets as of December 31, 2005 and 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Consolidated Statements of Income for the years ended December 31, 2005, 2004 and 2003 . . . . . . . . . . . . . . . . . . . . 50
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2005, 2004 and 2003 . . . . . . . 52
Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003 . . . . . . . . . . . . . . . . 54
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Schedule III – Real Estate and Accumulated Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
All other schedules are omitted since the required information is not present or is not present in amounts sufficient
to require submission of the schedule.
Acadia Realty Trust 2005 Annual Report 40
Management’s Discussion and Analysis continued
Exhibit No. Description
3.1
3.2
3.3
4.1
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.11
10.12
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
10.33
10.34
10.35
10.36
10.37
10.38
Declaration of Trust of the Company, as amended (1)
Fourth Amendment to Declaration of Trust (4)
Amended and Restated By-Laws of the Company (22)
Voting Trust Agreement between the Company and Yale University dated February 27, 2002 (14)
1999 Share Option Plan (8) (20)
2003 Share Option Plan (16) (20)
Form of Share Award Agreement (17) (21)
Form of Registration Rights Agreement and Lock-Up Agreement (18)
Registration Rights and Lock-Up Agreement (RD Capital Transaction) (11)
Registration Rights and Lock-Up Agreement (Pacesetter Transaction) (11)
Contribution and Share Purchase Agreement dated as of April 15, 1998 among Mark Centers Trust, Mark Centers Limited Part-
nership, the Contributing Owners and Contributing Entities named therein, RD Properties, L.P. VI, RD Properties, L.P. VIA and RD
Properties, L.P. VIB (9)
Agreement of Contribution among Acadia Realty Limited Partnership, Acadia Realty Trust and Klaff Realty, LP and Klaff Realty,
Limited (18)
Employment agreement between the Company and Kenneth F. Bernstein (6) (21)
Amendment to employment agreement between the Company and Kenneth F. Bernstein (18) (21)
First Amendment to Employment Agreement between the Company and Kenneth Bernstein dated as of January 1, 2001 (12) (21)
Letter of employment offer between the Company and Michael Nelsen, Sr. Vice President and Chief Financial Officer dated
February 19, 2003 (15) (21)
Severance Agreement between the Company and Joel Braun, Sr. Vice President, dated April 6, 2001 (13) (21)
Severance Agreement between the Company and Joseph Hogan, Sr. Vice President, dated April 6, 2001 (13) (21)
Severance Agreement between the Company and Joseph Napolitano, Sr. Vice President dated April 6, 2001 (18) (21)
Severance Agreement between the Company and Robert Masters, Sr. Vice President and General Counsel dated January 2001 (18) (21)
Severance Agreement between the Company and Michael Nelsen, Sr. Vice President and Chief Financial Officer dated February
19, 2003 (15) (21)
Secured Promissory Note between RD Absecon Associates, L.P. and Fleet Bank, N.A. dated February 8, 2000 (7)
Promissory Note between 239 Greenwich Associates, L.P. and Greenwich Capital Financial Products, Inc. dated May 30, 2003 (18)
Open-End Mortgage, Assignment of Leases and Rents, and Security Agreement between 239 Greenwich Associates, L.P. and
Greenwich Capital Financial Products, Inc. dated May 30, 2003 (18)
Promissory Note between Merrillville Realty, L.P. and Sun America Life Insurance Company dated July 7, 1999 (7)
Secured Promissory Note between Acadia Town Line, LLC and Fleet Bank, N.A. dated March 21, 1999 (7)
Promissory Note between RD Village Associates Limited Partnership and Sun America Life Insurance Company Dated Septem-
ber 21, 1999 (7)
Amended and Restated Mortgage Note between Port Bay Associates, LLC and Fleet Bank, N.A. dated July 19, 2000 (3)
Mortgage and Security Agreement between Port Bay Associates, LLC and Fleet Bank, N.A. dated July 19, 2000 (10)
Mortgage Note between Port Bay Associates, LLC and Fleet Bank, N.A. dated December 1, 2003 (18)
Mortgage and Security Agreement, and Assignment of Leases and Rents between Port Bay Associates, LLC and Fleet Bank, N.A.
dated December 1, 2003 (18)
Note Modification Agreement between Port Bay Associates, LLC and Fleet Bank, N.A. dated December 1, 2003 (18)
Amended and Restated Promissory Note between Acadia Realty L.P. and Metropolitan Life Insurance Company for $25.2 million
dated October 13, 2000 (10)
Amended and Restated Mortgage, Security Agreement and Fixture Filing between Acadia Realty L.P. and Metropolitan Life Insurance
Company dated October 13, 2000 (10)
Term Loan Agreement between Acadia Realty L.P. and The Dime Savings Bank of New York, dated March 30, 2000 (10)
Mortgage Agreement between Acadia Realty L.P. and The Dime Savings Bank of New York, dated March 30, 2000 (10)
Promissory Note between RD Whitegate Associates, L.P. and Bank of America, N.A. dated December 22, 2000 (10)
Promissory Note between RD Columbia Associates, L.P. and Bank of America, N.A. dated December 22, 2000 (10)
Term Loan Agreement dated as of December 28, 2001, among Fleet National Bank and RD Branch Associates, L.P., et al (13)
Term Loan Agreement dated as of December 21, 2001, among RD Woonsocket Associates Limited Partnership, et al. and The Dime
Savings Bank of New York, FSB (13)
Acadia Realty Trust 2005 Annual Report
41
Exhibit No. Description
10.39
10.40
10.41
10.42
10.43
10.44
10.45
10.46
10.47
10.48
10.49
10.49a
10.49b
10.49c
10.49d
10.50
10.51
10.52
10.53
10.54
21
23.1
23.2
31.1
31.2
32.1
32.2
99.1
99.2
99.3
99.4
99.5
99.6
Option Extension of Term Loan as of December 19, 2003, between RD Woonsocket Associates Limited Partnership, et al. and
Washington Mutual Bank, FA (18)
Revolving Loan Promissory Note dated as of November 22, 2002, among RD Elmwood Associates, L.P. and Washington Mutual
Bank, FA (15)
Revolving Loan Agreement dated as of November 22, 2002, among RD Elmwood Associates, L.P. and Washington Mutual Bank,
FA (15)
Mortgage Agreement dated as of November 22, 2002, among RD Elmwood Associates, L.P. and Washington Mutual Bank, FA (15)
Note Modification Agreement between RD Elmwood Associates, L.P. and Washington Mutual Bank, FA dated December 19, 2003 (18)
Prospectus Supplement Regarding Options Issued under the Acadia Realty Trust 1999 Share Incentive Plan and 2003 Share
Incentive Plan (19) (21)
Acadia Realty Trust 1999 Share Incentive Plan and 2003 Share Incentive Plan Deferral and Distribution Election Form (19) (21)
Amended, Restated And Consolidated Promissory Note between Acadia New Loudon, LLC and Greenwich Capital Financial
Products, Inc. dated August 13, 2004 (19)
Amended, Restated And Consolidated Mortgage, Assignment Of Leases And Rents And Security Agreement between Acadia
New Loudon, LLC and Greenwich Capital Financial Products, Inc. dated August 13, 2004 (19)
Amended and Restated Term Loan Agreement between Fleet National Bank and Heathcote Associates, L.P., Acadia Town Line, LLC,
RD Branch Associates, L.P., RD Abington Associates Limited Partnership, And RD Methuen Associates Limited Partnership dated
September 30, 2004 (19)
Mortgage Modification Agreement between Fleet National Bank and Acadia Town Line, LLC dated September 30, 2004 (19)
Mortgage Modification Agreement between Fleet National Bank and Heathcote Associates, L.P. dated September 30, 2004 (19)
Mortgage Modification Agreement between Fleet National Bank and RD Branch Associates dated September 30, 2004 (19)
Mortgage Modification Agreement between Fleet National Bank and RD Methuen Associates dated September 30, 2004 (19)
Mortgage Modification Agreement between Fleet National Bank and RD Abington Associates Limited Partnership dated Sep-
tember 30, 2004 (19)
Revolving Loan Agreement between Fleet National Bank and The Bank of China and RD Absecon Associates, L.P., RD Bloomfield
Associates, L.P.,RD Hobson Associates, L.P., RD Village Associates, L.P., and RD Woonsocket Associates L.P. dated May 26, 2005 (22)
Mortgage, Assignment of Leases and Rents and Security Agreement between Acadia Crescent Plaza, LLC and Greenwich Capital
Financial Products, Inc. dated August 31, 2005 (22)
Mortgage, Assignment of Leases and Rents and Security Agreement between Pacesetter/Ramapo Associates and Greenwich
Capital Financial Products, Inc. dated October 17, 2005 (22)
Loan Agreement between RD Elmwood Associates, L.P. and Bear Stearns Commercial Finance Mortgage, Inc. dated December 9,
2005 (22)
Mortgage and Security Agreement between RD Elmwood Associates, L.P. and Bear Stearns Commercial Finance Mortgage, Inc.
dated December 9, 2005 (22)
List of Subsidiaries of Acadia Realty Trust (22)
Consent of Registered Public Accounting Firm to Form S-3 and Form S-8 (22)
Consent of former Registered Public Accounting Firm to Form S-3 and Form S-8 (22)
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 (22)
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 (22)
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 (22)
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 (22)
Amended and Restated Agreement of Limited Partnership of the Operating Partnership (11)
First and Second Amendments to the Amended and Restated Agreement of Limited Partnership of the Operating Partnership (11)
Third Amendment to Amended and Restated Agreement of Limited Partnership of the Operating Partnership (18)
Fourth Amendment to Amended and Restated Agreement of Limited Partnership of the Operating Partnership (18)
Certificate of Designation of Series A Preferred Operating Partnership Units of Limited Partnership Interest of Acadia Realty
Limited Partnership (2)
Certificate of Designation of Series B Preferred Operating Partnership Units of Limited Partnership Interest of Acadia Realty
Limited Partnership (18)
Acadia Realty Trust 2005 Annual Report 42
Management’s Discussion and Analysis continued
Notes:
(1)
(2)
(3)
(4)
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
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
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
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
(5)
Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Registration Statement on Form S-11 (File No.33-60008)
(6)
(7)
(8)
Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Annual Report on Form10-K filed for the fiscal year
ended December 31, 1998
Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Annual Report on Form10-K filed for the fiscal year
ended December 31, 1999
Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Registration Statement on Form S-8 filed September
28, 1999
(9)
Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Form 8-K filed on April 20, 1998
(10) Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Form 10-K filed for the fiscal year ended December 31,
2000
(11)
(12)
(13)
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
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, 2001
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, 2001
(14)
Incorporated by reference to the copy thereof filed as an Exhibit to Yale University’s Schedule 13D filed on September 25, 2002
(15)
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, 2002
(16)
Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Definitive Proxy Statement on Schedule 14A filed April
29, 2003.
(17)
Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Current Report on Form 8-K filed on July 2, 2003
(18)
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
(19)
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, 2004.
(20) 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, 2004.
(21) Management contract or compensatory plan or arrangement.
(22) Filed herewith.
Acadia Realty Trust 2005 Annual Report
43
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereto duly authorized.
ACADIA REALTY TRUST
(Registrant)
By:
By:
By:
/s/ Kenneth F. Bernstein
Kenneth F. Bernstein
Chief Executive Officer, President and Trustee
/s/ Michael Nelsen
Michael Nelsen
Sr. Vice President and Chief Financial Officer
/s/ Jonathan W. Grisham
Jonathan W. Grisham
Vice President and Chief Accounting Officer
Dated: March 15, 2006
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
Signature
/s/ Kenneth F. Bernstein
(Kenneth F. Bernstein)
/s/ Michael Nelsen
(Michael Nelsen)
/s/ Jonathan W. Grisham
(Jonathan W. Grisham)
/s/ Douglas Crocker II
(Douglas Crocker II )
/s/ Alan S. Forman
(Alan S. Forman)
/s/ Suzanne Hopgood
(Suzanne Hopgood)
/s/ Lorrence T. Kellar
(Lorrence T. Kellar)
/s/ Wendy Luscombe
(Wendy Luscombe)
/s/ Lee S. Wielansky
(Lee S. Wielansky)
Title
Chief Executive Officer,
President and Trustee
(Principal Executive Officer)
Senior Vice President
and Chief Financial Officer
(Principal Financial Officer)
Vice President
and Chief Accounting Officer
(Principal Accounting Officer)
Trustee
Trustee
Trustee
Trustee
Trustee
Trustee
Date
March 15, 2006
March 15, 2006
March 15, 2006
March 15, 2006
March 15, 2006
March 15, 2006
March 15, 2006
March 15, 2006
March 15, 2006
Acadia Realty Trust 2005 Annual Report 44
Management’s Discussion and Analysis continued
EXHIBIT INDEX
The following is an index to all exhibits filed with the Annual Report on Form 10-K other than those incorporated by
reference herein:
Exhibit No. Description
3.3
Amended and Revised By-Laws of the Company
10.50
Revolving Loan Agreement between Fleet National Bank and The Bank of China and RD Absecon Associates, L.P.,
RD Bloomfield Associates, L.P.,RD Hobson Associates, L.P.,RD Village Associates, L.P., and RD Woonsocket Associates,
L.P., dated May 26, 2005
10.51
Mortgage, Assignment of Leases and Rents and Security Agreement between Acadia Crescent Plaza, LLC and
Greenwich Capital Financial Products, Inc. dated August 31, 2005
10.52
Mortgage, Assignment of Leases and Rents and Security Agreement between Pacesetter/Ramapo Associates and
Greenwich Capital Financial Products, Inc. dated October 17, 2005
10.53
Loan Agreement between RD Elmwood Associates, L.P. and Bear Stearns Commercial Finance Mortgage, Inc. dated
December 9, 2005
10.54
Mortgage and Security Agreement between RD Elmwood Associates, L.P. and Bear Stearns Commercial Finance
21
23.1
23.2
31.1
Mortgage, Inc. dated December 9, 2005
List of Subsidiaries of Acadia Realty Trust
Consent of Registered Public Accounting Firm to Form S-3 and Form S-8
Consent of former Registered Public Accounting Firm to Form S-3 and Form S-8
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
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
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
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
Acadia Realty Trust 2005 Annual Report
45
ACADIA REALTY TRUST AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
Report of Registered Public Accounting Firm for the year ended December 31, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Report of Registered Public Accounting Firm for the years ended December 31, 2004 and 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Consolidated Balance Sheets as of December 31, 2005 and 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Consolidated Statements of Income for the years ended December 31, 2005, 2004 and 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2005, 2004 and 2003 . . . . . . . . . . . . . . . . 52
Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003
. . . . . . . . . . . . . . . . . . . . . . . . 54
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Schedule III – Real Estate and Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Acadia Realty Trust 2005 Annual Report 46
Report of Independent Registered Public Accounting Firm
The Shareholders and Trustees of Acadia Realty Trust
We have audited the accompanying consolidated balance sheet of Acadia Realty Trust and subsidiaries (the “Company”) as of
December 31, 2005 and the related consolidated statements of income, stockholders' equity, and cash flows for the year then
ended. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements
and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these finan-
cial statements and schedule based on our audits.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial
position of Acadia Realty Trust and subsidiaries at December 31, 2005 and the consolidated results of their operations and
their cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles. Also, in our opinion,
the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the effectiveness of Acadia Realty Trust and subsidiaries’ internal control over financial reporting as of December 31, 2005,
based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission and our report dated March 8, 2006 expressed an unqualified opinion thereon.
