2008 ANNUAL REPORT
Focused. Disciplined. Value-Driven.
Financial Highlights
2008
2007
2006
2005
2004
In thousands
Total Revenues
$ 140,739
$ 98,022
$ 92,232
$ 90,481
$ 76,829
Funds from
Operations1
Real Estate Owned,
at Cost
Common Shares
Outstanding
Operating Partnership
Units Outstanding
$
40,457
$ 44,018
$ 39,953
$ 35,842
$ 30,004
$1,106,873
$833,694
$629,902
$650,945
$ 541,772
32,358
32,184
31,773
31,543
31,341
648
642
642
653
392
1The 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.
2008 was clearly one
of the most challenging
years in recent history
for the financial and credit
markets. Most significantly,
during the fourth quarter
of last year, we saw
the subprime contagion
spread from Wall Street
to the global economy.
The commercial real estate
market was not spared by
Kenneth F. Bernstein
President and CEO
what has become a worldwide crisis. Only time
will tell when a bottom has been reached and
what the rebound will look like. Many economists
and historians will devote their entire careers to
studying the causes and impact of this period, so
I will limit my observations in this letter to our core
areas of expertise.
While the swiftness and severity of the credit crisis
makes it seem as though its impact on the com-
mercial real estate industry occurred overnight, to
the careful observer, the symptoms of a correction
had been forming for some time. In response to
these warning signs, in recent years, as real estate
prices ascended, Acadia began aggressively reposi-
tioning its portfolio. We sold the bottom half of
our portfolio and used the sale proceeds to swap
into higher barrier-to-entry and supply-constrained
markets such as New York City and Chicago. When
we were unable to find suitable replacement assets,
we chose to pay down debt or, as was the case
this past year, return the profit to our shareholders
in the form of a special dividend. Many of the
actions that we took immediately inured to the
benefit of our shareholders, while other efforts
will only be recognized over time. And still others
may be of little benefit as the magnitude and
breadth of the correction has already exceeded
our precautionary measures.
Despite the awareness by some in the investment
community that risk was being mispriced, leverage
was being abused and a correction was inevitable,
I am amazed at how many of us — individuals
and institutions — were nevertheless caught
off-guard by the severity of the current market
collapse. A flight to safety meant very little unless
it was cash invested in Treasuries or a mattress.
The constant refrain of “there was nowhere to
hide” was almost as ubiquitous as the use of the
word “unprecedented” by CEOs justifying actions
or inactions.
As we are all too painfully aware, the U.S. consumer
is facing a variety of serious issues, ranging from
declines in home values to growing unemployment.
The consumer pull-back will inevitably have an
impact on many of our retailers. When the U.S.
emerges from the recession, we will still have to
confront the longer term issues of deleveraging
and the risk of inflation. All in all, it is unlikely that
we, as a nation, will see the financial crisis through
to its end without it materially altering our lives and
our businesses. With regard to the commercial
real estate market specifically, the assumptions
related to the acquisition, development, financing
and valuation of real estate will be significantly
different than in years past. In many ways, it will
simply be a return to more rational investment
principles. After the excesses of the past few
years, this “back to basics” approach is both
sound and welcomed.
How we choose to navigate through these issues
will be critical to our future success. In a post-bub-
ble environment of compressed multiples, limited
leverage and challenging operating fundamentals,
Acadia is well positioned to take advantage of
future opportunities as they begin to emerge.
We will remain flexible and adjust our business
strategy and tactics to reflect the new realities
of the marketplace. At the same time, the core
foundations upon which we built our business
more than 10 years ago (on the heels of the last
significant REIT market correction, no less) are
as relevant as ever: create a high quality core
Acadia Realty Trust 2008 Annual Report 11
portfolio of retail properties, a conservative capital
structure, and an external growth platform fueled
by both public and private institutional capital.
Maintain a high-quality core portfolio of
retail properties
Notwithstanding one of the most difficult retailing
environments in decades, our “same-store” net
operating income increased 2.3% year-over-year
and our occupancy held steady at 93.5%. While
we expect there to be more softness in the retail
environment before we experience a turnaround,
our property-level performance speaks well for our
portfolio. Its steady performance in an unsteady
environment is a direct result of our deliberate
pruning. We did so with the intention of main-
taining high-quality, well-located properties with
stable cash flow. Since 2000, we have executed
on these intentions by selling those assets that
were not consistent with our long-term growth
outlook and by aggressively re-tenanting and
redeveloping other assets.
Today, our portfolio is nicely balanced and primarily
anchored by retailers better-positioned to weather
the recession. Nearly 60% of our properties are
anchored by necessity-based retailers, such as
supermarkets and drugstores, which draw con-
sumers to their stores on a routine basis to satisfy
“everyday” needs. An additional quarter of our
properties are anchored by discount and value-
oriented retailers, including Wal-Mart, Target and
Marshalls. This category is also faring well on
a relative basis now that every consumer is
demanding more value for their dollar. The balance
of our portfolio, approximately 15%, consists of
high-quality street retail in high-quality locations
ranging from Greenwich, Connecticut to Lincoln
Park, Chicago.
Despite the strong performance of our core port-
folio, we were not immune to the repercussions of
the credit crisis. In the fourth quarter of 2008, we
recorded a $4.4 million impairment charge on a
mezzanine loan investment originated in 2004.
2
Acadia Realty Trust 2008 Annual Report
This contributed to an overall 8% decrease in
Funds From Operations versus 2007. This charge
was partially offset by a $2.0 million gain on our
purchase of $8.0 million in principal of Acadia’s
outstanding convertible debt at a discount. Not
only does this purchase generate a 15% annual
return through the December 2011 maturity, but it
also helps address our only significant on-balance-
sheet maturity exposure through 2011.
Maintain a safe balance sheet with
strong liquidity
The events of the past 12 months have re-enforced,
on the global stage, the importance of balance
sheet strength, particularly now that the collapse
of the subprime mortgage market and its aftermath
have effectively frozen the lending environment.
Today, debt is both scarce and expensive, and it
is extremely difficult to obtain a loan in excess of
$50 million. Furthermore, it is hard to foresee a
rapid return, if ever, to the freewheeling days of
2005, 2006 and 2007. As a result, those compa-
nies that operated under the assumption that an
aggressive debt market was the norm are now
facing extreme pressure. Additionally, as it relates
to larger companies and larger properties, the
lack of available debt to match their large size
will begin to have unpleasant consequences in
the not-too-distant future.
Fortunately, our property-level and corporate needs
are relatively small. Furthermore, our business model
was never built on the use of significant leverage.
Accordingly, as of year end and assuming that we
rationally exercise our extension options, we have
no debt maturing until December 2011. At that
time, we will have maturing obligations totaling
$107 million. As of year end, we had cash-on-hand
of $75 million and credit line availability of $42 mil-
lion. Thus, while the lack of a debt market is not
something to be taken lightly — and we do not
presume to venture a guess as to the banking
landscape between now and 2011 — if we remain
careful and disciplined, we will not have to resort
to some of the more drastic measures of our
peers. Moreover, with patience, high-quality
companies with strong track records and high
levels of transparency should be able to continue
to conservatively leverage real estate at reason-
able rates. This will likely work to our advantage —
there will be fewer lenders, but there will also be
fewer qualified borrowers.
In light of the current market conditions, debt
maturities and liquidity remain at the forefront of
any discussion of balance sheet strength. How-
ever, in 2008, we also maintained other important
balance sheet metrics, including fixed-charge
coverage of 2.9x and an FFO Payout Ratio of 70%.
Additionally, we maintained our regular quarterly
cash dividend. Furthermore, with 98% of our core
portfolio debt locked in at an all-in cost of 5.1%,
we have insulated ourselves from the unpredictable
movements in LIBOR over the next few years.
Maintain a disciplined growth strategy
that enables opportunistic investing
The fact that Acadia is well capitalized with a solid
core portfolio has enabled our team to execute our
growth strategy with limited distractions. At a time
when the majority of the investment community is
frozen either from legacy issues, lack of capital or
sheer panic, we are well positioned for growth.
A confluence of circumstances, including a growing
pool of distressed sellers and limited liquidity in
the capital markets, has created an opportunity for
those companies with access to capital to acquire
high-quality assets at attractive current yields.
Cortlandt Towne Center
Our recent 2009 acquisition of Cortlandt Towne
Center, a 640,000 square foot regional shopping
center located in Westchester County, New York,
is a prime example. Well-situated within a high
barriers-to-entry trade area and anchored by qual-
ity national tenants including Wal-Mart, Marshalls
and A&P Food Market, the property was acquired
at an attractive 9% going-in unlevered yield.
Furthermore, it is imbedded with significant upside
potential, part of which we will realize as we re-lease
the vacant space that resulted from the recent
bankruptcies of two junior anchors. We recognize
that a precipitous drop in values is neither an
indicator nor an assurance that a recovery will
promptly follow. While we may be acting ahead
of the bottom of the real estate market’s trough,
we think that we will be well-rewarded for buying
proven and irreplaceable real estate at a great price.
Fund III
We are fortunate to have both adequate balance
sheet capacity and a liquid discretionary invest-
ment fund backed by astute institutional investors.
This enables us to pursue future opportunities
without being overly beholden to the public markets.
Cortlandt was acquired through our third discre-
tionary investment fund, which was launched in
2007 with $503 million of equity. Inclusive of the
Cortlandt acquisition, we have deployed approxi-
mately 30% of the fund’s total equity commitments.
This leaves us with plenty of acquisition capital to
deploy over the next several years at the right time
for the right assets.
Existing Fund Investments
An acquisition in the same vein as Cortlandt was
impossible as recently as a few years ago as the
liquidity bubble reached its peak. At that time, it
became starkly clear to us that pricing for stabi-
lized real estate had outpaced intrinsic value. As a
result, we stopped chasing overpriced, stabilized
retail and refocused our attention on “value-add”
investments where we felt our stakeholders could
receive more attractive risk-adjusted returns. This
strategic shift was responsible for the launching of
two investment programs: our Retailer Controlled
Property (“RCP”) Venture and our New York
Urban/Infill Redevelopment Program.
Retailer Controlled Property Venture: Our RCP
Venture was launched in January 2004 with our
partners Klaff Realty and Lubert-Adler. The goal of
this highly successful venture has been to invest
3
Acadia Realty Trust 2008 Annual Report 3
in surplus or distressed properties owned or
controlled by retailers. Our most significant RCP
initiatives have been our participation in the acqui-
sitions of Mervyns Department Stores and Albert-
son’s Supermarkets. To date, Acadia, through
Funds I and II, has received distributions of $114
million on initial investments of $59 million, already
representing a 193% return on invested equity.
New York Urban/Infill Redevelopment Program:
Our other area of “value-add” focus has been
bringing national retailers to the densely populated
and under-retailed outer boroughs of New York City
through our New York Urban/Infill Redevelopment
Program. Launched in 2004 with our talented part-
ners at P/A Associates, the program acquires prime
properties throughout the five boroughs of New
York City. Leveraging our long-standing and strong
tenant relationships, we strive to bring the best
retailers to urban locations previously perceived as
too difficult for national tenants to penetrate.
During the past year, we completed construction
on five of the program’s 10 redevelopment projects,
with construction well underway on the sixth
project and the balance progressing in the design
phase. For those projects that have been com-
pleted, the retail is 84% leased and the office is
71% leased. Only a few moving pieces remain
(the continued lease-up of the office component
at Fordham Place, the retail component at Pelham
Manor and the self-storage component at both Pel-
ham Manor and Liberty Avenue) and the stabiliza-
tion of these projects is one of our top priorities in
2009. As the year progresses, we will selectively
decide to commence construction on our other
projects currently in the design phase, the criteria
for which includes significant pre-leasing and the
ability to secure construction financing.
Although we feel very comfortable with our exist-
ing investments, it is hard to ignore the fact that
almost all assets are worth less today than they
were a few years ago. At the same time, we take
comfort in the fact that we deliberately chose not
to buy into the hysteria; as a result, our invest-
4
Acadia Realty Trust 2008 Annual Report
ments should fare better than the investments of
those who invested heavily at the peak. Further-
more, we remained focused on properties located
in prime, irreplaceable locations. Location has been
the unifying element of our acquisition strategy,
and in general, we’ve been well-rewarded by
targeting properties in densely populated, high
barrier-to-entry locations. Although news of store
closures continues to make headlines, and retail-
ers are proceeding with caution as it relates to
new stores, before the recession fully recedes,
those retailers focused on long-term growth will
begin to refocus their efforts. We are of the opin-
ion that these retailers will be more likely to sign
leases in proven locations where the risk is less-
ened and the reward is more certain.
Storage Post Portfolio: Over the past few years,
we have enhanced our New York Urban/Infill
Redevelopment Platform by incorporating a self-
storage component either on top of, or adjacent
to, four of our urban redevelopments. Our strate-
gic partner and the operator of the storage com-
ponent at all four sites is the New York-based
self-storage company Storage Post. In February
2008, we completed the acquisition and recapital-
ization of an 11-property self-storage portfolio
operated by Storage Post, containing approximately
920,000 net rentable square feet. The portfolio
provided a unique opportunity to gain an even
greater foothold in urban storage locations with
dense populations and high barriers-to-entry. At
acquisition, the 10 previously-developed storage
properties had a collective occupancy of 70%,
while one asset remained under construction,
thus affording substantial lease-up opportunity.
Preferred Equity Investments
The majority of our investment activity is completed
through our fund platform through which we can
achieve greater scale by leveraging our skill set
and our capital with the capital of our institutional
partners. Nevertheless, we have periodically made
investments “on balance sheet.” These types of
investments are generally done in connection
with asset and capital recycling, and we take care
that these investments do not conflict with our
fund investments.
In 2008, we completed two key investments:
a $40 million senior preferred equity investment
collateralized by an 18-property retail portfolio in
Georgetown, Washington, D.C. and a $34 million
preferred equity investment collateralized by a
mixed-use retail and residential development at
72nd Street and Broadway on the Upper West
Side of Manhattan.
While mezzanine and preferred equity investments
have come under increased scrutiny as of late, it is
important to appreciate that not all investments of
this nature will perform in the same manner. Our
observations, supplemented by our own experience
this past year, have led us to conclude that the
mezzanine and equity investments that run into
problems are generally those with high levels of
senior leverage, creating defaults that cannot be
easily cured. With respect to the two investments
that we made this year, both are secured by assets
that we would welcome owning at our basis. We
see meaningful value in excess of our investment,
even at today’s compressed pricing. While we
expect these investments to simply provide us
with the 13% and 20% returns forecasted, if they
convert into a permanent ownership stake, we
do not consider this to be a negative outcome for
our shareholders. Looking forward, it is unlikely
that we will make additional investments like this
on-balance sheet as liquidity has taken on such
heightened importance.
Looking forward
As a community, we are experiencing unprece-
dented market conditions, and it appears that the
economy will continue to face headwinds through
the balance of 2009 and likely thereafter. As we
work our way through this very challenging period
in our economy, we will be extremely respectful of
the powerful forces that are impacting our industry
and will remain true to our core foundations:
We will monitor our tenants’ performance carefully
and will work to see that our portfolio weathers
the storm as successfully as possible.
We will carefully maintain the strength of our
balance sheet, recognizing that liquidity will remain
of paramount importance.
And finally, we will not let irrational fear drive
our capital into the mattress. Instead, we will be
extremely thoughtful and deliberate about each
new investment, and at the same time, we will be
prepared to utilize our external growth platform to
pursue the investment opportunities that will be
uniquely born out of the current market conditions.
We appreciate your support of Acadia Realty
Trust and, across all levels and functions within
the organization, remain dedicated to its contin-
ued success.
Kenneth F. Bernstein
President and CEO
5
Acadia Realty Trust 2008 Annual Report 5
Acadia Core and Opportunity Fund Properties
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
Route 202 Shopping Center, Wilmington, DE
Blackman Plaza, Wilkes-Barre, PA
Mark Plaza, Edwardsville, PA
Plaza 422, Lebanon, PA
Route 6 Mall, Honesdale, PA
Chestnut Hill Shoppes, Philadelphia, PA
Abington Towne Center, Abington, PA
Opportunity Fund Portfolio
FUND I PROPERTIES
Granville Center, Columbus, OH
Tarrytown Centre, Tarrytown, NY
Sterling Heights Shopping Center, Sterling Heights, MI
Kroger/Safeway Portfolio, various locations
FUND II PROPERTIES
Oakbrook, Oakbrook, IL
98th Street and Liberty Avenue, Queens, NY
216th Street, New York, NY
260 East 161st Street, Bronx, NY
Fordham Place, Bronx, NY
Pelham Manor Shopping Plaza, Pelham Manor, NY
Sherman Plaza, New York, NY
CityPoint, Brooklyn, NY
Atlantic Avenue, Brooklyn, NY
Canarsie Plaza, Brooklyn, NY
FUND III PROPERTIES
125 Main Street, Westport, CT
Sheepshead Bay Plaza, Brooklyn, NY
RETAIL PROPERTIES
Core Portfolio
NEW YORK REGION
239 Greenwich Avenue, Greenwich, CT
Elmwood Park Shopping Center, Elmwood Park, NJ
A&P Shopping Plaza, Boonton, NJ
Village Commons Shopping Center, Smithtown, NY
The Branch Plaza, Smithtown, NY
Amboy Shopping Center, Staten Island, NY
Bartow Avenue, Bronx, NY
Pacesetter Park Shopping Center, Pomona, NY
2914 Third Avenue, Bronx, NY
LA Fitness, Staten Island, NY
200 West 54th Street, New York, NY
East 17th Street, New York, NY
Crossroads Shopping Center, White Plains, NY
NEW ENGLAND REGION
Town Line Plaza, Rocky Hill, CT
Methuen Shopping Center, Methuen, MA
Crescent Plaza, Brockton, MA
New Loudon Center, Latham, NY
Walnut Hill Plaza, Woonsocket, RI
The Gateway, South Burlington, VT
MIDWEST REGION
Hobson West Plaza, Naperville, IL
Clark and Diversey, Chicago, IL
Merrillville Plaza, Hobart, IN
Bloomfield Town Square, Bloomfield Hills, MI
Mad River Station, Dayton, OH
MID-ATLANTIC REGION
Marketplace of Absecon, Absecon, NJ
Ledgewood Mall, Ledgewood, NJ
Brandywine Town Center, Wilmington, DE
Market Square Shopping Center, Wilmington, DE
6
Acadia Realty Trust 2008 Annual Report
2008 FORM 10-K REPORT
Focused. Disciplined. Value-Driven.
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, 2008
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.
YES o
4
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 approximately $748.9 million, based on a price of $23.15 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 27, 2009 was 33,905,289.
DOCUMENTS INCORPORATED BY REFERENCE
Part III: Portions of the Registrant’s definitive proxy statement relating to its 2009 Annual Meeting of Shareholders presently scheduled
to be held May 13, 2009 to be filed pursuant to Regulation 14A.
Acadia Realty Trust 2008 Annual Report
Acadia Realty Trust Form 10-K Report 2008
Table of Contents
Item No.
PART I
Page
1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
PART II
5. Market for Registrant’s Common Equity, Related Stock Matters and Issuer Purchases
of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . 33
7A. Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . 50
9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9B. Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
PART III
10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . . . . . . . . . . . 53
13. Certain Relationships and Related Transactions, and Director Independence. . . . . . . . . . . . . . . . . . . 53
14. Principal Accounting Fees and Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
PART IV
15. Exhibits, Financial Statements, Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Acadia Realty Trust 2008 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,” “esti-
mate,” “believe,” “intend” or “project” or the negative
thereof or other variations thereon or comparable terminol-
ogy. 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 headings “Item 1A.
Risk Factors” and “Item 7. Management’s Discussion and
Analysis of Financial Condition and Results of Operation”
in this Form 10-K. These risks and uncertainties should be
considered in evaluating any forward-looking statements
related opportunities including investments for which we
provide operational support to the operating ventures in
which we have a minority equity interest.
All of our investments are held by, and all of our operations
are conducted through, Acadia Realty Limited Partnership
(the “Operating Partnership”) and entities in which the
Operating Partnership owns a controlling interest. As of
December 31, 2008, the Trust controlled 98% of the Oper-
ating Partnership as the sole general partner. As the gen-
eral partner, the Trust is entitled to share, in proportion to
its percentage interest, in the cash distributions and profits
and losses of the Operating Partnership. The limited part-
ners generally represent entities or individuals, which con-
tributed their interests in certain assets or entities to the
Operating Partnership in exchange for common or pre-
ferred units of limited partnership interest (“Common OP
Units” or “Preferred OP Units”). Limited partners holding
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
contained or incorporated by reference herein.
manage commercial retail properties that will provide cash
PART I
for distributions to shareholders while also creating the
potential for capital appreciation to enhance investor
returns. We focus on the following fundamentals to
ITEM 1. BUSINESSx
achieve this objective:
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 85 properties, which
we own or have an ownership interest in. Twelve of these
properties are self-storage locations. These assets are
located primarily in the Northeast, Mid-Atlantic and Mid-
western regions of the United States and, in total, com-
prise approximately eight million square feet. We also
have private equity investments in other retail real estate
n Own and operate a Core Portfolio (as defined in Item 2
of this Form 10-K) of community and neighborhood
shopping centers and main street retail located in
markets with strong demographics.
n Generate internal growth within the Core Portfolio
through aggressive redevelopment, re-anchoring and
or 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 redevelop-
ment and leasing and/or transactions requiring creative
capital structuring to facilitate the transactions. These
transactions may include other types of commercial
real estate besides those types we invest in through
our Core Portfolio.
Acadia Realty Trust 2008 Annual Report 1
n Partner with private equity investors for the purpose of
(including the Operating Partnership) and 20% to the
making investments in operating retailers with significant
Operating Partnership as a Promote. The Operating Part-
embedded value in their real estate assets.
nership also earns fees and/or priority distributions for
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 evaluate the
blended cost of equity and debt and adjust the amount of
acquisition activity to align the level of investment activity
with capital flows. We may also engage in discussions
with public and private entities regarding business combi-
nations. In addition to our direct investments in real estate
asset management services equal to 1.5% of the allo-
cated invested equity, as well as for property manage-
ment, leasing, legal and construction services. All such
fees and priority distributions are reflected as a reduction
in the minority interest share in income from Opportunity
Funds in the Consolidated Financial Statements beginning
on page 59 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 to 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.
assets, we have also capitalized on our expertise in the
On January 4, 2006, Fund I recapitalized a one million
acquisition, redevelopment, leasing and management of
square foot retail portfolio located in Wilmington Delaware
retail real estate by establishing discretionary opportunity
(“Brandywine Portfolio”) through a merger of interests
fund joint ventures in which we earn, in addition to a return
with affiliates of GDC Properties (“GDC”). The Brandywine
on our equity interest and carried interest (“Promote”),
Portfolio was recapitalized through a “cash-out” merger
fees and priority distributions for our services. To date,
of the 77.8% interest, which was previously held by the
we have launched three opportunity fund joint ventures
institutional investors in Fund I, to GDC at a valuation of
(“Opportunity Funds”), Acadia Strategic Opportunity Fund,
$164.0 million. The Operating Partnership, through a sub-
LP (“Fund I”), Acadia Strategic Opportunity Fund II, LLC
sidiary, retained its existing 22.2% interest and continues
(“Fund II”) and Acadia Strategic Opportunity Fund III, LLC
to operate the Brandywine Portfolio and earn fees for such
(“Fund III”). Due to the level of our control, we consolidate
services. At the closing of the merger, the Fund I investors
these Opportunity 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
received a return of all of their capital invested in Fund I
and their unpaid preferred return, thus triggering the pay-
ment 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
Fund I and Mervyns I, as the general partner or managing
in Fund I.
member with a 22% interest. In addition to a pro-rata
return on its invested equity, the Operating Partnership is
entitled to a Promote based upon certain investment
return thresholds. Cash flow was distributed pro-rata to
the partners (including the Operating Partnership) until a
9% cumulative return was achieved (“Preferred Return”)
on, and a return of all capital contributions.
As of December 31, 2008, there were 27 assets compris-
ing approximately 1.3 million square feet remaining in Fund
I in which the Operating Partnership’s interest in cash flow
and income is 37.8% as a result of the Promote.
Fund II
Following our success with Fund I, during June of 2004
Now that a 9% cumulative return has been achieved,
we formed a second, larger acquisition joint venture,
remaining cash flow is now distributed 80% to the partners
Fund II, and during August of 2004, formed Acadia Mervyn
2
Acadia Realty Trust 2008 Annual Report
Investors II, LLC (“Mervyns II”), with the investors from
Fund I as well as two additional institutional investors,
Retailer Controlled Property Venture
(the “RCP Venture”)
whereby the investors, including the Operating Partnership,
On January 27, 2004, through Funds I and II, we entered
committed capital totaling $300.0 million. The Operating
into the RCP Venture with Klaff Realty, L.P. (“Klaff”) and
Partnership is the managing member with a 20% interest
Lubert-Adler Management, Inc. (“Lubert-Adler”) for the
in Fund II and Mervyns II and can invest the committed
purpose of making investments in surplus or underutilized
equity on a discretionary basis within the parameters
properties owned by retailers. The initial expected size of
defined in the Fund II and Mervyns II operating agreements.
the RCP Venture is approximately $300 million in equity,
The terms and structure of Fund II and Mervyns II are
of which our share is $60 million, based on anticipated
substantially the same as Fund I and Mervyns I with the
investments of approximately $1 billion. Each participant in
exception that the Preferred Return is 8%. As of Decem-
the RCP Venture has the right to opt out of any potential
ber 31, 2008, $192.0 million of Fund II’s capital was
investment. We, through Fund III, would consider expand-
invested and the balance of $108.0 million is expected
ing the size of the RCP Venture and our share thereof
to be utilized for existing Fund II investments.
In an effort to generate superior risk-adjusted returns for
our shareholders and the Opportunity Fund investors, we
have channeled our acquisition efforts through Fund II in
two opportunistic strategies described below — the New
York Urban Infill Redevelopment Initiative and the Retailer
Controlled Property Venture.
New York Urban/Infill Redevelopment Initiative
During September of 2004, through Fund II, we launched
our New York Urban Infill Redevelopment initiative. Despite
the current economy, we believe that retailers continue
to recognize that many of the nation’s urban markets are
underserved from a retail standpoint, and we are poised to
continue to capitalize on this trend by investing in redevel-
opment 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
based on investment opportunities. Investments under the
RCP Venture are structured as separate joint ventures as
there may be other investors participating in certain invest-
ments in addition to Klaff, Lubert-Adler and us. Affiliates of
Mervyns I and II and Fund II have invested $59.1 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 and Fund II is fully committed, Fund III will pro-
vide 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 partici-
pants 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 Pro-
mote”) and 80% to the partners (including Klaff). The
Operating Partnership may also earn market-rate fees for
property management, 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, historically we have provided our support on
reviewing potential acquisitions and operating and redevel-
opment assistance in areas where we have both a pres-
ence and expertise. We seek to invest opportunistically
with the RCP Venture primarily in the following four ways:
n Invest in operating retailers to control their real estate
detailed in “Liquidity and Capital Resources — New York
through private equity joint ventures.
Urban/Infill Redevelopment Initiative.” To date, Fund II
has invested in nine projects, eight of which are in con-
junction with P/A, as discussed further in “PROPERTY
ACQUISITIONS — New York Urban/Infill Redevelopment
Initiative” in this Item 1 of this Form 10-K.
n Work with financially healthy retailers to create value
from their surplus real estate.
Acadia Realty Trust 2008 Annual Report 3
n Acquire properties, designation rights or other
control of real estate or leases associated with
retailers in bankruptcy.
n Complete sale leasebacks with retailers in need of capital.
Capital Strategy — Balance Sheet Focus and
Access to Capital
Given the significant turmoil in the capital markets and
the unprecedented disruption of the economy, our primary
capital objective is to maintain a strong and flexible bal-
During 2004, we made our first RCP Venture investment
ance sheet through conservative financial practices while
with our participation in the acquisition of Mervyns. During
ensuring access to sufficient capital to fund future growth.
2006, 2007 and 2008, we made additional investments
We intend to continue financing acquisitions and property
as further discussed in “PROPERTY ACQUISITIONS —
redevelopment with sources of capital determined by
RCP Venture” below.
Fund III
Following the success of Fund I and the full commitment
of Fund II, we formed a third discretionary Opportunity
Fund (“Fund III”), during 2007, with 14 institutional
investors, including a majority of the investors from Fund I
and Fund II, whereby the investors, including the Operat-
ing Partnership, committed capital totaling $503 million.
The Operating Partnership’s share of the committed capi-
tal is $100 million and it is the sole managing member
management to be the most appropriate based on,
among other factors, availability in the current capital
markets, pricing and other commercial and financial terms.
The sources of capital may include the issuance of public
equity, unsecured debt, mortgage and construction loans,
and other capital alternatives including the issuance of
Operating Partnership 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 deriva-
tive instruments, including LIBOR swap agreements and
interest rate caps as discussed further in Item 7A of this
with a 19.9% interest in Fund III and can invest the com-
Form 10-K.
mitted equity on a discretionary basis within the parame-
ters defined in the Fund III operating agreements. The
terms and structure of Fund III are substantially the same
as the previous Funds, including the Promote structure,
with the exception that the Preferred Return is 6%. As of
December 31, 2008, $96.5 million of Fund III’s capital was
invested. To date, Fund III has invested in 13 projects as
discussed further in “PROPERTY ACQUISITIONS” in this
Item 1 of this Form 10-K.
Preferred Equity, Notes Receivable and Other Real
Estate Related Investments
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 had an initial conversion rate of 32.4002 of our
Common Shares for each $1,000 principal amount, repre-
senting a conversion price of approximately $30.86 per
Common Share, or a conversion premium of approxi-
mately 20.0% based upon our Common Share price on
the date of the issuance of the Notes. Pursuant to the
terms of the Notes, the conversion rate was adjusted to
32.7310 effective October 1, 2008 and 34.1708 effective
We may also invest in preferred equity investments, mort-
January 1, 2009. The Notes are redeemable for cash up to
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
their principal amount plus accrued interest and, at our
option, cash, our Common Shares, or a combination
thereof with respect to the remainder, if any, of the con-
underlying value of the real estate collateral is in excess of
version value in excess of the principal amount. The Notes
its loan balance. As of December 31, 2008, our preferred
mature December 15, 2026, although the holders of the
equity investment and notes receivable aggregated $125.6
Notes may require the Company to repurchase their Notes,
million, and were collateralized by the underlying properties,
in whole or in part, on December 20, 2011, December 15,
the borrower’s ownership interest in the properties and/or
2016, and December 15, 2021. After December 20, 2011,
by the borrower’s personal guarantee. Interest rates on
our preferred equity investment, mezzanine loan invest-
ments and notes receivable ranged from 9.75% to in
we have the right to redeem the Notes in whole or in part
at any time. The $112.1 million in proceeds, net of related
costs, were used to retire variable rate debt, provide for
excess of 20% with maturities that range from demand
future Opportunity Fund capital commitments and for
notes to January 2017.
4
Acadia Realty Trust 2008 Annual Report
general working capital purposes. During November and
Operating functions such as leasing, property management,
December of 2008, we purchased $8.0 million in princi-
construction, finance and legal (collectively, the “Operating
pal amount of the Notes and purchased an additional
Departments”) are provided by our personnel, providing
$13.5 million in principal amount during January 2009, all
for fully integrated property management and development.
at a discount of approximately 24%.
By incorporating the Operating Departments in the acqui-
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. As of December 31, 2008, we have remaining
capacity under this registration statement to issue up to
approximately $189 million of these securities.
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, and construction services for an existing port-
folio of retail properties. These units had 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 distribution attribu-
table to a Preferred OP Unit if such unit were converted
into a Common OP Unit. The Preferred OP Units are con-
vertible into Common OP Units based on the stated value
of $1,000 divided by 12.82 at any time. Klaff was entitled
to redeem them at par for either cash or Common OP
Units (at our option). During 2007, Klaff converted all 4,000
Series B Preferred OP Units into 312,013 Common OP
Units and ultimately into Common Shares.
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 inter-
nally through anchor recycling, property redevelopment
and strategic non-core dispositions. We have capitalized
sition 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 Portfolio properties for long-
term investment. As such, we continuously review the
existing portfolio and implement programs to renovate and
modernize targeted centers to enhance the property’s
market position. This in turn strengthens the competitive
position of the leasing program to attract and retain quality
tenants, increasing cash flow and consequently property
value. We also periodically identify certain properties for
disposition and redeploy the capital to existing centers or
acquisitions with greater potential for capital appreciation.
Our Core Portfolio consists primarily of neighborhood and
community shopping centers, which are generally domi-
nant 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. We
believe these attributes enable our properties to better
withstand the current recession.
During 2008, 2007 and 2006 we sold seven non-core prop-
erties and redeployed the capital to acquire seven retail
properties as further discussed in “ASSET SALES AND
CAPITAL/ASSET RECYCLING” below.
