2007 Annual Report
Focused.
Disciplined.
Value-Driven.
Financial Highlights
In thousands
2007
2006 1
2005 1
2004 1
2003 1
Total Revenues
$101,569
$ 95,800
$ 93,965
$ 80,283
$ 76,072
Funds from
Operations 2
Real Estate Owned,
at Cost
Common Shares
Outstanding
Operating Partnership
Units Outstanding
$ 44,018
$ 39,953
$ 35,842
$ 30,004
$ 27,664
$854,074
$650,051
$ 670,817
$561,370
$ 504,355
32,184
31,773
31,543
31,341
27,409
642
642
653
392
1,139
1Pursuant to the provisions of Emerging Issues Task Force 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 Cer-
tain Rights” we determined that we should report our investments in Acadia Strategic Opportunity Fund, LP, Aca-
dia Strategic Opportunity Fund II, LLC, Acadia Mervyn Investors I, LLC and Acadia Mervyn Investors II, LLC on a
consolidated basis rather than under the equity method of accounting, as we had previously reported such enti-
ties. We made an election to retrospectively adjust our historical financial information. In connection with the ret-
rospective adjustment of our historical financial information, we reclassified certain properties which were sold
subsequent to December 31, 2005 as discontinued operations. The amounts for 2002 through 2005 have been
restated to reflect these adjustments.
2The 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 pre-
sented to assist investors in analyzing the performance of the Company. It is helpful as it excludes various items
included in net income that are not indicative of the operating performance, such as gains (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 REITs.
FFO does not represent cash generated from operations as defined by generally accepted accounting principles
(“GAAP”) and is not indicative of cash available to fund all cash needs, including distributions. It should not be
considered as an alternative to net income for the purpose of evaluating the Company’s performance or to
cash flows as a measure of liquidity. Consistent with the NAREIT definition, the Company defines FFO as net
income (computed in accordance with GAAP), excluding gains (losses) from sales of depreciated property,
plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.
To Our Shareholders:
Focused. Disciplined. Value-Driven.
2007 was an incredibly volatile
year for the REIT sector, the real
estate industry, and the entire
financial community. This volatil-
ity is continuing in 2008 and in
some instances, worsening.
It is also beginning to impact the
overall economy. Notwithstand-
ing this turmoil, 2007 was a year
of significant accomplishment for
Acadia. Not only in terms of our
stock performance, but also in
how we positioned ourselves for
2008 and beyond.
Kenneth F. Bernstein
President and CEO
From a shareholder total return perspective, we were fortunate
to finish the year up 6% while the REIT sector was down 19%
and the retail shopping center sector down almost 15%.
Total Returns
n Acadia Realty Trust
n REIT Sector
n Shopping Center Sector
Source: Key Banc Capital Markets (January 2, 2008)
Although, on an absolute basis, our positive returns were below
our historical average, the Company’s outperformance relative
to the sector was significant. More importantly, over a three-
year basis our total returns were 76% vs. 16% for the REIT
sector and over a five-year basis our returns were 327% vs.
105% for the REIT sector.
In 2007, Acadia also achieved another year of solid earnings
growth of 9%, which is consistent with our average earnings
growth over the last three years. All areas of our business
contributed to this growth with both our core portfolio and our
external growth platforms providing significant contributions.
In last year’s letter to shareholders I wrote: “…risk
has been re-priced and, in some cases, mis-priced. Many
investors are taking too much risk to earn too little incremen-
tal return…We shouldn’t assume that a long-running real
estate bull market has become a permanent, secular shift
that is immune to a correction.” With this concern in mind, in
2007 we focused on both preparing for a re-pricing of risk in
the capital markets and positioning ourselves for the resulting
opportunities going forward. While many in our industry antic-
ipated some level of correction in the capital markets, most
of us were nonetheless surprised by the speed and severity
of the meltdown. What started as a relatively contained “sub-
prime” debt and liquidity issue soon became a global capital
markets crisis impacting all components of the real estate
industry. In anticipation of a correction, last year we focused
on three key initiatives:
s Refining our core portfolio by selling properties into a still
frothy market
s Strengthening our balance sheet to ensure that we had
plenty of dry powder to respond to any softening in the
economy as well as capitalize on investment opportunities
as they emerged
s Enhancing an already powerful external growth platform
by raising a new $500 million discretionary investment
fund which will enable us to almost double our assets
under management over the next several years
These three initiatives were not only prudent in light of the
weakness and distress we began seeing during the second
half of last year, they also put us in an extremely strong posi-
tion to capitalize on the opportunities that we are beginning to
see in 2008.
Balance Sheet Strength
Debt to Total
Market Capitalization
Dividend Payout Ratio Based on 2007
Adjusted Funds From Operations
n Acadia Realty Trust
n Shopping Center Sector
Source: Key Banc Capital Markets (January 2, 2008)
Acadia Realty Trust 2007 Annual Report 1
Upgrading Core Portfolio
Balance Sheet Strength Matters Again
2007 was another great year to sell assets. Last year we sold
15% of our portfolio and recycled some of the proceeds into
higher-quality assets in locations such as New York City and
Philadelphia. And where we couldn’t find suitable replace-
ments, we paid down our debt and sent you the balance in
the form of a special dividend. Our goal is to maintain a port-
folio of solid retail properties in densely populated, high-qual-
ity locations, because in the face of a potential consumer
slowdown, we believe that retail properties in more dense,
supply-constrained markets will outperform those in less con-
centrated areas. Simply put, landlords have better pricing
leverage when there is a limited supply of alternate space for
tenants to move into, and tenants generally perform better
where there are more shoppers.
Today, our core portfolio consists of approximately five mil-
lion square feet in strong urban infill locations, 85% of which
are in New York City, Northern New Jersey and Connecticut.
These properties are well-leased and well-managed. Bob
Scholem, Director of Property Management, and his team
are diligently focusing on the efficient management of both
our core portfolio and our Fund assets. Given the economic
uncertainties that we are facing in 2008, effective operations
and collections are of heightened importance, and nobody
does a better job than Bob.
We have built a capital structure that is designed to with-
stand and take advantage of uncertain times — allowing us
to move swiftly when the right opportunity presents itself.
For many years, the investment community was less focused
on leverage or financial ratios because it appeared that there
was an unlimited supply of cheap debt and equity. At Acadia,
we are not comfortable with risking our shareholders’ equity
on the notion that capital will always be available. As a result
of this more conservative strategy, we have maintained some
of the strongest financial ratios in our sector. By carefully
managing our debt exposure, we have no debt maturities
related to our core portfolio until 2011. Equally important,
we have enough cash and credit available to fund our equity
investment requirements for both our existing AKR Fund II
and our recently raised AKR Fund III.
Mike Nelsen, Jon Grisham and their finance team have done
a tremendous job of maintaining our financial discipline. Sus-
taining a safe balance sheet with plenty of liquidity has a cost
in terms of short-term earnings growth, but we are convinced
that, in the long run, our shareholders are better served by
our ability to remain liquid, flexible and opportunistic.
Enhanced External Growth Platform
Establishing a focused and opportunistic external investment
platform with access to dependable discretionary capital has
been a critical component of Acadia’s success. Last year
we further enhanced our investment platform by launching
AKR Fund III — our third institutional investment fund with
$500 million of private equity. This fund will allow us to
Focused.
acquire an additional $1.5 billion of real estate over the next
several years — enough to nearly double the Company’s
assets under management. We believe that this discretionary
fund structure is the ideal vehicle for Acadia to leverage our
resources and expertise while maximizing our capital struc-
ture and shareholder value.
In our view, a successful external growth platform must
have three components:
s A focused, value-creating investment strategy
s The proven ability to execute on that strategy
s Availability of appropriate capital sources and structure
to maximize profits
At Acadia, we take great pride in our capabilities in all three of
these areas. Led by Joel Braun, our Chief Investment Officer,
over the past several years we have chosen some of the
most exciting investment areas to participate in. We have
executed profitably. And we have utilized a highly effective
capital structure: discretionary institutional investment funds.
Our investment focus is in two general areas:
Opportunistic
Value-Add
Opportunistic
Historically, opportunistic investing has involved acquiring
existing assets from highly motivated or distressed sellers.
This has included the purchase of both distressed debt and
properties, and it was a significant and successful part of our
acquisition activities earlier in the decade. As the real estate
market strengthened over the past few years, there were
fewer and fewer attractively priced “opportunistic” invest-
ments and we spent more of our resources elsewhere. The
one opportunistic area where we have been active is our
Retailer Controlled Property (RCP) venture.
We established our RCP venture in 2004 with our partners
Klaff Realty and Lubert-Adler. Our most significant RCP
initiatives have been our participation in the acquisition of
Mervyns Department Stores and Albertson’s Supermarkets.
To date, Acadia, through Funds I and II have received distribu-
tions of $99.4 million on initial investments of $47.7 million,
representing more than a 200% return on invested equity.
Value-Add
Our value-add segment is focused on the development and
redevelopment of urban properties. While we have always
had a value-add component to our business, we have focused
on strengthening this area over the past several years.
New York Urban/Infill: Most recently, we have focused our
value-add efforts in New York City through our New York
Urban/Infill redevelopment program. Launched in 2004 with
our talented partners at P/A Associates, the program acquires
prime properties throughout the five boroughs of New York
City. Leveraging our long-standing and strong tenant relation-
ships, we strive to bring the best retailers to urban locations
previously perceived as too difficult for national tenants to
penetrate. Last year we announced three new development
projects through this initiative: Our most significant project
to date, CityPoint, in Downtown Brooklyn, New York; a retail
redevelopment project in Sheepshead Bay, Brooklyn, New
York; and a mixed-use redevelopment project in Canarsie,
Brooklyn, which will include retail, office and self-storage
components. Currently, we are developing 10 projects with
over 2.4 million square feet throughout New York City, with
values anticipated to be in excess of $1.5 billion. Joe Hogan,
our Director of Construction, and his dedicated team have
already successfully completed construction on two of the
10 projects, with several more now under way. Constructing
projects in New York City is always challenging, and Joe has
done a great job of successfully leading his team through
this process.
Disciplined.
Acadia Realty Trust 2007 Annual Report 3
Self-Storage: Over the past few years, we have enhanced
our New York Urban/Infill redevelopment platform by incor-
porating a self-storage component either on top of, or adja-
cent to, four of our urban redevelopments. In all of these
developments we have partnered with a talented New York-
based self-storage company, Storage Post, as our partner
and operator. In 2007, we were presented with the oppor-
tunity to buy out Storage Post’s previous institutional capital
partners and acquire a 10-property self-storage portfolio
located in densely-populated infill locations throughout
New York City and New Jersey. The portfolio offers a unique
opportunity to gain an even greater foothold in urban loca-
tions with high barriers to entry for self-storage. We were
able to purchase these properties at an attractive discount
to replacement cost — making the investment both strategic
and opportunistic.
Acadia’s partnership with Storage Post is a natural extension
of our urban redevelopment platform, and we look forward
to a successful, long-term relationship. The addition of these
10 assets to our four other self-storage development projects
produces an overall portfolio of over one million rentable
square feet in the New York metro area.
Westport, Connecticut: Through AKR Fund III, we purchased
a redevelopment property on Main Street in Westport, Con-
necticut with the accomplished local development team of
David Adam Realty. This project falls into Acadia’s “Main
Street” redevelopment program. Along with our properties
on Greenwich Avenue in Greenwich, Connecticut, Chestnut
Hill in Philadelphia and Lincoln Park in Chicago, we continue
to believe that street retail can be a very profitable component
of our business.
A Talented and Energized Management Team
Our goal is to bring focus, discipline and value to all that
we do. We are proud to have developed a network of pro-
fessional relationships to help drive our continued success
in the years to come. We have worked hard to build a
reputation that attracts tenants, investors, lenders, sellers
and developers, and as a result, we have been presented
with opportunities that were far more attractive and prof-
itable than the average investment.
We are extremely grateful to have a diverse, independent
and dedicated Board. In 2007 we were pleased to welcome
Bill Spitz, former Vice Chair for Investments and Treasurer of
Vanderbilt University, as a Trustee. Bill’s depth of experience
in the investment community and extensive history with
Acadia only strengthens and complements the outstanding
Board of Trustees that Acadia is fortunate to have.
Acadia has an outstanding management team, one that is fully
committed to taking the Company to even greater levels of
success. At a company of our size, every colleague can make a
meaningful difference. For example, our legal division, led by my
trusted advisor, Robert Masters, works tirelessly to ensure that
our Company is in full compliance with all of our obligations
and that our transactions are correctly structured, negotiated
and closed. Given that our in-house attorneys know all aspects
of Acadia, they don’t simply “lawyer” the deals, they add sig-
nificant value as well.
In 2007, Jon Grisham, whose depth of expertise has signifi-
cantly contributed to the organization, was promoted
to Senior Vice President, Chief Accounting Officer. In his
almost 15 years with Acadia, Jon has played a key role in
all components of our finance division, as well as working
closely with the investment community.
As Acadia has grown, the need to maximize and develop
our human capital has become of ever-increasing impor-
tance. In 2007, Joe Napolitano was promoted to the role of
Chief Administrative Officer, charged with ensuring that the
company continues to work and grow together as one team
focused on creating significant long-term value for our stake-
holders. Anyone who spends time at Acadia quickly sees the
important contribution Joe is making. He and our head of
human resources, Bobbie Lyons, are keenly focused on
ensuring that as we grow, we maintain our core values and
entrepreneurial spirit. One of the many contributions Joe
made last year was bringing in Deb Miley, Director of
Communications, to help us better communicate to all of our
constituencies. She is already making a huge contribution.
Also in 2007, the Leadership Council, which is comprised of
Acadia colleagues throughout the organization, initiated the
first-ever Acadia Distinguished Performance Awards. These
excellence awards are designed to honor Acadia colleagues
who have demonstrated outstanding performance and supe-
rior accomplishments above and beyond their core expertise.
This year’s award recipients: Geo Chacko, Dot Edwards and
German Velez-Rodriguez truly embody the core values of
Acadia. We are fortunate to have them on our team.
We have spent the last 10 years transforming Acadia,
I believe for the best. We have come far together and I con-
tinue to be inspired by the dedication of all our colleagues.
2008 and Beyond
From a shareholder return perspective, at the close of 2007,
Acadia was the best-performing shopping center REIT, as it
was for the past three years and five years. In fact, in the
last five years, Acadia’s stock price has grown by over
325%. The Acadia team has grown to include over 140
employees. And, although it is hard to believe, in August
of 2008, we will be celebrating our 10th anniversary.
Where do we go from here? We will continue to focus on
strengthening our core portfolio. We will maintain a disci-
plined and strong balance sheet. We will continue to drive
our growth through opportunistic and value-add acquisitions
Annual Dividends
Over the last five years we have increased our annual dividend
by an average of 9%.
utilizing our discretionary investment funds. And we will con-
tinue to cultivate our relationships with our partners, tenants,
the investment community and most of all, the Acadia Team.
We will develop new relationships and stretch our imagina-
tions to break ground on even more exciting projects than
we’ve created before. We will keep coming up with thought-
ful and creative ways to grow this Company and deliver on
our commitments to you, our fellow shareholders. We are
extremely appreciative for your support, and we look forward
to providing exceptional results in 2008 and beyond.
Kenneth F. Bernstein
President and CEO
Value-Driven.
Acadia Realty Trust 2007 Annual Report 5
Acadia Core and Joint Venture Properties
RETAIL PROPERTIES
NEW YORK
The Branch Plaza, Smithtown, NY
NEW ENGLAND REGION
Crescent Plaza, Brockton, MA
Crossroads Shopping Center, White Plains, NY
The Gateway, South Burlington, VT
New Loudon Center, Latham, NY
Methuen Shopping Center, Methuen, MA
Pacesetter Park Shopping Center, Pomona, NY
Walnut Hill Plaza, Woonsocket, RI
Tarrytown Centre, Tarrytown, NY
Village Commons Shopping Center, Smithtown, NY
PENNSYLVANIA
NEW YORK CITY
Abington Towne Center, Abington, PA
Blackman Plaza, Wilkes-Barre, PA
98th Street and Liberty Avenue, Queens, NY
Chestnut Hill Shoppes, Philadelphia, PA
200 West 54th Street, New York, NY
216th Street, New York, NY
260 East 161st Street, Bronx, NY
2914 Third Avenue, Bronx, NY
Mark Plaza, Edwardsville, PA
Plaza 422, Lebanon, PA
Route 6 Mall, Honesdale, PA
Amboy Shopping Center, Staten Island, NY
MID-ATLANTIC REGION
Bartow Avenue, Bronx, NY
Canarsie Plaza, Brooklyn, NY
CityPoint, Brooklyn, NY
Fordham Place, Bronx, NY
L/A Fitness, Staten Island, NY
Brandywine Town Center, Wilmington, DE
Haygood Shopping Center, Virginia Beach, VA
Market Square Shopping Center, Wilmington, DE
Route 202 Shopping Center, Wilmington, DE
Pelham Manor Shopping Plaza, Pelham Manor, NY
MIDWESTERN REGION
Sheepshead Bay Plaza, Brooklyn, NY
Sherman Plaza, New York, NY
NEW JERSEY
A&P Shopping Plaza, Boonton, NJ
Bloomfield Town Square, Bloomfield Hills, MI
Clark and Diversey, Chicago, IL
Granville Center, Columbus, OH
Hobson West Plaza, Naperville, IL
Mad River Station, Dayton, OH
Elmwood Park Shopping Center, Elmwood Park, NJ
Merrillville Plaza, Hobart, IN
Sterling Heights Shopping Center, Sterling Heights, MI
SOUTHEAST REGION
Hitchcock Plaza, Aiken, SC
Ledgewood Mall, Ledgewood, NJ
Marketplace of Absecon, Absecon, NJ
CONNECTICUT
125 Main Street, Westport, CT
239 Greenwich Avenue, Greenwich, CT
Town Line Plaza, Rocky Hill, CT
6
Acadia Realty Trust 2007 Annual Report
MANAGED PROPERTIES
MID-ATLANTIC REGION
Hechinger McDonalds, Norfolk, VA
HK-VB, LLC, Virginia Beach, VA
Levitz SL Portfolio, CA, NJ & PA
MIDWESTERN REGION
Mervyns, Detroit, MI
Prairie Towne Center, Schaumburg, IL
WESTERN REGION
El Paseo Square Shopping Center, Palm Desert, CA
Home Depot San Francisco, South San Francisco, CA
Levitz Tukwila, Tukwila, WA
Levitz, San Francisco, CA
STORAGE POST LOCATIONS
Brooklyn, NY
Bruckner, NY
Fordham, NY
Jersey City, NJ
Lawrence, NY
Linden, NJ
Long Island City, NY
New Rochelle, NY
Ridgewood, NY
Suffern, NY
Webster, NY
Yonkers, NY
Form 10k Report 2007
United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-K
4
o ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2007
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number 1-12002
ACADIA REALTY TRUST
(Exact name of registrant 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.
4
YES o
NO o
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 o
4
NO o
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.
4
YES o
NO o
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 con-
tained, 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. o
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).
4
Large Accelerated Filer o
Accelerated Filer o
Non-accelerated Filer o
Indicate by check mark whether the registrant ia a shell company (as defined in Rule 12b-2 of the Act).
YES o
4
NO o
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 $835.8 million, based on a price of $25.98 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 February 29, 2008 was 32,184,462.
DOCUMENTS INCORPORATED BY REFERENCE
Part III: Portions of the registrant’s definitive proxy statement relating to its 2008 Annual Meeting of Shareholders presently scheduled to
be held May 14, 2008 to be filed pursuant to Regulation 14A.
Acadia Realty Trust 2007 Annual Report
Acadia Realty Trust Form 10-K Report 2007
Table of Contents
Item No.
PART I
Page
1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
PART II
5. Market for Registrant’s Common Equity, Related Shareholder Matters, Issuer Purchases of
Equity Securities and Performance Graph . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . 31
7A. Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . 42
9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9B. Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
PART III
10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . . . . . . . . . . . 45
13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
PART IV
15. Exhibits, Financial Statements, Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Acadia Realty Trust 2007 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 and Exchange Act of
1934 and as such may involve known and unknown risks,
uncertainties and other factors which may cause our actual
results, performance or achievements to be materially
different from future results, performance or achievements
expressed or implied by such forward-looking statements.
Forward-looking statements, which are based on certain
assumptions and describe 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 nega-
tive 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
“Item 1A. Risk Factors” in this Form 10-K. These risks
and uncertainties should be considered in evaluating any
forward-looking statements contained or incorporated by
reference herein.
PART I
ITEM 1. BUSINESSx
GENERAL
Acadia Realty Trust (the “Trust”) was formed on March 4,
1993 as a Maryland real estate investment trust (“REIT”).
All references to “Acadia,” “we,” “us,” ”our,” and “Com-
pany” refer to Acadia Realty Trust and its consolidated
subsidiaries. We are a fully integrated, self-managed and
self-administered equity REIT focused primarily on the
ownership, acquisition, redevelopment and management
of retail properties, including neighborhood and commu-
nity shopping centers and mixed-use properties with retail
components. We currently operate 76 properties, which
we own or have an ownership interest in. These assets
are located primarily in the Northeast, Mid-Atlantic and
Midwestern regions of the United States, which, in total,
comprise approximately eight million square feet. We also
have private equity investments in other retail real estate
related opportunities including investments for which we
provide operational support to the operating ventures in
which we have a minority equity interest.
1
Acadia Realty Trust 2007 Annual Report
All of our investments are held by, and all of our opera-
tions are conducted through, Acadia Realty Limited Part-
nership (the “Operating Partnership”) and entities in which
the Operating Partnership owns a controlling interest. As
of December 31, 2007, the Trust controlled 98% of the
Operating Partnership as the sole general partner. As the
general partner, the Trust is entitled to share, in proportion
to its percentage interest, in the cash distributions and
profits and losses of the Operating Partnership. The lim-
ited partners represent entities or individuals, which con-
tributed their interests in certain properties or entities to
the Operating Partnership in exchange for common or
preferred units of limited partnership interest (“Common
OP Units” or “Preferred OP Units”). Limited partners hold-
ing Common OP Units are generally entitled to exchange
their units on a one-for-one basis for our common shares
of beneficial interest (“Common Shares”). This structure is
referred to as an umbrella partnership REIT or “UPREIT.”
BUSINESS OBJECTIVES AND
STRATEGIES
Our primary business objective is to acquire, develop and
manage commercial retail properties that will provide
cash for distributions to shareholders while also creating
the potential for capital appreciation to enhance investor
returns. We focus on the following fundamentals to
achieve this objective:
n Own and operate a portfolio of community and neigh-
borhood shopping centers and mixed-use properties
with a retail component located in markets with strong
demographics.
n Generate internal growth within the portfolio through
aggressive redevelopment, re-anchoring and leasing
activities.
n Generate external growth through an opportunistic
yet disciplined acquisition program. The emphasis is on
targeting transactions with high inherent opportunity for
the creation of additional value through redevelopment
and leasing and/or transactions requiring creative capital
structuring to facilitate the transactions.
n Partner with private equity investors for the purpose
of making investments in operating retailers with sig-
nificant embedded value in their real estate assets.
n Maintain a strong and flexible balance sheet through
conservative financial practices while ensuring access to
sufficient capital to fund future growth.
Investment Strategy — External Growth through
Opportunistic Acquisition Platforms
The requirements that acquisitions be accretive on a
long-term basis based on our cost of capital, as well as
increase the overall portfolio quality and value, are core
to our acquisition program. As such, we constantly evalu-
ate the blended cost of equity and debt and adjust the
amount of acquisition activity to align the level of invest-
ment activity with capital flows. We may also engage in
discussions with public and private entities regarding busi-
Consolidated Financial Statements beginning on page 52
of this Form 10-K.
Our acquisition program was executed primarily 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-market anchor leases with the potential to
create significant additional value through re-tenanting,
timely capital improvements and property redevelopment.
ness combinations. In addition to our direct investments
On January 4, 2006, Fund I recapitalized a one million
in real estate assets, we have also capitalized on our
square foot retail portfolio located in Wilmington Delaware
expertise in the acquisition, redevelopment, leasing and
(“Brandywine Portfolio”) through a merger of interests
management of retail real estate by establishing discre-
with affiliates of GDC Properties (“GDC”). The Brandy-
tionary opportunity fund joint ventures in which we earn,
wine Portfolio was recapitalized through a “cash-out”
in addition to a return on our equity interest and carried
merger of the 77.8% interest, which was previously held
interest (“Promote”), fees and priority distributions for our
by the institutional investors in Fund I, to GDC at a valua-
services. To date, we have launched three discretionary
tion of $164.0 million. The Operating Partnership, through
opportunity fund joint ventures, Acadia Strategic Opportu-
a subsidiary, retained its existing 22.2% interest and con-
nity Fund, LP (“Fund I”), Acadia Strategic Opportunity
tinues to operate the Brandywine Portfolio and earn fees
Fund II, LLC (“Fund II”) and Acadia Strategic Opportunity
for such services. At the closing of the merger, the Fund I
Fund III, LLC (“Fund III”). Due to our control, we consoli-
investors received a return of all of their capital invested
date these funds.
Fund I
During September of 2001, we and four of our institutional
shareholders formed a joint venture, Fund I, and during
August of 2004 formed a limited liability company, Acadia
Mervyn Investors I, LLC (“Mervyns I”), whereby the
investors committed $70.0 million for the purpose of
acquiring real estate assets. The Operating Partnership
committed an additional $20.0 million in the aggregate to
Fund I and Mervyns I, as the general partner with a 22%
in Fund I and their unpaid preferred return, thus triggering
the payment to the Operating Partnership of its additional
20% Promote in all future Fund I distributions. During
June 2006, the Fund I investors received $36.0 million
of additional proceeds from this transaction following the
replacement of bridge financing which they provided, with
permanent mortgage financing, triggering $7.2 million in
additional Promote due the Operating Partnership, which
was paid from the Fund I investor’s share of the remaining
assets in Fund I.
interest. In addition to a pro-rata return on its invested
As of December 31, 2007, there were 29 assets com-
equity, the Operating Partnership is entitled to a Promote
prising approximately 1.5 million square feet remaining
based upon certain investment return thresholds. Cash
in Fund I in which the Operating Partnership’s interest in
flow is distributed pro-rata to the partners (including the
cash flow and income has increased from 22.2% to 37.8%
Operating Partnership) until they have received a 9%
as a result of the Promote.
cumulative return (“Preferred Return”) on, and a return
of all capital contributions.
Fund II
Following our success with Fund I, during June of 2004
Thereafter, remaining cash flow is distributed 80% to the
we formed a second, larger acquisition joint venture,
partners (including the Operating Partnership) and 20%
Fund II, and during August of 2004, formed Acadia Mervyn
to the Operating Partnership as a Promote. The Operating
Investors II, LLC (“Mervyns II”), with the investors from
Partnership also earns fees and/or priority distributions for
Fund I as well as two additional institutional investors.
asset management services equal to 1.5% of the allocated
With $300.0 million of committed discretionary capital,
invested equity, as well as for property management, leas-
Fund II and Mervyns II, combined, expect to be able to
ing and construction services. All such fees and priority
acquire up to $900.0 million of real estate assets on a
distributions are reflected as a reduction in the minority
leveraged basis. The Operating Partnership is the manag-
interest share in income from opportunity funds in the
ing member with a 20% interest in Fund II and Mervyns II.
Acadia Realty Trust 2007 Annual Report 2
The terms and structure of Fund II and Mervyns II are
n Invest in operating retailers through private equity joint
substantially the same as Fund I and Mervyns I with the
ventures.
exception that the Preferred Return is 8%. As of December
31, 2007, $182.0 million of Fund II’s capital was invested
and the balance of $118.0 million was committed to exist-
ing investments.
As the demand for retail real estate has significantly
increased in recent years, there has been a commensurate
n Work with financially healthy retailers to create value
from their surplus real estate.
n Acquire properties, designation rights or other
control of real estate or leases associated with
retailers in bankruptcy.
increase in selling prices. In an effort to generate superior
n Complete sale leasebacks with retailers in need of capital.
risk-adjusted returns for our shareholders and fund investors,
we have channeled our acquisition efforts through Fund II
in two opportunistic strategies described below — the
Retailer Controlled Property Venture and the New York
Urban Infill Redevelopment Initiative.
Retailer Controlled Property Venture
(the “RCP Venture”)
On January 27, 2004, through Funds I and II, we entered
into the RCP Venture with Klaff Realty, L.P. (“Klaff”) and
Lubert-Adler Management, Inc. (“Lubert-Adler”) for the
purpose of making investments in surplus or underutilized
properties owned by retailers. The expected size of the RCP
Venture is approximately $300 million in equity, of which our
share is $60 million, based on anticipated investments of
approximately $1 billion. Each participant in the RCP Venture
has the right to opt out of any potential investment. Affili-
ates of Mervyns I and II and Fund II have invested $55.4
million in the RCP Venture to date on a non-recourse basis.
While we are not required to invest any additional capital
into any of these investments, should additional capital
be required and we elect not to contribute our share, our
proportionate share in the investment will be reduced. As
Fund I is fully invested, Fund II and Fund III will provide
the remaining portion of our original share of the equity in
future RCP Venture investments. Cash flow from any RCP
investments is to be distributed to the participants 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 Klaff (“Klaff’s Promote”) and
80% to the partners (including Klaff). The Operating Part-
nership may also earn market-rate fees for property man-
agement, leasing and construction services on behalf of
the RCP Venture. While we are primarily a passive partner
in the investments made through the RCP Venture, histori-
cally we have provided our support on reviewing potential
acquisitions and operating and redevelopment assistance
in areas where we have both a presence and expertise.
We seek to invest opportunistically with the RCP Venture
primarily in the following four ways:
3
Acadia Realty Trust 2007 Annual Report
During 2004, we made our first RCP Venture investment
with our participation in the acquisition of Mervyns. During
2006 and 2007, we made additional investments as further
discussed in “PROPERTY ACQUISITIONS” below.
New York Urban Infill Redevelopment Initiative
During September of 2004, through Fund II, we launched
our New York Urban Infill Redevelopment initiative. As
retailers continue to recognize that many of the nation’s
urban markets are underserved from a retail standpoint,
we are poised to capitalize on this trend by investing in
redevelopment projects in dense urban areas where retail
tenant demand has effectively surpassed the supply of
available sites. During 2004, Fund II, together with an
unaffiliated partner, P/A Associates, LLC (“P/A”), formed
Acadia-P/A Holding Company, LLC (“Acadia-P/A”) for the
purpose of acquiring, constructing, developing, owning,
operating, leasing and managing certain retail or mixed-use
real estate properties in the New York City metropolitan
area. P/A agreed to invest 10% of required capital up to
a maximum of $2.2 million and Fund II, the managing
member, agreed to invest the balance to acquire assets
in which Acadia-P/A agrees to invest. See Item 7 of this
Form 10K for further information on the Acadia P/A Joint
Venture as detailed in “Liquidity and Capital Resources.”
To date, Fund II has invested in nine projects, eight of
which are in conjunction with P/A, as discussed further in
“PROPERTY ACQUISITIONS” below.
Fund III
Following the success of Fund I and the full investment
of Fund II, we formed a third discretionary opportunity
fund, Acadia Strategic Opportunity Fund III, LLC (“Fund
III”) during 2007, with 14 institutional investors, including
a majority of the investors from Fund I and Fund II. With
$503.0 million of committed discretionary capital, Fund III
expects to be able to acquire or develop approximately
$1.5 billion of assets on a leveraged basis. The Operating
Partnership’s share of the committed capital is $100.0
million and it is the sole managing member with
a 19.9% interest in Fund III. The terms and structure of
remainder, if any, of the conversion value in excess of the
Fund III are substantially the same as the previous Funds,
principal amount. The Notes mature December 15, 2026,
including the Promote structure, with the exception that
although the holders of the Notes may require the Com-
the Preferred Return is 6%. To date, Fund III has invested
pany to repurchase their Notes, in whole or in part, on
in two projects, one of which is under our New York
December 20, 2011, December 15, 2016, and December
Urban Infill Redevelopment Program, as discussed further
15, 2021. After December 20, 2011, we have the right
in “PROPERTY ACQUISITIONS” in this Item 1 of this
to redeem the Notes in whole or in part at any time. The
Form 10-K.
Other Investments
We may also invest in preferred equity investments, mort-
gage loans, other real estate interests and other invest-
ments. The mortgage loans in which we invest may be
either first or second mortgages, where we believe the
underlying value of the real estate collateral is in excess
of its loan balance. As of December 31, 2007 our invest-
ments in first mortgages and mezzanine debt aggregated
$57.7 million.
Capital Strategy — Balance Sheet Focus and
Access to Capital
Our primary capital objective is to maintain a strong and
flexible balance sheet through conservative financial prac-
tices while ensuring access to sufficient capital to fund
future growth. We intend to continue financing acquisi-
tions and property redevelopment with sources of capital
determined by management to be the most appropriate
based on, among other factors, availability, pricing and
other commercial and financial terms. The sources of capi-
tal may include the issuance of public equity, unsecured
debt, mortgage and construction loans, and other capital
alternatives including the issuance of Operating Partner-
ship Units. We manage our interest rate risk primarily
through the use of fixed rate-debt and, where we use
variable rate debt, we use certain derivative instruments,
including LIBOR swap agreements and interest rate caps
as discussed further in Item 7A of this Form 10-K.
During December of 2006 and January of 2007, we
issued $115.0 million of 3.75% unsecured Convertible
Notes (the “Notes”). Interest on the Notes is payable
semi-annually. The Notes have an initial conversion rate of
32.4002 of our Common Shares for each $1,000 principal
amount, representing a conversion price of approximately
$30.86 per Common Share, or a conversion premium of
approximately 20.0% based upon our Common Share
price on the date of the issuance of the Notes. The Notes
are redeemable for cash up to their principal amount plus
accrued interest and, at our option, cash, our Common
Shares, or a combination thereof with respect to the
$112.1 million in proceeds, net of related costs, were used
to retire variable rate debt, provide for future Fund capital
commitments and for general working capital purposes.
During January 2007, we filed a shelf registration on Form
S-3 providing for offerings of up to a total of $300.0 million
of Common Shares, Preferred Shares and debt securities.
To date, we have not issued any securities pursuant to
this shelf registration.