BDO Seidman, LLP
New York, New York
March 8, 2006
Acadia Realty Trust 2005 Annual Report
47
Report of Independent Registered Public Accounting Firm
The Shareholders and Trustees of Acadia Realty Trust
We have audited the accompanying consolidated balance sheet of Acadia Realty Trust and subsidiaries (the “Company”) as of
December 31, 2004, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the two
years in the period ended December 31, 2004. These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial
position of Acadia Realty Trust and subsidiaries at December 31, 2004, and the consolidated results of their operations and
their cash flows for each of the two years in the period ended December 31, 2004, in conformity with U.S. generally accepted
accounting principles.
Ernst & Young LLP
New York, New York
March 10, 2005, except for Note 2B, as to which the date is March 15, 2006
Acadia Realty Trust 2005 Annual Report 48
Consolidated Balance Sheets
I N T H O U S A N D S , E X C E P T P E R S H A R E A M O U N T S
Assets
Real Estatei
Land
Buildings and improvements
Construction in progress
Less: accumulated depreciation
Net real estate
Cash and cash equivalents
Restricted cash
Cash in escrow
Investment in management contracts, net of accumulated amortization of $1,938
Preferred equity investment
Investments in and advances to unconsolidated partnerships
Rents receivable, net
Notes receivable
Prepaid expenses
Deferred charges, net
Acquired lease intangibles
Other assets
Assets of discontinued operations
Liabilities and Shareholders’ Equity
Mortgage notes payable
Accounts payable and accrued expenses
Dividends and distributions payable
Derivative instruments
Share of distributions in excess of share of income and investment
in unconsolidated partnerships
Other liabilities
Liabilities of discontinued operations
Total liabilities
Minority interest in Operating Partnership
Minority interests in majority-owned partnerships
Total minority interests
Shareholders’ equity:
Common shares, $.001 par value, authorized 100,000,000 shares,
issued and outstanding 31,542,942 and 31,340,637 shares, respectively
Additional paid-in capital
Accumulated other comprehensive loss
Deficit
Total shareholders’ equity
The accompanying notes are an integral part of these consolidated financial statements.
49
Acadia Realty Trust 2005 Annual Report
December 31,
22000055
22000044
$$ 5544,,996633
$$ 5522,,447722
338800,,005533
773355
443355,,775511
111188,,330099
331177,,444422
3399,,661122
551122
55,,339966
33,,117788
1199,,000000
4477,,002211
1111,,888800
1155,,773333
33,,005577
1155,,888800
44,,663388
1155,,770099
——
335566,,990088
55,,559944
441144,,997744
110055,,227788
330099,,669966
1133,,449999
661122
44,,446677
3,422
——
2277,,668844
1100,,448855
1100,,008877
22,,999944
1122,,662244
——
44,,880099
55,,226688
$$ 449999,,005588
$$ 440055,,664477
$$ 223388,,444488
$$ 115533,,336611
77,,331199
66,,008888
118800
1100,,331155
55,,339966
——
226677,,774466
99,,220044
11,,553322
1100,,773366
3311
222233,,119999
((1122))
((22,,664422))
222200,,557766
77,,662277
55,,559977
22,,113366
99,,330044
33,,009966
5511
118811,,117722
55,,774433
11,,880088
77,,555511
3311
2222,,771155
((33,,118800))
((22,,664422))
221166,,992244
$$ 449999,,005588
$$ 440055,,664477
Consolidated Statements of Income
I N T H O U S A N D S , E X C E P T P E R S H A R E A M O U N T S
Revenuesi
Minimum rents
Percentage rents
Expense reimbursements
Other property income
Management fee income (net of submanagement fees of $1,591)
Interest income
Other
Total revenues
Operating Expensesi
Property operating
Real estate taxes
General and administrative
Depreciation and amortization
Total operating expenses
Operating income
Equity in earnings of unconsolidated partnerships
Interest expense
Gain on sale of land
Minority interest
Income from continuing operations before income taxes
Income Taxes
Income from continuing operations
Discontinued operations:
Operating (loss) income from discontinued operations
Impairment of real estate
(Loss) gain on sale of properties
Minority interest
(Loss) income from discontinued operations
Years Ended December 31,
22000055
22000044
22000033
$$ 5522,,773377
$$5500,,666677
$$ 4488,,110000
774477
1133,,998800
778800
1111,,449922
33,,558822
——
8833,,331188
1144,,332233
99,,225533
1155,,338822
1166,,776633
5555,,772211
2277,,559977
88,,222288
((1111,,442233))
——
((669955))
2233,,770077
((22,,114400))
2211,,556677
((113388))
((777700))
((5500))
1177
((994411))
994488
1122,,998833
662200
44,,776633
11,,446666
221100
7711,,665577
1144,,554444
88,,776622
1100,,446688
1155,,447700
4499,,224444
2222,,441133
11,,779977
((1100,,443366))
993322
((11,,119900))
1133,,551166
——
1133,,551166
((550044))
——
66,,669966
((112233))
66,,006699
998888
1122,,883333
774488
11,,997711
778888
11,,221188
6666,,664466
1144,,441199
88,,220088
1100,,773344
1177,,119955
5500,,555566
1166,,009900
22,,441111
((99,,889966))
11,,118877
((11,,339999))
88,,339933
——
((559922))
559922
——
——
5522
554400
Net income
$$2200,,662266
$$ 1199,,558855
$$
77,,885533
The accompanying notes are an integral part of these consolidated financial statements.
Acadia Realty Trust 2005 Annual Report 50
Consolidated Statements of Income continued
I N T H O U S A N D S , E X C E P T P E R S H A R E A M O U N T S
Basic Earnings per Sharei
Income from continuing operations
(Loss) income from discontinued operations
Basic earnings per share
Diluted Earnings per Sharei
Income from continuing operations
(Loss) income from discontinued operations
Diluted earnings per share
The accompanying notes are an integral part of these consolidated financial statements.
Years Ended December 31,
22000055
22000044
22000033
$$ 00..6688
((00..0033))
$$ 00..6655
$$ 00..6677
((00..0033))
$$ 00..6644
$$00..4466
00..2211
$$ 00..6677
$$00..4455
00..2200
$$00..6655
$$ 00..3322
((00..0022))
$$ 00..3300
$$ 00..3311
((00..0022))
$$ 00..2299
Acadia Realty Trust 2005 Annual Report
51
Consolidated Statements of Shareholders’ Equity
Common Shares
Shares
Amount
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Total
Shareholders’
Equity
Deficit
I N T H O U S A N D S , E X C E P T P E R S H A R E A M O U N T S
Balance at December 31, 2002
2255,,225577
$$ 2255
$$ 117700,,885511
$$ ((66,,887744))
$$ ((22,,667799))
$$ 116611,,332233
Conversion of 2,058,804 OP Units to
Common Shares by limited partners
of the Operating Partnership
22,,005599
Conversion of 632 Series A Preferred OP Units to
Common Shares by limited partners
of the Operating Partnership
Employee restricted share award
Settlement of vested options
Dividends declared ($0.595 per
Common Share)
Employee exercise of 250 options
Unrealized gain on valuation of swap
agreements
Common Shares purchased under Employee
Stock Purchase Plan
Net income
8844
88
——
——
——
——
11
——
Balance at December 31, 2003
2277,,440099
Conversion of 746,762 OP Units to
Common Shares by limited partners
of the Operating Partnership
Shares issued to trustees and employees
Employee restricted share award
Settlement of vested options
Dividends declared ($0.6525 per
Common Share)
Employee and trustee exercise of
1,262,000 options
Unrealized gain on valuation of
swap agreements
Common Shares issued under
Employee Stock Purchase Plan
Issuance of 1,890,000 Common Shares,
net of issuance costs
Net income
Balance at December 31, 2004
774477
55
2222
——
——
11,,226622
——
66
11,,889900
—
3311,,334411
2
—
—
—
——
—
——
—
——
2277
11
——
——
——
——
11
——
——
22
—
3311
14,898
632
410
(750)
((88,,116600))
2
——
8
——
—
—
—
—
——
—
—
—
—
—
14,900
632
410
(750)
((77,,885533))
—
((1166,,001133))
2
11,,336699
——
11,,336699
—
——
—
77,,885533
8
77,,885533
117777,,889911
((55,,550055))
((22,,667799))
116699,,773344
66,,339955
444433
339944
((6677))
——
99,,226655
——
8844
2288,,331100
—
222222,,771155
——
——
——
——
——
——
22,,332255
——
——
—
——
——
——
——
66,,339966
444433
339944
((6677))
((1199,,554488))
((1199,,554488))
——
——
——
——
1199,,558855
99,,226666
22,,332255
8844
2288,,331122
1199,,558855
((33,,118800))
((22,,664422))
$$ 221166,,992244
Acadia Realty Trust 2005 Annual Report 52
Consolidated Statements of Shareholders’ Equity continued
Common Shares
Shares
Amount
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Total
Shareholders’
Equity
Deficit
I N T H O U S A N D S , E X C E P T P E R S H A R E A M O U N T S
Conversion of 796 Series A Preferred OP Units to
Common Shares by limited partners
of the Operating Partnership
Employee restricted share award
Dividends declared ($0.69 per
Common Share)
Employee and trustee exercise of
51,200 options
Unrealized gain on valuation of swap
agreements
Common Shares purchased under
Employee Stock Purchase Plan
Net income
9922
5522
——
5511
——
77
——
Balance at December 31, 2005
3311,,554433
$$——
——
$$
669966
11,,003300
$$ ——
——
$$
—— $$
——
669966
11,,003300
——
——
——
——
——
3311
((11,,669911))
334455
——
110044
——
222233,,119999
——
——
33,,116688
——
——
((1122))
((2200,,662266))
((2222,,331177))
——
——
——
2200,,662266
334455
33,,116688
110044
2200,,662266
((22,,664422))
222200,,557766
The accompanying notes are an integral part of these consolidated financial statements
Acadia Realty Trust 2005 Annual Report
53
Consolidated Statements of Cash Flows
I N T H O U S A N D S , E X C E P T P E R S H A R E A M O U N T S
Cash Flows from Operating Activities
Net income
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization
Gain on sale of land
(Loss) gain on sale of property
Impairment of real estate
Minority interests
Equity in earnings of unconsolidated partnerships
Distributions of operating income from unconsolidated partnerships
Amortization of derivative settlement included in interest expense
Provision for bad debts
Amortization of FAS 141 above-market rent
Changes in assets and liabilities:
Restricted cash
Funding of escrows, net
Rents receivable
Prepaid expenses
Other assets
Accounts payable and accrued expenses
Due to/from related parties
Other liabilities
Net cash provided by operating activities
Cash Flows from Investing Activities
Expenditures for real estate and improvements
Payment of accrued expense related to redevelopment project
Investment in and advances to unconsolidated partnerships
Return of capital from unconsolidated partnerships
Collections on notes receivable
Payment of deferred leasing costs
Advances of notes receivable
Preferred equity investment
Proceeds from sale of land
Proceeds from sale of property
Net cash (used in) provided by investing activities
The accompanying notes are an integral part of these consolidated financial statements.
Years Ended December 31,
22000055
22000044
22000033
$$ 2200,,662266
$$1199,,558855
$$ 77,,885533
1166,,885533
——
5500
777700
667788
((88,,222288))
559966
444400
448811
221177
110000
((992299))
((11,,551177))
((2299))
((99,,008877))
664466
——
22,,229922
2233,,995599
2255,,662299
——
((1122,,771111))
11,,001111
11,,886688
((11,,003344))
((77,,991144))
((1199,,000000))
——
33,,993311
((5599,,447788))
1166,,007777
((993322))
((66,,669966))
——
11,,331133
((11,,779977))
11,,664455
9999
778833
——
((110088))
((11,,112255))
((11,,228888))
9999
((33,,000044))
22,,446644
((997744))
((667733))
2255,,446688
((77,,113399))
——
((1166,,442222))
1155,,113366
33,,992299
((22,,337788))
((1100,,442299))
——
993322
——
1177,,990099
((11,,118877))
——
——
11,,334477
((22,,441111))
11,,554400
——
552233
——
((550044))
110055
((33,,995588))
((11,,008855))
((889911))
221188
((112266))
778855
2200,,111188
((1133,,553311))
((22,,448888))
((66,,003322))
6622
33,,223322
((22,,118833))
——
——
——
——
((1166,,337711))
((2200,,994400))
Acadia Realty Trust 2005 Annual Report 54
Acadia Realty Trust 2005 Annual Report 54
Consolidated Statements of Cash Flows continued
I N T H O U S A N D S , E X C E P T P E R S H A R E A M O U N T S
Cash Flows from Financing Activities
Principal payments on mortgage notes payable
Proceeds received on mortgage notes payable
Payment of deferred financing and other costs
Dividends paid
Distributions to minority interests in Operating Partnership
Distributions on Preferred Operating Partnership Units
Distributions to minority interests in majority-owned partnership
Common Shares issued under Employee Stock Purchase Plan
Settlement of options to purchase Common Shares
Exercise of options to purchase Common Shares
Termination of derivative instrument
Issuance of Common Shares
Net cash provided by (used in) financing activities
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Supplemental Disclosure of Cash Flow Informationi
Years Ended December 31,
22000055
22000044
22000033
$$ ((3399,,001144))
$$((110000,,992288))
$$ ((3322,,991177))
112244,,110000
((11,,119933))
((2211,,886699))
((338800))
((334422))
((111199))
110044
——
334455
——
——
6611,,663322
2266,,113333
1133,,449999
7766,,225511
((11,,663300))
((1188,,550077))
((441166))
((228833))
((660066))
8844
((6677))
9,340
((11,,330077))
2288,,331144
((99,,775577))
((666600))
1144,,115599
2211,,000000
((224411))
((1144,,889966))
((11,,220077))
((119999))
((998855))
88
((775500))
—
——
——
((3300,,118877))
3311,,000099
4455,,116688
$$ 3399,,661122
$$ 1133,,449999
$$ 1144,,115599
Cash paid during the period for interest
$$
1111,,445566
$$
1111,,777777
$$ 1111,,664455
Supplemental Disclosure of Non-Cash Investing and Financing Activitiesi
Acquisition of management contract rights through issuance of
Preferred Operating Partnership Units
Acquisition of property through issuance of
Preferred Operating Partnership Units
$$ 44,,000000
$$
220000
$$
$$
44000000
——
$
$
——
——
The accompanying notes are an integral part of these consolidated financial statements.