Property Acquisitions
on our expertise in the acquisition, redevelopment, leasing
RCP Venture
and management of retail real estate by establishing joint
Albertson’s
ventures, such as the Opportunity Funds, in which we
In June 2006, the RCP Venture participated in the acquisi-
earn, in addition to a return on our equity interest and Pro-
tion of 699 stores from Albertson’s, the nation’s second
mote, fees and priority distributions. In connection with
largest grocery and drug chain and 26 Cub Food stores.
these joint ventures we have launched several successful
The total price paid by the investment consortium, which
acquisition platforms including our New York Urban Infill
included subsidiaries of Cerberus Capital Management,
Redevelopment Initiative and RCP Venture.
Schottenstein Stores Corp. and Kimco Realty Corporation,
Acadia Realty Trust 2008 Annual Report 5
to Albertson’s for the portfolio was $1.9 billion, which
REALCO properties were occupied by tenants other than
was funded with $0.3 billion of equity and $1.6 billion of
Mervyns. During 2008 and 2007, Mervyns I and Mervyns
financing. Mervyns II’s share of equity invested totaled
II made additional investments in Mervyns totaling $2.9
$20.7 million. The Operating Partnership’s share was
million. The Operating Partnership’s share of the total
$4.2 million.
investment in Mervyns was $4.9 million.
During February of 2007, Mervyns II received cash distri-
Through December 31, 2008, Mervyns I and Mervyns II
butions totaling approximately $44.4 million from its own-
have also made add-on investments in Mervyns properties
ership position in Albertson’s. The Operating Partnership’s
totaling $3.0 million. The Operating Partnerships share of
share of this distribution amounted to approximately $8.9
this amount was $0.3 million.
million. The distributions primarily resulted from proceeds
received by Albertsons 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 in 2007 and $10.6 million in 2008. The
Operating Partnership’s share of these distributions was
$2.9 million.
During 2005, Mervyns made a distribution to the investors
from the proceeds from the sale of a portion of the port-
folio and the refinancing of existing debt, of which a total
of $42.7 million was distributed to Mervyns I and Mervyns
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
Through December 31, 2008, Mervyns II has made addi-
totaled $1.4 million.
tional add-on investments in Albertson’s, whereby Mervyns
II, Klaff and Lubert-Adler have together acquired specific
assets from the above investment consortium, totaling
$2.8 million and received distributions totaling $0.8 million
in the aggregate from these add-on 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 invest-
ment. Through Mervyns I and Mervyns II, we invested in
a consortium along with subsidiaries of Sun Capital Part-
ners, Inc. and Cerberus Capital Management to acquire
the Mervyns Department Store chain (“Mervyns”) consist-
ing of 262 stores (“REALCO”) and its retail operation
(“OPCO”) from Target Corporation. The gross acquisition
price of $1.2 billion was financed with $800 million of
debt and $400 million of equity. Mervyns I and Mervyns II
contributed in the aggregate $23.2 million of equity and
received an approximate 5.2% interest in REALCO and
an approximate 2.5% interest in OPCO. To date, REALCO
has disposed of a significant portion of the portfolio.
In addition, in November 2007, we sold our interest in
OPCO and, as a result, have no further investment
in OPCO. As of December 31, 2008, a majority of the
Other RCP Venture Investments
During 2006, Fund II invested $1.1 million in Shopko, a
regional multi-department retailer that, at the time of the
acquisition, operated 358 stores located throughout the
Midwest, Mountain and Pacific Northwest and $0.7 million
in Marsh, a regional supermarket chain which operated
271 stores in central Indiana, Illinois and western Ohio.
The Operating Partnership’s share of these investments
totaled $0.2 million. For the year ended December 31,
2007, Fund II received a $1.1 million distribution from the
Shopko investment, of which the Operating Partnership’s
share was $0.2 million.
During 2008, Fund II made investments of $2.0 million in
additional add-on investments in Marsh. The Operating
Partnership’s share was $0.4 million. For the year ended
December 31, 2008, Fund II received a $1.0 million distri-
bution from the Marsh add-on investment, of which the
Operating Partnership’s share was $0.2 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.
6
Acadia Realty Trust 2008 Annual Report
The following table summarizes the RCP Venture investments from inception through December 31, 2008:
(dollars in millions)
Investor
Investment
Mervyns I and Mervyns II
Mervyns
Year
acquired
2004
Mervyns I and Mervyns II
Mervyns add-on investments
2005/2008
Mervyns II
Mervyns II
Fund II
Fund II
Fund II
Mervyns II
Total
Albertson’s
2006
Albertson’s add-on investments
2006/2007
Shopko
Marsh
Marsh add-on investments
Rex
2006
2006
2008
2007
Operating
Partnership Share
Invested
capital
$26.1
3.0
20.7
2.8
1.1
0.7
2.0
2.7
Distributions
$ 46.0
1.3
63.8
0.8
1.1
—
1.0
—
Invested
capital
$ 4.9
0.3
4.2
0.4
0.2
0.1
0.4
0.5
Distributions
$ 11.3
0.3
11.8
0.1
0.2
—
0.2
—
$59.1
$114.0
$11.0
$ 23.9
New York Urban/Infill Redevelopment Initiative
Manhattan for $7.0 million. During 2007, we completed
As of December 31, 2008, we had 10 New York Urban/
Infill projects. Construction is substantially complete at five
of the projects, one is under construction and four are in
the design phase as follows:
Construction Substantially Complete
the construction of a 60,000 square foot office building
and we relocated an agency of the City of New York, which
was a tenant at another of our Urban/Infill Redevelopment
projects, to this location. Inclusive of acquisition costs,
total costs to Acadia P/A for the project, which also includes
a 100-space rooftop parking deck, was approximately
Fordham Place — On September 29, 2004, Acadia-P/A
$28.0 million.
purchased 400 East Fordham Road, Bronx, New York.
Construction of the four-level retail component is substan-
tially complete. The total retail space is 98% leased and
occupied by Best Buy, Sears, Walgreens, and by 24 Hour
fitness, which is scheduled to open during the first half of
2009. Construction on the office component is also sub-
stantially complete with 33% currently leased. The total
cost of the project to Acadia P/A, including the acquisition
cost of $30.0 million, is expected to be $125.0 million.
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) New York. Development of this
project has been completed and the property is currently
operating. It includes approximately 30,000 square feet of
retail anchored by a CVS drug store and a 95,000 square
foot self-storage facility operated by Storage Post. The
total cost to Acadia P/A of the redevelopment was approx-
Pelham Manor — On October 1, 2004, Acadia-P/A entered
imately $15.0 million.
into a 95-year, inclusive of extension options, ground lease
to redevelop a 16-acre site in Pelham Manor, Westchester
County, New York. We have demolished the existing
industrial and warehouse buildings, and are completing
construction of a multi-anchor community retail center at
a total estimated cost of $58.0 million. Home Depot was
originally slated to anchor the project, but announced their
decision to curtail plans for expansion. As part of our lease
161st Street — On August 5, 2005, Acadia-P/A purchased
244-268 161st Street located in the Bronx, New York for
$49.3 million, inclusive of closing costs. The ultimate rede-
velopment plan for this currently 88% occupied, 10-story
office building, is to be determined. Additional redevelop-
ment costs to Acadia P/A are anticipated to be approxi-
mately $16.0 million.
termination agreement with Home Depot, we purchased
Under Construction
the building that Home Depot had constructed on the site
Atlantic Avenue — During May 2007, we, through Fund II
for $10 million, representing approximately half of their
and in partnership with Post Management, LLC (“Storage
cost of construction. At the same time, we executed a
Post”), acquired a property on Atlantic Avenue in Brooklyn,
lease with BJ Wholesale Club (“BJ’s”) to anchor the site.
New York for $5.0 million. Storage Post is our unaffiliated
Construction on BJ’s space is underway.
partner in our self storage portfolio (see below) and at
216th Street — On December 1, 2005, Acadia-P/A
acquired a 65,000 square foot parking garage located at
10th Avenue and 216th Street in the Inwood section of
several of our other New York urban projects with a self
storage component. Redevelopment of the property has
commenced with the demolition of the existing structure
Acadia Realty Trust 2008 Annual Report 7
and the construction of an eight level state-of-the-art self
component with MacFarlane, which is expected to include
storage facility, which is expected to be completed in the
at least 125,000 square feet of office space. MacFarlane
second half of 2009.
In Design
Canarsie — During October of 2007, 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 323,000 square
foot mixed-use project consisting of retail, office, cold-stor-
age and self-storage. The total cost of the redevelopment,
including acquisition costs, is expected to be approximately
$50.0 million. We had executed a lease with Home Deport
to anchor the project. However, during 2008, we reached
an agreement with Home Depot to terminate their lease
as a result of Home Depot’s corporate decision to curtail
plans for expansion. As we had negotiated a lease with
terms favorable to us as landlord, including stringent open-
ing covenants and limited assignment rights, Home Depot
paid us $24.5 million to terminate this lease.
Sherman Plaza — On April 6, 2005, Acadia-P/A acquired
4650 Broadway located in the Washington Heights/Inwood
section of Manhattan. The property, a 140,000 square foot
building, which was occupied by an agency of the City of
New York and a commercial parking garage, was acquired
for a purchase price of $25.0 million. During 2007 we relo-
cated this tenant to Acadia P/A’s 216th St. redevelopment
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 redevelopment are
estimated at $55.0 million.
plans to develop and operate up to 1,000 residential units
with underground parking. Acadia P/A does not plan on
participating in the development of, or have an ownership
interest in, the residential component of the project. The
scope of the project remains under review and we may
decide to revise our development plan.
Sheepshead Bay — During November of 2007, Fund III
acquired a property in Sheepshead Bay, Brooklyn for
approximately $20.0 million. The project is currently in
the design phase; however, we have demolished the
existing site and expect to develop a multi-story retail
center with approximately 240,000 square feet of gross
leasable area (“GLA”). The total cost of the redevelopment,
including acquisition costs, is expected to be approxi-
mately $109.0 million.
Given the current dislocation in the credit markets, we do
not intend to proceed with significant development activi-
ties with respect to the forgoing properties that are in the
design phase until significant pre-leasing and the other
components of the projects, including the availability of
project financing, are in place.
Self-Storage Portfolio
On February 29, 2008, Fund III, in conjunction with Storage
Post, acquired a portfolio of 11 self-storage properties
from Storage Post’s existing institutional investors for
approximately $174.0 million. The portfolio totals approxi-
mately 920,000 net rentable square feet, of which 10
properties are operating at various stages of stabilization.
The remaining property is currently under construction.
The properties are located throughout New York and New
CityPoint — On June 13, 2007, Acadia-P/A and MacFarlane
Jersey. The portfolio continues to be operated by Storage
Partners (“MacFarlane”) purchased the leasehold interest
Post, which is a 5% equity partner.
in The Gallery at Fulton Street in downtown Brooklyn for
approximately $115.0 million, with an option to purchase
the fee position, which is owned by the City of New York,
at a later date. Redevelopment plans for the property,
renamed as CityPoint, include the demolition of the exist-
ing structure and the development of a 1.6 million square
foot mixed-use complex. The proposed development calls
for the construction of a combination of retail, office and
residential components, all of which are currently allowed
as of right. Acadia P/A, together with MacFarlane, will
develop and operate the retail component, which is antici-
Other Investments
In addition to the RCP Venture, the New York Urban/
Infill and Self-Storage Portfolio investments as discussed
above, through Fund II and Fund III, we have 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 and office use.
pated to total 475,000 square feet of retail space. Acadia
Core Portfolio
P/A will also participate in the development of the office
See Item 2. PROPERTIES for the definition of our
Core Portfolio.
8
Acadia Realty Trust 2008 Annual Report
During April of 2008, the Operating Partnership acquired
18 properties located primarily in Georgetown, Washing-
a 20,000 square foot single tenant retail property located
ton D.C. The portfolio consists of 306,000 square feet of
on 17th Street near 5th Avenue in Manhattan, New York
principally retail space. The term of this investment is for
for $9.7 million.
two years, with two one-year extensions, and provides a
During March of 2007, the Operating Partnership pur-
13% preferred return.
chased a 52,000 square foot single-tenant building located
During July 2008, the Operating Partnership made a $34.0
at 1545 East Service Road in Staten Island, New York for
million mezzanine loan, which is collateralized by a mixed-
$17.0 million.
During March of 2007, the Operating Partnership pur-
chased 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.
use retail and residential development at 72nd Street and
Broadway on the Upper West Side of Manhattan. Upon
completion, this project is expected to include approximately
50,000 square feet of retail on three levels and 196 luxury
residential rental apartments. The term of the loan is for
a period of three years, with a one year extension, and,
During September of 2006, the Operating Partnership
including the exit fee, provides an effective annual return
purchased 2914 Third Avenue in the Bronx, New York for
in excess of 20%.
$18.5 million. The 41,305 square foot property is 100%
leased and is located in a densely populated, high barrier-
to-entry, infill area.
During September 2008, Fund III made a $10.0 million first
mortgage loan, which is collateralized by land located on
Long Island, New York. The term of the loan is for a period
During June of 2006, the Operating Partnership purchased
of two years, and provides an effective annual return of
8400 and 8625 Germantown Road in Philadelphia, Penn-
approximately 13%.
sylvania for $16.0 million.
During June 2006, the Operating Partnership converted its
During January of 2006, the Operating Partnership closed
$20.0 million preferred equity investment in Levitz SL,
on a 20,000 square foot retail building in the Lincoln Park
L.L.C (“Levitz SL”), the owner of fee and leasehold inter-
district in Chicago. The property was acquired from an
ests in former Levitz Furniture Store locations, to a first
affiliate of Klaff for $9.9 million.
mortgage loan and advanced additional proceeds bringing
During January of 2006, the Operating Partnership acquired
a 60% interest in the A&P Shopping Plaza located in
Boonton, New Jersey. The property, located in northeast-
ern New Jersey, is a 63,000 square foot shopping center
anchored by a 49,000 square foot A&P Supermarket. The
remaining 40% interest is owned by a principal of P/A.
The interest was acquired for $3.2 million.
the total outstanding amount to $31.3 million. Following
the sale of two locations by Levitz SL during 2006 and
2007, $24.8 million of proceeds were used to repay our
first mortgage loan, and the remaining balance of $6.5
million remained outstanding at December 31, 2008. The
first mortgage loan matures in July 2009, with a one-year
extension option and bears interest at a rate of 11.6%.
Although the loan is collateralized by three former Levitz
Preferred Equity, Notes Receivable and Other Real
Estate Related Investments
locations, totaling 402,266 square feet, which are currently
vacant, we believe the underlying value of the real estate
During June 2008, the Operating Partnership made a
is sufficient to recover the principal and interest due under
$40.0 million preferred equity investment in a portfolio of
our mortgage loan.
Acadia Realty Trust 2008 Annual Report 9
The following table sets forth our preferred equity and notes receivable investments as of December 31, 2008:
Weighted Averages
Notes Receivable
(dollars in thousands)
Investment
Principal
Accrued
Interest
Total
Stated
Interest
Rate
Effective
Extension
Interest Maturity Options
Date
Rate1
Underlying Third-Party
First Mortgage Loan
(Years) Amount2 Maturity Dates
Georgetown A –
5 property portfolio
Georgetown B –
18 property portfolio
72nd Street
First mortgage notes
Mezzanine notes
$ 8,000
$ 810
$ 8,810
9.75% 10.25% 11/2010 2 x 1 year
$8,576
2009 through 2012
40,000
35,941
25,443
16,203
2,092
1,137
1,964
1,476
42,092
13.00% 13.50% 6/2010
2 x 1 year 114,150
2011 through 2016
37,078
13.00% 20.85% 7/2011
1 year
185,000
2011 with one year
extension
27,407
10.86% 11.43% 2009
0.2 years
N/A
N/A
17,679
13.30% 14.82% 2011
—
— 2012
Total notes receivable
$125,587
$7,479
$133,066 12.40% 15.15%
1The effective rate includes upfront points and exit fees.
2The first mortgage amount for 72nd Street represents the maximum availability under the loan.
Asset Sales and Capital/Asset Recycling
We periodically identify certain core properties for disposition and redeploy the capital to existing centers or acquisitions
with greater potential for capital appreciation. Since January of 2006, we have sold the following Core Portfolio assets:
Property
Location
Date Sold
Village Apartments
Colony and GHT Apartments
Soundview Marketplace
Bradford Towne Centre
Greenridge Plaza
Pittston Plaza
Luzerne Street Shopping Center
Winston-Salem, North Carolina April 2008
Columbia, Missouri
Long Island, New York
Towanda, Pennsylvania
Scranton, Pennsylvania
Pittston, Pennsylvania
Scranton, Pennsylvania
December 2007
December 2006
November 2006
November 2006
November 2006
November 2006
Total
GLA
599,106
625,545
183,815
257,123
191,767
79,498
58,035
1,994,889
Sales price
(dollars in thousands)
$ 23,300
15,512
24,000
16,000
10,600
6,000
3,600
$ 99,012
Proceeds from these sales in part have been used to fund
totaling approximately 3.0 million square feet. Following
the Core Portfolio acquisitions as discussed in “PROPERTY
the 2006 recapitalization of the Brandywine Portfolio as
ACQUISITIONS” above.
Fund I Liquidation
As originally contemplated when Fund I was established
as a finite life entity, we are currently engaged in the
multi-year process of liquidating the fund’s investments.
Historically, Fund I had purchased a total of 35 assets
discussed further in “BUSINESS OBJECTIVES AND
STRATEGIES” above and the sale of other properties as
discussed below, there were 27 assets comprising 1.3
million square feet remaining in Fund I as of December
31, 2008 (in which the Operating Partnership’s interest
in cash flow and income has increased from 22.2% to
37.8% as a result of the Promote) as follows:
Location
Year Acquired
GLA
Shopping Center
New York Region
New York
Tarrytown Centre
Midwest Region
Ohio
Granville Centre
Michigan
Westchester
Columbus
Sterling Heights Shopping Center
Detroit
Various Regions
Kroger/Safeway Portfolio
Various (24 properties)
Total
10
Acadia Realty Trust 2008 Annual Report
2004
2002
2004
2003
35,291
134,997
154,835
987,100
1,312,223
During April 2008, Fund I sold Haygood Shopping Center
regarding, among other things, revenues from external
located in Virginia Beach, Virginia, for $24.9 million, result-
customers, a measure of profit and loss and total assets
ing in a $6.8 million gain.
with respect to each of our segments.
During November 2007, Fund I sold Amherst Marketplace
and Sheffield Crossing, community shopping centers in
Ohio, for $26.0 million, resulting in a $7.5 million gain.
On February 2, 2009, The Kroger Co. purchased the fee
at six locations in Fund I’s Kroger/Safeway Portfolio for
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,
2008, we had 135 employees, of which 108 were located
$14.6 million. The Company’s share of the sales proceeds
at our executive office and 27 were located at regional
amounted to $8.1 million.
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.
property management offices. None of our employees are
covered by collective bargaining agreements. Management
believes that its relationship with employees is good.
Company Website
All of our filings with the Securities and Exchange Com-
mission, including our annual reports on Form 10-K,
quarterly reports on Form 10-Q and current reports on
Competition
There are numerous entities that compete with us in
Form 8-K and amendments to those reports filed or fur-
nished pursuant to Section 13(a) or 15(d) of the Securities
seeking properties for acquisition and tenants that will
Exchange Act of 1934, are available free of charge at our
lease space in our properties. Our competitors include
website at www.acadiarealty.com, as soon as reason-
other REIT’s, financial institutions, insurance companies,
ably practicable after we electronically file such material
pension funds, private companies and individuals. Our
with, or furnish it to, the Securities and Exchange Com-
properties compete for tenants with similar properties
mission. These filings can also be accessed through
primarily on the basis of location, total occupancy costs
the Securities and Exchange Commission’s website at
(including base rent and operating expenses) and the
www.sec.gov. Alternatively, we will provide paper copies
design and condition of the improvements.
of our filings free of charge upon request. If you wish to
Financial Information About
Market Segments
We have four reportable segments: Core Portfolio, Oppor-
receive a copy of the Form 10-K, you may contact Robert
Masters, Corporate Secretary at Acadia Realty Trust, 1311
Mamaroneck Avenue, Suite 260, White Plains, NY 10605.
You may also call (914) 288-8100 to request a copy of the
tunity Funds, Self Storage Portfolio, and Other. During
Form 10-K. Information included or referred to on our
2008, we acquired a portfolio of self storage properties and
website is not incorporated by reference in or otherwise
determined that it constitutes a new reportable segment.
a part of this Form 10-K.
“Other” primarily consists of management fees, interest
income, preferred equity investment and notes receivable.
The accounting policies of the segments are the same as
those described in the summary of significant accounting
Code Of Ethics and
Whistleblower Policies
The Board of Trustees adopted a Code of Ethics for Senior
policies. We evaluate property performance primarily based
Financial Officers that applies to our Chief Executive Officer,
on net operating income before depreciation, amortization
Senior Vice President–Chief Financial Officer, Senior Vice
and certain nonrecurring items. Investments in our Core
President–Chief Accounting Officer, Vice President–Con-
Portfolio are typically held long-term. Given the contem-
troller, Vice President–Financial Reporting, Director of
plated finite life of our Opportunity Funds, these invest-
Taxation and Assistant Controllers. The Board also adopted
ments are typically held for shorter terms. Fees earned by
a Code of Business Conduct and Ethics applicable to all
us as general partner/member of the Opportunity Funds
employees, as well as a “Whistleblower Policy.” Copies of
are eliminated in our Consolidated Financial Statements.
these documents are available in the Investor Information
See Note 3 to our Consolidated Financial Statements,
section of our website.
which begin on page 59 of this Form 10-K for information
Acadia Realty Trust 2008 Annual Report 11
ITEM 1A. RISK FACTORSx
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 tenants
that occupy space in more than one center. We could be
adversely affected in the event of the bankruptcy or insol-
vency of, or a downturn in the business of, any of our
major tenants, or in the event that any such tenant does
not renew its leases as they expire or renews at lower
rental rates. Vacated anchor space not only would reduce
rental revenues if not re-tenanted at the same rental rates
but also could adversely affect the entire shopping center
because of the loss of the departed anchor tenant’s 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
rent for the balance of the lease term, or the departure of
a “shadow” anchor tenant that owns its own property. In
addition, in the event that certain major tenants cease to
occupy a property, such an action may result in a signifi-
cant number of other tenants having the right to terminate
their leases, or pay a reduced rent based on a percentage
of the tenant’s sales, at the affected property, which could
adversely affect the future income from such property.
See “Item 2. Properties — Major Tenants” for quantified
information with respect the percentage of our minimum
rents received from major tenants.
We may not be able to renew current leases and the
terms of re-letting (including the cost of concessions
to tenants) may be less favorable to us than current
lease terms.
Upon the expiration of current leases for space located in
our properties, we may not be able to re-let all or a portion
of that space, or the terms of re-letting (including the cost
of concessions to tenants) may be less favorable to us
than current lease terms. If we are unable to re-let promptly
all or a substantial portion of the space located in our 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-
tions in our portfolio.
The current global financial crisis may cause us to
lose tenants and may impair our ability to borrow
money to purchase properties, refinance existing
debt or obtain the necessary financing to complete
our current redevelopment.
Our operations and performance depend on general eco-
nomic conditions. The U.S. economy has recently experi-
enced a financial downturn, with consumer spending on
the decline, credit tightening and unemployment rising.
Many financial and economic analysts are predicting that
the world economy has entered a prolonged economic
downturn characterized by high unemployment, limited
availability of credit and decreased consumer and business
spending. This economic downturn is expected to adversely
affect the businesses of many of our tenants. We and the
Opportunity Funds may experience higher vacancy rates
as well as delays in re-leasing vacant space.
The current downturn has had, and may continue to have,
an unprecedented impact on the global credit markets. In
general, credit is currently difficult to obtain. While we
currently believe we have adequate sources of liquidity,
there can be no assurance that we will be able to obtain
mortgage loans to purchase additional properties, obtain
financing to complete current redevelopment projects, or
successfully refinance our properties as loans become due.
To the extent that the availability of credit continues to be
limited, it will also adversely impact our preferred equity
and mezzanine investments as counterparties may not be
able to obtain the financing required to repay the loans
upon maturity. Additionally, if the current market conditions
continue, it will make it more difficult for us to raise capital
through the issuance of equity or debt securities.
The bankruptcy of, or a downturn in the business
of, any of our major tenants or a significant number
of our smaller 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.
12
Acadia Realty Trust 2008 Annual Report
Certain of our tenants have experienced financial difficul-
Bankruptcy. Tweeter is operating in one of our Core
ties and have filed for bankruptcy under Chapter 11 of the
Portfolio locations, leasing 12,799 square feet. Rental
United States Bankruptcy Code (“Chapter 11 Bankruptcy”).
revenues from Tweeter totaled $0.3 million, $0.3 million
Pursuant to bankruptcy law, tenants have the right to
and $0.4 million for the years ended December 31, 2008,
reject their leases. In the event the tenant exercises this
2007 and 2006, respectively. A new entity, Tweeter
right, the landlord generally has the right to file a claim
Newco, LLC, and its operating subsidiary, Tweeter Opco,
for lost rent equal to the greater of either one year’s rent
LLC, (“Tweeter 2”) assumed the lease. On November 5,
(including tenant expense reimbursements) for remaining
2008, Tweeter 2 filed for protection under Chapter 11
terms greater than one year, or 15% of the rent remaining
Bankruptcy, which was subsequently converted to a Chap-
under the balance of the lease term, but not to exceed
ter 7 Bankruptcy. Tweeter 2 has rejected the lease.
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.
In addition, through our investment in Mervyns I and
Mervyns II, as discussed in Item 1 under Property Acquisi-
tions of this Form 10-K, we leased space to the Mervyns
Department Store chain which declared bankruptcy and
Since January 1, 2006, there have been four significant
rejected the leases. This could adversely effect the Oper-
tenant bankruptcies within our portfolio:
ating Partnership’s revenues by less than $0.5 million.
On December 11, 2008, KB Toys (“KB”) filed for protection
under Chapter 11 Bankruptcy. KB operated in two locations
in our Core Portfolio, totaling approximately 12,000 square
feet. Rental revenues from KB at these locations aggregated
$0.3 million for each of the years ended December 31,
2008, 2007 and 2006, respectively. KB has filed a Motion
to Reject the lease at the two locations and a hearing on
the matter is scheduled for March 10, 2009.
On November 10, 2008, Circuit City Stores Inc. (“Circuit
City”) filed for protection under Chapter 11 Bankruptcy.
Circuit City operated at two of our Core Portfolio locations
totaling approximately 59,278 square feet. Rental revenues
from Circuit City at these locations totaled $1.0 million,
$0.7 million and $0.5 million for the years ended Decem-
ber 31, 2008, 2007 and 2006 respectively. Circuit City has
rejected one lease and has neither assumed nor rejected
one lease. In addition, Circuit City executed a lease at a
property owned by Acadia-P/A Holding Company. Circuit
City has rejected that lease. On January 16, 2009, Circuit
City announced that it will seek Bankruptcy Court approval
to liquidate the assets of the Company.
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 $0.04 million, $0.2 million and $0.2 million
for the years ended December 31, 2008, 2007 and 2006,
respectively. Bombay has rejected the lease at this location.
On June 11, 2007, Tweeter Home Entertainment Group,
Inc. (“Tweeter 1”) filed for protection under Chapter 11
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 ade-
quate maintenance and insurance and to control variable
operating costs. Shopping centers, in particular, may be
affected by changing perceptions of retailers or shoppers
regarding the safety, convenience and attractiveness of
the shopping center and by the overall climate for the
retail industry generally. Real estate values are also affected
by such factors as government regulations, interest rate
levels, the availability of financing and potential liability
under, and changes in, environmental, zoning, tax and
other laws. 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 num-
ber 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 expendi-
tures associated with each equity investment (such as
mortgage payments, real estate taxes and maintenance
costs) are generally not reduced when circumstances
cause a reduction in income from the investment.
Acadia Realty Trust 2008 Annual Report 13
Our ability to change our portfolio is limited
because real estate investments are illiquid.
Competition may adversely affect our ability to pur-
chase properties and to attract and retain tenants.
Equity investments in real estate are relatively illiquid and,
There are numerous commercial developers, real estate
therefore, our ability to change our portfolio promptly in
companies, financial institutions and other investors with
response to changed conditions will be limited. Our board
greater financial resources than we have that compete
of trustees may establish investment criteria or limitations
with us in seeking properties for acquisition and tenants
as it deems appropriate, but currently does not limit the
who will lease space in our properties. Our competitors
number of properties in which we may seek to invest or
include other REIT’s, financial institutions, insurance com-
on the concentration of investments in any one geographic
panies, pension funds, private companies and individuals.
region. We could change our investment, disposition and
This competition may result in a higher cost for properties
financing policies without a vote of our shareholders.
that we wish to purchase. In addition, retailers at our
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.
properties face increasing competition from outlet malls,
discount shopping clubs, Internet commerce, direct mail
and telemarketing, which could (i) reduce rents payable
to us; (ii) reduce our ability to attract and retain tenants
at our properties; and (iii) lead to increased vacancy rates
We have incurred, and expect to continue to incur, indebt-
at our properties.
edness in furtherance of our activities. Neither our Decla-
ration 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 indebted-
ness 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,
2008 would increase by $2.5 million annually for a 100 basis
point increase in interest rates. We may seek additional
variable-rate financing if and when pricing and other com-
mercial and financial terms warrant. As such, we would
consider hedging against the interest rate risk related to
such additional variable-rate debt through interest rate
swaps and protection agreements, or other means.
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 greater New York region,
from which we derive 34% of the annual base rents
within our Core Portfolio. Our operating results could be
adversely affected if market conditions, such as an over-
supply of space or a reduction in demand for real estate,
in this area become more competitive relative to other
geographic areas.
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 suc-
cessfully attract and retain qualified management person-
nel to manage the growth and operations of our business
We enter into interest-rate hedging transactions, including
and to finance such acquisitions. In addition, acquired prop-
interest rate swaps and cap agreements, with counter-
erties may fail to operate at expected levels due to the
parties. There can be no guarantee that the financial con-
numerous factors that may affect the value of real estate.
dition of these counterparties will enable them to fulfill
There can be no assurance that we will have sufficient
their obligations under these agreements.
resources to identify and manage acquired properties or
otherwise be able to maintain our historic rate of growth.
14
Acadia Realty Trust 2008 Annual Report
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 our
Opportunity Funds. In the context of our business plan,
“redevelopment” generally means an expansion or reno-
tax consequences of our actions to any limited partner,
there can be no assurance that the Operating Partnership
will not acquire properties in the future subject to material
restrictions designed to minimize the adverse tax conse-
quences to the limited partners who contribute such
properties. Such restrictions could result in significantly
reduced flexibility to manage our assets.
vation of an existing property. The consummation of any
Limited control over joint venture investments.
future acquisitions will be subject to satisfactory comple-
Under the terms of our Fund III joint venture, which is
tion of our extensive valuation analysis and due diligence
similar to the terms of Fund I and Fund II, we are required
review and to the negotiation of definitive documentation.
to first offer to Fund III all of our opportunities to acquire
We cannot be sure that we will be able to implement our
retail shopping centers. Only if (i) our joint venture partner
strategy because we may have difficulty finding new prop-
elects not to approve Fund III’s pursuit of an acquisition
erties, negotiating with new or existing tenants or secur-
opportunity; (ii) the ownership of the acquisition opportu-
ing acceptable financing.
Acquisitions of additional properties entail the risk that
investments will fail to perform in accordance with expec-
tations, including operating and leasing expectations. Rede-
velopment is subject to numerous risks, including risks of
construction delays, cost overruns or uncontrollable events
that may increase project costs, new project commence-
ment risks such as the receipt of zoning, occupancy and
nity 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.
other required governmental approvals and permits, and
Our joint venture investments, including our Opportunity
the incurrence of development costs in connection with
Fund investments may involve risks not otherwise present
projects that are not pursued to completion.
for investments made solely by us, including the possibility
A component of our growth strategy is through private-
equity type investments made through our RCP Venture.
These include investments in operating retailers. The
inability of the retailers to operate profitably would have an
adverse impact on income realized from these investments.
We operate through a partnership structure,
which could have an adverse effect on our ability
to manage our assets.
Our primary property-owning vehicle is the Operating
Partnership, of which we are the general partner. Our
acquisition of properties through the Operating Partnership
in exchange for interests in the Operating Partnership may
permit certain tax deferral advantages to limited partners
that our joint venture partner might have different interests
or goals than we do. Other risks of joint venture invest-
ments include impasse on decisions, such as a sale,
because neither we nor a joint venture partner would have
full control over the joint venture. Also, there is no limita-
tion under our organizational documents as to the amount
of funds that may be invested in joint ventures.
Through our investments in joint ventures we have also
invested in operating businesses that have operational
risk in addition to the risks associated with real estate
investments, including among other risks, human capital
issues, adequate supply of product and material, and
merchandising issues.
who contribute properties to the Operating Partnership.