Common and Preferred OP Unit Transactions
On January 27, 2004, we issued 4,000 Series B Preferred
OP Units to Klaff in connection with the acquisition from
Klaff of its rights to provide asset management, leasing,
disposition, development and construction services for an
existing portfolio of retail properties. These units have a
stated value of $1,000 each and are entitled to a quarterly
preferred distribution of the greater of (i) $13.00 (5.2%
annually) per Preferred OP Unit or (ii) the quarterly distri-
bution attributable to a Preferred OP Unit if such unit
were converted into a Common OP Unit. 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.
Klaff may redeem them at par for either cash or Common
OP Units (at our option). In 2007, Klaff converted all 4,000
Series B Preferred OP Units into 312,013 Common OP
Units and ultimately into Common Shares.
Effective February 15, 2005, we acquired the balance of
Klaff’s rights to provide the above services as well as cer-
tain potential future revenue streams. The consideration
for this acquisition was $4.0 million in the form of 250,000
restricted Common 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 trans-
action we also assumed all operational and redevelopment
responsibility for the Klaff Properties a year earlier than
was contemplated in the January 2004 transaction.
Operating Strategy — Experienced Management
Team with Proven Track Record
Our senior management team has decades of experience
in the real estate industry. We believe our management
team has demonstrated the ability to create value internally
Acadia Realty Trust 2007 Annual Report 4
through anchor recycling, property redevelopment and
PROPERTY ACQUISITIONS
strategic non-core dispositions. Our team has built several
successful acquisition platforms including our New York
Urban Infill Redevelopment Initiative and RCP Venture.
RCP Venture
Albertson’s
We have also capitalized on our expertise in the acquisi-
In June 2006, the RCP Venture made its second major
tion, redevelopment, leasing and management of retail
investment with its participation in the acquisition of 699
real estate by establishing joint ventures, such as Funds I,
stores from Albertson’s, the nation’s second largest grocery
II and III, in which we earn, in addition to a return on our
and drug chain and 26 Cub Food stores. The total price
equity interest and Promote, fees and priority distributions.
paid by the investment consortium, which included Cer-
Operating functions such as leasing, property manage-
ment, construction, finance and legal (collectively, the
“Operating Departments”) are provided by our personnel,
providing for fully integrated property management and
development. By incorporating the Operating Departments
in the acquisition process, acquisitions are appropriately
priced giving effect to each asset’s specific risks and
returns. Also, because of the Operating Departments
involvement with, and corresponding understanding of,
the acquisition process, transition time is minimized and
management can immediately execute on its strategic
plan for each asset.
We typically hold our core properties for long-term invest-
ment. As such, we continuously review the existing port-
folio and implement programs to renovate and modernize
targeted centers to enhance the property’s market posi-
tion. This in turn strengthens the competitive position of
the leasing program to attract and retain quality tenants,
increasing cash flow and consequently property value.
berus, Schottenstein and Kimco Realty, to Albertson’s for
the portfolio was $1.9 billion, which was funded with $0.3
billion of equity and $1.6 billion of financing. Mervyns II’s
share of equity invested totaled $20.7 million. The Operat-
ing Partnership’s share was $4.2 million. As with the
Mervyns investment (see below), we anticipate investing
in Albertson’s add-on real estate opportunities.
During February of 2007, Mervyns II received cash distri-
butions totaling approximately $44.4 million from its own-
ership position in Albertson’s. The Operating Partnership’s
share of this distribution amounted to approximately $8.9
million. The distributions primarily resulted from proceeds
received by Albertson’s in connection with its disposition
of certain stores, refinancing of the remaining assets held
in the entity and excess cash from operations. Mervyns II
received additional distributions from this investment total-
ing $8.8 million during the balance of the year ended
December 31, 2007. The Operating Partnership’s share of
these distributions was $1.0 million.
We also periodically identify certain properties for disposi-
For the years ended December 31, 2007 and 2006,
tion and redeploy the capital to existing centers or acquisi-
Mervyns II made additional add-on investments in Albert-
tions with greater potential for capital appreciation. Our
son’s totaling $2.8 million and received distributions total-
core portfolio consists primarily of neighborhood and com-
ing $0.8 million in the aggregate from these add-on
munity shopping centers, which are generally dominant
centers in high barrier-to-entry markets. The anchors at
these centers typically pay market or below-market rents.
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 opportunities to increase
rental income.
investments. The Operating Partnership’s share of such
amounts was $0.4 million and $0.1 million, respectively.
Mervyns Department Stores
In September 2004, we made our first RCP Venture
investment with our participation in the acquisition of
Mervyns. Through Mervyns I and Mervyns II, we invested
in the acquisition of Mervyns as part of an investment
consortium of Sun Capital and Cerberus that acquired
During 2007, 2006 and 2005 we sold seven non-core prop-
Mervyns from Target Corporation. As of the date of acqui-
erties and redeployed the capital to acquire seven retail
sition, Mervyns was a 257-store discount retailer with a
properties as further discussed in “ASSET SALES AND
very strong West Coast concentration. The total acquisi-
CAPITAL/ASSET RECYCLING” below.
5
Acadia Realty Trust 2007 Annual Report
tion price was approximately $1.2 billion which was
financed with $800 million of debt and $400 million of
equity. Mervyns I and Mervyns II share of equity invested
aggregated $23.9 million on a non-recourse basis and was
divided equally between them. The Operating Partnership’s
share was $4.9 million. During November 2007, Mervyns
Other Investments
II made an additional investment of $2.2 million in Mervyns.
During 2006, Fund II invested $1.1 million in Shopko, a
For the year ended December 31, 2005, Mervyns I and
Mervyns II made add-on investments in Mervyns proper-
ties totaling $1.3 million. The Operating Partnerships share
of this amount was $0.3 million.
regional multi-department retailer with 358 stores located
throughout the Midwest, Mountain and Pacific Northwest
and $0.7 million in Marsh, a regional supermarket chain
operating 271 stores in central Indiana, Illinois and west-
ern Ohio. The Operating Partnership’s share of these
During 2005, Mervyns made a distribution to the investors
investments totaled $0.2 million. For the year ended
from the proceeds from the sale of a portion of the port-
December 31, 2007, Fund II received a $1.1 million distri-
folio and the refinancing of existing debt, of which a total
bution from the Shopko investment, of which the Operat-
of $42.7 million was distributed to Mervyns I and Mervyns
ing Partnership’s share was $0.2 million.
II. The Operating Partnership’s share of this distribution
amounted to $10.2 million. In addition, during 2006,
Mervyns distributed additional cash totaling $4.6 million.
The Operating Partnership’s share of this distribution
totaled $1.4 million.
During July 2007, Mervyns II invested $2.7 million in REX
Stores Corporation which is comprised of electronic retail
stores located in 27 states. The Operating Partnership’s
share was $0.5 million.
The following table summarizes the RCP Venture invest-
ments from inception through December 31, 2007:
(dollars in millions)
Investor
Investment
Mervyns I and Mervyns II
Mervyns
Mervyns I and Mervyns II
Mervyns add-on investments
Mervyns II
Mervyns II
Fund II
Fund II
Mervyns II
Total
Albertson’s
Albertson’s add-on investments
2006/2007
Shopko
Marsh
Rex
2006
2006
2007
Year
acquired
Invested
capital
2004
2005
2006
$26.1
1.3
20.7
2.8
1.1
0.7
2.7
Operating
Partnership Share
Distributions
$ 46.0
Invested
capital
$ 4.9
Distributions
$ 11.3
1.3
53.2
0.8
1.1
—
—
0.3
4.2
0.4
0.2
0.1
0.5
0.3
9.8
0.1
0.2
—
—
$55.4
$102.4
$10.6
$ 21.7
New York Urban/Infill Redevelopment Initiative
CityPoint: During February of 2007, Acadia-P/A entered
Sheepshead Bay: During November of 2007, Fund III
acquired a property in Sheepshead Bay, Brooklyn for
approximately $20.0 million. Our redevelopment plan
includes the demolition of the existing structures and
the construction of a 240,000 square foot shopping
center on the site. The total cost of the redevelopment,
including acquisition costs, is expected to be approxi-
mately $109.0 million.
into an agreement for the purchase of the leasehold inter-
est in The Gallery at Fulton Street in downtown Brooklyn.
The fee position in the property is owned by the City of
New York and the agreement includes an option to pur-
chase this fee position at a later date. Acadia P/A has
partnered with MacFarlane Partners (“MacFarlane”) to
co-develop the project. On June 13, 2007, Acadia P/A and
MacFarlane acquired the leasehold interest for approxi-
mately $115.0 million. Redevelopment plans for the prop-
Canarsie: During October of 2007, Acadia P/A acquired
erty, renamed as CityPoint, include the demolition of the
a 530,000 square foot warehouse building in Canarsie,
existing structure and the development of a 1.6 million
Brooklyn for approximately $21.0 million. The development
square foot mixed-use complex. The proposed develop-
plan for this property includes the demolition of a portion
ment calls for the construction of a combination of retail,
of the warehouse and the construction of a 320,000
office and residential components, all of which are cur-
square foot mixed-use project consisting of retail, office,
rently allowed as of right. Acadia P/A, together with Mac-
cold-storage and self-storage. The total cost of the rede-
Farlane, will develop and operate the retail component,
velopment, including acquisition costs, is expected to be
which is anticipated to total 475,000 square feet of retail
approximately $70.0 million.
space. Acadia P/A will also participate in the development
of the office component with MacFarlane, which is
Acadia Realty Trust 2007 Annual Report 6
expected to include at least 125,000 square feet of office
4650 Broadway: On April 6, 2005, Acadia-P/A acquired
space. MacFarlane plans to develop and operate up to
4650 Broadway located in the Washington Heights/Inwood
1,000 residential units with underground parking. Acadia
section of Manhattan. The property, a 140,000 square foot
P/A does not plan on participating in the development of,
building, which was occupied by an agency of the City of
or have an ownership interest in, the residential compo-
New York and a commercial parking garage, was acquired
nent of the project.
Atlantic Avenue: During May 2007, we, through Fund II
and in partnership with a self-storage partner at several
of the other New York urban projects, acquired a property
on Atlantic Avenue in Brooklyn, New York for $5.0 million.
Redevelopment plans for the property call for the demoli-
tion of the existing structure and the construction of a
for a purchase price of $25.0 million. During 2007 we relo-
cated the office tenant to Acadia P/A’s 216th St. redevel-
opment as discussed above. We are currently reviewing
various alternatives to redevelop the site to include retail
and office components totaling over 216,000 square feet.
Expected costs for Acadia P/A to complete the redevelop-
ment are estimated at $30.0 million.
modern climate controlled self-storage facility consisting
Pelham Manor: On October 1, 2004, Acadia-P/A entered
of approximately 110,000 square feet.
into a 95-year, inclusive of extension options, ground lease
Liberty Avenue: On December 20, 2005, Acadia-P/A
acquired the remaining 40-year term of a leasehold inter-
est in land located at Liberty Avenue and 98th Street in
Queens (Ozone Park). Development of this project is com-
plete and includes approximately 30,000 square feet of
to redevelop a 16-acre site in Pelham Manor, Westchester
County, New York. We have demolished the existing
industrial and warehouse buildings, and are constructing
a multi-anchor community retail center at a total estimated
cost of $45.0 million.
retail anchored by a CVS drug store, which is open and
Fordham Road: On September 29, 2004, Acadia-P/A
operating. The project also includes a 95,000 square foot
purchased 400 East Fordham Road, Bronx, New York.
self-storage facility, which is open and currently operated
Sears, a former tenant that operated on four levels at this
by Storage Post. Storage Post is a partner in the self-stor-
property, has signed a new lease to occupy only the con-
age complex, and is anticipated to be a partner in future
course level after redevelopment. We have commenced
retail projects in New York City where self-storage will
redevelopment at this site, which is expected to include
be a potential component of the redevelopment. The total
four levels of retail and office space totaling 285,000
cost to Acadia P/A of the redevelopment was approximately
square feet when completed. The total cost of the project
$15 million.
to Acadia P/A, including the acquisition cost of $30 million,
216th Street: On December 1, 2005, Acadia-P/A acquired
is expected to be $120.0 million.
a 65,000 square foot parking garage located at 10th Avenue
Other Investments
and 216th Street in the Inwood section of Manhattan for
$7.0 million. During 2007, construction of the 60,000 square
foot office building was completed and we relocated an
agency of the City of New York, which was a tenant at
another of our Urban/Infill Redevelopment projects. Inclu-
sive of acquisition costs, total costs to Acadia P/A for the
project, which also includes a 100-space rooftop parking
deck, was approximately $27 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. The ultimate redevelopment plan
for the property, a 100% occupied, 10-story office building,
is to reconfigure the property so that approximately 50%
of the income from the building will eventually be derived
from retail tenants. Additional redevelopment costs to
Acadia P/A are anticipated to be approximately $16 million.
7
Acadia Realty Trust 2007 Annual Report
In addition to the New York Urban/Infill projects discussed
above, through Fund II and Fund III, we also acquired
the following:
During November 2007, Fund III acquired 125 Main Street,
Westport, Connecticut for approximately $17.0 million.
Our plan is to redevelop the existing building into 30,000
square feet of retail, office and residential use.
During November 2005, Fund II acquired a ground lease
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.
During July 2005, Fund II acquired for $1.0 million, a
50% equity interest in an entity which has a leasehold
interest in a former Levitz Furniture store located in
Rockville, Maryland.
Fund I
Brandywine Portfolio and the sale of Amherst Marketplace
To date, through Fund I we have purchased a total of
and Sheffield Crossing as discussed below, there are 29
35 assets totaling approximately 3.0 million square feet.
assets comprising 1.5 million square feet remaining in
During January 2006, we recapitalized the Brandywine
Fund I (in which the Operating Partnership’s interest in
Portfolio as discussed further in “BUSINESS OBJECTIVES
cash flow and income has increased from 22.2% to 37.8%
AND STRATEGIES.” Following the recapitalization of the
as a result of the Promote) as follows:
Location
Year Acquired
GLA
Shopping Center
New York Region
New York
Tarrytown Centre
Mid-Atlantic Region
Virginia
Westchester
Haygood Shopping Center
Virginia Beach
Midwest Region
Ohio
Granville Centre
Michigan
Columbus
Sterling Heights Shopping Center
Detroit
Various Regions
Kroger/Safeway Portfolio
Various
Total
2004
2004
2002
2004
2003
35,291
178,533
134,997
154,835
1,018,100
1,521,756
During November 2007, Fund I sold Amherst Marketplace
Core Portfolio
and Sheffield Crossing, community shopping centers in
During March of 2007, the Operating Partnership pur-
Ohio, for $26.0 million, resulting in a $7.5 million gain.
chased a 52,000 square foot single-tenant building located
In November 2006, Fund I acquired the remaining 50%
interest from our unaffiliated partner in the Tarrytown
Centre for $3.5 million.
During February 2006, Fund I finalized an agreement
with our unaffiliated partner in the Hitchcock Plaza whereby
we converted our common equity interest in the proper-
at 1545 East Service Road in Staten Island, New York for
$17.0 million.
During March of 2007, the Operating Partnership purchased
a retail commercial condominium at 200 West 54th Street
located in Manhattan, New York. The 10,000 square foot
property was acquired for $36.4 million.
ties to a preferred equity position with a 15% preferred
During September of 2006, the Operating Partnership
return payable currently and a 20% profit interest after all
purchased 2914 Third Avenue in the Bronx, New York for
invested capital and preferred returns are paid. In connec-
$18.5 million. The 41,305 square foot property is 100%
tion with this agreement, our partner assumed all opera-
leased and is located in a densely populated, high barrier-
tional, redevelopment and leasing responsibilities. In
to-entry, infill area.
August 2007, the Operating Partnership provided a $5.6
million loan to the third party investor in Hitchcock Plaza
who invested the proceeds into the partnership and were
used to liquidate Fund I’s preferred equity investment and
During June of 2006, the Operating Partnership purchased
8400 and 8625 Germantown Road in Philadelphia, Penn-
sylvania for $16.0 million.
cumulative preferred return. Fund I retains a 20% profits
During January of 2006, the Operating Partnership closed
interest, behind the return of our partner’s equity and
on a 20,000 square foot retail building in the Lincoln Park
cumulative preferred return.
district in Chicago. The property was acquired from an
affiliate of Klaff for $9.9 million.
Acadia Realty Trust 2007 Annual Report 8
During January of 2006, the Operating Partnership acquired
advanced additional proceeds bringing the total outstand-
a 60% interest in the A&P Shopping Plaza located in
ing amount to $31.3 million. The loan matures on May 31,
Boonton, New Jersey. The property, located in northeast-
2008 and bears interest at a rate of 10.5%. During 2006,
ern New Jersey, is a 63,000 square foot shopping center
Levitz SL sold one of the Levitz Properties located in North-
anchored by a 49,000 square foot A&P Supermarket. The
ridge, California and used $20.4 million of the proceeds to
remaining 40% interest is owned by a principal of P/A.
pay down the loan. During 2007, Levitz SL sold an addi-
The interest was acquired for $3.2 million.
tional Levitz Property located in St. Paul Minnesota and
During July 2005 the Operating Partnership purchased
4343 Amboy 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 drug store, and is subject to a 23-year
ground lease.
Other Investments
During March of 2005 the Operating Partnership invested
$20.0 million in a preferred equity position (“Preferred
Equity Investment”) in Levitz SL, L.L.C. (“Levitz SL”), the
owner of fee and leasehold interests in 30 current or for-
mer Levitz Furniture Store locations (the “Levitz Proper-
ties”), totaling 2.5 million square feet.
During June 2006, the Operating Partnership converted the
Preferred Equity Investment to a first mortgage loan and
used $4.8 million of the proceeds to pay down the first
mortgage loan. As of December 31, 2007, the loan balance
amounted to $6.1 million and was secured by fee and lease-
hold mortgages as well as a pledge of the entities owning
13 of the remaining Levitz Properties totaling 1.3 million
square feet. Although Levitz Furniture filed for Chapter 7
bankruptcy protection during November 2007, we believe
the underlying value of the real estate is sufficient to
recover the principal and interest due under the mortgage.
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. Since January 1,
2005, we have sold the following core portfolio assets:
Shopping Center
Location
Colony and GHT Apartments
Soundview Marketplace
Bradford Towne Centre
Greenridge Plaza
Pittston Plaza
Luzerne Street Shopping Center
Berlin Shopping Center
Columbia, Missouri
Long Island, New York
Towanda, Pennsylvania
Scranton, Pennsylvania
Pittston, Pennsylvania
Scranton, Pennsylvania
Central New Jersey
Date Sold
December 2007
December 2006
November 2006
November 2006
November 2006
November 2006
July 2005
Total
GLA
625,545
183,815
257,123
191,767
79,498
58,035
188,688
1,584,471
Sales price
(dollars in thousands)
$ 15,512
24,000
16,000
10,600
6,000
3,600
4,000
$ 79,712
Proceeds from these sales in part have been used to fund
building now occupied by Drexel Heritage and Panera Bread.
the core portfolio acquisitions as discussed in “PROPERTY
The new tenants opened and commenced paying rent dur-
ACQUISITIONS” above.
ing 2006, and are paying a combined base rent at a 127%
PROPERTY REDEVELOPMENT
AND EXPANSION
Our redevelopment program focuses on selecting well-
located neighborhood and community shopping centers
within our core portfolio and creating significant value
through re-tenanting and property redevelopment.
increase over that of the former tenant. In addition, we
have leased approximately 26,000 square feet to Circuit
City, which opened and commenced paying rent during
September of 2007 at a 79% increase over that of the for-
mer tenants. Total costs for this project were $4.6 million.
COMPETITION
There are numerous entities that compete with us in seek-
During 2006, we commenced the redevelopment and
ing properties for acquisition and tenants who will lease
re-tenanting of the Bloomfield Town Square, located in
space in our properties. Our competitors include other
Bloomfield Hills, Michigan. A former out-parcel building
REIT’s, financial institutions, insurance companies, pension
was demolished and replaced with a 17,500 square foot
funds, private companies and individuals. Our properties
9
Acadia Realty Trust 2007 Annual Report
compete for tenants with similar properties primarily on
request. Information included or referred to on our website
the basis of location, total occupancy costs (including base
is not incorporated by reference in or otherwise a part of
rent and operating expenses), services provided, and the
this Form 10-K.
design and condition of the improvements.
FINANCIAL INFORMATION ABOUT
MARKET SEGMENTS
We have three reportable segments: core portfolio, oppor-
CODE OF ETHICS AND WHISTLE-
BLOWER POLICIES
The Board of Trustees adopted a Code of Ethics for Senior
Financial Officers that applies to our Chief Executive Officer,
tunity funds and other, which primarily consists of manage-
Chief Financial Officer, Chief Accounting Officer, Controller,
ment fee income and interest income. We evaluate property
Director of Financial Reporting, Director of Taxation and
performance primarily based on net operating income
Assistant Controllers. The Board also adopted a Code of
before depreciation, amortization and certain non-recurring
Business Conduct and Ethics applicable to all employees,
items. Investments in our core portfolio are typically held
as well as a “Whistleblower Policy.” Copies of these docu-
long-term. Given the finite life of the opportunity funds,
ments are available in the Investor Information section of
these investments are typically held for shorter terms. Fees
our website.
earned by us as general partner/member of the opportu-
nity funds are eliminated in our consolidated financial
ITEM 1A. RISK FACTORSx
statements. We do not have any foreign operations. We
previously reported two reportable segments, retail prop-
erties and multi-family properties. During December of
2007, we sold the majority of our multi-family properties
and realigned our segments to reflect the way we now
manage our business. See Note 3 to our consolidated
financial statements, which begin on page 52 of this Form
10-K for certain information regarding each of our segments.
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. As of December
31, 2007, we had 142 employees, of which 120 were
located at our executive office, six at the Pennsylvania
regional office and the remaining property management
personnel were located on-site at our properties.
COMPANY WEBSITE
All of our filings with the Securities and Exchange Com-
If any of the following risks actually occur, our business,
results of operations and financial condition would likely
suffer. This section includes or refers to certain forward-
looking statements. Refer to the explanation of the qualifi-
cations and limitations on such forward-looking statements
discussed in the beginning of this Form 10-K.
We rely on revenues derived from major tenants.
We derive significant revenues from certain anchor ten-
ants that occupy space in more than one center. We could
be adversely affected in the event of the bankruptcy or
insolvency 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 cus-
tomer 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
mission, including our annual reports on Form 10-K, quarterly
rent for the balance of the lease term, or the departure of
reports on Form 10-Q and current reports on Form 8-K and
an anchor tenant that owns its own property. In addition,
amendments to those reports filed or furnished pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934, are available free of charge at our website at
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,
www.acadiarealty.com, as soon as reasonably practicable
or pay a reduced rent based on a percentage of the tenant’s
after we electronically file such material with, or furnish it
sales, at the affected property, which could adversely
to, the Securities and Exchange Commission. These filings
affect the future income from such property. See “Item 2.
can also be accessed through the Securities and Exchange
Properties — Major Tenants” for quantified information
Commission’s website at www.sec.gov. Alternatively, we
with respect the percentage of our minimum rents
will provide paper copies of our filings free of charge upon
received from major tenants.
Acadia Realty Trust 2007 Annual Report 10
Tenants may seek the protection of the bankruptcy laws,
of properties through the Operating Partnership in exchange
which could result in the rejection and termination of their
for interests in the Operating Partnership may permit certain
leases and thereby cause a reduction in the cash flow
tax deferral advantages to limited partners who contribute
available for distribution by us. Such reduction could be
properties to the Operating Partnership. Since properties
material if a major tenant files bankruptcy. See the risk
contributed to the Operating Partnership may have unreal-
factor titled, “The bankruptcy of, or a downturn in the
ized gain attributable to the difference between the fair
business of, any of our major tenants may adversely affect
market value and adjusted tax basis in such properties prior
our cash flows and property values” below.
to contribution, the sale of such properties could cause
Limited control over joint venture investments.
Our opportunity fund investments may involve risks not
otherwise 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 deci-
sions, such as a sale, because neither we nor a joint ven-
ture partner would have full control over the joint venture.
Also, there is no limitation under our organizational docu-
ments 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
in addition to the risks associated with real estate invest-
ments, including among other risks, human capital issues,
adequate supply of product and material, and merchandis-
ing issues.
adverse tax consequences to the limited partners who
contributed such properties. Although we, as the general
partner of the Operating Partnership, generally have no
obligation to consider 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 consequences to the limited partners who
contribute such properties. Such restrictions could result in
significantly reduced flexibility to manage our assets.
There are risks relating to investments in real estate.
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
During 2007 and 2006, our joint ventures provided Promote
maintenance and insurance and to control variable operat-
income. There can be no assurance that the joint ventures
ing costs. Shopping centers, in particular, may be affected
will continue to operate profitably and thus provide addi-
by changing perceptions of retailers or shoppers regarding
tional Promote income in the future.
the safety, convenience and attractiveness of the shopping
Under the terms of our Fund III joint ventures, we are
required to first offer to Fund III all of our opportunities to
acquire retail shopping centers. Only if (i) our joint venture
partner elects not to approve Fund III’s pursuit of an acqui-
sition opportunity; (ii) the ownership of the acquisition
opportunity by Fund III 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 attrac-
tive acquisitions directly and may only receive a minority
interest in such acquisitions through Fund III.
We operate through a partnership structure, which
could have an adverse effect on our ability to man-
age our assets.
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.
A significant portion 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 significant
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 landlord.
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
Our primary property-owning vehicle is the Operating Part-
from the investment.
nership, of which we are the general partner. Our acquisition
11
Acadia Realty Trust 2007 Annual Report
The bankruptcy of, or a downturn in the business
of, any of our major tenants may adversely affect
our cash flows and property values.
The bankruptcy of, or a downturn in the business of, any
of our major tenants causing them to reject their leases,
or not renew their leases as they expire, or renew at lower
rental rates may adversely affect our cash flows and prop-
erty values. Furthermore, the impact of vacated anchor
space and the potential reduction in customer traffic may
adversely impact the balance of tenants at the center.
Certain of our tenants have experienced financial difficul-
ties 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 satis-
faction 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, 2004, there have been three significant
tenant bankruptcies within our portfolio:
On January 14, 2004, KB Toys (“KB”) filed for protection
under Chapter 11 Bankruptcy. KB operated in five locations
in our core portfolio totaling approximately 41,000 square
feet. Rental revenues from KB at these locations aggre-
gated $0.3 million for each of the years ended December
31, 2007, 2006 and 2005, respectively. KB rejected the
lease at three of these locations and continues to operate
in two of our core portfolio locations but has neither
assumed nor rejected these two leases.
On September 27, 2007, the Bombay Company, Inc.
(“Bombay”) filed for protection under Chapter 11 Bank-
ruptcy. Bombay operated in one of our core portfolio loca-
tions, leasing 8,965 square feet. Rental revenues from
Bombay totaled $0.2 million for the years ended Decem-
ber 31, 2007, 2006 and 2005, respectively. Bombay has
rejected the lease at this location.
On June 11, 2007, Tweeter Home Entertainment Group,
Inc. (“Tweeter”) filed for protection under Chapter 11
Bankruptcy. Tweeter is operating in one of our core port-
folio locations, leasing 12,799 square feet. Rental rev-
enues from Tweeter totaled $0.3 million, $0.1 million and
$0.0 million for the years ended December 31, 2007, 2006
and 2005, respectively. Tweeter has neither assumed or
rejected the lease.
We could be adversely affected by poor market
conditions where properties are geographically
concentrated.
Our performance depends on the economic conditions in
markets in which our properties are concentrated. We have
significant exposure to the New York region, from which
we derive 35% of the annual base rents within our Core
portfolio. Our operating results could be adversely affected
if market conditions, such as an oversupply of space or a
reduction in demand for real estate, in this area become
more competitive relative to other geographic areas.
Our ability to change our portfolio is limited
because real estate investments are illiquid.
Equity investments in real estate are relatively illiquid and,
therefore, our ability to change our portfolio promptly in
response to changed conditions will be limited. 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. 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.
Recent disruptions in the financial markets could
affect our ability to obtain debt financing on reason-
able terms and have other adverse effects on us.
The United States credit markets have recently experi-
enced significant dislocations and liquidity disruptions
which have caused the spreads on prospective debt
financings to widen considerably. These circumstances
have materially impacted liquidity in the debt markets,
making financing terms for borrowers less attractive, and
in certain cases have resulted in the unavailability of cer-
tain types of debt financing. Continued uncertainty in the
credit markets may negatively impact our ability to access
Acadia Realty Trust 2007 Annual Report 12
additional debt financing at reasonable terms, which may
of these counterparties will enable them to fulfill their obli-
negatively affect our ability to make acquisitions. A pro-
gations under these agreements.
longed downturn in the credit markets may cause us to
seek alternative sources of potentially less attractive
financing, and may require us to adjust our business plan
accordingly. In addition, these factors may make it more
difficult for us to sell properties or may adversely affect
the price we receive for properties that we do sell, as
prospective buyers may experience increased costs of
debt financing or difficulties in obtaining debt financing.
These events in the credit markets have also had an
adverse effect on other financial markets in the United
States, which may make it more difficult or costly for us
to raise capital through the issuance of our equity securi-
ties. These disruptions in the financial markets may have
other adverse effects on us or the economy generally.
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 may not be able to renew current leases and
the terms of re-letting (including the cost of conces-
sions 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 prop-
erties or if the rental rates we receive upon re-letting are
significantly 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 of their leases. See “Item 2. Properties —
Lease Expirations” in this Annual Report on Form 10-K
for additional information as to the scheduled lease expira-
We have incurred, and expect to continue to incur,
tions in our portfolio.
indebtedness in furtherance of our activities. Neither our
Declaration of Trust nor any policy statement formally
adopted by our board of trustees limits either the total
amount of indebtedness 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 operations and our ability
to make distributions.
Our loan agreements contain customary representations,
covenants and events of default. Certain loan agreements
require us to comply with certain affirmative and negative
covenants, including the maintenance of certain debt serv-
ice coverage and leverage ratios.
Interest expense on our variable debt as of December 31,
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 liability without regard to whether we knew
of, or were responsible for, the presence or disposal of
those substances. This liability may be imposed on us in
connection with the activities of an operator of, or tenant
at, the property. The cost of any required remediation,
removal, fines or personal or property damages and our
liability therefore could exceed the value of the property
2007 would increase by $1.2 million annually for a 100 basis
and/or our aggregate assets. In addition, the presence of
point increase in interest rates. We may seek additional
those substances, or the failure to properly dispose of or
variable-rate financing if and when pricing and other com-
remove those substances, may adversely affect our ability
mercial and financial terms warrant. As such, we would
consider hedging against the interest rate risk related to
to sell or rent that property or to borrow using that prop-
erty as collateral, which, in turn, would reduce our revenues
such additional variable-rate debt through interest rate
and ability to make distributions.
swaps and protection agreements, or other means.
We enter into interest-rate hedging transactions, including
interest rate swaps and cap agreements, with counterpar-
A property can also be adversely affected either through
physical contamination or by virtue of an adverse effect
upon value attributable to the migration of hazardous or
ties. There can be no guarantee that the financial condition
toxic substances, or other contaminants that have or may
13
Acadia Realty Trust 2007 Annual Report
have emanated from other properties. Although our tenants
that we wish to purchase. In addition, retailers at our
are primarily responsible for any environmental damages
properties face increasing competition from outlet malls,
and claims related to the leased premises, in the event of
discount shopping clubs, internet commerce, direct mail
the bankruptcy or inability of any of our tenants to satisfy
and telemarketing, which could (i) reduce rents payable
any obligations with respect to the property leased to that
to us; (ii) reduce our ability to attract and retain tenants
tenant, we may be required to satisfy such obligations. In
at our properties; and (iii) lead to increased vacancy rates
addition, we may be held directly liable for any such dam-
at our properties.
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 environ-
mental 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:
n The discovery of previously unknown environmental
conditions;
n Changes in law;
n Activities of tenants; and
n Activities relating to properties in the vicinity of our
properties.
Changes in laws increasing the potential liability for envi-
ronmental conditions existing on properties or increasing
the restrictions on discharges or other conditions may
result in significant unanticipated expenditures or may
otherwise adversely affect the operations of our tenants,
which could adversely affect our financial condition or
results of operations.
We have pursued, and may in the future continue
to pursue, extensive growth opportunities which
may result in significant demands on our opera-
tional, administrative and financial resources.
We have pursued extensive growth opportunities. This
expansion has placed significant demands on our opera-
tional, administrative and financial resources. The contin-
ued growth of our real estate portfolio can be expected
to continue to place a significant strain on our resources.
Our future performance 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 that may affect the value of
real estate. There can be no assurance that we will have
sufficient resources to identify and manage acquired prop-
erties 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 earnings growth strategy is based on the acquisition
and development of additional properties, including acqui-
sitions through co-investment programs such as joint ven-
tures. In the context of our business plan, “development”
generally means an expansion or renovation of an existing
property. The consummation of any future acquisitions
will be subject to satisfactory completion of our extensive
valuation analysis and due diligence review and to the
negotiation of definitive documentation. We cannot be
sure that we will be able to implement our strategy
Competition may adversely affect our ability to pur-
chase properties and to attract and retain tenants.
because we may have difficulty finding new properties,
negotiating with new or existing tenants or securing
There are numerous commercial developers, real estate
acceptable financing.
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 other REIT’s, financial institutions, insurance com-
panies, pension funds, private companies and individuals.
This competition may result in a higher cost for properties
Acquisitions of additional properties entail the risk that
investments will fail to perform in accordance with expec-
tations, including operating and leasing expectations.
Redevelopment is subject to numerous risks, including
risks of construction delays, cost overruns or uncontrol-
lable events that may increase project costs, new project
Acadia Realty Trust 2007 Annual Report 14
commencement risks such as the receipt of zoning, occu-
qualification as a REIT or the federal income tax conse-
pancy and other required governmental approvals and per-
quences of such qualification. If we do not qualify as a REIT,
mits, and the incurrence of development costs in connection
we would not be allowed a deduction for distributions to
with projects that are not pursued to completion.
shareholders in computing our net taxable income. In addi-
A component of our growth strategy is through private-
equity type investments made through our RCP Venture.
These include investments in operating retailers. The inabil-
ity of the retailers to operate profitably would have an
adverse impact on income realized from these investments.
Our board of trustees may change our investment
policy without shareholder approval.
tion, our income would be subject to tax at the regular
corporate rates. We also could be disqualified from treat-
ment 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 distributions. Although we currently intend to
Our board of trustees will determine our investment and
continue to qualify as a REIT, it is possible that future
financing policies, our growth strategy and our debt, capi-
economic, market, legal, tax or other considerations may
talization, distribution, acquisition, disposition and operat-
cause us, without the consent of the shareholders, to
ing policies. Our board of trustees may establish investment
revoke the REIT election or to otherwise take action that
criteria or limitations as it deems appropriate, but currently
would result in disqualification.