Acadia Realty Trust 2005 Annual Report
Acadia Realty Trust 2005 Annual Report
55
55
Notes to Consolidated Statements
In thousands, except per share amounts
Note 1i
Organization, Basis of Presentation
and Summary of Significant Account-
ing Policies
Acadia Realty Trust (the “Company”) is a fully integrated,
self-managed and self-administered equity real estate
investment trust (“REIT”) focused primarily on the owner-
ship, acquisition, redevelopment and management of retail
properties, including neighborhood and community shopping
centers and mixed-use properties with retail components.
All of the Company’s assets are held by, and all of its operations
are conducted through, Acadia Realty Limited Partnership
(the “Operating Partnership”) and its majority owned part-
nerships. As of December 31, 2005, the Company controlled
98% of the Operating Partnership as the sole general part-
ner. As the general partner, the Company is entitled to share,
in proportion to its percentage interest, in the cash distribu-
tions and profits and losses of the Operating Partnership.
The limited partners represent entities or individuals who
contributed their interests in certain properties or partner-
ships to the Operating Partnership in exchange for common
or preferred units of limited partnership interest (“Common
or Preferred OP Units”). 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 Company (“Common Shares”). This structure is com-
monly referred to as an umbrella partnership REIT or “UPREIT.”
As of December 31, 2005, the Company operated 71 properties,
which it owns or has an ownership interest in, principally
located in the Northeast, Mid-Atlantic and Midwest regions
of the United States.
Principles of Consolidation
The consolidated financial statements include the consoli-
dated accounts of the Company and its majority owned
partnerships, including the Operating Partnership. All sig-
nificant intercompany balances and transactions have been
eliminated in consolidation. Investments in partnerships for
which the Company has the ability to exercise significant
influence over, but does not have financial or operating con-
trol, are accounted for using the equity method of accounting.
Accordingly, the Company’s share of the earnings (or loss) of
these partnerships are included in consolidated net income.
“Consolidation of Variable Interest Entities” (“FIN 46-R”) are
required to be consolidated by their primary beneficiary. The
primary beneficiary of a variable interest entity is determined
to be the party that absorbs a majority of the entity’s expected
losses, receives a majority of its expected returns, or both.
Management has evaluated the applicability of FIN 46-R
to its investments in certain joint ventures and determined
that these joint ventures do not meet the requirements of a
variable interest entity and, therefore, consolidation of these
ventures is not required. Accordingly, these investments are
accounted for using the equity method.
Use of Estimates
Accounting principles generally accepted in the United
States of America (“GAAP”) require the Company’s manage-
ment to make estimates and assumptions that affect the
amounts reported in the financial statements and accompa-
nying notes. The most significant assumptions and estimates
relate to the valuation of real estate, depreciable lives, revenue
recognition and the collectability of trade accounts receivable.
Application of these assumptions requires the exercise of
judgment as to future uncertainties and, as a result, actual
results could differ from these estimates.
Real Estate
Real estate assets are stated at cost less accumulated depre-
ciation. Expenditures for acquisition, development, construc-
tion and improvement of properties, as well as significant
renovations are capitalized. Interest costs are capitalized
until construction is substantially complete. Construction
in progress includes costs for significant shopping center
expansion and redevelopment. Depreciation is computed
on the straight-line basis over estimated useful lives of 30
to 40 years for buildings and the shorter of the useful life or
lease term for improvements, furniture, fixtures and equip-
ment. Expenditures for maintenance and repairs are charged
to operations as incurred.
Upon acquisitions of real estate, the Company assesses the
fair value of acquired assets (including land, buildings and
improvements, and identified intangibles such as above and
below market leases and acquired in-place leases and cus-
tomer relationships) and acquired liabilities in accordance
with Statement of Financial Accounting Standards (“SFAS”)
No. 141, “Business Combinations” and SFAS No. 142,” Goodwill
and Other Intangible Assets,” and allocates purchase price
based on these assessments. The Company assesses fair
value based on estimated cash flow projections that utilize
Variable interest entities within the scope of Financial
appropriate discount and capitalization rates and available
Accounting Statements Board (“FASB”) Interpretation No. 46,
market information. Estimates of future cash flows are
Acadia Realty Trust 2005 Annual Report 56
Notes to Consolidated Statements continued
Notes to Consolidated Statements continued
based on a number of factors including the historical operat-
The Company makes estimates of the uncollectability of
ing results, known trends, and market/economic conditions
its accounts receivable related to base rents, expense reim-
that may affect the property.
The Company reviews its long-lived assets used in operations
for impairment when there is an event, or change in circum-
stances that indicates impairment in value. 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 prop-
bursements and other revenues. An allowance for doubtful
accounts has been provided against certain tenant accounts
receivable that are estimated to be uncollectible. Once the
amount is ultimately deemed to be uncollectible, it is written
off. Rents receivable at December 31, 2005 and 2004 are
shown net of an allowance for doubtful accounts of $2,843
and $2,841, respectively.
erties are less than their carrying amounts. In cases where
Interest income from notes receivable is recognized on an
the Company does not expect to recover its carrying costs
accrual basis based on the contractual terms of the notes.
on properties held for use, the Company reduces its carrying
cost to fair value, and for properties held for sale, the Com-
pany reduces its carrying value to the fair value less costs to
sell. During the year ended December 31, 2005, an impairment
loss of $770 was recognized related to a property that was
sold in July of 2005. Management does not believe that the
values of its properties within the portfolio are impaired as
of December 31, 2005.
Deferred Costs
Fees and costs paid in the successful negotiation of leases
have been deferred and are being amortized on a straight-
line basis over the terms of the respective leases. Fees and
costs incurred in connection with obtaining financing have
been deferred and are being amortized over the term of the
related debt obligation.
Management Contracts
Income from management contracts, net of submanage-
ment fees of $303 and $1,591 for the years ended December
31, 2005 and 2004, respectively, is recognized on an accrual
basis as such fees are earned. The initial acquisition cost
of the management contracts is being amortized over the
estimated lives of the contracts acquired.
Revenue Recognition and Accounts Receivable
Leases with tenants are accounted for as operating leases.
Minimum rents are recognized on a straight-line basis over
the term of the respective leases. As of December 31, 2005
and 2004 unbilled rents receivable relating to straight-lining
of rents were $6,988 and $6,506, respectively. Certain of
these leases also provide for percentage rents based upon
Cash and Cash Equivalents
The Company considers all highly liquid investments with
an original maturity of three months or less when purchased
to be cash equivalents.
Restricted Cash and Cash in Escrow
Restricted cash and cash in escrow consists principally of
cash held for real estate taxes, property maintenance, insur-
ance, minimum occupancy and property operating income
requirements at specific properties as required by certain
loan agreements.
Income Taxes
The Company has made an election to be taxed, and believes
it qualifies as a REIT under Sections 856 through 860 of the
Internal Revenue Code of 1986, as amended (the “Code”). To
maintain REIT status for Federal income tax purposes, the
Company is generally required to distribute to its stockhold-
ers at least 90% of its REIT taxable income as well as comply
with certain other requirements as defined by the Code.
Accordingly, the Company is not subject to federal corporate
income tax to the extent that it distributes 100% of its REIT
taxable income each year.
Although it may qualify for REIT status for Federal income
tax purposes, the Company is subject to state income or
franchise taxes in certain states in which some of its proper-
ties are located. In addition, taxable income from non-REIT
activities managed through the Company’s taxable REIT
subsidiaries (“TRS”) are subject to Federal, state and local
income taxes.
the level of sales achieved by the tenant. Percentage rents
TRS income taxes are accounted for under the asset and lia-
are recognized in the period when the tenants’ sales break-
bility method as required by SFAS No. 109, “Accounting for
point is met. In addition, leases typically provide for the
Income Taxes.” Under the asset and liability method, deferred
reimbursement to the Company of real estate taxes, insurance
income taxes are recognized for the temporary differences
and other property operating expenses. These reimburse-
between the financial reporting basis and the tax basis of
ments are recognized as revenue in the period the expenses
the TRS assets and liabilities.
are incurred.
Acadia Realty Trust 2005 Annual Report
57
Stock-based Compensation
Prior to 2002, the Company accounted for stock options under
Accounting Principles Board Opinion No. 25, “Accounting for
Stock Issued to Employees” and related interpretations.
Effective June 30, 2005, the Company adopted the fair value
method of recording stock-based compensation contained
in SFAS No. 123R, “Accounting for Stock-Based Compensation.”
As such, all stock options granted after December 31, 2001
are reflected as compensation expense in the Company’s
consolidated financial statements over their vesting period
based on the fair value at the date the stock-based compen-
sation was granted. As provided for in SFAS No. 123, the Com-
pany elected the “prospective method” for the adoption of
the fair value basis method of accounting for employee stock
options. Under this method, the recognition provisions have
effective date did not have a material effect on the Company’s
consolidated financial statements.
On December 16, 2004, the FASB issued SFAS No. 123R
(Revised 2004), “Share-Based Payment.” SFAS 123R replaces
SFAS No. 123, which the Company adopted on January 1,
2003. SFAS No. 123R requires that the compensation cost
relating to share-based payment transactions be recognized
in financial statements and be measured based on the
fair value of the equity or liability instruments issued. SFAS
No. 123R is effective as of the first interim or annual report-
ing period that begins after June 15, 2005. The Company
does not believe that the adoption of SFAS No. 123R will
have a material effect on the Company’s consolidated
financial statements.
been applied to all employee awards granted, modified or
In May 2005, the FASB issued SFAS No. 154, “Accounting
settled after January 1, 2002.
The following table illustrates the effect on net income and
earnings per share if the Company had applied the fair value
based method of accounting for stock-based employee com-
pensation for vested stock options granted prior to January 1,
2002. See Note 11 – “Share Incentive Plan” for the assumptions
utilized in valuing the below vested stock options:
Years Ended December 31,
2005
2004
2003
Net income:
As reported
Pro forma
Basic earnings per share:
As reported
Pro forma
Diluted earnings per share:
As reported
Pro forma
$19,585
$7,853
19,561
7,829
$ 0.67
$ 0.30
0.67
0.29
$ 0.65
$ 0.29
0.65
0.29
Recent Accounting Pronouncements
On December 16, 2004, the FASB issued SFAS No. 153,
“Exchanges of Nonmonetary Assets — An Amendment of
APB Opinion No. 29.” The amendments made by SFAS No. 153
are based on the principle that exchanges of nonmonetary
assets should be measured based on the fair value of the
assets exchanged. Further, the amendments eliminate the
narrow exception for nonmonetary exchanges of similar
productive assets and replace it with a broader exception
for exchanges of nonmonetary assets that do not have
“commercial substance.” SFAS No. 153 is effective for non-
monetary asset exchanges occurring in fiscal periods begin-
ning after June 15, 2005. The adoption of SFAS No. 153 on its
Changes and Error Corrections – A Replacement of APB
Opinion No. 20 and SFAS No. 3.” SFAS No. 154 changes the
requirements for the accounting and reporting of a change
in accounting principle by requiring that a voluntary change
in accounting principle be applied retrospectively with all
prior periods’ financial statements presented on the new
accounting principle, unless it is impracticable to do so.
SFAS No. 154 also requires that a change in depreciation or
amortization for long-lived, nonfinancial assets be accounted
for as a change in accounting estimate effected by a change
in accounting principle and corrections of errors in previously
issued financial statements should be termed a “restatement.”
SFAS No. 154 is effective for accounting changes and correc-
tions of errors made in fiscal years beginning after Decem-
ber 15, 2005. The Company believes that the adoption of
SFAS No. 154 will not have a material effect on its consolidated
financial statements.
In 2005, the Emerging Issues Task Force (“EITF”) reached a
consensus that the general partners in a limited partnership
should determine whether they control a limited partnership
based on the application of the framework as discussed in
EITF 04-5, “Determining Whether a General Partner, or the
General Partners as a Group, Controls a Limited Partnership
or Similar Entity When the Limited Partners Have Certain
Rights.” Under EITF 04-5, the general partners in a limited
partnership are presumed to control that limited partner-
ship regardless of the extent of the general partners’ owner-
ship interest in the limited partnership. The assessment of
whether the rights of the limited partners should overcome
the presumption of control by the general partners is a matter
of judgment that depends on facts and circumstances. If
the limited partners have either (a) the substantive ability
to dissolve (liquidate) the limited partnership or otherwise
Acadia Realty Trust 2005 Annual Report 58
Notes to Consolidated Statements continued
remove the general partners without cause or (b) substantive
pertains to a beneficial interest other than another deriva-
participating rights, the general partners do not control the
tive financial instrument. This Statement is effective for all
limited partnership. EITF 04-5 was effective immediately for
financial instruments acquired or issued after the beginning
new partnerships formed and existing limited partnerships
of an entity’s first fiscal year that begins after September 15,
for which the partnership agreements are modified on or
2006. The Company believes that the adoption of SFAS No.
after June 29, 2005, and, for all other partnerships, EITF 04-5
155 will not have a material effect on its consolidated finan-
would be effective no later than the beginning of the first
cial statements.
reporting period in fiscal years beginning after December 15,
2005. The provisions of EITF 04-5 may be initially applied
through either one of two methods: (1) similar to a cumula-
tive effect of a change in accounting principle or (2) retro-
spective application. The Company is currently assessing the
impact of EITF 04-5 as it relates to the method of accounting
utilized for its investments in Funds I and II (note 4), which
Comprehensive income
The following table sets forth comprehensive income for the
years ended December 31, 2005, 2004 and 2003:
Years Ended December 31,
2005
2004
2003
$20,626
$19,585
$ 7,853
are currently accounted for under the equity method of
Net income
accounting. There would be no impact on net income or
shareholders’ equity for any of the reported periods in the
accompanying consolidated financial statements if the Com-
pany were to consolidate these investments. If the Company
was required to consolidate these investments, total assets,
total liabilities and minority interest as of December 31, 2005
Other comprehensive
income (loss)1
3,168
2,325
1,369
Comprehensive income
1Relates to the changes in the fair value of derivative instruments
accounted for as cash flow hedges.
$ 23,794
$ 21,910
$ 9,222
and December 31, 2004 would be as follows:
The following table sets forth the change in accumulated
December 31,
other comprehensive loss for the years ended December 31,
Total assets
Total liabilities
Minority interest
2005
$ 816,732
484,473
$ 111,683
2004
$624,387
343,741
$ 63,722
In February 2006, the FASB issued SFAS No. 155, “Accounting
for Certain Hybrid Financial Instruments — an amendment
of FASB Statements No. 133 and No. 14.” This Statement
amends SFAS No. 133, “Accounting for Derivative Instruments
and Hedging Activities,” and SFAS No. 140, “Accounting for
Transfers and Servicing of Financial Assets and Extinguish-
ments of Liabilities” and resolves issues addressed in SFAS
No. 133 Implementation Issue No. D1, “Application of SFAS
No. 133 to Beneficial Interests in Securitized Financial Assets.”