During 2008, 2007 and 2006, our Fund I joint venture pro-
Since properties contributed to the Operating Partnership
vided Promote income. There can be no assurance that
may have unrealized gain attributable to the difference
the joint ventures will continue to operate profitably and
between the fair market value and adjusted tax basis in
thus provide additional Promote income in the future.
such properties prior to contribution, the sale of such
properties could cause 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
Market factors 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
Acadia Realty Trust 2008 Annual Report 15
Common Shares as a percentage of its market price. An
damages and claims related to the leased premises, in
increase in market interest rates may lead purchasers of
the event of the bankruptcy or inability of any of our ten-
our Common Shares to seek a higher annual dividend rate,
ants to satisfy any obligations with respect to the property
which could adversely affect the market price of our Com-
leased to that tenant, we may be required to satisfy such
mon Shares. A decline in our share price, as a result of
obligations. In addition, we may be held directly liable for
this or other market factors, could unfavorably impact our
any such damages or claims irrespective of the provisions
ability to raise additional equity in the public markets.
of any lease.
The loss of a key executive officer could have an
adverse effect on us.
From time to time, in connection with the conduct of our
business, and prior to the acquisition of any property from
Our success depends on the contribution of key manage-
a third party or as required by our financing sources, we
ment members. The loss of the services of Kenneth F.
authorize the preparation of Phase I environmental reports
Bernstein, President and Chief Executive Officer, or other
and, when necessary, Phase II environmental reports,
key executive-level employees could have a material
with respect to our properties. Based upon these environ-
adverse effect on our results of operations. We have
mental reports and our ongoing review of our properties,
obtained key-man life insurance for Mr. Bernstein. In addi-
we are currently not aware of any environmental condition
tion, we have entered into an employment agreement
with respect to any of our properties that we believe would
with Mr. Bernstein; however, it could be terminated by
be reasonably likely to have a material adverse effect on
Mr. Bernstein. We have not entered into employment
us. There can be no assurance, however, that the environ-
agreements with other key executive level employees.
mental reports will reveal all environmental conditions at
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
and/or our aggregate assets. In addition, the presence of
those substances, or the failure to properly dispose of or
remove those substances, may adversely affect our ability
to sell or rent that property or to borrow using that prop-
erty as collateral, which, in turn, would reduce our rev-
enues and ability to make distributions.
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
toxic substances, or other contaminants that have or
may have emanated from other properties. Although our
tenants are primarily responsible for any environmental
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.
Uninsured losses or a loss in excess of insured lim-
its could adversely affect our financial condition.
We carry comprehensive general liability, fire, extended
coverage, loss of rent insurance, and environmental liabil-
ity on most of our properties, with policy specifications
and insured limits customarily carried for similar properties.
However, with respect to those properties where the
leases do not provide for abatement of rent under any
circumstances, we generally do not maintain loss of rent
insurance. In addition, there are certain types of losses,
such as losses resulting from wars, terrorism or acts of
16
Acadia Realty Trust 2008 Annual Report
God that generally are not insured because they are
shareholders to comply with the distribution requirements
either uninsurable or not economically insurable. Should
of the Internal Revenue Code and to minimize exposure to
an uninsured loss or a loss in excess of insured limits occur,
federal income and nondeductible excise taxes. Differences
we could lose capital invested in a property, as well as the
in timing between the receipt of income and the payment
anticipated future revenues from a property, while remain-
of expenses in determining our income as well as required
ing obligated for any mortgage indebtedness or other finan-
debt amortization payments and the capitalization of cer-
cial obligations related to the property. Any loss of these
tain expenses could require us to borrow funds on a short-
types would adversely affect our financial condition.
term basis to meet the distribution requirements that are
Our Board of Trustees may change our investment
policy without shareholder approval.
Our board of trustees will determine our investment
and financing policies, our growth strategy and our debt,
capitalization, distribution, acquisition, disposition and
operating policies. Our board of trustees may establish
investment criteria or limitations as it deems appropriate,
but currently does not limit the number of properties in
which we may seek to invest or on the concentration of
investments in any one geographic region. Although our
board of trustees has no present intention to revise or
amend our strategies and policies, it may do so at any
time without a vote by our shareholders. Accordingly,
our shareholders’ control over changes in our strategies
and policies is limited to the election of trustees, and
changes made by our board of trustees may not serve
necessary to achieve the tax benefits associated with
qualifying as a REIT. The distribution requirements also
severely limit our ability to retain earnings to acquire and
improve properties or retire outstanding debt.
There can be no assurance we have qualified or
will remain qualified as a REIT for federal income
tax purposes.
We believe that we have consistently met the require-
ments for qualification as a REIT for federal income tax
purposes beginning with our taxable year ended Decem-
ber 31, 1993, and we intend to continue to meet these
requirements in the future. However, qualification as a
REIT involves the application of highly technical and com-
plex provisions of the Internal Revenue Code, for which
there are only limited judicial or administrative interpreta-
tions. No assurance can be given that we have qualified or
the interests of all of our shareholders and could adversely
will remain qualified as a REIT. The Internal Revenue Code
affect our financial condition or results of operations,
including our ability to distribute cash to shareholders or
qualify as a REIT.
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 each
calendar year. Pursuant to recent IRS pronouncements,
up to 90% of such distribution may be made in Common
Shares rather than cash. Our taxable income is determined
without regard to any deduction for dividends paid and by
excluding net capital gains. To the extent that we satisfy
the distribution requirement, but distribute less than 100%
of our taxable income, we will be subject to federal corpo-
rate 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;
(iii) 100% of our undistributed taxable income from prior
years. We intend to continue to make distributions to our
provisions and income tax regulations applicable to REIT’s
differ significantly from those applicable to other corpora-
tions. The determination of various factual matters and cir-
cumstances not entirely within our control can potentially
affect our ability to continue to qualify as a REIT. In addi-
tion, no assurance can be given that legislation, regulations,
administrative interpretations or court decisions will not
significantly change the requirements for qualification as
a REIT or the federal income tax consequences of such
qualification. Under current law, if we fail to qualify as a
REIT, we would not be allowed a deduction for dividends
paid to shareholders in computing our net taxable income.
In addition, our income would be subject to tax at the reg-
ular corporate rates. We also could be disqualified from
treatment as a REIT for the four taxable years following
the year during which qualification was lost. Cash available
for distribution to our shareholders would be significantly
reduced for each year in which we do not qualify as a
REIT. In that event, we would not be required to continue
to make distributions. Although we currently intend to
continue to qualify as a REIT, it is possible that future
economic, market, legal, tax or other considerations may
cause us, without the consent of the shareholders, to
Acadia Realty Trust 2008 Annual Report 17
revoke the REIT election or to otherwise take action that
Restrictions on a potential change of control.
would result in disqualification.
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
in the Internal Revenue Code to include certain entities)
during the last half of each taxable year after 1993, and
such capital shares must be beneficially owned by 100 or
more persons during at least 335 days of a taxable year
of 12 months or during a proportionate part of a shorter
taxable year (in each case, other than the first such year).
Our Declaration of Trust includes certain restrictions
regarding transfers of our capital shares and ownership
limits that are intended to assist us in satisfying these
limitations. These restrictions and limits may not be ade-
quate 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.
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
could be in the best interest of the shareholders.
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.
Actual or constructive ownership of our capital shares in
excess of the share ownership limits contained in our
Declaration of Trust would cause the violative transfer
Legislative or regulatory tax changes could have
an adverse effect on us.
There are a number of issues associated with an invest-
or ownership to be null and void from the beginning and
ment in a REIT that are related to the federal income tax
subject to purchase by us at a price equal to the lesser
laws, including, but not limited to, the consequences of
of (i) the price stipulated in the challenged transaction;
a company’s failing to continue to qualify as a REIT. At
and (ii) the fair market value of such shares (determined
any time, the federal income tax laws governing REIT’s or
in accordance with the rules set forth in our declaration of
the administrative interpretations of those laws may be
trust). As a result, if a violative transfer were made, the
amended or modified. Any new laws or interpretations
recipient of the shares would not acquire any economic
may take effect retroactively and could adversely affect
or voting rights attributable to the transferred shares. Addi-
us or our shareholders. Reduced tax rates applicable to
tionally, the constructive ownership rules for these limits
certain corporate dividends paid to most domestic noncor-
are complex and groups of related individuals or entities
porate shareholders are not generally available to REIT
may be deemed a single owner and consequently in viola-
shareholders since a REIT’s income generally is not
tion of the share ownership limits.
Concentration of ownership by certain investors.
Eight institutional shareholders own 5% or more individu-
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 noncor-
porate investors. This could adversely affect the market
ally, and 52.8% in the aggregate, of our Common Shares.
price of the Company’s shares.
A significant concentration of ownership may allow an
investor or a group of investors to exert a greater influ-
ITEM 1B. UNRESOLVED STAFF COMMENTSx
ence over our management and affairs and may have the
effect of delaying, deferring or preventing a change in
None.
control of us.
18
Acadia Realty Trust 2008 Annual Report
ITEM 2. PROPERTIESx
rental revenues were from national tenants. A majority of
the income from the properties consists of rent received
Shopping Center Properties
The discussion and tables in this Item 2 include properties
under long-term leases. These leases generally provide for
the payment of fixed minimum rent monthly in advance
held through our Core Portfolio and our Opportunity Funds.
and for the payment by tenants of a pro-rata share of the
We define our Core Portfolio as those properties either
real estate taxes, insurance, utilities and common area
100% owned by, or partially owned through joint venture
maintenance of the shopping centers. Minimum rents and
interests by the Operating Partnership, or subsidiaries
expense reimbursements accounted for approximately
thereof, not including those properties owned through our
69% of our total revenues for the year ended December
Opportunity Funds. The discussion of the Opportunity
31, 2008.
Funds does not include Fund III’s investment in a portfolio
of self storage properties, which are detailed separately
within this Item 2.
As of December 31, 2008, approximately 33% of our
existing leases also provided for the payment of percent-
age rents either in addition to, or in place of, minimum
As of December 31, 2008, in our Core Portfolio we
rents. These arrangements generally provide for payment
owned and operated 35 properties totaling approximately
to us of a certain percentage of a tenant’s gross sales in
5.5 million square feet of gross leasable area (“GLA”). The
excess of a stipulated annual amount. Percentage rents
Core Portfolio properties are located in 12 states and are
accounted for approximately 0.4% of the total 2008 rev-
generally well-established, community and neighborhood
enues of the Company.
shopping centers anchored by supermarkets or value-ori-
ented retail. The properties are diverse in size, ranging
from approximately 10,000 to 875,000 square feet with an
average size of 158,000 square feet. As of December 31,
2008, our Core Portfolio was 93.5% occupied.
Three of our Core Portfolio properties and four of our
Opportunity Fund 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
As of December 31, 2008, we owned and operated 29
and expenses associated with the building and improve-
properties totaling 1.4 million square feet of GLA, exclud-
ments at all seven locations.
ing properties under redevelopment, in our Opportunity
Funds. In addition to shopping centers, the Opportunity
Funds’ assets have invested in mixed-use properties,
which generally include retail activities. The Opportunity
Fund properties are located in 15 states. As of December
31, 2008, the properties owned by our Opportunity Funds
were, in total, 93.3% occupied.
No individual property contributed in excess of 10% of our
total revenues for the years ended December 31, 2008,
2007 and 2006. Reference is made to Note 8 to our Con-
solidated Financial Statements, which begin on page 59 of
this Form 10-K, for information on the mortgage debt per-
taining to our properties. The following sets forth more
specific information with respect to each of our shopping
Within our Core Portfolio and Opportunity Funds, we had
centers at December 31, 2008:
502 leases as of December 31, 2008. A majority of our
Acadia Realty Trust 2008 Annual Report 19
Shopping Center
Location
Acquired (A)
Interest
GLA
Year
Constructed (C) Ownership
Occupancy %(1)
12/31/08
Anchor Tenants
Current Lease Expiration/
Lease Option Expiration
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)
87,237
125,751
87%
100%
A&P 2013/2028
CVS 2010/—
Amboy Road
Staten Island
2005 (A)
LI (4)
63,290
100%
King Kullen 2028/—
Bartow Avenue
Pacesetter Park Shopping Center
2914 Third Avenue
West Shore Expressway
West 54th Street
East 17th Street
Crossroads Shopping Center
Bronx
Pomona
Bronx
Staten Island
Manhattan
Manhattan
White Plains
2005 (C)
1999 (A)
2006 (A)
2007 (A)
2007 (A)
2008 (A)
1998 (A)
Fee
Fee
Fee
Fee
Fee
Fee
14,676
96,434
42,400
55,000
9,995
19,622
JV (7)
310,714
76%
93%
100%
100%
97%
100%
96%
Duane Reade 2013/2018
Stop & Shop 2020/2040
Dr. J’s 2021/—
LA Fitness 2021/—
Stage Deli 2013/—
Barnes & Noble 2011/2016
A&P/Waldbaum’s 2012/2032
Kmart 2012/2032
B. Dalton 2012/2022
Modell’s 2009/2019
Pier 1 2012/—
Home Goods 2018/2033
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
1,054,352
97%
Rocky Hill
1998 (A)
Fee
206,346 (2)
100%
Stop & Shop 2024/2064
Wal-Mart (2)
Methuen
Brockton
1998 (A)
LI/Fee (4)
130,021
100%
DeMoulas Market 2010/2015
1984 (A)
Fee
218,141
95%
Supervalu 2012/2042
Wal-Mart 2012/2052
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
95%
Supervalu 2013/2028
Sears 2013/2033
CVS 2009/2014
South Burlington
1999 (A)
Fee
101,784
1,196,835
96%
98%
Supervalu 2024/2053
20
Acadia Realty Trust 2008 Annual Report
Shopping Center
Location
Acquired (A)
Interest
GLA
Year
Constructed (C) Ownership
Occupancy %(1)
12/31/08
Anchor Tenants
Current Lease Expiration/
Lease Option Expiration
MIDWEST REGION
Illinois
Hobson West Plaza
Clark Diversey
Indiana
Merrillville Plaza
Michigan
Bloomfield Town Square
Ohio
Mad River Station
Naperville
Chicago
1998 (A)
2006 (A)
Fee
Fee
99,138
19,265
97%
100%
Garden Fresh Markets 2012/2032
Merrillville
1998 (A)
Fee
235,167
95%
TJ Maxx 2009/—
JC Penney 2013/2018
Office Max 2013/2028
K&G 2017/2027
Pier 1 2009/—
David’s Bridal 2010/2020
Bloomfield Hills
1998 (A)
Fee
232,181
87%
TJ Maxx 2009/2014
Marshalls 2011/2026
Home Goods 2010/2020
Office Max 2010/2025
Dayton
1999 (A)
Fee
155,840 (6)
82%
Babies ‘R’ Us 2010/2020
Office Depot 2010/—
Pier 1 2010/—
Total Midwest Region
741,591
90%
Acadia Realty Trust 2008 Annual Report 21
Shopping Center
Location
Acquired (A)
Interest
GLA
Year
Constructed (C) Ownership
Occupancy %(1)
12/31/08
Anchor Tenants
Current Lease Expiration/
Lease Option Expiration
MID-ATLANTIC REGION
New Jersey
Marketplace of Absecon
Absecon
1998 (A)
Fee
104,718
99%
Rite Aid 2020/2040
Supervalu 2015/—
Ledgewood Mall
Ledgewood
1983 (A)
Fee
517,151
81%
Wal-Mart 2019/2049
Macy’s 2010/2025
The Sports Authority 2012/2037
Marshalls 2014/2034
Ashley Furniture 2010/2020
Barnes and Noble 2010/2035
Delaware
Brandywine Town Center
Wilmington
2003 (A)
JV (9)
874,908
97%
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/—
MJM Designer 2015/2035
World Market 2015/—
Christmas Tree Shops 2028/2048
Market Square Shopping Center
Wilmington
2003 (A)
JV (9)
102,786
93%
TJ Maxx 2011/2016
Naamans Road
Pennsylvania
Blackman Plaza
Mark Plaza
Plaza 422
Wilmington
2006 (C)
LI/JV (4) (9)
19,970
55%
Trader Joe’s 2019/2034
Wilkes-Barre
1968 (C)
Fee
125,264
93%
Kmart 2009/2049
Eckerd 2016/—
Edwardsville
1968 (C)
LI/Fee (4)
216,401
86%
Redner’s Markets 2018/2028
Lebanon
1972 (C)
Fee
156,279
92%
Home Depot 2028/2058
Dunham’s 2016/2031
Kmart 2009/2049
Route 6 Mall
Honesdale
1994 (C)
Fee
175,519
100%
Kmart 2020/2070
Chestnut Hill
Philadelphia
2006 (A)
Fee (10)
40,570
100%
Borders 2010/2020
Rite Aid 2011/2026
Fashion Bug 2016/—
Abington Towne Center
Abington
1998 (A)
Fee
216,358 (5)
Total Mid-Atlantic Region
Total Core Properties
2,549,924
5,542,702
Express 2009/—
TJ Maxx 2010/2020
Target (5)
99%
94%
94%
22
Acadia Realty Trust 2008 Annual Report
Shopping Center
Location
Acquired (A)
Interest
GLA
Year
Constructed (C) Ownership
Occupancy %(1)
12/31/08
Anchor Tenants
Current Lease Expiration/
Lease Option Expiration
Opportunity Fund Portfolio
Fund I Properties
Ohio
Granville Centre
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
Columbus
2002 (A)
Fee
134,997
38%
Lifestyle Family Fitness 2017/2027
Westchester
2004 (A)
Fee
35,291
90 %
Walgreens 2080/—
Various
2003 (A)
JV
987,100
100%
24 Kroger/Safeway Supermarkets
1,157,388
92%
2009/Various
Oakbrook
2005 (A)
LI (4)
112,000
100%
Neiman Marcus 2011/2036
New York
New York
2005 (A)
2005 (A)
JV/LI (4)
JV
26,125
60,000
198,125
1,355,513
82%
100%
98%
93%
CVS 2032/2052
City of New York 2027/2042
Total Opportunity Fund Operating Properties
Properties Under Redevelopment
Fund I
Sterling Heights Shopping Center
Fund II
161st Street
Fordham Place
Detroit
2004 (A)
JV (8)
154,835
61%
Burlington Coat Factory 2024/—
Bronx
Bronx
2005 (A)
2004 (A)
JV (8)
JV
223,521
—
87%
—
Rite-Aid 2026/2046
City of New York 2011/—
Best Buy 2019/2039
Sears 2023/2033
Walgreens 2048/—
24 Hour Fitness 2023/2038
Bank of America 2019/2029
BJ’s Wholesale Club 2033/2053
Michaels 2013/2033
Target
Pelham Manor Shopping Plaza
Westchester
2004 (A)
LI/JV (4)
Sherman Avenue
CityPoint
Atlantic Avenue
Canarsie Plaza
Fund III
Westport
Sheepshead Bay
Total Redevelopment Properties
New York
Brooklyn
Brooklyn
Brooklyn
Westport
Brooklyn
2005 (A)
2007 (A)
2007 (A)
2007 (A)
2007 (A)
2007 (A)
JV
JV
JV
JV
JV
JV
—
—
—
—
—
—
—
378,356
—
—
—
—
—
—
—
76%
Notes:
(6) 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, 2008.
(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 us.
(8) Partially operating.
(9) We have a 22% investment in this property.
(10) Property consists of two buildings.
Acadia Realty Trust 2008 Annual Report 23
Major Tenants
No individual retail tenant accounted for more than 6.4% of minimum rents for the year ended December 31, 2008 or
occupied more than 8.7% of total leased GLA as of December 31, 2008. The following table sets forth certain information
for the 20 largest retail tenants based upon minimum rents in place as of December 31, 2008. The amounts below
include our pro-rata share of GLA and annualized base rent for the Operating Partnership’s partial ownership interest in
properties, including the Opportunity Funds (GLA and rent in thousands):
Retail Tenant
A&P (Waldbaum’s, Pathmark)
Supervalu (Shaw’s)
TJX Companies
(T.J. Maxx, Marshalls, Homegoods)
Sears (Sears, Kmart)
Wal-Mart
Stage Deli
Ahold (Stop & Shop)
Kroger
Safeway
Home Depot
Barnes & Noble
Sleepy’s
Price Chopper
Restoration Hardware
Federated (Macy’s)
Walgreens
JC Penney
Payless Shoesource
Rite Aid
Express
Total
Notes:
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
5
4
9
5
2
1
2
12
12
2
3
5
1
1
1
2
1
8
3
1
216
221
250
440
210
4
118
156
124
211
38
40
77
9
73
21
50
28
32
13
$ 3,861
3,049
4.3%
4.4%
2,110
1,633
1,515
1,350
1,320
1,254
1,251
1,069
1,044
848
802
781
651
614
545
537
512
510
5.0%
8.7%
4.2%
0.1%
2.3%
3.1%
2.5%
4.2%
0.8%
0.8%
1.5%
0.2%
1.5%
0.4%
1.0%
0.6%
0.6%
0.3%
6.4%
5.0%
3.5%
2.7%
2.5%
2.2%
2.2%
2.1%
2.1%
1.8%
1.7%
1.4%
1.3%
1.3%
1.1%
1.0%
0.9%
0.9%
0.8%
0.8%
80
2,331
$ 25,256
46.5%
41.7%
(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, 2008.
(2) Represents total GLA and annualized base rent for our retail properties including the Operating Partnership’s pro-rata share of joint
venture properties, including the Opportunity Funds.
24
Acadia Realty Trust 2008 Annual Report
Lease Expirations
The following table shows scheduled lease expirations for retail tenants in place as of December 31, 2008, assuming that
none of the tenants exercise renewal options. (GLA and Annualized Base Rent in thousands):
Core Portfolio:
Leases maturing in
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Thereafter
Total
Number of
Leases
101
65
52
52
55
23
23
11
20
25
35
462
Opportunity Funds:
Leases maturing in
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Thereafter
Total
Note:
Number of
Leases
30
1
8
5
1
2
–
–
1
2
8
58
Annualized Base Rent (1)
GLA
Percentage
of Total
Square Feet
Percentage
of Total
Current
Annual Rent
$ 7,315
6,236
6,788
6,649
8,268
4,720
5,726
1,860
4,773
7,201
12,296
$ 71,832
10%
9%
9%
9%
12%
7%
8%
3%
7%
10%
16%
100%
616
515
354
564
519
288
336
114
212
410
1,032
4,960
Annualized Base Rent (1)
GLA
Current
Annual Rent
$ 8,995
84
4,826
635
168
145
–
–
450
78
4,330
$19,711
Percentage
of Total
46%
0%
24%
3%
1%
1%
0%
0%
2%
0%
23%
100%
Square Feet
1,007
3
278
30
4
4
–
–
35
4
188
1,553
13%
10%
7%
11%
11%
6%
7%
2%
4%
8%
21%
100%
Percentage
of Total
65%
0%
18%
2%
0%
0%
0%
0%
2%
0%
13%
100%
(1) Base rents do not include percentage rents, additional rents for property expense reimbursements, nor contractual rent escalations
due after December 31, 2008.
Acadia Realty Trust 2008 Annual Report 25
Geographic Concentrations
The following table summarizes our retail properties by region as of December 31, 2008. (GLA and Annualized Base Rent
in thousands):
Region
Core Properties:
New York Region
New England
Midwest
Mid-Atlantic
Total Core Properties
Opportunity Fund Properties:
Operating Properties:
Midwest (3)
New York Region (4)
Various (Kroger/Safeway
Portfolio) (5)
Total Opportunity Fund
1,054
1,197
742
2,549
5,542
247
121
987
97%
98%
90%
92%
94%
66%
93%
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
36%
14%
13%
37%
$26,159
$ 25.67
10,225
8,964
26,484
9.56
13.44
12.06
$71,832
$ 14.51
100%
100%
$ 1,438
4,324
$ 8.82
38.15
18%
9%
100%
8,843
8.96
73%
10%
30%
60%
Operating Properties
1,355
93%
$14,605
$11.56
100%
100%
Redevelopment Properties:
Midwest (6)
New York Region (7)
Total Opportunity Fund
Redevelopment Properties
155
224
379
Notes:
61%
87%
$
575
4,531
$ 6.08
23.27
41%
59%
11%
89%
76%
$ 5,106
$17.65
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
calculating annualized base rent per square foot.
(2) The above occupancy and rent amounts do not include space that is currently leased, but for which payment of rent had not
commenced as of December 31, 2008.
(3) 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.
(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 has a 98.76% interest in two properties.
(5) Fund I portfolio of 24 triple-net, anchor-only leases with Kroger and Safeway supermarkets.
(6) We have a 37.78% interest in future earnings and distributions from Fund I, which has a 50% interest in one property.
(7) We have a 20% interest in Fund II, which has a 98.76% interest in one property.
26
Acadia Realty Trust 2008 Annual Report
Storage Post Portfolio
During February 2008, through Fund III, we acquired a
95% controlling interest in a portfolio of eleven self-stor-
age properties from Storage Post's existing institutional
investors for approximately $174.0 million. The Portfolio
totals 920,596 net rentable square feet, of which ten
properties are operating at various stages of stabilization.
The remaining property is currently under construction.
The properties are located throughout New York and New
Jersey. The portfolio continues to be operated by Storage
Post, which is a 5% equity partner.
Operating Properties
Location
Net Rentable
Square Feet
Occupancy as of
December 31, 2008
Stabilized
New Rochelle
Suffern
Yonkers
Jersey City
Subtotal Stabilized
Currently in Lease-up
Bruckner Blvd
Fordham Road
Webster Avenue
Lawrence
Long Island City
Linden
Subtotal in Lease-up
Total Operating Properties
Currently Under Development
Westchester, New York
Suffern, New York
Westchester, New York
Jersey City, New Jersey
Bronx, New York
Bronx, New York
Bronx, New York
Lawrence, New York
Queens, New York
Linden, New Jersey
42,182
79,000
100,811
76,695
298,688
90,129
84,405
36,931
97,743
138,765
84,035
532,008
830,696
84.7%
67.8%
73.9%
Ridgewood
Queens, New York
89,900
Total Storage Post Portfolio
920,596
Kroger/Safeway Portfolio
As of December 31, 2008, Fund I, together with an unaffil-
ground lease for a property thereafter, it will be obligated
to pay an average ground rent of approximately $2.00 per
iated joint venture partner (“Kroger/Safeway JV”), that
square foot.
owned interests, through master leases with an unaffili-
ated entity (“Master Lessee”), in 24 triple-net Kroger and
Safeway supermarket leases (“Operating Leases”) aggre-
gating approximately 1.0 million square feet. The master
leases, one for the Kroger and one for the Safeway loca-
tions, expire in 2011 with the Master Lessee having the
option of extending the term of either or both of the mas-
ter leases. The Kroger/Safeway JV acquired its interest
The initial Operating Leases expire during 2009. Options
on these leases provide for extensions through 2049 at an
average rent of approximately $5.00 per square foot upon
the commencement of the initial option period during 2009.
The Kroger Co. purchased six of these locations compris-
ing 277,700 square feet, or 28% of the portfolio, during
February of 2009 for $14.6 million, resulting in a gain of
subject to long-term ground leases, which have a term in
approximately $4.5 million.
excess of 80 years inclusive of multiple renewal options.
Although there is no obligation for the Kroger/Safeway JV
to pay ground rent during the initial term of the master
lease, to the extent it exercises an option to renew a
Following these sales, there are six Kroger and 12
Safeway locations in eleven states averaging approxi-
mately 39,000 square feet at rents ranging from approxi-
mately $3.90 to $7.00 per square foot.
Acadia Realty Trust 2008 Annual Report 27
ITEM 3. LEGAL PROCEEDINGSx
We are involved in other various matters of litigation aris-
ing in the normal course of business. While we are unable
to predict with any certainty the amounts involved, man-
agement 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.
In September 2008, we, and certain of our subsidiaries,
and other unrelated entities were named as defendants
in an adversary proceeding brought by Mervyn’s LLC
Quarter Ended
High
Low
Dividend
Per Share
2008
March 31, 2008
June 30, 2008
September 30, 2008
December 31, 2008
2007
March 31, 2007
June 30, 2007
September 30, 2007
December 31, 2007
$26.09
$21.17
$0.2100
26.78
26.14
25.23
22.54
21.38
9.04
0.2100
0.2100
0.7600
$28.14
$24.12
$0.2000
28.75
27.93
29.00
25.43
21.19
24.03
0.2000
0.2000
0.4325
(“Mervyns”) in the United States Bankruptcy Court for
At February 27, 2009, there were 337 holders of record of
the District of Delaware. In an Amended Complaint filed
our Common Shares.
December 22, 2008, Mervyns asserts claims of fraudulent
transfer and breach of fiduciary duty against the defendants
based upon payments made by Mervyns in September
2004, in connection with its acquisition by an entity con-
trolled by certain of the defendants. Mervyns seeks to
recover from the defendants these allegedly fraudulent
transfers, other unspecified damages, and attorney’s fees.
The defendants’ response to the Amended Complaint is
due April 3, 2009. We believe that we have meritorious
defenses in connection with this action and that the ulti-
mate resolution will not have a material adverse effect on
our results of operations or consolidated financial condition.
ITEM 4. SUBMISSION OF MATTERS TOx
A VOTE OF SECURITY HOLDERSx
No matter was submitted to a vote of security holders
through the solicitation of proxies or otherwise during the
fourth quarter of 2008.
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 dividends declared
during the two years ended December 31, 2008 and 2007:
(b) Dividends
We have determined that for income tax purposes that
the composition of dividends for 2008 are as follows.
54% of the total dividends distributed to shareholders
represented ordinary income, 20% represented unrecap-
tured Section 1250 gain and 26% represented Section
1231 gain. Our cash flow is affected by a number of fac-
tors, including the revenues received from rental proper-
ties, our operating expenses, the interest expense on our
borrowings, the ability of lessees to meet their obligations
to us and unanticipated capital expenditures. Future divi-
dends paid by us will be at the discretion of the Trustees
and will depend on our actual cash flows, our financial
condition, capital requirements, the annual distribution
requirements under the REIT provisions of the Code and
such other factors as the Trustees deem relevant. In
addition, we have the ability to pay dividends in cash,
Common Shares or in any combination of cash and
Common Shares.
(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.
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
31, 2008.
28
Acadia Realty Trust 2008 Annual Report
During November and December 2008, we purchased $8.0 million in principal amount of our outstanding 3.75% convert-
ible notes (the “Notes”) payable at a discount of approximately 24%. The following sets forth the amount purchased
during the quarter ended December 31, 2008:
Period
October 1, 2008–
October 31, 2008
November 1, 2008–
November 30, 2008
Total Number of
Shares (or Units)
Purchased
None
$2,000,000 in
principal amount
December 1, 2008–
December 31, 2008
$6,000,000 in
principal amount
Note:
Average Price Paid
per Share (or Unit) (1)
—
$771.250 for each
$1,000 principal
amount of notes
$750.00 for each
$1,000 principal
amount of notes
Total Number of
Shares (or Units)
Purchased as Part of
Publicly Announced
Plans or Programs
Maximum Number
(or Approximate Dollar
Value) of Shares
(or Units) that May
Yet Be Purchased Under
the Plans or Programs
None
None
None
None
None
None
(1) At the time of purchase, the Notes had a conversion rate of 32.7310 Common Shares for each $1,000 in principal amount of the
Notes, representing a conversion price of approximately $30.55 per share.
During January 2009, we purchased an additional $13.5 million in principal amount of the Notes at a discount of approxi-
mately 24%.
(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 Incentive Plan (the “2006 Plan”) as of December 31, 2008:
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)]
421,244
—
421,244
$10.65
—
$10.65
407,207 (1)
—
407,207 (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, 2008
Outstanding OP Units as of December 31, 2008
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 compensation plans
Less: Issuance of Restricted Shares Granted
Issuance of Options Granted
Number of Common Shares remaining available
32,357,530
647,656
33,005,186
3,960,622
500,000
4,460,622
(1,274,835)
(2,778,580)
407,207
Acadia Realty Trust 2008 Annual Report 29
(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, 2003 through December 31, 2008 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, 2003, and assuming reinvestment of 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:
Acadia Realty Trust
Russell 2000
NAREIT All Equity REIT Index
SNL REIT Retail
Shopping Center Index
300
250
200
150
100
e
u
l
a
V
x
e
d
n
I
50
12/31/03
Index
Acadia Realty Trust
Russell 2000
NAREIT All Equity REIT Index
12/31/04
12/31/05
12/31/06
12/31/07
12/31/08
12/31/03
12/31/04
12/31/05
12/31/06
12/31/07
Period Ended
100.00
100.00
100.00
136.33
118.33
131.58
135.86
174.41
123.72
147.58
148.26
224.54
146.44
199.32
199.56
239.04
144.15
168.05
164.30
12/31/08
144.75
95.44
104.65
98.92
SNL REIT Retail Shopping Center Index
100.00
(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.