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 election of trustees, and changes made by our board
of trustees may not serve the interests of all of our share-
holders and could adversely affect our financial condition
or results of operations, including our ability to distribute
cash to shareholders 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
purposes, we are generally required to distribute to our
shareholders 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 exclud-
ing net capital gains. To the extent that we satisfy the
distribution requirement, 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% nondeductible excise tax on the amount,
if any, by which our distributions 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;
We believe that we have met the requirements for quali-
(iii) 100% of our undistributed taxable income from prior
fication as a REIT for federal income tax purposes begin-
years. We intend to continue to make distributions to our
ning with our taxable year ended December 31, 1993, and
shareholders to comply with the distribution requirements
we intend to continue to meet these requirements in the
of the Internal Revenue Code and to reduce exposure to
future. However, qualification as a REIT involves the appli-
federal income and nondeductible excise taxes. Differences
cation of highly technical and complex provisions of the
in timing between the receipt of income and the payment
Internal Revenue Code, for which there are only limited
of expenses in determining our income and the effect of
judicial or administrative interpretations. No assurance can
required debt amortization payments could require us to
be given that we have qualified or will remain qualified as
borrow funds on a short-term basis to meet the distribu-
a REIT. The Internal Revenue Code provisions and income
tion requirements that are necessary to achieve the tax
tax regulations applicable to REIT’s are more complex than
benefits associated with qualifying as a REIT.
those applicable to corporations. The determination of vari-
ous factual matters and circumstances not entirely within
our control may affect our ability to continue to qualify as a
REIT. In addition, no assurance can be given that legislation,
regulations, administrative interpretations or court deci-
sions will not significantly change the requirements for
Uninsured losses or a loss in excess of insured lim-
its could adversely affect our financial condition.
We carry comprehensive liability, fire, extended coverage
and rent loss insurance on most of our properties, with
policy specifications and insured limits customarily carried
15
Acadia Realty Trust 2007 Annual Report
for similar properties. However, with respect to those
properties where the leases do not provide for abatement
Adverse legislative or regulatory tax changes could
have an adverse effect on us.
of rent under any circumstances, we generally do not
There are a number of issues associated with an invest-
maintain rent loss insurance. In addition, there are certain
ment in a REIT that are related to the federal income tax
types of losses, such as losses resulting from wars, ter-
laws, including, but not limited to, the consequences of
rorism or acts of God that generally are not insured
failing to continue to qualify as a REIT. At any time, the
because they are either uninsurable or not economically
federal income tax laws governing REIT’s or the adminis-
insurable. Should an uninsured loss or a loss in excess
trative interpretations of those laws may be amended.
of insured limits occur, we could lose capital invested in
Any of those new laws or interpretations may take effect
a property, as well as the anticipated future revenues from
retroactively and could adversely affect us or our share-
a property, while remaining obligated for any mortgage
holders. Recently enacted legislation reduces tax rates
indebtedness or other financial obligations related to the
applicable to certain corporate dividends paid to most
property. Any loss of these types would adversely affect
domestic noncorporate shareholders. REIT dividends gen-
our financial condition.
Limits on ownership of our capital shares.
For the Company to qualify as a REIT for federal income
tax purposes, among other requirements, not more than
50% of the value of our capital shares may be owned,
directly or indirectly, by five or fewer individuals (as defined
erally are not eligible for reduced rates because a REIT’s
income generally is not subject to corporate level tax. As a
result, investment in non-REIT corporations may be viewed
as relatively more attractive than investment in REIT’s by
domestic noncorporate investors. This could adversely
affect the market price of the Company’s shares.
in the Internal Revenue Code to include certain entities)
Concentration of ownership by certain investors.
during the last half of each taxable year after 1993, and
Ten institutional shareholders own 5% or more individually,
such capital shares must be beneficially owned by 100 or
and 67.9% in the aggregate, of our Common Shares.
more persons during at least 335 days of a taxable year of
A significant concentration of ownership may allow an
12 months or during a proportionate part of a shorter tax-
investor to exert a greater influence over our management
able year (in each case, other than the first such year). Our
and affairs and may have the effect of delaying, deferring
Declaration of Trust includes certain restrictions regarding
or preventing a change in control of us.
transfers of our capital shares and ownership limits that
are intended to assist us in satisfying 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.
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 pre-
ferred 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
Actual or constructive ownership of our capital shares in
could be in the best interest of the shareholders.
excess of the share ownership limits contained in our Dec-
laration of Trust would cause the violative transfer or own-
ership 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 rules for these limits are com-
plex and groups of related individuals or entities may be
deemed a single owner and consequently in violation of
the share ownership limits.
In addition, we have entered into an employment agree-
ment 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 and either the termination of their employ-
ment without cause (as defined) or their resignation for
good reason (as defined), 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), which could deter
a change of control of us that could be in our best interest.
Acadia Realty Trust 2007 Annual Report 16
The loss of a key executive officer could have an
adverse effect on us.
We had 545 leases as of December 31, 2007. A majority
of our rental revenues were from national tenants. A
Our success depends on the contribution of key manage-
majority of the income from the properties consists of rent
ment members. The loss of the services of Kenneth F.
received under long-term leases. These leases generally
Bernstein, President and Chief Executive Officer, or other
provide for the payment of fixed minimum rent monthly
key executive-level employees could have a material
adverse effect on our results of operations. We have
in advance and for the payment by tenants of a pro-rata
share of the real estate taxes, insurance, utilities and com-
entered into an employment agreement with Mr. Bern-
mon area maintenance of the shopping centers. Minimum
stein; however, it could be terminated by Mr. Bernstein.
rents and expense reimbursements accounted for approxi-
We have not entered into employment agreements with
mately 84% of our total revenues for the year ended
other key executive level employees.
December 31, 2007.
ITEM 1B. UNRESOLVED STAFF COMMENTSx
None.
ITEM 2. PROPERTIESx
Shopping Center Properties
The discussion and tables in this Item 2 include properties
held through consolidated and unconsolidated joint ventures
in which we own a partial interest (“Consolidated Joint
Venture Portfolio” and “Unconsolidated Joint Venture
Portfolio,” respectively). Except where noted, it does not
include our partial interest in 25 anchor-only leases with
Kroger and Safeway supermarkets. These are detailed
As of December 31, 2007, approximately 35% of our
existing leases also provided for the payment of percent-
age 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 2007 rev-
enues of the Company.
Seven of our shopping center properties are subject to
long-term ground leases in which a third party owns and
has leased the underlying land to us. We pay rent for the
use of the land at seven locations and are responsible for
all costs and expenses associated with the building and
separately within this Item 2 as the majority of these prop-
improvements at all seven locations.
erties are free-standing and all are triple-net leases.
No individual property contributed in excess of 10% of our
total revenues for the years ended December 31, 2007,
2006 and 2005. Reference is made to our consolidated
financial statements beginning on page 52 of this Annual
Report on form 10-K for information on the mortgage debt
pertaining to our properties. The following sets forth more
specific information with respect to each of our shopping
centers at December 31, 2007:
As of December 31, 2007, we owned and operated 51
commercial properties as part of our core portfolio and
opportunity fund portfolios. The properties are primarily
neighborhood and community shopping centers, mixed-
use centers and one multi-family property. Ten of these
properties are currently under redevelopment. Our shop-
ping centers, which total approximately 7.5 million square
feet of gross leaseable area (“GLA”), are located in 13
states and are generally well-established, anchored com-
munity and neighborhood shopping centers. The operating
properties are diverse in size, ranging from approximately
10,000 to 875,000 square feet with an average size of
150,000 square feet. As of December 31, 2007, our core
portfolio and the opportunity fund portfolios (excluding
properties under redevelopment) were 94.9% and 93.7%
occupied, respectively. Our shopping centers are typically
anchored by supermarkets or value-oriented retail.
17
Acadia Realty Trust 2007 Annual Report
Shopping Center
Location
Acquired (A)
Interest
GLA
Year
Constructed (C) Ownership
Anchor Tenants
Occupancy (1) % Current Lease Expiration/
Lease Option Expiration
12/31/07
Core Portfolio
NEW YORK REGION
Connecticut
239 Greenwich Avenue
New Jersey
Elmwood Park Shopping Center
Greenwich
1998 (A)
Fee
16,834 (3)
100%
Restoration Hardware 2014/2024
Coach 2016/2021
Elmwood Park
1998 (A)
Fee
149,491
100%
A&P 2017/2052
Walgreens 2022/2062
A&P Shopping Plaza
Boonton
2006 (A)
Fee
62,908
100%
A&P 2024/2069
New York
Village Commons Shopping Center
Branch Shopping Plaza
Smithtown
Smithtown
1998 (A)
1998 (A)
Fee
LI (4)
87,169
125,751
98%
99%
Daffy’s 2008/2028
A&P 2013/2028
CVS 2010/—
Amboy Road
Staten Island
2005 (A)
LI (4)
60,090
100%
A&P/Waldbaum’s 2028/—
Bartow Avenue
Pacesetter Park Shopping Center
2914 Third Avenue
West Shore Expressway
West 54th Street
Crossroads Shopping Center
Bronx
Pomona
Bronx
Staten Island
Manhattan
White Plains
2005 (C)
1999 (A)
2006 (A)
2007 (A)
2007 (A)
1998 (A)
Fee
Fee
Fee
Fee
Fee
14,676
96,698
42,400
55,000
9,945
JV (7)
310,624
Duane Reade 2008/2018
Sleepy’s 2009/2014
Stop & Shop 2020/2040
Dr. J’s 2021/—
LA Fitness 2021/—
Stage Deli 2011/—
A&P/Waldbaum’s 2012/2032
87%
93%
79%
100%
82%
97%
Kmart 2012/2032
B. Dalton 2012/2022
Modell’s 2009/2019
Pier 1 2012/—
Pay Half 2007/—
Total New York Region
NEW ENGLAND REGION
Connecticut
Town Line Plaza
Massachusetts
Methuen Shopping Center
Crescent Plaza
New York
New Loudon Center
Rhode Island
Walnut Hill Plaza
Vermont
The Gateway Shopping Center
Total New England Region
1,031,586
97%
Rocky Hill
1998 (A)
Fee
206,356 (2)
99%
Stop & Shop 2023/2063
Wal-Mart (2)
Methuen
Brockton
1998 (A)
LI/Fee (4)
130,021
100%
DeMoulas Market 2015/2020
1984 (A)
Fee
218,141
99%
Wal-Mart 2012/2052
Shaw’s 2012/2042
Home Depot 2021/2056
Latham
1982 (A)
Fee
255,826
100%
Price Chopper 2015/2035
Marshall’s 2014/2029
Bon Ton 2014/2034
Raymour and Flanigan 2019/2034
AC Moore 2009/2024
Woonsocket
1998 (A)
Fee
284,717
89%
Shaw’s 2013/2028
Sears 2008/2033
CVS 2009/2014
South Burlington
1999 (A)
Fee
101,784
1,196,845
96%
97%
Shaw’s 2024/2053
Acadia Realty Trust 2007 Annual Report 18
Shopping Center
Location
Acquired (A)
Interest
GLA
Year
Constructed (C) Ownership
Anchor Tenants
Occupancy (1) % Current Lease Expiration/
Lease Option Expiration
12/31/07
MIDWEST REGION
Illinois
Hobson West Plaza
Naperville
1998 (A)
Fee
98,908
98%
Bobak’s Market & Restaurant
2012/2032
Clark Diversey
Chicago
2006 (A)
Fee
19,265
100%
Papyrus 2010/2015
Starbucks 2010/2015
Nine West 2009/—
The Vitamin Shoppe 2014/2024
Indiana
Merrillville Plaza
Michigan
Bloomfield Town Square
Ohio
Mad River Station
Merrillville
1998 (A)
Fee
235,685
96%
TJ Maxx 2009/2014
JC Penney 2008/2018
Office Max 2008/2028
K&G 2017/2027
Pier 1 2009/—
David’s Bridal 2010/2020
Bloomfield Hills
1998 (A)
Fee
232,181
98%
TJ Maxx 2009/2014
Marshalls 2011/2026
Home Goods 2010/2020
Circuit City 2023/2038
Office Max 2010/2025
Dayton
1999 (A)
Fee
155,838 (6)
81%
Babies ‘R’ Us 2010/2020
Office Depot 2010/—
Pier 1 2010/—
Total Midwest Region
741,877
94%
19
Acadia Realty Trust 2007 Annual Report
Shopping Center
Location
Acquired (A)
Interest
GLA
Year
Constructed (C) Ownership
Anchor Tenants
Occupancy (1) % Current Lease Expiration/
Lease Option Expiration
12/31/07
MID-ATLANTIC REGION
New Jersey
Marketplace of Absecon
Absecon
1998 (A)
Fee
105,135
95%
Acme 2015/2055
Eckerd Drug 2020/2040
Ledgewood Mall
Ledgewood
1983 (A)
Fee
517,151
89%
Wal-Mart 2019/2049
Macy’s 2010/2025
The Sports Authority 2012/2037
Circuit City 2020/2040
Marshalls 2014/2034
Ashley Furniture 2010/2020
Barnes and Noble 2010/2035
Delaware
Brandywine Town Center
Wilmington
2003 (A)
JV (10)
874,908
98%
Drexel Heritage 2016/2026
Michaels 2011/2026
Old Navy (The Gap) 2011/2016
PetSmart 2017/2042
Thomasville Furniture 2011/2021
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 2018/2058
TransUnion Settlement 2013/2018
Lane Home Furnishings 2015/2030
MJM Designer 2015/2030
World Market 2015/—
Christmas Tree Shops 2028/2048
Target Expansion 2011/2363
Market Square Shopping Center
Wilmington
2003 (A)
JV (10)
102,662
89%
TJ Maxx 2011/2016
Naamans Road
Pennsylvania
Blackman Plaza
Mark Plaza
Plaza 422
Route 6 Mall
Wilmington
2006 (C)
LI/JV (10) (4)
19,970
100%
Tweeters 2026/2046
Trader Joe’s 2013/2028
Wilkes-Barre
1968 (C)
Fee
125,264
93%
Kmart 2009/2049
Eckerd 2016/—
Edwardsville
1968 (C)
LI/Fee (4)
216,401
93%
Redner’s Markets 2018/2028
Lebanon
Honesdale
1972 (C)
1994 (C)
Fee
Fee
155,149
175,505
69%
100%
Kmart 2009/2049
Home Depot 2028/2058
Kmart 2020/2070
Eckerd 2011/2026
Fashion Bug 2016/—
Chestnut Hill (13)
Philadelphia
2006 (A)
Fee
40,570
100%
Borders 2010/2020
Express 2009/—
Abington Towne Center
Abington
1998 (A)
Fee
216,355 (5)
99%
TJ Maxx 2010/2020
Total Mid-Atlantic Region
Total Core Properties
Target (5)
2,549,070
5,519,378
94%
95%
Acadia Realty Trust 2007 Annual Report 20
Shopping Center
Location
Acquired (A)
Interest
GLA
Year
Constructed (C) Ownership
Anchor Tenants
Occupancy (1) % Current Lease Expiration/
Lease Option Expiration
12/31/07
Opportunity Fund Portfolio
Fund I Properties
Ohio
Granville Centre
Virginia
Haygood Shopping Center
New York
Tarrytown Shopping Center
VARIOUS REGIONS
Kroger/Safeway Portfolio
Total Fund I Properties
Fund II Properties
Illinois
Oakbrook
New York
Liberty Avenue
216th Street
Total Fund II Properties
Total Opportunity Fund Operating Properties
Properties Under Redevelopment
Sterling Heights Shopping Center
Detroit
161st Street
400 E. Fordham Road
Bronx
Bronx
Pelham Manor Shopping Plaza
Westchester
Sherman Avenue
CityPoint
Atlantic Avenue
Canarsie Plaza
Westport
Sheepshead Bay
Total Redevelopment Properties
New York
Brooklyn
Brooklyn
Brooklyn
Westport
Brooklyn
Columbus
2002 (A)
JV (8)
134,997
41%
Lifestyle Family Fitness 2017/2027
Virginia Beach
2004 (A)
JV (8)
178,533
93%
Eckerd Drug 2009/—
Farm Fresh 2026/2101
Marshalls 2017/—
Westchester
2004 (A)
JV (8)
35,291
85%
Walgreens 2080/—
Various
2003 (A)
JV (8)
1,018,100
100%
25 Kroger/Safeway Supermarkets
1,366,921
93%
2009/—
Oakbrook
2005 (A)
JV (4) (9)
112,000
100%
Neiman Marcus 2011/2036
New York
New York
2005 (A)
2005 (A)
JV (4) (9)
JV (9)
17,088
60,000
CVS 2032/2052
NY Dept. of Citywide Admin Svcs
2027/2042
100%
100%
100%
94%
189,088
1,556,009
2004 (A)
JV (8)
154,835
69%
Burlington Coat Factory 2024/—
2005 (A)
2004 (A)
2004 (A)
2005 (A)
2007 (A)
2007 (A)
2007 (A)
2007 (A)
2007 (A)
JV (9)
JV (9)
LI/JV (4) (9)
JV (9)
JV (9)
JV (9)
JV (9)
JV (12)
JV (12)
223,521
87%
City of New York 2011/—
Rite-Aid 2026/2046
(11)
(11)
(11)
(11)
(11)
(11)
(11)
(11)
378,356
(11)
(11)
(11)
(11)
(11)
(11)
(11)
(11)
80%
Notes:
(6) The GLA for this property includes 28,205 square feet of office space.
(1) Does not include space leased for which rent had not yet commenced as of
(7) We have a 49% investment in this property.
December 31, 2007.
(2) Includes a 97,300 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) We are a ground lessee under a long-term ground lease.
(5) Includes a 157,616 square foot Target Store that is not owned by the Company.
(8) We have invested in this asset through Fund I.
(9) We have invested in this asset through Fund II.
(10) We have invested in this asset with Ginsburg Development Corp. (GDC).
(11) Under redevelopment.
(12) We have invested in this asset through Fund III.
(13) Property consists of two buildings.
21
Acadia Realty Trust 2007 Annual Report
Major Tenants
No individual retail tenant accounted for more than 6.3% of minimum rents for the year ended December 31, 2007 or
8.7% of total leased GLA as of December 31, 2007. The following table sets forth certain information for the 20 largest
retail tenants based upon minimum rents in place as of December 31, 2007. The table includes leases related to our par-
tial interest in 25 anchor-only leases with Kroger and Safeway supermarkets. The amounts below include our pro-rata
share of GLA and annualized base rent for our partial ownership interest in properties (GLA and rent in thousands):
Number of Stores
in Portfolio
Total GLA
Annualized
Base Rent (1)
Total Portfolio
GLA (2)
Annualized Base
Rent (2)
Percentage of Total
Represented by Retail Tenant
Retail Tenant
A&P (Waldbaum’s)
Albertson’s (Shaw’s, Acme)
T.J. Maxx (T.J. Maxx, Marshalls, Homegoods)
Sears (Sears, Kmart)
Wal-Mart
Ahold (Stop & Shop)
Kroger (3)
Safeway (4)
Home Depot
Circuit City
Price Chopper
Restoration Hardware
Sleepy’s
Federated (Macy’s)
Walgreens
CVS
Payless Shoesource
Limited Brands
JC Penney
Borders
Total
Notes:
5
4
8
5
2
2
12
13
2
2
1
1
5
1
2
4
9
1
1
1
216
220
237
440
210
118
156
132
211
60
77
9
36
73
21
31
29
13
50
19
$ 3,769
3,013
1,853
1,633
1,515
1,299
1,046
1,040
1,010
950
804
781
683
651
615
562
552
510
495
482
4.3%
4.4%
4.7%
8.7%
4.1%
2.3%
3.1%
2.6%
4.2%
1.2%
1.5%
0.2%
0.7%
1.4%
0.4%
0.6%
0.6%
0.3%
1.0%
0.4%
6.3%
5.0%
3.1%
2.7%
2.5%
2.2%
1.8%
1.7%
1.7%
1.6%
1.3%
1.3%
1.1%
1.1%
1.0%
0.9%
0.9%
0.9%
0.8%
0.8%
81
2,358
$ 23,263
46.7%
38.7%
(1) Base rents do not include percentage rents (except where noted), additional rents for property expense reimbursements, and contrac-
tual rent escalations due after December 31, 2007.
(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 opera-
tions 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 oper-
ations at one other location. Safeway is obligated to pay rent through the full term of all these leases which expire in 2009.
Acadia Realty Trust 2007 Annual Report 22
Lease Expirations
The following table shows scheduled lease expirations for retail tenants in place as of December 31, 2007, assuming that
none of the tenants exercise renewal options. (GLA and Annualized Base Rent in thousands):
Core Portfolio:
Leases maturing in
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Thereafter
Total
Number of
Leases
106
78
65
52
42
20
24
20
12
20
39
478
Opportunity Fund Portfolios:
Leases maturing in
Number of
Leases
2008
2009
2010
2011
2012
2014
2015
2016
2017
Thereafter
Total
Note:
23
28
4
11
8
6
2
1
3
9
95
Annualized Base Rent (1)
GLA
Current
Annual Rent
$8,134
6,176
6,259
7,416
5,534
4,463
4,806
5,558
1,762
4,701
16,377
$71,186
Percentage
of Total
Square Feet
Percentage
of Total
11%
9%
9%
10%
8%
6%
7%
8%
2%
7%
23%
100%
476
550
526
330
505
266
288
336
82
212
1,414
4,985
10%
11%
11%
7%
10%
5%
6%
7%
2%
4%
27%
100%
Annualized Base Rent (1)
GLA
Current
Annual Rent
$
523
7,480
190
5,037
748
341
47
111
741
4,668
$ 19,886
Percentage
of Total
Square Feet
Percentage
of Total
3%
37%
1%
25%
4%
2%
0%
1%
4%
23%
100%
47
1,036
9
290
44
14
3
8
66
242
1,759
2%
60%
1%
16%
2%
1%
0%
0%
4%
14%
100%
(1) Base rents do not include percentage rents, additional rents for property expense reimbursements, nor contractual rent escalations
due after December 31, 2007.
23
Acadia Realty Trust 2007 Annual Report
Geographic Concentrations
The following table summarizes our retail properties by region as of December 31, 2007. (GLA and Annualized Base Rent
in thousands):
Region
Core Properties:
New York Region (3)
New England
Midwest
Mid-Atlantic
Total Core Properties
Opportunity Fund Properties:
Midwest (4)
Mid-Atlantic (5)
New York Region (6)
Various (Kroger/Safeway
Portfolio) (7)
Total Operating
GLA (1)
Occupied % (2)
Annualized
Base Rent (2)
Annualized Base
Rent Per Occupied
Square Foot
Percentage of Total
Represented by Region
GLA
19%
22%
13%
46%
Annualized
Base Rent
35%
14%
13%
38%
$ 24,654
$24.67
10,167
9,455
26,910
9.60
13.57
12.07
$ 71,186
$14.28
100%
100%
$ 1,488
1,768
4,095
$ 8.86
10.69
38.23
16%
12%
7%
10%
12%
28%
50%
1,018
100%
7,363
7.23
65%
1,032
1,197
742
2,549
5,520
247
179
112
97%
97%
94%
94%
95%
68%
93%
95%
Opportunity Fund Properties
1,556
94%
$ 14,714
$10.09
100%
100%
Fund Redevelopment Properties:
Midwest (8)
New York Region (9)
Total Fund Redevelopment
Properties
Notes:
155
224
379
69%
87%
$
641
4,531
$ 6.02
23.27
40%
60%
12%
88%
80%
$ 5,172
$17.16
100%
100%
(1) Property GLA includes a total of 255,000 square feet which is not owned by us. This square footage has been excluded for calcu-
lating annualized 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 had not yet com-
menced as of December 31, 2007.
(3) We have a 49% interest in two partnerships, which together, own the Crossroads Shopping Center.
(4) We have a 37.78% interest in future earnings and distributions from Fund I, which owns one property, and a 20% interest in Fund II,
which owns one property.
(5) We have a 37.78% interest in future earnings and distributions from Fund I, which has a 50% interest in a property.
(6) We have a 37.78% interest in future earnings and distributions from Fund I, which owns one property, and a 20% interest in Fund II,
which has a 98.6% interest in two properties.
(7) Fund I portfolio of 25 triple-net, anchor-only leases with Kroger and Safeway supermarkets.
(8) We have a 37.78% interest in future earnings and distributions from Fund I, which has a 50% interest in one property.
(9) We have a 20% interest in Fund II, which has a 98.6% interest in one property.
Acadia Realty Trust 2007 Annual Report 24
Kroger/Safeway Portfolio
In January of 2003, Fund I formed a joint venture (the
with terms, including renewal options, averaging in excess
of 80 years, which are master leased to a non-affiliated
“Kroger/Safeway JV”) with an affiliate of real estate devel-
entity. The primary lease terms end during 2009 (“Primary
oper and investor AmCap Incorporated (“AmCap”) for the
purpose of acquiring a portfolio of 25 supermarket leases
for $48.9 million inclusive of the closing and other related
acquisition costs. The portfolio, which aggregates approxi-
mately 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-stand-
ing and all are triple-net leases. The Kroger/Safeway JV
acquired the portfolio subject to long-term ground leases
Term”). Rental options for the supermarket leases at the
end of their Primary Term are at an average rent of $5.13
per square foot and for 10-year increments through 2049.
Although there is no obligation for the Kroger/Safeway JV
to pay ground rent during the Primary Term, to the extent
it exercises an option to renew a ground lease for a prop-
erty at the end of the Primary Term, it will be obligated to
pay an average ground rent of $1.55 per square foot.
The following table sets forth more specific information 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
Notes:
Tenant
Kroger Co.
Kroger Co.
Kroger Co.
Kroger Co.
Kroger Co.
Kroger Co.
Kroger Co.
Kroger Co.
Kroger Co.
Kroger Co.
Kroger Co.
Safeway
Safeway
Safeway
Safeway
Safeway
Safeway
Safeway
Safeway
Safeway
Safeway
Safeway
Safeway
Safeway
Kroger Co.
Total
Notes
(1) (5)
(7)
(2) (6)
(2) (5)
(7)
(4)
(1) (5)
(5)
(5)
(1) (5)
(1) (6)
(3) (5)
(1) (7)
(1) (7)
(1) (4)
(1) (7)
(4)
(1) (4)
(2) (6)
(1) (4)
(7)
(4)
(4)
(1) (6)
(3) (4)
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
$ 3.07
Rent upon
initial option
commencement
$ 2.40
6.90
5.92
5.90
4.99
5.57
4.84
11.09
8.97
9.57
8.92
6.23
8.94
7.36
6.43
10.29
7.01
6.49
9.29
9.33
7.76
7.56
7.32
7.75
5.86
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
(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.
(4) The tenant has exercised its option to renew its lease.
(5) The tenant has exercised its option to purchase the fee to this property during 2009.
(6) The tenant has not exercised its option to renew the lease.
(7) Renewal status pending.
25
Acadia Realty Trust 2007 Annual Report
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 any certainty the amounts involved,
management is of the opinion that, when such litigation is
resolved, our resulting net 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
(b) Dividends
We have determined that for 2007, 51% of the total divi-
dends distributed to shareholders represented ordinary
income, 15% represented unrecaptured Section 1250
gain and 34% represented Section 1231 gain. Our cash
flow is affected by a number of factors, including the
revenues received from rental properties, our operating
expenses, the interest expense on our borrowings, the
ability of lessees to meet their obligations to us and
unanticipated capital expenditures. Future dividends paid
by us will be at the discretion of the Trustees and will
No matter was submitted to a vote of security holders
depend on our actual cash flows, our financial condition,
through the solicitation of proxies or otherwise during the
capital requirements, the annual distribution requirements
fourth quarter of 2007.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON x
EQUITY, RELATED STOCK MATTERS ANDx
ISSUER PURCHASES OF EQUITY SECURITIESx
(a) Market Information
The following table shows, for the period indicated,
the high and low sales price for our Common Shares as
reported on the New York Stock Exchange, and cash divi-
dends declared during the two years ended December 31,
2007 and 2006:
under the REIT provisions of the Code and such other
factors as the Trustees deem relevant.
(c) Issuer purchases of equity securities
We have an existing share repurchase program that
authorizes management, at its discretion, to repurchase
up to $20.0 million of our outstanding Common Shares.
Through February 29, 2008, we had repurchased 2.1 million
Common Shares at a total cost of $11.7 million. All of
these Common Shares have been subsequently reissued.
The program may be discontinued or extended at any
time and there is no assurance that we will purchase the
full amount authorized. There were no Common Shares
repurchased by us during the fiscal year ended December
Quarter Ended
High
Low
Dividend
Per Share
31, 2007.
(d) Securities authorized for issuance under equity
compensation plans
The following table provides information related to our
1999 Share Incentive Plan (the “1999 Plan”), 2003 Share
Incentive Plan (the “2003 Plan”) and the 2006 Share Incen-
tive Plan (the “2006 Plan”) as of December 31, 2007:
2007
March 31, 2007
June 30, 2007
September 30, 2007
December 31, 2007
2006
March 31, 2006
June 30, 2006
September 30, 2006
December 31, 2006
$28.14
$24.12
$0.2000
28.75
27.93
29.00
25.43
21.19
24.03
0.2000
0.2000
0.4325
$24.21
$19.79
$0.1850
23.94
26.70
27.13
19.51
22.70
23.81
0.1850
0.1850
0.2000
At February 29, 2008, there were 321 holders of record of
our Common Shares.
Acadia Realty Trust 2007 Annual Report 26
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)]
531,738
—
531,738
$9.99
—
$9.99
618,041 (1)
—
618,041 (1)
Equity compensation plans
approved by security holders
Equity compensation plans
not approved by security holders
Total
Notes:
(1) The 1999 Plan authorizes the issuance of options equal to up to 8% 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 exer-
cise of options and no participant may receive more than 5,000,000 Common Shares during the term of the 1999 Plan. The 2003 Plan
authorizes the issuance of options equal to up to 4% of the total 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. The 2006 Plan
authorizes the issuance of a maximum number of 500,000 Common Shares. No participant may receive more than 500,000 Common
Shares during the term of the 2006 Plan.
Remaining Common Shares available is as follows:
Outstanding Common Shares as of December 31, 2007
Outstanding OP Units as of December 31, 2007
Total Outstanding Common Shares and OP Units
12% of Common Shares pursuant to the 1999 and 2003 Plans
Common Shares pursuant to the 2006 Plan
Total Common Shares available under equity compensations plans
Less: Issuance of Restricted Shares Granted
Issuance of Options Granted
Number of Common Shares remaining available
32,184,462
642,272
32,826,734
3,939,208
500,000
4,439,208
(1,042,005)
(2,779,162)
618,041
27
Acadia Realty Trust 2007 Annual Report
(e) Share Price Performance Graph (1)
The following graph compares the cumulative total shareholder return for our Common Shares for the period commenc-
ing December 31, 2002 through December 31, 2007 with the cumulative total return on the Russell 2000 Index (“Russell
2000”), the NAREIT All Equity REIT Index (the “NAREIT”) and the SNL Shopping Center REITs (the “SNL”) over the same
period. Total return values for the Russell 2000, the NAREIT, the SNL and the Common Shares were calculated based
upon cumulative total return assuming the investment of $100.00 in each of the Russell 2000, the NAREIT, the SNL and
our Common Shares on December 31, 2002, and assuming reinvestment of such dividends. The shareholder return as
set forth in the table below is not necessarily indicative of future performance.
Comparison of Five-Year Cumulative Total Return among Acadia Realty Trust, the Russell 2000,
the NAREIT and the SNL:
Period Ending
Index
Acadia Realty Trust
Russell 2000
NAREIT All Equity REIT Index
SNL REIT Retail Shopping Ctr Index
12/31/02
12/31/03
12/31/04
12/31/05
12/31/06
12/31/07
100.00
100.00
100.00
100.00
178.76
147.25
137.13
141.78
243.71
174.24
180.44
192.62
311.77
182.18
202.38
210.19
401.39
215.64
273.34
282.93
427.32
212.26
230.45
232.94
(1) The information is this section is not “soliciting material,” is not deemed “filed” with the SEC, and is not to be incorporated by
reference into any filing of the Trust under the Securities Act or the Exchange Act, whether made before or after the date hereof
and irrespective of any general incorporation language contained in such filing.
Acadia Realty Trust 2007 Annual Report 28
5010015020025030035040045050012/31/0712/31/0612/31/0512/31/0412/31/0312/31/02SNLShoppingCenterREITSIndexNAREITAllEquityREITIndexRussell2000AcadiaRealtyTrustIndexValue ITEM 6. SELECTED FINANCIAL DATAx
The following table sets forth, on a historical basis, our selected financial data. This information should be read in conjunc-
tion 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. Funds from operations (“FFO”) amounts for the year
ended December 31, 2007 have been adjusted as set forth in “Item 7. Management’s Discussion and Analysis of Finan-
cial Condition and Results of Operations – Reconciliation of Net Income to Funds from Operations and Adjusted Funds
From Operations.”
(dollars in thousands, except per share amounts)
2007
2006
2005
2004
2003
Years ended December 31,
OPERATING DATA:
Revenues
Operating expenses
Interest expense
Depreciation and amortization
Equity in earnings of unconsolidated partnerships
Minority interest
Income tax provision (benefit)
Income from continuing operations
Income from discontinued operations
Income from extraordinary item (1)
$101,569
$ 95,800
$ 93,965
$ 80,283
$ 76,072
48,617
22,775
27,506
6,619
9,063
297
18,056
5,537
3,677
42,734
20,377
25,361
2,559
5,227
(508)
15,622
23,391
—
38,453
16,689
24,697
21,280
(13,946)
2,140
19,320
1,306
—
32,884
14,525
21,607
513
(1,462)
—
10,318
9,267
—
31,521
13,389
22,537
985
(4,892)
—
4,718
3,135
—
Net income
$ 27,270
$ 39,013
$ 20,626
$ 19,585
$
7,853
Basic earnings per share:
Income from continuing operations
Income from discontinued operations
Income from extraordinary item
Basic earnings per share
Diluted earnings per share:
Income from continuing operations
Income from discontinued operations
Income from extraordinary item
Diluted earnings per share
Weighted average number of Common Shares
outstanding
– basic
– diluted
$
$
$
$
0.55
0.17
0.11
0.83
0.54
0.17
0.11
0.82
$
$
$
0.48
0.72
—
1.20
0.48
0.70
—
$
$
$
0.61
0.04
—
0.65
0.60
0.04
—
$
1.18
$
0.64
$
$
$
$
0.35
0.32
—
0.67
0.34
0.31
—
0.65
$
$
$
0.18
0.12
—
0.30
0.18
0.11
—
$
0.29
32,907
33,309
32,502
33,153
31,949
32,214
29,341
29,912
26,640
27,232
Cash dividends declared per Common Share
$ 1.0325
$
0.755
$ 0.7025
$ 0.6525
$
0.595
BALANCE SHEET DATA:
Real estate before accumulated depreciation
$854,074
$650,051
$670,817
$ 561,370
$ 504,355
Total assets
Total mortgage indebtedness
Total convertible notes payable
Minority interest in Operating Partnership
Minority interests in partially-owned affiliates
Total equity
OTHER:
Funds from Operations, adjusted for
extraordinary item (1) (2)
Cash flows provided by (used in):
Operating activities
Investing activities
Financing activities
See Notes on following page.