This Statement (a) permits fair value remeasurement for
any hybrid financial instrument that contains an embedded
derivative that otherwise would require bifurcation, (b) clarifies
which interest-only strips and principal-only strips are not
subject to the requirements of SFAS No. 133, (c) establishes
a requirement to evaluate interests in securitized financial
assets to identify interests that are freestanding derivatives
2005, 2004 and 2003:
Years Ended December 31,
2005
2004
2003
Beginning balance
$3,180
$ 5,505
$ 6,874
Unrealized gain on
valuation of derivative
instruments
(3,168)
(2,325)
(1,369)
Ending balance
$
12
$ 3,180
$ 5,505
Reclassifications
Certain 2004 and 2003 amounts were reclassified to con-
form to the 2005 presentation.
Note 2i
Acquisition and Disposition of
Properties and Discontinued Operations
A. Acquisition and Disposition of Properties
Currently the primary vehicle for the Company’s acquisitions
or that are hybrid financial instruments that contain an
is through its acquisition joint ventures (Note 4).
embedded derivative requiring bifurcation, (d) clarifies that
concentrations of credit risk in the form of subordination are
not embedded derivatives and (e) amends SFAS No. 140 to
eliminate the prohibition on a qualifying special-purpose
entity from holding a derivative financial instrument that
Dispositions relate to the sale of shopping centers and
land. Gains from these sales are recognized in accordance
with the provisions of SFAS No. 66, “Accounting for Sales of
Real Estate.”
Acadia Realty Trust 2005 Annual Report
59
Acquisitions
During July of 2005, the Company purchased 4343 Amboy
The combined results of operations and assets and liabilities
of the properties classified as discontinued operations are
Road located in Staten Island, New York for $16,635 in cash
summarized as follows:
and $200 in Common OP Units.
Dispositions
On July 7, 2005, the Company sold the Berlin Shopping Center
Assets:
for $4,000. An impairment loss of $770 was recognized for
the year ended December 31, 2005, to reduce the carrying
value of this asset to fair value less costs to sell.
On November 22, 2004, the company disposed of the East
End Centre, a 308,000 square foot shopping center in Wilkes-
Barre, Pennsylvania, for approximately $12,405 resulting in a
$6,696 gain on the sale.
Net real estate
Rents receivable, net
Prepaid expenses
Total Assets
Liabilities and Deficit:
Accounts payable and
accrued expenses
On November 8, 2002, the Company and an unaffiliated
joint venture partner completed the sale of a contract to
purchase land in Bethel, Connecticut, to the Target Corpora-
tion for $1,540 after closing and other related costs. The joint
Other liabilities
Total liabilities
Surplus
venture received a $1,632 note receivable for the net purchase
Total liabilities and surplus
price and additional reimbursements due from the buyer
and deferred recognition of the gain on sale in accordance
with SFAS No. 66. The note was paid in full on January 10,
2003, and as such, the Company’s share of the deferred gain,
or $634, was recognized in 2003. Additional amounts held in
escrow from the closing of $932 were released to the Com-
pany during 2004 and recognized as additional gain. Of this
amount, $466 was attributable to the Company’s joint venture
partner and reflected in minority interest in the Company’s
consolidated statement of income.
B. Discontinued Operations
SFAS No. 144 requires discontinued operations presentation
for disposals of a “component” of an entity. In accordance
Total revenue
Total expenses
Impairment of real estate
(Loss) gain on sale
of properties
Minority interest
(Loss) Income from
December 31,
2005
2004
$4,827
406
35
$5,268
13
38
51
$
5,217
$5,268
Years Ended December 31,
2005
2004
2003
$438
$ 2,554
$2,799
576
3,058
3,391
(504)
(592)
(138)
(770)
—
(50)
6,696
17
(123)
—
—
52
discontinued operations
$(941)
$6,069
$ (540)
with SFAS No. 144, for all periods presented, the Company
Note 3i
reclassified its consolidated statements of income to reflect
income and expenses for properties which became held for
sale subsequent to December 31, 2001, as discontinued oper-
ations and reclassified its consolidated balance sheets to
reflect assets and liabilities related to such properties as
assets and liabilities related to discontinued operations.
The combined results of operations of either sold properties
or properties held for sale are reported separately as discon-
tinued operations for the years ended December 31, 2005,
2004 and 2003. These are related to the Berlin Shopping
Center, which was sold on July 7, 2005 and the East End
Centre, which was sold on November 22, 2004.
Segment Reporting
The Company has two reportable segments: retail properties
and multi-family properties. 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. The reportable segments are managed separately due
to the differing nature of the leases and property operations
associated with the retail versus residential tenants. The fol-
lowing table sets forth certain segment information for the
Company, reclassified for discontinued operations, as of and
for the years ended December 31, 2005, 2004, and 2003
(does not include unconsolidated partnerships):
Acadia Realty Trust 2005 Annual Report 60
Notes to Consolidated Statements continued
2005
2004
2003
Retail Multi-Family
All
Retail Multi-Family
All
Retail Multi-Family
Properties Properties Other
Total
Properties Properties Other
Total
Properties Properties
All
Other
Total
$ 61,540
$ 7,688 $14,090 $ 83,318
$ 57,600
$ 7,596
$6,461
$ 71,657
$ 55,351
$ 7,318 $ 3,977
$ 66,646
19,323
4,253
—
23,576
2,141
267
12,974
15,382
19,172
3,733
4,134
—
23,306
18,440
4,187
—
490
6,245
10,468
7,892
1,005
1,837
22,627
10,734
$ 40,076
$ 3,168 $ 1,116 $ 44,360 $ 34,695
$ 2,972
$ 216
$ 37,883
$ 29,019 $ 2,126 $ 2,140
$ 33,285
$ 14,847
$ 1,465 $
451 $ 16,763
$ 13,709
$ 1,433
$ 328
$ 15,470
$ 15,538 $ 1,336 $ 321
$
17,195
$ 10,068
$ 1,355 $ — $ 11,423
$
8,918
$
1,518
$ — $ 10,436
$ 8,366 $ 1,530 $ — $ 9,896
$ 394,118
$ 41,633 $ — $ 435,751
$374,359
$ 40,615
$ — $ 414,974
$367,446 $ 39,774 $ — $ 407,220
$ 413,158
$ 37,295 $48,605 $499,058 $348,026 $ 36,872
$20,749 $405,647
$ 337,724 $36,830 $13,630 $ 388,184
$ 19,759
$ 1,018 $ — $ 20,777
$ 6,314
$
842
$ — $
7,156
$
11,971
$ 1,378 $ — $ 13,349
$ 87,389
$ 73,784
$ 68,286
Revenues
Property operating expenses
and real estate taxes
Other Expenses
Net property income
before depreciation
and amortization
Depreciation and
amortization
Interest expense
Real estate at cost
Total assets
Expenditures for real
estate and improvements
Revenues
Total revenues for
reportable segments
(1,290)
(708)
(129)
—
$ 71,657
$ 24,432
(1,126)
—
$ 23,306
$ 37,883
(15,470)
1,797
(10,436)
932
6,069
—
(1,190)
$ 19,585
(1,340)
(300)
—
—
$ 66,646
$ 23,784
(1,157)
—
$ 22,627
$ 33,285
(17,195)
2,411
(9,896)
1,187
(540)
—
(1,399)
$
7,853
Elimination of intersegment
management fee income
(1,514)
Elimination of intersegment
asset management fee income (1,143)
Elimination of intersegment
service fees and interest income (878)
Elimination of promote fee income (536)
$ 83,318
Total consolidated revenues
Property Operating Expenses
and Real Estate Taxes
Total property operating
expenses and real estate
taxes for reportable
segments
Elimination of intersegment
management fee expense
Elimination of intersegment
interest expense
$ 25,191
(1,273)
(342)
Total consolidated expenses
$ 23,576
Reconciliation to Net Income
Net property income
before depreciation
and amortization
Depreciation and
amortization
Equity in earnings of
unconsolidated
partnerships
Interest expense
Gain on sale of property
Loss from discontinued
operations
Income taxes
Minority interest
Net income
$ 44,360
(16,763)
8,228
(11,423)
—
(941)
(2,140)
(695)
$ 20,626
Acadia Realty Trust 2005 Annual Report
61
Note 4i
Investments in Unconsolidated
Partnerships
buildings and improvements are being amortized over the
life of the related property.
Acadia Strategic Opportunity Fund, LP (“Fund I”)
In 2001, the Company formed a joint venture, Fund I, with
Crossroads
The Company owns a 49% interest in Crossroads Joint Ven-
four of its institutional investors for the purpose of acquiring
real estate assets. The Company is the sole general partner
ture LLC and Crossroads II LLC (collectively, “Crossroads”)
with 22% interest in the joint venture and is also entitled to
which collectively own a 311,000 square foot shopping cen-
a profit participation in excess of its invested capital based
ter in White Plains, New York. The Company accounts for its
on certain investment return thresholds. The Company also
investment in Crossroads using the equity method. Sum-
earns market-rate fees for asset management as well as for
mary financial information of Crossroads and the Company’s
property management, construction and leasing services.
investment in and share of income from Crossroads follows:
Decisions made by the general partner as it relates to pur-
Balance Sheets
Assets:
Rental property, net
Other assets
Total assets
Liabilities and partners’ equity
Mortgage note payable
Other liabilities
Partners’ equity
Total liabilities and
partners’ equity
December 31,
2005
2004
chasing, financing and disposition of properties are subject
to the unanimous disapproval of the Advisory Committee,
which is comprised of representatives from each of the four
institutional investors.
$ 6,458
$ 6,939
5,543
6,129
$ 12,001
$ 13,068
$64,000
$64,000
2,359
2,481
(54,358)
(53,413)
As of December 31, 2005, Fund I owns or has an ownership
interest in ten shopping centers and 25 anchor-only super-
market leases comprising 2.7 million square feet. Acquisitions
completed during 2004 and 2003 were as follows:
On March 11, 2004, Fund I, in conjunction with the Company’s
long-time investment partner, Hendon Properties (“Hendon”),
purchased a $9,600 first mortgage loan from New York Life
Insurance Company for $5,500. The loan, which was secured
by the Hitchcock Plaza in Aiken, South Carolina, was in default
$ 12,001
$ 13,068
at acquisition. Fund I and Hendon acquired the loan with the
Company’s investment
$ (10,315)
$ 9,304
intention of pursuing ownership of the property securing the
debt. Fund I provided 90% of the equity capital and Hendon
Years Ended December 31,
provided the remaining 10% of the equity capital used to
2005
2004
2003
acquire the loan. Hendon is entitled to receive profit partici-
Statements of Income
Total revenue
Operating and
other expenses
Interest expense
Depreciation and
amortization
Net income
Company’s share of
net income
Amortization of excess
investment (see below)
Income from partnerships
$8,772
$8,160
$ 8,324
2,581
3,632
2,707
2,740
2,465
2,542
654
778
570
$1,905
$ 1,935
$ 2,747
pation in excess of its proportionate equity interest. Subse-
quent to the acquisition of the loan, Fund I and Hendon
obtained fee title to this property. The Company provided
$3,150 of mortgage financing to the project in connection
with the purchase of the first mortgage loan. The note
matures March 9, 2006, and bears interest at 7% for the first
year and 6% for the second year. In addition to this loan, the
Company invested approximately $900, primarily its pro rata
share of equity as a partner in Fund I. In September 2004,
Fund I and Hendon purchased the Pine Log Plaza for $1,500.
$ 988
$ 1,112
$ 1,377
The 35,000 square foot center is located in front of and
392
392
392
adjacent to Hitchcock Plaza. Related to this transaction, the
Company provided an additional $750 mortgage loan to the
$ 596
$ 720
$ 985
project with a March 2006 maturity and interest at 7% for
The unamortized excess of the Company’s investment over
its share of the net equity in Crossroads at the date of acqui-
sition was $19,580. The portion of this excess attributable to
the first year and 6% for the second year.
During May 2004, Fund I acquired a 50% interest in Haygood
Shopping Center and Sterling Heights Shopping Center for
Acadia Realty Trust 2005 Annual Report 62
Notes to Consolidated Statements continued
an aggregate investment of $3,184. These assets are part of
the portfolio that the Company currently manages as a result
of its January 2004 acquisition of certain management con-
Balance Sheets
tracts (note 7).
Assets:
During May 2004, Fund I and an unaffiliated partner, each
Rental property, net
with a 50% interest, acquired a 35,000 square foot shopping
Other assets
center in Tarrytown, New York, for approximately $5,300.
Related to this acquisition, the Company loaned $2,000 to
Fund I which bears interest at the prime rate and matured
May 2005. This loan has been converted to a demand note.
Total assets
Liabilities and partners’ equity
Mortgage note payable
December 31,
2005
2004
$189,188
$187,046
20,835
13,077
$210,023
$200,123
$113,888
$120,188
16,756
79,379
24,060
55,875
$210,023
$200,123
$ 17,072
$ 12,155
Years Ended December 31,
2005
2004
2003
$ 30,605
$26,664
$ 26,008
5,282
5,807
5,017
2,284
6,568
9,166
284
2,106
6,673
8,731
166
207
—
2,171
6,399
8,055
157
—
—
Other liabilities
Partners’ equity
Total liabilities and
partners’ equity
Company’s investment
Statements of Income
Total revenue
Operating and
other expenses
Management and
other fees
Interest expense
Depreciation and
amortization
Minority interest
Equity in earnings (loss) in
unconsolidated subsidiary
Provisions for income taxes
(235)
53
Net income
$ 7,203
$ 2,974
$ 4,209
Company’s share of
net income
$ 2,228
$
1,170
$ 1,426
Acadia Strategic Opportunity Fund II, LLC (“Fund II”)
In June of 2004, the Company formed a joint venture, Fund
II, with the investors from Fund I as well as two new institu-
tional investors for the purpose of acquiring real estate
assets. The Company is the sole managing member with
20% interest in the joint venture and is also entitled to a
During January 2003, Fund I and an unaffiliated joint venture
party acquired a one million square foot supermarket port-
folio consisting of twenty-five anchor-only leases with either
Kroger or Safeway supermarkets (“Kroger/Safeway Portfolio”).
The portfolio was acquired through long-term ground leases
with terms, including renewal options, averaging in excess
of 80 years, which are master leased to a non-affiliated
entity. The purchase price of $48,900 (inclusive of closing
and other related acquisition costs) included the assumption
of $34,450 of existing fixed-rate debt which bears interest at
a weighted-average rate of 6.6%. The mortgage debt fully
amortizes through 2009, which is coterminous with the pri-
mary lease term of the supermarket leases. Fund I invested
$11,250 of the equity capitalization of which the Company’s
share was $2,500.