30
Acadia Realty Trust 2008 Annual Report
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 Condi-
tion and Results of Operations appearing elsewhere in this Form 10-K. Funds from operations (“FFO”) amounts for the
year ended December 31, 2008 have been adjusted as set forth in “Item 7. Management’s Discussion and Analysis of
Financial 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)
2008
2007
2006
2005
2004
Years ended December 31,
OPERATING DATA:
Revenues
Operating expenses
Interest expense
Depreciation and amortization
Gain on sale of land
Equity in earnings of unconsolidated partnerships
Impairment of notes receivable
Gain on extinguishment of debt
Minority interest
Income tax provision (benefit)
Income from continuing operations
Income from discontinued operations
Income from extraordinary item (1)
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
$ 140,739
$ 98,022
$ 92,232
$ 90,481
$ 76,829
61,641
26,890
34,964
763
19,906
(4,392)
1,958
(12,217)
3,362
19,900
7,648
—
46,608
22,775
26,892
—
6,619
—
—
9,082
297
17,151
6,442
3,677
40,810
20,134
24,729
—
2,559
—
—
5,242
(508)
14,868
24,145
—
36,618
16,555
24,086
—
21,280
—
—
(13,928)
2,140
18,434
2,192
—
31,268
14,245
20,973
—
513
—
—
(1,444)
—
9,412
10,173
—
27,548
$ 27,270
$ 39,013
$ 20,626
$ 19,585
0.59
0.22
—
0.81
0.58
0.22
—
0.80
$
$
$
$
0.51
0.19
0.11
0.81
0.50
0.19
0.11
0.80
$
$
$
0.44
0.71
—
1.15
0.43
0.70
—
$
$
$
0.55
0.07
—
0.62
0.55
0.07
—
$
$
$
0.31
0.33
—
0.64
0.30
0.33
—
$
1.13
$
0.62
$
0.63
$
$
$
$
$
Weighted average number of Common Shares
outstanding
– basic
– diluted
33,813
34,267
33,600
34,282
33,789
34,440
33,236
33,501
30,628
31,199
Dividends declared per Common Share
$
1.39
$ 1.0325
$
0.755
$ 0.7025
$ 0.6525
BALANCE SHEET DATA:
Real estate before accumulated depreciation
$1,106,873
$ 833,694
$ 629,902
$ 650,945
$541,772
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
1,291,556
654,868
107,000
5,667
208,839
221,298
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
378,770
—
9,204
137,086
220,576
599,724
242,527
—
6,893
75,244
216,924
extraordinary item (1) (2)
$
40,457
$ 44,018
$ 39,953
$ 35,842
$ 30,004
Cash flows provided by (used in):
Operating activities
Investing activities
Financing activities
See Notes on following page.
65,887
(301,635)
199,096
105,165
(208,869)
87,476
39,627
(58,890)
68,359
50,239
(135,470)
159,425
33,885
(72,860)
40,050
Acadia Realty Trust 2008 Annual Report 31
Notes:
(1) The extraordinary item only relates to 2007 and represents
the Company’s share of an extraordinary gain from its private-
equity investment in Albertson’s. 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 depre-
ciation and amortization, and after adjustments for unconsoli-
dated partnerships and joint ventures.
32
Acadia Realty Trust 2008 Annual Report
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, 2008, we operated 85 properties,
which we own or have an ownership interest in, within
our Core Portfolio or within our three Opportunity Funds.
Our Core Portfolio consists of those properties either
100% owned by, or partially owned through joint venture
interests by the Operating Partnership, or subsidiaries
thereof, not including those properties owned through our
Opportunity Funds. These properties consist of commer-
n Generate internal growth within the Core Portfolio
through aggressive redevelopment, re-anchoring and
or 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 redevelop-
ment and leasing and/or transactions requiring creative
capital structuring to facilitate the transactions. These
transactions may include other types of commercial
real estate besides those types we invest in through
our Core Portfolio.
cial properties, primarily neighborhood and community
n Partner with private equity investors for the purpose
shopping centers, self-storage and mixed-use properties
of making investments in operating retailers with sig-
with a retail component. The properties we operate are
nificant embedded value in their real estate assets.
located primarily in the Northeast, Mid-Atlantic and Mid-
western regions of the United States. Our Core Portfolio
consists of 35 properties comprising approximately 5.5
million square feet. Fund I has 27 properties comprising
approximately 1.3 million square feet. Fund II has 10 prop-
erties, seven of which (representing 1.2 million square
feet) are currently operating or near construction, and
three of which are in design phase. The Fund II portfolio
will approximate 2.3 million square feet upon completion
of all current construction and anticipated redevelopment
activities. Fund III has 13 properties totaling approximately
1.2 million square feet, of which 11 locations representing
0.9 million net rentable square feet are self storage facilities.
The majority of our operating income derives from rental
revenues from these properties, including recoveries from
tenants, offset by operating and overhead expenses. As
our RCP Venture invests in operating companies, we con-
sider these investments to be private-equity style, 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”).
Our primary business objective is to acquire and manage
commercial retail properties that will provide cash for distri-
butions to shareholders while also creating the potential for
capital appreciation to enhance investor returns. We focus
on the following fundamentals to achieve this objective:
n Own and operate a Core Portfolio of community and
neighborhood shopping centers and main street retail
located in markets with strong demographics.
n Maintain a strong and flexible balance sheet through
conservative financial practices while ensuring access
to sufficient capital to fund future growth.
Business Outlook
The U.S. economy has recently experienced a financial
downturn, which has resulted in a significant decline in
retail sales due to reduced consumer spending. Many
financial and economic analysts are predicting that this
business recession will extend through 2009 and perhaps
beyond. Although the occupancy and net operating income
within our portfolio has not been materially adversely
affected through December 31, 2008, should retailers
continue to experience deteriorating sales performance,
the likelihood of tenant bankruptcy filings may increase
which would negatively impact our results of operations.
In addition to the impact on retailers, the current downturn
has had an unprecedented impact on the U.S. credit mar-
kets. Traditional sources of financing, such as the com-
mercial-mortgage backed security market, have become
severely curtailed. If these conditions continue, our ability
to finance new acquisitions will be adversely affected.
Accordingly, our ability to generate external growth in
income could be limited.
See the “Item 1A. Risk Factors,” including the discussions
under the headings “The current global financial crisis
may cause us to lose tenants and may impair our ability to
borrow money to purchase properties, refinance existing
debt or obtain the necessary financing to complete our
current redevelopment” and “The bankruptcy of, or a
Acadia Realty Trust 2008 Annual Report 33
Results of Operations
Comparison of the year ended December 31, 2008 (“2008”) to the year ended December 31, 2007 (“2007”)
(dollars in millions)
2008
Revenues:
Minimum rents
Percentage rents
Expense reimbursements
Lease termination income
Other property income
Management fee income
Interest income
Other income
Core
Portfolio
$ 50.8
0.6
14.2
—
0.3
—
—
—
Opportunity Storage
Portfolio
$ 4.8
—
—
—
0.8
—
—
—
Funds
$24.6
—
2.6
24.0
(0.5)
—
—
—
Other (1)
$ —
—
—
—
0.6
3.4
14.5
—
Core
Portfolio
$ 48.9
0.6
12.4
—
0.8
—
—
0.2
Total revenues
$ 65.9
$50.7
$ 5.6
$18.5
$ 62.9
2007
Opportunity Storage
Funds
$ 19.5
—
0.9
—
—
—
—
—
$ 20.4
Portfolio Other (1)
$ 0.3
—
—
—
—
—
—
—
$ —
—
—
—
—
4.1
10.3
—
$ 0.3
$14.4
(1) For this and subsequent tables under “Results of operations,” this includes amounts eliminated in consolidation, which are adjusted
in Minority Interest. Reference is made to Note 3 to our Consolidated Financial Statements, which begin on page 59 of this Form
10-K for an overview of the Company’s four reportable segments.
downturn in the business of, any of our major tenants or
adversely impacted by charges related to this settlement
a significant number of our smaller tenants may adversely
and the related accrual adjustments totaling $1.0 million.
affect our cash flows and property values.”
The increase in expense reimbursements in the Opportunity
The increase in minimum rents in the Core Portfolio was
attributable to additional rents following the acquisitions
of 200 West 54th Street, 145 East Service Road and East
17th Street (“2007/2008 Core Acquisitions”) of $1.8 million.
Funds relates primarily to the billing in 2008 of previous
year’s operating expenses at 161st Street for $1.2 million
and the billing of previous year’s utility charges to an
anchor tenant for $0.3 million.
The increase in rents in the Opportunity Funds primarily
Lease termination income in the Opportunity Funds for
relates to additional rents following the acquisition of 125
2008 relates to a termination fee earned, net of costs,
Main Street (“2007 Fund Acquisitions”) of $0.5 million,
from Home Depot at Canarsie Plaza.
216th Street being placed in service October 1, 2007 of
$2.1 million, and Pelham Manor Shopping Plaza and Ford-
ham Plaza being partially placed in service in 2008. The
increase in minimum rents in the Storage Portfolio relates
to the acquisition of the Storage Post Portfolio (“2008
Storage Acquisition”).
Management fee income decreased as a result of lower
management fees earned in connection with our invest-
ments in unconsolidated affiliates, primarily as a result
of higher leasing commissions earned during 2007, as
well as lower fees from our Klaff management contracts
(Reference is made to Note 11 in the Notes to Consolidated
Expense reimbursements in the Core Portfolio increased
Financial Statements) following the disposition of certain
for both real estate taxes and common area maintenance
managed assets in 2008 and 2007. These decreases were
(“CAM”). Real estate tax reimbursements increased
offset by fees totaling $1.0 million earned from the City
$0.7 million in the Core Portfolio as a result of the 2007/2008
Point development project.
Core Acquisitions as well as general increases in real estate
taxes experienced across the Core Portfolio in 2008. CAM
expense reimbursements in the Core Portfolio increased
$1.1 million. As a result of the completion of a multi-year
The increase in interest income was the result of higher
interest earning assets in 2008, primarily from new notes/
mezzanine financing investments.
review of CAM billings during 2007 and the resolution of
The decrease in other income was primarily attributable
the majority of all outstanding CAM billing issues with
to the non recurrence of income related to the settlement
our tenants, 2007 CAM expense reimbursements were
of interest rate swap agreements in 2007.
34
Acadia Realty Trust 2008 Annual Report
Management’s Discussion and Analysis continued
(dollars in millions)
2008
2007
Operating Expenses:
Property operating
Real estate taxes
General and administrative
Depreciation and amortization
Impairment of notes receivable
Core
Portfolio
$ 12.4
8.8
26.0
20.4
—
Opportunity Storage
Portfolio
$ 5.3
1.4
—
3.0
—
Funds
$ 7.2
2.0
16.5
11.6
—
Other
$ —
—
(18.0)
—
4.4
Core
Portfolio
$ 10.6
8.2
25.2
17.5
—
Opportunity Storage
Portfolio
$ 0.7
—
—
0.3
—
Funds
$ 2.8
1.2
13.4
9.1
—
Other
$ —
—
(15.5)
—
—
Total operating expenses
$ 67.6
$37.3
$ 9.7
$(13.6)
$ 61.5
$ 26.5
$ 1.0
$(15.5)
The increase in property operating expenses in the Core
increased activity in Opportunity Fund assets and asset
Portfolio relates to additional reserves for tenant receivables,
management services. The increase in general and admin-
including straight line rent. The increase in property oper-
istrative expense in the Opportunity Funds primarily related
ating expenses in the Opportunity Funds was attributable
to additional Fund III asset management fees of $2.8 million
to 216th Street being placed in service October 1, 2007 of
in 2008 as well as an increase in other professional fees.
$0.6 million, allocated property operating expenses related
These increases were offset by a $0.8 million decrease in
to Pelham Manor Shopping Plaza and Fordham Plaza being
Promote expense related to Fund I and Mervyns I. The
partially placed in service in 2008 of $2.3 million as well as
decrease in general and administrative in “Other” primarily
additional reserves for tenant receivables, which was prima-
relates to the elimination of the Fund III asset manage-
rily for straight line rent receivables. The increase in prop-
ment fees offset by the elimination of the Fund I and
erty operating expenses in the Storage Portfolio relates to
Mervyns I Promote expense for consolidated financial
the 2008 Storage Acquisition.
statement presentation.
The increase in real estate taxes in the Core Portfolio was
Depreciation expense in the Core Portfolio increased
due to the 2007/2008 Core Acquisitions as well as general
$2.9 million in 2008. This was principally a result of
increases in real estate taxes experienced across the Core
increased depreciation expense following the full depre-
Portfolio. The increase in real estate taxes in the Opportu-
ciation of tenant improvements at two properties following
nity Funds was primarily attributable to allocated real estate
the bankruptcy of Circuit City of $2.4 million and increased
taxes related to Pelham Manor Shopping Plaza and Ford-
depreciation expense resulting from the 2007/2008 Core
ham being partially placed in service in 2008. The increase
Acquisitions. The increase in depreciation and amortization
in real estate taxes in the Storage Portfolio relates to the
expense for the Opportunity Funds is primarily related to
acquisition of the 2008 Storage Acquisition.
216th Street being placed in service October 1, 2007 as
The increase in general and administrative expense in the
Core Portfolio was primarily attributable to increased com-
pensation expense of $1.1 million for additional personnel
hired in the second half of 2007 and in 2008 as well as
well as Pelham Manor Shopping Plaza and Fordham Plaza
being partially placed in service in 2008. The increase in
depreciation and amortization in the Storage Portfolio
relates to the acquisition of the 2008 Storage Acquisition.
increases in existing employee salaries. In addition, there
The impairment of notes receivable of $4.4 million in 2008
was an increase of $0.3 million for other overhead expenses
relates to the impairment of a mezzanine loan.
following the expansion of our infrastructure related to
Acadia Realty Trust 2008 Annual Report 35
(dollars in millions)
2008
2007
Other:
Gain on sale of land
Equity in earnings from
unconsolidated affiliates
Interest expense
Gain on debt extinguishment
Minority interest
Income tax provision
Income from discontinued
operations
Extraordinary item
Core
Portfolio
$ 0.8
Opportunity Storage
Portfolio
$ —
Funds
$ —
Other
$ —
Core
Portfolio
$ —
Opportunity Storage
Portfolio
$ —
Funds
$ —
Other
$ —
—
(17.6)
2.0
0.2
2.7
—
—
19.9
(5.6)
—
(16.4)
—
—
—
—
(3.7)
—
0.4
—
—
—
—
—
—
3.6
—
7.6
—
0.6
(17.4)
—
—
0.3
—
—
5.8
(5.5)
—
6.1
—
—
3.7
—
(0.4)
—
—
—
—
—
0.2
0.5
—
3.0
—
6.4
—
The gain on sale of land in 2008 in the Core Portfolio
2008. Interest expense in the Storage Portfolio increased
relates to a land parcel sale at Bloomfield Towne Square.
$3.3 million as a result of the 2008 Storage Acquisition.
Equity in earnings of unconsolidated affiliates in the
The gain on extinguishment of debt of $2.0 million is
Opportunity Funds increased primarily as a result of our
attributable to the purchase of the Company’s convertible
pro rata share of gains from the sale of Mervyns locations
debt at a discount in 2008.
in 2008 of $5.2 million, additional distributions in excess
of basis from our Albertson’s investment of $7.9 million
and our pro rata share of gain from the sale of the Hay-
good Shopping Center of $3.3 million. These increases
were partially offset by a decrease in our pro rata share
of distributions in excess of basis from our investment in
Hitchcock Plaza of $2.7 million as compared to 2007.
The minority interest in the Opportunity Funds primarily
represents the minority partners’ share of all Opportunity
Fund activity and ranges from an effective 62.22% interest
in Fund I, as a result of our Promote position, to an 80.1%
interest in Fund III. The variance between 2008 and 2007
represents the minority partners’ share of all the Opportu-
nity Funds variances discussed above. The minority inter-
Interest expense in the Core Portfolio increased $0.2 million
est in Other relates to the minority partners’ share of
in 2008. This was the result of a $1.1 million increase
capitalized construction, leasing and legal fees.
attributable to higher average outstanding borrowings in
2008 and a $0.2 million increase related to higher average
interest rates in 2008. This increase was offset by a $0.7
million FAS 141 (Reference is made to Note 1 in the Notes
to Consolidated Financial Statements) adjustment related
The variance in income tax provision in the Core Portfolio
primarily relates to income taxes at the taxable REIT sub-
sidiary (“TRS”) level for our share of gains from the sale
of Mervyns locations in 2008.
to the 2008 repayment of debt at less than recorded value
Income from discontinued operations represents activity
and a $0.4 million decrease resulting from costs associ-
related to properties held for sale and sold in 2008 and 2007.
ated with a loan payoff in 2007. Interest expense in the
Opportunity Funds increased $0.1 million in 2008. This
was the result of an increase of $3.2 million due to higher
average outstanding borrowings in 2008 offset by a $3.1
million decrease related to lower average interest rates in
The extraordinary item in 2007 in the Opportunity
Funds relates to our share of the extraordinary gain,
net of income taxes and minority interest, from our
Albertson’s investment.
36
Acadia Realty Trust 2008 Annual Report
Management’s Discussion and Analysis continued
Comparison of the year ended December 31, 2007 (“2007”) to the year ended December 31, 2006 (“2006”)
(dollars in millions)
2007
2006
Revenues:
Minimum rents
Percentage rents
Expense reimbursements
Lease termination income
Other property income
Management fee income
Interest income
Other income
Core
Portfolio
$ 48.9
0.6
12.4
—
0.8
—
—
0.2
Opportunity Storage
Portfolio
$ 0.3
—
—
—
—
—
—
—
Funds
$19.5
—
0.9
—
—
—
—
—
Total revenues
$ 62.9
$20.4
$ 0.3
Other
$ —
—
—
—
—
4.1
10.3
—
$14.4
Core
Portfolio
$ 43.2
0.6
12.9
—
0.7
—
—
1.6
Opportunity Storage
Portfolio
$ —
—
—
—
—
—
—
—
Funds
$ 17.1
0.6
1.6
—
—
—
—
—
$ 59.0
$ 19.3
$ —
Other
$ —
—
—
—
—
5.6
8.3
—
$13.9
The increase in minimum rents in the Core Portfolio was
comparison of 2008 and 2007, partially offset by higher
primarily attributable to additional rents following our
CAM recovery resulting from increased snow removal
acquisition of 200 West 54th Street, 145 East Service
costs in 2007. The decrease in expense reimbursements
Road, 2914 Third Avenue and Chestnut Hill (“2006/2007
in the Opportunity Funds relates primarily to the capital-
Core Acquisitions”) as well as increased rents as a result
ization of construction period operations in 2007 at two
of re-tenanting activities throughout the Core Portfolio.
properties that were operating in 2006.
The increase in minimum rents in the Opportunity Funds
was primarily related to Liberty Avenue and 216th Street
being placed in service January 1, 2007 and October 1,
2007, respectively and increased rents following re-tenant-
ing activities.
Percentage rents in the Opportunity Funds decreased
primarily as a result of the temporary closing of an
anchor tenant at Fordham Place during the construction
period in 2007.
Real estate tax reimbursements in the Core Portfolio
decreased $0.3 million as a result of a $0.4 million real
estate tax charge to an anchor tenant for previous years
billed in 2006. CAM reimbursements in the Core Portfolio
decreased $0.2 million. This was a result of the 2007
CAM settlement related adjustments as discussed in the
Management fee income decreased $1.5 million primarily
as a result of lower fees earned in connection with Klaff
management contracts following the disposition of certain
assets in 2006 and 2007 and lower management fees
from our investments in unconsolidated affiliates.
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
balances 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 Port-
folio in 2006 as well as $0.5 million of additional income
related to the termination of interest rate swap agreements.
Acadia Realty Trust 2008 Annual Report 37
(dollars in millions)
2007
2006
Operating Expenses:
Property operating
Real estate taxes
General and administrative
Depreciation and amortization
Core
Portfolio
$ 10.6
8.2
25.2
17.5
Opportunity Storage
Portfolio
$ 0.7
—
—
0.3
Funds
$ 2.8
1.2
13.4
9.1
Other
$ —
—
(15.5)
—
Core
Portfolio
$ 9.3
7.7
19.6
15.2
Opportunity Storage
Portfolio
$ —
—
—
—
Funds
$ 1.8
2.2
6.7
9.5
Total operating expenses
$ 61.5
$26.5
$ 1.0
$(15.5)
$ 51.8
$ 20.2
$ —
Other
$ —
—
(6.5)
—
$ (6.5)
The increase in property operating expenses in the Core
The increase in general and administrative expense in the
Portfolio was primarily the result of the 2006/2007 Core
Opportunity Funds primarily related to Fund III asset man-
Acquisitions and higher snow removal costs of $1.0 million
agement fees of $4.7 million in 2008 as well as Promote
in 2007. The increase in property operating expenses in
expense related to Fund I and Mervyns I. The decrease in
the Opportunity Funds was primarily attributable to Liberty
general and administrative in Other primarily relates to the
Avenue and 216th Street being placed in service January
elimination of the Fund III asset management fees, the
1, 2007 and October 1, 2007.
The increase in real estate taxes in the Core Portfolio was
primarily due to the 2006/2007 Core Acquisitions of $0.8
million as well as general increases across the Core Port-
elimination of the Fund I and Mervyns I Promote expense
as well as an increase in the elimination of construction
fees due to higher redevelopment activities for consolidated
financial statement presentation.
folio. These increases were offset by tax refunds of $0.6
Depreciation expense in the Core Portfolio increased
million recorded in 2007. The decrease in real estate taxes
$1.1 million in 2007. This was principally a result of
in the Opportunity Funds principally related to the capital-
increased depreciation expense following the 2006/2007
ization of construction period real estate taxes at a property
Core Acquisitions. Amortization expense in the Core
that was operating in 2006 and the adjustment of real
Portfolio increased $1.2 million primarily as a result of
estate tax estimates recorded in 2007.
increased amortization of loan costs following our con-
The variance in general and administrative expense in
the Core Portfolio was attributable to increased compen-
sation expense, including share based compensation of
$4.7 million for additional personnel hired in the second
half of 2006 and in 2007 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 infrastructure related to increased
fund investments and asset management services.
vertible debt issuances in December 2006 and January
2007 as well as increased amortization of loan costs from
financing activity in late 2006 and 2007. The decrease in
depreciation and amortization expense for the Opportunity
Funds is primarily related to a property that was under
redevelopment in 2007 but was operating in 2006. This
decrease was primarily offset by Liberty Avenue and
216th Street being placed in service during 2007.
38
Acadia Realty Trust 2008 Annual Report
Management’s Discussion and Analysis continued
(dollars in millions)
2007
2006
Other:
Gain on sale of land
Equity in earnings from
unconsolidated affiliates
Interest expense
Impairment of notes receivable
Gain on debt extinguishment
Minority interest
Income tax provision (benefit)
Income from discontinued
operations
Extraordinary item
Core
Portfolio
$ —
Opportunity Storage
Portfolio
$ —
Funds
$ —
Other
$ —
Core
Portfolio
$ —
Opportunity Storage
Portfolio
$ —
Funds
$ —
Other
$ —
0.6
(17.4)
—
—
—
0.3
—
—
5.8
(5.5)
—
—
6.1
—
—
3.7
—
(0.4)
—
—
—
—
—
—
0.2
0.5
—
—
3.0
—
6.4
—
1.2
(14.1)
—
—
(0.5)
0.5
—
—
1.9
(6.3)
—
—
4.4
—
—
—
—
—
—
—
—
—
—
—
(0.5)
0.3
—
—
1.3
—
24.1
—
Equity in earnings of unconsolidated affiliates in the
The minority interest in the Opportunity Funds primarily
Opportunity Funds increased as a result of our distributions
represents the minority partners’ share of all Opportunity
in excess of our invested capital from both our Albertson’s
Fund activity and ranges from a 77.8% interest in Fund I
investment of $2.4 million and our investment in Hitchcock
to an 80.1% interest in Fund III. The variance between
Plaza of $2.4 million. These increases were offset by a
2007 and 2006 represents the minority partners’ share of
decrease in our pro rata share of earnings from our Mervyns
all the Opportunity Funds variances discussed above. The
investment of $1.3 million.
Interest expense in the Core Portfolio increased $3.3 mil-
minority interest in “Other” relates to the minority partners’
share of capitalized construction, leasing and legal fees.
lion in 2007. This was the result of a $4.2 million increase
The variance in income tax provision in the Core Portfolio
attributable to higher average outstanding borrowings in
primarily relates to income taxes at the TRS level for our
2007 and a $0.4 million increase resulting from costs asso-
share of income and losses from Albertson’s and Mervyns.
ciated with a loan payoff in 2007. These increases were
offset by a $1.3 million decrease related to lower average
interest rates in 2007. Interest expense in the Opportunity
Income from discontinued operations represents activity
related to properties sold in 2008, 2007 and 2006.
Funds decreased $0.8 million in 2007. This was the result
The extraordinary item in 2007 in the Opportunity Funds
of a decrease of $1.6 million due to lower average interest
relates to our share of the extraordinary gain, net of income
rates in 2007 offset by a $0.8 million increase related to
taxes and minority interest, from our Albertson’s investment.
higher average outstanding borrowings in 2007.
Acadia Realty Trust 2008 Annual Report 39
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
(net of minority interests’ share)
Consolidated affiliates
Unconsolidated affiliates
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,
2008
2007
2006
2005
2004
$ 27,548
$27,270
$39,013
$20,626
$ 19,585
18,519
1,688
19,669
1,736
20,206
1,806
16,676
746
16,026
714
449
614
803
416
375
(7,182)
(565)
—
40,457
—
(5,271)
—
(3,677)
40,341
3,677
(20,974)
(901)
—
39,953
—
50
(2,672)
—
35,842
—
(6,696)
—
—
30,004
—
$ 40,457
$44,018
$39,953
$35,842
$ 30,004
(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
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.
(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
we paid a quarterly dividend of $0.21 per Common Share
and Common OP Unit. In addition, in December of 2008,
our Board of Trustees approved a special dividend of
approximately $0.55 per share, or $18.0 million in the
(i) distributions to our shareholders and OP unit holders,
aggregate, which was associated with taxable gains aris-
(ii) investments which include the funding of our capital
ing from property dispositions in 2008, which was paid
committed to our Opportunity Funds and property acquisi-
on January 30, 2009, to shareholders of record as of
tions and redevelopment/re-tenanting activities within our
December 31, 2008. 90% of the special dividend was
Core Portfolio, and (iii) debt service and loan repayments.
paid with the issuance of 1.3 million Common Shares and
Distributions
In order to qualify as a REIT for Federal income tax purposes,
we must currently distribute at least 90% of our taxable
10%, or $1.8 million, was paid in cash.
Fund I and Mervyns I
In September 2001, the Operating Partnership committed
income to our shareholders. For the four quarters of 2008,
$20.0 million to a newly formed Opportunity Fund with
40
Acadia Realty Trust 2008 Annual Report
Management’s Discussion and Analysis continued
four of our institutional shareholders, who committed
member with a 20% interest in the joint venture. The
$70.0 million for the purpose of acquiring a total of
terms and structure of Fund II are substantially the same
approximately $300.0 million of community and neighbor-
as Fund I with the exceptions that the preferred return is
hood shopping centers on a leveraged basis.
8%. As of December 31, 2008, $192.0 million had been
On January 4, 2006, we recapitalized a one million square
foot retail portfolio located in Wilmington, Delaware
contributed to Fund II, of which the Operating Partner-
ship’s share is $38.4 million.
(“Brandywine Portfolio”) through a merger of interests
Fund II has invested in the New York Urban/Infill Redevel-
with affiliates of GDC Properties (“GDC”). The Brandywine
opment and the RCP Venture initiatives and other invest-
Portfolio was recapitalized through a “cash out” merger
ments as further discussed in “PROPERTY ACQUISITIONS”
of the 77.8% interest, which was previously held by the
in Item 1 of this Form 10-K.
institutional investors in Fund I (the “Investors”) to affili-
ates of GDC at a valuation of $164.0 million. The Operating
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 2006, the Investors received $36.0 million of addi-
tional proceeds from this transaction following the replace-
ment of bridge financing provided by them with permanent
mortgage financing.
New York Urban/Infill Redevelopment Initiative
In September 2004, we, through Fund II, launched our
New York Urban Infill Redevelopment initiative. During
2004, Fund II, together with an unaffiliated partner, P/A,
formed Acadia P/A (“Acadia P/A”) for the purpose of
acquiring, constructing, developing, owning, operating,
leasing and managing certain retail real estate properties
in the New York City metropolitan area. P/A has agreed
to invest 10% of required capital up to a maximum of
$2.2 million and Fund II, the managing member, has
agreed to invest the balance to acquire assets in which
Acadia P/A agrees to invest. Operating cash flow is gener-
ally to be distributed pro-rata to Fund II and P/A until each
has received a 10% cumulative return and then 60% to
Fund II and 40% to P/A. Distributions of net refinancing
As of December 31, 2008, Fund I has a total of 27 proper-
and net sales proceeds, as defined, follow the distribution
ties totaling 1.3 million square feet as further discussed in
of operating cash flow except that unpaid original capital
“PROPERTY ACQUISITIONS” in Item 1 of this Form 10-K.
is returned before the 60%/40% split between Fund II and
Fund II and Mervyns II
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, whereby the investors, including
the Operating Partnership, committed capital totaling
$300 million. The Operating Partnership is the managing
P/A, respectively. Upon the liquidation of the last property
investment of Acadia P/A, to the extent that Fund II has
not received an 18% internal rate of return (“IRR”) on all
of its capital contributions, P/A is obligated to return a
portion of its previous distributions, as defined, until Fund
II has received an 18% IRR. To date, Fund II has invested
in nine projects, eight of which are in conjunction with
P/A, as follows:
Acadia Realty Trust 2008 Annual Report 41
Location
Queens
Manhattan
Bronx
Property
Liberty Avenue (1) (2)
216th Street (3)
Fordham Place
Pelham Manor Shopping Center (1) Westchester
161st Street
Canarsie Plaza
Sherman Plaza
CityPoint (1)
Atlantic Avenue
Bronx
Brooklyn
Manhattan
Brooklyn
Brooklyn
Total
Notes:
Year
Acquired
2005
2005
2004
2004
2005
2007
2005
2007
2007
Purchase
Price
$ 14.9
27.7
30.0
—
49.0
21.0
25.0
29.0
5.0
$201.6
Redevelopment (dollars in millions)
Anticipated
Additional
Costs
$ —
—
95.0
57.8
16.0
29.0
30.0
199.8
18.0
$445.6
Estimated
Completion
Completed
Completed
First half 2009
Second half 2009
(4)
(4)
(4)
(4)
Second half 2009
Square
Feet Upon
Completion
125,000
60,000
285,000
320,000
232,000
323,000
216,000
419,000
110,000
2,090,000
(1) Fund II acquired a ground lease interest at this property.
(2) Liberty Avenue redevelopment is complete. The purchase price includes redevelopment costs of $14.9 million.
(3) 216th Street redevelopment is complete. The purchase price includes redevelopment costs of $20.7 million.
(4) To be determined.
RCP Venture
The following table summarizes the RCP Venture investments from inception through December 31, 2008:
(dollars in millions)
Investor
Mervyns I and Mervyns II Mervyns
Mervyns I and Mervyns II Mervyns add-on
Investment
Year
Acquired
2004
Invested
Capital
$ 26.1
Distributions
$ 46.0
Invested
Capital
$ 4.9
Distributions
$ 11.3
Operating Partnership Share
Mervyns II
Mervyns II
Fund II
Fund II
Fund II
Mervyns II
Total
investments
Albertson’s
Albertson’s add-on
investments
Shopko
Marsh
Marsh add-on
Rex
2005/2008
2006
2006/2007
2006
2006
2008
2007
3.0
20.7
2.8
1.1
0.7
2.0
2.7
1.3
63.9
0.8
1.1
—
1.0
—
0.3
4.2
0.4
0.2
0.1
0.4
0.5
0.3
11.8
0.1
0.2
—
0.2
—
$ 59.1
$114.1
$ 11.0
$ 23.9
Fund III
In May 2007, we closed Fund III with 14 institutional
with the exception that the Preferred Return is 6%. As of
December 31, 2008, $96.5 million has been invested in
investors, including a majority of the investors from Fund I
Fund III, of which the Operating Partnership contributed
and Fund II with a total of $503.0 million of committed dis-
$19.2 million.
cretionary capital. The Operating Partnership’s share of the
committed capital is $100.0 million and it is the sole man-
aging member with a 19.9% interest in Fund III. The
terms and structure of Fund III are substantially the same
as the previous Funds, including the Promote structure,
Fund III has invested in the New York Urban/Infill Redevel-
opment initiatives and other investments as further dis-
cussed in “PROPERTY ACQUISITIONS” in Item 1 of this
Form 10-K. The projects are as follows:
42
Acadia Realty Trust 2008 Annual Report
Management’s Discussion and Analysis continued
Location
Brooklyn
Westport, CT
Year
Acquired
2007
2007
Redevelopment (dollars in millions)
Purchase
Price
$ 20.0
17.0
$ 37.0
Anticipated
Additional
Costs
$ 89.0
6.0
$ 95.0
Estimated
Completion
(1)
(1)
Square
Feet Upon
Completion
240,000
30,000
270,000
Property
Sheepshead Bay
Main Street
Total
Note:
(1) To be determined.