999,012
402,903
115,000
4,595
166,516
240,736
851,692
319,507
100,000
8,673
105,064
241,119
841,204
382,510
—
9,204
137,086
220,576
599,724
242,527
—
6,893
75,244
216,924
518,914
248,180
—
7,875
37,681
169,734
$ 44,018
$ 39,953
$ 35,842
$ 30,004
$ 27,664
105,165
(208,869)
87,476
39,627
(58,890)
68,359
50,239
(135,470)
159,425
33,885
(72,860)
40,050
31,031
(76,552)
15,454
29
Acadia Realty Trust 2007 Annual Report
Notes:
(1) The extraordinary item represents the Company’s share of
estimated extraordinary gain related to its private-equity invest-
ment in Albertson’s. The Albertson’s entity has recorded an
extraordinary gain in connection with the allocation of purchase
price to assets acquired. The Company considers its private-
equity investments to be investments in operating businesses
as opposed to real estate. Accordingly, all gains and losses
from private-equity investments are included in FFO, which
management believes provides a more accurate reflection of
the operating performance of the Company.
(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 disclo-
sure of operating performance for an equity REIT due to its
widespread acceptance and use within the REIT and analyst
communities. FFO is presented to assist investors in analyzing
the performance of the Company. It is helpful as it excludes
various items included in net income that are not indicative of
the operating performance, such as gains (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 operations as defined by gen-
erally accepted accounting principles (“GAAP”) and is not
indicative of cash available to fund all cash needs, including
distributions. It should not be considered as an alternative to
net income for the purpose of evaluating the Company’s per-
formance or to cash flows as a measure of liquidity. Consis-
tent 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 depreci-
ation and amortization, and after adjustments for unconsolidated
partnerships and joint ventures.
Acadia Realty Trust 2007 Annual Report 30
Management’s Discussion and Analysis
ITEM 7. MANAGEMENT’S DISCUSSION ANDx
ANALYSIS OF FINANCIAL CONDITIONx
AND RESULTS OF OPERATIONS x
Overview
As of December 31, 2007, we operated 76 properties,
which we own or have an ownership interest in, within
our Core Portfolio or within our Opportunity Funds I, II and
III. These properties consist of 75 commercial properties,
primarily neighborhood and community shopping centers
and mixed-use developments, which are located primarily
in the Northeast, Mid-Atlantic and Midwestern regions of
the United States and one multi-family property located in
Southeast region of the United States. Our Core Portfolio
consists of 34 properties comprising approximately 5.5
million square feet. Fund I has 29 properties comprising
approximately 1.5 million square feet. Fund II has 10 prop-
erties, the majority of which are undergoing redevelop-
ment and will have approximately two million square feet
upon completion of redevelopment activities. The newly
created Fund III has two properties, which are undergoing
redevelopment and will have approximately 0.3 million
square feet upon completion of redevelopment activities.
and leasing and/or transactions requiring creative capital
structuring to facilitate the transactions.
n Partner with private equity investors for the purpose
of making investments in operating retailers with sig-
nificant embedded value in their real estate assets.
n Maintain a strong and flexible balance sheet through
conservative financial practices while ensuring access
to sufficient capital to fund future growth.
Results of Operations
Comparison of the year ended December 31, 2007
(“2007”) to the year ended December 31, 2006
(“2006”)
(dollars in millions)
Revenues:
Minimum rents
Percentage rents
Expense reimbursements
Other property income
Management fee income
Interest income
Other
Change
2007
2006
$72.1 $63.6
1.2
14.5
0.9
5.6
8.3
1.7
0.6
13.3
1.0
4.1
10.3
0.2
$
$8.5
(0.6)
(1.2)
0.1
(1.5)
2.0
(1.5)
%
13%
(50)%
(8)%
11%
(27)%
24%
(88)%
The majority of our operating income derives from the
Total revenues
$101.6 $95.8
$5.8
6%
rental revenues from these properties, including recover-
ies from tenants, offset by operating and overhead
expenses. As our RCP Venture invests in operating com-
panies, we consider these investments to be private-
equity, as opposed to real estate investments. Since these
are not traditional investments in operating rental real
estate, the Operating Partnership invests in these through
a taxable REIT subsidiary (“TRS”).
The increase in minimum rents was primarily attributable to
additional rents following our acquisition of 200 West 54th
Street, 145 East Service Road, 2914 Third Avenue and
Chestnut Hill (“2006/2007 Acquisitions”) as well as Liberty
Avenue and 216th Street being placed in service January 1,
2007 and October 1, 2007, respectively. In addition, mini-
mum rents increased as a result of re-tenanting activities
Our primary business objective is to acquire and manage
across our portfolio.
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:
n Own and operate a portfolio of community and neigh-
borhood shopping centers and mixed-use properties
with a retail component located in markets with strong
demographics.
Percentage rents decreased primarily as a result of the tem-
porary closing of an anchor tenant at Fordham Place during
the construction period in 2007.
Expense reimbursements for common area maintenance
(“CAM”) decreased $0.2 million. During 2007, we com-
pleted our multi-year review of CAM billings and resolved
the majority of all outstanding CAM billing issues with our
tenants. As a result, 2007 was adversely impacted by charges
n Generate internal growth within the portfolio through
related to settlements and related adjustments totaling
aggressive redevelopment, re-anchoring and leasing
$1.0 million. This was partially offset by higher CAM recov-
activities.
n Generate external growth through an opportunistic yet
disciplined acquisition program. The emphasis is on
targeting transactions with high inherent opportunity for
the creation of additional value through redevelopment
31
Acadia Realty Trust 2007 Annual Report
ery resulting from increased snow removal costs in 2007.
Real estate tax reimbursements decreased $1.0 million,
primarily as a result of lower real estate tax expense in
2007 and a $0.4 million real estate tax charge to an anchor
tenant for previous years billed during 2006.
Management fee income decreased $1.5 million primarily
Depreciation expense increased $1.3 million in 2007. This
as a result of lower fees earned in connection with Klaff
was principally a result of increased depreciation expense
management contracts following the disposition of certain
following the 2006/2007 Acquisitions and Liberty Avenue
assets in 2006 and 2007 and lower management fees from
and 216th Street being placed in service during 2007. Amor-
our investments in unconsolidated affiliates.
tization expense increased $0.8 million in 2007. This was
The increase in interest income was attributable to interest
income on notes and other advances receivable originated
in the second half of 2006 and 2007 as well as higher bal-
ances in interest earning assets in 2007.
The decrease in other income was primarily attributable to a
$1.1 million reimbursement of certain fees by the institutional
investors of Fund I for the Brandywine Portfolio in 2006 as
well as $0.5 million of additional income related to termina-
tion of interest rate swap agreements.
(dollars in millions)
Operating Expenses:
Property operating
Real estate taxes
General and administrative
Depreciation and
Change
2007
$15.9
9.7
23.0
2006
$12.8
10.1
19.8
$
$3.1
(0.4)
3.2
amortization
27.5
25.4
2.1
Total operating expenses
$76.1
$68.1
$8.0
%
24%
(4)%
16%
8%
12%
The increase in property operating expenses was primarily
primarily attributable to increased amortization of loan costs
following our convertible debt issuances in December 2006
and January 2007 as well as increased amortization of loan
costs from financing activity in late 2006 and 2007.
(dollars in millions)
Other:
Equity in earnings of
unconsolidated affiliates
Interest expense
Minority interest
Income taxes
Income from discontinued
operations
Extraordinary item
2007
2006
$
%
Change
$6.6
(22.8)
9.1
0.3
$2.6
(20.4)
5.2
(0.5)
$4.0
(2.4)
3.9
(0.8)
153%
(12)%
75%
(160)%
23.4
5.5
3.7 —
(17.9)
3.7
(76)%
100%
Equity in earnings of unconsolidated affiliates increased
as a result of our distributions in excess of our invested
capital from both our Albertson’s investment of $2.4 million
and our investment in Hitchcock Plaza of $2.4 million. These
increases were offset by a decrease in our pro rata share
of earnings from our Mervyns investment of $1.3 million.
the result of the 2006/2007 Acquisitions, Liberty Avenue
Interest expense increased $2.4 million in 2007. This was
being placed in service January 1, 2007 and higher snow
the result of a $4.9 million increase attributable to higher
removal costs of $1.0 million in 2007.
The decrease in real estate taxes was due to tax refunds
and adjustments of estimates of $0.6 million recorded
in 2007 and $0.6 million related to the capitalization of
construction period real estate taxes at a property that
average outstanding borrowings in 2007 and $0.4 million
of costs associated with a loan payoff in 2007. These
increases were offset by a $2.9 million decrease resulting
from a lower average interest rate on the portfolio mort-
gage debt in 2007.
was operating in 2006. These decreases were offset by
The variance in minority interest is primarily attributable
increased real estate tax expense of $0.8 million following
to the minority partners’ share of increased fund level fees
the 2006/2007 Acquisitions as well as general increases
partially offset by $2.6 million representing the minority
across the portfolio.
The variance in general and administrative expense was
partners’ share of the income reported from the equity
in earnings of unconsolidated affiliates.
attributable to increased compensation expense, including
The variance in income tax expense primarily relates to
share based compensation of $4.7 million for additional
income tax on our share of income and losses from
personnel hired in the second half of 2006 and in 2007
Albertson’s and Mervyns.
as well as increases in existing employee salaries. In
addition, there was an increase of $0.7 million for other
overhead expenses following the expansion of our infra-
Income from discontinued operations represents activity
related to properties sold in 2007 and 2006.
structure related to increased fund investments and asset
The extraordinary gain in 2007 relates to our share of the
management services. These factors were partially offset
extraordinary gain, net of income taxes and minority inter-
by an increase in capitalized construction salaries due to
est, from our Albertson’s investment. This gain was char-
higher redevelopment activities in 2007.
acterized as extraordinary consistent with the accounting
Acadia Realty Trust 2007 Annual Report 32
Management’s Discussion and Analysis continued
treatment by Albertson’s which reflected the excess of fair
Subsequent to the recapitalization and conversion of inter-
value of net assets acquired over the purchase price as an
ests from Fund I to GDC in January 2006, the Brandywine
extraordinary gain.
Comparison of the year ended December 31, 2006
(“2006”) to the year ended December 31, 2005
(“2005”)
Portfolio is accounted for under the equity method of
accounting for the year ended December 31, 2006. In the
following tables, we have excluded the Brandywine Port-
folio operations for the year ended December 31, 2005 for
purposes of comparability with the year ended December
The Brandywine Portfolio operations were consolidated as
31, 2006.
part of Fund I for the year ended December 31, 2005.
(dollars in millions)
Revenues:
Minimum rents
Percentage rents
Expense reimbursements
Other property income
Management fee income
Interest income
Other
Total revenues
2005
Brandywine
2005
Change from 2005 Adjusted
2006
$ 63.6
1.2
14.5
0.9
5.6
8.3
1.7
$ 95.8
As Reported
$ 69.4
1.3
14.4
2.0
3.6
3.3
—
$ 94.0
Portfolio
$(14.0)
(0.6)
(2.2)
(0.2)
0.5
—
—
$(16.5)
Adjusted
$55.4
0.7
12.2
1.8
4.1
3.3
—
$77.5
$
$ 8.2
0.5
2.3
(0.9)
1.5
5.0
1.7
$18.3
%
15%
71%
19%
(50)%
37%
152%
100%
24%
The increase in minimum rents was attributable to addi-
Management fee income increased primarily as a result of
tional rents following our acquisition of Chestnut Hill,
fees earned in connection with the acquisition of the Klaff
Clark Diversey, A&P Shopping Plaza, 2914 Third Avenue
management contract rights in February 2005 and addi-
and Boonton Shopping Center (60% owned) as well as
tional management fees earned from our investments in
Fund II acquisitions of Sherman Avenue and 161st Street
unconsolidated affiliates.
in New York and a leasehold interest in Chicago (“2005/
2006 Acquisitions”).
The increase in interest income was attributable to inter-
est income on our advances and notes receivable origi-
Expense reimbursements for both CAM and real estate
nated in 2005 and 2006, as well as higher balances in
taxes increased in 2006. CAM expense reimbursements
interest earning assets in 2006.
increased $0.5 million as a result of higher tenant reim-
bursements following the 2005/2006 Acquisitions, offset
by a decrease in tenant reimbursements as a result of
lower snow removal costs in 2006. Real estate tax reim-
bursements increased $1.8 million, primarily as a result of
the 2005/2006 Acquisitions, as well as general increases
in real estate taxes across the portfolio.
The decrease in other property income was the result of
receipt of a bankruptcy claim settlement against a former
Other income increased as a result of a $1.1 million
reimbursement of the Company’s share of certain fees
incurred by the institutional investors of Fund I for the
Brandywine Portfolio, as well as $0.5 million related to
the termination of an interest rate swap in 2006.
tenant in 2005.
(dollars in millions)
2005
Brandywine
2005
Change from 2005 Adjusted
Operating Expenses:
Property operating
Real estate taxes
General and administrative
Depreciation and amortization
Total operating expenses
2006
$ 12.8
10.1
19.8
25.4
$ 68.1
As Reported
$ 13.3
9.0
16.2
24.7
$ 63.2
Portfolio
$ (3.4)
(0.8)
—
(2.6)
$ (6.8)
Adjusted
$ 9.9
8.2
16.2
22.1
$56.4
$
$ 2.9
1.9
3.6
3.3
$11.7
%
29%
23%
22%
15%
21%
33
Acadia Realty Trust 2007 Annual Report
The increase in property operating expenses was primarily
$0.9 million, and $0.9 million of other overhead expenses
the result of the recovery of approximately $0.5 million
following the expansion of our infrastructure related to
related to the settlement of our insurance claim in con-
increased investment in development-intensive projects
nection with the flood damage incurred at the Mark Plaza
in Fund assets and asset management services.
in 2005, increased property operating expenses related to
the 2005/2006 Acquisitions and higher bad debt expense
in 2006. These increases were offset by lower snow
removal costs during 2006.
Depreciation expense increased $1.4 million in 2006. This
was principally a result of increased depreciation expense
related to the 2005/2006 Acquisitions. Amortization
expense increased $1.9 million, which was primarily the
The increase in real estate taxes was due to general
combination of an increase in amortization related to the
increases in real estate taxes experienced across the port-
2005/2006 Acquisitions, specifically, amortization of tenant
folio, as well as increased real estate tax expense related
installation costs of $1.0 million, amortization of leasehold
to the 2005/2006 Acquisitions.
The increase in general and administrative expense was
primarily attributable to increased compensation expense
of $2.7 million, including stock-based compensation of
interest of $0.5 million and amortization of loan costs of
$0.2 million. In addition, amortization expense increased
$0.2 million related to the write off of certain Klaff man-
agement contracts following the disposition of certain
related assets in 2006.
2005
As Reported
Brandywine
Portfolio
2005
Adjusted
Change from 2005 Adjusted
$
%
(dollars in millions)
Other:
Equity in earnings of
unconsolidated affiliates
Interest expense
Minority interest
Income taxes
Income from discontinued
operations
2006
$ 2.6
(20.4)
5.2
(0.5)
$21.3
(16.7)
(13.9)
2.1
23.4
1.3
$ 0.9
3.7
5.1
—
—
$22.2
(13.0)
(8.8)
2.1
$ (19.6)
(7.4)
14.0
2.6
(88)%
(57)%
159%
124%
1.3
22.1
1,700%
Equity in earnings of unconsolidated affiliates decreased
The variance in income tax expense relates to taxes at the
during 2006 primarily as a result of the gains recognized
taxable REIT subsidiary (“TRS”) level on our share of gains
from the sale of Mervyns assets in 2005.
from the sale of Mervyns locations during 2005.
Interest expense increased $7.4 million as a result of
Income from discontinued operations represents activity
higher average outstanding borrowings in 2006.
related to properties sold in 2007, 2006 and 2005.
Minority interest variance is attributable to the minority
partner’s share of gains from the sale of Mervyns assets
in 2005.
Acadia Realty Trust 2007 Annual Report 34
Management’s Discussion and Analysis continued
Reconciliation of Net Income to Funds from Operations and Adjusted Funds from Operations
(dollars in thousands)
Net income
Depreciation of real estate and amortization
of leasing costs:
Consolidated affiliates, net of minority
interests’ share
Unconsolidated affiliates
Income attributable to minority interest
in operating partnership (1)
Gain on sale of properties
Extraordinary item (net of minority interests’
share and income taxes) (3)
Funds from operations (2)
Add back: Extraordinary item, net (3)
Funds from operations, adjusted
for extraordinary item
Notes:
For the years ended December 31,
2007
2006
2005
2004
2003
$ 27,270
$39,013
$20,626
$19,585
$ 7,853
19,669
1,736
614
(5,271)
(3,677)
40,341
3,677
20,206
1,806
803
(21,875)
—
39,953
—
16,676
746
416
(2,622)
—
35,842
—
16,026
714
375
(6,696)
—
30,004
—
18,421
643
747
—
—
27,664
—
$ 44,018
$39,953
$35,842
$30,004
$ 27,664
(1) Represents income attributable to Common Operating Partnership Units and does not include distributions paid to Series A and B
Preferred OP Unitholders.
(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 accept-
ance and use within the REIT and analyst communities. FFO is presented to assist investors in analyzing the performance of the
Company. It is helpful as it excludes various items included in net income that are not indicative of the operating performance, such
as gains (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 operations as defined by generally accepted accounting principles (“GAAP”) and is not indicative
of cash available to fund all cash needs, including distributions. It should not be considered as an alternative to net income for the pur-
pose of evaluating the Company’s performance or to cash flows as a measure of liquidity. Consistent with the NAREIT definition, the
Company defines FFO as net income (computed in accordance with GAAP), excluding gains (losses) from sales of depreciated prop-
erty, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.
(3) The extraordinary item represents the Company’s share of estimated extraordinary gain related to its private-equity investment in
Albertson’s. The Albertson’s entity has recorded an extraordinary gain in connection with the allocation of purchase price to assets
acquired. The Company considers its private-equity investments to be investments in operating businesses as opposed to real estate.
Accordingly, all gains and losses from private-equity investments are included in FFO, which management believes provides a more
accurate reflection of the operating performance of the Company.
Liquidity and Capital Resources
Uses of Liquidity
Our principal uses of liquidity are expected to be for
(i) distributions to our shareholders and OP unit holders,
(ii) investments which include the funding of our capital
committed to our opportunity funds, property acquisitions
and redevelopment/re-tenanting activities within our exist-
ing portfolio and (iii) debt service and loan repayments.
Distributions
In order to qualify as a REIT for Federal income tax pur-
poses, we must currently distribute at least 90% of our
taxable income to our shareholders. For the first three
quarters during 2007, we paid a quarterly dividend of
$0.20 per Common Share and Common OP Unit. In
December of 2007, our Board of Trustees approved and
declared an 5.0% increase in our quarterly dividend to
$0.21 per Common Share and Common OP Unit for the
fourth quarter of 2007, which was paid January 15, 2008.
In addition, in December of 2007, our Board of Trustees
approved a special dividend of $0.2225 per Common Share
in connection with taxable gains arising from property
dispositions that was paid on January 15, 2008 to the
shareholders of record as of December 31, 2007.
Fund I and Mervyns I
In September 2001, the Operating Partnership committed
$20.0 million to a newly formed opportunity fund with
four of our institutional shareholders, who committed
$70.0 million, for the purpose of acquiring a total of
approximately $300.0 million of community and neigh-
borhood shopping centers on a leveraged basis.
On January 4, 2006, we recapitalized a one million square
foot retail portfolio located in Wilmington, Delaware
35
Acadia Realty Trust 2007 Annual Report
(“Brandywine Portfolio”) through a merger of interests
Fund II and Mervyns II
with affiliates of GDC Properties (“GDC”). The Brandywine
Portfolio was recapitalized through a “cash out” merger
of the 77.8% interest, which was previously held by the
institutional investors in Fund I (the “Investors”) to affili-
ates of GDC at a valuation of $164.0 million. The Operat-
ing Partnership, through a subsidiary, retained our existing
22.2% interest and continues to operate the Brandywine
Portfolio and earn fees for such services. At the closing,
the Investors, excluding the Operating Partnership, received
a return of all their capital invested in Fund I and preferred
return, thus triggering the Operating Partnership’s Promote
distribution in all future Fund I distributions and increasing
the Operating Partnership’s interest in cash flow and income
from 22.2% to 37.8% as a result of the Promote. In June
On June 15, 2004, we closed our second opportunity
fund, Fund II, and during August 2004, formed Mervyns II
with the investors from Fund I as well as two additional
institutional investors. With $300.0 million of committed
discretionary capital, Fund II and Mervyns II combined
expect to be able to acquire up to $900.0 million of real
estate assets on a leveraged basis. The Operating Partner-
ship is the managing member with a 20% interest in the
joint venture. The terms and structure of Fund II are sub-
stantially the same as Fund I with the exceptions that the
preferred return is 8%. As of December 31, 2007, $182.0
million had been contributed to Fund II, of which the Oper-
ating Partnership’s share is $36.4 million.
2006, the Investors received $36.0 million of additional
Fund II has invested in the RCP Venture and the New
proceeds from this transaction following the replacement
York Urban/Infill Redevelopment initiatives and other
of bridge financing provided by them with permanent
investments as further discussed in “PROPERTY ACQUI-
mortgage financing.
SITIONS” in Item 1 of this Form 10-K.
As of December 31, 2007, Fund I has a total of 29 proper-
ties totaling 1.5 million square feet as further discussed in
“PROPERTY ACQUISITIONS” in Item 1 of this Form 10-K.
RCP Venture
The following table summarizes the RCP Venture investments from inception through December 31, 2007:
(dollars in millions)
Investor
Mervyns I and Mervyns II Mervyns
Mervyns I and Mervyns II Mervyns add-on
Investment
Mervyns II
Mervyns II
Fund II
Fund II
Mervyns II
Total
investments
Albertson’s
Albertson’s add-on
investments
Shopko
Marsh
Rex
Year
Acquired
2004
2005
2006
2006/2007
2006
2006
2007
Operating Partnership Share
Invested
Capital
$ 26.1
Distributions
$ 46.0
Invested
Capital
$ 4.9
Distributions
$ 11.3
1.3
20.7
2.8
1.1
0.7
2.7
1.3
53.2
0.8
1.1
—
—
0.3
4.2
0.4
0.2
0.1
0.5
0.3
9.8
0.1
0.2
—
—
$ 55.4
$ 102.4
$ 10.6
$ 21.7
New York Urban/Infill Redevelopment Initiative
In September 2004, we, through Fund II, launched our
$2.2 million and Fund II, the managing member, has agreed
to invest the balance to acquire assets in which Acadia
New York Urban Infill Redevelopment initiative. During
P/A agrees to invest. Operating cash flow is generally to
2004, Fund II, together with an unaffiliated partner, P/A,
be distributed pro-rata to Fund II and P/A until each has
formed Acadia P/A (“Acadia P/A”) for the purpose of
received a 10% cumulative return and then 60% to Fund
acquiring, constructing, developing, owning, operating,
II and 40% to P/A. Distributions of net refinancing and
leasing and managing certain retail real estate properties
net sales proceeds, as defined, follow the distribution of
in the New York City metropolitan area. P/A has agreed
operating cash flow except that unpaid original capital is
to invest 10% of required capital up to a maximum of
returned before the 60%/40% split between Fund II and
Acadia Realty Trust 2007 Annual Report 36
Management’s Discussion and Analysis continued
P/A, respectively. Upon the liquidation of the last property
portion of its previous distributions, as defined, until Fund
investment of Acadia P/A, to the extent that Fund II has
II has received an 18% IRR. To date, Fund II has invested
not received an 18% internal rate of return (“IRR”) on
in nine projects, eight of which are in conjunction with
all of its capital contributions, P/A is obligated to return a
P/A, as follows:
Location
Queens
Manhattan
Property
Liberty Avenue (1) (2)
216th Street (3)
Pelham Manor Shopping Center (1) Westchester
161st Street
400 East Fordham Road
Canarsie Plaza
4650 Broadway
CityPoint (1)
Atlantic Avenue
Bronx
Bronx
Brooklyn
Manhattan
Brooklyn
Brooklyn
Total
Notes:
Year
Acquired
2005
2005
2004
2005
2004
2007
2005
2007
2007
Purchase
Price
$ 14.5
27.5
—
49.0
30.0
21.0
25.0
29.0
5.0
$201.0
Redevelopment (dollars in millions)
Anticipated
Additional
Costs
$ —
—
45.0
16.0
90.0
49.0
30.0
296.0
18.0
$544.0
Estimated
Completion
Completed
Completed
Second half 2008
First half 2009
First half 2009
First half 2009
Second half 2009
(4)
Second half 2009
Square
Feet Upon
Completion
125,000
60,000
320,000
232,000
285,000
323,000
216,000
600,000
110,000
2,271,000
(1) Fund II acquired a leasehold interest at this property.
(2) Liberty Avenue redevelopment is complete. The purchase price includes redevelopment costs of $14.5 million.
(3) 216th Street redevelopment is complete. The purchase price includes redevelopment costs of $20.5 million.
(4) To be determined.
Fund III
In May 2007, we closed on our third opportunity fund,
in Fund III. The terms and structure of Fund III are sub-
stantially the same as the previous Funds, including the
Fund III with 14 institutional investors, including a majority
Promote structure, with the exception that the Preferred
of the investors from Fund I and Fund II. With $503.0
Return is 6%.
million of committed discretionary capital, Fund III expects
to be able to acquire or develop approximately $1.5 billion
of assets on a leveraged basis. The Operating Partner-
ship’s share of the committed capital is $100.0 million
and it is the sole managing member with a 19.9% interest
Fund III has invested in the New York Urban/Infill Rede-
velopment initiatives and another investment as further
discussed in “PROPERTY ACQUISITIONS” in Item 1 of
this Form 10-K. The projects are as follows:
Property
Sheepshead Bay
Main Street
Total
Location
Brooklyn
Westport, CT
Year
Acquired
2007
2007
Purchase
Price
$ 20.0
17.0
$ 37.0
Redevelopment (dollars in millions)
Anticipated
Additional
Costs
$ 89.0
6.0
$ 95.0
Estimated
Completion
To be determined
To be determined
Square
Feet Upon
Completion
240,000
30,000
270,000
Other Investments
During 2005, 2006 and 2007, we made the following
(iii) $3.2 million for Boonton Shopping Center
(iv) $16.0 million for Chestnut Hill
other core portfolio investments as further discussed in
(v) $18.5 million for 2914 Third Avenue
“PROPERTY ACQUISITIONS” in Item 1 of this Form 10-K:
(vi) $36.4 million for West 54th Street
(i) $16.8 million in Amboy Road
(ii) $9.8 million for Clark/Diversey
(vii) $17.0 million for East Service Road
37
Acadia Realty Trust 2007 Annual Report
Property Development, Redevelopment and
Expansion
Our redevelopment program focuses on selecting well-
amounted to approximately $10.0 million. We anticipate that
cash flow from operating activities will continue to provide
adequate capital for all of our debt service payments, recur-
located neighborhood and community shopping centers
ring capital expenditures and REIT distribution requirements.
and creating significant value through re-tenanting and
On January 5, 2006, we made a distribution of $42.7 mil-
property redevelopment.
During 2006, we commenced the redevelopment and
re-tenanting of the Bloomfield Town Square, located in
Bloomfield Hills, Michigan. A former outparcel building,
occupied by Chrysler Dodge, was demolished and replaced
with a 17,500 square foot building occupied by Drexel
Heritage and Panera Bread. The new tenants opened and
commenced paying rent during the third and fourth quarters
of 2006, and are paying base rent at a 127% increase over
that of Chrysler Dodge. In addition, we have re-tenanted
approximately 26,000 square feet to Circuit City, which
commenced paying rent in September of 2007 at a 79%
increase over that of the former tenants. Total costs for
this project was $4.6 million.
Additionally, for the year ended December 31, 2007, we
currently estimate that capital outlays of approximately $2.5
million to $3.5 million will be required for tenant improve-
lion utilizing a $42.7 million distribution we received from
an unconsolidated affiliate on December 29, 2005.
Issuance of Convertible Notes
During December of 2006 and January of 2007, we issued
$115.0 million of 3.75% Convertible Notes. These notes
were issued at par and are due in 2026. The $112.1 million
in proceeds, net of related costs, were used to retire vari-
able rate debt, fund capital commitments and general
company purposes.
Shelf Registration Statements and
Issuance of Equity
During January 2007, we filed a shelf registration on Form
S-3 providing offerings for up to a total of $300.0 million
of Common Shares, Preferred Shares and debt securities.
To date, we have not issued any securities pursuant to
this shelf registration.
ments, related renovations and other property improvements.
In addition, we have $46.7 million of remaining capacity
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 and Fund III as well as new
funds that we may establish in the future, as the primary
vehicles for our future acquisitions, including investments
in the RCP Venture and New York Urban/Infill Redevelop-
ment initiative. Additional sources of capital for funding
property acquisitions, development, redevelopment, expan-
sion, re-tenanting, tenanting, RCP investments and New
York Urban/Infill are expected to be obtained primarily from
(i) the issuance of public equity or debt instruments, (ii)
cash on hand, (iii) additional debt financings, (iv) unrelated
member capital contributions and (v) future sales of exist-
ing properties. As of December 31, 2007, we had a total
of approximately $202.3 million of additional capacity under
existing debt facilities, cash and cash equivalents on hand
of $123.3 million, and 10 properties that are unencum-
to issue equity under the shelf registration statement we
filed in November 2004.
Financing and Debt
At December 31, 2007, mortgage and convertible notes
payable aggregated $517.0 million, net of unamortized
premium of $0.9 million, and were collateralized by 49
properties and related tenant leases. Interest rates on
our outstanding indebtedness ranged from 3.75% to 8.5%
with maturities that ranged from March 2008 to November
2032. Taking into consideration $34.3 million of notional
principal under variable to fixed-rate swap agreements
currently in effect, as of December 31, 2007 $401.4
million of the portfolio, or 78%, was fixed at a 5.2%
weighted average interest rate and $115.6 million, or
22% was floating at a 6.0% weighted average interest
rate. There is $92.2 million of debt maturing in 2008 at
weighted average interest rates of 5.8%. We intend to
refinance the indebtedness or select other alternatives
based on market conditions at that time.
bered and available as potential collateral for future bor-
Reference is made to Note 7 and Note 8 in the Notes to
rowings. In addition, during 2007, we, through our RCP
Consolidated Financial Statements included in this Form
Venture, received cash distributions totaling approximately
10-K for a summary of the financing and refinancing trans-
$53.2 million from our ownership position in Albertson’s.
actions since December 31, 2006.
The Operating Partnership’s share of these distributions
Acadia Realty Trust 2007 Annual Report 38
Management’s Discussion and Analysis continued
Asset Sales
Asset sales are an additional source of liquidity for us.
During December of 2007, we sold an apartment complex
Contractual Obligations and Other
Commitments
At December 31, 2007, maturities on our mortgage notes
in Columbia Missouri and during November and December
ranged from March 2008 to November 2032. In addition,
of 2006, we sold the Soundview Marketplace, Bradford
we have non-cancelable ground leases at seven of our
Towne Center, Greenridge Plaza, Luzerne Street Shopping
shopping centers. We lease space for our White Plains
Center and Pittston Plaza. During 2005 we sold the Berlin
corporate office for a term expiring in 2015. The following
Shopping Center. These sales are discussed in “ASSET
table summarizes our debt maturities and obligations under
SALES AND CAPITAL/ASSET RECYCLING” in Item 1 of
non-cancelable operating leases of December 31, 2007:
this Form 10-K.
(dollars in millions)
Contractual obligation
Future debt maturities
Interest obligations on debt
Operating lease obligations
Total
Payments due by period
Less than
1 year
1 to 3
years
3 to 5
years
More than
5 years
$ 92.2
$ 64.9
$143.1
$ 216.8
23.7
3.9
40.0
10.2
31.4
11.2
51.0
101.4
$119.8
$ 115.1
$185.7
$ 369.2
Total
$517.0
146.1
126.7
$789.8
During May of 2007, we closed on our third opportunity
n The Operating Partnership has a 4.9% interest in City-
fund, Fund III. The Operating Partnership’s share of Fund
Point, a Fund II investment, of which the Operating Part-
III’s $503.0 million committed capital is $100.0 million.
nership’s pro-rata share of mortgage debt (net of Fund II
In conjunction with the redevelopment of our core portfolio
and opportunity fund properties, we have entered into con-
struction commitments aggregating approximately $47.8
minority interest share), was $1.7 million as of December
31, 2007. This loan bears interest at LIBOR plus 120
basis points and matures on June 13, 2008.
million with general contractors as of December 31, 2007.
n The Operating Partnership has an 18.9% interest in
Off Balance Sheet Arrangements
We have investments in the following joint ventures for
the purpose of investing in operating properties. We
account for these investments using the equity method of
accounting as we have a non-controlling interest. As such,
our financial statements reflect our share of income from
two Fund I investments of which the Operating Partner-
ship’s pro-rata share of mortgage debt (net of the Fund I
minority interest share), was $3.2 million as of Decem-
ber 31, 2007. These loans carry a weighted average
interest rate of 6.21% and both loans mature during
August 2010.
but not the assets and liabilities of these joint ventures.