Also during January 2003, Fund I acquired a one million
square foot portfolio for an initial purchase price of $86,287,
inclusive of closing and other related acquisition costs. The
portfolio consists of two shopping centers located in Wilm-
ington, Delaware (“Brandywine Portfolio”). A portion of one
of the properties is currently unoccupied, which Fund I will
pay for on an “earn-out” basis only when it is leased. To date,
Fund I has incurred costs of $30,302 for earn-out space. At
closing, Fund I assumed $38,082 of fixed-rate debt which
bears interest at a weighted-average rate of 6.2% as well
as obtained an additional fixed-rate loan of $30,000 which
bears interest at 4.7%. Fund I invested equity of $19,270 in
the acquisition, of which the Company’s share was $4,282.
On January 4, 2006, the Company recapitalized the Brandy-
wine Portfolio (note 21).
The Company accounts for its investment in Fund I using
profit participation in excess of its invested capital based
the equity method. Summary financial information of Fund I
on certain investment return thresholds. The Company also
and the Company’s investment in and share of income from
earns market-rate fees for asset management as well as for
Fund I is as follows:
Acadia Realty Trust 2005 Annual Report
63
property management, construction, legal and leasing serv-
ices. Decisions made by the managing member as it relates
to purchasing, financing and disposition of properties are
subject to the unanimous disapproval of the Advisory
Committee, which is comprised of representatives from each
with five five-year options at the current rent plus one 15-
of the six institutional investors.
year option at fair market value. The tenant has exercised
On September 29, 2004, in conjunction with an investment
the first five-year option which expires in October 2011.
partner, P/A Associates, LLC (“P/A”), Fund II, through Acadia-
In December 2005, Acadia-P/A acquired a 65,000 square
P/A Holding Company, LLC (“Acadia-P/A”), purchased 400 East
foot parking garage located at 10th Avenue in Manhattan,
Fordham Road in the Bronx, NY for $30,197, inclusive of clos-
New York. The purchase price was $5,310, including closing
ing and other related acquisition costs. The Company had
and other acquisition costs. Concurrent with the closing,
provided a bridge loan of $18,000 to Fund II in connection
Acadia-P/A obtained a $4,900 short term loan which
with this acquisition. Subsequent to the acquisition, Fund II
matures on March 31, 2006 and bears interest at LIBOR
repaid this loan from the Company with $18,000 of proceeds
plus 125 basis points.
from a new loan from a bank which bears interest at LIBOR
plus 175 basis points and matures November 2007. On Febru-
ary 25, 2005, Acadia-P/A purchased a parcel of land adjacent
to 400 E. Fordham Road for $867, inclusive of closing and
related acquisition costs.
On October 1, 2004, Acadia-P/A entered into a 95-year
ground lease to redevelop a 16-acre site in Pelham Manor,
Westchester County, New York.
On April 6, 2005, Acadia-P/A purchased a 140,000 square
foot building located in the Washington Heights section of
Manhattan, NY. The building was acquired for a purchase
price of $25,000. In September 2005, Acadia-P/A obtained
a mortgage loan of $19,000 secured by this property which
requires monthly payments of interest only at a fixed inter-
est rate of 5.26% and matures September 2007.
Also in December 2005, Acadia-P/A acquired the remaining
40-year term of a leasehold interest on land located at Lib-
erty Avenue in Queens, New York for $308.
During the year of 2005, Fund II drew down a total of
$24,400 (net of $10,000 of repayments) under an existing
subscription credit facility, which bears interest at LIBOR plus
75 basis points. The line proceeds were utilized for various
acquisitions during the year of 2005.
The Company accounts for its investment in Fund II using
the equity method. Summary financial information of Fund
II and the Company’s investment in and share of income
from Fund II as follows:
During July 2005, Fund II, in conjunction with its partners in
Balance Sheets
the Retailer Controlled Property Venture, invested $1,000 for
Assets:
a 50% interest in a leasehold located in Rockville, Maryland.
On August 5, 2005, Acadia-P/A purchased 260 East 161st
Rental property, net
Other assets
Street in the Bronx, NY for $49,374, inclusive of closing and
Total assets
other related acquisition costs. Concurrent with the closing,
Acadia-P/A obtained a short term loan of $12,066 which
bears interest at LIBOR plus 150 basis points and matures
March 2006.
On November 3, 2005, Fund II acquired a 36-year ground
lease interest for a 112,000 square foot building located at
Oakbrook Center in the Chicago Metro Area for $6,906,
including closing and other acquisition costs. The term of
the ground lease expires in July 2017 with three 10-year
options. The current tenant’s lease expires in October 2006
Liabilities and partners’ equity
Mortgage notes payable
Other liabilities
Partners’ equity
Total liabilities and
partners’ equity
December 31,
2005
2004
$ 117,389
$ 29,058
16,662
4,434
$ 134,051
$ 33,492
$ 78,366
$ 18,000
7,717
47,968
321
15,171
$ 134,051
$ 33,492
Company’s investment in Fund II
$ 9,328
$ 2,760
Acadia Realty Trust 2005 Annual Report 64
Notes to Consolidated Statements continued
Period from
June 15, 2004
Year ended
(inception) to
December 31, December 31,
2005
2004
Statements of Operations
Total revenue
$ 4,685
$ 885
Operating and other expenses
Management and other fees
Interest expense
Depreciation and amortization
Minority interest
Equity in earnings of
unconsolidated partnership
2,388
4,286
2,124
1,972
(65)
318
935
2,039
262
248
(27)
L.L.C. (“Levitz SL”), the owner of 2.5 million square feet of fee
and leasehold interests in 30 locations (the “Properties”), the
majority of which are currently leased to Levitz Furniture
Stores. Klaff Realty L.P. (“Klaff”) is a managing member of
Levitz SL. The Preferred Equity receives a return of 10%, plus a
minimum return of capital of $2,000 per annum. At the end
of 12 months, the rate of return will be reset to the six-
month LIBOR plus 644 basis points. The Preferred Equity is
redeemable at the option of Levitz SL at any time, although
if redeemed during the first 12 months, the redemption price
is equal to the outstanding amount of the Preferred Equity,
plus the return calculated for the remainder of the 12-month
period. In October 2005, Levitz Furniture filed for bankruptcy
0
under Chapter 11. The Company has a preferred equity
Net loss
Company’s share of
net loss1
$ (6,338)
$ (2,572)
$ (390)
$
(93)
1The Company’s pro-rata share of net income is before Management
and other fees as these amounts are paid to the Company.
Retailer Controlled Property Venture
On January 27, 2004, the Company entered into the Retailer
Controlled Property Venture (“RCP Venture”) with Klaff
Realty, L.P. (“Klaff”) and Klaff’s long-time capital partner
Lubert-Adler Management, Inc. for the purpose of making
investments in surplus or underutilized properties owned
by retailers. On September 2, 2004, affiliates of Fund I and
Fund II, through newly-formed limited liability companies,
invested, on a nonrecourse basis, in the acquisition of
Mervyn’s through the RCP Venture, which, as part of an
investment consortium of Sun Capital Partners, Inc. and Cer-
investment of $19,000 at December 31, 2005. Levitz was in
arrears in minimum return of capital by $0.5 million. This
investment was not made based on Levitz remaining as a
tenant, but rather based on the underlying value of the real
estate, which management believes is sufficient to recover
our equity investment and the return attributable thereto.
Accordingly, no reserve is required at December 31, 2005.
Note 5i
Deferred Charges
Deferred charges consist of the following as of
December 31, 2005 and 2004:
December 31,
2005
2004
Deferred financing costs
$ 6,537
$ 7,263
berus Capital Management L.P., acquired Mervyn’s from Tar-
Deferred leasing and other costs
get Corporation. The total acquisition price was $1,175,000,
with such affiliates’ combined $23,520 share of the invest-
ment divided equally between them. The Company’s share
of the acquisition totaled $4,965. During the year ended
December 31, 2005, affiliates of Funds I and II contributed an
Accumulated amortization
20,815
16,889
27,352
24,152
(11,472)
(11,528)
$15,880
$ 12,624
additional total of $1,040 into the Mervyn’s investment, of
Note 6i
which the Company’s share was $220. During the year ended
December 31, 2005, the Company recognized $5,793 of
income from the Mervyn’s investment representing its share
of net income from this investment. In addition, the Com-
pany recognized $979 as a result of its 20% carried interest
in the Mervyn’s investment, which is included in Manage-
ment Fee Income in the Consolidated Statements of Income.
Preferred Equity Investment
In March of 2005, the Company invested $20,000 in a pre-
ferred equity position (“Preferred Equity”) with Levitz SL,
Mortgage Loans
At December 31, 2005, mortgage notes payable aggregated
$238,448 and were collateralized by 20 properties and related
tenant leases. Interest rates ranged from 5.0% to 7.6%. Mort-
gage payments are due in monthly installments of principal
and/or interest and mature on various dates through 2016.
Certain loans are cross-collateralized and cross-defaulted.
The loan agreements contain customary representations,
covenants and events of default. Certain loan agreements
require the Company to comply with certain affirmative and
Acadia Realty Trust 2005 Annual Report
65
negative covenants, including the maintenance of certain
On August 31, 2005, the company closed on a $17,600 loan,
debt service coverage and leverage ratios.
which bears interest at a fixed rate of 4.98%. This loan, which
On February 25, 2005, the Company drew down $20,000 under
an existing revolving facility, which bears interest at LIBOR plus
150 basis points. The proceeds from this drawdown were uti-
lized for the Preferred Equity investment (Note 4).
During April 2005, the company borrowed $7,400 under an
existing secured revolving facility.
matures September 2015, requires the payment of interest
only until October 2010, and thereafter interest and principal
based on 30-year amortization. The proceeds from this loan
were in part used to pay down $15,000 on an existing line.
On October 17, 2005, the Company closed on a $12,500 loan,
which bears interest at a fixed rate of 5.12%. This loan, which
matures November 2015, requires the payment of interest
On May 26, 2005, the Company closed on a $65,000 cross-
only until November 2008, and thereafter interest and prin-
collateralized revolving facility which is collateralized by five
cipal until maturity. The proceeds from this loan were in part
of the Company’s properties. The facility bears interest at
used to pay down $10,000 on the aforementioned $65,000
LIBOR plus 130 basis points and matures June 1, 2010. At
revolving facility.
closing, the lender advanced $12,000, of which $7,400 was
used to refinance an existing facility with the same lender.
On June 27, 2005, an additional $20,000 was drawn on this
line. On October 21, 2005, $10,000 was repaid on this line
resulting in $22,000 outstanding under this facility as of
December 31, 2005.
On December 9, 2005, the Company closed on a $34,600
loan, which bears interest at a fixed rate of 5.53%. This loan,
which matures January 2016, requires the payment of inter-
est only until January 2010, and thereafter interest and prin-
cipal until maturity.
Acadia Realty Trust 2005 Annual Report 66
Notes to Consolidated Statements continued
The following table summarizes the Company’s mortgage indebtedness (exclusive of mortgage debt of discontinued opera-
tions) as of December 31, 2005 and 2004:
DECEMBER 31,
2005
2004
Interest Rate at
December 31, 2005
Properties
Monthly
Maturity
Encumbered
Payment Terms
Mortgage notes payable – variable-rate
Washington Mutual Bank, FA
Bank of America, NA
Bank of America, NA
Bank of America, NA
Bank of America, NA
Interest Rate Swaps
Total variable-rate debt
Mortgage notes payable – fixed-rate
Bank of America, NA
RBS Greenwich Capital
RBS Greenwich Capital
SunAmerica Life Insurance Company
RBS Greenwich Capital
RBS Greenwich Capital
Bear Stearns Commercial Mortgage, Inc.
Fleet National Bank — Interest Rate
Interest Rate Swaps
Total fixed-rate debt
Notes:
(1) Bradford Towne Centre
Ledgewood Mall
(2) Branch Shopping Center
Abington Towne Center
Methuen Shopping Center
$ 29,131
$ 29,900
5.89% (LIBOR + 1.50%)
44,485
10,082
8,338
22,000
44,485
5.79% (LIBOR + 1.40%)
10,252
5.79% (LIBOR + 1.40%)
8,473
5.79% (LIBOR + 1.40%)
—
5.69% (LIBOR + 1.30%)
04/01/11
06/29/12
06/29/12
12/01/08
06/01/10
(92,376)
(86,156)
21,660
6,954
15,882
15,000
15,894
12,936
17,600
12,500
34,600
16,062
7.55%
15,000
5.64%
16,000
5.19%
13,189 6.46%
— 6.46%
— 6.46%
— 6.46%
92,376
86,156
5.77%
216,788
146,407
$238,448
$ 153,361
01/01/11
09/06/14
06/01/13
07/01/07
09/06/15
11/06/15
01/01/16
(16)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(13)
(13)
(17)
(13)
(12)
(15)
(13)
(13)
(18)
(19)
(6) GHT Apartments/Colony
(17) Interest only monthly
(7) New Loudon Center
(18) Interest only until 11/08; monthly principal
(8) 239 Greenwich Avenue
(9) Merrillville Plaza
and interest thereafter
(19) Interest only until 1/10; monthly principal
and interest thereafter
(3) Smithtown Shopping Center
(10) Crescent Plaza
(4) Soundview Marketplace; there is additional
(11) Pacesetter Park Shopping Plaza
capacity of $5,000 on this facility
(5) Bloomfield Town Square
Walnut Hill Plaza
Hobson West Plaza
Marketplace of Absecon
Village Apartments
There is additional capacity of $43,000 on
this facility
(12) Elmwood Park Shopping Center
(13) Monthly principal and interest
(14) Annual principal and monthly interest
(15) Interest only until 5/05; monthly principal
and interest thereafter
(16) Maturing between 10/1/06 and 1/1/11
Acadia Realty Trust 2005 Annual Report
67
The scheduled principal repayments of all mortgage indebt-
Shares. The repurchased shares are reflected as a reduction
edness as of December 31, 2005 are as follows:
of par value and additional paid-in capital.
2006
2007
2008
2009
2010
Thereafter
$ 2,141
16,383
12,447
5,328
38,445
163,704
$238,448
Note 7i
Shareholders’ Equity and
Minority Interests
Minority Interests
Minority interest in the Operating Partnership represents (i)
the limited partners’ interest of 653,360 and 392,255 Common
OP Units at December 31, 2005 and 2004, respectively, (ii)
884 and 1,580 Series A Preferred OP Units at December 31,
2005 and 2004, respectively, with a nominal value of $1,000
per unit, which are entitled to a preferred quarterly distribu-
tion of the greater of (a) $22.50 per unit (9% annually) per
Series A Preferred OP Unit or (b) the quarterly distribution
attributable to a Series A Preferred OP Unit if such unit were
converted into a Common OP Unit, and (iii) 4,000 Series B
Preferred OP Units at both December 31, 2005 and 2004 with
Common Shares
In March of 2004, a secondary public offering was completed
a nominal value of $1,000 per unit, which are entitled to a
preferred quarterly distribution of the greater of (a) $13.00
for a total of 5,750,000 Common Shares. The selling share-
(5.2% annually) per unit or (b) the quarterly distribution
holders, Yale University and its affiliates (“Yale”) and Ross
attributable to a Series B Preferred OP Unit if such unit were
Dworman, a former trustee, sold 4,191,386 and 1,558,614
converted into a Common OP Unit. Minority interests in
Common Shares, respectively. The Company did not sell any
majority-owned partnerships represent third-party interests
Common Shares in the offering and did not receive any pro-
in three partnerships in which the Company has a majority
ceeds from the offering.
ownership position.