During February 2008, Acadia, through Fund III, and in
default under the first mortgage loan, but has entered into
conjunction with an unaffiliated partner, Storage Post,
a standstill agreement with the first mortgage lender, as
acquired a portfolio of 11 self-storage properties from
well as with us. While we had been engaged in discussions
Storage Post’s existing institutional investors for approxi-
with the owner and the first mortgage lender to restructure
mately $174.0 million. The portfolio totals approximately
the debt and provide a portion of the additional capital
920,000 net rentable square feet, of which 10 properties
required to stabilize the Project, these discussions did
are operating at various stages of stabilization. The remain-
not result in a successful resolution. Accordingly, during
ing property is currently under construction. The properties
December 2008, we recorded an impairment charge equal
are located throughout New York and New Jersey. The
to 100% of our original mezzanine loan and the related
portfolio continues to be operated by Storage Post, which
accrued interest aggregating $4.4 million.
is a 5% equity partner.
During June 2008, we made a $40.0 million preferred
During September 2008, Fund III made a $10 million first
equity investment in a portfolio of 18 properties located
mortgage loan, which is collateralized by land located on
primarily in Georgetown, Washington D.C. The portfolio
Long Island, New York. The term of the loan is for a period
consists of 306,000 square feet of principally retail space.
of two years, and provides an effective annual return of
The term of this investment is for two years, with two
approximately 13%.
one-year extensions, and provides a 13% preferred return.
Preferred Equity Investment, Mezzanine Loan
Investments and Notes Receivable
At December 31, 2008, our preferred equity investment,
During July 2008, we made a $34.0 million mezzanine
loan, which is collateralized by a mixed-use retail and
residential development at 72nd Street and Broadway
mezzanine loan investments and notes receivable aggre-
on the Upper West Side of Manhattan. Upon completion,
gated $125.6 million, and were collateralized by the under-
this project is expected to include approximately 50,000
lying properties, the borrower’s ownership interest in the
square feet of retail on three levels and 196 luxury resi-
entities that own the properties and/or by the borrower’s
dential rental apartments. The term of the loan is for a
personal guarantee. Interest rates on our preferred equity
period of three years, with a one year extension, and is
investment, mezzanine loan investments and notes
expected to yield in excess of 20%.
receivable ranged from 3.41% to in excess of 20% with
maturities that range from demand notes to January 2017.
Other Investments
Acquisitions made during 2006, 2007 and 2008 are
During 2004, we provided a $3.0 million mezzanine loan
discussed in “PROPERTY ACQUISITIONS” in Item 1
to help fund a redevelopment project of the retail com-
of this Form 10-K.
plexes associated with seven public rest stops along the
toll roads in and around Chicago, Illinois (the “Project”).
This investment included a right of first offer to acquire an
ownership interest in the Project. As a result of economic
conditions, including the current disruption in the credit
markets, the owner has experienced difficulty in stabilizing
and refinancing the Project. The owner is currently in
Property Development, Redevelopment and
Expansion
Our redevelopment program focuses on selecting well-
located neighborhood and community shopping centers
and creating significant value through re-tenanting and
property redevelopment.
Acadia Realty Trust 2008 Annual Report 43
Purchase of Convertible Notes
Repurchase of the Notes is another use of our liquidity.
During November and December of 2008, we purchased
$8.0 million in principal amount of our Notes and purchased
an additional $13.5 million in principal amount during
January 2009, all at a discount of approximately 24%.
Share Repurchase
Repurchases of our Common Shares is an additional use
of liquidity as discussed in Item 5 of this Form 10-K.
Shelf Registration Statements and
Issuance of Equity
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.
As of December 31, 2008, we have remaining capacity
under this registration statement to issue up to approxi-
mately $189 million of these securities.
Financing and Debt
At December 31, 2008, mortgage and convertible notes
Sources of Liquidity
We intend on using Fund III as well as funds that we may
payable aggregated $761.7 million, net of unamortized
premium of $0.1 million, and were collateralized by 57
establish in the future, as the primary vehicles for our
properties and related tenant leases. Interest rates on
future growth. Additional sources of capital for funding
our outstanding indebtedness ranged from 1.4% to 7.2%
property acquisitions, property redevelopment and other
with maturities that ranged from January 2009 to Novem-
potential real estate related investments are expected
ber 2032. Taking into consideration $73.4 million of notional
to be obtained primarily from (i) the issuance of public
principal under variable to fixed-rate swap agreements
equity or debt instruments, (ii) cash on hand and cash flow
currently in effect, as of December 31, 2008, $513.5 million
from operating activities, (iii) additional debt financings,
of the portfolio, or 67%, was fixed at a 5.3% weighted
(iv) unrelated member capital contributions and (v) future
average interest rate and $248.2 million, or 33% was float-
sales of existing properties.
During July 2008, Home Depot terminated its lease
at a Fund II redevelopment project located in Canarsie,
Brooklyn in exchange for its payment of $24.5 million,
of which our share, net of minority interests’ share,
was $20.6 million.
ing at a 2.7% weighted average interest rate. There is
$220.7 million of debt maturing in 2009 at weighted aver-
age interest rates of 3.0%. Of this amount, $5.9 million
represents scheduled annual amortization (of which $4.8
million has been paid during February 2009) and $19.0 mil-
lion was extended for one year during January 2009. The
loans relating to $121.9 million of the 2009 maturities pro-
As of December 31, 2008, we had a total of approximately
vide for extension options, which we believe we will be
$125.4 million of additional capacity under existing debt
able to exercise. If we are unable to extend these loans
facilities, cash and cash equivalents on hand of $86.7 million,
and refinance the balance of $73.9 million, we believe
and twelve unencumbered properties available as potential
we will be able to repay this debt with existing liquidity,
collateral for future borrowings.
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.
including unfunded capital commitments from the Oppor-
tunity Fund investors. As it relates to maturities after 2009,
we may not have sufficient cash on hand to repay such
indebtedness, we may have to refinance this indebted-
ness or select other alternatives based on market condi-
tions at that time. Given the current global financial crisis,
refinancing this debt will be very difficult. See “Item 1A.
Risk Factors — The current global financial crisis may
cause us to lose tenants and may impair our ability to
borrow money to purchase properties, refinance existing
debt or obtain the necessary financing to complete our
current redevelopment.”
44
Acadia Realty Trust 2008 Annual Report
Management’s Discussion and Analysis continued
The following table sets forth certain information pertaining to the Company’s secured credit facilities:
(dollars in millions)
Borrower
Total available
credit facilities
Amount borrowed
as of 12/31/07
2008 net borrowings
(repayments)
during the year
ended 12/31/08
Amount borrowed
as of 12/31/08
Letters of credit
outstanding
as of 12/31/08
Amount available
under credit
facilities as of
12/31/08
Acadia Realty, LP
$ 72.3
$ —
$ 48.9
$ 48.9
$ 11.4
$ 12.0
Acadia Realty, LP
Fund II
Fund III
Total
30.0
70.0
125.0
$297.3
—
34.5
—
$ 34.5
—
0.2
62.3
—
34.7
62.3
—
11.1
3.5
30.0
24.2
59.2
$111.4
$ 145.9
$ 26.0
$125.4
Reference is made to Note 8 and Note 9 to our Consolidated Financial Statements, which begin on Page 59 of this Form
10-K, for a summary of the financing and refinancing transactions since December 31, 2007.
Asset Sales
Asset sales are an additional source of liquidity for us.
During April 2008, we sold a residential complex located
Contractual Obligations and
Other Commitments
At December 31, 2008, maturities on our mortgage notes
in Winston-Salem, North Carolina. During December of
ranged from January 2009 to November 2032. In addition,
2007, we sold an apartment complex in Columbia Missouri
we have non-cancelable ground leases at seven of our
and during November and December of 2006, we sold
shopping centers. We lease space for our White Plains cor-
the Soundview Marketplace, Bradford Towne Center,
porate office for a term expiring in 2015. The following
Greenridge Plaza, Luzerne Street Shopping Center and
table summarizes our debt maturities, obligations under
Pittston Plaza. During 2005 we sold the Berlin Shopping
non-cancelable operating leases and construction commit-
Center. These sales are discussed in “ASSET SALES AND
ments as of December 31, 2008:
CAPITAL/ASSET RECYCLING” in Item 1 of this Form 10-K.
(dollars in millions)
Contractual obligation
Future debt maturities
Interest obligations on debt
Operating lease obligations
Construction commitments (1)
Total
Note:
Payments due by period
Total
$ 761.7
150.8
121.5
24.6
Less than
1 year
$220.7
29.1
5.1
24.6
1 to 3
years
$ 287.8
48.3
10.2
—
3 to 5
years
$ 22.1
29.2
10.5
—
More than
5 years
$ 231.1
44.2
95.7
—
$ 1,058.6
$279.5
$ 346.3
$ 61.8
$ 371.0
(1) In conjunction with the redevelopment of our Core Portfolio and Opportunity Fund properties, we have entered into construction
commitments with general contractors. We intend to fund these requirements with existing liquidity.
Off Balance Sheet Arrangements
We have investments in four joint ventures for the pur-
pose 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 finan-
cial statements reflect our share of income from but not
the assets and liabilities of these joint ventures.
Reference is made to Note 4 to our Consolidated Financial
Statements, which begin on page 59 of this Form 10-K,
for a discussion of our unconsolidated investments. Our
pro rata share of unconsolidated debt related to those
investments is as follows:
Acadia Realty Trust 2008 Annual Report 45
(dollars in millions)
Investment
Crossroads
Brandywine
CityPoint
Sterling Heights
Total
Pro rata share
of mortgage debt
Interest rate at
December 31, 2008
$31.0
36.9
7.8
3.2
$78.9
5.37%
5.99%
2.94%
2.29%
Maturity date
December 2014
July 2016
August 2009
August 2010
In addition, we have arranged for the provision of nine
equity investment in 2008 and (iv) a decrease of $22.6 mil-
separate letters of credit in connection with certain leases
lion of return of capital distributions from our unconsolidated
and investments. As of December 31, 2008, there were
affiliates in 2008, primarily from the RCP Venture invest-
no outstanding balances under any of the letters of credit.
ment in Albertson’s. These additional uses of cash in 2008
If the letters of credit were fully drawn, the combined
were offset by the following: (i) $31.8 million of additional
maximum amount of exposure would be $26.0 million.
investments in unconsolidated affiliates in 2007, primarily
Historical Cash Flow
The following table compares the historical cash flow for
the year ended December 31, 2008 (“2008”) with the cash
flow for the year ended December 31, 2007 (“2007”).
CityPoint, (ii) an additional $8.9 million of additional collec-
tions of notes receivable in 2008 and (iii) an additional $4.0
million of proceeds from the sale of a property in 2008.
The $111.6 million increase in net cash provided by financ-
ing activities resulted from the following increases in cash
(dollars in millions)
Net cash provided by
operating activities
Net cash used in
Years Ended December 31,
for 2008: (i) an additional $59.0 million of borrowings in 2008,
2008
2007
Variance
(ii) a decrease of $48.3 million in distributions to partners
and members in 2008, and (iii) an additional $97.0 million
used for the repayment of debt in 2007. These 2008 cash
$
65.9
$105.2
$ (39.3)
increases were offset by the following: (i) $15.0 million of
additional proceeds received from the issuance of convert-
investing activities
(301.6)
(208.9)
(92.7)
ible debt in 2007, (ii) $6.0 million of additional cash used
Net cash provided by
financing activities
199.1
87.5
111.6
of cash of $64.5 million in contributions from partners and
for the purchase of convertible notes in 2008, (iii) a decrease
Total
$ (36.6)
$ (16.2)
$ (20.4)
members and from minority interests in partially-owned
A discussion of the significant changes in cash flow for
2008 versus 2007 is as follows:
affiliates in 2008, and (iv) an increase of $8.7 million in
dividends paid to Common Shareholders in 2008.
A decrease of $39.3 million in net cash provided by oper-
ating activities resulted from the following: (i) a decrease
Critical Accounting Policies
Management’s discussion and analysis of financial condi-
of $22.2 million in distributions of operating income from
tion and results of operations is based upon our Consoli-
unconsolidated affiliates, primarily from the RCP Venture
dated Financial Statements, which have been prepared in
investment in Albertson’s and (ii) a net decrease in other
accordance with U.S. GAAP. The preparation of these
assets, which was the result of the repayment of notes
Consolidated Financial Statements requires management
receivable relating to our tax deferred transaction in 2007
to make estimates and judgments that affect the reported
and additional cash used for short term financial instru-
amounts of assets, liabilities, revenues and expenses. We
ments in 2008. These net decreases in cash were offset
base our estimates on historical experience and assump-
by an increase in lease termination income of $24.0 million
tions that are believed to be reasonable under the circum-
from Home Depot at Canarsie Plaza in 2008.
An additional $92.7 million of net cash used in investing
activities resulted from the following additional uses of
cash for 2008: (i) $38.5 million of additional expenditures
for real estate acquisitions, development and tenant instal-
lations in 2008, (ii) $36.3 million of additional notes receiv-
able originated in 2008, (iii) $40.0 million for a preferred
stances, the results of which form the basis for making
judgments about carrying value of assets and liabilities
that are not readily apparent from other sources. Actual
results may differ from these estimates under different
assumptions or conditions. We believe the following criti-
cal accounting policies affect the significant judgments
and estimates used by us in the preparation of our Con-
solidated Financial Statements.
46
Acadia Realty Trust 2008 Annual Report
Management’s Discussion and Analysis continued
Valuation of Property Held for Use and Sale
On a quarterly basis, we review the carrying value of
market leases and acquired in-place leases and customer
relationships) and acquired liabilities in accordance with
both properties held for use and for sale. We perform
Statement of Financial Accounting Standards (“SFAS”)
the impairment analysis by calculating and reviewing net
No. 141, “Business Combinations” and SFAS No. 142,
operating income on a property-by-property basis, we
“Goodwill and Other Intangible Assets,” and allocate pur-
evaluate leasing projections and perform other analyses
chase price based on these assessments. We assess fair
to conclude whether an asset is impaired. We record
value based on estimated cash flow projections that utilize
impairment losses and reduce the carrying value of prop-
appropriate discount and capitalization rates and available
erties when indicators of impairment are present and the
market information. Estimates of future cash flows are
expected undiscounted cash flows related to those prop-
based on a number of factors including the historical oper-
erties are less than their carrying amounts. In cases where
ating results, known trends, and market/economic condi-
we do not expect to recover our carrying costs on proper-
tions that may affect the property.
ties 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, 2008 and 2007, no impairment losses were
recognized. Management does not believe that the value
of any properties in its portfolio was impaired as of
December 31, 2008 or 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. For the years ended December 31,
2008 and 2007, we had recorded an allowance for doubtful
accounts of $5.7 million and $3.1 million, respectively. If the
financial condition of our tenants were to deteriorate, result-
ing in an impairment of their ability to make payments, addi-
tional allowances may be required.
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. Con-
struction 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 fur-
niture, fixtures and equipment. Expenditures for mainte-
nance and repairs are charged to operations as incurred.
Upon acquisitions of real estate, we assess the fair value
of acquired assets (including land, buildings and improve-
ments, and identified intangibles such as above and below
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
breakpoint is met. In addition, leases typically provide for
the reimbursement to us of real estate taxes, insurance
and other property operating expenses. These reimburse-
ments are recognized as revenue in the period the
expenses are incurred.
We make estimates of the uncollectability of our accounts
receivable related to tenant revenues. An allowance for
doubtful accounts has been provided against certain tenant
accounts receivable that are estimated to be uncollectible.
See “Bad Debts” above. Once the amount is ultimately
deemed to be uncollectible, it is written off.
Notes Receivable and Preferred Equity Investment
Real estate notes receivable and preferred equity invest-
ments are intended to be held to maturity and are carried
at cost. Interest income from notes receivable and pre-
ferred equity investments are recognized on the effective
interest method over the expected life of the loan. Under
the effective interest method, interest or fees to be col-
lected at the origination of the loan or the payoff of the
loan is recognized over the term of the loan as an adjust-
ment to yield.
Allowances for real estate notes receivable and preferred
equity investments are established based upon manage-
ment’s quarterly review of the investments. In performing
this review, management considers the estimated net
recoverable value of the loan as well as other factors,
Acadia Realty Trust 2008 Annual Report 47
including the fair value of any collateral, the amount and
are often related to increases in the consumer price index
status of any senior debt, and the prospects for the bor-
or similar inflation indexes. In addition, many of our leases
rower. Because this determination is based upon projec-
are for terms of less than 10 years, which permits us to
tions of future economic events, which are inherently
seek to increase rents upon re-rental at market rates if
subjective, the amounts ultimately realized from the loans
current rents are below the then existing market rates. Most
may differ materially from the carrying value at the balance
of our leases require the tenants to pay their share of
sheet date. Interest income recognition is generally sus-
operating expenses, including common area maintenance,
pended for loans when, in the opinion of management,
real estate taxes, insurance and utilities, thereby reducing
a full recovery of income and principal becomes doubtful.
our exposure to increases in costs and operating
Income recognition is resumed when the suspended loan
expenses resulting from inflation.
becomes contractually current and performance is demon-
strated to be resumed.
During 2004, we provided a $3.0 million mezzanine loan
to help fund a redevelopment project of the retail com-
plexes associated with seven public rest stops along the
toll roads in and around Chicago, Illinois (the “Project”).
As a result of economic conditions, including the current
disruption in the credit markets, the owner has experi-
Recently Issued Accounting
Pronouncements
Reference is made to Notes to our Consolidated Financial
Statements, which begin on page 59 of this Form 10-K.
ITEM 7A. QUANTITATIVE AND QUALITATIVEx
DISCLOSURES ABOUT MARKET RISKx
enced difficulty in stabilizing and refinancing the Project.
Information as of December 31, 2008
The owner is currently in default under the first mortgage
Our primary market risk exposure is to changes in interest
loan, but has entered into a standstill agreement with the
rates related to our mortgage debt. See Note 8 to our
first mortgage lender, as well as with us. While we had
Consolidated Financial Statements, which begin on page
been engaged in discussions with the owner and the first
59 of this Form 10-K, for certain quantitative details related
mortgage lender to restructure the debt and provide a por-
to our mortgage debt.
tion of the additional capital required to stabilize the Project,
these discussions did not result in a successful resolution.
Accordingly, during December 2008, we recorded an
impairment charge equal to 100% of our original mezza-
nine loan and the related accrued interest aggregating
$4.4 million.
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
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,
2008, we had total mortgage and convertible debt of
$761.7 million of which $513.5 million, or 67%, was fixed-
rate, inclusive of interest rate swaps, and $248.2 million,
or 33%, was variable-rate based upon LIBOR or commer-
cial paper rates plus certain spreads. As of December 31,
2008, we were a party to seven interest rate swap trans-
actions and one interest rate cap transaction to hedge our
exposure to changes in interest rates with respect to
$73.4 million and $30.0 million of LIBOR-based variable-
rate debt, respectively.
48
Acadia Realty Trust 2008 Annual Report
Management’s Discussion and Analysis continued
The following table sets forth information as of December 31, 2008 concerning our long-term debt obligations, including
principal cash flows by scheduled maturity and weighted average interest rates of maturing amounts (dollars in millions):
Consolidated mortgage debt:
Year
2009
2010
2011
2012
2013
Thereafter
Scheduled
Amortization
$ 6.5
1.6
1.9
2.1
2.2
11.4
$25.7
Maturities
$ 214.2
58.7
225.6
9.0
8.8
219.7
$ 736.0
Mortgage debt in unconsolidated partnerships (at our pro-rata share):
Year
2009
2010
2011
2012
2013
Thereafter
Scheduled
Amortization
Maturities
$0.4
0.5
0.5
0.5
0.5
0.6
$3.0
$ 1.6
1.0
—
—
—
64.9
$67.5
Total
$ 220.7
60.3
227.5
11.1
11.0
231.1
$ 761.7
Total
$ 2.0
1.5
0.5
0.5
0.5
65.5
$70.5
Weighted Average
Interest Rate
2.7%
1.8%
3.0%
1.8 %
5.5%
5.8%
Weighted Average
Interest Rate
2.9%
2.3%
N/A
N/A
N/A
5.7%
Of our total consolidated and our pro-rata share of uncon-
Based on our outstanding debt balances as of December
solidated outstanding debt, $222.7 million and $61.8 mil-
31, 2008, the fair value of our total consolidated outstand-
lion will become due in 2009 and 2010, respectively. As
ing debt would decrease by approximately $18.1 million if
we intend on refinancing some or all of such debt at the
interest rates increase by 1%. Conversely, if interest rates
then-existing market interest rates which may be greater
decrease by 1%, the fair value of our total outstanding
than the current interest rate, our interest expense would
debt would increase by approximately $19.3 million.
increase by approximately $2.8 million annually if the inter-
est rate on the refinanced debt increased by 100 basis
points. After giving effect to minority interest, the Com-
pany’s share of this increase would be $1.0 million. Inter-
est expense on our variable debt of $248.2 million, net of
variable to fixed-rate swap agreements currently in effect,
as of December 31, 2008 would increase $2.5 million if
LIBOR increased by 100 basis points. After giving effect
to minority interest, the Company’s share of this increase
would be $0.6 million. We may seek additional variable-
As of December 31, 2008 and 2007, we had preferred
equity investments and notes receivable of $125.6 million
and $57.7 million, respectively. We determined the esti-
mated fair value of our preferred equity investment and
notes receivable as of December 31, 2008 and 2007 were
$122.3 million and $57.7 million, respectively, by discount-
ing future cash receipts utilizing a discount rate equivalent
to the rate at which similar notes receivable would be
originated under conditions then existing.
rate financing if and when pricing and other commercial
Based on our outstanding preferred equity investments
and financial terms warrant. As such, we would consider
and notes receivable balances as of December 31, 2008,
hedging against the interest rate risk related to such addi-
the fair value of our total outstanding preferred equity
tional variable-rate debt through interest rate swaps and
investments and notes receivable would decrease by
protection agreements, or other means.
approximately $1.3 million if interest rates increase by 1%.
Acadia Realty Trust 2008 Annual Report 49
Conversely, if interest rates decrease by 1%, the fair
value of our total outstanding preferred equity invest-
ments and notes receivable would increase by approxi-
mately $1.3 million.
Changes in Market Risk Exposures from 2007
to 2008
Our interest rate risk exposure from December 31, 2007
to December 31, 2008 has increased, as we had $115.6
million in variable-rate debt (or 22% of our total debt) at
Summarized Information as of December 31, 2007
December 31, 2007, as compared to $248.2 million (or
As of December 31, 2007, we had total mortgage debt of
33% of our total debt) in variable-rate debt at December
$517.0 million of which $401.4 million, or 78%, was fixed-
31, 2008. In addition, the amount of our total debt increased
rate, inclusive of interest rate swaps, and $115.6 million,
from $517.0 million at December 31, 2008 to $761.7 mil-
or 22%, was variable-rate based upon LIBOR plus certain
lion at December 31, 2008. This increased amount of
spreads. As of December 31, 2007, we were a party to
debt could expose us to greater fluctuations in the fair
four interest rate swap transactions and one interest rate
value of our debt.
cap transaction to hedge our exposure to changes in inter-
est rates with respect to $34.3 million and $30.0 million of
LIBOR-based variable-rate debt, respectively.
Interest expense on our variable debt of $115.6 million as
of December 31, 2007 would have increased $1.2 million
if LIBOR increased by 100 basis points. Based on our out-
standing debt balances as of December 31, 2007, the fair
value of our total outstanding debt would have decreased
by approximately $19.0 million if interest rates increased
by 1%. Conversely, if interest rates decreased by 1%,
the fair value of our total outstanding debt would have
increased by approximately $20.4 million.
ITEM 8. FINANCIAL STATEMENTS ANDx
SUPPLEMENTARY DATAx
The financial statements beginning on page 59 are incor-
porated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTSx
WITH ACCOUNTANTS ON ACCOUNTINGx
AND FINANCIAL DISCLOSUREx
None.
50
Acadia Realty Trust 2008 Annual Report
ITEM 9A. CONTROLS AND PROCEDURESx
the criteria set forth in the framework in Internal Control–
Integrated Framework issued by the Committee of Spon-
(i) Disclosure Controls and Procedures
soring Organizations of the Treadway Commission (the
We conducted an evaluation, under the supervision and
“COSO criteria”). Based on our evaluation under the COSO
with the participation of management including our Chief
criteria, our management concluded that our internal con-
Executive Officer and Chief Financial Officer, of the effec-
trol over financial reporting was effective as of December
tiveness of our disclosure controls and procedures. Based
31, 2008 to provide reasonable assurance regarding the
on that evaluation, the Chief Executive Officer and Chief
reliability of financial reporting and the preparation of finan-
Financial Officer concluded that our disclosure controls
cial statements for external reporting purposes in accor-
and procedures were effective as of December 31, 2008
dance with U.S. generally accepted accounting principles.
to provide reasonable assurance that information required
In conducting our evaluation of the effectiveness of our
to be disclosed by us in reports that we file or submit
internal control, we excluded the 2008 acquisition of Stor-
under the Exchange Act is recorded, processed, summa-
age Post, a portfolio of 11 self-storage properties. The con-
rized, and reported within the time periods specified in
tribution from this acquisition represented approximately
SEC rules and forms, and is accumulated and communi-
4% and 15% of total revenues and total assets, respec-
cated to management, including our Chief Executive Offi-
tively, as of and for the year ended December 31, 2008.
cer and Chief Financial Officer, as appropriate to allow
Reference is made to Note 2 to our Consolidated Financial
timely decisions regarding required disclosure.
Statements, which begin on page 59 of this Form 10-K for
(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 supervi-
sion and with the participation of our management, includ-
ing our principal executive officer and principal financial
officer, we conducted an evaluation of the effectiveness of
our internal control over financial reporting as of December
31, 2008 as required by the Securities Exchange Act of
1934 Rule 13a-15(c). In making this assessment, we used
further discussion of our acquisition.
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, 2008, which appears in paragraph (b) of
this Item 9A.
Acadia Realty Trust
White Plains, New York
February 27, 2009
Acadia Realty Trust 2008 Annual Report 51
(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, 2008,
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 con-
trol over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Report-
ing. 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.
As indicated in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting, management’s
assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal
controls of Storage Post, which was acquired on February 29, 2008, and which is included in the consolidated balance sheets
of Acadia Realty Trust and Subsidiaries as of December 31, 2008 and the related consolidated statements of income,
shareholders’ equity, and cash flows for the year then ended. Storage Post constituted 4% and 15% of total revenues and
total assets, respectively, as of and for the year ended December 31, 2008. Management did not assess the effectiveness
of internal control over financial reporting of Storage Post because of the timing of the acquisition which was completed on
February 29, 2008. Our audit of internal control over financial reporting of Acadia Realty Trust and subsidiaries also did not
include an evaluation of the internal control over financial reporting of Storage Post.
In our opinion, Acadia Realty Trust and subsidiaries maintained in all material respects effective internal control over finan-
cial reporting as of December 31, 2008, 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, 2008 and 2007 and the related
consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended
December 31, 2008 and our report dated February 27, 2009 expressed an unqualified opinion thereon.
/s/ BDO Seidman, LLP
New York, New York
February 27, 2009
52
Acadia Realty Trust 2008 Annual Report
ITEM 9B. OTHER INFORMATIONx
None
(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, 2008 that has materially affected, or is reasonably
likely to materially affect, our internal control over finan-
cial reporting.
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 2009 annual meeting of stockholders (our
“2009 Proxy Statement”) that we intend to file with the SEC no later than April 30, 2009.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEx
The information under the following headings in the 2009 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 2009 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 2009 Proxy Statement is incorporated herein by reference.
The information under Item 5 of this Form 10-K 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 2009 Proxy Statement is incorporated herein by reference:
n “CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS”
n “PROPOSAL 1 — ELECTION OF TRUSTEES — Trustee Independence”
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICESx
The information under the heading “AUDIT COMMITTEE INFORMATION” in the 2009 Proxy Statement is incorporated
herein by reference.
Acadia Realty Trust 2008 Annual Report 53
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULESx
1. Financial Statements: See “Index to Financial Statements” at page 59 below.
2. Financial Statement Schedule: See “Schedule III — Real Estate and Accumulated Depreciation”
at page 99 below.
3. Exhibits: The index of exhibits below is incorporated herein by reference.
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 27, 2009
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/ 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
Date
February 27, 2009
February 27, 2009
February 27, 2009
February 27, 2009
February 27, 2009
February 27, 2009
February 27, 2009
February 27, 2009
February 27, 2009
54
Acadia Realty Trust 2008 Annual Report
EXHIBIT INDEX
The following is an index to all exhibits filed with the Annual Report on Form 10-K other than those incorporated by
reference herein:
Exhibit No. Description
3.1
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
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.33
10.34
10.44
10.45
10.46
10.47
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)
Form of Amended and Restated Severance Agreement, dated June 12, 2008, that was entered into with each of Joel
Braun, Executive Vice President and Chief Investment Officer; Michael Nelsen, Senior Vice President and Chief Financial
Officer; Robert Masters, Senior Vice President, General Counsel, Chief Compliance Officer and Secretary; and Joseph
Hogan, Senior Vice President and Director of Construction. (Incorporated by reference to the Exhibit 10.1 to the Company’s
Form 8-K filed with the SEC on June 12, 2008) (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)
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 Finan-
cial 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)
Acadia Realty Trust 2008 Annual Report 55
Exhibit No. Description
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
10.71
10.72
10.73
Mortgage, Assignment of Leases and Rents and Security Agreement between Acadia Crescent Plaza, LLC and Greenwich
Capital Financial Products, Inc. dated August 31, 2005 (22)
Mortgage, Assignment of Leases and Rents and Security Agreement between Pacesetter/Ramapo Associates and
Greenwich Capital Financial Products, Inc. dated October 17, 2005 (22)
Loan Agreement between RD Elmwood Associates, L.P. and Bear Stearns Commercial Finance Mortgage, Inc. dated
December 9, 2005 (22)
Mortgage and Security Agreement between RD Elmwood Associates, L.P. and Bear Stearns Commercial Finance
Mortgage, Inc. dated December 9, 2005 (22)
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, “Borrowers”),
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)
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)
56
Acadia Realty Trust 2008 Annual Report
Exhibit No. Description
10.74
10.75
10.76
10.77
10.78
10.79
10.80
10.81
10.82
21
23.1
31.1
31.2
32.1
32.2
99.1
99.2
Notes:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
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)
Real Estate Purchase and Sale Agreement between Suffern Self Storage, L.L.C., Jersey City Self Storage, L.L.C., Linden
Self Storage, L.L.C., Webster Self Storage, L.L.C., Bronx Self Storage, L.L.C., American Storage Properties North LLC, and
The Storage Company LLC (collectively, as Seller) and Acadia Storage Post LLC, a Delaware limited liability company, as
Buyer, for ten Properties and Storage Facilities located thereon (31)
Real Estate Purchase and Sale Agreement between American Storage Properties North LLC , as Seller and Acadia Storage
Post Metropolitan Avenue LLC, as Buyer for 4805 Metropolitan Avenue, Unit 2, Maspeth, Queens, New York (31)
First Amendment to Real Estate Purchase and Sale Agreement between Suffern Self Storage, L.L.C., Jersey City Self
Storage, L.L.C., Linden Self Storage, L.L.C., Webster Self Storage, L.L.C., Bronx Self Storage, L.L.C., American Storage
Properties North LLC, and The Storage Company LLC (collectively, “Seller”) and Acadia Storage Post LLC (“Buyer”) (31)
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 Partner-
ship (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)
List of Subsidiaries of Acadia Realty Trust (32)
Consent of Registered Public Accounting Firm to incorporation by reference its reports into Forms S-3 and Forms S-8 (32)
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 (32)
Certification of Chief Financial Officer pursuant to rule 13a–14(a)/15d-14(a) of the Securities Exchange Act of 1934, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (32)
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (32)
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 (32)
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 Form 10-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 Form 10-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
Acadia Realty Trust 2008 Annual Report 57
(12)
(13)
(14)
(15)
(16)
(17)
(18)
(19)
(20)
(21)
(22)
(23)
(24)
(25)
(26)
(27)
(28)
(29)
(30)
(31)
(32)
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
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
Incorporated by reference to the copy thereof filed as an Exhibit to the Company’s Quarterly Report on Form 10-K filed for
the year ended December 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 March 31, 2008
Filed herewith
58
Acadia Realty Trust 2008 Annual Report
ACADIA REALTY TRUST AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Consolidated Balance Sheets as of December 31, 2008 and 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Consolidated Statements of Income for the years ended December 31, 2008, 2007 and 2006. . . . . . . . . . . . . . . . . . . 62
Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2008, 2007 and 2006 . . . . . . . . 63
Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006 . . . . . . . . . . . . . . . 64
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Schedule III – Real Estate and Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Acadia Realty Trust 2008 Annual Report 59
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, 2008 and 2007 and the related consolidated statements of income, shareholders’ equity, and cash
flows for each of the three years in the period ended December 31, 2008. In connection with our audits of the financial
statements we have also audited the accompanying financial statement schedule listed on page 59. 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, 2008, and 2007 and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 2008, 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, 2008, 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 27, 2009 expressed an unqualified opinion thereon.