In addition, we have arranged for the provision of five
n The Operating Partnership owns a 49% interest in
two partnerships which own the Crossroads Shopping
Center (“Crossroads”). The Operating Partnership’s
pro rata share of Crossroads mortgage debt was $31.4
million as of December 31, 2007. This fixed-rate debt
bears interest at 5.4% and matures in December 2014.
n The Operating Partnership owns a 22.2% investment
in various entities which own the Brandywine Portfolio.
The Operating Partnership’s pro-rata share of Brandy-
wine debt was $36.9 million as of December 31, 2007
with a fixed interest rate of 5.99%. These loans mature
on July 1, 2016.
separate letters of credit in connection with certain leases
and investments. As of December 31, 2007, there were
no outstanding balances under any of the letters of credit.
If the letters of credit were fully drawn, the combined
maximum amount of exposure would be $12.2 million.
Historical Cash Flow
The following table compares the historical cash flow for
the year ended December 31, 2007 (“2007”) with the cash
flow for the year ended December 31, 2006 (“2006”).
39
Acadia Realty Trust 2007 Annual Report
Years Ended December 31,
2007
2006
Variance
Critical Accounting Policies
Management’s discussion and analysis of financial condi-
(dollars in millions)
Net cash provided by
operating activities
Net cash used in
$ 105.2
$ 39.6
$ 65.6
investing activities
(208.9)
(58.9)
(150.0)
Net cash provided by
financing activities
87.5
68.4
19.1
Total
$ (16.2)
$ 49.1
$ (65.3)
A discussion of the significant changes in cash flow for
2007 versus 2006 is as follows:
The variance in net cash provided by operating activities
resulted from an increase of $23.5 million in operating
income before non-cash expenses in 2007, which was
primarily due to the increase of $33.4 million in distribu-
tions of operating income from unconsolidated affiliates
tion and results of operations is based upon our consoli-
dated financial statements, which have been prepared in
accordance with U.S, GAAP. The preparation of these con-
solidated financial statements requires management to
make estimates and judgments that affect the reported
amounts of assets, liabilities, 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 fol-
lowing critical accounting policies affect the significant
judgments and estimates used by us in the preparation
of our consolidated financial statements.
as a result of the distributions from Albertson’s in 2007 as
well as those factors discussed in this Item 7. In addition,
Valuation of Property Held for Use and Sale
On a quarterly basis, we review the carrying value of both
a net increase in cash of $42.1 million resulted from
properties held for use and for sale. We perform the
changes in operating assets and liabilities, primarily other
impairment analysis by calculating and reviewing net oper-
assets, that was the result of the repayment of notes
ating income on a property-by-property basis, we evaluate
relating to certain transactions in 2007 as well as an
leasing projections and perform other analyses to conclude
increase in accrued expenses and other liabilities.
whether an asset is impaired. We record impairment losses
The increase in net cash used in investing activities
resulted from $118.0 million of additional expenditures
for real estate acquisitions, development and tenant
installations in 2007, $12.1 million of additional invest-
ments in unconsolidated affiliates, primarily CityPoint, in
2007, $9.9 million of additional collections of notes receiv-
able in 2006 as well as an additional $18.8 million of pro-
ceeds from sales in 2006 and the repayment of $19.0
million of our preferred equity investment in 2006. These
net increases were offset by $29.6 million of additional
notes receivable originated in 2006.
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. For properties held
for sale, we reduce our carrying value to the fair value less
costs to sell. For the years ended December 31, 2007 and
2006, no impairment losses were recognized. 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. Management does not believe that the
The increase in net cash provided by financing activities
value of any properties in its portfolio was impaired as of
resulted from an increase of $65.8 million of contributions
December 31, 2007 or 2006.
from partners and members and minority interests in par-
tially-owned affiliates in 2007, as well as additional cash
of $62.6 million from borrowings in 2007. These increases
were offset by an additional $85.0 million in cash received
from the issuance of convertible debt in 2006 and an addi-
tional $27.3 million of distributions to partners and mem-
bers in 2007.
Bad Debts
We maintain an allowance for doubtful accounts for esti-
mated losses resulting from the inability of tenants to make
payments on arrearages in billed rents, as well as the likeli-
hood 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, 2007, we had
Acadia Realty Trust 2007 Annual Report 40
Management’s Discussion and Analysis continued
recorded an allowance for doubtful accounts of $3.1 million.
The Company makes estimates of the uncollectability
If the financial condition of our tenants were to deteriorate,
of its accounts receivable related to tenant revenues. An
resulting in an impairment of their ability to make payments,
allowance for doubtful accounts has been provided against
additional allowances may be required.
certain tenant accounts receivable that are estimated to
Real Estate
Real estate assets are stated at cost less accumulated
depreciation. Expenditures for acquisition, development,
construction 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
property expansion and redevelopment. Depreciation is
computed on the straight-line basis over estimated useful
lives of 30 to 40 years for buildings, the shorter of the
useful life or lease term for tenant improvements and
five years for furniture, fixtures and equipment. Expendi-
tures for maintenance and repairs are charged to opera-
tions as incurred.
be uncollectible. Once the amount is ultimately deemed
to be uncollectible, it is written off.
Interest income from notes receivable is recognized on
an accrual basis based on the contractual terms of the
notes. The Company reviews notes receivable on a quar-
terly basis to determine collectability.
Inflation
Our long-term leases contain provisions designed to miti-
gate the adverse impact of inflation on our net income.
Such provisions include clauses enabling us to receive
percentage rents based on tenants’ gross sales, which
generally increase as prices rise, and/or, in certain cases,
escalation clauses, which generally increase rental rates
during the terms of the leases. Such escalation clauses
Upon acquisitions of real estate, we assess the fair value
are often related to increases in the consumer price index
of acquired assets (including land, buildings and improve-
or similar inflation indexes. In addition, many of our leases
ments, and identified intangibles such as above and below
are for terms of less than 10 years, which permits us to
market leases and acquired in-place leases and customer
seek to increase rents upon re-rental at market rates if
relationships) and acquired liabilities in accordance with
current rents are below the then existing market rates.
Statement of Financial Accounting Standards (“SFAS”)
Most of our leases require the tenants to pay their share
No. 141, “Business Combinations” and SFAS No. 142,
of operating expenses, including common area mainte-
“Goodwill and Other Intangible Assets,” and allocate pur-
nance, real estate taxes, insurance and utilities, thereby
chase price based on these assessments. We assess fair
reducing our exposure to increases in costs and operating
value based on estimated cash flow projections that utilize
expenses resulting from inflation.
appropriate discount and capitalization rates and available
market information. Estimates of future cash flows are
based on a number of factors including the historical oper-
ating results, known trends, and market/economic condi-
tions that may affect the property.
Revenue Recognition and Accounts and
Notes 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, beginning when
the tenant takes possession of the space. Certain of these
leases also provide for percentage rents based upon the
level of sales achieved by the tenant. Percentage rent is
recognized in the period when the tenants’ sales break-
point is met. In addition, leases typically provide for the
reimbursement to the Company of real estate taxes, insur-
ance and other property operating expenses. These reim-
bursements are recognized as revenue in the period the
expenses are incurred.
Recently Issued Accounting
Pronouncements
Reference is made to the Notes to Consolidated Financial
Statements which begins on page 60 of this Form 10-K.
ITEM 7A. QUANTITATIVE AND QUALITATIVEx
DISCLOSURES ABOUT MARKET RISKx
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
interest rates primarily through the use of fixed-rate debt
and interest rate swap agreements. As of December 31,
2007, we had total mortgage debt of $517.0 million of
which $401.4 million, or 78%, was fixed-rate, inclusive
of interest rate swaps, and $115.6 million, or 22%, was
41
Acadia Realty Trust 2007 Annual Report
variable-rate based upon LIBOR plus certain spreads. As
The following table sets forth information as of December
of December 31, 2007, we were a party to four interest
31, 2007 concerning our long-term debt obligations,
rate swap transactions and one interest rate cap transac-
including principal cash flows by scheduled maturity and
tion to hedge our exposure to changes in interest rates
weighted average interest rates of maturing amounts
with respect to $34.3 million and $30.0 million of LIBOR-
(dollars in millions):
based variable-rate debt, respectively.
Consolidated mortgage debt:
Year
2008
2009
2010
2011
2012
Thereafter
Scheduled
Amortization
$ 6.0
6.1
1.7
2.1
2.2
16.4
$ 34.5
Maturities
$ 86.2
47.3
9.8
129.8
9.0
200.4
$ 482.5
Mortgage debt in unconsolidated partnerships (at our pro-rata share):
Year
2008
2009
2010
2011
2012
Thereafter
Scheduled
Amortization
$ 0.4
0.5
0.5
0.5
0.5
1.6
$ 4.0
Maturities
$ 1.7
—
3.1
—
—
64.3
$69.1
Total
$ 92.2
53.4
11.5
131.9
11.2
216.8
$ 517.0
Total
$ 2.1
0.5
3.6
0.5
0.5
65.9
$73.1
Weighted Average
Interest Rate
5.8%
6.3%
6.1%
4.0%
5.9%
5.6%
Weighted Average
Interest Rate
5.8%
5.4%
6.1%
5.4%
5.4%
5.7%
Of our total consolidated and our pro-rata share of uncon-
As of December 31, 2007 and 2006, we had notes receiv-
solidated outstanding debt, $94.3 million and $53.9 million
able of $57.7 million and $36.0 million, respectively. Given
will become due in 2008 and 2009, respectively. As we
the short term nature of the notes and the fact that several
intend on refinancing some or all of such debt at the then-
of the notes are demand notes, we have determined that
existing market interest rates which may be greater than
the carrying value of the notes receivable approximates
the current interest rate, our interest expense would
fair value.
increase by approximately $1.4 million annually if the inter-
est rate on the refinanced debt increased by 100 basis
points. Interest expense on our variable debt of $115.6
ITEM 8. FINANCIAL STATEMENTS ANDx
SUPPLEMENTARY DATAx
million as of December 31, 2007 would increase $1.2 mil-
The financial statements beginning on page 52 are incor-
lion if LIBOR increased by 100 basis points. We may seek
porated herein by reference.
additional variable-rate financing if and when pricing and
other commercial and financial terms warrant. As such,
we would consider hedging against the interest rate risk
related to such additional variable-rate debt through inter-
est rate swaps and protection agreements, or other means.
ITEM 9. CHANGES IN AND DISAGREEMENTSx
WITH ACCOUNTANTS ON ACCOUNTINGx
AND FINANCIAL DISCLOSUREx
None.
Based on our outstanding debt balances as of December
ITEM 9A. CONTROLS AND PROCEDURESx
31, 2007, the fair value of our total outstanding debt
would decrease by approximately $19.0 million if interest
rates increase by 1%. Conversely, if interest rates decrease
by 1%, the fair value of our total outstanding debt would
increase by approximately $20.4 million.
(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 effec-
tiveness of our disclosure controls and procedures. Based
Acadia Realty Trust 2007 Annual Report 42
on that evaluation, the Chief Executive Officer and Chief
assessment, we used the criteria set forth in the frame-
Financial Officer concluded that our disclosure controls
work in Internal Control–Integrated Framework issued
and procedures were effective as of December 31, 2007
by the Committee of Sponsoring Organizations of the
to provide reasonable assurance that information required
Treadway Commission. Based on our evaluation under
to be disclosed by us in reports that we file or submit
the framework in Internal Control–Integrated Framework,
under the Exchange Act is recorded, processed, summa-
our management concluded that our internal control over
rized, and reported within the time periods specified in
financial reporting was effective as of December 31, 2007
SEC rules and forms, and is accumulated and communi-
to provide reasonable assurance regarding the reliability
cated to management, including our Chief Executive
of financial reporting and the preparation of financial state-
Officer and Chief Financial Officer, as appropriate to allow
ments for external reporting purposes in accordance with
timely decisions regarding required disclosure.
U.S. generally accepted accounting principles.
(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 manage-
ment, including our principal executive officer and principal
financial officer, we conducted an evaluation of the effec-
tiveness of our internal control over financial reporting
as of December 31, 2007 as required by the Securities
Exchange Act of 1934 Rule 13a-15(c). In making this
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 internal control over financial reporting as
of December 31, 2007 which appears in paragraph (b)
of this item 9A.
Acadia Realty Trust
White Plains, New York
February 29, 2008
43
Acadia Realty Trust 2007 Annual Report
(b) Attestation report of the independent registered public accounting firm
The Shareholders and Trustees of Acadia Realty Trust
We have audited Acadia Realty Trust and subsidiaries’ internal control over financial reporting as of December 31, 2007,
based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organiza-
tions 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 included in the accompanying Management’s Report on Internal Control over Financial Reporting.
Our responsibility is to express an opinion on 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 effec-
tive internal control over financial reporting was maintained in all material respects. Our audit included obtaining an under-
standing of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and
evaluating the design and operating effectiveness of internal control, based on the assessed risk. Our audit also included
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 gener-
ally accepted accounting principles. A company’s internal control over financial reporting includes those policies and proce-
dures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as neces-
sary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditures 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, Acadia Realty Trust and subsidiaries maintained in all material respects effective internal control over finan-
cial reporting as of December 31, 2007, 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, 2007 and 2006 and the related
consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended
December 31, 2007 and our report dated February 29, 2008 expressed an unqualified opinion thereon.
/s/ BDO Seidman, LLP
New York, New York
February 29, 2008
(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,
2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATIONx
None
Acadia Realty Trust 2007 Annual Report 44
PART III
In accordance with the rules of the SEC, certain information required by Part III is omitted and is incorporated by refer-
ence into this Form 10-K from our definitive proxy statement relating to our 2008 annual meeting of stockholders (our
“2008 Proxy Statement”) that we intend to file with the SEC no later than April 29, 2008.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEx
The information under the following headings in the 2008 Proxy Statement is incorporated herein by reference:
n “PROPOSAL 1 — ELECTION OF TRUSTEES”
n “MANAGEMENT”
n “SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE”
ITEM 11. EXECUTIVE COMPENSATIONx
The information under the following headings in the 2008 Proxy Statement is incorporated herein by reference:
n “ACADIA REALTY TRUST COMPENSATION COMMITTEE REPORT”
n “COMPENSATION DISCUSSION AND ANALYSIS”
n “EXECUTIVE AND TRUSTEE COMPENSATION”
n “COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION”
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTx
The information under the heading “SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT”
in the 2008 Proxy Statement is incorporated herein by reference.
The information under Item 5 under the heading “(d) Securities authorized for issuance under equity compensation plans”
is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEx
The information under the following headings in the 2008 Proxy Statement is incorporated herein by reference:
n “CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS”
n “PROPOSAL 1 — ELECTION OF TRUSTEES — Trustee Independence”
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICESx
The information under the heading “AUDIT COMMITTEE INFORMATION” in the 2008 Proxy Statement is incorporated
herein by reference.
45
Acadia Realty Trust 2007 Annual Report
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULESx
1. Financial Statements: See “Index to Financial Statements” at page 52 below.
2. Financial Statement Schedule: See “Schedule III — Real Estate and Accumulated Depreciation” at
page 89 below.
3. Exhibits:
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
10.33
10.34
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) (21)
2003 Share Option Plan (16) (21)
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
Partnership, 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 dated October 1998 (6) (21)
Amendment to employment agreement between the Company and Kenneth F. Bernstein dated January 19, 2007 (26) (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
September 21, 1999 (7)
First Amendment to Severance Agreements between the Company and Joel Braun, Executive Vice President and Chief
Investment Officer, Michael Nelsen, Senior Vice President and Chief Financial Officer, Robert Masters, Senior Vice Presi-
dent, General Counsel, Chief Compliance Officer and Secretary and Joseph Hogan, Senior Vice President and Director of
Construction dated January 19, 2007 (21) (26)
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)
Acadia Realty Trust 2007 Annual Report 46
Exhibit No. Description
10.44
10.45
10.46
10.47
10.51
10.52
10.53
10.54
10.55
10.56
10.57
10.58
10.59
10.60
10.61
10.62
10.63
10.64
10.65
10.66
10.67
10.68
10.69
10.70
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)
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 Green-
wich 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 Mort-
gage, Inc. dated December 9, 2005 (22)
Agreement and Plan Of Merger Dated as of December 22, 2005 by and among Acadia Realty Acquisition I, LLC, Ara Btc
LLC, ARA MS LLC, ARA BS LLC, ARA BC LLC and ARA BH LLC, Acadia Investors, Inc., AII BTC LLC, AII MS LLC, AII BS
LLC, AII BC LLC And AII BH LLC, Samuel Ginsburg 2000 Trust Agreement #1, Martin Ginsburg 2000 Trust Agreement #1,
Martin Ginsburg, Samuel Ginsburg and Adam Ginsburg, and GDC SMG, LLC, GDC Beechwood, LLC, Aspen Cove Apart-
ments, LLC and SMG Celebration, LLC (23)
Amended and Restated Loan Agreement between Acadia Realty Limited Partnership, as lender, and Levitz SL Woodbridge,
L.L.C., Levitz SL St. Paul, L.L.C., Levitz SL La Puente, L.L.C., Levitz SL Oxnard, L.L.C., Levitz SL Willowbrook, L.L.C.,
Levitz SL Northridge, L.L.C., Levitz SL San Leandro, L.L.C., Levitz SL Sacramento, L.L.C., HL Brea, L.L.C., HL Deptford,
L.L.C., HL Hayward, L.L.C., HL San Jose, L.L.C., HL Scottsdale, L.L.C., HL Torrance, L.L.C., HL Irvine 1, L.L.C., HL West
Covina, L.L.C., HL Glendale, L.L.C. and HL Northridge, L.L.C., each a Delaware limited liability company, Levitz SL Lang-
horne, L.P. and HL Fairless Hills, L.P., each a Delaware limited partnership (each, together with its permitted successors
and assigns, a “Borrower,” and collectively, together with their respective permitted successors and assigns,“ Borrow-
ers”), dated June 1, 2006 (24)
Consent and Assumption Agreement between Thor Chestnut Hill, LP, Thor Chestnut Hill II, LP, Acadia Chestnut, LLC, Aca-
dia Realty Limited Partnership and Wells Fargo Bank, N.A. dated June 9, 2006, original Mortgage and Security Agreement
between Thor Chestnut Hill, LP and Thor Chestnut Hill II, LP and Column Financial, Inc. dated June 5, 2003 and original
Assignment of Leases and Rents from Thor Chestnut Hill, LP and Thor Chestnut Hill II, LP to Column Financial, Inc. dated
June 2003 (24)
Loan Agreement and Promissory Note between RD Woonsocket Associates, L.P. and Merrill Lynch Mortgage Lending, Inc.
dated September 8, 2006 (25)
Amended and Restated Revolving Loan Agreement dated as of December 19, 2006 by and among RD Abington Associ-
ates LP, Acadia Town Line, LLC, RD Methuen Associates LP, RD Absecon Associates, LP, RD Bloomfield Associates, LP,
RD Hobson Associates, LP, and RD Village Associates LP, and Bank of America, N.A. and the First Amendment to
Amended and Restated Revolving Loan Agreement dated February, 2007 (26)
Loan Agreement between Bank of America, N.A. and RD Branch Associates, LP dated December 19, 2006 (26)
Loan Agreement between 239 Greenwich Associates Limited Partnership and Wachovia Bank, National Association dated
January 25, 2007 (28)
Revolving Credit Agreement between Acadia Realty Limited Partnership and Washington Mutual Bank dated March 29,
2007 (28)
Loan Agreement between Acadia Merrillville Realty, L.P. and Bear Stearns Commercial Mortgage, Inc dated July 2, 2007 (29)
Promissory Note between Acadia Merrillville Realty, L.P. and Bear Stearns Commercial Mortgage, Inc dated July 2, 2007 (29)
Loan Agreement Note between APA 216th Street and Bank of America, N.A. dated September 11, 2007 (29)
Promissory Note between APA 216th Street and Bank of America, N.A. dated September 11, 2007 (29)
Acquisition and Project Loan agreement between Acadia – PA East Fordham Acquisitions, LLC and Eurohypo AG, New
York Branch dated October 5, 2007 (30)
Building Loan Agreement between Acadia – PA East Fordham Acquisitions, LLC and Eurohypo AG, New York Branch dated
October 5, 2007 (30)
Revolving credit agreement between Acadia Strategic Opportunity Fund III, LLC. and Bank of America, N.A. dated October
10, 2007 (30)
Mortgage Consolidation and Modification Agreement between Acadia Tarrytown LLC and Anglo Irish Bank Corporation,
PLC dated October 30, 2007 (30)
47
Acadia Realty Trust 2007 Annual Report
10.71
10.72
10.73
10.74
10.75
21
23.1
31.1
31.2
32.1
32.2
99.1
99.2
99.3
99.4
99.5
99.6
Notes:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
Project Loan Agreement between P/A – Acadia Pelham Manor, LLC and Bear Stearns Commercial Mortgage, Inc. dated
December 10, 2007 (30)
Building Loan Agreement P/A – Acadia Pelham Manor, LLC and Bear Stearns Commercial Mortgage, Inc. dated December
10, 2007 (30)
Project Loan Agreement between Acadia Atlantic Avenue, LLC and Bear Stearns Commercial Mortgage, Inc. dated Decem-
ber 26, 2007 (30)
Building Loan Agreement between Acadia Atlantic Avenue, LLC and Bear Stearns Commercial Mortgage, Inc. dated
December 26, 2007 (30)
Certain information regarding the compensation arrangements with certain officers of registrant (Incorporated by reference
to Item 5.02 of the registrant’s Form 8-K filed with the SEC on February 4, 2008)
List of Subsidiaries of Acadia Realty Trust (30)
Consent of Registered Public Accounting Firm to incorporation by reference its reports into Forms S-3 and Forms S-8 (30)
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 (30)
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 (30)
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 (30)
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 (30)
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)
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
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)
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
Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Form 8-K filed on April 20, 1998
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
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
Acadia Realty Trust 2007 Annual Report 48
Notes continued
(14)
(15)
(16)
(17)
(18)
(19)
(20)
(21)
(22)
(23)
(24)
(25)
(26)
(27)
(28)
(29)
Incorporated by reference to the copy thereof filed as an Exhibit to Yale University’s Schedule 13D filed on September 25, 2002
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
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
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
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
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
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
Management contract or compensatory plan or arrangement.
Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Annual Report on Form 10-K filed for the
fiscal year ended December 31, 2005
Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Current Report on Form 8-K filed on
January 4, 2006
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, 2006
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, 2006
Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Current Report on Form 8-K filed on
January 19, 2007
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, 2006
Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q filed for
the quarter ended March 31, 2007
Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Quarterly Report on Form 10-Q filed for
the quarter ended September 30, 2007
(30)
Filed herewith
49
Acadia Realty Trust 2007 Annual Report
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
Senior Vice President and Chief Financial Officer
/s/ Jonathan W. Grisham
Jonathan W. Grisham
Senior Vice President and Chief Accounting Officer
Dated: February 29, 2008
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/ William T. Spitz
(William T. Spitz)
/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)
Senior Vice President
and Chief Accounting Officer
(Principal Accounting Officer)
Trustee
Trustee
Trustee
Trustee
Trustee
Trustee
Trustee
Date
February 29, 2008
February 29, 2008
February 29, 2008
February 29, 2008
February 29, 2008
February 29, 2008
February 29, 2008
February 29, 2008
February 29, 2008
February 29, 2008
Acadia Realty Trust 2007 Annual Report 50
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
10.67
10.68
10.69
10.70
10.71
10.72
10.73
10.74
21
23.1
31.1
31.2
32.1
32.2
Acquisition and Project Loan agreement between Acadia – PA East Fordham Acquisitions, LLC and Eurohypo AG, New
York Branch dated October 5, 2007
Building Loan Agreement between Acadia – PA East Fordham Acquisitions, LLC and Eurohypo AG, New York Branch dated
October 5, 2007
Revolving credit agreement between Acadia Strategic Opportunity Fund III, LLC. and Bank of America, N.A. dated October
10, 2007
Mortgage Consolidation and Modification Agreement between Acadia Tarrytown LLC and Anglo Irish Bank Corporation,
PLC dated October 30, 2007
Project Loan Agreement between P/A – Acadia Pelham Manor, LLC and Bear Stearns Commercial Mortgage, Inc. dated
December 10, 2007
Building Loan Agreement P/A – Acadia Pelham Manor, LLC and Bear Stearns Commercial Mortgage, Inc. dated December
10, 2007
Project Loan Agreement between Acadia Atlantic Avenue, LLC and Bear Stearns Commercial Mortgage, Inc. dated
December 26, 2007
Building Loan Agreement between Acadia Atlantic Avenue, LLC and Bear Stearns Commercial Mortgage, Inc. dated
December 26, 2007
List of Subsidiaries of Acadia Realty Trust
Consent of Registered Public Accounting Firm to incorporation by reference its reports into Forms S-3 and Forms 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
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
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
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
51
Acadia Realty Trust 2007 Annual Report
ACADIA REALTY TRUST AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Consolidated Balance Sheets as of December 31, 2007 and 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Consolidated Statements of Income for the years ended December 31, 2007, 2006 and 2005. . . . . . . . . . . . . . . . . . . 55
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2007, 2006 and 2005 . . . . . . . . 56
Consolidated Statements of Cash Flows for the years ended December 31, 2007, 2006 and 2005 . . . . . . . . . . . . . . . 57
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Schedule III – Real Estate and Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Acadia Realty Trust 2007 Annual Report 52
Report of Independent Registered Public Accounting Firm
The Shareholders and Trustees of Acadia Realty Trust
We have audited the accompanying consolidated balance sheets of Acadia Realty Trust and subsidiaries (the “Company”)
as of December 31, 2007 and 2006 and the related consolidated statements of income, stockholders’ equity, and cash
flows for each of the three years in the period ended December 31, 2007. In connection with our audits of the financial
statements we have also audited the accompanying financial statement schedule listed on page 52. These financial state-
ments 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 also includes examining, on a test basis, evidence sup-
porting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements and schedules.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of Acadia Realty Trust and subsidiaries at December 31, 2007, and 2006 and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 2007, in conformity with generally accepted
accounting principles in the United States of America.
Also, in our opinion, the financial statement schedule, when considered in relation to the basic financial statements taken
as a whole, presents 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), Acadia Realty Trust and subsidiaries’ internal control over financial reporting as of December 31, 2007, based
on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO) and our report dated February 29, 2008 expressed an unqualified opinion thereon.
As explained in Note 1 to the financial statements, effective January 1, 2006, Acadia Realty Trust and subsidiaries
adopted the provisions of Staff Accounting Bulletin 108, Considering the Effects of Prior Year Misstatements when
Qualifying Misstatements in Current Year Financial Statements.
BDO Seidman, LLP
New York, New York
February 29, 2008
53
Acadia Realty Trust 2007 Annual Report
Consolidated Balance Sheets
(dollars in thousands)
Assets
Real estate
Land
Buildings and improvements
Construction in progress
Less: accumulated depreciation
Net real estate
Cash and cash equivalents
Cash in escrow
Investments in and advances to unconsolidated affiliates
Rents receivable, net
Notes receivable
Deferred charges, net
Acquired lease intangibles
Prepaid expenses and other assets, net
Assets of discontinued operations
December 31,
2007
2006
$ 235,550
540,760
77,764
$ 145,916
465,050
39,085
854,074
155,480
698,594
123,343
6,637
44,654
13,449
57,662
21,825
16,103
16,745
—
650,051
135,085
514,966
139,571
5,321
33,333
11,869
36,038
20,749
11,653
41,959
36,233
Total assets
$ 999,012
$ 851,692
Liabilities and Shareholders’ Equity
Mortgage notes payable
Convertible notes payable
Acquired lease intangibles
Accounts payable and accrued expenses
Dividends and distributions payable
Share of distributions in excess of share of income and investment
in unconsolidated affiliates
Other liabilities
Liabilities of discontinued operations
Total liabilities
Minority interest in operating partnership
Minority interests in partially-owned affiliates
Total minority interests
Shareholders’ equity:
Common shares, $.001 par value, authorized 100,000,000 shares, issued
and outstanding 32,184,462 and 31,772,952 shares, respectively
Additional paid-in capital
Accumulated other comprehensive loss
Retained earnings
Total shareholders’ equity
Total liabilities and shareholders’ equity
The accompanying notes are an integral part of these consolidated financial statements.
$ 402,903
115,000
5,651
15,289
14,420
20,007
13,895
—
587,165
4,595
166,516
171,111
$ 319,507
100,000
4,919
9,882
6,661
21,728
5,379
28,760
496,836
8,673
105,064
113,737
32
227,890
(953)
13,767
240,736
31
227,555
(234)
13,767
241,119
$ 999,012
$ 851,692
Acadia Realty Trust 2007 Annual Report 54
Consolidated Statements of Income
(dollars in thousands, except per share amounts)
Revenues
Minimum rents
Percentage rents
Expense reimbursements
Other property income
Management fee income from related parties, net
Interest income
Other income
Total revenues
Operating Expenses
Property operating
Real estate taxes
General and administrative
Depreciation and amortization
Total operating expenses
Operating Income
Equity in earnings of unconsolidated affiliates
Interest expense
Minority interest
Income from continuing operations before income taxes
Income tax provision (benefit)
Income from continuing operations
Discontinued operations
Operating income from discontinued operations
Impairment of real estate
Gain (loss) on sale of properties, net
Minority interest
Income from discontinued operations
Extraordinary item
Share of extraordinary gain from investment in
unconsolidated affiliate
Minority interest
Income tax provision
Income from extraordinary item
Net income
Basic earnings per share
Income from continuing operations
Income from discontinued operations
Income from extraordinary item
Basic earnings per share
Diluted earnings per share
Income from continuing operations
Income from discontinued operations
Income from extraordinary item
Diluted earnings per share
Years Ended December 31,
2007
2006
2005
$ 72,051
625
13,318
1,031
4,064
10,315
165
101,569
15,881
9,678
23,058
27,506
76,123
25,446
6,619
(22,775)
9,063
18,353
297
18,056
377
—
5,271
(111)
5,537
30,200
(24,167)
(2,356)
3,677
$ 63,629
1,192
14,538
857
5,625
8,311
1,648
$ 69,401
1,272
14,440
1,972
3,564
3,316
—
95,800
93,965
12,857
10,095
19,782
25,361
68,095
27,705
2,559
(20,377)
5,227
15,114
(508)
15,622
2,879
—
20,974
(462)
23,391
—
—
—
—
13,348
8,952
16,153
24,697
63,150
30,815
21,280
(16,689)
(13,946)
21,460
2,140
19,320
2,152
(770)
(50)
(26)
1,306
—
—
—
—
$ 27,270
$ 39,013
$ 20,626
$ 0.55
0.17
0.11
$ 0.83
$ 0.54
0.17
0.11
$ 0.82
$0.48
0.72
—
$1.20
$0.48
0.70
—
$1.18
$ 0.61
0.04
—
$ 0.65
$ 0.60
0.04
—
$ 0.64
The accompanying notes are an integral part of these consolidated financial statements.
55
Acadia Realty Trust 2007 Annual Report
Consolidated Statements of Shareholders’ Equity
Common Shares
Shares
Amount
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Retained
Earnings
(Deficit)
Total
Shareholders’
Equity
(dollars in thousands, except per share amounts)
Balance at December 31, 2004
31,341
$ 31
$222,715
$ (3,180)
$ (2,642)
$216,924
Conversion of 796 Series A Preferred OP Units
to Common Shares by limited partners
of the Operating Partnership
Employee Restricted Share awards
Dividends declared ($0.7025 per Common Share)
Employee and Trustee exercise of 51,200 options
Common Shares issued under Employee
Share Purchase Plan
Unrealized gain on valuation of swap
agreements
Amortization of derivative instrument
Net income
Total comprehensive income
92
52
—
51
7
—
—
—
Balance at December 31, 2005
31,543
Cumulative effect of straight-line
rent adjustment
Conversion of 696 Series A Preferred OP Units
to Common Shares by limited partners
of the Operating Partnership
Employee restricted share awards
Dividends declared ($0.755 per Common Share)
Employee exercise of 7,500 options to purchase
Common Shares
Common Shares issued under Employee
Share Purchase Plan
Redemption of 11,105 restricted
Common OP Units
Issuance of Common Stock to Trustees
Unrealized loss on valuation of swap
agreements
Amortization of derivative instrument
Net income
Total comprehensive income
—
93
122
—
8
4
—
3
—
—
—
Balance at December 31, 2006
31,773
Conversion of 4,000 Series B Preferred OP Units
to Common Shares by limited partners
of the Operating Partnership
Employee Restricted Share awards
Dividends declared ($1.0325 per Common Share)
Employee exercise of 17,474 options
to purchase Common Shares
Common Shares issued under Employee
Share Purchase Plan
Issuance of Common Shares to Trustees
Employee Restricted Shares cancelled
Unrealized loss on valuation of swap agreements
Amortization of derivative instrument
Net income
Total comprehensive income
312
103
—
17
7
13
(41)
—
—
—
—
—
—
—
—
—
—
—
—
31
—
—
—
—
—
—
—
—
—
—
—
31
—
1
—
—
—
—
—
—
—
—
—
696
1,030
(1,691)
345
104
—
—
—
—
—
—
—
—
2,708
460
—
—
—
—
696
1,030
(20,626)
(22,317)
—
—
—
20,626
—
345
104
2,708
460
20,626
23,794
223,199
(12)
(2,642)
220,576
—
696
3,530
—
43
112
(101)
76
—
—
—
—
—
—
—
—
—
—
—
(662)
440
—
—
1,796
1,796
—
—
696
3,530
(24,400)
(24,400)
—
—
—
—
—
43
112
(101)
76
(662)
440
39,013
—
39,013
38,791
227,555
(234)
13,767
241,119
4,000
3,151
(6,425)
174
183
346
(1,094)
—
—
—
—
—
—
—
—
—
—
—
(921)
202
—
—
—
—
4,000
3,152
(27,270)
(33,695)
—
—
—
—
—
—
27,270
—
174
183
346
(1,094)
(921)
202
27,270
26,551
Balance at December 31, 2007
32,184
$ 32
$227,890
$ (953)
$ 13,767
$240,736
The accompanying notes are an integral part of these consolidated financial statements.