During November 2004, the Company issued 1,890,000
During July 2005, the Company issued to a third party 11,105
Common Shares (the “Offering”). The $28,312 in proceeds
Restricted Common OP Units valued at $18.01 per unit in
from the Offering, net of related costs, was used to retire
connection with the purchase of 4343 Amboy Road. The
above-market, fixed-rate indebtedness as well as to invest
holder of the Common OP Units was restricted from selling
in real estate assets. Yale and Kenneth F. Bernstein, the
these for six months from the date of the transaction.
Company’s Chief Executive Officer, also sold 1,000,000, and
110,000 Common Shares, respectively, in connection with
this transaction. Mr. Bernstein sold 110,000 Common Shares
in connection with his exercise of options to purchase
150,000 Common Shares.
In February 2005, the Company issued $4,000 (250,000
Restricted Common OP Units valued at $16.00 each) of
Restricted Common OP Units to Klaff in consideration for
the 25% balance of certain management contract rights as
well as the rights to 25% of certain potential future revenue
In October 2005, the Board of Trustees approved a resolution
streams. This followed the acquisition of 75% of the man-
permitting one of its institutional shareholders, which at the
agement contract rights and 75% of certain potential future
time owned approximately 3.8% of the Company’s outstand-
revenue streams from Klaff in January 2004 as reflected
ing Common Shares, to acquire additional shares through
below. The Restricted Common OP Units are convertible into
open market purchases. This waiver of the Company’s share
the Company’s Common Shares on a one-for-one basis after
ownership limitation permitted this shareholder to acquire
a five-year lock-up period. $1,116 of the purchase price was
up to an additional 6% of the Company’s shares through
allocated to investment in management contracts in the
December 31, 2005, or an aggregate of up to 9.8% of the
consolidated balance sheet and is being amortized over the
Company’s Common Shares.
Through December 31, 2005, the Company had repurchased
2,051,605 Common Shares at a total cost of $11,650 (of which
2,009,509 of these Common Shares have been subsequently
estimated remaining life of the contracts. The remainder of
the purchase price has been allocated to deferred charges
in the consolidated balance sheet and will be allocated to
future revenue streams as identified.
reissued) under its share repurchase program that allows for
During 2005 and 2004, various limited partners converted a
the repurchase of up to $20,000 of its outstanding Common
total of 746,762 and 2,058,804 Common OP Units into Com-
mon Shares on a one-for-one basis, respectively. Mr. Dworman,
Acadia Realty Trust 2005 Annual Report 68
Notes to Consolidated Statements continued
a trustee of the Company, received 34,841 of Common OP
The Company also earns fees in connection with its rights
Units through various affiliated entities during 2003 (Note 8).
to provide asset management, leasing, disposition, develop-
The Series A Preferred OP Units were issued on November 16,
1999 in connection with the acquisition of all the partnership
interests of the limited partnership which owns the Pace-
setter Park Shopping Center. Certain Series A Preferred OP
Unit holders converted 696 Series A Preferred OP Units into
92,800 Common OP Units and then into Common Shares
during 2005. The Series A Preferred OP Units are currently
convertible into Common OP Units based on the stated
ment and construction services for an existing portfolio of
retail properties and/or leasehold interests in which Klaff, a
preferred OP unit holder, has an interest. Net fees earned by
the Company in connection with this portfolio were $3,602
and $885 for the years ended December 31, 2005 and 2004,
respectively. These amounts are net of the payment of sub-
management fees to Klaff of $303 and $1,591 for the years
ended December 31, 2005 and 2004, respectively.
value divided by $7.50. After the seventh anniversary follow-
The Company managed one property in which a major
ing their issuance, either the Company or the holders can
shareholder of the Company had an ownership interest
call for the conversion of the Series A Preferred OP Units at
and earned a management fee of 3% of tenant collections.
the lesser of $7.50 or the market price of the Common
Management fees earned by the Company under this con-
Shares as of the conversion date.
tract aggregated $142 for the year ended December 31, 2004.
The Series B Preferred OP Units were issued to Klaff Realty LP
(“Klaff”) in January 2004 in consideration for the acquisition
of certain management contract rights. The Preferred OP Units
are convertible into Common OP Units based on the stated
value of $1,000 divided by $12.82 at any time. Additionally,
In addition, the Company earned leasing commission of
$157 related to this property for the year ended December 31,
2004. In connection with the sale of the property on July 12,
2004, the management contract was terminated and the
Company earned a $75 disposition fee.
Klaff may redeem them at par for either cash or Common
Lee Wielansky, the Lead Trustee of the Company, was paid
OP Units after the earlier of the third anniversary of their
a consulting fee of $100 for both years ended December 31,
issuance, or the occurrence of certain events including a
2005 and 2004.
change in the control of the Company. Finally, after the fifth
anniversary of the issuance, the Company may redeem the
Preferred OP Units and convert them into Common OP Units
at market value as of the redemption date.
Note 8i
Related Party Transactions
In February 2005, the Company issued $4,000 of Restricted
Common OP Units to Klaff for the balance of certain man-
agement contract rights as well as the rights to certain
potential future revenue streams (Note 7).
On March 19, 2004, Ross Dworman, a former trustee of the
Company, and certain entities controlled by Mr. Dworman
converted 1,000,000 share options and 548,614 OP Units
held by them in connection with a secondary public offering.
Included in the Common OP Units converted to Common
Shares during 2003 were 2,300 Common OP Units converted
by Mr. Dworman who then transferred them to a charitable
foundation in accordance with a pre-existing arrangement.
During the year ended December 31, 2004, Kenneth F. Bern-
stein, President and Chief Executive Officer, and certain
trustees of the Company exercised 400,000 and 20,000
In March 2005, the Company completed a $20,000 Preferred
options to purchase Common Shares, respectively.
Equity Investment with Levitz SL, of which Klaff, a common
and preferred OP unit holder, is the managing member.
Note 9i
The Company earns certain management and service fees
in connection with its investment in Fund I and Fund II
Tenant Leases
Space in the shopping centers and other retail properties is
(Note 4). Such fees earned by the Company aggregated
leased to various tenants under operating leases that usu-
$7,890, $3,504 and $1,689 for the years ended December 31,
ally grant tenants renewal options and generally provide for
2005, 2004 and 2003, respectively.
additional rents based on certain operating expenses as well
as tenants’ sales volume.
69
Acadia Realty Trust 2005 Annual Report
Minimum future rentals to be received under non-can-
from time to time on a fully diluted basis. However, not more
cellable leases for shopping centers and other retail proper-
than 4,000,000 of the Common Shares in the aggregate
ties as of December 31, 2005 are summarized as follows:
may be issued pursuant to the exercise of options and no
2006
2007
2008
2009
2010
Thereafter
$ 46,281
43,456
38,619
34,344
29,229
184,869
$ 376,798
participant may receive more than 5,000,000 Common Shares
during the term of the 1999 Plan. Options are granted by
the Share Option Plan Committee (the “Committee”), which
currently consists of two non-employee Trustees, and will
not have an exercise price less than 100% of the fair market
value of the Common Shares and a term of greater than 10
years at the grant date. Vesting of options is at the discretion
Minimum future rentals above include a total of $4,108 for
of the Committee with the exception of options granted
three tenants (with four leases), which have filed for bank-
to non-employee Trustees, which vest in five equal annual
ruptcy protection. None of these leases have been rejected
installments beginning on the date of grant.
nor affirmed. During the years ended December 31, 2005,
2004 and 2003, no single tenant collectively accounted for
more than 10% of the Company’s total revenues.
Note 10i
Lease Obligations
The Company leases land at five of its shopping centers,
The 1999 Plan also provides for the granting of share appre-
ciation rights, restricted shares and performance units/shares.
Share appreciation rights provide for the participant to receive,
upon exercise, cash and/or Common Shares, at the discretion
of the committee, equal to the excess of the market value
of the Common Shares at the exercise date over the market
value of the Common Shares at the Grant Date. The Commit-
which are accounted for as operating leases and generally
tee will determine the award and restrictions placed on
provide the Company with renewal options. Ground rent
restricted shares, including the dividends thereon and the
expense was $796, $791 and $780 for the years ended
term of such restrictions. The Committee also determines
December 31, 2005, 2004 and 2003, respectively. The leases
the award and vesting of performance units and performance
terminate during during 2008 to 2066. Three of these leases
shares based on the attainment of specified performance
provides the Company with options to renew for additional
objectives of the Company within a specified performance
terms aggregating from 20 to 44 years. The Company leases
period. Through December 31, 2005, no share appreciation
space for its White Plains corporate office for a term expiring
rights or performance units/shares have been awarded.
in 2010. Office rent expense under this lease was $412, $239
and $242 for the years ended December 31, 2005, 2004 and
2003, respectively. Future minimum rental payments
required for leases having remaining non-cancelable lease
terms are as follows:
2006
2007
2008
2009
2010
Thereafter
Note 11i
$ 1,792
1,848
1,930
1,939
1,731
28,974
$38,214
Share Incentive Plan
During 1999, the Company adopted the 1999 Share Incentive
Plan (the “1999 Plan”), which replaced both the 1994 Share
Option Plan and the 1994 Non-Employee Trustees’ Share
Option Plan. The 1999 Plan authorizes the issuance of options
equal to up to 8% of the total Common Shares outstanding
During 2003, the Company adopted the 2003 Share Incen-
tive Plan (the “2003 Plan”) because no Common Shares
remained available for future grants under the 1999 Plan.
The 2003 Plan provides for the granting of options, share
appreciation rights, restricted shares and performance units
(collectively, “Awards”) to officers, employees and trustees of
the Company and consultants to the Company. The 2003
Plan is generally identical to the 1999 Plan, except that the
maximum number of Common Shares that the Company
may issue pursuant to the 2003 Plan is four percent of the
Common Shares outstanding from time to time on a fully
diluted basis. However, no participant may receive more than
1,000,000 Common Shares during the term of the 2003 Plan
with respect to Awards. Pursuant to the 2003 Plan, non-
employee Trustees receive an automatic grant of 3,000
options following each Annual Meeting of Shareholders.
As of December 31, 2005, the Company has 437,242 options
outstanding to officers and employees. These fully vested
options are for 10-year terms from the grant date and vested
Acadia Realty Trust 2005 Annual Report 70
Notes to Consolidated Statements continued
in three equal annual installments which began on the grant
For the years ended December 31, 2005, 2004 and 2003, $1,029,
date. In addition, 40,000 options have been issued to non-
$764 and $410, respectively, were recognized in compensa-
employee Trustees of which 13,400 options were vested as
tion expense related to Restricted Share grants. Unearned
of December 31, 2005.
compensation of $3,541 as of December 31, 2005 will be rec-
During 2005, the Company issued a total of 109,826 restricted
ognized in expense as such shares vest.
Common Shares (“Restricted Shares”) to executive officers
Effective January 1, 2002, the Company adopted the fair
(“Officers”) and 23,642 Restricted Shares (net of subsequent
value method of recording stock-based compensation
forfeitures) to certain employees (“Employees”) of the Com-
contained in SFAS No. 123, “Accounting for Stock-Based Com-
pany. In general, the Restricted Shares carry all the rights of
pensation.” As such, stock-based compensation awards are
Common Shares including voting and dividend rights, but
expensed over the vesting period based on the fair value at
may not be transferred, assigned or pledged until the Recipi-
the date the stock-based compensation was granted.
ents have a vested non-forfeitable right to such shares. Vest-
ing with respect to the Restricted Shares issued to Officers,
which is subject to the recipients’ continued employment
with the Company through the applicable vesting dates, is
ratably over four years commencing on the first anniversary
of the Grant Date and each of the next three anniversaries
thereafter. In addition, vesting on 50% of these Restricted
Shares is also subject to certain total shareholder returns
on the Company’s Common Shares. Vesting with respect to
the Restricted Shares issued to Employees, which is subject
to the Recipients’ continued employment with the Company
through the applicable vesting dates, is ratably over five years
commencing on the Grant Date and each of the next four
anniversaries thereafter. In addition, vesting on 25% of these
Restricted Shares is also subject to certain total shareholder
returns on the Company’s Common Shares.
The Company has used the Binomial method for 2005 and
the Black-Scholes option-pricing model in previous years for
purposes of estimating the fair value in determining com-
pensation expense for options granted for the years ended
December 31, 2005, 2004 and 2003. The Company has also
used this model for the pro forma information regarding net
income and earnings per share as required by SFAS No. 123
for options issued for the year ended December 31, 2001, as if
the Company had also accounted for these employee stock
options under the fair value method. The fair value for the
options issued by the Company was estimated at the date of
the grant using the following weighted-average assumptions
resulting in:
Years Ended December 31,
2005
2004
2003
4.0%
4.0%
4.2%
4.2%
4.4%
5.8%
7.5 yrs.
7.5 yrs.
10.0 yrs.
The total value of the above Restricted Share awards on the
date of grant was $2,179 which will be recognized in compen-
Risk-free interest rate
sation expense over the vesting period.
For the year ended December 31, 2004, 126,853 Restricted
Dividend yield
Expected life
Shares (net of forfeitures) were issued pursuant to the 2003
Expected volatility
18.0%
18.0%
18.0%
Plan. The total value of the Restricted Share awards on the
date of grant was $1,586 which will be recognized in expense
over the vesting period. No awards of share appreciation
rights or performance units/shares were granted for the
years ended December 31, 2005, 2004 and 2003.
Fair value at date of grant
(per option)
$ 2.57
$ 2.17
$0.82
Acadia Realty Trust 2005 Annual Report
71
Changes in the number of shares under all option arrangements are summarized as follows:
Outstanding at beginning of year
Granted
Option price per share granted
Cancelled
Exercisable at end of period
Settled1
Exercised
Expired
Outstanding at end of year
Option prices per share outstanding
Years Ended December 31,
2005
464,650
69,296
$16.35
—
437,242
—
56,704
—
477,242
2004
2,095,150
19,000
$12.55–$14.13
—
446,850
39,500
1,610,000
—
464,650
2003
2,472,400
8,000
$9.11-$11.66
—
2,082,750
385,000
250
—
2,095,150
$5.75–$16.35
$5.75–$14.13
$4.89–$11.66
1Pursuant to the 1999 Plan these options were settled and did not result in the issuance of any additional Common Shares.
As of December 31, 2005, the outstanding options had a weighted average exercise price of $6.61 and a weighted average
remaining contractual life of approximately 5.4 years.