BDO Seidman, LLP
New York, New York
February 27, 2009
60
Acadia Realty Trust 2008 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 and preferred equity investment
Deferred charges, net
Acquired lease intangibles
Prepaid expenses and other assets, net
Assets of discontinued operations
December 31,
2008
2007
$ 294,132
742,318
70,423
1,106,873
174,809
932,064
86,691
6,794
54,978
12,161
125,587
22,072
19,476
31,733
—
$ 232,121
523,809
77,764
833,694
150,494
683,200
123,343
6,637
44,654
13,449
57,662
21,825
16,103
16,544
15,595
Total assets
$ 1,291,556
$ 999,012
Liabilities and Shareholders’ Equity
Mortgage notes payable
Convertible notes payable
Acquired lease and other intangibles, net
Accounts payable and accrued expenses
Dividends and distributions payable
Distributions in excess of income from 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 32,357,530 and 32,184,462 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.
$ 654,868
107,000
6,506
22,236
25,514
20,633
18,995
—
855,752
5,667
208,839
214,506
$ 402,903
115,000
5,651
15,205
14,420
20,007
13,750
229
587,165
4,595
166,516
171,111
32
212,007
(4,508)
13,767
221,298
32
227,890
(953)
13,767
240,736
$ 1,291,556
$ 999,012
Acadia Realty Trust 2008 Annual Report 61
Consolidated Statements of Income
(dollars in thousands, except per share amounts)
Revenues
Minimum rents
Percentage rents
Expense reimbursements
Lease termination income
Other property income
Management fee income
Interest income
Other income
Total revenues
Operating Expenses
Property operating
Real estate taxes
General and administrative
Depreciation and amortization
Impairment of notes receivable
Total operating expenses
Operating Income
Gain on sale of land
Equity in earnings of unconsolidated affiliates
Interest and other finance expense
Gain on debt extinguishment
Minority interest
Income from continuing operations before income taxes
Income tax provision (benefit)
Income from continuing operations
Discontinued operations
Operating income from discontinued operations
Gain 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,
2008
2007
2006
$ 80,166
598
16,855
23,961
1,191
3,434
14,534
—
140,739
24,945
12,151
24,545
34,964
4,392
100,997
39,742
763
19,906
(26,890)
1,958
(12,217)
23,262
3,362
19,900
618
7,182
(152)
7,648
—
—
—
—
$ 68,680
625
13,318
—
855
4,064
10,315
165
98,022
14,080
9,470
23,058
26,892
—
73,500
24,522
—
6,619
(22,775)
—
9,082
17,448
297
17,151
1,301
5,271
(130)
6,442
30,200
(24,167)
(2,356)
3,677
$ 60,255
1,192
14,538
—
663
5,625
8,311
1,648
92,232
11,126
9,902
19,782
24,729
—
65,539
26,693
—
2,559
(20,134)
—
5,242
14,360
(508)
14,868
3,648
20,974
(477)
24,145
—
—
—
—
$ 27,548
$ 27,270
$ 39,013
$
$
$
0.59
0.22
—
0.81
0.58
0.22
—
$
0.80
$
$
$
$
0.51
0.19
0.11
0.81
0.50
0.19
0.11
0.80
0.44
0.71
—
1.15
0.43
0.70
—
$
$
$
1.13
The accompanying notes are an integral part of these consolidated financial statements.
62
Acadia Realty Trust 2008 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 January 1, 2006
31,543
$31
$223,199
$
(12)
$
(846)
$222,372
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
92
122
—
8
5
Redemption of 11,105 restricted Common OP Units —
Issuance of Common Shares to Trustees
Unrealized loss on valuation of swap
agreements
Amortization of derivative instrument
Net income
Total comprehensive income
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)
—
—
—
—
Balance at December 31, 2007
32,184
Employee Restricted Share awards
Dividends declared ($1.39 per Common Share)
Employee exercise of 110,245 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
Realized loss on settlement of swap agreements
Net income
Total comprehensive income
137
—
110
7
2
(83)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
31
—
1
—
—
—
—
—
—
—
—
—
32
—
—
—
—
—
—
—
—
—
—
696
3,530
—
43
112
(101)
76
—
—
—
—
—
—
—
—
—
—
—
(662)
440
—
—
—
—
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)
—
—
—
—
227,890
2,917
(17,905)
841
180
81
(1,997)
—
—
—
—
—
—
—
(921)
202
—
—
—
—
4,000
3,152
(27,270)
(33,695)
—
—
—
—
—
—
27,270
—
174
183
346
(1,094)
(921)
202
27,270
26,551
(953)
13,767
240,736
—
—
—
—
—
—
—
2,917
(27,548)
(45,453)
—
—
—
—
—
—
27,548
—
841
180
81
(1,997)
(2,820)
(735)
27,548
23,993
—
—
—
—
(2,820)
(735)
—
—
Balance at December 31, 2008
32,357
$32
$212,007
$ (4,508)
$ 13,767
$221,298
The accompanying notes are an integral part of these consolidated financial statements.
Acadia Realty Trust 2008 Annual Report 63
Consolidated Statements of Cash Flows
(dollars in thousands)
Cash Flows from Operating Activities
Net income
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization
Gain on sale of property
Gain on debt extinguishment
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
Impairment of notes receivable
Provision for bad debt
Changes in assets and liabilities:
Funding of escrows, net
Rents receivable
Prepaid expenses and other assets, net
Accounts payable and accrued expenses
Other liabilities
Net cash provided by operating activities
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 on notes receivable and preferred equity investment
Proceeds from sale of property
Net cash used in investing activities
Years Ended December 31,
2008
2007
2006
$ 27,548
$ 27,270
$ 39,013
34,964
(7,945)
(1,958)
12,369
6,856
(782)
3,434
(19,906)
14,420
—
4,392
3,593
(157)
(2,305)
(18,232)
8,368
1,228
65,887
(244,403)
(6,068)
(7,918)
4,052
19,922
(90,847)
23,627
(301,635)
28,428
(5,271)
—
15,215
722
(111)
3,285
(36,819)
36,666
202
—
881
667
(2,061)
23,926
4,962
7,203
27,178
(20,974)
—
(4,765)
1,080
(144)
3,531
(2,559)
3,277
440
—
1,395
(1,389)
(1,135)
967
(5,200)
(1,088)
105,165
39,627
(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
(25,162)
38,477
(58,890)
The accompanying notes are an integral part of these consolidated financial statements.
64
Acadia Realty Trust 2008 Annual Report
Consolidated Statements of Cash Flows continued
(dollars in thousands)
Cash Flows from Financing Activities
Principal payments on mortgage notes
Proceeds received on mortgage notes
Repurchase of convertible notes
Proceeds received on convertible notes
Payment of deferred financing and other costs
Capital contributions from partners and members and
from minority interests in partially-owned affiliates
Distributions to partners and members and to
minority interests in partially-owned affiliates
Dividends paid to Common Shareholders
Distributions to minority interests in Operating Partnership
Distributions on preferred Operating Partnership Units to
minority interests
Repurchase and cancellation of shares
Redemption of Operating Partnership Units
Common Shares issued under Employee Share Purchase Plan
Exercise of options to purchase Common Shares
Net cash provided by financing activities
(Decrease) increase in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Supplemental disclosure of cash flow information:
Cash paid during the period for interest, including capitalized
Years Ended December 31,
2008
2007
2006
(68,412)
281,192
(6,042)
—
(1,763)
(165,451)
222,218
—
15,000
(4,128)
(168,082)
159,617
—
100,000
(7,026)
46,014
110,542
44,781
(15,347)
(34,710)
(809)
(27)
(2,102)
—
261
841
199,096
(36,652)
123,343
$ 86,691
(63,662)
(26,039)
(527)
(86)
(1,094)
—
529
174
(36,352)
(23,823)
(487)
(254)
—
(246)
188
43
87,476
68,359
(16,228)
139,571
$ 123,343
49,096
90,475
$ 139,571
interest of $6,779, $3,031, and $454, respectively
$ 33,778
$ 26,705
$ 23,218
Cash paid for income taxes
$
6,633
Acquisition of real estate through assumption of debt
$ 39,967
$
$
348
$
1,039
—
$ 22,583
Issuance of notes receivable in connection with
sale of real estate
.
$
—
$ (18,000)
$
—
Acadia Realty Trust 2008 Annual Report 65
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,
2008
2007
2006
$ —
—
—
—
—
$ —
$ —
—
—
$ —
$ —
—
—
—
—
$124,962
(11,413)
(66,984)
(36,504)
(10,428)
$ —
$
(367)
$ —
—
—
$ —
$ (9,260)
5,901
3,469
$
110
66
Acadia Realty Trust 2008 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 (“Pro-
mote”). 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.
As of December 31, 2008, the Company operated 85
properties, which it owns or has an ownership interest in,
principally located in the Northeast, Mid-Atlantic and Mid-
west 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, 2008, 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 limited
partners represent entities or individuals who contributed
their interests in certain properties or entities to the Oper-
ating Partnership in exchange for common or preferred
units of limited partnership interest (“Common or Pre-
ferred OP Units”). Limited partners holding Common OP
Units are generally entitled to exchange their units on a
Partnership) and 20% to the Operating Partnership as
a Promote. As all contributed capital and accumulated
preferred return has been distributed to investors, the
Operating 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 addi-
tional institutional investors with a total of $300.0 million
of committed discretionary capital. The Operating Partner-
ship’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, 2008, the Operating Partnership
had contributed $30.8 million to Fund II and $7.6 million to
Mervyns II.
one-for-one basis for common shares of beneficial interest
During May of 2007, the Company formed Acadia Strate-
of the Trust (“Common Shares”). This structure is referred
gic Opportunity Fund III LLC (“Fund III”) with 14 institu-
to as an umbrella partnership REIT or “UPREIT.”
tional investors, including a majority of the investors from
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
company, 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, 2008,
the Operating Partnership had contributed $16.5 million to
Fund I and $2.7 million to Mervyns I.
The Operating Partnership is the general partner of Fund I
and sole managing member of Mervyns I, with a 22.2%
Fund I and Fund II with a total of $503.0 million of com-
mitted discretionary capital. 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 are 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, 2008, the Operating Partnership
had contributed $19.2 million to Fund III.
Principles of Consolidation
The consolidated financial statements include the consoli-
dated accounts of the Company and its controlling invest-
ments in partnerships and limited liability companies in
Acadia Realty Trust 2008 Annual Report 67
which the Company is presumed to have control in accor-
Principles Board (“APB”) 18 “Equity Method of Account-
dance with Emerging Issues Task Force (“EITF”) Issue No.
ing for Investments in Common Stock.”
04-5. The ownership interests of other investors in these
entities are recorded as minority interests. All significant
intercompany balances and transactions have been elimi-
nated in consolidation. Investments in entities for which
the Company has the ability to exercise significant influ-
ence over, but does not have financial or operating control,
are accounted for using the equity method of accounting.
Accordingly, the Company’s share of the earnings (or loss)
of these entities are included in consolidated net income.
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 bene-
ficiary. The primary beneficiary of a variable interest entity
is determined to be the party that bears a majority of the
entity’s expected losses, receives a majority of its expected
returns, or both. Management has evaluated the applicabil-
ity of FIN 46-R to its investments in certain joint ventures
and determined that these joint ventures do not meet the
requirements of a variable interest entity or the Company
is not the primary beneficiary and, therefore, consolidation
of these ventures is not required. Accordingly, these
investments are accounted for using the equity method.
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
The Company periodically reviews its investment in
unconsolidated joint ventures for other than temporary
declines in market value. Any decline that is not expected
to be recovered in the next 12 months is considered
other than temporary and an impairment charge is recorded
as a reduction in the carrying value of the investment. No
impairment charges related to the Company’s investment
in unconsolidated joint ventures were recognized for the
years ended December 31, 2008, 2007 and 2006.
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
and estimates relate to the valuation of real estate, depre-
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
these estimates.
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
not exercise control over significant asset decisions such
capitalized until construction is substantially complete.
as buying, selling or financing nor is it the primary benefici-
Construction in progress includes costs for significant
ary under FIN 46R, as discussed above. Under the equity
property expansion and redevelopment. Depreciation is
method, the Company increases its investment for its pro-
computed on the straight-line basis over estimated useful
portionate share of net income and contributions to the
joint venture and decreases its investment balance by
lives of 30 to 40 years for buildings, the shorter of the
useful life or lease term for tenant improvements and five
recording its proportionate share of net loss and distribu-
years for furniture, fixtures and equipment. Expenditures
tions. The Company recognizes income for distributions in
for maintenance and repairs are charged to operations
excess of its investment where there is no recourse to
as incurred.
the Company. For investments in which there is recourse
to the Company, distributions in excess of the investment
are recorded as a liability. Although the Company accounts
for its investment in Albertson’s (Note 4), under the equity
method of accounting, the Company adopted the policy of
not recording its equity in earnings or losses of this uncon-
solidated affiliate until it receives the audited financial
statements of Albertson’s to support the equity earnings
or losses in accordance with paragraph 19 of Accounting
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
in accordance with Statement of Financial Accounting
Standards (“SFAS”) No. 141, “Business Combinations”
and SFAS No. 142, “Goodwill and Other Intangible Assets,”
and allocates purchase price based on these assessments.
68
Acadia Realty Trust 2008 Annual Report
Notes to Consolidated Financial Statements continued
The Company assesses fair value based on estimated
executed with no contingencies and the prospective buyer
cash flow projections that utilize appropriate discount
has funds at risk to ensure performance.
and capitalization 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
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.
Company records impairment losses and reduces the car-
rying value of properties when indicators of impairment
Management Contracts
Income from management contracts is recognized on an
are present and the expected undiscounted cash flows
accrual basis as such fees are earned. The initial acquisi-
related to those properties are less than their carrying
tion cost of the management contracts is being amortized
amounts. In cases where the Company does not expect
over the estimated lives of the contracts acquired.
to recover its carrying costs on properties held for use,
the Company reduces its carrying cost to fair value, and
for properties held for sale, the Company reduces its car-
rying value to the fair value less costs to sell. During the
years ended December 31, 2008, 2007 and 2006, no
impairment losses were recognized. Management does
not believe that the values of its properties within the
portfolio are impaired as of December 31, 2008.
Revenue Recognition and Accounts Receivable
Leases with tenants are accounted for as operating
leases. Minimum rents are recognized on a straight-line
basis over the term of the respective leases, beginning
when the tenant takes possession of the space. As of
December 31, 2008 and 2007, included in rents receivable,
net on the accompanying consolidated balance sheet,
unbilled rents receivable relating to straight-lining of rents
Sale of Real Estate
The Company recognizes property sales in accordance
were $11.1 million and $8.4 million, respectively. Certain
of these leases also provide for percentage rents based
with SFAS No. 66, “Accounting for Sales of Real Estate.”
upon the level of sales achieved by the tenant. Percentage
The Company generally records the sales of operating
rent is recognized in the period when the tenants’ sales
properties and outparcels using the full accrual method
breakpoint is met. In addition, leases typically provide for
at closing when the earnings process is deemed to be
the reimbursement to the Company of real estate taxes,
complete. Sales not qualifying for full recognition at the
insurance and other property operating expenses. These
time of sale are accounted for under other appropriate
reimbursements are recognized as revenue in the period
deferral methods.
the expenses are incurred.
Real Estate Held-for-Sale
The Company evaluates the held-for-sale classification
of its real estate each quarter. Assets that are classified
as held-for-sale are recorded at the lower of their carrying
amount or fair value less cost to sell. Assets are generally
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.
On occasion, the Company will receive unsolicited offers
from third parties to buy individual Company properties.
Under these circumstances, the Company will classify
the properties as held-for-sale when a sales contract is
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 esti-
mated to be uncollectible. Once the amount is ultimately
deemed to be uncollectible, it is written off. Rents receiv-
able at December 31, 2008 and 2007 are shown net of an
allowance for doubtful accounts of $5.7 million and $3.1
million, respectively.
Notes Receivable and Preferred Equity
Investments
Real estate notes receivable and preferred equity invest-
ments are intended to be held to maturity and are carried
at cost. Interest income from notes receivable and preferred
Acadia Realty Trust 2008 Annual Report 69
equity investments are recognized on the effective inter-
est method over the expected life of the loan. Under the
Restricted Cash and Cash in Escrow
Restricted cash and cash in escrow consist principally
effective interest method, interest or fees to be collected
of cash held for real estate taxes, property maintenance,
at the origination of the loan or the payoff of the loan are
insurance, minimum occupancy and property operating
recognized over the term of the loan as an adjustment
income requirements at specific properties as required by
to yield.
certain loan agreements.
Allowances for real estate notes receivable and preferred
equity investments are established based upon manage-
ment’s quarterly review of the investments. In performing
this review, management considers the estimated net
recoverable value of the loan as well as other factors,
including the fair value of any collateral, the amount and
status of any senior debt, and the prospects for the bor-
rower. Because this determination is based upon projec-
tions of future economic events, which are inherently
subjective, the amounts ultimately realized from the loans
may differ materially from the carrying value at the balance
sheet date. Interest income recognition is generally sus-
pended for loans when, in the opinion of management, a
full recovery of income and principal becomes doubtful.
Income recognition is resumed when the suspended loan
becomes contractually current and performance is demon-
strated to be resumed.
During 2004, the Company provided a $3.0 million mezza-
nine loan to help fund a redevelopment project of the
retail complexes associated with seven public rest stops
along the toll roads in and around Chicago, Illinois (the
“Project”). As a result of economic conditions, including
the current disruption in the credit markets, the owner
has experienced difficulty in stabilizing and refinancing the
Project. The owner is currently in default under the first
mortgage loan, but has entered into a standstill agreement
with the first mortgage lender, as well as with us. While
the Company had been engaged in discussions with the
owner and the first mortgage lender to restructure the debt
and provide a portion of the additional capital required to
stabilize the Project, these discussions did not result in a
successful resolution. Accordingly, in December 2008, the
Company recorded an impairment charge equal to 100%
of its original mezzanine loan and the related accrued
interest aggregating $4.4 million. Management believes
that the balance of notes receivable are collectable as of
December 31, 2008.
Cash and Cash Equivalents
The Company considers all highly liquid investments
with an original maturity of three months or less when
purchased to be cash equivalents.
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 income, asset
and organizational requirements as defined in the Code.
Accordingly, the Company is generally not subject to fed-
eral 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”) is fully subject to Federal, state
and local income taxes.
TRS income taxes are accounted for under the liability
method as required by SFAS No. 109, “Accounting for
Income Taxes.” Under the 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.
In accordance with FASB financial Interpretation No. 48,
“Accounting for Uncertainty in Income Taxes — an inter-
pretation of SFAS No. 109” the Company believes that it
has appropriate support 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 subject to review by the Internal
Revenue Service. The Company’s policy relating to inter-
est 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
70
Acadia Realty Trust 2008 Annual Report
Notes to Consolidated Financial Statements continued
expense in the Company’s consolidated financial state-
retrospectively to all periods presented. Early adoption
ments over their vesting period based on the fair value
of FSP 14-1 is not permitted. FSP 14-1 will change the
at the date the stock option was granted.
accounting treatment of the Company’s $107.0 million
Recent Accounting Pronouncements
During September of 2006, the Financial Accounting
Statements Board (“FASB”) issued Statement of Financial
Accounting Standards (“SFAS”) No. 157 “Fair Value Mea-
surements.” This SFAS defines fair value, establishes a
framework for measuring fair value in GAAP, and expands
disclosures about fair value measurements. This state-
ment applies to accounting pronouncements that require
or permit fair value measurements, except for share-based
payment transactions under SFAS No. 123R. SFAS 157 is
effective for financial statements issued for fiscal years
beginning after November 15, 2007, except for non-finan-
cial assets and liabilities, for which this statement will be
effective for fiscal years beginning after November 15, 2008.
SFAS No. 157 does not require any new fair value meas-
urements or remeasurements of previously computed fair
values. On January 1, 2008, the Company adopted SFAS
No. 157 and it did not have a material impact to the Com-
pany’s financial statements or results of operations.
During February of 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
value, even if fair value measurement is not required
under GAAP. SFAS 159 is effective for fiscal years begin-
ning after November 15, 2007. The Company adopted
SFAS No. 159 on January 1, 2008 with no impact to the
Company’s financial statements or results of operations.
During May of 2008, the FASB issued a FASB Staff Position
14-1 “Accounting for Convertible Debt Instruments That
May Be Settled in Cash upon Conversion (Including Partial
Cash Settlement)” (“FSP 14-1”). FSP 14-1 requires the
proceeds from the issuance of convertible debt be allocated
3.75% Convertible Notes Payable which were issued
during December 2006 and January 2007. The Company
estimates that the adoption of FSP 14-1 beginning in fiscal
year 2009 will result in an increase in non-cash interest
expense of approximately $2.0 million and will reduce
annual diluted earnings per share by approximately $0.06
per share. Additionally, the Company estimates that the
adoption of FSP 14-1 will decrease the Company’s Decem-
ber 31, 2008 debt balance by approximately $6.6 million,
with a corresponding increase to shareholders’ equity.
The Company estimates that the retrospective adjustment
of the adoption of FSP 14-1 will increase non-cash interest
expense by approximately $2.1 million and $2.0 million for
the fiscal years ended 2008 and 2007, respectively, and
reduce annual diluted earnings per share by approximately
$0.06 per share for each year.
During December of 2007, the FASB issued SFAS No.
160, “Noncontrolling Interests in Consolidated Financial
Statements,” which, among other things, provides guid-
ance and establishes amended accounting and reporting
standards for a parent company’s noncontrolling or minor-
ity interest in a subsidiary. The adoption of SFAS No. 160,
which is effective for fiscal years beginning on or after
December 15, 2008, will result in an increase to the Com-
pany’s shareholders’ equity.
During December of 2007, the FASB issued SFAS No. 141R,
“Business Combinations,” which replaces SFAS No. 141
Business Combinations. SFAS No. 141R and, among other
things, establishes principles and requirements for how
an acquirer entity recognizes and measures in its financial
statements the identifiable assets acquired (including
intangibles), the liabilities assumed and any noncontrolling
interest in the acquired entity. The Company is currently
evaluating the impact of adopting SFAS No. 141R, which
is effective for fiscal years beginning on or after December
between a debt component and an equity component.
The debt component will be measured based on the fair
15, 2008.
value of similar debt without an equity conversion feature,
and the equity component will be determined as the resid-
ual of the fair value of the debt deducted from the original
proceeds received. The resulting discount on the debt
component will be amortized over the period the convert-
ible debt is expected to be outstanding as additional non-
cash interest expense. FSP 14-1 is effective for fiscal
years beginning after December 15, 2008, and is applied
During March of 2008, the FASB issued SFAS No. 161
“Disclosures about Derivative Instruments and Hedging
Activities – an amendment of SFAS No. 133.” SFAS No.
161 amends SFAS No. 133 to provide additional informa-
tion about how derivative and hedging activities affect
an entity’s financial position, financial performance, and
cash flows. It requires enhanced disclosures about an
entity’s derivatives and hedging activities. SFAS No. 161 is
Acadia Realty Trust 2008 Annual Report 71
effective for financial statements issued for fiscal years
Accumulated other comprehensive loss
beginning after November 15, 2008. The adoption of SFAS
No. 161 is not expected to have an impact on the Com-
pany’s financial condition or results of operations.
During June of 2008, the FASB ratified EITF Issue 07-5
“Determining Whether an Instrument (or Embedded
Feature) Is Indexed to an Entity’s Own Stock” (“EITF
07-5”). Paragraph 11(a) of SFAS 133 specifies that a con-
tract that would otherwise meet the definition of a deriva-
(dollars in thousands)
Beginning balance
Unrealized loss on valuation
of derivative instruments
and amortization of derivative
tive but is both (a) indexed to the Company’s own stock
Realized loss on settlement of
Years Ended
December 31,
2008
2007
$ (953)
$ (234)
(2,820)
(719)
and (b) classified in stockholders’ equity in the statement
of financial position would not be considered a derivative
financial instrument. EITF 07-5 provides a new two-step
model to be applied in determining whether a financial
instrument or an embedded feature is indexed to an
issuer’s own stock and thus able to qualify for the SFAF
133 paragraph 11(a) scope exception. EITF 07-5 is effec-
tive on January 1, 2009. The Company is currently evaluat-
ing the impact of the adoption of this standard on its
consolidated financial statements.
Comprehensive Income
The following table sets forth comprehensive income for
the years ended December 31, 2008, 2007 and 2006:
Years Ended December 31,
derivative instruments
(735)
—
Ending balance
$(4,508)
$ (953)
Note 2i
Acquisition and Disposition of
Properties and Discontinued
Operations
A. Acquisition and Disposition of Properties
Although Fund III has been the primary vehicle for the
Company’s acquisitions since its formation in 2007, the
Company has also made certain acquisitions through
the Operating Partnership, primarily for the deferral of
2008
2007
2006
income taxes.
(dollars in thousands)
Net income
$27,548
$27,270
$39,013
Other comprehensive loss (3,555)
(719)
(222)
Acquisitions
On February 29, 2008, the Company acquired a portfolio
of 11 self-storage properties located throughout New York
Comprehensive income
$23,993
$26,551
$38,791
and New Jersey for approximately $174.0 million. The
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
portfolio totals approximately 920,000 net rentable square
feet. Ten properties are operating and one is currently
under construction.
interest expense, of derivative instruments.
On April 22, 2008, the Company acquired a 20,000 square
The following table sets forth the change in accumulated
other comprehensive loss for the years ended December
31, 2008 and 2007:
foot single tenant retail property located in Manhattan,
New York for $9.7 million.
On March 20, 2007, the Company purchased a retail com-
mercial condominium at 200 West 54th Street located in
Manhattan, New York. The 10,000 square foot property
was acquired for $36.4 million.
72
Acadia Realty Trust 2008 Annual Report
Notes to Consolidated Financial Statements continued
Additionally, on March 20, 2007, the Company purchased
On November 5, 2007, the Company, through Acadia P/A,
a single-tenant building located at 1545 East Service Road
acquired a property in Sheepshead Bay, Brooklyn for
in Staten Island, New York for $17.0 million.
approximately $20.0 million. The redevelopment plan
On May 31, 2007, the Company purchased a property
located on Atlantic Avenue in Brooklyn, New York for
includes the demolition of the existing structures and the
construction of a 240,000 square foot shopping center.
$5.0 million. The existing property has been demolished
On January 12, 2006, the Company closed on a 19,265
and construction is underway for an 110,000 square foot
square foot retail building in the Lincoln Park district in
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
Chicago. The property was acquired from an affiliate of
Klaff (Note 4) for a purchase price of $9.9 million, including
the assumption of existing mortgage debt in the principal
amount of $3.8 million.
Street and adjacent parking garage located in downtown
On January 24, 2006, the Company acquired a 60% inter-
Brooklyn, New York for $115.0 million. The property has
est in the entity which owns the A&P Shopping Plaza
been demolished and redevelopment plans include the
located in Boonton, New Jersey. The property is a 63,000
construction of a mixed-use project to be called CityPoint.
square foot shopping center anchored by a 49,000 square
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
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.
Canarsie, Brooklyn for approximately $21.0 million. The
On June 16, 2006, the Company purchased 8400 and
development plan for this property includes the demolition
8625 Germantown Road, totaling 40,570 square feet, in
of a portion of the warehouse and the construction of a
Philadelphia, Pennsylvania for $16.0 million. The Company
323,000 square foot mixed-use project consisting of retail,
assumed a $10.1 million first mortgage loan which has a
office, cold-storage and self-storage.
maturity date of June 11, 2013.
On November 1, 2007, the Company, and an unaffiliated
On September 21, 2006, the Company purchased 2914
partner acquired a property in Westport, Connecticut for
Third Avenue, a 41,305 square foot building located in the
approximately $17.0 million. The plan is to redevelop the
Bronx, New York for $18.5 million.
existing building into 30,000 square feet of retail and resi-
dential use.
Dispositions
During 2008, 2007 and 2006, the Company disposed of
the following properties:
(dollars in thousands)
Property
2008
Village Apartments
2007
Amherst Marketplace and Sheffield Crossing
Colony and GHT Apartments
2006
Bradford Towne Centre
Soundview Marketplace
Greenridge Plaza
Luzerne Street Center
Pittston Plaza
Total
Sales Price
Gain/(Loss)
GLA
$ 23,300
$ 7,200
599,106
26,000
15,500
16,000
24,000
10,600
3,600
6,000
7,500
(2,000)
5,600
7,900
4,753
2,521
487
192,479
625,545
257,123
183,815
191,767
58,035
79,498
$125,000
$ 33,961
2,187,368
Acadia Realty Trust 2008 Annual Report 73
B. Discontinued Operations
SFAS No. 144 requires discontinued operations presenta-
tion for disposals of a “component” of an entity. In accor-
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
related to such properties as assets and liabilities related
to discontinued operations. Interest expense specific to a
discontinued operation property is reflected in discontin-
ued operations.
The combined assets and liabilities as of December 31,
2007 and results of operations of the properties classified
as discontinued operations for the years ended December
31, 2008, 2007 and 2006 are summarized as follows:
(dollars in thousands)
Assets
Net real estate
Prepaid expenses
Other assets
Total assets of
discontinued operations
Liabilities
December 31,
2007
$15,394
132
69
$15,595
Note 3i
Segment Reporting
The Company has four reportable segments: Core Port-
folio, Opportunity Funds, Storage Portfolio, and Other. Dur-
ing 2008, the Company acquired a portfolio of self storage
properties and later determined that it constitutes, as of
year end, a new reportable segment. “Other” primarily
consists of management fees, interest income, preferred
equity investment and notes receivable. 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 contem-
plated finite life of the Opportunity Funds, these invest-
ments are typically held for shorter terms. Fees earned
by the Company as general partner/member of the Oppor-
tunity Funds are eliminated in the Company’s consolidated
financial statements. The following table sets forth certain
segment information for the Company, reclassified for
discontinued operations, as of and for the years ended
December 31, 2008, 2007, and 2006 (does not include
unconsolidated affiliates):
Accounts payable and accrued expenses
$
Other liabilities
Total liabilities of
discontinued operations
84
145
$
229
Statement of Operations
2008
2007
2006
Years Ended December 31,
(dollars in thousands)
Total revenues
Total expenses
Operating income
$ 1,333 $10,018
$18,927
715
618
8,717
15,279
1,301
3,648
Gain on sale of properties
7,182
5,271
20,974
Minority interest
(152)
(130)
(477)
Income from discontinued
operations
$ 7,648 $ 6,442
$24,145
74
Acadia Realty Trust 2008 Annual Report
Notes to Consolidated Financial Statements continued
(dollars in thousands)
Revenues
Property operating expenses and
real estate taxes
Impairment of notes receivable
Other expenses
Net income (loss) before depreciation
2008
Core
Portfolio
Opportunity
Funds
Storage
Portfolio
Other
Elimination
Total
$ 65,782
$ 50,738
$
5,615
$ 41,839
$ (23,235) $ 140,739
21,187
—
9,240
—
26,007
16,502
6,669
—
68
—
4,392
—
—
—
(18,032)
37,096
4,392
24,545
and amortization
$ 18,588
$ 24,996
$ (1,122)
$ 37,447
$ (5,203) $
74,706
Depreciation and amortization
$ 20,402
$ 11,560
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
Gain on sale of land
Gain on debt extinguishment
Income tax provision
Minority interest
Income from discontinued operations
Net income
$ 17,694
$
5,550
$ 494,524
$ 433,298
$186,529
$
$
3,002
3,650
$
$
$
— $
— $
34,964
— $
(4) $
26,890
— $ (7,478) $1,106,873
$ 571,698
$ 483,539
$194,992
$125,587
$ (84,260) $1,291,556
$ 18,424
$ 90,588
$135,391
$
— $
— $ 244,403
$
74,706
(34,964)
19,906
(26,890)
763
1,958
(3,362)
(12,217)
7,648
$
27,548
Acadia Realty Trust 2008 Annual Report 75
(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
Storage
Portfolio
Other
Elimination
Total
$ 62,819
$ 20,381
$
291
$ 34,899
$ (20,368)
$ 98,022
18,761
25,217
4,033
13,312
756
—
—
—
—
(15,471)
23,550
23,058
$ 18,841
$ 17,511
$ 17,439
$
$
$
3,036
9,070
5,493
$ 483,768
$ 346,546
$ 574,216
$ 407,830
$ 58,575
$ 151,652
$
$
$
$
$
$
(465)
$ 34,899
$ (4,897)
$ 51,414
311
359
6,908
$
$
$
— $
—
$ 26,892
— $
(516)
$ 22,775
— $ (3,528)
$ 833,694
7,173
$ 57,662
$ (47,869)
$ 999,012
— $
— $
—
$ 210,227
$ 51,414
(26,892)
6,619
(22,775)
(297)
9,082
6,442
3,677
$ 27,270
76
Acadia Realty Trust 2008 Annual Report
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 benefit
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 commenced the
RCP Venture with Klaff Realty, LP (“Klaff”) and Lubert-
Adler Management, Inc., through a limited liability com-
pany (“KLA”), for the purpose of making investments in
surplus or underutilized properties owned by retailers. As
of December 31, 2008, the Company has invested $59.1
million through the RCP Venture on a non-recourse basis.