Acadia Realty Trust 2007 Annual Report 56
Consolidated Statements of Cash Flows
(dollars in thousands)
Cash Flows from Operating Activities
Net income
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization
(Gain) loss on sale of property
Impairment of real estate
Minority interests
Amortization of lease intangibles
Amortization of mortgage note premium
Share compensation expense
Equity in earnings of unconsolidated affiliates
Distributions of operating income from unconsolidated affiliates
Amortization of derivative settlement included in interest expense
Changes in assets and liabilities:
Funding of escrows, net
Rents receivable
Prepaid expenses and other assets, net
Accounts payable and accrued expenses
Other liabilities
Years Ended December 31,
2007
2006
2005
$ 27,270
$ 39,013
$ 20,626
28,428
(5,271)
—
15,215
722
(111)
3,285
(36,819)
36,666
202
667
(1,180)
23,926
4,962
7,203
27,178
(20,974)
—
(4,765)
1,080
(144)
3,531
(2,559)
3,277
440
(1,389)
260
967
(5,200)
(1,088)
27,747
50
770
13,972
980
(530)
1,029
(21,280)
21,498
460
(1,827)
(3,004)
(8,867)
(3,855)
2,470
Net cash provided by operating activities
105,165
39,627
50,239
Cash Flows from Investing Activities
Investment in real estate and improvements
Deferred acquisition and leasing costs
Investments in and advances to unconsolidated affiliates
Return of capital from unconsolidated affiliates
Collections of notes receivable
Advances of notes receivable
Preferred equity investment
Proceeds from sale of property
Net cash used in investing activities
(210,227)
(1,746)
(39,712)
26,625
11,071
(14,548)
—
19,668
(208,869)
(87,009)
(6,941)
(27,626)
28,423
20,948
(44,162)
19,000
38,477
(131,077)
(5,670)
(455)
22,847
1,868
(7,914)
(19,000)
3,931
(58,890)
(135,470)
The accompanying notes are an integral part of these consolidated financial statements.
57
Acadia Realty Trust 2007 Annual Report
Consolidated Statements of Cash Flows continued
Years Ended December 31,
2007
2006
2005
(dollars in thousands)
Cash Flows from Financing Activities
Principal payments on mortgage notes
Proceeds received on mortgage notes
Proceeds received on convertible notes
Payment of deferred financing and other costs
Capital contributions from partners and members
Distributions to partners and members
Dividends paid to Common Shareholders
Distributions to minority interests in Operating Partnership
Distributions on preferred Operating Partnership Units to
minority interests
Distributions to minority interests in partially-owned affiliates
Repurchase and cancellation of shares
Contributions from minority interests in partially-owned affiliates
Redemption of Operating Partnership Units
Common Shares issued under Employee Share Purchase Plan
Exercise of options to purchase Common Shares
(165,451)
222,218
15,000
(4,128)
105,520
(61,050)
(26,039)
(527)
(86)
(2,612)
(1,094)
5,022
—
529
174
(168,082)
159,617
100,000
(7,026)
44,481
(36,120)
(23,823)
(487)
(254)
(232)
—
300
(246)
188
43
(44,784)
184,466
—
(2,801)
44,122
—
(21,869)
(380)
(342)
(436)
—
1,000
—
104
345
Net cash provided by financing activities
87,476
68,359
159,425
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
(16,228)
139,571
$ 123,343
49,096
90,475
$ 139,571
74,194
16,281
$ 90,475
Supplemental disclosure of cash flow information:
Cash paid during the period for interest, including capitalized
interest of $34, $79, and $260, respectively
$ 23,709
$ 22,843
$ 18,799
Cash paid for income taxes
$
348
$
1,039
$
1,512
Supplemental disclosure of non-cash investing and financing activities:
Acquisition of management contract rights through issuance of
Common and Preferred Operating Partnership Units
Acquisition of real estate through assumption of debt
$
$
—
—
$
—
$ 22,583
Issuance of notes receivable in connection with sale of real estate
$ (18,000)
Acquisition of property through issuance of
Preferred Operating Partnership Units
Conversion of common equity interest into preferred equity
interest in investments
$
$
—
—
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
$
$
$
$
4,000
—
—
200
—
—
—
$
3,255
Acadia Realty Trust 2007 Annual Report 5858
Consolidated Statements of Cash Flows continued
(dollars in thousands)
Recapitalization and deconsolidation of investment:
Real estate, net
Other assets and liabilities
Mortgage debt
Minority interests
Investment in unconsolidated affiliates
Cash included in investments and advances to
unconsolidated affiliates
Acquisition of interest in investment from unaffiliated investor:
Real estate, net
Other assets and liabilities
Investment in unconsolidated affiliates
Cash included in expenditures for real estate and improvements
The accompanying notes are an integral part of these consolidated financial statements.
Years Ended December 31,
2007
2006
2005
$ —
—
—
—
—
$ —
$ —
—
—
$ —
$124,962
(11,413)
(66,984)
(36,504)
(10,428)
$
(367)
$ (9,260)
5,901
3,469
$
110
$ —
—
—
—
—
$ —
$ —
—
—
$ —
59
59 Acadia Realty Trust 2007 Annual Report
Notes to Consolidated Financial Statements
Note 1i
Organization, Basis of Presentation
and Summary of Significant
Accounting Policies
Acadia Realty Trust (the “Trust”) and subsidiaries (collec-
interest in both Fund I and Mervyns I and is also entitled
to a profit participation in excess of its invested capital
based on certain investment return thresholds (“Promote”).
Cash flow is distributed pro-rata to the partners and
members (including the Operating Partnership) until they
receive a 9% cumulative return (“Preferred Return”),
tively, the “Company”) is a fully integrated, self-managed
and the return of all capital contributions. Thereafter,
and self-administered equity real estate investment trust
remaining cash flow (which is net of distributions and
(“REIT”) focused primarily on the ownership, acquisition,
fees to the Operating Partnership for management, asset
redevelopment and management of retail properties,
management, leasing, construction and legal services) is
including neighborhood and community shopping centers
distributed 80% to the partners (including the Operating
and mixed-use properties with retail components.
Partnership) and 20% to the Operating Partnership as a
As of December 31, 2007, the Company operated 76
properties, which it owns or has an ownership interest
in, principally located in the Northeast, Mid-Atlantic and
Midwest regions of the United States.
All of the Company’s assets are held by, and all of its oper-
ations are conducted through, Acadia Realty Limited Part-
nership (the “Operating Partnership”) and entities in which
the Operating Partnership owns a controlling interest. As
of December 31, 2007, the Trust controlled 98% of the
Operating Partnership as the sole general partner. As the
general partner, the Trust is entitled to share, in proportion
to its percentage interest, in the cash distributions and
profits and losses of the Operating Partnership. The lim-
ited partners represent entities or individuals who con-
tributed their interests in certain properties or entities to
the Operating Partnership in exchange for common or pre-
ferred 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 inter-
est of the Trust (“Common Shares”). This structure is
Promote. As all contributed capital and accumulated pre-
ferred return has been distributed to investors, the Oper-
ating Partnership is currently entitled to a Promote on all
earnings and distributions.
During June of 2004, the Company formed Acadia Strate-
gic Opportunity Fund II, LLC (“Fund II”), and during August
2004 formed Acadia Mervyn Investors II, LLC (“Mervyns
II”), with the investors from Fund I as well as two additional
institutional investors. With $300.0 million of committed
discretionary capital, Fund II and Mervyns II combined
expect to be able to acquire or develop up to $900.0 million
of investments on a leveraged basis. The Operating Part-
nership’s share of committed capital is $60.0 million. The
Operating Partnership is the managing member with a
20% interest in both Fund II and Mervyns II. The terms
and structure of Fund II and Mervyns II are substantially
the same as Fund I and Mervyns I, including the Promote
structure, with the exception that the Preferred Return is
8%. As of December 31, 2007, the Operating Partnership
had contributed $28.8 million to Fund II and $7.6 million
to Mervyns II.
referred to as an umbrella partnership REIT or “UPREIT.”
During May of 2007, the Company formed Acadia Strategic
During September of 2001, the Company formed a part-
nership, Acadia Strategic Opportunity Fund I, LP (“Fund I”),
and during August of 2004 formed a limited liability com-
pany, Acadia Mervyn Investors I, LLC (“Mervyns I”), with
four institutional investors. The Operating Partnership
committed a total of $20.0 million to Fund I and Mervyns I,
and the four institutional shareholders committed a total
of $70.0 million, for the purpose of acquiring approximately
$300.0 million in investments. As of December 31, 2007,
the Operating Partnership had contributed $16.5 million to
Fund I and $2.7 million to Mervyns I.
Opportunity Fund III LLC (“Fund III”) with 14 institutional
investors, including a majority of the investors from Fund I
and Fund II. With $503.0 million of committed discretionary
capital, Fund III expects to be able to acquire or develop
approximately $1.5 billion of assets on a leveraged basis.
The Operating Partnership’s share of the invested capital
is $100.0 million and it is the managing member with a
19.9% interest in Fund III. The terms and structure of
Fund III is substantially the same as the previous Funds I
and II, including the Promote structure, with the exception
that the Preferred Return is 6%. As of December 31,
2007, the Operating Partnership had contributed $10.5
The Operating Partnership is the general partner of Fund I
million to Fund III.
and sole managing member of Mervyns I, with a 22.2%
Acadia Realty Trust 2007 Annual Report 60
Notes to Consolidated Financial Statements continued
Principles of Consolidation
The consolidated financial statements include the consoli-
as buying, selling or financing nor is it the primary benefi-
ciary under FIN 46R, as discussed above. Under the equity
dated accounts of the Company and its controlling invest-
method, the Company increases its investment for its
ments in partnerships and limited liability companies in
proportionate share of net income and contributions to
which the Company is presumed to have control in accor-
the joint venture and decreases its investment balance
dance with Emerging Issues Task Force (“EITF”) Issue No.
by recording its proportionate share of net loss and distri-
04-5. The ownership interests of other investors in these
butions. The Company recognizes income for distributions
entities are recorded as minority interests. All significant
in excess of its investment where there is no recourse to
intercompany balances and transactions have been elimi-
the Company. For investments in which there is recourse
nated in consolidation. Investments in entities for which
to the Company, distributions in excess of the investment
the Company has the ability to exercise significant influence
are recorded as a liability. Although the Company accounts
over, but does not have financial or operating control, are
for its investment in Albertson’s (Note 4), using the equity
accounted for using the equity method of accounting.
method of accounting, the Company adopted the policy
Accordingly, the Company’s share of the earnings (or loss)
of not recording its equity in earnings or losses of this
of these entities are included in consolidated net income.
unconsolidated affiliate until the Company receives the
Variable interest entities within the scope of Financial
Accounting Statements Board (“FASB”) Interpretation No. 46,
“Consolidation of Variable Interest Entities” (“FIN 46-R”) are
required to be consolidated by their primary beneficiary. The
audited financial statements of Albertson’s to support the
equity earnings or losses in accordance with paragraph 19
of Accounting Principles Board (“APB”) 18 “Equity Method
of Accounting for Investments in Common Stock.”
primary beneficiary of a variable interest entity is determined
The Company periodically reviews its investment in
to be the party that bears a majority of the entity’s expected
unconsolidated joint ventures for other than temporary
losses, receives a majority of its expected returns, or both.
declines in market value. Any decline that is not expected
Management has evaluated the applicability of FIN 46-R to
to be recovered in the next 12 months is considered other
its investments in certain joint ventures and determined that
than temporary and an impairment charge is recorded as
these joint ventures do not meet the requirements of a
a reduction in the carrying value of the investment. No
variable interest entity or the Company is not the primary
impairment charges were recognized for the years ended
beneficiary and, therefore, consolidation of these ventures is
December 31, 2007, 2006 and 2005.
not required. Accordingly, these investments are accounted
for using the equity method
On January 4, 2006, Fund I recapitalized its investment in
a one million square foot shopping center portfolio located
in Wilmington, Delaware (“Brandywine Portfolio”). The
recapitalization was effected through the conversion of the
Use of Estimates
Accounting principles generally accepted in the United
States of America (“GAAP”) require the Company’s man-
agement to make estimates and assumptions that affect
the amounts reported in the financial statements and
accompanying notes. The most significant assumptions
77.8% interest which was previously held by the institutional
and estimates relate to the valuation of real estate, depre-
investors in Fund I to affiliates of GDC Properties (“GDC”)
through a merger of interests in exchange for cash. The
Operating Partnership has retained its existing 22.2% inter-
est in the Brandywine Portfolio in partnership with GDC and
ciable lives, revenue recognition and the collectability of
trade accounts receivable. Application of these assump-
tions requires the exercise of judgment as to future uncer-
tainties and, as a result, actual results could differ from
continues to operate the portfolio and earn fees for such
these estimates.
services. Following the January 2006 recapitalization of the
Brandywine Portfolio, the Company no longer has a control-
ling interest in this investment and, accordingly, accounts for
this investment under the equity method of accounting.
Investments in and Advances to Unconsolidated
Joint Ventures
The Company accounts for its investments in unconsoli-
dated joint ventures using the equity method as it does
not exercise control over significant asset decisions such
61
Acadia Realty Trust 2007 Annual Report
Real Estate
Real estate assets are stated at cost less accumulated
depreciation. Expenditures for acquisition, development,
construction 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
property expansion and redevelopment. Depreciation is
computed on the straight-line basis over estimated useful
lives of 30 to 40 years for buildings, the shorter of the use-
Real Estate Held-for-Sale
The Company evaluates the held-for-sale classification of
ful life or lease term for tenant improvements and five years
its real estate each quarter. Assets that are classified as
for furniture, fixtures and equipment. Expenditures for main-
held-for-sale are recorded at the lower of their carrying
tenance and repairs are charged to operations as incurred.
amount or fair value less cost to sell. Assets are generally
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 customer relationships) and acquired liabilities
classified as held-for-sale once management has initiated
an active program to market them for sale and has received
a firm purchase commitment. The results of operations of
these real estate properties are reflected as discontinued
operations in all periods reported.
in accordance with Statement of Financial Accounting
On occasion, the Company will receive unsolicited offers
Standards (“SFAS”) No. 141, “Business Combinations,”
from third parties to buy individual Company properties.
and SFAS No. 142, “Goodwill and Other Intangible Assets,”
Under these circumstances, the Company will classify
and allocates purchase price based on these assessments.
the properties as held-for-sale when a sales contract is
The Company assesses fair value based on estimated cash
executed with no contingencies and the prospective buyer
flow projections that utilize appropriate discount and capi-
has funds at risk to ensure performance.
talization rates and available market information. Estimates
of future cash flows are based on a number of factors
including the historical operating results, known trends, and
market/economic conditions that may affect the property.
The Company reviews its long-lived assets used in opera-
tions for impairment when there is an event, or change
in circumstances that indicates impairment in value. The
Company records impairment losses and reduces the car-
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.
rying value of properties when indicators of impairment
are present and the expected undiscounted cash flows
Management Contracts
Income from management contracts is recognized on an
related to those properties are less than their carrying
accrual basis as such fees are earned. The initial acquisition
amounts. In cases where the Company does not expect
cost of the management contracts is being amortized over
to recover its carrying costs on properties held for use,
the estimated lives of the contracts acquired. Income from
the Company reduces its carrying cost to fair value, and
management contracts for the year ended December 31,
for properties held for sale, the Company reduces its car-
2005 is net of sub-management fees of $0.3 million.
rying value to the fair value less costs to sell. During the
years ended December 31, 2007 and 2006, no impairment
losses were recognized. During the year ended December
31, 2005, an impairment loss of $0.8 million was recog-
nized related to a property that was sold during July of
2005. Management does not believe that the values of its
properties within the portfolio are impaired as of Decem-
ber 31, 2007.
Sale of Real Estate
The Company recognizes property sales in accordance with
SFAS No. 66, “Accounting for Sales of Real Estate.” The
Company generally records the sales of operating proper-
ties and outparcels using the full accrual method at closing
when the earnings process is deemed to be complete.
Sales not qualifying for full recognition at the time of sale
are accounted for under other appropriate deferral methods.
Revenue Recognition and Accounts and
Notes 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, beginning
when the tenant takes possession of the space. As of
December 31, 2007 and 2006, included in rents receivable,
net on the accompanying consolidated balance sheet,
unbilled rents receivable relating to straight-lining of rents
were $8.4 million and $5.6 million, respectively. Certain
of these leases also provide for percentage rents based
upon the level of sales achieved by the tenant. Percentage
rent is recognized in the period when the tenants’ sales
breakpoint is met. In addition, leases typically provide for
the reimbursement to the Company of real estate taxes,
insurance and other property operating expenses. These
Acadia Realty Trust 2007 Annual Report 62
Notes to Consolidated Financial Statements continued
reimbursements are recognized as revenue in the period
TRS income taxes are accounted for under the asset and
the expenses are incurred.
The Company makes estimates of the uncollectability of
its accounts receivable related to tenant revenues. An
allowance for doubtful accounts has been provided against
certain tenant accounts receivable that are estimated to
liability method as required by SFAS No. 109, “Accounting
for Income Taxes.” Under the asset and liability method,
deferred income taxes are recognized for the temporary
differences between the financial reporting basis and the
tax basis of the TRS assets and liabilities.
be uncollectible. Once the amount is ultimately deemed
The Company adopted the provisions of the FASB Financial
to be uncollectible, it is written off. Rents receivable
Interpretation No. 48, “Accounting for Uncertainty in Income
at December 31, 2007 and 2006 are shown net of an
Taxes — an interpretation of SFAS No. 109,” as of January 1,
allowance for doubtful accounts of $3.1 million and $3.2
2007. The Company believes that it has appropriate support
million, respectively.
Interest income from notes receivable is recognized on an
accrual basis based on the contractual terms of the notes.
The Company reviews notes receivable on a quarterly
basis and determined that all notes receivable are deemed
to be collectible as of December 31, 2007.
Cash and Cash Equivalents
The Company considers all highly liquid investments with
an original maturity of three months or less when pur-
chased to be cash equivalents.
Restricted Cash and Cash in Escrow
Restricted cash and cash in escrow consist principally of
cash held for real estate taxes, property maintenance,
insurance, 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 distrib-
ute at least 90% of its REIT taxable income to its stock-
holders 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 prop-
erties 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.
for the income tax positions taken and, as such, does not
have any uncertain tax positions that result in a material
impact on the Company’s financial position or results of
operation. The prior three years income tax returns are sub-
ject to review by the Internal Revenue Service. The Com-
pany’s policy relating to interest and penalties is to recognize
them as a component of the provision for income taxes.
Stock-based Compensation
The Company accounts for stock options pursuant to SFAS
No. 123R, “Accounting for Stock-Based Compensation.”
As such, all stock options are reflected as compensation
expense in the Company’s consolidated financial state-
ments over their vesting period based on the fair value at
the date the stock option was granted.
Recent Accounting Pronouncements
In September 2006, the SEC issued Staff Accounting
Bulletin (SAB) No. 108, “Considering the Effects of Prior
Year Misstatements when Quantifying Misstatements in
Current Year Financial Statements.” This Bulletin provides
guidance on the consideration of the effects of prior year
misstatements in quantifying current year misstatements
for the purpose of a materiality assessment. The guidance
in this Bulletin must be applied to financial reports cover-
ing the first fiscal year ending after November 15, 2006.
As a result of the adoption of SAB No. 108, the Company
recorded a $1.8 million cumulative effect of straight-line
rent adjustment for prior years effective January 1, 2006.
This adjustment was the result of changing the calculation
of tenants straight-line rent from rent commencement
date to the date the tenant took possession of the space.
This adjustment is reflected in the Company’s balance
sheet as an increase to both rents receivable, net and
retained earnings.
During September 2006, the FASB issued Statement of
Financial Accounting Standards (“SFAS”) No. 157, “Fair
Value Measurements.” This SFAS defines fair value,
establishes a framework for measuring fair value in GAAP,
63
Acadia Realty Trust 2007 Annual Report
and expands disclosures about fair value measurements.
intangibles), the liabilities assumed and any noncontrolling
This statement applies to accounting pronouncements
interest in the acquired entity. The Company is currently
that require or permit fair value measurements, except for
evaluating the impact of adopting the Statement, which is
share-based payment transactions under SFAS No. 123.
effective for fiscal years beginning on or after December
SFAS 157 is effective for financial statements issued for
15, 2008.
fiscal years beginning after November 15, 2007. As SFAS
No. 157 does not require any new fair value measurements
or remeasurements of previously computed fair values,
the Company does not believe adoption of SFAS No. 157
will have a material effect on its financial statements.
On February 15, 2007, the FASB issued SFAS No. 159,
“The Fair Value Option for Financial Assets and Financial
Liabilities.” This statement permits companies and not-
for-profit organizations to make a one-time election to
carry eligible types of financial assets and liabilities at fair
Comprehensive income
The following table sets forth comprehensive income for
the years ended December 31, 2007, 2006 and 2005:
Years Ended December 31,
2007
2006
2005
(dollars in thousands)
Net income
$27,270
$39,013
$20,626
Other comprehensive
(loss) income
(719)
(222)
3,168
value, even if fair value measurement is not required
Comprehensive income
$26,551
$38,791
$23,794
under GAAP. SFAS 159 is effective for fiscal years begin-
ning after November 15, 2007. The Company is currently
evaluating the effect of the adoption of SFAS No. 159.
Other comprehensive income relates to the changes in the
fair value of derivative instruments accounted for as cash
flow hedges and amortization, which is included in interest
On August 31, 2007, the FASB issued a proposed FASB
expense, of derivative instruments.
Staff Position (the “Proposed FSP”) that affects the
accounting for the Company’s convertible notes payable.
The Proposed FSP requires the initial debt proceeds from
the sale of the Company’s convertible notes to be allocated
between a liability component and an equity component.
The resulting debt discount must be amortized over the
period the debt is expected to remain outstanding as
additional interest expense. The Proposed FSP, if adopted,
would be effective for fiscal years beginning after Decem-
ber 15, 2007 and would require retroactive application.
The Company is currently evaluating the impact that
this Proposed FSP would have on its financial statements
if adopted.
In December 2007, the FASB issued SFAS No. 160, “Non-
controlling Interests in Consolidated Financial Statements,”
which, among other things, provides guidance and estab-
lishes amended accounting and reporting standards for a
parent company’s noncontrolling or minority interest in a
subsidiary. The Company is currently evaluating the impact
of adopting the Statement, which is effective for fiscal years
beginning on or after December 15, 2008.
In December 2007, the FASB issued SFAS No. 141R,
The following table sets forth the change in accumulated
other comprehensive loss for the years ended December
31, 2007 and 2006:
Accumulated other comprehensive loss
(dollars in thousands)
Beginning balance
Years Ended
December 31,
2007
2006
$(234)
$ (12)
Unrealized (loss) gain on valuation
of derivative instruments
(719)
(222)
Ending balance
$(953)
$ (234)
Note 2i
Acquisition and Disposition of
Properties and Discontinued
Operations
A. Acquisition and Disposition of Properties
“Business Combinations,” which replaces SFAS No. 141
Currently the primary vehicles for the Company’s acquisi-
Business Combinations. SFAS No. 141R, among other
tions are Funds I, II and III (Note 1).
things, establishes principles and requirements for how
an acquirer entity recognizes and measures in its financial
statements the identifiable assets acquired (including
Acquisitions
On March 20, 2007, the Company purchased a retail com-
mercial condominium at 200 West 54th Street located in
Acadia Realty Trust 2007 Annual Report 64
Notes to Consolidated Financial Statements continued
Manhattan, New York. The 10,000 square foot property
located in Boonton, New Jersey. The property is a 63,000
was acquired for $36.4 million.
square foot shopping center anchored by a 49,000 square
Additionally, on March 20, 2007, the Company purchased
a single-tenant building located at 1545 East Service Road
in Staten Island, New York for $17.0 million.
On May 31, 2007, the Company purchased a property
located on Atlantic Avenue in Brooklyn, New York for
$5.0 million. Redevelopment plans for the property call
for the demolition of the existing structure and the con-
struction of a 110,000 square foot self-storage facility.
On June 13, 2007, the Company (approximately 25%),
along with an unaffiliated partner (approximately 75%),
acquired a leasehold interest in The Gallery at Fulton
Street and adjacent parking garage located in downtown
Brooklyn, New York for $115.0 million. The redevelopment
plans include the demolition of the existing improvements
and the construction of a mixed-use project to be called
CityPoint.
On October 31, 2007, the Company, in conjunction with
an unaffiliated partner, P/A Associates, LLC (“Acadia P/A”),
acquired a 530,000 square foot warehouse building in
Canarsie, Brooklyn for approximately $21.0 million. The
development plan for this property includes the demolition
of a portion of the warehouse and the construction of a
320,000 square foot mixed-use project consisting of retail,
office, cold-storage and self-storage.
foot A&P Supermarket. A portion of the remaining 40%
interest is owned by a principal of P/A Associates, LLC.
The interest was acquired for $3.2 million.
On June 16, 2006, the Company purchased 8400 and
8625 Germantown Road, totaling 40,570 square feet, in
Philadelphia, Pennsylvania for $16.0 million. The Company
assumed a $10.1 million first mortgage loan which has a
maturity date of June 11, 2013.
On September 21, 2006, the Company purchased 2914
Third Avenue, a 41,305 square foot building located in the
Bronx, New York for $18.5 million.
Dispositions
On November 15, 2007, the Company sold the Amherst
Marketplace and Sheffield Crossing, shopping centers
located in Ohio, for $26.0 million, which resulted in a $7.5
million gain on sale.
On December 13, 2007, the Company sold a residential
complex in Columbia, Missouri for $15.5 million, which
resulted in a $2.0 million loss on sale.
On November 3, 2006, the Company sold the Bradford
Towne Centre, a 257,123 square foot shopping center
located in Towanda, Pennsylvania, for $16.0 million, which
resulted in a $5.6 million gain on sale.
On November 1, 2007, the Company, and an unaffiliated
partner acquired a property in Westport, Connecticut for
On November 28, 2006, the Company sold three proper-
ties located in northeastern Pennsylvania as follows:
approximately $17.0 million. The plan is to redevelop the
(dollars in thousands)
existing building into 30,000 square feet of retail and resi-
Property
Sales Price
Gain
GLA
dential use.
On November 5, 2007, the Company, through Acadia P/A,
acquired a property in Sheepshead Bay, Brooklyn for
Greenridge Plaza
$10,600
$4,753
191,767
Luzerne Street Center
Pittston Plaza
3,600
6,000
2,521
487
58,035
79,498
approximately $20.0 million. The redevelopment plan
Total
$20,200
$7,761
329,300
includes the demolition of the existing structures and the
construction of a 240,000 square foot shopping center.
On December 14, 2006, the Company sold the Soundview
Marketplace, a 183,815 square foot shopping center in Port
On January 12, 2006, the Company closed on a 19,265
Washington, New York, for $24.0 million which resulted in
square foot retail building in the Lincoln Park district in
a $7.9 million gain on the sale.
Chicago. The property was acquired from an affiliate of
Klaff for a purchase price of $9.9 million, including the
assumption of existing mortgage debt in the principal
amount of $3.8 million.
On July 7, 2005, the Company sold the Berlin Shopping
Center for $4.0 million. An impairment loss of $0.8 million
was recognized for the year ended December 31, 2005 to
reduce the carrying value of this asset to fair value less
On January 24, 2006, the Company acquired a 60% inter-
costs to sell.
est in the entity which owns the A&P Shopping Plaza
65
Acadia Realty Trust 2007 Annual Report
B. Discontinued Operations
SFAS No. 144 requires discontinued operations presenta-
Years Ended December 31,
2007
2006
2005
tion for disposals of a “component” of an entity. In accor-
(dollars in thousands)
dance with SFAS No. 144, for all periods presented, the
Company has reclassified its consolidated statements of
income to reflect income and expenses for sold properties
(Note 2A), as discontinued operations and reclassified its
consolidated balance sheets to reflect assets and liabilities
Revenues
$ 6,471 $15,359
$16,278
Operating expenses
Interest expense
4,460
1,634
9,590
2,890
11,338
2,788
Operating income
377
2,879
2,152
related to such properties as assets and liabilities related
Impairment of real estate
—
—
(770)
to discontinued operations. Interest expense specific to a
discontinued operation property is reflected in discontin-
Gain (loss) on sale
of properties
5,271
20,974
ued operations.
Minority interest
(111)
(462)
(50)
(26)
The combined results of operations of sold properties are
Income from discontinued
reported separately as discontinued operations for the
years ended December 31, 2007, 2006 and 2005.
The combined assets and liabilities and results of opera-
tions of the properties classified as discontinued opera-
tions are summarized as follows:
(dollars in thousands)
Assets
Net real estate
Rents receivable, net
Other assets
Total assets of
discontinued operations
Liabilities
December 31,
2006
$32,616
1,080
2,537
$36,233
operations
$ 5,537 $23,391
$ 1,306
Note 3i
Segment Reporting
The Company has three reportable segments: core portfo-
lio, opportunity funds and other which, primarily consists
of management fee and interest income. The accounting
policies of the segments are the same as those described
in the summary of significant accounting policies. The
Company evaluates property performance primarily based
on net operating income before depreciation, amortization
and certain nonrecurring items. Investments in the core
portfolio are typically held long-term. Given the finite life
of the opportunity funds, these investments are typically
held for shorter terms. Fees earned by the Company as
general partner/member of the opportunity funds are
eliminated in the Company’s consolidated financial state-
Mortgage notes payable
$26,955
ments. The Company previously reported two reportable
Accounts payable and accrued expenses
Other liabilities
Total liabilities of
discontinued operations
665
1,140
$28,760
segments, retail properties and multi-family properties.
During December of 2007, the Company sold the majority
of its multi-family properties and realigned the segments to
reflect the way the Company now manages the business.
The following table sets forth certain segment information
for the Company, reclassified for discontinued operations,
as of and for the years ended December 31, 2007, 2006,
and 2005 (does not include unconsolidated affiliates):
Acadia Realty Trust 2007 Annual Report 66
Notes to Consolidated Financial Statements continued
(dollars in thousands)
Revenues
Property operating expenses and real estate taxes
Other expenses
Net income before depreciation and amortization
Depreciation and amortization
Interest expense
Real estate at cost
Total assets
Expenditures for real estate
and improvements
Reconciliation to net income
Net property income before depreciation
and amortization
Depreciation and amortization
Equity in earnings of unconsolidated partnerships
Interest expense
Income tax provision
Minority interest
Income from discontinued operations
Extraordinary item
Net income
2007
Core
Portfolio
Opportunity
Funds
Other
Elimination
Total
$ 62,970
$ 20,672
$38,294
$(20,367)
$ 101,569
18,770
25,239
$ 18,961
$ 17,510
$ 17,439
$
$
$
5,069
13,032
2,000
(280)
—
(15,213)
25,559
23,058
2,571
$36,294
$ (4,874)
$ 52,952
9,381
5,852
$
$
615
$
— $ 27,506
— $
(516)
$ 22,775
$ 460,591
$ 377,461
$20,380
$ (4,358)
$ 854,074
$ 569,538
$ 419,045
$14,787
$ (4,358)
$ 999,012
$ 58,124
$ 151,652
$
451
$
— $ 210,227
$ 52,952
(27,506)
6,619
(22,775)
297
9,063
5,537
3,677
$ 27,270
67
Acadia Realty Trust 2007 Annual Report
2006
Core
Portfolio
Opportunity
Funds
Other
Elimination
Total
(dollars in thousands)
Revenues
Property operating expenses and real estate taxes
Other expenses
$ 58,450
$ 19,291
$26,654
$ (8,595)
$ 95,800
16,655
21,610
4,710
4,410
1,916
—
(329)
(6,238)
22,952
19,782
Net income before depreciation and amortization
$ 20,185
$ 10,171
$24,738
$ (2,028)
$ 53,066
Depreciation and amortization
Interest expense
Real estate at cost
Total assets
Expenditures for real estate
and improvements
Reconciliation to net income
Net property income before depreciation
and amortization
Depreciation and amortization
Equity in earnings of unconsolidated partnerships
Interest expense
Income tax (benefit)
Minority interest
Income from discontinued operations
Net income
$ 15,212
$ 14,160
$
$
9,517
6,298
$
$
632
243
$ —
$ 25,361
$ (324)
$ 20,377
$ 407,858
$ 223,748
$20,149
$ (1,704)
$ 650,051
$ 584,544
$ 254,586
$14,266
$ (1,704)
$ 851,692
$ 62,725
$ 24,092
$
192
$ —
$ 87,009
$ 53,066
(25,361)
2,559
(20,377)
(508)
5,227
23,391
$ 39,013
Acadia Realty Trust 2007 Annual Report 68
Notes to Consolidated Financial Statements continued
2005
Core
Portfolio
Opportunity
Funds
Other
Elimination
Total
(dollars in thousands)
Revenues
Property operating expenses and real estate taxes
Other expenses
$ 52,996
$ 32,045
$18,555
$(9,631)
$ 93,965
14,713
15,382
5,754
8,888
1,833
—
—
(8,117)
22,300
16,153
Net income before depreciation and amortization
$ 22,901
$ 17,403
$16,722
$(1,514)
$ 55,512
Depreciation and amortization
Interest expense
Real estate at cost
Total assets
Expenditures for real estate
and improvements
Reconciliation to net income
Net property income before depreciation
and amortization
Depreciation and amortization
Equity in earnings of unconsolidated partnerships
Interest expense
Income tax provision
Minority interest
Income from discontinued operations
Net income
Note 4i
Investments
A. Investments in and Advances to
Unconsolidated Affiliates
Retailer Controlled Property Venture
("RCP Venture”)
During January of 2004, the Company entered into the
$ 13,546
$ 10,540
$
9,394
$
7,503
$
$
611
134
$ —
$ 24,697
$ (342)
$ 16,689
$ 337,344
$ 314,773
$19,872
$(1,172)
$ 670,817
$ 436,136
$ 389,456
$16,784
$(1,172)
$ 841,204
$ 25,355
$ 105,448
$
274
$ —
$ 131,077
$ 55,512
(24,697)
21,280
(16,689)
2,140
(13,946)
1,306
$ 20,626
Mervyns Department Stores
During September of 2004, the RCP Venture invested in
a consortium to acquire the Mervyns Department Store
chain from Target Corporation. The gross acquisition price
of $1.2 billion was financed with $800 million of debt and
$400 million of equity. The Company’s share of this invest-
ment was $23.9 million. For the year ended December 31,
2007, the Company made an additional investment of $2.2
million in Mervyns through the RCP Venture.
RCP Venture with Klaff Realty, L.P. (“Klaff”) and Lubert-
For the year ended December 31, 2005, the Company
Adler Management, Inc. for the purpose of making invest-
made add-on investments in Mervyns totaling $1.3 million.
ments in surplus or underutilized properties owned by
The Company accounts for these add-on investments
retailers. Through December 31, 2007, the Company has
using the cost method due to the minor ownership interest
invested $55.4 million through the RCP Venture on a non-
and the inability to exert influence over the partnership’s
recourse basis. Cash flow is to be distributed to the RCP
operating and financial policies.