Note 12i
Employee Stock Purchase and
Deferred Share Plan
In 2003, the Company adopted the Acadia Realty Trust
Employee Stock Purchase Plan (the “Purchase Plan”), which
allows eligible employees of the Company to purchase Com-
mon Shares through payroll deductions. The Purchase Plan
provides for employees to purchase Common Shares on a
quarterly basis at a 15% discount to the closing price of the
Company’s Common Shares on either the first day or the
last day of the quarter, whichever is lower. The amount of
the payroll deductions will not exceed a percentage of the
participant’s annual compensation that the Committee
establishes from time to time, and a participant may not
purchase more than 1,000 Common Shares per quarter.
Compensation expense will be recognized by the Company
date. The Share Units are equivalent to a Common Share
on a one-for-one basis and carry a dividend equivalent right
equal to the dividend rate for the Company’s Common shares.
The deferral period is determined by each of the participants
and generally terminates after the cessation of the partici-
pant’s continuous service with the Company, as defined in the
agreement. In December 2004, optionees exercised 346,000
options pursuant to the Deferred Share Election and tendered
155,513 Common Shares in consideration of the option exercise
price. In 2004 the Company issued 155,513 Common Shares to
optionees and 190,487 Share Units. During 2005 there were no
additional Shared Units contributed to the plan.
Note 13i
Employee 401(k) Plan
The Company maintains a 401(k) plan for employees under
to the extent of the above discount to the average closing
which the Company currently matches 50% of a plan partici-
price of the Common Shares with respect to the applicable
pant’s contribution up to 6% of the employee’s annual salary.
quarter. During 2005, 2004 and 2003, 6,412, 6,397 and 810
A plan participant may contribute up to a maximum of 15%
Common Shares, respectively, were purchased by Employees
of their compensation but not in excess of $14 for the year
under the Purchase Plan and the associated compensation
ended December 31, 2005. The Company contributed $128,
expense was $16, $15 and $1 respectively.
$109, and $110 for the years ended December 31, 2005, 2004
In August of 2004, the Company adopted a Deferral and
Distribution Election pursuant to the 1999 Share Incentive
Plan and 2003 Share Incentive Plan, whereby the participants
elected to defer receipt of 190,487 Common Shares (“Share
Units”) that would otherwise be issued upon the exercise of
certain options. The payment of the option exercise price was
made by tendering Common Shares that the participants
owned for at least six months prior to the option exercise
and 2003, respectively.
Note 14i
Dividends and Distributions Payable
On November 8, 2005, the Company declared a cash divi-
dend for the quarter ended December 31, 2005 of $0.185 per
Common Share. The dividend was paid on January 13, 2006
to shareholders of record as of December 31, 2005.
Acadia Realty Trust 2005 Annual Report 72
Notes to Consolidated Statements continued
Note 15i
Federal Income Taxes
The Company has elected to qualify as a REIT in accordance
with the Internal Revenue Code (the “Code”) and intends at
all times to qualify as a REIT under Sections 856 through
860 of the Internal Revenue Code of 1986, as amended. To
qualify as a REIT, the Company must meet a number of orga-
nizational and operational requirements, including a require-
ment that it currently distribute at least 90% of its annual
REIT taxable income to its shareholders. As a REIT, the Com-
pany generally will not be subject to corporate Federal income
tax, provided that distributions to its shareholders equal at
least the amount of its REIT taxable income as defined under
the Code. As the Company distributed sufficient taxable
income for the years ended December 31, 2005,2004 and
2003 no U.S. Federal income or excise taxes were incurred.
If the Company fails to qualify as a REIT in any taxable year,
it will be subject to Federal income taxes at the regular cor-
porate rates (including any applicable alternative minimum
tax) and may not be able to qualify as a REIT for the four
subsequent taxable years. Even though the Company quali-
fies for taxation as a REIT, the Company is subject to certain
state and local taxes on its income and property and Federal
income and excise taxes on any undistributed taxable income.
In addition, taxable income from non-REIT activities managed
through the Company’s TRS’s are subject to Federal, state and
local income taxes.
The primary difference between the GAAP and tax reported
amounts of the Company’s assets and liabilities is a higher
GAAP basis in its real estate properties. This is primarily the
result of assets acquired as a result of property contributions
in exchange for OP Units .
Reconciliation between GAAP Net Income and Federal Taxable Income
The following table reconciles GAAP net income to taxable income for the years ended December 31, 2005, 2004 and 2003:
GAAP net Income
Less: GAAP net income of TRS
2005
(estimated)
$20,626
1,349
GAAP net income from REIT operations1
Book/tax difference in depreciation and amortization
Book/tax difference on exercise of options
to purchase Common Shares
Book/tax difference on capital transactions
Other book/tax differences, net
19,277
5,163
(26)
(50)
(748)
2004
(actual)
$19,585
—
19,585
3,438
(8,970)
(1,354)
1,953
2003
(Actual)
$7,853
—
7,853
3,828
—
—
(326)
REIT taxable income before dividends paid deduction
1All adjustments to GAAP net income from REIT operations are net of amounts attributable to minority interest and TRS.
$14,652
$23,616
$11,355
Characterization of Distributions:
The Company has determined that the cash distributed to
Taxable REIT Subsidiaries (“TRS”)
Income taxes have been provided for on the asset and liabil-
the shareholders is characterized as follows for Federal
ity method as required by SFAS No. 109. The Company’s TRS
income tax purposes:
Ordinary income
Section 1250 gain
Return of capital
Years Ended December 31,
2005
95%
3%
2%
2004
59%
32%
9%
2003
100%
—
—
100%
100%
100%
income and provision for income taxes for the year ended
December 31, 2005 is summarized as follows:
TRS income before income taxes
Less provision for income taxes:
Federal
State and Local
Total provision for income taxes
GAAP net income TRS
2005
(Estimated)
$ 3,458
1,601
508
2,109
$ 1,349
Acadia Realty Trust 2005 Annual Report
73
The Company has provided a full valuation allowance against
mortgage notes payable are $235,297 and $153,612, respectively,
its deferred tax asset of $247 due to the current uncertainty
by discounting future cash payments utilizing a discount rate
of its realization and as such is not included in the accompa-
equivalent to the rate at which similar mortgage notes payable
nying Consolidated Balance Sheets at December 31, 2005.
would be originated under conditions then existing.
This deferred tax asset relates primarily to the differences in
the timing of the recognition of income/(deductions) and
gain/(loss) between the GAAP and tax basis of accounting
for (i) real estate joint ventures activities, (ii) capital transac-
tions and (iii) other deductible temporary differences.
The income tax provision differs from the amount computed
by applying the statutory federal income tax rate to taxable
income before income taxes as follows:
2005
$ 1,210
330
476
208
(115)
31
$ 2,140
Federal provision at statutory tax rate (35%)
State and local taxes, net of federal benefit
Tax effect of:
Permanent differences
Valuation allowance against
deferred tax asset
Utilization of loss and deduction
carry forwards
Other
Total provision for income taxes
Note 16i
Financial Instruments
Fair Value of Financial Instruments:
SFAS No. 107, “Disclosures About Fair Value of Financial
Instruments” requires disclosure on the fair value of financial
instruments. Certain of the Company’s assets and liabilities
are considered financial instruments. Fair value estimates,
methods and assumptions are set forth below.
Cash and Cash Equivalents, Restricted Cash, Cash in Escrow,
Rents Receivable, Notes Receivable, Prepaid Expenses, Other
Assets, Accounts Payable and Accrued Expenses, Dividends
and Distributions Payable, Due to Related Parties and Other
Liabilities. The carrying amount of these assets and liabilities
approximates fair value due to the short-term nature of
such accounts.
Derivative Instruments: The fair value of these instruments
is based upon the estimated amounts the Company would
receive or pay to terminate the contracts as of December 31,
2005 and 2004 and is determined using interest rate market
pricing models.
Mortgage Notes Payable: As of December 31, 2005 and 2004,
the Company has determined the estimated fair value of its
Derivative Financial Instruments:
SFAS No. 133, “Accounting for Derivative Instruments and
Hedging Activities,” as amended and interpreted, establishes
accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other
contracts, and for hedging activities. As required by SFAS 133,
the Company records all derivatives on the balance sheet at
fair value. The accounting for changes in the fair value of
derivatives depends on the intended use of the derivative
and the resulting designation. Derivatives used to hedge the
exposure to changes in the fair value of an asset, liability, or
firm commitment attributable to a particular risk, such as
interest rate risk, are considered fair value hedges. Derivatives
used to hedge the exposure to variability in expected future
cash flows, or other types of forecasted transactions, are
considered cash flow hedges.
For derivatives designated as fair value hedges, changes in
the fair value of the derivative and the hedged item related
to the hedged risk are recognized in earnings. For derivatives
designated as cash flow hedges, the effective portion of
changes in the fair value of the derivative is initially reported
in other comprehensive income (outside of earnings) and
subsequently reclassified to earnings when the hedged
transaction affects earnings, and the ineffective portion
of changes in the fair value of the derivative is recognized
directly in earnings. The Company assesses the effectiveness
of each hedging relationship by comparing the changes in
fair value or cash flows of the derivative hedging instrument
with the changes in fair value or cash flows of the designated
hedged item or transaction. For derivatives not designated
as hedges, changes in fair value are recognized in earnings.
As of December 31, 2005 and 2004, no derivatives were
designated as fair value hedges or hedges of net invest-
ments in foreign operations. Additionally, the Company
does not use derivatives for trading or speculative purposes
and currently does not have any derivatives that are not
designated as hedges.
The following table summarizes the notional values and fair
values of the Company’s derivative financial instruments as
of December 31, 2005. The notional value does not represent
exposure to credit, interest rate or market risks:
Acadia Realty Trust 2005 Annual Report 74
Notes to Consolidated Statements continued
Hedge
Type
LIBOR Swap
LIBOR Swap
LIBOR Swap
LIBOR Swap
LIBOR Swap
LIBOR Swap
Interest rate swap receivable
LIBOR Swap
LIBOR Swap
Interest rate swap liability
Notional
Value
$ 36,778
20,000
15,149
11,719
8,730
4,640
Rate
4.35%
4.53%
4.32%
4.11%
4.47%
4.71%
Forward
Interest
Start Date Maturity
N/A
N/A
N/A
N/A
N/A
10/2/06
1/1/11
10/1/06
1/1/07
1/1/07
1/1/07
1/1/10
$ 11,410
8,434
4.90%
5.14%
10/2/06
6/1/07
10/1/11
3/1/12
Fair
Value
$ 615
24
62
72
31
5
$ 809
$ (59)
(121)
$ (180)
As of December 31, 2005, the derivative instruments were
The Company’s interest rate hedges are designated as cash
reported at fair value as reflected above. The interest rate
flow hedges and hedge the future cash outflows on mort-
swap receivable is included in Other Assets in the Consoli-
gage debt. Interest rate swaps that convert variable payments
dated Balance Sheets. As of December 31, 2004, the deriva-
to fixed payments, such as those held by the Company, as
tive instruments were reported at fair value as a derivative
well as interest rate caps, floors, collars, and forwards are cash
instrument liability of $2,136. As of December 31, 2005 and
flow hedges. The unrealized gains and losses in the fair value
2004, unrealized losses totaling $12 and $3,219, respectively,
of these hedges are reported on the balance sheet with a
represented the fair value of the aforementioned derivatives,
corresponding adjustment to either accumulated other
of which $12 and $3,180, respectively, were reflected in accu-
comprehensive income or earnings depending on the type
mulated other comprehensive loss, and $0 and $39, respec-
of hedging relationship. For cash flow hedges, offsetting gains
tively, as a reduction of minority interest in the Operating
and losses are reported in accumulated other comprehensive
Partnership. For the years ended December 31, 2004 and
income. Over time, the unrealized gains and losses held in
2003, the Company recorded in interest expense an unreal-
accumulated other comprehensive income will be reclassified
ized loss of $37 and unrealized gain of $51, respectively, due
to earnings. This reclassification occurs over the same time
to partial ineffectiveness on one of the swaps which was
period in which the hedged items affect earnings.
terminated in November 2004. The ineffectiveness resulted
from differences between the derivative notional and the
principal amount of the hedged variable rate debt.
Acadia Realty Trust 2005 Annual Report
75
Note 17i
Earnings Per Common Share
Basic earnings per share was determined by dividing the
applicable net income to common shareholders for the year
by the weighted average number of Common Shares out-
standing during each year consistent with SFAS No. 128.
Diluted earnings per share reflects the potential dilution
that could occur if securities or other contracts to issue
Common Shares were exercised or converted into Common
Shares or resulted in the issuance of Common Shares that
then shared in the earnings of the Company. The following
table sets forth the computation of basic and diluted
earnings per share from continuing operations for the
periods indicated:
Numerator:
Income from continuing operations — basic earnings per share
$21,567
$ 13,516
$ 8,393
Years Ended December 31,
2005
2004
2003
Effect of dilutive securities:
Preferred OP Unit distributions
Numerator for diluted earnings per share
Denominator:
—
21,567
—
13,516
—
8,393
Weighted average shares — basic earnings per share
31,949
29,341
26,640
Effect of dilutive securities:
Employee stock options
Dilutive potential Common Shares
265
265
571
571
592
592
Denominator for diluted earnings per share
32,214
29,912
27,232
Basic earnings per share from continuing operations
$ 0.68
$ 0.46
$ 0.32
Diluted earnings per share from continuing operations
$ 0.67
$ 0.45
$ 0.31
The weighted average shares used in the computation of
basis. The income allocable to such units is allocated on this
basic earnings per share include unvested restricted shares
same basis and reflected as minority interest in the accom-
(Note 11) and Share Units (Note 12) that are entitled to receive
panying consolidated financial statements. As such, the
dividend equivalent payments. The effect of the conversion
assumed conversion of these units would have no net impact
of Common OP Units is not reflected in the above table as
on the determination of diluted earnings per share.
they are exchangeable for Common Shares on a one-for-one
Acadia Realty Trust 2005 Annual Report 76
Notes to Consolidated Statements continued
Note 18i
Summary of Quarterly Financial Information (unaudited)
The quarterly results of operations of the Company for the years ended December 31, 2005 and 2004 are as follows:
Revenue
Income from continuing operations
Income (loss) from discontinued operations
Net income
Net income per Common Share — basic:
Income from continuing operations
Income (loss) from discontinued operations
Net income
Net income per Common Share — diluted:
Income from continuing operations
Income (loss) from discontinued operations
Net income
Cash dividends declared per Common Share
Weighted average Common Shares outstanding:
March 31
$19,613
4,360
85
4,445
$ 0.14
0.00
$ 0.14
$ 0.14
0.00
$ 0.14
$ 0.1725
June 30
$20,346
5,044
(699)
4,345
$ 0.16
(0.02)
$ 0.14
$ 0.16
(0.02)
$ 0.14
2005
September 30
December 31
Total For Year
$20,745
7,294
(69)
7,225
$ 0.23
(0.00)
$ 0.23
$ 0.22
(0.00)
$ 0.22
$22,614
4,869
(258)
4,611
$ 0.15
(0.01)
$ 0.14
$ 0.15
(0.01)
$ 0.14
$ 83,318
21,567
(941)
20,626
$ 0.68
0.03
$ 0.65
$ 0.67
(0.03)
$ 0.64
$0.1725
$ 0.1725
$ 0.185
$0.7025
Basic
Diluted
31,867,185
31,898,644
29,459,175
32,017,316
31,948,610
32,139,833
32,144,529
29,953,528
32,293,926
32,214,231
Revenue
Income(loss) from continuing operations
Income from discontinued operations
Net income
Net income per Common Share — basic:
Income from continuing operations
Income from discontinued operations
Net income
Net income per Common Share — diluted:
Income from continuing operations
Income from discontinued operations
Net income
March 31
$17,685
3,124
(274)
2,850
$
0.11
(0.01)
$ 0.10
$
0.11
(0.01)
$ 0.10
June 30
$17,466
3,966
(202)
3,764
$ 0.13
0.00
$ 0.13
$ 0.13
0.00
$ 0.13
2004
September 30
December 31
Total For Year
$18,087
$18,878
$ 71,657
3,097
(202)
2,895
$
$
0.11
0.00
0.11
$ 0.10
0.00
$ 0.10
3,329
6,747
10,076
$ 0.11
0.22
$ 0.33
$ 0.11
0.21
$ 0.32
13,516
6,069
19,585
$ 0.46
0.21
$ 0.67
$ 0.45
0.20
$ 0.65
Cash dividends declared per Common Share
$ 0.16
$ 0.16
$ 0.16
$0.1725
$0.6525
Weighted average Common Shares outstanding:
Basic
Diluted
27,890,065
29,333,184
29,459,175
27,431,982
29,340,992
28,763,751
29,793,310
29,953,528
28,305,567
29,912,405
Acadia Realty Trust 2005 Annual Report
77
Note 19i
Commitments and Contingencies
Under various Federal, state and local laws, ordinances and
regulations relating to the protection of the environment,
a current or previous owner or operator of real estate may
be liable for the cost of removal or remediation of certain
hazardous or toxic substances disposed, stored, generated,
released, manufactured or discharged from, on, at, under, or
in a property. As such, the Company may be potentially liable
for costs associated with any potential environmental reme-
diation at any of its formerly or currently owned properties.