The expected size of the RCP Venture is approximately
$300 million, of which the Company’s share is $60 million.
Cash flow from any investment in which the RCP Venture
2006
Core
Portfolio
Opportunity
Funds
Storage
Portfolio
Other
Elimination
Total
$ 58,990
$ 19,291
$
— $ 22,638
$ (8,687)
$ 92,232
16,939
19,596
$ 22,455
$ 15,212
$ 14,161
$
$
$
4,089
6,662
8,540
9,517
6,298
$ 418,909
$ 211,333
$ 596,363
$ 259,755
$ 62,917
$ 24,092
$
$
$
$
$
$
—
—
—
—
—
(6,476)
21,028
19,782
— $ 22,638
$ (2,211)
$ 51,422
— $
— $
—
$ 24,729
— $
— $
(325)
$ 20,134
— $
— $
(340)
$ 629,902
— $ 36,038
$ (40,464)
$ 851,692
— $
— $
—
$ 87,009
$ 51,422
(24,729)
2,559
(20,134)
508
5,242
24,145
$ 39,013
participants elect to invest, is to be distributed to the par-
ticipants 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
partners (including Klaff).
Mervyns Department Stores
During September of 2004, the RCP Venture invested in
a consortium to acquire the Mervyns Department Store
chain (“Mervyns”) consisting of 262 stores (“REALCO”)
and its retail operation (“OPCO”) 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 contributed $23.2 million of equity and received
an approximate 5.2% interest in REALCO and an approxi-
mate 2.5% interest in OPCO. To date, REALCO has dis-
posed of a significant portion of the portfolio. In addition,
in November 2007, the Company sold its interest in OPCO
Acadia Realty Trust 2008 Annual Report 77
and, as a result, has no further investment in OPCO. As of
minor ownership interest and the inability to exert influ-
December 31, 2008, a majority of the REALCO properties
ence over KLA’s operating and financial policies.
were occupied by tenants other than Mervyns. For the
years ended December 31, 2008 and 2007, the Company
made additional investments of $0.7 million and $2.2 mil-
The table below summarizes the Company’s invested capital
and distributions received from its Albertson’s investment.
lion, respectively, in Mervyns.
Other Investments
Through December 31, 2008, the Company made add-on
investments in Mervyns totaling $3.1 million. The Com-
pany accounts for these add-on investments using the
cost method due to the minor ownership interest and the
inability to exert influence over KLA’s operating and finan-
cial policies.
During 2006, the Company made investments of
$1.1 million in Shopko, a regional multi-department retailer
that, at the time of acquisition, had 358 stores located
throughout the Midwest, Mountain and Pacific Northwest,
and $0.7 million in Marsh, a regional supermarket chain,
that at the time of acquisition, operated 271 stores in cen-
tral Indiana, Illinois and western Ohio, through the RCP
The table below summarizes the Company’s invested capi-
Venture. During 2007, the Company received a $1.1 million
tal and distributions received from its Mervyns investment.
cash distribution from the Shopko investment representing
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
100% of its invested capital. The Company made invest-
ments of $2.0 million in additional add-on investments in
Marsh during the year ended December 31, 2008. In addi-
tion, in July 2008, the Company received distributions of
$1.0 million from Marsh.
received a cash distribution of $44.4 million from this
During July of 2007, the RCP Venture acquired a portfolio
investment, which was sourced from the disposition of
of 87 retail properties from Rex Stores Corporation, which
certain operating stores and a refinancing of the remaining
was comprised of electronic retail stores located in 27
assets held by Albertson’s. The Company recognized
states. The Company’s share of this investment was
distributions in excess of its invested capital in income,
$2.7 million.
including $30.2 million characterized as extraordinary
consistent with the accounting treatment by Albertson’s.
The Company received additional distributions from this
investment of $8.8 million and $10.6 million in the years
ended December 31, 2007 and 2008.
During 2007, 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 using the cost method due to the
The Company accounts for these other investments using
the cost method due to its minor ownership interest and
the inability to exert influence over KLA’s operating and
financial policies.
The following table summarizes the Company’s RCP
Venture investments from inception through December
31, 2008:
Operating
Partnership Share
(dollars in thousands)
Investor
Investment
Mervyns I and Mervyns II
Mervyns
Year
Acquired
2004
Invested Capital
and Advances Distributions
Invested Capital
and Advances
Distributions
$26,061
$ 45,966
$ 4,901
$ 11,251
Mervyns I and Mervyns II
Mervyns add-on investments
2005/2008
Mervyns II
Mervyns II
Fund II
Fund II
Fund II
Mervyns II
Total
Albertson’s
2006
Albertson’s add-on investments
2006/2007
Shopko
Marsh
Marsh add-on investments
Rex Stores
2006
2006
2008
2007
3,086
20,717
2,765
1,100
667
2,000
2,701
1,342
63,833
827
1,100
—
1,010
—
283
4,239
386
220
133
400
535
283
11,847
93
220
—
202
—
$59,097
$114,078
$11,097
$ 23,896
78
Acadia Realty Trust 2008 Annual Report
Notes to Consolidated Financial Statements continued
Brandywine Portfolio
The Company owns a 22.2% interest in a one million
square foot retail portfolio located in Wilmington,
Delaware (the “Brandywine Portfolio”) that is accounted
for using the equity method.
Crossroads
The Company owns a 49% interest in the Crossroads
Joint Venture and Crossroads II (collectively, “Cross-
roads”), which collectively own a 311,000 square foot
shopping center located in White Plains, New York that
is accounted for using the equity method.
Other Investments
Fund I Investments
Fund I owns a 50% interest in the Sterling Heights Shop-
ping Center which is accounted for using the equity
method of accounting.
Fund II Investments
Fund II’s approximately 25% investment in CityPoint is
accounted for using the equity method. The Company has
determined that CityPoint is a variable interest entity, and
the Company is not the primary beneficiary. The Com-
pany’s maximum exposure is its current investment bal-
ance of $33.4 million.
The following tables summarize the Company’s invest-
ment in unconsolidated subsidiaries as of December 31,
2008, December 31, 2007 and December 31, 2006.
Acadia Realty Trust 2008 Annual Report 79
(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)
December 31, 2008
RCP
Venture
CityPoint
Brandywine
Portfolio
Crossroads Investments
Total
Other
$
—
$159,922
$129,679
$ 5,143
$11,481
$306,225
295,168
—
—
3,983
—
8,769
—
5,283
—
2,770
295,168
20,805
$ 295,168
$163,905
$138,448
$ 10,426
$14,251
$622,198
$
—
—
$ 34,000
$166,200
$ 63,176
$ 5,173
$268,549
2,307
7,895
2,072
295,168
127,598
(35,647)
(54,822)
1,083
7,995
13,357
340,292
Total liabilities and partners’ equity
$ 295,168
$163,905
$138,448
$ 10,426
$14,251
$622,198
Company’s investment in and advances to
unconsolidated affiliates
$ 18,066
$ 33,445
$
—
$
—
$ 3,467
$ 54,978
Share of distributions in excess of share of income
and investment in unconsolidated affiliates
$
—
$
—
$ (8,236)
$(12,397)
$
—
$ (20,633)
(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)
December 31, 2007
RCP
Venture
CityPoint
Brandywine
Portfolio
Crossroads Investments
Total
Other
$
—
$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)
80
Acadia Realty Trust 2008 Annual Report
Notes to Consolidated Financial Statements continued
Year Ended December 31, 2008
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
177,775
Depreciation and amortization
Gain on sale of property, net
Net income (loss)
Company’s share of net income
Amortization of excess investment
Company’s share of net income (loss)
—
—
$177,775
$ 16,784
—
$ 16,784
$ 19,782
6,535
10,130
—
3,799
—
(682)
(151)
—
(151)
$
$
$
$ 7,894
3,116
3,461
—
650
—
$ 667
$ 326
(391)
$
(65)
$ 2,781
1,909
542
—
884
6,838
$ 6,284
$ 3,338
—
$ 30,457
11,560
14,133
177,775
5,333
6,838
$184,044
$ 20,297
(391)
$ 3,338
$ 19,906
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
$ 18,324
$ 9,208
$ 3,707
$ 31,239
(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)
$
—
—
—
(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
Acadia Realty Trust 2008 Annual Report 81
Note 5i
Notes Receivable and Preferred
Equity Investment
At December 31, 2008, the Company’s preferred equity
the borrower’s ownership interest in the entities that own
the properties and/or by the borrower’s personal guaran-
tee. Interest rates on the Company’s preferred equity
investment and notes receivable ranged from 3.41% to in
excess of 20% with maturities that range from demand
investment and notes receivable aggregated $125.6 mil-
notes to January 2017. Notes receivable and preferred
lion, and were collateralized by the underlying properties,
equity investments are as follows:
(dollars in thousands)
Description
Borrower
Mezzanine Loans:
Hitchcock Plaza
72nd Street
Georgetown A
Georgetown B
Individually less than 3%
Total Mezzanine Loans
First Mortgages:
East Shore Rd.
Fairchild
Levitz
Individually less than 3%
Total First Mortgages
Total
Notes:
Effective
Final
Interest Rate Maturity Date
Periodic
Payment
Terms
Prior
Liens
Face Amount
of Mortgages of Mortgages
Carrying
Amount
15.00%
20.85%
10.25%
13.50%
3.41%–
21.46%
(1)
7/18/2011
11/12/2010
6/27/2010
Demand note –
1/1/2017
10.00% Demand note
12.75%
11.60%
9.50%
9/11/2010
7/17/2009
4/15/2009
(1)
(2)
(4)
(3)
(4)
(4)
(4)
$ 16,400
185,000
8,576
114,150
$
5,648
47,000
8,000
40,000
$
4,286
35,941
8,000
40,000
—
—
—
14,066
114,714
11,917
100,144
6,150
10,000
7,134
5,438
28,722
6,150
10,000
6,463
2,830
25,443
$143,436
$125,587
(1) Principal and interest due upon capital event.
(2) Principal and interest, including a $7.5 million exit fee, are due upon maturity.
(3) Payable upon maturity.
(4) Interest only payable monthly, principal due on maturity
During June 2008, the Company made a $40.0 million pre-
this project is expected to include approximately 50,000
ferred equity investment in an entity that owns a portfolio
square feet of retail on three levels and 196 luxury resi-
of 18 properties located primarily in Georgetown, Wash-
dential rental apartments. The term of the loan is for a
ington D.C. The portfolio consists of 306,000 square feet
period of three years, with a one year extension, and is
of principally retail space. The term of this investment is
expected to yield in excess of 20%.
for two years, with two one-year extensions, and provides
a 13% preferred return.
During September 2008, the Company, through Fund III,
made a $10 million first mortgage loan, which is collateral-
During July 2008, the Company made a $34.0 million mez-
ized by land located on Long Island, New York. The term
zanine loan, which is collateralized by a mixed-use retail
of the loan is for a period of two years, and provides an
and residential development at 72nd Street and Broadway
effective annual return of approximately 13%.
on the Upper West Side of Manhattan. Upon completion,
82
Acadia Realty Trust 2008 Annual Report
Notes to Consolidated Financial Statements continued
The following table reconciles notes receivable and
The scheduled amortization of acquired lease intangible
preferred equity investments from January 1, 2006 to
assets as of December 31, 2008 is as follows:
December 31, 2008:
(dollars in thousands)
Years Ended December 31,
2008
2007
2006
(dollars in thousands)
Balance at beginning
of period
$ 57,662
$ 36,038 $ 34,733
Additions during period:
New mortgage loans
88,480
32,548
44,013
Deductions during period:
2009
2010
2011
2012
2013
Thereafter
$ 7,758
1,961
1,436
956
802
6,563
$19,476
Collections of principal
(19,923)
(11,071)
(39,948)
Amortization of premium
2,368
147
149
The scheduled amortization of acquired lease intangible
liabilities as of December 31, 2008 is as follows:
(3,000)
— (2,909)
(dollars in thousands)
Other
Balance at close
of period
Note 6i
$125,587 $ 57,662 $ 36,038
Deferred Charges
Deferred charges consist of the following as of
December 31, 2008 and 2007:
2009
2010
2011
2012
2013
Thereafter
$ 1,060
1,036
1,039
993
657
1,721
$ 6,506
December 31,
2008
2007
Note 8i
(dollars in thousands)
Deferred financing costs
$ 23,044
$ 18,756
Mortgage Loans
At December 31, 2008 and 2007, mortgage notes payable,
Deferred leasing and other costs
22,117
20,399
excluding the net valuation premium on the assumption
45,161
39,155
of debt, aggregated $654.7 million and $402.0 million,
Accumulated amortization
(23,089)
(17,330)
$ 22,072
$ 21,825
Note 7i
Acquired Lease Intangibles
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, acquired in-place leases
and customer relationships) and acquired liabilities in
accordance with SFAS No. 141. The intangibles are
amortized over the remaining non-cancelable terms of
the respective leases.
respectively, and were collateralized by 57 and 49 proper-
ties and related tenant leases, respectively. Interest rates
on the Company’s outstanding mortgage indebtedness
ranged from 1.4% to 7.18% with maturities that ranged
from January 2009 to November 2032. Certain loans are
cross-collateralized and cross-defaulted. The loan agree-
ments contain customary representations, covenants and
events of default. Certain loan agreements require the
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
ended December 31, 2008:
Acadia Realty Trust 2008 Annual Report 83
During the year ended December 31, 2008, the Company
During July 2008, the Company paid off $3.7 million of
borrowed $73.2 million on four existing construction loans.
mortgage debt, which was secured by a property.
During February 2008, in conjunction with the purchase
During September 2008, the Company extended a $19.0
of a portfolio of self-storage properties, the Company
million loan to a new maturity date of January 15, 2009
assumed a loan of $34.9 million, which bears interest at
and converted the interest rate from a fixed rate of 5.83%
a fixed rate of 5.9% and matures on June 11, 2009, and
to a variable rate of LIBOR plus 185 basis points.
a loan of $5.0 million, which bears interest at a fixed rate
of 5.4% and matures on December 1, 2009.
During March 2008, the Company closed on a $41.5 million
mortgage loan secured by five properties, which bears inter-
est at a fixed rate of 5.3% and matures on March 16, 2011.
During October 2008, the Company paid off a $2.7 mil-
lion loan.
The following table sets forth certain information pertain-
ing to the Company’s secured credit facilities:
(dollars in thousands)
Borrower
Total available
credit facilities
Amount borrowed
as of 12/31/07
2008 net borrowings
(repayments)
during the year
ended 12/31/08
Amount borrowed
as of 12/31/08
Letters of credit
outstanding
as of 12/31/08
Amount available
under credit
facilities as of
12/31/08
Acadia Realty, LP
$ 72,250
$
Acadia Realty, LP
Fund II
Fund III
30,000
70,000
125,000
—
—
34,500
—
$ 48,900
$ 48,900
$ 11,405
$ 11,945
—
181
62,250
—
34,681
62,250
—
11,073
3,500
30,000
24,246
59,250
Total
$ 297,250
$ 34,500
$111,331
$145,831
$ 25,978
$125,441
84
Acadia Realty Trust 2008 Annual Report
Notes to Consolidated Financial Statements continued
The following table summarizes our mortgage indebtedness as of December 31, 2008 and December 31, 2007:
December 31,
Interest Rate at
Properties
2008
2007
December 31, 2008
Maturity
Encumbered
Payment
Terms
(dollars in thousands)
Mortgage notes payable — variable-rate
Bank of America, N.A.
RBS Greenwich Capital
PNC Bank, National Association
Bank One, N.A.
Bank of America, N.A.
Anglo Irish Bank Corporation
Eurohypo AG
Bank of China
$ 9,624
$ 9,781
1.84% (LIBOR + 1.40%)
6/29/2012
30,000
11,423
—
15,526
9,800
80,443
19,000
30,000
1.84% (LIBOR + 1.40%)
4/1/2009
9,990
2,818
2.09% (LIBOR + 1.65%)
5/18/2009
2.43% (LIBOR + 2.00%)
10/5/2008
15,773
1.74% (LIBOR + 1.30%)
12/1/2011
9,800
2.09% (LIBOR + 1.65%)
10/30/2010
37,263
2.19% (LIBOR + 1.75%)
10/4/2009
–
2.29% (LIBOR + 1.85%)
1/15/2009
Sub-total mortgage notes payable
175,816
115,425
Secured credit facilities
Bank of America, N.A.
Washington Mutual Bank, F.A.
Bank of America, N.A./Bank of New York
Bank of America, N.A
48,900
—
34,681
62,250
— 1.69% (LIBOR + 1.25%)
— 1.69% (LIBOR + 1.25%)
12/1/2010
3/29/2010
34,500
1.44% (LIBOR + 1.00%)
3/1/2009
— 2.76% (Commercial
(1)
(2)
(4)
(5)
(7)
(11)
(6)
(23)
(8)
(31)
(9)
Paper + 0.45%)
10/9/2011
(10)
Sub-total secured credit facilities
Interest rate swaps (44)
Total variable-rate debt
145,831
34,500
(73,415)
(34,284)
248,232
115,641
Mortgage notes payable – fixed-rate
RBS Greenwich Capital
RBS Greenwich Capital
RBS Greenwich Capital
Bear Stearns Commercial
Bear Stearns Commercial
LaSalle Bank, N.A.
J.P. Morgan Chase
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
GEMSA Loan Services, L.P.
Wachovia
GEMSA Loan Services, L.P.
Bear Stearns Commercial
Interest rate swaps (44)
Total fixed-rate debt
Total fixed and variable debt
Valuation premium on assumption
of debt net of amortization (45)
Total
See notes on following page.
14,554
17,600
12,485
34,600
20,500
—
8,322
9,663
23,500
—
2,475
2,318
25,500
26,250
26,000
25,284
4,944
34,322
41,500
3,265
73,415
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
—
—
—
—
—
34,284
406,497
286,341
654,729
401,982
139
921
$654,868 $402,903
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%
5.37%
5.86%
5.30%
7.14%
5.35%
9/6/2014
9/6/2015
11/6/2015
1/1/2016
3/1/2016
7/11/2008
11/1/2032
6/11/2013
10/1/2016
3/1/2008
2/1/2009
1/15/2009
10/1/2017
8/1/2017
2/11/2017
1/1/2020
12/1/2009
6/11/2009
3/16/2011
1/1/2020
(46)
(14)
(15)
(16)
(17)
(18)
(19)
(20)
(21)
(22)
(23)
(24)
(25)
(3)
(12)
(13)
(29)
(26)
(27)
(28)
(30)
(32)
(33)
(43)
(32)
(32)
(33)
(43)
(33)
(34)
(33)
(33)
(33)
(32)
(35)
(36)
(37)
(33)
(32)
(32)
(32)
(38)
(33)
(42)
(42)
(33)
(39)
(33)
(43)
(32)
(32)
(33)
(41)
Acadia Realty Trust 2008 Annual Report 85
Notes:
(15) Crescent Plaza
(1) Village Commons Shopping Center
(16) Pacesetter Park Shopping Center
(2) 161st Street
(3) 216th Street
(4) Liberty Avenue
(5) Granville Center
(6) Fordham Place
(7) Branch Shopping Center
(17) Elmwood Park Shopping Center
(18) Gateway Shopping Center
(19) Clark Diversey
(20) Boonton Shopping Center
(21) Chestnut Hill
(22) Walnut Hill
(8) Line of credit secured by the
(23) Sherman Avenue
following properties:
Marketplace of Absecon
Bloomfield Town Square
Hobson West Plaza
Town Line Plaza
Methuen Shopping Center
Abington Towne Center
(9) Acadia Strategic Opportunity Fund II, LLC
line of credit secured by unfunded
investor capital commitments
(24) Kroger Portfolio
(25) Safeway Portfolio
(26) Acadia Suffern
(27) Acadia Storage Company, LLC
(28) Acadia Storage Post Portfolio Co., LLC
(29) Pelham Manor
(30) Atlantic Avenue
(31) Line of credit secured by Ledgewood Mall
(10) Acadia Strategic Opportunity Fund III,
(32) Monthly principal and interest.
LLC line of credit secured by unfunded
investor capital commitments
(11) Tarrytown Center
(12) Merrillville Plaza
(13) 239 Greenwich Avenue
(14) New Loudon Center
Note 9i
(33) Interest only monthly.
(34) Annual principal and monthly interest.
(35) Interest only monthly until 9/10; monthly
principal and interest thereafter.
(36) Interest only monthly until 12/08; monthly
principal and interest thereafter.
(37) Interest only monthly until 1/10;
monthly principal and interest thereafter.
(38) Interest only monthly until 10/11;
monthly principal and interest thereafter.
(39) Interest only monthly until 7/12;
monthly principal and interest thereafter.
(40) Interest only monthly until 11/12;
monthly principal and interest thereafter.
(41) Interest only monthly until 12/1/14;
monthly principal and interest thereafter
(42) Annual principal and semi-annual
interest payments.
(43) Interest only upon draw-down on
construction loan.
(44) Maturing between 1/1/10 and 11/30/2012.
(45) In connection with the assumption of
debt in accordance with the requirements
so SFAS no. 141, the Company has
recorded valuation premium that is being
amortized to interest expense over the
remaining terms of the underlying mort-
gage loans.
(46) Represents the amount of the Company’s
variable-rate debt that has been fixed
through certain cash flow hedge trans-
actions (Note 20).
Convertible Notes Payable
In December 2006 and January 2007, the Company issued
a total of $115.0 million in principal of convertible notes
with a fixed interest rate of 3.75% due 2026 (the “Con-
vertible 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 Con-
vertible Notes are unsecured unsubordinated obligations
and rank equally with all other unsecured and unsubordi-
nated indebtedness. The Convertible 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 Con-
vertible Notes may only be converted prior to maturity:
(i) during any calendar quarter 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 consecutive 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 applicable trading day; or (ii) during
the five consecutive trading-day period following any five
86
Acadia Realty Trust 2008 Annual Report
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 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 repurchase date.
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,
Notes to Consolidated Financial Statements continued
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
cash dividend of $0.21 per Common Share, but will be not
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 con-
version value; and (ii) if the conversion value is greater
than the principal return, an amount with a value equal to
the difference between the conversion value and the prin-
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.
During the fourth quarter of 2008, the Company purchased
$8.0 million in principal amount of the outstanding $115.0
million in principal amount of its convertible debt at a dis-
count of approximately 24%. The transaction resulted in a
$2.0 million gain. The outstanding balance as of December
31, 2008 was $107.0 million. Subsequent to December
31, 2008, the Company purchased an additional $13.5 mil-
lion in principal amount of the outstanding convertible
debt, also at a discount of approximately 24%.
The scheduled principal repayments of all indebtedness as
of December 31, 2008 are as follows:
(dollars in thousands)
2009
2010
2011
2012
2013
Thereafter
$220,724
60,323
227,494
11,122
10,931
231,135
$761,729(1)
Note:
(1) Does not include $139 net valuation premium on assumption
of debt.
Note 10i
Fair Value Measurements
Effective January 1, 2008, the Company adopted SFAS
No. 157 for its financial assets and liabilities. SFAS No.
157 establishes a new framework for measuring fair value
and expands disclosure requirements. SFAS No. 157
defines fair value as the price that would be received to
sell an asset, or paid to transfer a liability, in an orderly
transaction between market participants.
SFAS No. 157’s valuation techniques are based on
observable or unobservable inputs. Observable inputs
reflect market data obtained from independent sources,
while unobservable inputs reflect the Company’s market
assumptions. These two types of inputs have created the
following fair value hierarchy:
n Level 1: Quoted prices for identical instruments in
active markets
n Level 2: Quoted prices for similar instruments in active
markets; quoted prices for identical or similar instruments
in markets that are not active; and model-derived valua-
tions in which significant value drivers are observable
n Level 3: Valuations derived from valuation techniques in
which significant value drivers are unobservable
The following describes the valuation methodologies the
Company uses to measure financial assets and liabilities
at fair value:
Derivative Instruments — The Company’s derivative finan-
cial liabilities primarily represent interest rate swaps and a
cap and are valued using Level 2 inputs. The fair value of
these instruments is based upon the estimated amounts
the Company would to sell an asset or pay to transfer a
liability in an orderly transaction between market partici-
pants at the reporting date and is determined using inter-
est rate market pricing models. With the adoption of SFAS
No. 157, the Company has amended the techniques used
in measuring the fair value of its derivative positions. This
amendment includes the impact of credit valuation adjust-
ments on derivatives measured at fair value. The implemen-
tation of this amendment did not have a material impact
on the Company’s consolidated financial position or results
of operations.
Acadia Realty Trust 2008 Annual Report 87
The following table presents the Company’s liabilities
Note 11i
measured at fair value based on level of inputs at Decem-
ber 31, 2008:
(dollars in thousands)
Level 1
Level 2
Level 3
Shareholders’ Equity and
Minority Interests
Liabilities
Derivatives
$ —
$ 4,962
$ —
Total liabilities measured
at fair value
$ —
$ 4,962
$ —
Common Shares
During the first quarter of 2008, 83,042 employee Restricted
Shares were cancelled to pay the employees’ income
taxes due on the value of the portion of the Restricted
Shares that vested. During the year ended December 31,
2008, the Company recognized accrued Common Share
and Common OP Unit-based compensation totaling $3.4
million in connection with the vesting of Restricted Shares
and Units (Note 15).
Minority Interests
The following table summarizes the change in the minority interests since December 31, 2007:
Minority Interest in
Operating Partnership
Minority Interest in
Partially-Owned Affiliates
(dollars in thousands)
Balance at December 31, 2007
Distributions declared of $1.39 per Common OP Unit
Net income for the period January 1 through December 31, 2008
Distributions paid
Other comprehensive income —
unrealized loss on valuation of swap agreements
Minority Interest contributions
Employee Long-term Incentive Plan Unit Awards
Balance at December 31, 2008
$4,595
(1,192)
471
—
(70)
—
1,863
$5,667
$166,516
—
11,898
(15,347)
(242)
46,014
—
$208,839
Minority interest in the Operating Partnership represents
Contributions Distributions
(i) the limited partners’ 642,272 Common OP Units at both
(dollars in thousands)
December 31, 2008 and 2007, (ii) 188 Series A Preferred
OP Units at both December 31, 2008 and 2007, with a
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) 186,951 and 21,536 LTIP units as of Decem-
ber 31, 2008 and December 31, 2007 respectively, as dis-
cussed in Share Incentive Plan (Note 15).
Partially-owned affiliates
$
Fund I
Fund II
Mervyns II
Fund III
—
—
8,305
—
37,709
$
144
5,439
1,740
8,000
24
$46,014
$ 15,347
In 2004 and 2005, the Company issued 4,000 Series B
Preferred OP Units and 250,000 Restricted Common OP
Units, respectively, to Klaff in consideration for interest in
Minority interests in partially-owned affiliates include third-
certain management contract rights. The Preferred OP
party interests in Fund I, II and III, and Mervyns I and II
Units were convertible into Common OP Units based on
and three other entities.
The following table summarizes the minority interest con-
tributions and distributions in 2008:
the stated value of $1,000 divided by $12.82 at any time.
The Restricted Common OP Units are convertible into the
Company’s Common Shares on a one-for-one basis after a
five-year lock-up period. During 2007, Klaff converted all
88
Acadia Realty Trust 2008 Annual Report
Notes to Consolidated Financial Statements continued
4,000 Series B Preferred Units into 312,013 Common OP
Note 13i
Units and ultimately into Common Shares.
The Series A Preferred OP Units were issued on Novem-
ber 16, 1999 in connection with the acquisition of the Pace-
setter Park Shopping Center. Through December 31, 2008,
696 Series A Preferred OP Units were converted into
92,800 Common OP Units and then into Common Shares.
The 188 remaining Series A Preferred OP Units are cur-
rently 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
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.
Minimum future rentals to be received under non-cance-
lable leases for shopping centers and other retail proper-
ties as of December 31, 2008 are summarized as follows:
A Preferred OP Units at the lesser of $7.50 or the market
(dollars in thousands)
price of the Common Shares as of the conversion date.
Note 12i
Related Party Transactions
During 2007, Klaff converted 4,000 Series B Preferred OP
units into 312,013 Common Shares (Note 11).
During 2005, the Operating Partnership issued $4.0 million
of Restricted Common OP Units to Klaff (Note 11).
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 con-
verted its Preferred Equity Investment with Levitz SL, into
a mortgage loan.
2009
2010
2011
2012
2013
Thereafter
$ 85,935
77,642
65,501
57,400
51,383
300,292
$ 638,153
Minimum future rentals above include a total of $10.8
million for three tenants, totaling three leases, which have
filed for bankruptcy protection. The three tenant’s leases
have not been rejected nor affirmed. During the years
ended December 31, 2008, 2007 and 2006, no single
tenant collectively accounted for more than 10% of the
Company’s total revenues.
The Company earns asset management, leasing, dispo-
Note 14i
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 $1.1 million, $2.1 million and $3.5 million for the years
ended December 31, 2008, 2007 and 2006 respectively.
Lease Obligations
The Company leases land at seven of its shopping centers,
which are accounted for as operating leases and generally
provide the Company with renewal options. Ground rent
expense was $2.7 million, $4.1 million, and $4.5 million
(including capitalized ground rent at properties under
The Company earns fees from two of its investments in
development of $1.1 million, $2.7 million and $3.4 million)
unconsolidated partnerships (Note 4). The Company earned
for the years ended December 31, 2008, 2007 and 2006,
property management, construction, legal and leasing fees
respectively. The leases terminate at various dates
from the Brandywine Portfolio totaling $0.9 million, $1.7
between 2015 and 2066. These leases provide the Com-
million and $1.4 million for the years ended December 31,
pany with options to renew for additional terms aggregating
2008, 2007 and 2006, respectively. In addition, the Com-
from 20 to 60 years. The Company leases space for its
pany earned property management and development fees
White Plains corporate office for a term expiring in 2015.
from CityPoint totaling $1.0 million, $0.2 million and $0.0
Office rent expense under this lease was $1.2 million,
million for the years ended December 31, 2008, 2007 and
$0.8 million and $0.6 million for the years ended Decem-
2006, 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, 2008, 2007, and 2006.
ber 31, 2008, 2007 and 2006, respectively. Future minimum
rental payments required for leases having remaining non-
cancelable lease terms are as follows:
Acadia Realty Trust 2008 Annual Report 89
(dollars in thousands)
2009
2010
2011
2012
2013
Thereafter
Note 15i
$ 5,088
5,107
5,144
5,212
5,289
95,674
$121,514
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
On January 31, 2008, the Company issued 4,722 Restricted
Shares and 156,058 LTIP Units to officers of the Company.
On February 1, 2008, and March 27, 2008, the Company
also issued 1,050 and 11,672 LTIP Units, respectively, to
an officer of the Company. Vesting with respect to these
awards is recognized over a range of the next seven to 10
years. The vesting on 50% of these awards is also gener-
ally subject to achieving certain total shareholder returns
on the Company’s Common Shares or certain annual
earnings growth. 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 distri-
bution 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.
officers, employees and trustees of the Company and
Also on January 31, 2008, the Company issued 26,999
consultants to the Company equal to up to four percent
Restricted Shares to employees of the Company. Vesting
of the total Common Shares of the Company outstanding
with respect to these awards is recognized ratably over
from time to time on a fully diluted basis. However, no
the next four anniversaries of the issuance date. The vest-
participant may receive more than the equivalent of
ing on 25% of these awards is also subject to achieving
1,000,000 Common Shares during the term of the 2003
certain total shareholder returns on the Company’s Com-
Plan with respect to Awards. Options are granted by the
mon Shares or certain annual earnings growth. In addition,
Compensation Committee (the “Committee”), which cur-
on June 23, 2008, the Company issued 406 LTIP Units to
rently consists of three non-employee Trustees, and will
employees of the Company. Vesting with respect to these
not have an exercise price less than 100% of the fair mar-
LTIP Units is recognized ratably over the next five anniver-
ket value of the Common Shares and a term of greater
saries of the issuance date.
than 10 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
The total value of the above Restricted Shares and LTIP
Units issued was $4.9 million, of which $1.4 million was
recognized in compensation expense in 2007 and repre-
sented executive cash bonuses used to purchase a portion
of the Restricted Shares, and $3.5 million will be recognized
in compensation expense over the vesting period. The
weighted average fair value for Restricted Shares and LTIP
Units granted for the years ended December 31, 2008, 2007
and 2006 were $24.51, $24.91 and $20.46, respectively.
and vesting of performance units and performance shares
For the years ended December 31, 2008, 2007 and 2006,
based on the attainment of specified performance objectives
$3.4 million, $3.3 million, and $2.7 million, respectively,
of the Company within a specified performance period.
were recognized in compensation expense related to
Through December 31, 2008, no share appreciation rights
Restricted Share and LTIP Unit grants.
or performance units/shares had been awarded.