Venture partners in accordance with their ownership inter-
ests 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 Klaff and 80% to the part-
ners (including Klaff).
Albertson’s
During June of 2006, the RCP Venture made its second
investment as part of an investment consortium, acquiring
Albertson’s and Cub Foods, of which the Company’s share
was $20.7 million. During February of 2007, the Company
received a cash distribution of $44.4 million from this
69
Acadia Realty Trust 2007 Annual Report
investment which was sourced from the disposition of
Other Investments
certain operating stores and a refinancing of the remaining
During 2006, the Company made additional investments
assets held by Albertson’s. The distribution in excess of
of $1.1 million in Shopko and $0.7 million in Marsh through
the Company’s invested capital was reflected as an extra-
the RCP Venture. For the year ended December 31, 2007,
ordinary gain of $30.2 million. This gain was characterized
the Company received a $1.1 million cash distribution
as extraordinary consistent with the accounting treatment
from the Shopko investment representing 100% of its
by Albertson’s which reflected the excess of fair value of
invested capital.
net assets acquired over the purchase price as an extraor-
dinary gain. The Company received additional distributions
from this investment totaling $8.8 million for the year ended
December 31, 2007.
For the years ended December 31, 2007 and 2006, the
Company made add-on investments in Albertson’s totaling
$2.8 million and received distributions totaling $0.8 million.
The Company accounts for these add-on investments
During July of 2007, the RCP Venture acquired a portfolio
of 87 retail properties from Rex Stores Corporation. The
Company’s share of this investment was $2.7 million.
The Company accounts for the two above investments
using the cost method due to its minor ownership interest
and the inability to exert influence over the partnership’s
operating and financial policies.
using the cost method due to the minor ownership interest
The following table summarizes the RCP Venture invest-
and the inability to exert influence over the partnership’s
ments from inception through December 31, 2007:
operating and financial policies.
(dollars in thousands)
Investor
Investment
Mervyns I and Mervyns II
Mervyns
Mervyns I and Mervyns II
Mervyns add-on investments
Year
Acquired
2004
2005
2006
Albertson’s
Albertson’s add-on investments
2006/2007
Shopko
Marsh
Rex
2006
2006
2007
Mervyns II
Mervyns II
Fund II
Fund II
Mervyns II
Total
Operating
Partnership Share
Invested
Capital
$26,072
1,342
20,717
2,765
1,100
667
2,701
Distributions
$ 45,966
Invested
Capital
$ 4,901
1,342
53,206
833
1,100
—
—
283
4,239
386
220
133
535
Distributions
$ 11,251
283
9,847
93
220
—
—
$55,364
$102,447
$10,697
$ 21,694
Brandywine Portfolio
center located in White Plains, New York which is
The Company owns a 22.2% interest in a one million
accounted for using the equity method.
square foot retail portfolio located in Wilmington, Delaware
(the “Brandywine Portfolio”) which is accounted for using
the equity method.
Crossroads
The Company owns a 49% interest in the Crossroads
Joint Venture and Crossroads II (collectively, “Crossroads”),
which collectively own a 311,000 square foot shopping
Other Investments
Fund I Investments
Fund I has joint ventures with unaffiliated third-party
investors in the ownership and operation of the following
shopping centers, which are accounted for using the
equity method of accounting.
Shopping Center
Location
Year Acquired
Haygood Shopping Center
Virginia Beach, VA
Sterling Heights Shopping Center
Detroit, MI
2004
2004
Total
GLA
178,533
154,835
333,368
Acadia Realty Trust 2007 Annual Report 70
Notes to Consolidated Financial Statements continued
In November 2006, Fund I completed the purchase of the
Fund II’s approximately 25% investment in CityPoint (Note
remaining 50% interest in the Tarrytown Centre, a 35,000
2) is accounted for using the equity method. This invest-
square foot center located in Westchester, New York,
ment is a variable interest entity of which the Company
from its unaffiliated partner. This investment, which had
is not the primary beneficiary. The Company’s maximum
previously been accounted for using the equity method, is
exposure is its current investment balance of $28.9 million.
now consolidated.
Fund II Investments
In addition to these investments, the Company made
advances to unconsolidated affiliates. At December 31,
Fund II has invested $1.2 million as a 50% owner in an
2007 and 2006, advances to unconsolidated affiliates
entity which has a leasehold interest in a former Levitz
totaled $4.0 million and $2.3 million, respectively.
Furniture store located in Rockville, Maryland, which is
accounted for using the equity method.
The following tables summarize the Company’s invest-
ment in unconsolidated subsidiaries as of December 31,
2007, December 31, 2006 and December 31, 2005.
December 31, 2007
RCP
Venture
CityPoint
Brandywine
Portfolio
Crossroads Investments
Total
Other
(dollars in thousands)
Balance Sheets
Assets
Rental property, net
Investment in unconsolidated affiliates
Other assets
Total assets
Liabilities and partners’ equity
Mortgage note payable
Other liabilities
Partners’ equity (deficit)
$
—
$145,775
$136,942
$ 5,552
$ 38,137
$ 326,406
195,672
—
—
3,046
—
10,631
—
4,372
—
6,650
195,672
24,699
$195,672
$148,821
$147,573
$ 9,924
$ 44,787
$ 546,777
$
—
—
$ 34,000
$166,200
$ 64,000
$ 33,084
$ 297,284
2,213
9,629
1,112
195,672
112,608
(28,256)
(55,188)
2,307
9,396
15,261
234,232
Total liabilities and partners’ equity
$195,672
$148,821
$147,573
$ 9,924
$ 44,787
$ 546,777
Company’s investment in and advances to
unconsolidated affiliates
$ 9,813
$ 28,890
$
—
$
—
$ 5,951
$ 44,654
Share of distributions in excess of share of income
and investment in unconsolidated affiliates
$
—
$
—
$ (7,822)
$ (12,185)
$
— $ (20,007)
(dollars in thousands)
Balance Sheets
Assets
Rental property, net
Investment in unconsolidated affiliates
Other assets
Total assets
Liabilities and partners’ equity
Mortgage note payable
Other liabilities
Partners’ equity (deficit)
Total liabilities and partners’ equity
Company’s investment in and advances to
RCP
Venture
Brandywine
Portfolio
Crossroads
Other
Investments
Total
December 31, 2006
$
—
385,444
—
$127,146
$ 6,017
$ 43,660
$176,823
—
6,747
—
4,511
—
6,632
385,444
17,890
$385,444
$133,893
$ 10,528
$ 50,292
$580,157
$
—
—
385,444
$385,444
$166,200
$ 64,000
$ 28,558
$258,758
12,709
(45,016)
1,858
(55,330)
8,862
12,872
23,429
297,970
$133,893
$ 10,528
$ 50,292
$580,157
unconsolidated affiliates
$ 24,894
$
—
$
—
$ 8,439
$ 33,333
Share of distributions in excess of share of income
and investment in unconsolidated affiliates
$
—
$ (10,541)
$(11,187)
$
—
$ (21,728)
71
Acadia Realty Trust 2007 Annual Report
Year Ended December 31, 2007
RCP
Venture
Brandywine
Portfolio
Crossroads
Other
Investments
Total
(dollars in thousands)
Statement of Operations
Total revenue
Operating and other expenses
Interest expense
$
—
—
—
Equity in earnings of unconsolidated affiliates
46,416
Equity in earning of unconsolidated affiliates
extraordinary gain
Depreciation and amortization
Net income (loss)
Company’s share of net income
Amortization of excess investment
Company’s share of net income
before extraordinary gain
Company’s share of extraordinary gain
151,000
—
$197,416
$
3,312
—
$
3,312
$ 30,200
$ 20,252
$ 8,518
$ 5,862
$ 34,632
5,620
10,102
—
—
3,269
$ 1,261
$
$
$
232
—
232
—
3,095
3,485
—
—
475
$ 1,463
$ 717
392
$ 325
$ —
1,396
2,333
—
—
4,439
$(2,306)
$ 2,750
—
$ 2,750
$ —
10,111
15,920
46,416
151,000
8,183
$197,834
$ 7,011
392
$ 6,619
$ 30,200
Year Ended December 31, 2006
RCP
Venture
Brandywine
Portfolio
Crossroads
Other
Investments
Total
(dollars in thousands)
Statement of Operations
Total revenue
Operating and other expenses
Interest expense
Equity in (losses) of unconsolidated affiliates
Depreciation and amortization
Net (loss) income
Company’s share of net income
Amortization of excess investment
Company’s share of net income (loss)
(dollars in thousands)
Statement of Operations
Total revenue
Operating and other expenses
Interest expense
Equity in earnings of unconsolidated affiliates
Depreciation and amortization
Net income (loss)
Company’s share of net income
Amortization of excess investment
Company’s share of net income (loss)
$ 18,324
$ 9,208
$ 3,707
$ 31,239
$
—
—
—
(4,554)
—
4,800
12,066
—
2,947
$ (4,554)
$ (1,489)
$
$
2,212
—
2,212
$
$
(31)
—
(31)
3,121
3,485
—
580
$ 2,022
$ 991
392
$ 599
2,295
1,448
—
1,416
$(1,452)
$ (221)
—
10,216
16,999
(4,554)
4,943
$ (5,473)
$ 2,951
392
$ (221)
$ 2,559
Year Ended December 31, 2005
RCP
Venture
Crossroads
Other
Investments
Total
$
—
—
—
181,543
—
$ 181,543
$ 20,902
—
$ 20,902
$ 8,772
2,581
3,632
—
654
$ 1,905
$ 988
392
$ 596
$ 3,778
2,206
906
—
927
$ (261)
$ (218)
—
$ 12,550
4,787
4,538
181,543
1,581
$183,187
$ 21,672
392
$ (218)
$ 21,280
Acadia Realty Trust 2007 Annual Report 72
Notes to Consolidated Financial Statements continued
B. Notes Receivable and Preferred Equity
above and below market leases, acquired in-place leases
Investment
and customer relationships) and acquired liabilities in
During March of 2005, the Company made a $20.0 million
accordance with SFAS No. 141. The intangibles are amor-
preferred equity investment (“Preferred Equity Invest-
tized over the remaining non-cancelable terms of the
ment”) in Levitz SL, L.L.C. (“Levitz SL”), the owner of
respective leases.
fee and leasehold interests in 30 current or former Levitz
Furniture Store locations (the “Levitz Properties”), totaling
2.5 million square feet.
During June 2006, the Company converted the Preferred
Equity Investment to a first mortgage loan and made an
additional advance bringing the total outstanding amount
to $31.3 million. The loan matures on May 31, 2008 and
bears interest at a rate of 10.5%. During 2006, Levitz SL
sold one of the Levitz Properties located in Northridge,
California and used $20.4 million of the proceeds to pay
down the loan. During 2007, Levitz SL sold an additional
Levitz Property located in St. Paul Minnesota and used
$4.8 million of the proceeds to pay down the first mort-
gage loan. As of December 31, 2007 and 2006, the loan
balance amounted to $6.1 million and $10.9 million,
respectively, and was secured by fee and leasehold mort-
gages as well as a pledge of the entities owning 13 of the
remaining Levitz Properties totaling 1.3 million square feet.
Although Levitz Furniture filed for Chapter 7 bankruptcy
protection during November 2007, the Company believes
the underlying value of the real estate is sufficient to
recover the principal and interest due under the mortgage.
Note 5i
Deferred Charges
Deferred charges consist of the following as of
December 31, 2007 and 2006:
December 31,
2007
2006
(dollars in thousands)
Deferred financing costs
$ 18,756
$ 15,684
The scheduled amortization of acquired lease intangible
assets as of December 31, 2007 is as follows:
(dollars in thousands)
2008
2009
2010
2011
2012
Thereafter
$ 2,744
2,222
1,782
1,258
777
7,320
$16,103
The scheduled amortization of acquired lease intangible
liabilities as of December 31, 2007 is as follows:
(dollars in thousands)
2008
2009
2010
2011
2012
Thereafter
Note 7i
$ (827)
(694)
(631)
(634)
(588)
(2,277)
$(5,651)
Mortgage Loans
At December 31, 2007 and 2006, mortgage notes payable,
excluding the net valuation premium on the assumption
of debt, aggregated $402.0 million and $318.3 million,
respectively, and were collateralized by 49 and 52 proper-
ties and related tenant leases, respectively. Interest rates
on the Company’s outstanding mortgage indebtedness
Deferred leasing and other costs
20,399
19,342
ranged from 4.75% to 8.5% with maturities that ranged
Accumulated amortization
(17,330)
(14,277)
39,155
35,026
from March 2008 to November 2032. Certain loans are
cross-collateralized and cross-defaulted. The loan agree-
ments contain customary representations, covenants and
$ 21,825
$ 20,749
events of default. Certain loan agreements require the
Note 6i
Acquired Lease Intangibles
Upon acquisitions of real estate, the Company assesses
Company to comply with certain affirmative and negative
covenants, including the maintenance of certain debt
service coverage and leverage ratios.
The following reflects mortgage loan activity for the year
the fair value of acquired assets (including land, buildings
ended December 31, 2007:
and improvements, and identified intangibles such as
73
Acadia Realty Trust 2007 Annual Report
During 2007, the Company drew an additional $17.4 million
During October 2007, the Company closed on a $75.0
on two existing construction loans. During September 2007,
million revolving facility, which bears interest at the com-
the Company paid off the remaining $19.2 million balance
mercial paper rate plus 50 basis points and matures on
of one of these loans. As of December 31, 2007, the out-
October 10, 2011. As of December 31, 2007, this facility
standing balance on the remaining construction loan was
was fully available.
$10.0 million.
On October 30, 2007, the Company closed on a $9.8
During January 2007, the Company paid off a $21.5
million loan secured by a property, which bears interest
million loan.
at LIBOR plus 165 basis points and matures on October
During January 2007, the Company closed on a $26.0
30, 2010.
million loan secured by a property, which bears interest
During October 2007, the Company closed on a construc-
at a fixed rate of 5.4% and matures on February 11, 2017.
tion loan for a property for $95.3 million. This loan bears
A portion of the proceeds was used to pay off an existing
interest at LIBOR plus 175 basis points and matures on
$15.7 million loan.
During March 2007, the Company closed on a $30.0 mil-
lion revolving facility which bears interest at LIBOR plus
125 basis points and matures on March 29, 2010. As of
October 4, 2009. A portion of the proceeds were used to
pay down an existing $18.0 million loan. As of December
31, 2007, the amount outstanding on this loan was $37.3
million.
December 31, 2007, this line of credit was fully available.
During November and December 2007, in conjunction
During 2007, the Company borrowed $34.5 million on an
existing credit facility.
During July 2007, the Company closed on a new $26.3 mil-
lion mortgage loan secured by a property. The loan bears
interest at a fixed rate of 5.9% and matures on August 1,
2017. A portion of the proceeds were used to pay down
an existing $12.5 million loan.
with the sale of four properties, the Company paid off
$26.5 million of debt.
During December 2007, the Company closed on a con-
struction loan for a property for $35.7 million. This loan
bears interest at a fixed rate of 7.2%. Based upon meet-
ing certain conditions, this loan will become permanent
after a two-year period and the interest rate will be
adjusted. This loan matures on January 1, 2020. As of
During September 2007, the Company extended a $19.0
December 31, 2007, there was no outstanding balance
million loan that bears fixed interest at 5.8% to a new
on this loan.
maturity date of March 1, 2008 and also extended a $2.9
million loan that bears interest at LIBOR plus 200 basis
points to a new maturity date of October 5, 2008.
During December 2007, the Company closed on a con-
struction loan for a property for $16.2 million. This loan
bears interest at a fixed rate of 7.1%. Based upon meet-
On September 12, 2007, the Company closed on a $25.5
ing certain conditions, this loan will become permanent
million loan secured by a property, which bears interest
after a two-year period and the interest rate will be
at a fixed rate of 5.8% and matures on October 1, 2017.
adjusted. This loan matures on January 1, 2020. As of
A portion of the proceeds were used to pay down an
December 31, 2007, there was no outstanding balance
existing $19.2 million construction loan.
on this loan.
Acadia Realty Trust 2007 Annual Report 74
Notes to Consolidated Financial Statements continued
The following table summarizes our mortgage indebtedness as of December 31, 2007 and December 31, 2006:
December 31,
Interest Rate at
Properties
2007
2006
December 31, 2007
Maturity
Encumbered Payment Terms
(dollars in thousands)
Mortgage notes payable — variable-rate
Washington Mutual Bank, FA
$
— $ 21,524 6.10% (LIBOR + 1.50%)
4/1/2011
Bank of America, N.A.
RBS Greenwich Capital
Bank of America, N.A.
PNC Bank, National Association
Bank One, N.A.
9,781
30,000
9,925 6.00% (LIBOR + 1.40%) 6/29/2012
30,000 6.00% (LIBOR + 1.40%)
4/1/2008
—
6,424 5.85% (LIBOR + 1.25%) 12/31/2008
9,990
2,818
5,363 6.25% (LIBOR + 1.65%) 5/18/2009
2,939 6.60% (LIBOR + 2.00%) 10/5/2008
Bank of China, New York Branch
—
18,000 6.35% (LIBOR + 1.75%) 11/1/2007
Bank of America, N.A.
Bank of America, N.A.
Anglo Irish Bank Corporation
Eurohypo AG
Bank of America, N.A./Bank of New York
Bank of America, N.A.
15,773
16,000 5.90% (LIBOR + 1.30%) 12/1/2011
—
9,800
37,263
34,500
—
— 5.85% (LIBOR + 1.25%) 12/1/2010
— 6.25% (LIBOR + 1.65%) 10/30/2010
— 6.35% (LIBOR + 1.75%) 10/4/2009
— 5.35% (LIBOR + 0.75%)
3/1/2008
— 4.75% (Commercial
Paper + 0.50%)
10/9/2011
Interest rate swaps (41)
(34,284)
(16,002)
Total variable-rate debt
115,641
94,173
6.46%
5.19%
5.64%
4.98%
5.12%
5.53%
5.44%
8.50%
6.40%
5.45%
6.06%
5.83%
6.62%
6.51%
5.80%
5.88%
5.42%
7.18%
7.14%
6.18%
7/1/2007
6/1/2013
9/6/2014
9/6/2015
11/6/2015
1/1/2016
3/1/2016
4/11/2028
11/1/2032
6/11/2013
8/29/2016
3/1/2008
2/1/2009
1/15/2009
10/1/2017
8/1/2017
2/11/2017
1/1/2020
1/1/2020
(39)
Mortgage notes payable – fixed-rate
Sun America Life Insurance Company
RBS Greenwich Capital
RBS Greenwich Capital
RBS Greenwich Capital
RBS Greenwich Capital
Bear Stearns Commercial
Bear Stearns Commercial
LaSalle Bank, N.A.
GMAC Commercial
Column Financial, Inc.
Merrill Lynch Mortgage Lending, Inc.
Bank of China
Cortlandt Deposit Corp
Cortlandt Deposit Corp
Bank of America, N.A.
Bear Stearns Commercial
Wachovia
Bear Stearns Commercial
Bear Stearns Commercial
Interest rate swaps (41)
Total fixed-rate debt
Total fixed and variable debt
Valuation premium on assumption
of debt net of amortization (40)
Total
See notes on following page.
—
—
14,752
17,600
12,500
34,600
20,500
3,727
8,451
9,834
23,500
19,000
4,950
4,893
25,500
26,250
26,000
—
—
12,665
15,672
14,940
17,600
12,500
34,600
20,500
3,782
8,565
9,997
23,500
19,000
7,425
7,339
—
—
—
—
—
34,284
16,002
286,341
224,087
401,982
318,260
921
1,247
$402,903 $ 319,507
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(7)
(11)
(12)
(13)
(14)
(15)
(16)
(17)
(18)
(19)
(20)
(21)
(22)
(23)
(24)
(25)
(26)
(4)
(13)
(14)
(27)
(28)
(29)
(29)
(30)
(30)
(36)
(35)
(30)
(29)
(31)
(30)
(36)
(30)
(30)
(29)
(29)
(29)
(32)
(33)
(34)
(30)
(29)
(29)
(29)
(37)
(30)
(35)
(35)
(30)
(38)
(30)
(36)
(36)
75
Acadia Realty Trust 2007 Annual Report
Notes:
(1) Ledgewood Mall
(15) New Loudon Center
(16) Crescent Plaza
(2) Village Commons Shopping Center
(17) Pacesetter Park Shopping Center
(3) 161st Street
(4) 216th Street
(5) Liberty Avenue
(6) Granville Center
(7) Fordham Place
(8) Branch Shopping Center
(9) Marketplace of Absecon
Bloomfield Town Square
Hobson West Plaza
Village Apartments
Town Line Plaza
Methuen Shopping Center
Abington Towne Center
(10) Tarrytown Centre
(11) Acadia Strategic Opportunity Fund II LLC
(12) Acadia Strategic Opportunity Fund III LLC
(13) Merrillville Plaza
(14) 239 Greenwich Avenue
Note 8i
(18) Elmwood Park Shopping Center
(19) Gateway Shopping Center
(20) Clark-Diversey
(21) Boonton Shopping Center
(22) Chestnut Hill
(23) Walnut Hill
(24) Sherman Avenue
(25) Kroger Portfolio
(26) Safeway Portfolio
(27) Pelham Manor
(28) Atlantic Avenue Self-Storage
(29) Monthly principal and interest
(30) Interest only monthly
(31) Annual principal and monthly interest
(32) Interest only monthly until 9/10; monthly
principal and interest thereafter
(33) Interest only monthly until 12/08; monthly
principal and interest thereafter
(34) Interest only monthly until 1/10; monthly
principal and interest thereafter
(35) Annual principal and semi-annual interest
payments
(36) Interest only upon draw down on con-
struction loan
(37) Interest only until 10/11, monthly principal
and interest thereafter
(38) Interest only until 7/12, monthly principal
and interest thereafter
(39) Maturing between 1/1/10 and 3/1/12
(40) In connection with the assumption of
debt in accordance with the requirements
of SFAS No. 141, the Company has
recorded a valuation premium which is
being amortized to interest expense over
the remaining terms of the underlying
mortgage loans
(41) Represents the amount of the company’s
variable-rate debt that has been fixed
through certain cash flow hedge
transactions (Note 18)
Convertible Notes Payable
In December 2006, the Company issued $100.0 million of
convertible notes with a fixed interest rate of 3.75% due
2026 (the “Convertible Notes”). The Convertible Notes
were issued at par and require interest payments semi-
annually in arrears on June 15th and December 15th of
each year. The Convertible Notes are unsecured unsubor-
dinated obligations and rank equally with all other unse-
cured and unsubordinated indebtedness. On January 8,
2007, the option to increase the issuance of the Convert-
ible Notes by an additional $15.0 million, was exercised,
resulting in additional proceeds of $14.7 million. The Con-
vertible Notes had an initial conversion price of $30.86 per
share. Upon conversion of the Convertible Notes, the
Company will deliver cash and, in some circumstances,
Common Shares, as specified in the indenture relating to
the Convertible Notes. The Convertible Notes may only be
Company’s Common Shares multiplied by the applicable
conversion rate; or (iii) if those notes have been called for
redemption, at any time prior to the close of business on
the second business day prior to the redemption date; or
(iv) if the Company’s Common Shares are not listed on a
United States national or regional securities exchange for
30 consecutive trading days. Prior to December 20, 2011,
the Company will not have the right to redeem Convertible
Notes, except to preserve its status as a REIT. After
December 20, 2011, the Company will have the right to
redeem the notes, in whole or in part, at any time and
from time to time, for cash equal to 100% of the principal
amount of the notes plus any accrued and unpaid interest
to, but not including, the redemption date. The Holders of
notes may require the Company to repurchase their notes,
in whole or in part, on December 20, 2011, December 15,
2016, and December 15, 2021 for cash equal to 100% of
the principal amount of the notes to be repurchased plus
any accrued and unpaid interest to, but not including, the
converted prior to maturity: (i) during any calendar quarter
repurchase date.
beginning after December 31, 2006 (and only during such
calendar quarter), if, and only if, the closing sale price of
the Company’s Common Shares for at least 20 trading
days (whether consecutive or not) in the period of 30 con-
secutive trading days ending on the last trading day of the
preceding calendar quarter is greater than 130% of the
conversion price per common share in effect on the appli-
cable trading day; or (ii) during the five consecutive trad-
ing-day period following any five consecutive trading-day
period in which the trading price of the notes was less
than 98% of the product of the closing sale price of the
If certain change of control transactions occur prior to
December 20, 2011 and a holder elects to convert the
Convertible Notes in connection with any such transaction,
the Company will increase the conversion rate in connec-
tion with such conversion by a number of additional com-
mon shares based on the date such transaction becomes
effective and the price paid per common share in such
transaction. The conversion rate may also be adjusted
under certain other circumstances, including the payment
of cash dividends in excess of our current regular quarterly
Acadia Realty Trust 2007 Annual Report 76
Notes to Consolidated Financial Statements continued
cash dividend of $0.21 per Common Share, but will be not
Note 9i
adjusted for accrued and unpaid interest on the notes.
Upon a conversion of notes, the Company will deliver cash
and, at the Company’s election, its Common Shares, with
an aggregate value, which the Company refers to as the
“conversion value,” equal to the conversion rate multiplied
by the average price of the Company’s Common Shares
as follows: (i) an amount in cash which the Company
refers to as the “principal return,” equal to the lesser of
(a) the principal amount of the converted notes and (b) the
conversion value; and (ii) if the conversion value is greater
than the principal return, an amount with a value equal to
Shareholders’ Equity and
Minority Interests
Common Shares
Through December 31, 2007, the Company had repurchased
2,051,605 Common Shares at a total cost of $11.7 million
(all of these Common Shares have been subsequently reis-
sued) under its share repurchase program that allows for
the repurchase of up to $20.0 million of its outstanding
Common Shares. The repurchased shares are reflected as
a reduction of Common Shares at par value and additional
the difference between the conversion value and the prin-
paid-in capital.
During the first quarter of 2007, 43,865 employee Restric-
ted Shares were cancelled to pay the employees’ income
taxes due on the value of the portion of the Restricted
Shares which vested. During the year ended December 31,
2007, the Company recognized accrued Common Share
and Common OP Unit-based compensation totaling $3.3
million in connection with the vesting of Restricted Shares
and Units. (Note 13).
cipal return, which the Company refers to as the “new
amount.” The net amount may be paid, at the Company’s
option, in cash, its Common Shares or a combination of
cash and its Common Shares.
The scheduled principal repayments of all indebtedness as
of December 31, 2007 are as follows:
(dollars in thousands)
2008
2009
2010
2011
2012
Thereafter
$ 92,199
53,356
11,515
131,870
11,239
216,803
$516,982(1)
Note:
(1) Does not include $921 net valuation premium on assumption
of debt.
Minority Interests
The following table summarizes the change in the minority interests since December 31, 2006:
Minority Interest in
Operating Partnership
Minority Interest in
Partially-Owned Affiliates
(dollars in thousands)
Balance at December 31, 2006
Distributions declared of $1.033 per Common OP Unit
Net income for the period January 1 through December 31, 2007
Distributions paid
Conversion of Series B Preferred OP Units
Other comprehensive income –
unrealized loss on valuation of swap agreements
Minority Interest contributions
Employee Long-term Incentive Plan Unit Awards
Balance at December 31, 2007
77
Acadia Realty Trust 2007 Annual Report
$ 8,673
(690)
615
—
(4,000)
(136)
—
133
$ 4,595
$ 105,064
—
14,601
(63,691)
—
—
110,542
—
$ 166,516
Minority interest in the Operating Partnership represents
The following table summarizes the minority interest con-
(i) the limited partners’ 642,272 Common OP Units at both
tributions and distributions in 2007:
December 31, 2007 and 2006, (ii) 188 Series A Preferred
Contributions Distributions
OP Units at both December 31, 2007 and 2006, with a
(dollars in thousands)
stated value of $1,000 per unit, which are entitled to a
preferred quarterly distribution of the greater of (a) $22.50
(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) 0 and 4,000 Series B Preferred OP Units at
December 31, 2007 and December 31, 2006, respectively,
with a stated value of $1,000 per unit, which are entitled
to a preferred quarterly distribution of the greater of (a)
$13.00 (5.2% annually) per unit or (b) the quarterly distri-
Partially-owned affiliates
$
— $ (2,641)
Fund I
Fund II
Mervyns II
Fund III
—
(3,658)
66,050
(17,628)
2,139
(39,764)
42,353
—
$110,542
$ (63,691)
bution attributable to a Series B Preferred OP Unit if such
In February 2005, the Company issued $4.0 million (250,000
unit were converted into a Common OP Unit.
During February 2007, Klaff (Note 10) converted 3,800
Series B Preferred Units into 296,412 Common OP Units
and ultimately into the same number of Common Shares.
During June 2007 Klaff converted its remaining 200 Series
B Preferred Units into 15,601 Common OP Units and
ultimately into the same number of Common Shares.
Restricted Common OP Units valued at $16.00 each) of
Restricted Common OP Units to Klaff in consideration for
the remaining 25% interest in certain management contract
rights previously acquired from Klaff as well as the rights
to certain potential future revenue streams. This followed
the acquisition of 75% of the management contract rights
from Klaff in January 2004 as reflected below. The Restricted
Common OP Units are convertible into the Company’s Com-
Minority interests in partially-owned affiliates include third-
mon Shares on a one-for-one basis after a five-year lock-up
party interests in Fund I, II and III, and Mervyns I and II
period. $1.1 million of the purchase price was allocated to
and three other entities.
During July 2005, the Company issued to a third party
11,105 Restricted Common OP Units valued at $18.01
investment in management contracts in the consolidated
balance sheet and is being amortized over the estimated
remaining life of the contracts.
per unit in connection with the purchase of 4343 Amboy
The Series A Preferred OP Units were issued on November
Road. The holder of the Common OP Units was restricted
16, 1999 in connection with the acquisition of all the part-
from selling these for six months from the date of the
nership interests of the limited partnership which owns the
transaction. During June 2006, the Company redeemed
Pacesetter Park Shopping Center. Through December 31,
for cash the 11,105 Restricted Common OP Units.
2007, 696 Series A Preferred OP Units were converted into
During January 2006, the Company acquired a 60% inter-
est in the A&P Shopping Plaza located in Boonton, New
Jersey (Note 2). The remaining 40% interest is owned
by a third party and is reflected as minority interest in the
accompanying Consolidated Balance Sheets at December
31, 2007 and December 31, 2006.
92,800 Common OP Units and then into Common Shares.
The Series A Preferred OP Units are currently convertible
into Common OP Units based on the stated value divided
by $7.50. Either the Company or the holders can currently
call for the conversion of the Series A Preferred OP Units
at the lesser of $7.50 or the market price of the Common
Shares as of the conversion date.
4,000 Series B Preferred OP Units were issued to Klaff
during January of 2004 in consideration for the acquisition
of 75% of certain management contract rights. 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, Klaff may currently redeem them at
par for either cash or Common OP Units. After the fifth
anniversary of the issuance, the Company may redeem the
Acadia Realty Trust 2007 Annual Report 78
Notes to Consolidated Financial Statements continued
Preferred OP Units and convert them into Common OP
Minimum future rentals to be received under non-cancelable
Units at market value as of the redemption date. The $4.0
leases for shopping centers and other retail properties as
million purchase price is reflected in the investment in man-
of December 31, 2007 are summarized as follows:
agement contracts in the consolidated balance sheet and is
(dollars in thousands)
being amortized over the estimated life of the contracts. For
the years ended December 31, 2006 and 2005, $0.5 million
of these Klaff management contracts were written off fol-
lowing the disposition of these assets. During 2007, Klaff
converted all 4,000 Series B Preferred Units into 312,013
Common OP Units and ultimately into Common Shares.
2008
2009
2010
2011
2012
Thereafter
$ 84,482
81,036
71,734
58,538
49,778
326,286
$ 671,854
Note 10i
Related Party Transactions
During January 2004, the Operating Partnership issued
Minimum future rentals above include a total of $7.5 mil-
lion for three tenants, totaling three leases, which have
filed for bankruptcy protection. Two tenant’s leases have
4,000 Restricted Preferred OP Units to Klaff for certain
not been rejected nor affirmed. One tenant has filed a
management contract rights and the rights to certain
notice of rejection dated January 18, 2008. During the
potential future revenue streams. During 2007, Klaff con-
years ended December 31, 2007, 2006 and 2005, no sin-
verted all of these units into 312,013 Common Shares
gle tenant collectively accounted for more than 10% of
(Note 9).
the Company’s total revenues.
During February 2005, the Operating Partnership issued
$4.0 million of Restricted Common OP Units to Klaff for
the balance of certain management contract rights as well
as the rights to certain potential future revenue streams
(Note 9).
During March 2005, the Company completed $20.0 million
Preferred Equity Investment with Levitz SL, of which Klaff
is the managing member. In June 2006, the Company
converted its Preferred Equity Investment with Levitz SL,
into a mortgage loan (Note 4).
The Company earns asset management, leasing, dispo-
sition, development and construction fees for providing
services to an existing portfolio of retail properties and/or
leasehold interests in which Klaff has an interest. Fees
earned by the Company in connection with this portfolio
were $2.1 million, $3.5 million and $3.6 million for the years
ended December 31, 2007, 2006 and 2005 respectively.
Lee Wielansky, the Lead Trustee of the Company, was
paid a consulting fee of $0.1 million for each of the years
ended December 31, 2007, 2006, and 2005.
Note 11i
Tenant Leases
Space in the shopping centers and other retail properties
is leased to various tenants under operating leases that
usually grant tenants renewal options and generally
provide for additional rents based on certain operating
expenses as well as tenants’ sales volume.