The Company conducts Phase I environmental reviews with
respect to properties it acquires. These reviews include an
investigation for the presence of asbestos, underground
storage tanks and polychlorinated biphenyls (PCBs). Although
such reviews are intended to evaluate the environmental
condition of the subject property as well as surrounding
properties, there can be no assurance that the review con-
ducted by the Company will be adequate to identify environ-
mental or other problems that may exist. Where a Phase I
assessment is so recommended, a Phase II assessment was
conducted to further determine the extent of possible envi-
believe would have a material adverse impact on the Com-
pany’s financial position or results of operations. Manage-
ment is unaware of any instances in which it would incur
significant environmental costs if any or all properties were
sold, disposed of or abandoned. However, there can be no
assurance that any such non-compliance, liability, claim or
expenditure will not arise in the future.
For the year ended December 31, 2004, the Company accrued
a reserve for $730 related to flood damage incurred at one of
its properties. Under the terms of the Company’s insurance
policy, a maximum deductible of approximately $730 would
apply in the event the flood damage was the direct result of
a “named” storm. During the first quarter of 2005, the Com-
pany reduced the reserve by $480 due to the settlement of
the insurance claim.
The Company is involved in various matters of litigation aris-
ing in the normal course of business. While the Company is
unable to predict with certainty the amounts involved, the
Company’s management and counsel are of the opinion that,
when such litigation is resolved, the Company’s resulting lia-
bility, if any, will not have a significant effect on the Com-
pany’s consolidated financial position or results of operations.
ronmental contamination. In all instances where a Phase I
or II assessment has resulted in specific recommendations
Note 20i
for remedial actions, the Company has either taken or sched-
uled the recommended remedial action. To mitigate unknown
Subsequent Events
On January 4, 2006, the institutional investors of Fund I
risks, the Company has obtained environmental insurance
merged their 78% interest in the Brandywine Portfolio into
for most of its properties, which covers only unknown envi-
affiliates of GDC Properties Incorporated (“GDC”) in exchange
ronmental risks.
The Company believes that it is in compliance in all material
respects with all Federal, state and local ordinances and reg-
ulations regarding hazardous or toxic substances. Manage-
ment is not aware of any environmental liability that they
for cash. The Company merged its 22% share of the Brandy-
wine Portfolio into GDC in exchange for a 22% interest in
GDC. Prior to the closing of this transaction, the Company
provided $17.6 million of mortgage financing to GDC secured
by certain properties within the Brandywine Portfolio.
Acadia Realty Trust 2005 Annual Report 78
Schedule III: Real Estate And Accumulated Depreciation
December 31, 2005
Encum-
brances
Land
Buildings &
Improvements
Costs
capitalized
Subsequent to
Acquisition
Land
Buildings &
Improvements
Total
Accumulated
Depreciation
Date of
Acquisition (a)
Construction(c)
$ 17,600
$ 1,147
$ 7,425
$
822
$ 1,147
$ 8,247
$ 9,394
$ 4,344
1984(a)
15,000
505
4,161
10,840
505
15,001
15,506
8,024
1982(a)
(1)
—
—
—
—
—
—
—
(1)
(2)
(3)
(3)
619
5,434
33,096
619
38,530
39,149
25,506
1983(a)
—
35
120
4,268
315
—
4,765
1,722
—
35
9,033
9,033
5,709
1968(c)
2,037
2,072
1,141
1983(a)
1,599
120
1,599
1,719
587
1968(c)
1,335
6,314
2,292
1,335
8,606
9,941
4,652
1986(c)
190
3,004
720
190
3,724
3,914
2,714
1972(c)
—
1,500
—
—
1,691
5,803
—
—
12,695
1,664
11,031
12,695
4,262
1995(c)
5,956
1,521
5,935
7,456
2,139
1995(c)
11,909
11,909
11,909
1,691
5,847
7,538
133
145
2002(c)
2005(a)
44
—
—
817
—
16,100
15,283
16,100
6,158
1994(c)
799
3,197
1,994
799
5,191
5,990
1,182
1998(a)
3,443
13,774
4,684
3,443
18,458
21,901
3,561
1998(a)
3,122
12,488
844
3,122
13,332
16,454
2,983
1998(a)
Description
Shopping Centers
Crescent Plaza
Brockton, MA
New Loudon Center
Latham, NY
Ledgewood Mall
Ledgewood, NJ
Mark Plaza
Edwardsville, PA
Luzerne Street Plaza
Scranton, PA
Blackman Plaza
Wilkes-Barre, PA
Greenridge Plaza
Scranton, PA
Plaza 422
Lebanon, PA
Route 6 Mall
Honesdale, PA
Pittston Mall
Pittston, PA
—
Bartow Avenue
Bronx, NY
Amboy Rd. Shopping Ctr. —
Staten Island, NY
Bradford Towne Centre
Towanda, PA
Abington Towne Center
Abington, PA
Bloomfield Town Square
Bloomfield Hills, MI
Walnut Hill Plaza
Woonsocket, RI
Elmwood Park Plaza
Elmwood Park, NJ
34,600
3,248
12,992
14,764
3,800
27,205
31,005
5,178
1998(a)
12,936
Merrillville Plaza
Hobart, IN
Soundview Marketplace 8,338
Port Washington, NY
4,288
17,152
1,199
4,288
18,351
22,639
3,723
1998(a)
2,428
9,711
5,994
3,227
14,904
18,131
3,355
1998(a)
Marketplace of Absecon
Absecon, NJ
(3)
2,573
10,294
2,467
2,573
12,761
15,334
2,501
1998(a)
Acadia Realty Trust 2005 Annual Report
79
December 31, 2005
Description
Hobson West Plaza
Naperville, IL
Smithtown
Shopping Center
Smithtown, NY
Town Line Plaza
Rocky Hill, CT
Branch Shopping Center
Village of the Branch, NY
The Methuen
Shopping Center
Methuen, MA
Gateway
Shopping Center
Burlington, VT
Mad River Station
Dayton, OH
Pacesetter Park
Shopping Center
Ramapo, NY
239 Greenwich
Greenwich, CT
Residential Properties
Gate House, Holiday
House, Tiger Village
Columbia, MO
Village Apartments
Winston-Salem, NC
Colony Apartments
Columbia, MO
Undeveloped land
Encum-
brances
Land
Buildings &
Improvements
Costs
capitalized
Subsequent to
Acquisition
Land
Buildings &
Improvements
Total
Accumulated
Depreciation
Date of
Acquisition (a)
Construction(c)
$
(3)
$ 1,793
$
7,172
$
687
$ 1,793
$
7,859
$ 9,652
$
1,700
1998(a)
10,082
3,229
12,917
1,230
3,229
14,147
17,376
3,173
1998(a)
878
3,510
7,048
909
10,528
11,437
6,304
1998(a)
(2)
3,156
12,545
619
3,156
13,164
16,320
2,523
1998(a)
(2)
956
3,826
—
956
3,826
4,782
705
1998(a)
(2)
1,273
5,091
11,517
1,273
16,608
17,881
1,851
1999(a)
—
2,350
9,404
419
2,350
9,823
12,173
1,763
1999(a)
12,500
1,475
5,899
971
1,475
6,870
8,345
1,223
1999(a)
15,894
1,817
15,846
359
1,817
16,205
18,022
2,761
1999(c)
10,588
2,312
9,247
3,092
2,312
12,339
14,651
3,053
1998(a)
(3)
3,429
13,716
2,727
3,429
16,443
19,872
3,769
1998(a)
5,294
1,118
4,470
1,522
1,118
5,992
7,110
1,487
1998(a)
250
250
250
$238,448
$50,829
$ 231,884
$ 153,038
$54,963
$380,788
$ 435,751
$ 118,309
1. These properties serve as collateral for the financing with Washington Mutual Bank, FA in the amount of $29,131 (Note 6)
2. These properties serve as collateral for the financing with Bank of America, FA in the amount of $44,485 (Note 6)
3. These properties serve as collateral for the financing with Bank of America, NA in the amount of $22,000 (Note 6).
4. Depreciation and investments in buildings and improvements reflected in the statements of income is calculated over the estimated useful
life of the assets as follows:
Buildings: 30 to 40 years
Improvements: Shorter of lease term or useful life
5. The aggregate gross cost of property included above for Federal income tax purposes was $373,098 as of December 31, 2005.
6. (a) Reconciliation of Real Estate Properties:
Acadia Realty Trust 2005 Annual Report 80
Schedule III: Real Estate And Accumulated Depreciation continued
The following table reconciles the real estate properties from January 1, 2003 to December 31, 2005:
Balance at beginning of year
Other Improvements
Reclassification of tenant improvement activities
Depreciation related to Real estate
Balance at end of year
(b) Reconciliation of Accumulated Depreciation:
2005
$ 414,974
8,868
—
11,909
Years Ended December 31,
2004
$ 407,220
6,909
845
—
2003
$ 393,652
13,568
—
—
$ 435,751
$ 414,974
$ 407,220
The following table reconciles accumulated depreciation from January 1, 2003 to December 31, 2005:
Balance at beginning of year
Reclassification of tenant improvement activities
Depreciation related to Real estate
Balance at end of year
Years Ended December 31,
2005
$ 105,278
—
13,031
$ 118,309
2004
$ 91,777
660
12,841
$105,278
2003
$76,454
—
15,323
$91,777
Acadia Realty Trust 2005 Annual Report
81
Trustees and Officers
Shareholder Information
Trustees
Kenneth F. Bernstein
President and Chief Executive Officer
Douglas Crocker II
Former Chief Executive Officer,
Equity Residential
Alan S. Forman
Director of Investments Office
Yale University
Suzanne M. Hopgood
President and Chief Executive Officer
The Hopgood Group, LLC
Lorrence T. Kellar
Vice President of Retail
Development, Continental
Properties
Wendy Luscombe
President and CEO
WKL Associates, Inc.
Lee S. Wielansky (Lead Trustee)
Chairman of the Board and Chief
Executive Officer, Midland
Development Group Inc.
Senior Officers
Kenneth F. Bernstein
President and
Chief Executive Officer
Joel Braun
Sr. Vice President,
Chief Investment Officer
Joseph Hogan
Sr. Vice President,
Director of Construction
Robert Masters, Esq.
Sr. Vice President,
General Counsel and
Corporate Secretary
Joseph M. Napolitano
Sr. Vice President,
Director of Operations
Michael Nelsen
Sr. Vice President,
Chief Financial Officer
Joseph Povinelli
Sr. Vice President,
Director of Leasing
Robert Scholem
Sr. Vice President,
Director of Property
Management
Corporate Headquarters
Acadia Realty Trust
1311 Mamaroneck Avenue, Suite 260
White Plains, NY 10605
Tel: 914.288.8100
Internet Address
Visit us online at www.acadiarealty.com
for more information about Acadia
Realty Trust and its real estate portfolio.
The 2005 Annual Report is available
online, as well as current news and
quarterly financial and operational
supplementary information.
Legal Counsel
Paul, Hastings, Janofsky &
Walker, LLP
Park Avenue Tower
75 East 55th Street
New York, NY 10022
Annual Meeting
Acadia’s Board of Trustees has sched-
uled the Annual Shareholders Meeting
for Monday, May 15, 2006 at 10:00 AM,
local time, to be held at the offices of
Paul, Hastings, Janofsky & Walker, LLP,
Park Avenue Tower, 75 East 55th Street,
New York, NY 10022. The record date
for determination of shareholders
entitled to vote is March 31, 2006.
Independent Auditors
BDO Seidman, LLP
330 Madison Avenue
New York, NY 10017
Stock Exchange
NYSE: AKR
The Company has filed the Section
302 certifications as an exhibit to its
Form 10-K, and the Chief Executive
Officer has provided the annual
certification to the NYSE.
Transfer Agent
and Registrar
American Stock Transfer
Trust Company
59 Maiden Lane
Plaza Level
New York, NY 10038
Tel: 877.777.0800
website: www.amstock.com
email: info@amstock.com
Investor Relations
Jon Grisham
Vice President
Chief Accounting Officer
Tel: 914.288.8100
email: jgrisham@acadiarealty.com
A copy of the Company’s annual report
and Form 10-K filed with the Securities
and Exchange Commission may be
obtained without charge by contacting
Investor Relations.
Dividend Reinvestment
Acadia Realty Trust offers a dividend
reinvestment plan that enables its
shareholders to automatically reinvest
dividends as well as make voluntary
cash payments toward the purchase
of additional shares. To participate,
contact Acadia Realty Trust’s dividend
reinvestment agent at 800.937.5449
ext. 6820
or write to:
American Stock Transfer &
Trust Company
Attn: Dividend Reinvestment Dept.
59 Maiden Lane
Plaza Level
New York, NY 10038
For further information contact
Investor Relations.
1311 Mamaroneck Avenue
Suite 260
White Plains, NY 10605
Tel: 914.288.8100
E