On May 14, 2008, the Company issued 1,878 unrestricted
During 2006, the Company adopted the 2006 Share Incen-
Common Shares and 4,000 Restricted Shares to Trustees
tive Plan (the “2006 Plan”). The 2006 Plan is substantially
of the Company in connection with Trustee fees. The
similar to the 2003 Plan, except that the maximum num-
Restricted Shares vest over three years with 33% vesting
ber of Common Share equivalents that the Company may
on each of the next three anniversaries of the issuance
issue pursuant to the 2006 Plan is 500,000.
date. The Restricted Shares do not carry voting rights or
90
Acadia Realty Trust 2008 Annual Report
Notes to Consolidated Financial Statements continued
other rights of Common Shares until vesting and may
The Company has used the Binomial method for purposes
not be transferred, assigned or pledged until the recipi-
of estimating the fair value in determining compensation
ents have a vested non-forfeitable right to such shares.
expense for options granted for the year ended December
Dividends are not paid currently on unvested Restricted
31, 2006. No options were issued during 2008 and 2007.
Shares, but are paid cumulatively, from the issuance date
The fair value for the options issued by the Company was
through the applicable vesting date of such Restricted
estimated at the date of the grant using the following
Shares vesting. Trustee fee expense of $81,000 for the
weighted-average assumptions resulting in:
year ended December 31, 2008 has been recognized in
the accompanying consolidated financial statements
related to this issuance.
As of December 31, 2008, the Company had 363,244
options outstanding to officers and employees of which
all have vested. These options are for 10-year terms from
the grant date and vested in three equal annual install-
ments, which began on the Grant Date. In addition, 58,000
options have been issued, of which all have vested, to
non-employee Trustees as of December 31, 2008.
Weighted-average volatility
Expected dividends
Expected life (in years)
Risk-free interest rate
Year ended
December 31, 2006
18.0%
3.6%
7.5
4.4%
Fair value at date of grant (per option)
$3.03
A summary of option activity under all option arrangements as of December 31, 2008, and changes during the year then
ended is presented below:
Options
Outstanding at January 1, 2008
Granted
Exercised
Forfeited or Expired
Outstanding at December 31, 2008
Exercisable at December 31, 2008
Shares
531,738
—
(110,245)
(249)
421,244
421,244
Weighted Average
Exercise Price
Weighted Average
Remaining
Contractual Term
Aggregate
Intrinsic Value
(dollars in thousands)
$ 9.99
—
7.47
20.65
$10.65
$10.65
3.7
3.7
$ 1,527
$ 1,527
The weighted average Grant Date fair value of options granted during the year 2006 was $3.03. The total intrinsic value
of options exercised during the years ended December 31, 2008, 2007 and 2006 was $0.8 million, $0.3 million and
$0.1 million, respectively.
A summary of the status of the Company’s unvested Restricted Shares and LTIP Units as of December 31, 2008 and
changes during the year ended December 31, 2008, is presented below:
Unvested Shares and LTIP Units
Unvested at January 1, 2008
Granted
Vested
Forfeited
Unvested at December 31, 2008
Restricted Shares
(in thousands)
595
32
(143)
(5)
479
Weighted
Grant-Date
Fair Value
$20.51
24.50
18.63
24.59
$21.29
LTIP Units
(in thousands)
22
169
(6)
(4)
181
Weighted
Grant-Date
Fair Value
$ 24.91
24.51
24.91
24.50
$ 24.55
Acadia Realty Trust 2008 Annual Report 91
As of December 31, 2008, there was $8.6 million of total
the agreement. As of December 31, 2008, 190,487 Share
unrecognized compensation cost related to unvested
Units have been contributed to the plan, all of which were
share-based compensation arrangements granted under
contributed prior to January 1, 2006.
share incentive plans. That cost is expected to be recog-
nized over a weighted-average period of 2.5 years. The
total fair value of Restricted Shares that vested during the
years ended December 31, 2008, 2007 and 2006, was
$2.7 million, $1.6 million and $2.5 million, respectively.
Note 16i
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 Common
Shares on either the first day or the last day of the quarter,
whichever is lower. The amount of the payroll deductions
will not exceed a percentage of the participant’s annual
During May of 2006, the Company adopted a Trustee
Deferral and Distribution Election whereby the participating
Trustees have deferred compensation of $0.4 million,
$.02 million and $0.1 million for 2008, 2007 and 2006,
respectively.
Note 17i
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
maximum of 15% of their compensation but not in
excess of $15,500 for the year ended December 31, 2008.
The Company contributed $0.3 million, $0.2 million and
$0.2 million for the years ended December 31, 2008, 2007
and 2006, respectively.
compensation that the Committee establishes from time
Note 18i
to time, and a participant may not purchase more than
1,000 Common Shares per quarter. Compensation expense
will be recognized by the Company to the extent of the
above discount to the average closing price of the Com-
Dividends and Distributions
Payable
On December 3, 2008, the Board of Trustees declared a
mon Shares with respect to the applicable quarter. During
cash dividend for the quarter ended December 31, 2008,
2008, 2007 and 2006, 7,499, 7,123 and 5,307 Common
of $0.21 per Common Share, which was paid on January
Shares, respectively, were purchased by Employees under
15, 2009 to holders of record as of December 31, 2008.
the Purchase Plan. Associated compensation expense of
In addition, on December 22, 2008, the Board of Trustees
$0.03 million was recorded in each of 2008 and 2007 and
declared a special dividend payable to holders of its Com-
$0.02 million was recorded in 2006.
During August of 2004, the Company adopted a Deferral
and Distribution Election pursuant to the 1999 Share
Incentive Plan and 2003 Share Incentive Plan, whereby
the participants elected to defer receipt of 190,487 Com-
mon Shares (“Share Units”) that otherwise would have
been issued upon the exercise of certain options. The pay-
ment of the option exercise price was made by tendering
Common Shares that the participants owned for at least
six months prior to the option exercise date. The Share
Units are equivalent to a Common Share on a one-for-one
basis and carry a dividend equivalent right equal to the
dividend rate for the Company’s Common shares. The
deferral period is determined by each of the participants
and generally terminates after the cessation of the partici-
pants continuous service with the Company, as defined in
mon Shares of approximately $0.55 per share, or $18.0
million in the aggregate. The special dividend, which is
associated with taxable gains for 2008 arising from prop-
erty dispositions, was paid on January 30, 2009, to share-
holders of record as of December 31, 2008. 90% of the
special dividend was paid with the issuance of 1.3 million
Common Shares and 10%, or $1.8 million, was paid in
cash. All previously reported Common Shares used to
calculate EPS and earnings per share amounts have been
adjusted to reflect the inclusion of the 1.3 million special
dividend Common Shares.
Note 19i
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
92
Acadia Realty Trust 2008 Annual Report
Notes to Consolidated Financial Statements continued
856 through 860 of the Code of 1986, as amended. To
Even though the Company qualifies for taxation as a REIT,
qualify as a REIT, the Company must meet a number of
the Company is subject to certain state and local taxes on
organizational and operational requirements, including a
its income and property and Federal income and excise
requirement that it currently distribute at least 90% of its
taxes on any undistributed taxable income. In addition,
annual REIT taxable income to its shareholders. As a REIT,
taxable income from non-REIT activities managed through
the Company generally will not be subject to corporate
the Company’s TRS is subject to Federal, state and local
Federal income tax, provided that distributions to its share-
income taxes.
holders equal at least the amount of its REIT taxable income
as defined under the Code. As the Company distributed
sufficient taxable income for the years ended December
31, 2008, 2007 and 2006, no U.S. Federal income or
excise taxes were incurred. If the Company fails to qualify
as a REIT in any taxable year, it will be subject to Federal
income taxes at the regular corporate rates (including any
applicable alternative minimum tax) and may not be able
to qualify as a REIT for the four subsequent taxable years.
The difference between the GAAP and tax reported
amounts of the Company’s assets and liabilities is due
largely to the higher GAAP basis in the Company’s real
estate properties. This is primarily the result of assets
acquired as a result of property contributions in exchange
for OP Units and the utilization of Code Section 1031 tax-
deferred exchanges.
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, 2008,
2007 and 2006:
(dollars in thousands)
Net Income
Net income attributable to TRS
Net income attributable to REIT
Book/tax difference in depreciation and amortization (1)
Book/tax difference on exercise of stock options and
vesting of restricted shares
Book/tax difference on capital transactions (2)
Impairment loss not recognized for tax (3)
Other book/tax differences, net
2008
(Estimated)
$27,548
1,155
26,393
(1,010)
82
11,573
4,306
2,200
2007
(Actual)
$ 27,270
2,514
24,756
4,155
(689)
8,300
—
467
REIT taxable income before dividends paid deduction
$43,544
$ 36,989
2006
(Actual)
$ 39,013
405
38,608
4,906
(397)
(16,709)
—
2,963
$ 29,371
Note:
(1)Includes one-time deduction of $4,907 in 2008, resulting from reclassification of certain fixed assets for income tax purposes.
(2) Principally the result of the deferral of the gain from the sale of properties for income tax purposes.
(3) 100% of mezzanine loans for redevelopment of the retail complexes associated with seven public rest stops along the toll roads
in and around Chicago, Illinois. See Note 1.
Characterization of Distributions
The Company has determined that the cash distributed to
the shareholders is characterized as follows for Federal
income tax purposes:
Ordinary income
Capital gain
Years Ended December 31,
2008
2007
2006
54%
46%
51%
49%
100%
—%
100%
100%
100%
Acadia Realty Trust 2008 Annual Report 93
Taxable REIT Subsidiaries (“TRS”)
Income taxes have been provided for using the liability
method as required by SFAS No. 109. The Company’s
combined TRS income (loss) and provision (benefit) for
income taxes for the years ended December 31, 2008,
2007 and 2006 are summarized as follows:
2008
(Estimated)
2007
(Actual)
2006
(Actual)
(dollars in thousands)
TRS income (loss) before
income taxes
$ 4,359
$5,077
$ (296)
Provision (benefit) for
income taxes:
Federal
State and local
2,441
763
2,097
466
(590)
(111)
TRS net income
$ 1,155
2,514
$ 405
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:
2008
2007
2006
(dollars in thousands)
Federal provision (benefit)
at statutory tax rate
$ 1,996
$1,726
$(100)
State and local taxes,
net of federal benefit
277
255
(15)
and liabilities approximates fair value due to the short-term
nature of such accounts.
Notes Receivable and Preferred Equity Investments —
as of December 31, 2008 and 2007, the Company has
determined the estimated fair values of its preferred equity
investments and notes receivable were $122.3 million
and $57.7 million, respectively, by discounting future cash
receipts utilizing a discount rate equivalent to the rate at
which similar notes receivable would be originated at the
reporting date.
Derivative Instruments — the fair value of these instru-
ments is based upon the estimated amounts the Company
would receive to sell an asset or pay to transfer a liability
in an orderly transaction between market participants at
the reporting date and is determined using interest rate
market pricing models.
Mortgage Notes Payable and Notes Payable — As of
December 31, 2008 and 2007, the Company has deter-
mined the estimated fair values of its mortgage notes
payable, including those relating to discontinued operations,
were $731.8 million and $519.4 million, respectively, by
discounting future cash payments utilizing a discount rate
equivalent to the rate at which similar mortgage notes
payable would be originated at the reporting date.
Tax effect of:
Change in estimate
REIT state, local and
franchise taxes
Total provision (benefit)
931
158
605
(586)
Derivative Financial Instruments:
SFAS No. 133, “Accounting for Derivative Instruments
and Hedging Activities,” as amended and interpreted,
67
193
establishes accounting and reporting standards for deriv-
for income taxes
$ 3,362
$2,653
$(508)
Note 20i
Financial Instruments
Fair Value of Financial Instruments:
SFAS No. 107, “Disclosures about Fair Value of Financial
ative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities.
As required by SFAS 133, the Company records all deriv-
atives on the balance sheet at fair value. The accounting
for changes in the fair value of derivatives depends on the
intended use of the derivative and the resulting designation.
Derivatives used to hedge the exposure to changes in the
fair value of an asset, liability, or firm commitment attrib-
Instruments” requires disclosure on the fair value of finan-
utable to a particular risk, such as interest rate risk, are
cial instruments. Certain of the Company’s assets and
considered fair value hedges. Derivatives used to hedge
liabilities are considered financial instruments. Fair value
the exposure to variability in expected future cash flows,
estimates, methods and assumptions are set forth below.
or other types of forecasted transactions, are considered
Cash and Cash Equivalents, Restricted Cash, Cash in
cash flow hedges.
Escrow, Rents Receivable, Prepaid Expenses, Other
For derivatives designated as fair value hedges, changes
Assets, Accounts Payable and Accrued Expenses, Divi-
in the fair value of the derivative and the hedged item
dends and Distributions Payable, Due to Related Parties
related to the hedged risk are recognized in earnings. For
and Other Liabilities. The carrying amount of these assets
derivatives designated as cash flow hedges, the effective
94
Acadia Realty Trust 2008 Annual Report
Notes to Consolidated Financial Statements continued
portion of changes in the fair value of the derivative is ini-
As of December 31, 2008 and 2007, no derivatives were
tially reported in other comprehensive income (outside of
designated as fair value hedges or hedges of net invest-
earnings) and subsequently reclassified to earnings when
ments in foreign operations. Additionally, the Company
the hedged transaction affects earnings, and the ineffec-
does not use derivatives for trading or speculative purposes
tive portion of changes in the fair value of the derivative is
and currently does not have any derivatives that are not
recognized directly in earnings. The Company assesses
designated as hedges. As of December 31, 2008, none
the effectiveness of each hedging relationship by compar-
of the Company’s hedges were ineffective.
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, 2008. The notional value does not
represent 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
LIBOR Swap
LIBOR Swap
LIBOR Swap
Interest rate swaps
Interest Rate LIBOR Cap
Net Derivative instrument liability
$ 4,469
10,952
8,194
9,800
15,000
15,000
10,000
$73,415
$30,000
4.71%
4.90%
5.14%
4.47%
3.79%
3.41%
2.65%
01/01/10
10/01/11
03/01/12
10/29/10
11/30/12
11/30/12
11/30/12
6.00%
04/01/09
$ (171)
(975)
(856)
(585)
(1,116)
(907)
(324)
(4,934)
(28)
$ (4,962)
The above derivative instruments have been designated as
Note 21i
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, 2008 and
2007, unrealized losses totaling $4.9 and $1.1 million,
respectively were reflected in accumulated other compre-
hensive loss. It is estimated that approximately $2.2 million
included in accumulated other comprehensive income
related to derivatives will be reclassified to interest
expense in 2009 results of operations.
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.
In accordance with GAAP, all Common Shares used to cal-
culate EPS have been adjusted to reflect a special dividend
paid on January 30, 2009, which resulted in the issuance
of approximately 1.3 million additional Common Shares.
The following table sets forth the computation of basic
and diluted earnings per share from continuing operations
for the periods indicated:
Acadia Realty Trust 2008 Annual Report 95
Years Ended December 31,
2008
2007
2006
(dollars in thousands, except per share amounts)
Numerator:
Income from continuing operations — basic earnings per share
$19,900
$17,151
$14,868
Effect of dilutive securities:
Preferred OP Unit distributions
—
23
254
Numerator for diluted earnings per share
19,900
17,174
15,122
Denominator:
Weighted average shares — basic earnings per share
33,813
33,600
33,789
Effect of dilutive securities:
Employee share options
Convertible Preferred OP Units
Dilutive potential Common Shares
454
—
454
616
66
682
314
337
651
Denominator for diluted earnings per share
34,267
34,282
34,440
Basic earnings per share from continuing operations
Diluted earnings per share from continuing operations
$
$
0.59
0.58
$
$
0.51
0.50
$
$
0.44
0.43
The weighted average shares used in the computation of
The conversion of the convertible notes payable (Note 9)
basic earnings per share include unvested Restricted Shares
is not reflected in the table above as such conversion
and LTIP Units (Note 15) that are entitled to receive divi-
based on the market price of the Common Shares would
dend equivalent payments. The effect of the conversion
be effected with only cash. The effect of the assumed
of Common OP Units is not reflected in the above table,
conversion of 25,067 and 41,696 Series A and B Preferred
as they are exchangeable for Common Shares on a one-
OP Units for the year ended December 31, 2007 would be
for-one basis. The income allocable to such units is allocated
dilutive and they are included in the table. The effect of the
on this same basis and reflected as minority interest in the
assumed conversion of 25,067 and 312,012 Series A and
accompanying consolidated financial statements. As such,
B Preferred OP Units for the year ended December 31,
the assumed conversion of these units would have no net
2006 would be dilutive and they are included in the table.
impact on the determination of diluted earnings per share.
96
Acadia Realty Trust 2008 Annual Report
Notes to Consolidated Financial Statements continued
Note 22i
Summary of Quarterly Financial Information (unaudited)
The quarterly results of operations of the Company for the years ended December 31, 2008 and 2007 are as follows:
(dollars in thousands, except per share amounts)
Revenue
Income (loss) from continuing operations
Income (loss) from discontinued operations
Net income (loss)
Net income per Common Share — basic:
Income (loss) from continuing operations
Income from discontinued operations
Net income (loss)
Net income per Common Share — diluted:
March 31
$ 28,682
$ 8,232
$
512
$ 8,744
$
0.24
0.01
$
0.25
2008
September 30
December 31
$ 28,739
$ 4,987
$
(1)
$ 4,986
$
0.15
—
$
0.15
$ 31,110
$ (4,107)
$
14
$ (4,093)
$ (0.12)
—
$ (0.12)
June 30
$52,208
$10,788
$ 7,123
$17,911
$
0.32
0.21
$
0.53
Income (loss) from continuing operations
$
0.24
$
0.31
$
0.15
$ (0.12)
Income (loss) from discontinued operations
Net income (loss)
Cash dividends declared per Common Share
Weighted average Common Shares outstanding:
0.01
0.25
0.21
$
$
0.21
0.52
0.21
$
$
—
0.15
0.21
$
$
—
$ (0.12)
$
0.76
Basic
Diluted
33,747,797
34,244,449
33,806,747
34,376,530
33,845,368
34,366,002
33,850,271
33,850,271
(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
$24,115
$ 3,378
$
458
$ 2,883
$ 6,719
June 30
$ 22,631
$ 2,825
$
$
210
—
$ 3,035
2007
September 30
December 31
$25,400
$ 7,941
$
$
(246)
794
$ 8,489
$25,876
$ 3,007
$ 6,020
$
—
$ 9,027
Income from continuing operations
$
0.10
$
0.08
$
0.24
$
0.09
Income (loss) from discontinued operations
Income from extraordinary item
0.01
0.09
0.01
—
(0.01)
0.02
0.18
—
Net income
$
0.20
$
0.09
$
0.25
$
0.27
Net income per Common Share — diluted:
Income from continuing operations
$
0.10
$
0.08
$
0.24
$
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
0.09
0.20
0.20
$
$
0.01
—
0.09
0.20
$
$
(0.01)
0.02
0.25
0.20
$
$
0.17
—
$
0.26
$0.4325
Basic
Diluted
33,441,973
34,328,847
33,626,566
34,220,728
33,659,684
34,244,063
33,666,979
34,307,038
Acadia Realty Trust 2008 Annual Report 97
Note 23i
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 remedia-
tion of certain hazardous or toxic substances disposed,
stored, generated, released, manufactured or discharged
from, on, at, under, or in a property. As such, the Com-
pany may be potentially liable for costs associated with
any potential environmental remediation at any of its
formerly or currently owned properties.
The Company conducts Phase I environmental reviews
with respect to properties it acquires. These reviews
include an investigation for the presence of asbestos,
underground storage tanks and polychlorinated biphenyls
(PCBs). Although such reviews are intended to evaluate
the environmental condition of the subject property as
well as surrounding properties, there can be no assurance
that the review conducted by the Company will be ade-
quate to identify environmental or other problems that
may exist. Where a Phase II assessment is so recom-
mended, a Phase II assessment is conducted to further
determine the extent of possible environmental contami-
nation. In all instances where a Phase I or II assessment
has resulted in specific recommendations for remedial
actions, the Company has either taken or scheduled the
recommended remedial action. To mitigate unknown risks,
the Company has obtained environmental insurance for
most of its properties, which covers only unknown envi-
ronmental risks.
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
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 sig-
nificant effect on the Company’s consolidated financial
position or results of operations.
In September 2008, the Company, certain of its subsidi-
aries, and other unrelated entities were named as defen-
dants in an adversary proceeding brought by Mervyn’s
LLC (“Mervyns”) in the United States Bankruptcy Court
for the District of Delaware. In an Amended Complaint
filed December 22, 2008, Mervyns asserts claims of
fraudulent transfer and breach of fiduciary duty against
the defendants based upon payments made by Mervyns
in September 2004, in connection with its acquisition by
an entity controlled by certain of the defendants. Mervyns
seeks to recover from the defendants these allegedly
fraudulent transfers, other unspecified damages, and
attorney’s fees. The defendants’ response to the Amended
Complaint is due April 3, 2009. The Company believes
that it has meritorious defenses in connection with this
action and that the ultimate resolution will not have a
material adverse effect on the Company’s results of
operations or consolidated financial condition.
The Company has arranged for the provision of nine sep-
arate letters of credit in connection with certain leases
and investments. As of December 31, 2008, 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 $26.0 million.
Note 24i
Subsequent Events
During January 2009, the Company, through Fund III, pur-
chased Cortlandt Towne Center for approximately $78.0
million. The property is a 640,000 square foot shopping
center located in Westchester County, NY.
the Company’s financial position or results of operations.
During January 2009, the Company purchased an addi-
Management is unaware of any instances in which the
tional $13.5 million in principal amount of its outstanding
Company would incur significant environmental costs if
convertible debt, at a discount of approximately 24%.
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.
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
98
Acadia Realty Trust 2008 Annual Report
During February 2009, The Kroger Co. purchased the fee
at six locations in the Company’s Fund I Kroger/Safeway
Portfolio for $14.6 million, resulting in a gain of approxi-
mately $4.5 million.
Schedule III: Real Estate and Accumulated Depreciation
December 31, 2008
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
$ 1,205
$ 1,147
$ 8,630
$ 9,777
$ 5,265
1984(a)
Description
Shopping Centers
Crescent Plaza
Brockton, MA
New Loudon Center 14,554
Latham, NY
505
4,161
10,879
505
15,040
15,545
9,745
1982(a)
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
Center3
Abington, PA
Bloomfield Town
Square3
Bloomfield Hills, MI
Walnut Hill Plaza
Woonsocket, RI
—
—
—
—
—
—
—
—
—
619
5,434
33,200
619
38,634
39,253
31,526
1983(a)
—
4,268
4,690
—
8,958
8,958
6,336
1968(c)
120
—
1,599
120
1,599
1,719
736
1968(c)
190
3,004
1,714
190
4,718
4,908
3,106
1972(c)
—
—
12,695
1,664
11,031
12,695
5,315
1995(c)
1,691
5,803
574
1,691
6,377
8,068
950
2002(c)
—
11,909
1,496
—
13,405
13,405
1,166
2005(a)
799
3,197
1,994
799
5,191
5,990
1,897
1998(a)
3,207
13,774
9,202
3,207
22,976
26,183
6,799
1998(a)
23,500
3,122
12,488
1,840
3,122
14,328
17,450
4,139
1998(a)
Elmwood Park Plaza 34,600
Elmwood Park, NJ
3,248
12,992
14,764
3,798
27,206
31,004
8,682
1998(a)
26,250
4,288
17,152
1,587
4,288
18,739
23,027
5,416
1998(a)
—
—
—
—
Merrillville Plaza
Hobart, IN
Marketplace of
Absecon3
Absecon, NJ
Clark Diversey
Chicago, IL
Boonton
Boonton, NJ
Chestnut Hill
Philadelphia, PA
Third Avenue
Bronx, NY
Hobson West Plaza3
Naperville, IL
Village Commons/
Smithtown Shopping
Center
Smithtown, NY
Town Line Plaza3
Rocky Hill, CT
Branch Shopping
Center
Village of the
Branch, NY
2,573
10,294
2,502
2,577
12,792
15,369
3,576
1998(a)
10,061
2,773
8,322
1,328
7,188
—
—
10,061
2,773
12,834
1,328
7,188
8,516
9,663
8,289
5,691
43
8,289
5,734
14,023
11,108
8,038
1,013
11,855
8,304
20,159
208
524
360
468
2006(a)
2006(a)
2006(a)
2006(a)
1,793
7,172
726
1,793
7,898
9,691
2,342
1998(a)
9,624
3,229
12,917
2,438
3,229
15,355
18,584
4,609
1998(a)
—
878
3,510
7,269
907
10,750
11,657
7,129
1998(a)
15,526
3,156
12,545
777
3,156
13,322
16,478
3,646
1998(a)
Acadia Realty Trust 2008 Annual Report 99
December 31, 2008
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
The Methuen
Shopping Center3
Methuen, MA
$
—
$
956
$ 3,826
$
594
$
961
$ 4,415
$ 5,376
$ 1,152
1998(a)
Gateway Shopping
Center
Burlington, VT
Mad River Station
Dayton, OH
Pacesetter Park
Shopping Center
Ramapo, NY
239 Greenwich
Greenwich, CT
West Shore
Expressway
Staten Island, NY
West 54th Street
Manhattan, NY
Acadia 5–7
East 17th Street
Manhattan, NY
Fund I:
Tarrytown Centre
Westchester, NY
Granville Center
Columbus, OH
Kroger/Safeway
Various
Fund II:
Liberty Avenue
New York, NY
Pelham Manor
Westchester, NY
20,500
1,273
5,091
11,536
1,273
16,627
17,900
3,723
1999(a)
—
2,350
9,404
598
2,350
10,002
12,352
2,620
1999(a)
12,485
1,475
5,899
1,121
1,475
7,020
8,495
2,102
1999(a)
26,000
1,817
15,846
502
1,817
16,348
18,165
4,009
1999(c)
—
—
—
3,380
13,554
16,699
18,704
—
28
3,380
13,554
16,934
16,699
18,732
35,431
653
810
2007(a)
2007(a)
3,212
7,671
—
3,212
7,671
10,883
142
2008(a)
9,800
2,323
7,396
329
2,323
7,725
10,048
894
2004(a)
—
2,186
8,744
4,793
—
47,745
59
—
2,186
8,803
10,989
1,425
2002(a)
—
47,745
47,745
33,024
2003(a)
11,423
—
12,627
673
—
13,300
13,300
25,284
905
—
33,437
905
33,437
34,342
649
594
2005(a)
2004(a)
400 E. Fordham Road 80,443
Bronx, NY
11,144
18,010
69,703
16,254
82,603
98,857
1,881
2004(a)
4650 Broadway/
Sherman Ave
New York, NY
216th Street
New York, NY
161st Street
Bronx, NY
Oakbrook
Oakbrook, IL
Atlantic Avenue
Brooklyn, NY
Canarsie Plaza
Brooklyn, NY
Pelham Manor
Westchester, NY
ASOF II, LLC
34,681
19,000
25,267
25,500
7,261
—
—
—
25,267
—
25,267
—
2005(a)
20,237
7,261
20,237
27,498
762
2005(a)
30,000
16,679
28,410
261
16,679
28,671
45,350
2,459
2005(a)
—
—
6,906
3,265
5,322
32,543
—
—
—
—
—
—
10,161
—
17
—
—
240
—
—
6,923
6,923
1,853
2005(a)
5,322
32,543
—
—
—
—
5,322
32,543
—
—
2007(a)
2007(a)
10,401
10,401
127
2004(a)
—
—
—
100
Acadia Realty Trust 2008 Annual Report
Schedule III: Real Estate and Accumulated Depreciation continued
December 31, 2008
Description
Encum-
brances
Land
Buildings and
Improvements
Shopping Centers, cont’d
Costs
Capitalized
Subsequent to
Acquisition
Land
Buildings and
Improvements
Accumulated Acquisition (a)
Depreciation Construction (c)
Total
Date of
Fund III:
125 Main Street
Associations
Westport, CT
Sheepshead Bay
Brooklyn, NY
Suffern Self Storage
Suffern, NY
Linden Self Storage1
Linden, NJ
Webster Self Storage1
Bronx, NY
Jersey City
Self Storage1
Jersey City, NJ
Bronx Self Storage1
Bronx, NY
Lawrence
Self Storage1
Lawrence, NY
Starr Avenue
Self Storage2
Queens, NY
New Rochelle
Self Storage2
Westchester, NY
Yonkers Self Storage2
Westchester, NY
Bruckner Boulevard
Self Storage2
Bronx, NY
Ridgewood
Self Storage
Queens, NY
—
—
—
—
—
—
—
—
—
—
ASOF III, LLC
62,250
Underdeveloped land
Properties under
development
—
—
$— $ 12,994
$ 4,316
$
265
$ 12,994
$
4,581
$
17,575
—
20,391
—
4,944
4,561
7,484
3,515
6,139
1,041
5,506
2,377
9,654
10,835
5,936
20,391
—
20,391
4,561
7,484
12,045
3,515
6,139
9,654
1,041
5,506
6,547
33
—
157
136
111
2007(a)
2007(a)
2008(a)
2008(a)
2008(a)
2,377
9,654
12,031
205
2008(a)
10,835
5,936
16,771
13
2008(a)
—
—
—
—
—
—
6,977
12,688
—
6,977
12,688
19,665
248
2008(a)
7,597
22,391
—
7,597
22,391
29,988
450
2008(a)
1,977
4,769
3,121
17,457
—
—
1,977
4,769
6,746
94
2008(a)
3,121
17,457
20,578
337
2008(a)
6,244
10,551
—
6,244
10,551
16,795
206
2008(a)
8,000
—
250
—
—
—
—
—
—
—
—
8,000
—
250
—
—
—
8,000
—
250
—
—
—
2008(c)
70,423
70,423
70,423
$654,729
$286,023
$498,620
$322,230
$294,132
$ 812,741
$1,106,873 $174,809
Notes:
(1) These properties serve as collateral for the financing with GEMSA, in the amount of $41,500.
(2) These properties serve as collateral for the financing with Wachovia, in the amount of $34,322.
(3) These properties serve as collateral for the financing with Bank of America, N.A. in the amount of $48,900.
Acadia Realty Trust 2008 Annual Report 101
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 $416.9 million as of
December 31, 2008.
3. (a) Reconciliation of Real Estate Properties:
The following table reconciles the real estate properties from January 1, 2006 to December 31, 2008:
Years Ended December 31,
2008
2007
2006
(dollars in thousands)
Balance at beginning of year
$ 833,694
$ 629,902
Transfers(1)
Other improvements
Property acquired
Balance at end of year
—
103,476
169,703
—
75,776
128,016
$ 650,945
(131,341)
40,523
69,775
$1,106,873
$ 833,694
$ 629,902
(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, 2006 to December 31, 2008:
(dollars in thousands)
Balance at beginning of year
Depreciation related to real estate
Balance at end of year
Years Ended December 31,
2008
2007
2006
$ 150,494
24,315
$ 174,809
$130,708
19,786
$150,494
$118,308
12,400
$130,708
102
Acadia Realty Trust 2008 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
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 and Leasing
Jon Grisham
Sr. Vice President,
Chief Accounting Officer
Joseph Hogan
Sr. Vice President,
Director of Construction
Robert Masters, Esq.
Sr. Vice President,
General Counsel and
Chief Compliance Officer
Joseph M. Napolitano
Sr. Vice President,
Chief Administrative Officer
Michael Nelsen
Sr. Vice President,
Chief Financial Officer
David Robinov
Sr. Vice President,
Investments
Robert Scholem
Sr. Vice President,
Director of Property
Management
Investor Relations
Jon Grisham
Sr. Vice President,
Chief Accounting Officer
Tel: 914.288.8100
email: jgrisham@acadiarealty.com
A copy of the Company’s 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 2008 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 13, 2009, at
10 a.m., local time, to be held at the
Company’s corporate headquarters at
1311 Mamaroneck Avenue, Suite 260,
White Plains, NY 10605. The record
date for determination of shareholders
entitled to vote is March 31, 2009.
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, LLC
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
Printed on recycled paper.