79
Acadia Realty Trust 2007 Annual Report
Note 12i
Lease Obligations
The Company leases land at seven of its shopping cen-
ters, which are accounted for as operating leases and gen-
erally provide the Company with renewal options. Ground
rent expense was $4.1 million, $4.5 million, and $3.5 mil-
lion (including capitalized ground rent at properties under
development of $2.7 million, $3.4 million and $2.7 million)
for the years ended December 31, 2007, 2006 and 2005,
respectively. The leases terminate at various dates between
2008 and 2066. These leases provide the Company with
options to renew for additional terms aggregating from
20 to 60 years. The Company leases space for its White
Plains corporate office for a term expiring in 2015. Office
rent expense under this lease was $0.8 million, $0.6 million
and $0.4 million for the years ended December 31, 2007,
2006 and 2005, respectively. Future minimum rental pay-
ments required for leases having remaining non-cancelable
lease terms are as follows:
(dollars in thousands)
2008
2009
2010
2011
2012
Thereafter
$ 3,904
4,656
5,538
5,575
5,642
101,360
$126,675
Note 13i
Share Incentive Plan
During 2003, the Company adopted the 2003 Share Incen-
tive Plan (the “2003 Plan. The 2003 Plan authorizes the
issuance of options, share appreciation rights, restricted
shares (“Restricted Shares”), restricted OP units (“LTIP
Units”) and performance units (collectively, “Awards”) to
officers, employees and trustees of the Company and
consultants to the Company equal to up to four percent
of the total Common Shares of the Company outstanding
from time to time on a fully diluted basis. However, no
participant may receive more than the equivalent of
1,000,000 Common Shares during the term of the 2003
Plan with respect to Awards. Options are granted by the
Compensation 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 ten years at the grant date. Vesting of options is at
the discretion of the Committee. 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 Committee deter-
mines the restrictions placed on Awards, including the
dividends or distributions thereon and the term of such
restrictions. The Committee also determines the award
and vesting of performance units and performance shares
based on the attainment of specified performance objec-
tives of the Company within a specified performance period.
Through December 31, 2007, no share appreciation rights
or performance units/shares had been awarded.
During 2006, the Company adopted the 2006 Share Incen-
tive Plan (the “2006 Plan”). The 2006 Plan is substantially
similar to the 2003 Plan, except that the maximum num-
ber of Common Shares equivalents that the Company
may issue pursuant to the 2006 Plan is 500,000.
On January 15, 2007 (the “Grant Date”), the Company
issued 108,823 Restricted Common Shares (“Restricted
Shares”) to officers and 20,735 Restricted Shares to
employees of the Company. The Restricted Shares do
not carry the rights of Common Shares, including voting
rights, until vesting and may not be transferred, assigned
or pledged until the recipients have a vested non-forfeitable
right to such shares. All Restricted Shares are subject to
the recipients’ continued employment with the Company
through the applicable vesting dates. Vesting with respect
to 61,940 of the Restricted Shares issued to officers is
over four years with 25% vesting on each of the next four
anniversaries of the Grant Date. In addition, vesting on
50% of the Restricted Shares issued to officers is also
subject to certain Company performance targets. Vesting
with respect to 46,883 of the Restricted Shares issued to
officers is over three years with 30% vesting on the first
anniversary and 35% vesting on the following two anniver-
saries of the Grant Date. Vesting with respect to the 20,735
Restricted Shares issued to employees is over four years
with 25% vesting on each of the next four anniversaries
of the Grant Date. In addition, vesting on 25% of the
Restricted Shares issued to employees is also subject
to certain total shareholder returns on the Company’s
Common Shares.
On the Grant Date, the Company also issued 50,000 Restric-
ted Shares to an officer in connection with his promotion
to Executive Vice President. Vesting with respect to these
Restricted Shares, is over five years with 20% vesting on
each of the next five anniversaries of the Grant Date.
Dividends on 46,883 of the Restricted Shares, issued to
officers are paid currently on both unvested and vested
shares. Dividends on 132,675 of these Restricted Shares
will not be paid until such Restricted Shares vest. There
will be a cumulative dividend payment upon vesting from
the Grant Date to the applicable vesting date.
The total value of the above Restricted Share awards on
the date of grant was $4.5 million. Compensation expense
of $1.1 million has been recognized in the accompanying
consolidated financial statements related to these Restric-
ted Shares for the year ended December 31, 2007. The
weighted average fair value for shares granted for the
years ended December 31, 2007, 2006 and 2005 were
$24.91, $20.46 and $16.30, respectively,
On the Grant Date, the Company also issued 20,322 LTIP
Units to officers and 1,214 LTIP Units to employees of the
Company. LTIP Units are similar to Restricted Shares but
provide for a quarterly partnership distribution in a like
amount as paid to Common OP Units. This distribution is
paid on both unvested and vested LTIP Units. The LTIP
Units are convertible into Common OP Units and Common
Shares upon vesting and a revaluation of the book capital
accounts. Vesting with respect to the LTIP Units is over
four years with 25% vesting on each of the next four
anniversaries of the Grant Date. In addition, vesting on
Acadia Realty Trust 2007 Annual Report 80
Notes to Consolidated Financial Statements continued
50% of the officers’ LTIP Units and 25% of the employees’
options have been issued, of which all are vested, to non-
LTIP Units are also subject to certain Company perform-
employee Trustees as of December 31, 2007.
ance targets.
For the years ended December 31, 2007, 2006 and 2005,
The total value of these LTIP Units on the Grant Date was
$3.3 million, $2.7 million, and $1.0 million, respectively,
$0.5 million. Compensation expense of $0.1 million has
were recognized in compensation expense related to
been recognized in the accompanying financial statements
Restricted Share and LTIP Unit grants.
related to these LTIP Units for the year ended December
31, 2007.
The Company has used the Binomial method for purposes
of estimating the fair value in determining compensation
On May 15, 2007, the Company issued 10,831 Common
expense for options granted for the years ended Decem-
Shares and the equivalent of 5,096 Common Shares through
ber 31, 2006 and 2005. No options were issued during
a deferred compensation plan to Trustees of the Company.
2007. The fair value for the options issued by the Com-
In addition, on August 23, 2007, the Company issued an
pany was estimated at the date of the grant using the fol-
additional 1,918 unrestricted Common Shares to a newly
lowing weighted-average assumptions resulting in:
elected Trustee. Trustee fee expense of $0.5 million for
the year ended December 31, 2007 has been recognized
in the accompanying consolidated financial statements
related to these issuances.
Years Ended
December 31,
2006
2005
Weighted-average volatility
18.0% 18.0%
As of December 31, 2007, the Company had 473,738
options outstanding to officers and employees of which
454,106 are vested. These options are for 10-year terms
from the grant date and vest in three equal annual install-
Expected dividends
Expected life (in years)
Risk-free interest rate
3.6% 4.2%
7.5
7.5
4.4% 4.0%
ments, which began on the Grant Date. In addition, 58,000
Fair value at date of grant (per option) $3.03
$2.57
A summary of option activity under all option arrangements as of December 31, 2007, and changes during the year then
ended is presented below:
Options
Outstanding at January 1, 2007
Granted
Exercised
Forfeited or Expired
Outstanding at December 31, 2007
Exercisable at December 31, 2007
Shares
550,372
—
(17,474)
(1,160)
531,738
512,106
Weighted Average
Exercise Price
Weighted Average
Remaining
Contractual Term
Aggregate
Intrinsic Value
(dollars in thousands)
$10.01
—
9.94
20.65
$ 9.99
$ 9.58
4.0
3.9
$ 8,305
$ 8,207
The weighted average Grant Date fair value of options
A summary of the status of the Company’s unvested
granted during the years 2006 and 2005 was $3.03 and
Restricted Shares and LTIP Units as of December 31,
$2.57, respectively. The total intrinsic value of options
2007 and changes during the year ended December 31,
exercised during the years ended December 31, 2007,
2007, is presented on the following page:
2006 and 2005 was $0.3 million, $0.1 million and $0.6
million, respectively.
81
Acadia Realty Trust 2007 Annual Report
Unvested Shares and LTIP Units
Unvested at January 1, 2007
Granted
Vested
Forfeited
Unvested at December 31, 2007
Restricted Shares
(in thousands)
550
180
(105)
(30)
595
Weighted
Grant-Date
Fair Value
$ 17.27
24.91
14.89
19.41
$ 20.51
LTIP Units
(in thousands)
—
22
—
—
22
Weighted
Grant-Date
Fair Value
$ —
24.91
—
—
$ 24.91
As of December 31, 2007, there was $8.5 million of total
ing Common Shares that the participants owned for at
unrecognized compensation cost related to unvested
least six months prior to the option exercise date. The
share-based compensation arrangements granted under
Share Units are equivalent to a Common Share on a one-
share incentive plans. That cost is expected to be recog-
for-one basis and carry a dividend equivalent right equal
nized over a weighted-average period of 2.3 years. The
to the dividend rate for the Company’s Common shares.
total fair value of Restricted Shares that vested during the
The deferral period is determined by each of the participants
years ended December 31, 2007, 2006 and 2005, was
and generally terminates after the cessation of the partici-
$1.6 million, $2.5 million and $1.0 million, respectively.
pants continuous service with the Company, as defined in
Note 14i
Employee Share Purchase and
Deferred Share Plan
The Acadia Realty Trust Employee Share Purchase Plan
(the “Purchase Plan”), allows eligible employees of the
Company to purchase Common 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 Com-
mon 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 partici-
pant’s annual compensation that the Committee estab-
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 2007, 2006 and 2005 there were no additional
Share Units contributed to the plan.
Note 15i
Employee 401(k) Plan
The Company maintains a 401(k) plan for employees
under which the Company currently matches 50% of a
plan participant’s contribution up to 6% of the employee’s
annual salary. A plan participant may contribute up to a
lishes from time to time, and a participant may not purchase
maximum of 15% of their compensation but not in excess
more than 1,000 Common Shares per quarter. Compen-
sation expense will be recognized by the Company to the
extent of the above discount to the average closing price
of $15,500 for the year ended December 31, 2007. The
Company contributed $0.2 million, $0.2 million and $0.1
million for the years ended December 31, 2007, 2006 and
of the Common Shares with respect to the applicable
2005, respectively.
quarter. During 2007, 2006 and 2005, 7,123, 5,307 and
6,412 Common Shares, respectively, were purchased by
Note 16i
Employees under the Purchase Plan. Associated compen-
sation expense of $0.03 million was recorded in 2007 and
$0.02 million was recorded in 2006 and 2005.
Dividends and Distributions
Payable
On December 6, 2007, the Company declared a cash
During August of 2004, the Company adopted a Deferral
dividend for the quarter ended December 31, 2007 of
and Distribution Election pursuant to the 1999 Share
$0.21 per Common Share. The dividend was paid on Jan-
Incentive Plan and 2003 Share Incentive Plan, whereby
uary 15, 2008 to shareholders of record as of December
the participants elected to defer receipt of 190,487 Com-
31, 2007. In addition, on December 21, 2007, the Company
mon Shares (“Share Units”) that otherwise would have
announced the successful completion of its 2007 disposi-
been issued upon the exercise of certain options. The
tion initiatives. In connection with the taxable gains arising
payment of the option exercise price was made by tender-
from these and earlier property dispositions, the Company’s
Acadia Realty Trust 2007 Annual Report 82
Notes to Consolidated Financial Statements continued
Board of Trustees approved a special dividend totaling
December 31, 2007, 2006 and 2005, no U.S. Federal
$7.4 million, or $0.2225 per Common Share, which was
income or excise taxes were incurred. If the Company
paid on January 15, 2008 to the shareholders of record
fails to qualify as a REIT in any taxable year, it will be sub-
as of December 31, 2007.
Note 17i
Federal Income Taxes
The Company has elected to qualify as a REIT in accor-
dance with the Internal Revenue Code (the “Code”) and
intends at all times to qualify as a REIT under Sections
856 through 860 of the Code of 1986, as amended. To
qualify as a REIT, the Company must meet a number of
organizational and operational requirements, including a
ject to Federal income taxes at the regular corporate 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 qualifies for taxa-
tion 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 are subject to Federal, state
and local income taxes.
requirement that it currently distribute at least 90% of its
The primary difference between the GAAP and tax
annual REIT taxable income to its shareholders. As a REIT,
reported amounts of the Company’s assets and liabilities
the Company generally will not be subject to corporate
are a higher GAAP basis in its real estate properties.
Federal income tax, provided that distributions to its
This is primarily the result of assets acquired as a result
shareholders equal at least the amount of its REIT taxable
of property contributions in exchange for OP Units and the
income as defined under the Code. As the Company dis-
utilization of Code Section 1031 deferred exchanges.
tributed sufficient taxable income for the years ended
Reconciliation between GAAP net income and Federal taxable income
The following unaudited table reconciles GAAP net income to taxable income for the years ended December 31, 2007,
2006 and 2005:
(dollars in thousands)
Net Income
Net income attributable to TRS
Net income attributable to REIT
Book/tax difference in depreciation and amortization
Book/tax difference on exercise of stock options
and vesting of restricted shares
Book/tax difference on capital transactions (1)
Other book/tax differences, net
2007
(Estimated)
$27,270
2,514
24,756
4,155
(689)
8,300
494
REIT taxable income before dividends paid deduction
$37,016
2006
(Actual)
$39,013
405
38,608
4,906
(397)
(16,709)
2,963
$29,371
2005
(Actual)
$20,626
1,349
19,277
2,817
(405)
(465)
(2,065)
$19,159
Note:
(1) Principally the result of the deferral of the gain from the sale of properties for income tax purposes.
Characterization of Distributions
The Company has determined that the cash distributed to
the shareholders is characterized as follows for Federal
Ordinary income
income tax purposes:
Capital gain
Return of capital
Years Ended December 31,
2007
2006
2005
51%
49%
—
100%
95%
—
—
3%
2%
100%
100%
100%
83
Acadia Realty Trust 2007 Annual Report
Taxable REIT Subsidiaries (“TRS”)
Income taxes have been provided for using the asset and
Assets, Accounts Payable and Accrued Expenses, Divi-
dends and Distributions Payable, Due to Related Parties
liability method as required by SFAS No. 109. The Com-
and Other Liabilities. The carrying amount of these assets
pany’s combined TRS income (loss) and provision (benefit)
and liabilities approximates fair value due to the short-term
for income taxes for the years ended December 31, 2007,
nature of such accounts.
2006 and 2005 are summarized as follows:
2007
2006
2005
(Estimated)
(Actual)
(Actual)
(dollars in thousands)
TRS income (loss) before
income taxes
$ 5,077
$(296)
$ 3,458
Provision (benefit) for
income taxes:
Federal
State and local
2,097
466
(590)
(111)
1,601
508
TRS net income
$ 2,514
$ 405
$ 1,349
The income tax provision (benefit) differs from the amount
computed by applying the statutory federal income tax rate
to taxable income (loss) before income taxes as follows:
2007
2006
2005
(dollars in thousands)
Federal provision (benefit)
at statutory tax rate
$1,726
$(100)
$1,210
State and local taxes,
net of federal benefit
255
(15)
330
Tax effect of:
Valuation allowance
against deferred
tax liability asset
Utilization of loss and
—
deduction carry forwards —
—
—
Change in estimate
605
(586)
208
(115)
—
REIT state, local and
franchise taxes
Total provision (benefit)
67
193
507
for income taxes
$2,653
$(508)
$2,140
Note 18i
Financial Instruments
Fair Value of Financial Instruments:
SFAS No. 107, “Disclosures about Fair Value of Financial
Instruments” requires disclosure on the fair value of finan-
Notes Receivable — As of December 31, 2007 and 2006,
the Company had notes receivable of $57.7 million and
$36.0 million, respectively. Given the short-term nature
of the notes and the fact that several of the notes are
demand notes, the Company has determined that the car-
rying value of the notes receivable approximates fair value.
Derivative Instruments — The fair value of these instru-
ments is based upon the estimated amounts the Com-
pany would receive or pay to terminate the contracts as
of December 31, 2007 and 2006 and is determined using
interest rate market pricing models.
Mortgage Notes Payable and Notes Payable — As of
December 31, 2007 and 2006, the Company has deter-
mined the estimated fair value of its mortgage notes
payable, including those relating to discontinued opera-
tions, were $519.4 million and $439.1 million, respectively,
by discounting future cash payments utilizing a discount
rate equivalent to the rate at which similar mortgage notes
payable would be originated under conditions then existing.
Derivative Financial Instruments:
SFAS No. 133, “Accounting for Derivative Instruments
and Hedging Activities,” as amended and interpreted,
establishes accounting and reporting standards for deriva-
tive instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities.
As required by SFAS 133, the Company records all deriva-
tives 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 designa-
tion. 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 con-
sidered cash flow hedges.
cial instruments. Certain of the Company’s assets and lia-
For derivatives designated as fair value hedges, changes
bilities are considered financial instruments. Fair value
in the fair value of the derivative and the hedged item
estimates, methods and assumptions are set forth below.
related to the hedged risk are recognized in earnings. For
Cash and Cash Equivalents, Restricted Cash, Cash in
Escrow, Rents Receivable, Prepaid Expenses, Other
derivatives designated as cash flow hedges, the effective
portion of changes in the fair value of the derivative is ini-
Acadia Realty Trust 2007 Annual Report 84
Notes to Consolidated Financial Statements continued
tially reported in other comprehensive income (outside of
As of December 31, 2007 and 2006, no derivatives were
earnings) and subsequently reclassified to earnings when
designated as fair value hedges or hedges of net invest-
the hedged transaction affects earnings, and the ineffec-
ments in foreign operations. Additionally, the Company
tive portion of changes in the fair value of the derivative is
does not use derivatives for trading or speculative pur-
recognized directly in earnings. The Company assesses
poses and currently does not have any derivatives that are
the effectiveness of each hedging relationship by compar-
not designated as hedges.
ing the changes in fair value or cash flows of the deriva-
tive 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.
The following table summarizes the notional values and fair
values of the Company’s derivative financial instruments as
of December 31, 2007. The notional value does not repre-
sent exposure to credit, interest rate or market risks:
Hedge Type
Notional Value
Rate
Maturity
Fair Value
(dollars in thousands)
Interest Rate Swaps
LIBOR Swap
LIBOR Swap
LIBOR Swap
LIBOR Swap
Interest rate swaps
Interest Rate LIBOR Cap
Net Derivative instrument liability
$ 4,640
11,410
8,434
9,800
$34,284
$30,000
The above derivative instruments have been designated
as cash flow hedges and hedge the future cash outflows
on mortgage debt. Such instruments are reported at the
fair values reflected above. As of December 31, 2007
and 2006, unrealized losses totaling $1.1 and $0.2 million,
respectively were reflected in accumulated other compre-
hensive loss.
4.71%
4.90%
5.14%
4.47%
01/01/10
10/01/11
03/01/12
10/29/10
6.00%
04/01/08
$
(93)
(395)
(383)
(195)
(1,066)
(28)
$ (1,094)
Note 19i
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
outstanding during each year consistent with SFAS No.
128. Diluted earnings per share reflects the potential dilu-
tion 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:
85
Acadia Realty Trust 2007 Annual Report
Years Ended December 31,
2007
2006
2005
(dollars in thousands, except per share amounts)
Numerator:
Income from continuing operations – basic earnings per share
$18,056
$15,622
$19,320
Effect of dilutive securities:
Preferred OP Unit distributions
23
254
—
Numerator for diluted earnings per share
$18,079
$15,876
$19,320
Denominator:
Weighted average shares – basic earnings per share
32,907
32,502
31,949
Effect of dilutive securities:
Employee share options
Convertible Preferred OP Units
Dilutive potential Common Shares
335
67
402
314
337
651
265
—
265
Denominator for diluted earnings per share
33,309
33,153
32,214
Basic earnings per share from continuing operations
Diluted earnings per share from continuing operations
$
$
0.55
0.54
$
$
0.48
0.48
$
$
0.61
0.60
The weighted average shares used in the computation of
Shares on a one-for-one basis. The income allocable to
basic earnings per share include unvested restricted
such units is allocated on this same basis and reflected as
shares (Note 13) and Share Units (Note 14) that are enti-
minority interest in the accompanying consolidated finan-
tled to receive dividend equivalent payments. The effect
cial statements. As such, the assumed conversion of these
of the conversion of Common OP Units is not reflected in
units would have no net impact on the determination of
the above table as they are exchangeable for Common
diluted earnings per share. The conversion of the convert-
ible notes payable (Note 8) is not reflected in the table
above as such conversion would be anti-dilutive.
Acadia Realty Trust 2007 Annual Report 86
Notes to Consolidated Financial Statements continued
Note 20i
Summary of Quarterly Financial Information (unaudited)
The quarterly results of operations of the Company for the years ended December 31, 2007 and 2006 are as follows:
(dollars in thousands, except per share amounts)
Revenue
Income from continuing operations
Income (loss) from discontinued operations
Income from extraordinary item
Net income
Net income per Common Share — basic:
March 31
June 30
September 30
December 31
2007
$24,989
$ 3,670
$
166
$ 2,883
$ 6,719
$ 23,481
$ 3,028
$
$
6
—
$ 3,034
$26,282
$ 8,117
$ (421)
$
794
$ 8,490
$26,817
$ 3,241
$ 5,786
$
—
$ 9,027
Income from continuing operations
$
0.11
$
0.09
$
0.25
$
0.10
Income (loss) from discontinued operations
Income from extraordinary item
0.01
0.09
—
—
(0.01)
0.02
0.17
—
Net income
$
0.21
$
0.09
$
0.26
$
0.27
Net income per Common Share — diluted:
Income from continuing operations
$
0.11
$
0.09
Income (loss) from discontinued operations
Income from extraordinary item
Net income
Cash dividends declared per Common Share
Weighted average Common Shares outstanding:
0.01
0.08
0.20
0.20
$
$
—
—
$
$
0.09
0.20
$
0.24
(0.01)
0.02
0.25
0.20
$
$
$
0.10
0.17
—
$
0.27
$0.4325
Basic
Diluted
32,753,337
33,274,066
32,934,843
33,290,845
32,965,619
33,315,524
32,972,503
33,327,965
(dollars in thousands, except per share amounts)
Revenue
Income 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
Cash dividends declared per Common Share
Weighted average Common Shares outstanding:
March 31
June 30
September 30
December 31
2006
$23,906
$ 3,667
$
686
$ 4,353
$
0.11
0.02
$
0.13
$
0.11
0.02
$
0.13
$ 0.185
$ 22,303
$ 4,366
$
482
$ 4,848
$
0.13
0.02
$
0.15
$
0.13
0.01
$
0.14
$ 0.185
$24,260
$ 3,722
$
400
$ 4,122
$
0.12
0.01
$
0.13
$
0.12
0.01
$
0.13
$ 0.185
$25,331
$ 3,867
$21,823
$25,690
$
0.12
0.67
$
0.79
$
0.12
0.66
0.78
0.20
$
$
Basic
Diluted
32,468,204
32,766,119
32,509,360
32,810,794
32,513,398
32,836,473
32,514,803
33,186,718
87
Acadia Realty Trust 2007 Annual Report
Note 21i
Commitments and Contingencies
Under various federal, state and local laws, ordinances
and regulations relating to the protection of the environ-
ment, 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,
The Company is involved in various matters of litigation
arising in the normal course of business. While the Com-
pany 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 liability, if any, will not have a signifi-
cant effect on the Company’s consolidated financial posi-
tion or results of operations.
on, at, under, or in a property. As such, the Company may
Note 22i
be potentially liable for costs associated with any potential
environmental remediation at any of its formerly or cur-
rently owned properties.
Subsequent Events
On February 11, 2008, the Company entered into contract
to sell the Ledgewood Mall for $55 million. Ledgewood
The Company conducts Phase I environmental reviews
Mall is a 517,000 square foot enclosed mall in Ledgewood,
with respect to properties it acquires. These reviews
New Jersey. The Company expects to close on this trans-
include an investigation for the presence of asbestos,
action in the second quarter of 2008.
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 conducted by the Company will be ade-
quate to identify environmental or other problems that
During the fiscal year ending December 31, 2008, the
investment consortium which owns Mervyns (Note 4),
sold 41 Mervyns Store locations. The Operating Partner-
ship’s share of the gain amounted to approximately
$1.9 million, net of taxes.
may exist. Where a Phase II assessment is so recom-
During December 2007, the Company, through Fund III,
mended, a Phase II assessment is conducted to further
and in conjunction with its current self-storage partner,
determine the extent of possible environmental contami-
Storage Post, entered into an agreement to acquire a
nation. In all instances where a Phase I or II assessment
portfolio of 10 self-storage properties from Storage
has resulted in specific recommendations for remedial
Post’s existing institutional investors for approximately
actions, the Company has either taken or scheduled the
$160 million. During January 2008, the Company, through
recommended remedial action. To mitigate unknown
Fund III, entered into an agreement to acquire an addi-
risks, the Company has obtained environmental insurance
tional Storage Post self-storage project currently under
for most of its properties, which covers only unknown
construction for approximately $11 million. These transac-
environmental risks.
tions are expected to close in the first quarter of 2008.
The Company believes that it is in compliance in all mate-
rial respects with all federal, state and local ordinances
and regulations regarding hazardous or toxic substances.
Management is not aware of any environmental liability
that it believes would have a material adverse impact on
the Company’s financial position or results of operations.
Management is unaware of any instances in which the
Company 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.
Acadia Realty Trust 2007 Annual Report 88
Schedule III: Real Estate and Accumulated Depreciation
December 31, 2007
Encum-
brances
Land
Buildings and
Improvements
Costs
Capitalized
Subsequent to
Acquisition
Land
Buildings and
Improvements
Accumulated Acquisition (a)
Depreciation Construction (c)
Total
Date of
$17,600
$ 1,147
$ 7,425
$ 1,099
$ 1,147
$ 8,524
$ 9,671
$ 4,898
1984 (a)
Description
Shopping Centers
Crescent Plaza
Brockton, MA
505
619
4,161
10,839
505
15,000
15,505
9,170
1982 (a)
5,434
33,200
619
38,634
39,253
28,450
1983 (a)
—
4,268
4,690
—
8,958
8,958
6,177
1968 (c)
120
190
—
—
1,599
3,004
730
120
190
1,599
1,719
687
1968 (c)
3,734
3,924
2,938
1972 (c)
—
12,695
1,664
11,031
12,695
4,964
1995 (c)
1,691
5,803
481
1,691
6,284
7,975
637
2002 (c)
—
11,909
1,496
—
13,405
13,405
830
2005 (a)
799
3,197
1,994
799
5,191
5,990
1,646
1998 (a)
3,443
13,774
8,960
3,443
22,734
26,177
5,173
1998 (a)
—
—
—
—
—
—
—
—
—
New Loudon Center 14,752
Latham, NY
Ledgewood Mall
Ledgewood, NJ
Mark Plaza
Edwardsville, PA
Blackman Plaza
Wilkes-Barre, PA
Plaza 422
Lebanon, PA
Route 6 Mall
Honesdale, PA
Bartow Avenue
Bronx, NY
Amboy Road
Shopping Center
Staten Island, NY
Abington Towne
Center
Abington, PA
Bloomfield Town
Square
Bloomfield Hills, MI
Walnut Hill Plaza
Woonsocket, RI
23,500
3,122
12,488
1,523
3,122
14,011
17,133
3,718
1998 (a)
Elmwood Park Plaza 34,600
Elmwood Park, NJ
3,248
12,992
14,764
3,798
27,206
31,004
7,549
1998 (a)
Merrillville Plaza
Hobart, IN
Marketplace of
Absecon
Absecon, NJ
Clark Diversey
Boonton
Chestnut Hill
Third Avenue
Liberty Avenue
Tarrytown Centre
Acadia Realty L.P.
Pelham Manor
Hobson West Plaza
Naperville, IL
Village Commons/
Smithtown Shopping
Center
Smithtown, NY
Town Line Plaza
Rocky Hill, CT
26,250
4,288
17,152
1,516
4,288
18,668
22,956
4,838
1998 (a)
—
2,573
10,294
2,479
2,577
12,769
15,346
3,220
1998 (a)
3,727
8,451
9,834
11,303
3,297
8,978
—
11,108
2,903
7,611
5,568
8,038
9,990
9,800
—
—
—
—
12,627
2,323
—
905
1,793
7,396
1,455
—
7,172
(1,372)
(2,392)
(515)
894
—
224
153
—
718
10,061
1,328
8,289
11,855
2,773
7,188
5,742
8,185
—
12,627
2,323
—
905
1,793
7,620
1,608
—
7,890
12,834
8,516
14,031
20,040
12,627
9,943
1,608
905
9,683
139
344
214
256
316
651
1,348
2,136
2006 (a)
2006 (a)
2006 (a)
2006 (a)
2005 (a)
2004 (a)
2004 (a)
1998 (a)
9,781
3,229
12,917
1,866
3,229
14,783
18,012
4,143
1998 (a)
—
878
3,510
7,257
907
10,738
11,645
6,849
1998 (a)
89
Acadia Realty Trust 2007 Annual Report
December 31, 2007
Description
Encum-
brances
Land
Buildings and
Improvements
Costs
Capitalized
Subsequent to
Acquisition
Land
Buildings and
Improvements
Accumulated Acquisition (a)
Depreciation Construction (c)
Total
Date of
Shopping Centers, cont’d
Branch Shopping
Center
Village of the
Branch, NY
15,773
3,156
12,545
777
3,156
13,322
16,478
3,273
1998 (a)
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 Property
Winston-Salem, NC
Granville Center
Kroger/Safeway
Various
400 E. Fordham Road
Bronx, NY
4650 Broadway/
Sherman Avenue
New York, NY
216th Street
New York, NY
161st Street
Bronx, NY
Oakbrook
Oakbrook, IL
West Shore
Expressway
West 54th Street
Atlantic Avenue
Canarsie Plaza
125 Main Street
Assoc.
Sheepshead Bay
—
956
3,826
594
961
4,415
5,376
972
1998 (a)
20,500
1,273
5,091
11,536
1,273
16,627
17,900
3,101
1999 (a)
—
2,350
9,404
591
2,350
9,995
12,345
2,329
1999 (a)
12,500
1,475
5,899
1,108
1,475
7,007
8,482
1,791
1999 (a)
26,000
1,817
15,846
502
1,817
16,348
18,165
3,590
1999 (c)
—
2,818
9,843
3,429
2,186
—
13,716
8,744
48,988
3,237
59
(48)
3,429
2,186
—
16,953
8,803
48,940
20,382
10,989
48,940
4,989
1,206
28,127
1998 (a)
2002 (a)
2003 (a)
37,263
11,144
18,010
2,240
13,351
18,043
31,394
1,018
2004 (a)
19,000
25,267
25,500
7,313
—
—
—
25,267
—
25,267
—
2005 (a)
19,286
7,261
19,338
26,599
146
2005 (a)
30,000
16,679
28,410
261
16,679
28,671
45,350
1,731
2005 (a)
—
—
—
—
—
—
—
—
6,906
17
—
6,923
6,923
1,268
2005 (a)
3,380
16,699
5,322
32,656
12,994
20,391
—
250
—
13,554
18,704
—
—
4,316
—
1,899
—
—
—
—
—
—
—
—
—
—
3,380
16,699
5,322
32,656
12,994
20,391
—
250
13,554
18,704
—
—
4,316
—
1,899
—
16,934
35,403
5,322
32,656
17,310
20,391
1,899
250
77,764
—
77,764
77,764
265
340
—
—
19
—
24
—
—
2007 (a)
2007 (a)
2007 (a)
2007 (a)
2007 (a)
2007 (a)
ASOF II, LLC
34,500
Underdeveloped land
Properties under
development
—
—
$ 401,982
$234,296
$ 396,956
$222,822
$235,550
$ 618,524
$854,074
$155,480
See notes on following page.
Acadia Realty Trust 2007 Annual Report 90
Schedule III: Real Estate and Accumulated Depreciation continued
Notes:
1. Depreciation and investments in buildings and improvements reflected in the statements of income are calculated over
the estimated useful life of the assets as follows:
Buildings: 30 to 40 years
Improvements: shorter of lease term or useful life.
2. The aggregate gross cost of property included above for Federal income tax purposes was $407.4 million as of
December 31, 2007.
3. (a) Reconciliation of Real Estate Properties:
The following table reconciles the real estate properties from January 1, 2005 to December 31, 2007:
Years Ended December 31,
2007
2006
2005
(dollars in thousands)
Balance at beginning of year
Transfers (1)
Other improvements
$ 650,051
—
76,007
Reclassification of tenant improvement activities
—
Property acquired
Balance at end of year
128,016
$ 854,074
$ 670,817
(131,341)
40,800
—
69,775
$ 650,051
$ 561,370
—
11,599
—
97,848
$ 670,817
(1) Reflects the change in accounting for the Brandywine Portfolio following the recapitalization of the investment in January 2006 (Note 1).
3. (b) Reconciliation of Accumulated Depreciation:
The following table reconciles accumulated depreciation from January 1, 2005 to December 31, 2007:
Years Ended December 31,
2007
2006
2005
(dollars in thousands)
Balance at beginning of year
$ 135,085
$122,077
Reclassification of tenant improvement activities
—
Depreciation related to real estate
Balance at end of year
20,395
$ 155,480
—
13,008
$135,085
$102,315
—
19,762
$122,077
91
Acadia Realty Trust 2007 Annual Report
Trustees and Officers
Shareholder Information
Trustees
Kenneth F. Bernstein
President and Chief Executive Officer
Lee S. Wielansky
(Lead Trustee)
Chairman of the Board and
Chief Executive Officer
Midland Development Group Inc.
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, Retail Development
Continental Properties
Wendy Luscombe
President and CEO
WKL Associates, Inc.
William T. Spitz
Former Vice Chancellor
for Investments and Treasurer
Vanderbilt University
Senior Officers
Kenneth F. Bernstein
President and
Chief Executive Officer
Joel Braun
Executive Vice President,
Chief Investment Officer
Christopher Conlon
Sr. Vice President,
Acquisitions
Jon Grisham
Sr. Vice President,
Chief Accounting Officer
Joseph Hogan
Sr. Vice President,
Director of Construction
Numa Jerome
Sr. Vice President,
Director of Leasing
Robert Masters, Esq.
Sr. Vice President,
General Counsel and
Corporate Secretary
Joseph M. Napolitano
Sr. Vice President,
Chief Administrative Officer
Michael Nelsen
Sr. Vice President,
Chief Financial Officer
Robert Scholem
Sr. Vice President,
Director of Property
Management
Investor Relations
Debra Miley
Director of Marketing
and Communiations
Tel: 914.288.8100
email: dmiley@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 reinvest-
ment 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.
Internet Address
Visit us online at www.acadiarealty.com
for more information. The 2007 Annual
Report, current news and quarterly
financial and operational supplementary
information can be found on the
Company’s website.
Corporate Headquarters
Acadia Realty Trust
1311 Mamaroneck Avenue,
Suite 260
White Plains, NY 10605
Tel: 914.288.8100
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 Shareholder Meeting
for Wednesday, May 14, 2008, at
10 a.m., 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 determina-
tion of shareholders entitled to vote is
March 31, 2008.
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
1311 Mamaroneck Avenue
Suite 260
White Plains, NY 10605
Tel: 914.288.8100
E Printed on recycled paper.